Soccer Inc. (SI) is a public corporation incorporated in 20X2. SI operates a professional soccer team and related activities. New bank financing was obtained in 20X9 for the construction of a new stadium. The bank requires annual audited financial statements and SI has a covenant with a maximum debt-to-equity ratio. SI’s players have an agreement with SI that entitles them to a bonus if SI exceeds net income of $25 million in the year. They agreed to this new bonus arrangement in 20X9 instead of a salary increase. Net income before any adjustments on 31 December 20X9 was $24 million. The players are upset, since the games have been well attended and they anticipated a substantial bonus payment. Management has stated that they have invested in the future, which will provide healthy bonuses in later years. Exhibit 1 includes the income statement.

You have been hired by the players to review the accounting policies for SI’s 31 December year-end. Exhibit 2 provides the notes to the financial statements. You have been asked by the players to analyze the current accounting policies; discuss alternatives, where possible; and provide recommendations on the appropriate accounting policies for events that have occurred during 20X9. The incremental borrowing rate for SI is 10%. The tax rate for SI is 30%.

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EXHIBIT 1 Revenues Operating expenses Operating profit Finance costs Finance income STATEMENT OF COMPREHENSIVE INCOME Comprehensive Income SOCCER INCORPORATED Income Statement (unaudited) Year Ended 31 Dec. 20X9 (in millions) Net income Other comprehensive income: Unrealized gain on investments recorded-FVTOCI Fair value changes on cash flow hedge Foreign exchange gain-subsidiary Actuarial gain pension plan $ 50 (22) (7) 3 5 (1) 2 3 28 $24 $33