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Book is Financial Reporting and Analysis 13th ed

Case 4-1 HOMEBUILDERS LENNAR CORPORATION AND SUBSIDIARIES* CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended November 30, 2010, 2009 and 2008 2010 2009 2008 (Dollars in thousands, except per share amounts) Revenues: Lennar Homebuilding Lennar Financial services Rialto Investments $2,705,639 275,786 92,597 2,834,285 285,102 ______ 4,263,038 312,379 ______ 3,074,022 3,119,387 4,575,417 Lennar Homebuilding (1) 2,543,323 3,210,386 4,541,881 Lennar Financial services (2) Rialto Investments Corporate general and administrative 244,502 67,904 93,926 249,120 2,528 117,565 343,369 129,752 2,949,655 3,579,599 5,015,002 Lennar Homebuilding equity in loss from unconsolidated entities (3) (10,966) (130,917) (59,156) Lennar Homebuilding other income (expense), net (4) 19,135 (98,425) (172,387) Other interest expense (70,245) (70,850) (27,594) Gain on recapitalization of Lennar Homebuilding unconsolidated entity Rialto Investments equity in earnings from unconsolidated entities Rialto Investments other income, net Earnings (loss) before income taxes 15,363 17,251 94,725 ______ (760,404) 133,097 ______ (565,625) Benefit (provision) for income taxes (5) 25,734 314,345 (547,557) Net earnings (loss) (including net earnings (loss) attributable to noncontrolling interests) 120,459 (446,059) (1,113,182 Total revenues Costs and expenses: Total costs and expenses *\"We are one of the nation's largest homebuilders, a provider of financial services and through our Rialto Investments (\"Rialto\") segment, an investor in distressed real estate assets.\" 10-K Source: Lennar Corporation and Subsidiaries Consolidated 2010 10k 2010 2009 2008 (Dollars in thousands, except per share amounts) Less: Net earnings (loss) attributable to noncontrolling interests (6) 25,198 (28,912) (4,097) (1,109,08 Net earnings (loss) attributable to Lennar $ 95,261 (417,147) 5) Basic earnings (loss) per share $ 0.51 (2.45) (7.01) Diluted earnings (loss) per share $ 0.51 (2.45) (7.01) (1) Lennar Homebuilding costs and expenses include $51.3 million, $373.5 million and $340.5 million, respectively, of valuation adjustments and write-offs of option deposits and pre-acquisition costs for the years ended November 30, 2010, 2009 and 2008. (2) Lennar Financial Services costs and expenses for the year ended November 30, 2008 include a $27.2 million impairment of goodwill. (3) Lennar Homebuilding equity in loss from unconsolidated entities includes the Company's share of valuation adjustments related to assets of unconsolidated entities in which the Company has investments of $10.5 million, $101.9 million and $32.2 million, respectively, for the years ended November 30, 2010, 2009 and 2008. (4) Lennar Homebuilding other income (expense), net includes valuation adjustments to investments in Lennar Homebuilding unconsolidated entities of $1.7 million, $89.0 million and $172.8 million, respectively, for the years ended November 30, 2010, 2009 and 2008. (5) Benefit (provision) for income taxes for the year ended November 30, 2010 primarily related to settlements with various taxing authorities. For the year ended November 30, 2009, benefit (provision) for income taxes includes a reversal of the Company's deferred tax asset valuation allowance of $351.8 million. For the year ended November 30, 2008, benefit (provision) for income taxes includes a $730.8 million valuation allowance recorded against the Company's deferred tax assets. (6) Net earnings (loss) attributable to noncontrolling interests for the year ended November 30, 2010 includes $33.2 million related to the FDIC's interest in the portfolio of real estate loans that the Company acquired in partnership with the FDIC. Net earnings (loss) attributable to noncontrolling interests for the year ended November 30, 2009 includes ($13.6) million recorded as a result of $27.2 million of valuation adjustments to inventories of 50%-owned consolidated joint ventures. Required a. Would you consider the presentation to be a multiple-step income statement or a single-step income statement? Comment. b. Does it appear that there is a 100% ownership in all consolidated subsidiaries? c. If a subsidiary were not consolidated but rather accounted for using the equity method, would this change net earnings (loss)? Explain. d. Describe equity in loss from unconsolidated entities. e. Comment on Note 1. Does this note project favorably on the future of Lennar Corporation? Explain. f. Comment on Note 2. Why take an impairment for goodwill under financial services