Assume you are the Director of Financial Reporting for New Vertical Corp, a manufacturer of self-driving cars. The company became publicly traded in 2020. Fiscal years 2020-2022 were highly profitable because the company was the first to market. However, the company reported a loss of $20 million in 2023 due to increased competition. It is now December and the end of fiscal year 2024 is approaching. It has been another rough year with more competitors entering the market and lower sales revenue due to market saturation. You check your emails and find the following message from the company's CFO: 7 just spoke with the ouditors and they will require us to record an impairment loss if we hove a large amount of unsold cars sitting in inventory at the end of the year. The impoirment loss would reduce 2024 net income below our debt covenant threshold and force the company into bankruptcy. Bottam line - we need to sell at least 100,000 cars before the end of the year. If we don't, all of us are zoing to be out of a job. What if we offer a friends and family discount to oll employees? The discount would require $0 down payment, can be paid in installments over 10 years with no interest, and can be returned for a full refund arytime in the next year. We could dramatically lower our ending inventory, avoid an impairment loss, and boost our revenue! Honestly, most of the cars will probably be returned next year, but we can worry about that next year. What do you think?" Consider the following prompts assuming the CFO's plan can be structured so that US GAAP rules are not violated: - Would you help the CFO implement this plan? - What are the factors or considerations that most influence your response? Engage in the discussion in the following ways: - Begin your own thread by selecting the "Reply" button beneath these instructions. - Reply to one or more of your classmates posts if you would like to comment on their response. - "Like" any comments you find particularly interesting or agree with. Maintaining appropriate "netiquette" is crucial to ensuring that the discussion forum offers a rich leaming experience. Please be sure to follow the participation norms outlined in the syllabus. Assume you are the Director of Financial Reporting for New Vertical Corp, a manufacturer of self-driving cars. The company became publicly traded in 2020. Fiscal years 2020-2022 were highly profitable because the company was the first to market. However, the company reported a loss of $20 million in 2023 due to increased competition. It is now December and the end of fiscal year 2024 is approaching. It has been another rough year with more competitors entering the market and lower sales revenue due to market saturation. You check your emails and find the following message from the company's CFO: 7 just spoke with the ouditors and they will require us to record an impairment loss if we hove a large amount of unsold cars sitting in inventory at the end of the year. The impoirment loss would reduce 2024 net income below our debt covenant threshold and force the company into bankruptcy. Bottam line - we need to sell at least 100,000 cars before the end of the year. If we don't, all of us are zoing to be out of a job. What if we offer a friends and family discount to oll employees? The discount would require $0 down payment, can be paid in installments over 10 years with no interest, and can be returned for a full refund arytime in the next year. We could dramatically lower our ending inventory, avoid an impairment loss, and boost our revenue! Honestly, most of the cars will probably be returned next year, but we can worry about that next year. What do you think?" Consider the following prompts assuming the CFO's plan can be structured so that US GAAP rules are not violated: - Would you help the CFO implement this plan? - What are the factors or considerations that most influence your response? Engage in the discussion in the following ways: - Begin your own thread by selecting the "Reply" button beneath these instructions. - Reply to one or more of your classmates posts if you would like to comment on their response. - "Like" any comments you find particularly interesting or agree with. Maintaining appropriate "netiquette" is crucial to ensuring that the discussion forum offers a rich leaming experience. Please be sure to follow the participation norms outlined in the syllabus
