Questions
ON BOEING AND  China Eastern Airlines Describe at least two differences in disclosure provided in the footnotes...

ON BOEING AND  China Eastern Airlines

Describe at least two differences in disclosure provided in the footnotes of the competitors under IFRS and US GAAP. Example:

The Property, Plant and Equipment footnote is much more detailed for Company X in IFRS than for Company Y using US GAAP. For each PP&E component, it reconciles the differences beginning and ending net book values including additions, disposals, currency translation effects, depreciation and impairments. Company Y lists the PP&E components only.

For one of the major accounting differences, do further research into the applicable standards for IFRS and for U.S. GAAP. Quote portions from each standard and then explain the standards in your own words. Where are the U.S. GAAP and IFRS standards specifically similar and different? Example:

Earnings per Share:   Under IFRS, Company X calculates dilutive potential common shares independently for each interim period presented (discrete method). Under US GAAP, Company Y computes dilutive potential common shares on a year-to-date weighted average for each interim period presented (integral method).

In: Accounting

Case 16.1: Will Fiat Be Successful in the United States This Time? The launch of the...

Case 16.1: Will Fiat Be Successful in the United States This Time?

The launch of the Fiat 500 has created a great deal of excitement around the Fiat brand in the U.S. automobile market. This new sporty subcompact car is available in several variants including the high performance Abarth and luxury Gucci special edition models. While the recent U.S. launch of this eye-catching car is news, neither the 500moniker nor the presence of Fiat in the world’s largest automobile market is new.

Fiat left the U.S. automobile market almost 30 years ago and it was not on the best of terms. Its cars were known for having mechanical issues and customers complained of poor service support. The company’s abandonment of the American market as other foreign manufacturers such as Toyota and Honda were rising in prominence not only highlighted Fiat’s quality issues but also their lack of infrastructure and organization in the country.

The adage that “time heals all wounds” may apply to Fiat’s reputation in the United States. Most potential buyers of the recently launched 500 will have never seen a Fiat from the company’s previous unsuccessful foray into the American automobile market that ended with the Italian car company folding up shop in the ’80s.
In fact, Fiat’s recent reentry into the United States was one of scale and strength and as a potential savior for Chrysler Group LLC. In 2009, the struggling American automaker largely emerged from a government-brokered bankruptcy procedure through an alliance with Fiat. The agreement gave Fiat a 20 percent ownership interest in Chrysler that has since grown to well over 50 percent ownership. Fiat is not just another foreign car company selling its automobiles in the United States; it is the company that is helping to revitalize Chrysler’s sales and long-term viability.

When the Fiat-Chrysler strategic alliance was initially announced, industry pundits projected that Fiat designs would be offered in Chrysler dealerships while Fiat exploited a relatively weak dollar by manufacturing in the United States. The rollout hasn’t quite happened as expected.

Fiat has entered the American market as a separate brand with a single model, the 500, a car that was launched several years ago in Europe. In many ways the 500 launch in the United States was similar to the introduction of BMW’s Mini Cooper. Both of the cars were stylized based upon the iconic shapes of their predecessors, and like Mini’s formation of a separate dealer network from its parent BMW, Fiat has formed a separate network of dealers from Chrysler.

While there are several variants of the 500, Fiat dealers have only a single car model to sell and no firm timeline for the introduction of future models. Chrysler dealerships have three cars of their own: the 200, 200 convertible and the300, along with a minivan in their showrooms. Although current year Chrysler sales have increased, largely attributed to pentup demand, the intentional separation of the Fiat brand into independent dealerships has limited any direct benefit from the Fiat-Chrysler partnership for Chrysler dealers. Meanwhile, Fiat sales have begun to take off. The 2012 Abarth sold out less than one month after its launch, leaving potential customers to choose another version of the 500, be put on a waiting list for the next model year, or leave the dealership in search of another vehicle. The addition of the new car is having only a marginal impact on Chrysler’s U.S. workforce; the engine of the Fiat 500 is manufactured in Michigan, but the transmission is made in Italy, and assembly of the vehicle is performed in Mexico.

