Rebound Sports, Team Project

You were just promoted to CFO of Rebound Sports, a publicly traded sporting goods manufacturing company. You have been tasked with helping the company improve its financial statements as part of its push to gain back investor confidence. The share price of the company from the beginning of the year until now has dropped from $30 per share to $20 per share and the board of directors is concerned.

Youll need to rely on your understanding of the financial statements and which numbers and ratios investors value to lead a winning change at your organization while also observing generally accepted accounting principles (US GAAP). Simply hoping that market conditions improve will not be adequate.

Youll need to financially discipline the company by advising the executive team on decisions that will lead to greater financial health. Youll also need to ensure avoid fraudulent accounting practices. Remember, the primary source for US GAAP is the FASBs accounting standards codification (ASC) online. Also relevant for public companies are SEC comment letters and enforcement actions, which I have included where appropriate in the case.

The executive team needs your advice regarding 6 accounting issues (listed below). You will assess each issue, analyzing how it would affect the financial statements and analysis ratios. Your analysis should be more thorough than simply stating which accounts are affected and whether they increased or decreased. Current financial statements are included in the attached Excel file, Rebound Financial Statements. I have included the relevant FASB ASC reference for each of the accounting issues so you can follow the appropriate US GAAP. Remember, some US GAAP leaves room for manager judgment. In deciding how to handle the accounting issues, you should consider both the short-term goal of improving the financial performance of the company AND what is best for the company and its investors long-term.

The issues on the table for discussion include the following:

1. Year-end Sales Push: In the 4^th quarter of the year, the CEO would like to give deep sales discounts to customers to encourage them to stock up on more of the companys products (channel stuffing). Customers can pay in the subsequent year, which would put all sales into receivables. The customers could keep the inventory they purchase in the companys warehouses until they are ready to receive it (a bill-and-hold arrangement). This would bring in an estimated $1,000,000 in Sales at the end of the year with an estimated $500,000 in COGS.
   1. Relevant US GAAP: ASC 606-10-55-81 through 84 (Bill-and-Hold Arrangements); SEC AAER Release No. 1393 in 2001 regarding channel stuffing and bill-and-hold sales by Sunbeam Corporation.
   2. Textbook guidance on accounts affected: Chapter 5, LO 5-1

Balances as of 9/30/2023
(in thousands)
	Net Sales	$150,000
	Cost of Goods Sold	########
	Gross Profit	$50,000
	General Operating Expenses	($36,200)
	Bad Debt Expense	$0
	Interest Expense	($3,300)
	Depreciation Expense	($10,000)
	Contingent Liability Expense	$0
	Income Before Tax	$500
	Income Tax Expense (Benefit)	$150
	Net Income (Loss)	$350
	Earnings (Loss) Per Share	$0.88