PART A: case study (General Motors)
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At the new General Motors, we are passionate about designing, building and selling the world's best vehicles. This vision unites us as a team each and every day and is the hallmark of our customer-driven culture.
In fact, there are a lot of exciting things to share about our company. Our story starts on November 18, 2010, when we completed the world's largest initial public offering, emerging with a solid financial foundation that enables us to produce great vehicles for our customers and build a bright future for employees, partners and shareholders.
Leading the way is our seasoned leadership team who set high standards for our company so that we can give you the best cars and trucks. This means that we are committed to delivering vehicles with compelling designs, flawless quality and reliability, and leading safety, fuel economy and infotainment features. All are intended to create that special bond that can only happen between a driver and their vehicle.
Making the world's best vehicles can only happen with the world's greatest employees. We take great pride in our work, and take great care to deliver exceptional cars and a positive ownership experience to our customers around the world.
Access the GM home web page at: www.gm.com From GM's home page and then "The Company", click on "FINANCIAL INFORMATION", followed by "Reports and results", then select the year 2013 to display and download the "Annual report and accounts" 2013 on Form PDF.
Note: the financial statements of GM are available at:
www.gm.com/annualreport/downloads/2013_GM_Annual_Report.pdf
Instructions Use the annual report and accounts of 2013 to answer the following questions:
1. What is GM management strategy? And how do they achieve these strategies?
2. What is the responsibility of management toward the financial reporting?
3. In the annual report GM mentioned that they measure certain asset and liabilities using fair value measurement, according to FASB there are three level hierarchy for the fair value measurement technique explain them? Mention example from the balance sheet for asset and liabilities that were measured at fair value for each level.
4. Write a memo explaining: (Hint: Explain and support your memo by suitable figures from the GM's annual report.)
a- What was the composition of identifiable and unidentifiable intangible assets reported by GM 2013?
b- How do GM account for their intangible asset and the goodwill?
c- How much impairment did GM report from the intangible assets and goodwill?
d- Why did GM impair the goodwill, if any?
5. According to chapter 1, there are 3 legal forms of business combination explain them and mention form the annual report example of latest business combination done in 2013 – 2012.
6. According to IASB, there are conditions where the company owns more than 50% in the subsidiary but they do not consolidate the financials, explain the conditions, and mention examples from the annual report with reasons of non-consolidations.
PART B: case study
Using the equity method solve the following:
Jackson Corporation has acquired 90% of Sole Company stock for $202,500 on January 1, 2013, when Sole Equity consisted of $150,000 capital stock and $34,000 retained earnings.
· Sole company land was undervalued by $14,000 in time acquisition.
· Any excess differential above the $14,000 which was mentioned above should be allocated to Patent, the patent has useful life of 10 years.
· Sole distributed cash dividends of $16,000 .
Separate Company financial statements for the year ended December 31, 2013 for Jackson Corporation and its Subsidiary Sole Company provided below
|
| Jackson | Sole |
| Incomes statement and retained earnings 31, Dec 2013 |
|
|
| Sales | $400,000 | $100,000 |
| Income from Sole | $17,600 | - |
| Cost of goods sold | $(250,000) | $(50,000) |
| Operating expenses | $(100,600) | $(26,000) |
| Net income | $67,000 | $24,000 |
| Add: retained earnings, 1 Jan 2013 | $177,000 | $34,000 |
| Less: dividends | $(50,000) | $(16,000) |
| Retained earnings 31 Dec. 2013 | $194,000 | $42,000 |
| Balance sheet 31, Dec 2013 |
|
|
| Cash | $18, 000 | $15,000 |
| Receivable – net | $80,000 | $25,000 |
| Dividends receivable from Sole | $14,400 | - |
| Inventories | $95,000 | $10,000 |
| Investment in Sole | $218,800 | - |
| Land | $65,000 | $30,000 |
| Building- net | $170,000 | $80,000 |
| equipment- net | $130,000 | $50,000 |
| Total asset | $784,000 | $210,000 |
| Account payable | $90,000 | $10,000 |
| Dividends Payable | - | $16,000 |
| Capital stock | $500,000 | $150,000 |
| Retained earnings | $194,000 | $42,000 |
| Total equity and liabilities | $784,000 | $210,000 |
USE Equity method
1. Calculate the following:
o unamortized excess amount and
o the amount to be allocated to the Patent
2. Calculate the adjusted income from subsidiary for
o the parent and
o the NCI
3. Record the elimination entries required
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