While the Chrysler brand may not yet have benefitted from the partnership with its new co-owner, Chrysler’s sister brand, Dodge, has done so. The newly launched Dodge Dart, a model name reintroduced after a 36-year absence, has been designed on a modified Fiat platform allowing for significant savings in engineering costs and reduced time to market. This vehicle, which gets 40 miles per gallon (MPG), exemplifies the potential success of the Fiat-Chrysler partnership.

CEO Sergio Marchionne merged the two companies into Fiat Chrysler Automobiles in late 2014, reducing the total number of vehicle platforms and brands sold by the new firm. The merged company began trading on Wall Street under the ticker FCAU that same year as a way to establish itself as a leading global player in the auto industry. More recently, Marchionne talked up a possible consolidation in the U.S. auto industry, with Fiat Chrysler joining up with one of several suitors rumored to include Ford, Toyota, and Volkswagen. He believes consolidation in the industry would help reduce the prohibitive costs of developing more technologically advanced vehicles.

Answer the following questions:

1.Which model of organizational design is more likely to be effective in Fiat's reentry into the U.S. market?

2. Delegation of authority is critical to the success of any business. Which is the wiser course for Chrysler/Fiat, centralization or decentralization?

3.Does a matrix model offer hope to Fiat's future?

In: Operations Management

Imagine that you are the CEO of Moet Hennessy Louis Vuitton SE (LVMH).  You have just received...

Imagine that you are the CEO of Moet Hennessy Louis Vuitton SE (LVMH).  You have just received share price valuation estimates for a potential buyout target, Rimowa, from two of your top financial analysts. Both analysts used the discounted cash flow (DCF) model to estimate the share price resulting in a valuation of $50, by the first analyst and $60, by the second analyst.  

You made a buyout offer of $55 a share and Rimowa’s CEO rejected it.  The German luxury luggage brand Rimowa is crucial to LVHM’s strategic expansion into brands that have heritage and a unique position.  As the CEO of LVHM what would you do to meet LVHM’s strategic objectivewhile minimizing the costto acquire Rimowa?  Briefly defend your recommendation.

In: Finance

If you were the Human Resources manager and wanted to convince the CEO/management team to implement...

If you were the Human Resources manager and wanted to convince the CEO/management team to implement a flextime policy (e.g., can work any 8 hours between 6 am and 6 pm) to assist employees with children (elderly parents, others) to care for, what would you say/do?

You should present your post from the viewpoint of your role as the HR manager, a senior and experienced leader, to the CEO and his/her management team. It should be a comprehensive discussion or presentation-like, using influence and persuasion techniques. Don't forget to introduce the topic as if you were in a leadership meeting with the CEO and his/her team and not all members know about your topic and request; don't forget to be clear on the request.

In: Operations Management

The average age of CEOs is 56 years. Assume the variable is normally distributed, with a...

The average age of CEOs is 56 years. Assume the variable is normally distributed, with a standard deviation of 4 years. Give numeric answers with 4 decimal places.

a) If one CEO is randomly selected, find the probability that he/she is older than 63. Blank 1

b) If one CEO is randomly selected, find the probability that his/her mean age is less than 57. Blank 2

c) If one CEO is randomly selected, find the probability that his/her age will be between 53 and 59. Blank 3

d) If 36 CEOs are randomly selected, find the probability that their mean age is between 53 and 59. Blank 4

e) Explain the reason the answers to c) and d) above are differen

In: Statistics and Probability

Case Study - Aussie Airlines and the Global Pandemic Your Role Your firm, DUA, has been...

Case Study - Aussie Airlines and the Global Pandemic

Your Role

  1. Your firm, DUA, has been the auditor of Aussie Airlines for the past three years.

  2. You are the audit team manager and you are about to commence the risk assessment phase, as well as the risk response work plan for the audit of AA’s financial statements for the year ending 30th June 2020.

Context

  1. Aussie Airlines (AA) is a large listed Australian airline and has been operating for more than fifty years.

  2. In recent years, under pressure to improve profitability as fuel costs rose, the airline successfully undertook a comprehensive cost cutting and business efficiency drive, which returned it to profit three years ago. According to the CEO and Chairperson, Andrew Norris, “the operations of AA are now as lean as they could be; we have squeezed the fruit dry.”

