CASE 5-3 HUM PRODUCTS LTD. HUM Products Lid. (HUM) is a consumer products company that designs, manufactures, markets, and distributes a diverse portfolio of products, primarily in the recreational and leisure segments. The products enjoy strong positive brand recognition and include such goods as bicycles, car seats, small boats, and strollers. As a public Canadian company, HUM complies with IFRS. The company is currently evaluating alternative presentations for the SCF. You are an independent accounting professional, hired to provide some expertise in the area. Your charge from the CFO Page 262 We'd like to take a fresh look at our SCF, with your help. We'd like to see what our SCF would look like if we used the direct method to present operating activities, rather than the indirect method that we have always used in the past. It would probably be helpful if your analysis also included an analysis of our strategic operating, investing, and financing decisions that are apparent from the SCF. I've provided you with the information you need [ Exhibit 1]. You can piece it ogether from this, I expect. Document your assumptions and we'll review it together next week. We'd also like you to evaluate the alternatives for presenting dividends and interest paid in the operating versus financing sections: a demonstration of the alternatives, and the impact on our key reporting numbers, would be helpful. We also struggle with the accounting policy for our development costs; they're pretty steady from year to year, and we expense them. But that's a judgement call; we're evaluating the capitalization and amortization decision as well. Perhaps you should analyze that issue as well. We are meeting with the audit committee next week, and we need to present an analysis to them. XHIBIT 1 HUM PRODUCTS LTD Statement of Financial Position As of 31 December (in thousands) 20X4 20X3 Assets Current assets Cash and cash equivalents $ 19,600 22,500 Accounts receivable 316,300 286,900 Inventories 508,500 322,400 Prepaid expenses 16.300 10,600 860,700 642,400 Property, plant, and equipment, net 159,800 140,400 Intangible assets, net 368,900 276,400 Goodwill 540,200 540,200 $1,929,600 $1,599,400 Liabilities Current liabilities Bank indebtedness $ 4,400 $ 5,800 Accounts payable and accrued liabilities 380,900 325,900 Income tax payable 30,600 25,500 Current portion of long-term debt 8,900 63,000 424,800 420,200 Long-term debt 450,700 62,900 Pension obligations 20,100 20,90 Deferred tax 111,800 109,700 1,007,400 713,700 Shareholders' Equity Common shares 177,500 177,500 Retained earnings 744, 700 708,200 922,200 885,70 $1,929,600 $1,599,400 For the year ended 31 December (in thousands) 20X4 20X3