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By: Se Kim. By: Se Kim Module 11: Adjusting Accounting Information April 7th , 2014. Agenda. Inventory Operating Leases Special Purpose Entity – no mention in the 10-k Employee Stock Options (ESO). Inventory. LIFO -> FIFO FIFO numbers are more meaningful when comparing companies

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By se kim

By: Se Kim

By: Se Kim

Module 11: Adjusting Accounting Information

April 7th, 2014


Agenda
Agenda

  • Inventory

  • Operating Leases

  • Special Purpose Entity – no mention in the 10-k

  • Employee Stock Options (ESO)


Inventory
Inventory

  • LIFO -> FIFO

    • FIFO numbers are more meaningful when comparing companies

  • However, doesn’t disclose any financials about inventory methodology

  • “As of Jan. 31st, our inventories valued at LIFO approximated those inventories as if they were valued at FIFO.” (10-k)


Operating leases
Operating Leases

  • Absence of operating lease liability -> more financial leverage

  • Moving “Off-balance-sheet financing” back into the Balance Sheet




Step 3 4 adjustments
Step 3 & 4: Adjustments

  • Adjust NEA upward by $8,665

  • Financing Liabilities increases by $8665

    • Current: $660

    • Noncurrent: $8,005

  • Remove $1,734 from SG&A and reclassify:

    • Interest expense: $1,076

    • Depreciation: $660

  • Net increase to EPAT: $720.65

    • ($1,734-$660)*(1-.329)


Employee stock options eso
Employee Stock Options (ESO)

  • Under ASC 718-10-25-2, expense FV of options at grant date

  • However, use of grant date omits any changes in value of the ESO between the grant date and exercise date

  • Goal of adjustment -> measure liability and realize additional expense at exercise date





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