  3. In March 2020, the World Health Organisation declared a pandemic, people and governments have responded, and the volume of global business-related and leisure-related air travel has fallen by 95%.

  4. It is not known how long the pandemic will last, how long restrictions on air travel will last—most guesses range from two to twelve months, a small minority fear it will be worse—and the Australian government has not yet announced how it’s economic response to the pandemic will specifically help the airline industry.

  5. AA has ‘temporarily’ laid off 90% of its workforce, including cabin staff, pilots, and 95% of its airport ground crew. There are murmurs about a class action by employees if they do not receive adequate payments while they are laid off. Some fear the change may be permanent.

  6. The company is not taking bookings from customers; the AA website says “for the foreseeable future”.

  7. The CEO has told the press that while the current situation represents “an existential crisis”, he is absolutely confident that AA will get through it and come out stronger the other side.

  8. The Chief Financial Officer, Clara Major, stopped you in the corridor to say hello and offered you these words: “Look, everything might seem dire but we have it in hand. We will be here this time next year, so keep that in mind.”

  9. As expected, you have been offered access to any records and to people inside and outside the AA organisation that you feel will be necessary to complete your risk assessment and interim work.

  10. You are also confident that AA’s internal controls remain very strong, although you do not know if or how they have been changed/enhanced to respond to the effects of the global pandemic on AA.

Forecast Financial Statements

On your second day at AA’s head office, you have been given the forecast financial statements for the full year to 30 June 2020, as well as the previous two years’ audited results.

Aussie Airlines: Consolidated Income Statement (Selected) Year Ended 30th June
Currency AUD Millions (figures are rounded)

Forecast 2020

Actual 2019

Actual 2018

Revenue

12.0

18.0

18.0

Expenditure

Wages

3.3

5.0

5.0

Aircraft Costs

4.0

4.0

3.7

Fuel

2.5

3.0

3.0

Depreciation

1.6

1.4

1.4

Other

2.5

3.1

3.4

PBIT

(1.9)

1.5

1.5

Finance Costs

(0.2)

(0.2)

(0.2)

Income Tax

0.0

(0.4)

(0.4)

Statutory Profit for the Year

(2.1)

0.9

0.9

Aussie Airlines: Consolidated Balance Sheet (Selected) As at 30th June
Currency AUD Millions (figures are rounded)

Forecast 2020

Actual 2019

Actual 2018

Current Assets

Cash & Cash Equivalents

0.5

1.8

1.5

Receivables

2.0

1.5

1.0

Other

0.7

1.0

1.0

Total Current Assets

3.2

4.3

3.5

Non-Current Assets

Property, Plant & Equipment

12.3

13.0

13.0

Intangible Assets

0.7

2.0

2.1

Other

1.0

0.0

0.1

Total Non-Current Assets

14.0

15.1

15.2

Total Assets

17.2

19.4

18.7

Current Liabilities

Payables

4.0

1.8

1.7

Revenue Received in Advance

1.0

5.0

4.5

Interest Bearing Liabilities

2.0

0.6

0.4

Provisions

0.9

1.0

1.0

Other

Total Current Liabilities

7.9

8.6

7.6

Non-Current Liabilities

Forecast 2020

Actual 2019

Actual 2018

Revenue Received in Advance

0.2

1.5

1.5

Interest Bearing Liabilities

6.5

4.6

4.3

Provisions

0.4

0.4

0.4

Deferred Tax Liabilities

0.8

0.8

0.9

Other

0.1

0.1

0.0

Total Non-Current Liabilities

8.0

7.4

7.1

Total Liabilities

15.9

15.9

14.7

Net Assets

1.3

3.5

4.0

Equity

Issued Capital

1.9

1.9

2.5

Treasury Shares

(0.2)

(0.2)

(0.1)

Reserves

0.2

0.2

0.5

Retained Earnings

(0.5)

1.6

1.1

Total Equity

1.3

3.5

4.0

Notes:

You have received additional information from AA’s Chief Financial Officer and from your initial review of AA Board minutes:

  1. Not all 2020 forecast Income Statements line items and Balance Sheet balances have been finalised at this point, though they are best guesses.

