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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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