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BU211 Financial Accounting 2 Week 5: Intangibles – Case #4 Assignment BU211 Financial Accounting 2 Case #4: “What’s in a Name?” Organizational Situation It is a quiet afternoon in late April. Your company has just released their third new product this year and acquired two different companies in Asia. These acquisitions open a fresh market for the new products. Your schedule has been hectic for the last 4 months with the due diligence on these acquisitions. It is finally quiet, then “PING” a new text comes in on your corporate cell phone, your senior vice president. The message is her usual, a short 5 word message “What happened on April 14th?” You have been here many times before. Figure out the puzzle! Her calendar says she is in a senior executive meeting and something about this date is important for her. Which April 14th? 1865 was the date Abraham Lincoln was killed. 1902 was when Penny’s opened their first store. 1912 was when the RMS Titanic hit the famous iceberg. 1935 was when “Black Sunday” dust cloud started the great Dust Bowl. 2019 when Tiger Woods won the Masters after a 11 year win drought. You take a lucky guess; try Tiger Woods, the most current event. Second puzzle part, what about Tiger Woods is important? Quickly you retrieve the April 19, 2019 Wall Street Journal article on Tiger’s Big Comeback. Now, third puzzle part, what is that meeting about? You quietly enter the executive floor and talk with the administrative assistant. You need to know the agenda of the meeting your boss is attending. The executive admin always knows what is happening. You show her the senior vice president’s text otherwise she would never disclose any information. She giggles and whispers the answer - intangibles. Sure enough! You guessed correctly! The chief executive and senior officers are discussing the advantages and disadvantages of intangible accounting treatments before the auditors come in two months. Which intangible? Intangibles include goodwill, licenses, trademarks, patents, copyrights, rights, customer lists or brand equity. The company made acquisitions and launched new products recently. Acquisitions come with goodwill issues. New products impact existing trademarks and brand equity. Political Environment You have worked with the same senior vice president from case #2 for over 5 years now. You know she is demanding and accepts no excuses for incomplete or delayed work. So far, you have survived by your exceptional research skills and critical thinking. As you rethink the past 4 months, the new products have not had time to mature or build brand recognition. You reread the Wall Street Journal article on Tiger Woods, “The Business Lesson in Tiger’s Big Comeback”. It was published just days after the requested “April 14th” date. Now, the fourth puzzle part, what is the issue? As you are walking back to your office, you notice two attorneys from the in-house counsel walking towards the conference room. They are carrying a large GAAP volume and are in deep discussion on account rules FAS 141, FAS142 and Accounting Standards Update (ASU) 2017-4. The attorneys are discussing impairment conditions. They also frantically keep stating “This has to be done each year before the independent auditors come to review financial statements. We need to hurry.” Bingo! You quickly look up those financial accounting standards to discover these standards cover goodwill, impairment and determining annual goodwill values. Your research discloses that the consolidated amount of goodwill in Standard & Poor’s 500 corporations is $3.3 trillion or 10% of total assets. You also discovered that General Electric wrote down $22 billion of goodwill in 2018 due to acquisitions. They still have $60 billion of goodwill on their balance sheet, equal to 19% of total assets. You remember from the WSJ article that Kraft Heinz Co. also wrote off $15.4 billion. You also know that Kraft Heinz’s market value dropped by 27%. Now you know you need to prepare for impairment charges related to reductions in goodwill. Report Requirements · First, from the list of corporations listed below, select one company. You will use this company for the analysis required in the fourth requirement. · Second, start your report with a discussion of goodwill write-offs and impairment charges. Your review should include a complete definition of impairment, a review of “mark-to-market” charges and examples of impairment charges. A review of the advantages, disadvantages and possible impacts on operating ratios and loan management will be included in this analysis. · Third, research the common methods used to determine a trademark’s value and how this relates to goodwill. There are four approaches to evaluation of trademarks, goodwill and other intangibles. These are royalty, income, market and cost-based brand. You will use this information in the next requirement. · Last, for the company you selected, discuss the intangible issue which it experienced and when it was reported publicly. Give a quick summary of related events and possible causes. Determine how that company reported the intangible before and after the event experienced in the financial statements. Research and determine the method they used for any write-off and the impact of that write-off to their capital and operating structures (market share price and loan management). PAPER REQUIREMENTS The case paper must be 3 pages and no longer than 6 pages. The content must be presented clearly to demonstrate all the report requirements. There must be a bulleted executive summary to begin your paper. Your report must be written in APA 6th Edition format, in Times New Roman, 12-point font with one inch margins and single or single/half spaced. Research or statistics must be sourced and cited. Comparatives to the other companies are allowed. Your title pages and reference page is NOT included in the required paper length. To assist with your initial research, a listing of possible WSJ research articles follows. Not all articles will apply this this first case study. In order to access these and other business articles within our copyright laws, you have two options: 1. Purchase a student subscription to the periodical 2. Access the online version of the article from the Truett McConnell University’s Cofer Library utilizing GALILEO. Additional resources are available to you through GALILEO including Newspaper Source Plus and West Law. The library staff is willing to assist any online student. Wall Street Journal Options available for your Research Choose the relevant articles 1. The Power Players that Dominate Chapter 11: WSJ 5/25-26/19 2. Earning Offer Next Test of Retailers’ Turnaround, 8/14/18 3. This Earnings Season, A Miss Hurt More, Corrie Driebusch WSJ 4/24/19 4. Bruised Retailers Face More Pain, Michael Wursthorn, WSJ 5/13/19 5. Weakness Across Assets Puts Some on Edge, Amrith Ramkumar, WSJ 5/13/2019 6. Canada’s Free-Market Example for the SEC , John Hartsel and Peter St. Onge, WSJ 5/16/19 7. Former JP Morgan Banker Charged with Bribery in ‘Sons and Daughters’ Program, Joanne Chiu, WSJ 5/17/19 8. CEOs Talk Tech, Scrutiny, Turmoil, Ben Dummett, WSJ 5/15/19 9. The Business Lesson in Tiger’s Big Comeback, John D. Stoll, WSJ 4/19/19 10. EXCHANGE --- Weekend Investor—Tax Report: How to Know if a Roth 401(k) is Right for You---Many workers now have the opportunity to save for retirement in a Roth plan alongside a traditional 401(k), But should they?, Laura Saunders, WSJ 5/18/19 11. Your Caveman Brain Isn’t Built for Investing, Jason Zweig, WSJ 5/18/19 12. Just Leaving: Parting Pay, Patrick Thomas, WSJ 5/18/19 13. Buyback Drop Threatens Stocks, Michael Wursthorn WSJ 7/3/19 14. China to Merge Its Largest Shipbuilders, Trefor Moss and Bingyan Wang, WSJ 7/3/19 2 | Page