  2. Intangible Assets constitute goodwill relating to an international airline business AA acquired five years ago. This business mainly services South East Asia, China, and Polynesia destinations.

  3. Property, Plant & Equipment consists primarily of aircraft, aircraft engines, and aircraft parts.

  4. Revenue Received in Advance relates to customers’ prepaid flights.

  5. Aircraft are leased from third parties. A reduction in monthly payments and a restructuring of the lease terms are under negotiation but, so far, nothing has been agreed with the aircraft makers/lessors.

  6. AA is currently negotiating with its bank to receive a grace period for repayment of short term and long-term debt as the company is currently in breach of its debt covenants per the loan agreement. If no deal is reached, this debt becomes due and payable on August 31st 2020.

  7. AA is seeking a financial bail-out package from the government of $7million to fund its ongoing operating costs for 12 months while its fleet of aircraft is grounded. The Federal government has made positive noises about the request but has not yet committed to support the request and has told AA that it will take at least two months to reach a decision.

  8. Under the current conditions, the CFO’s papers to the AA Board estimate that cash coming in from operations will, on average, be $0.5million per month while unavoidable operating costs are estimated to be $0.8million per month.

  9. AA has an unused line of credit of $2.5million provided by its banking syndicate. It can access this money to fund its cash requirements. Currently, there are no other sources of cash beyond this line of credit.

QUESTION

  1. Assuming that you have completed the work in previous questions and determined that AA is a going concern, select one material account from AA’s Balance Sheet and one material account from the Income Statement and prepare a brief plan for auditing each account. Give particular attention to the following:

    1. An assessment of the audit risk for the account, given the information in this case study and your assumptions.

    2. The relevant/significant audit assertions for this account.

    3. Name two controls that you would expect management to implement for this account. How would you test these controls.

    4. Describe two substantive testing procedures that you would perform in relation to this account to address the relevant/significant assertions.

NOTE: please refer to previous questions asked and answer them first please

In: Accounting

Question: Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the...

Question: Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the ...

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets per year. Costs associated with this level of production and sales are given below:

Unit Total
Direct materials $ 15 $ 450,000
Direct labor 8 240,000
Variable manufacturing overhead 3 90,000
Fixed manufacturing overhead 9 270,000
Variable selling expense 4 120,000
Fixed selling expense 6 180,000
Total cost $ 45 $ 1,350,000

The Rets normally sell for $50 each. Fixed manufacturing overhead is $270,000 per year within the range of 25,000 through 30,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 25,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 5,000 units. This machine would cost $10,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order?

2. Refer to the original data. Assume again that Polaski Company expects to sell only 25,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

3. Assume the same situation as described in (2) above, except that the company expects to sell 30,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

In: Accounting

Business Law 1) United Express is spending several Million dollars on an advertising campaign about how...

Business Law
1) United Express is spending several Million dollars on an advertising campaign about how environmentally responsible the company is. the ads showcase the company's new all electric fleet of delivery vans. The CEO of United Express is negotiating with several airlines for the purchase of used passenger jets that will be converted by carry backage. the problem is that these 20-30 year old aircraft pollute ten times more than newer modern jets. Does United Express have an ethical issue to deal with? briefly explain.

In: Economics

A winery decided to raise capital through IPO. The company has 1000 shares outstanding, and each...

A winery decided to raise capital through IPO. The company has 1000 shares outstanding, and each was valued at $100. CEO proposed to issue 1000 more shares. The IB set the offering price at $100 a share, the shares opened at $100, and quickly jumped to $130, the closing price on the first day of trading was $110. What was the underpricing? What is the total market value of equity in the winery after the IPO?

10%, 210 000?

30%, 210 000?

30%, 220 000?

10%, 220 000?

In: Finance

You are the international manager of a Canadian pharmaceutical company that has just developed a new...

You are the international manager of a Canadian pharmaceutical company that has just developed a new drug that can perform the same functions as the competition’s but costs only half as much to manufacture. Your CEO has asked you to formulate a recommendation for how to expand into Western Europe. You can choose to 1. Export from Canada; 2.License a European firm to manufacture and market the new drug in Europe; or 3.Set up a wholly owned subsidiary in Europe. Which option would you choose and why?

In: Economics