This is an individual case assignment.
这门课涉及到的重难点主要有
Financial Statements—Process, Design, and Preparation
Issues Regarding Items in Financial Statements (under various GAAPs)
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Case Question: Power Entertainment Ltd.
Required:
Prepare the report requested.
Power Entertainment Ltd. (PEL) is an interactive entertainment company for the mobile world. Frank Prince and his family members own the majority of the 4,000 shares, and have financed all growth through shareholder loans, equity investment, and retained earnings; lenders, historically, have been hesitant to become involved in this sector.
Currently, the company has three games it has developed and currently sells: Power CRASH, Power RATS, and Power DOOM. Users access PEL games for free via their mobile devices and through social networks. PEL generates revenue primarily through sales of virtual items that can be used in the games, such as extra lives, boosters, and game content that enhance users’ entertainment experience.
Power CRASH has experienced viral growth in the past year, changing PEL from a marginal, home-grown company into an entity with far more potential. Frank is coming to understand that his company might be a takeover target for one of the larger players in this business, or even have the potential to go public itself if growth continues. PEL would require far more volume and breadth of games for a public offering to be feasible, however.
You, CPA, have just been hired as the first-ever professional accounting member of PEL’s management team. You are VP Finance, but your position involves many different elements. The financial records have primarily been kept on a cash basis, but because of growth, Frank thinks it is time to revisit accounting policies and start getting audited statements that comply with ASPE or perhaps IFRS.
All revenue is received through direct deposit from Facebook© and PayPal©. Frank’s wife, Ethel, keeps the accounting records, and is known for her attention to detail. Payroll is handled by a third-party service. Ethel prepares simple monthly financial statements for Frank based on cash received and paid. Unpaid bills are accrued at year-end for the preparation of the annual financial statements.
Frank has reviewed the cash-based revenue figures for 20X3 to date, per Exhibit 1. He explains that his expectations from hiring a professional accountant include having someone put the accounting policies in order and get the financial statements verified by external accountants. Frank is attentive to general business news, is involved with local business groups, and has some general awareness of specific accounting concepts. Frank asks that within the specific context of PEL, you explain the similarities and differences between Canadian Accounting Standards for Private Enterprises (ASPE) and International Financial Reporting Standards (IFRS). Then, you are to identify the reporting issues facing PEL, and draft a report that sets out reporting policy alternatives and your recommendations. Based on your recommendations, you will have to recalculate revenue and any related balance sheet accounts.