Question
. Balance sheet format, terminology, and accounting methods. Exhibit 4.4 presents the balance sheet of Paul Loren Company for Years 10 and 9. This balance
. Balance sheet format, terminology, and accounting methods. Exhibit 4.4 presents the balance sheet of Paul Loren Company for Years 10 and 9. This balance sheet uses the terminology, format, and accounting methods of U.S. GAAP, and Paul Loren reports results in millions of U.S. dollars. (Adapted from the financial statements of Polo Ralph Lauren.) In addition to the items reported in Paul Lorens balance sheet, assume the following hypothetical information is available to you: In Year 10 Paul Loren revalued a building with an acquisition cost of $200 million downward, to its current fair value of $182 million. In Year 10 Paul Loren wrote up the value of inventory, with a carrying value of $135 million, to its fair value of $165 million. Included in commitments and contingencies for Year 10 is a lawsuit filed against Paul Loren for breach of contract. Paul Loren estimates the following range of outcomes for this lawsuit: 70% chance of damages of $100 million, 20% chance of damages of $500 million, and 10% chance of damages of $1 billion. a. Prepare a balance sheet for Paul Loren for Year 10, following the format, terminology, and accounting methods required by U.S. GAAP. Ignore any income tax effects of any revisions to reported amounts. b. How, if at all, would your answer to part a differ if Paul Loren used IFRS? Paul Loren Company Balance Sheets For Years 10 and 9 (amounts in millions of US$) (Problem 32) Year 10 Year 9 ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 563.1 $ 481.2
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584.1 338.7
Accounts receivable, net of allowances of $206.1 and $190.9 million . . . 381.9 474.9
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504.0 525.1
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.0 101.8
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139.7 135.0
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,275.8 2,056.7
Noncurrent investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.5 29.7
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697.2 651.6
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.9 102.8
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986.6 966.4
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363.2 348.9
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.7 200.4
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,648.9 $4,356.5
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149.8 $ 165.9
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.8 35.9
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559.7 472.3
Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747.3 674.1 Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747.3 674.1
Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282.1 406.4
Other Noncurrent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126.0 154.8
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,902.7 1,909.4 STOCKHOLDERS EQUITY:
Class A common stock, par value $0.01 per share; 75.7 million and 72.3 million shares issued; 56.1 million and 55.9 million shares outstanding . . . . . . . . . . . . . . . . . 0.8 0.7
Class B common stock, par value $0.01 per share; 42.1 million and 43.3 million shares issued and outstanding. . . . . . . . . . 0.4 0.4
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,243.8 1,108.4
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,544.9 2,177.5
Treasury stock, Class A, at cost (19.6 million and 16.4 million shares) . . . . (1,197.7) (966.7)
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . 154.0 126.8
Total Stockholders Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,746.2 2,447.1
Total Liabilities and Stockholders Equity . . . . . . . . . . . . . . . . . . . . . . $ 4,648.9 $4,356.5
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