Description: Bombardier announced this week that it’s cutting about 10% of its workforce. This is around 7,500 jobs in total, with about 2,000 or so of those at home here in Canada. CEO Alain Bellemare cited competitive pressures as prompting these cuts. Two-thirds of this latest round of layoffs will hit Bombardier’s rail division.
Date: October 21, 2016
1) What role do you think the chief financial officer at Bombardier would have played in the CEO’s decision to cut staff?
2) How would Bombardier account for the costs associated with terminating this large group of employees?
3) The article notes that Mr. Bellemare wants to improve Bombardier’s cash flow. What are some of the ways an organization can use to better manage its cash? (Hint: See Chapter 7 of Wiley’s Financial Accounting: Tools for Business Decision Making)
Description: Mountain Equipment Co-op (MEC) has responded to concern from its members and scrapped certain criteria it had proposed for its board members. Given its role as a major retailer, MEC wanted board members who had governance or management experience in large and complex organizations. But this upset MEC’s members who appealed to the principle of democratic governance of the co-op.
Date: October 16, 2016
1) Are you or any one in your family a MEC member? If so, were you familiar with the controversy over governance?
2) What is your take on the controversy? Should democratic principles trump the criteria for directors?
3) The article notes that although MEC’s sales were up, its profits were down. What factors may have lead to this?
Description: The Competition Bureau is running into trouble in its ongoing investigation of Loblaw’s pricing practices. The problem seems to be that Loblaw’s suppliers seem reluctant to talk to the regulator for fear that Loblaws might retaliate against them. One thing the Bureau may be examining is Loblaw’s controversial practice of asking for 1.45 % discounts on bills from its suppliers. This cut, which has been in place since September, has obviously made a lot of suppliers unhappy.
Date: October 17, 2016; updated October 18, 2016
1) The food business is known for tight margins. If you were the chief financial officer at one of Loblaw’s major suppliers, what would be your reaction to the 1.45% cut imposed by Loblaws?
2) The article discusses Loblaw’s acquisition of Shoppers Drug Mart. Appendix A of Wiley’s Financial Accounting: Tools for Business Decision Making contains specimen financial statements for Shoppers. What size of an impact would a 1.45% cut on suppliers’ invoices have on Shoppers’ gross profit?
3) Why do you think that suppliers are reluctant to speak with the Competition Bureau on these matters?
Description: After seven long years, it looks like Nortel pensioners will have a better deal as this bankruptcy saga winds down. While pensioners are probably relieved to see issues settled, it has been a very expensive process. The total for legal and professional services paid out of the Nortel funds is over $2.5 billion, making it the most expensive bankruptcy to date in Canada.
Date: October 13, 2016
1) What do you know about the Nortel story?
2) What are some of the accounting issues you might have to deal with if you worked for a creditor of Nortel?
3) Does a career as a bankruptcy trustee appeal to you?
Description: Not so long ago Samsung’s Galaxy Note 7 launch was met with claims of ‘phone to beat’ status from Cnet.com. The past few days, however, have been unfriendly times for Samsung’s Note 7 with multiplying accounts of phones on fire. The latest blow: airlines banning the planes from flight. Combined with news of Samsung’s exploding washing machines, Samsung will have some reputation rebuilding to think about.
Date: October 15, 2016
Source: theglobeandmail.com; CNN.com
1) Are you or any of your friends owners of the Note 7? Have any of you seen the phone go up in flames?
2) If you were working for Samsung, what strategies might you recommend to combat the issues over product quality?n
3) Chapter 10 of Wiley’s Financial Accounting: Tools for Business Decision Making speaks about provisions and contingent liabilities. Should Samsung use one of these approaches in accounting for the Galaxy Note 7?
Description: Facebook has built a huge business on its advertising based social media platform. But now, after a year of testing, Facebook is offering a new platform called Workplace to compete with the Startup company Slack. Workplace – like Slack – will combine various productivity technologies like e-mail and newsletters. Workplace will be sold to businesses on a $1-$3 per user basis. Slack’s business customers currently pay a minimum of around $7 for each user.
Date: October 10, 2016
1) Have you ever used Slack at work or perhaps on project teams at school? If so, what did you like about the platform?
2) Do you think business might look at switching to Workplace? Why?
3) What factors would go into pricing Workplace?
Description: You might think lower food prices would be good news. But Sylvain Charlebois, Dean of Dalhousie Univeristy’s Faculty of Management says that we might want to hold off on the celebration. Agricultural commodity prices have dropped to about half of what they were in 2012, creating challenges for producers, retailers and processors.
Date: October 4, 2016
1) Have you noticed any of these deflationary price trends on your grocery budget?
2) What are some of the strategies indicated by the article for raising margins in the face of these price pressures?
3) Chapter 5 of Wiley’s Financial Accounting: Tools for Business Decision Making tell us a story about Canada’s largest grocery chain, Loblaw Companies, in its opening vignette. What are some of the strategies Loblaw’s has developed in recent years to help it deal with the pressures on its gross margin?
Description: Asset Recycling is a fancy phrase Canadian governments are now using for what we used to call privatization – another invented word that grated on many when it entered the vocabulary. Asset recycling means that governments will sell off older ‘legacy’ capital assets – like in Ontario’s partial sale of Ontario Hydro – in order to obtain cash for other infrastructure projects. Part of the demand is driven by pension funds searching for returns given today’s low interest rates. Ottawa appears to be next in line for this recycling program, despite the warnings that the federal government may lack the expertise to negotiate good deals when selling off assets citizens have already paid for.
Date: October 7, 2016
1) What do you think about this strategy to sell off assets to provide for new ones?
2) How would a government have to account for ‘asset recycling’ in its financial statements?
3) What sort of skill sets will the government negotiating teams require in order to protect citizens’ interests?
Description: Last week’s news featured the rather shocking jewellery robbery at the private hotel of celebrity Kim Kardashian. In addition to all the usual reality television hype, the theft did throw a spotlight on an ‘unknown’ hotel, L’hôtel de Pourtalè. It’s representative of a growing number of private luxury residences, attracting groups of wealthy travelers seeking an alternative to their normal five star hotels. Of course, as the daring crime illustrates, the private residences may offer less security than the typical five star competitor.
Date: October 6, 2016; updated October 7, 2016
1) What would be some of the marketing challenges in starting a private luxury residence?
2) What depreciation/amortization rates would you expect to see on the furnishings and fixtures in a private luxury residence? How might they compare to those of large hotel chains?
3) What might be some of the managerial accounting issues that would be particularly applicable to a private luxury residence? For example, would you expect to see less concern for cost control in this environment?
Description: The Canadian federal government is on its way to giving shareholders increased power to vote against a board director. Under the rules right now, voters can only withhold a vote for a nominee they are unhappy with. This means, theoretically, that a “bad” director could be elected with a single vote if all other shareholders refused to vote for him or her.
Date: September 29, 2016
1) Are you or any of your classmates shareholders in a publicly traded corporation? Have you ever cast a vote at a shareholders’ meeting?
2) What is your opinion of this proposed change in the voting process for electing directors of publicly traded corporations? Do you think it will lead to better governance?
3) What does Chapter 3 of Wiley’s Auditing: A Practical Approach tell us are some of the key attributes of good corporate governance?