Which оf the fоllоwing provide а correct definition of the term circle. Check аll thаt apply.
Rоbin Yellоwbird, CPA, wаs tаking а break frоm his work reviewing an audit file of a new client, Alberta Innovative Resources Ltd. (AIR). Robin, a manager in the CPA firm of Dolittle and Dunn, was responsible for ensuring that the audit fieldwork files were complete, properly documented, and supported the audit opinion. Robin had been an audit manager with the firm for seven years, but this was his first year working on the audit of AIR. AIR was a private company engaged in the development of oilfield technology applications. Recently, AIR purchased the assets of PetroLink, another oilfield technology company, in order to acquire the rights to some proprietary technology. Robin was taking a second look at the inventory section of the audit file as a result of a conversation he had just had with the engagement partner, Tom Dolittle. ROBIN: I am concerned about the client’s inventory valuation. I attended the client’s inventory count with our audit senior, as she had expressed some concern about obsolete inventory. We did a thorough job and selected a larger sample size than usual. We did a “dust test” and discussed the movement of several items with the warehouse manager. There is an entire corner of the warehouse that appears to have some old pipes, valves, and other equipment that hasn’t moved in years. The warehouse manager pointed out all the items to us that were not currently being sold. Based on this information, we were able to trace these items back to the inventory records. To summarize, it looks like the inventory may be over-valued by at least $1.5 million. I propose that we take this adjustment to the client and request the write-off of the obsolete inventory. This is a material amount, based on our planning materiality. TOM: Robin, I have discussed this matter with the CFO of AIR. Most of these items were part of the asset purchase from PetroLink. They needed to acquire this old junk in order to close the deal. This was critical to ensuring they were able to get a hold of the proprietary technology. This technology is essential to AIR’s expansion plan into international markets. With this planned expansion, the company will be able to proceed to the next step of an initial public offering of their shares. This is why this audit is so important. The CFO has indicated that the company needs to show good results this year to generate enough interest in the IPO. He is aware of the inventory problem, but he has asked us to write off the obsolete items over three years, to minimize the effect in the current year. ROBIN: But that would result in an overvaluation of the inventory in the current year of at least a million dollars. That would still be material to this year’s statements.TOM: I know you have completed your inventory testing procedures, but I want you to revisit them. There is some judgment in evaluating obsolete inventory. The CFO has indicated that some of these items may be saleable in secondary markets overseas. Sharpen your pencil and take another look at this. AIR needs good results this year, and we need AIR to be successful. AIR is a new client for us, but if they can pull off the IPO, they could easily become our largest audit client. There will also likely be some consulting work that could eventually come from them. This is good for our firm, and it could be good for you, Robin. Now go take another look at those numbers. I will need revised draft financial statements by the end of this week. Robin took off his glasses and rubbed his eyes. No matter how long he looked at the file, he could not see any way to justify the client’s position. Required: Review the excerpt below, taken from IAS 2, the IFRS related to inventories. Is there any part of the accounting standard that supports the client’s position to not write off the entire obsolete inventory balance? What further information would be needed to support the client’s position? (6 marks) Applying the Giving Voice to Values methodology, answer the following questions from Robin Yellowbird’s perspective. (24 marks)a) What are the main arguments you are trying to counter? That is, what are the reasons and rationalizations you need to address. b) What is at stake for the key parties, including those who disagree with you?c) What levers can you use to influence those who disagree with you?d) What is your most powerful and persuasive response to the reasons and rationalizations you need to address? To whom should the argument be made? When and in what context? EXCERPT FROM IAS 2 – Inventories The cost of inventories may not be recoverable if those inventories are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined. The cost of inventories may also not be recoverable if the estimated costs of completion or the estimated costs to be incurred to make the sale have increased. The practice of writing inventories down below cost to net realisable value is consistent with the view that assets should not be carried in excess of amounts expected to be realised from their sale or use. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, of the amount the inventories are expected to realise. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. Estimates of net realisable value also take into consideration the purpose for which the inventory is held. For example, the net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess is based on general selling prices. Provisions may arise from firm sales contracts in excess of inventory quantities held or from firm purchase contracts. Such provisions are dealt with under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
When Chevrоlet begаn tо sell its Nоvа cаrs in Latin America, hardly anyone would buy them. The company finally learned that Spanish speakers read the car's name as the Spanish phrase no va, meaning "doesn't go"! Like Chevrolet, many American companies have learned the hard way that they need to know their customers' language. When Pepsi-Cola ran its "Come Alive with Pepsi" ads in China, the consumers laughed. The company had not translated its slogan accurately. In Chinese, it came out as "Pepsi brings your ancestors back from the dead."