You have been hired by the payers to review the accounting policies for SI's December year end. You have been asked to analyze the current accounting policies, discuss alternatives, where possible, and provide recommendations on the accounting policies for events that have occurred during 20X9. the incremental borrowing rate for SI is 10%. Tax rate is 30%

Event:

SI provided 100,000 coupons for 2$ off the game food combinations at local grocery stores and pharmacies. The $200,000 was expensed as an advertising cost

Soccer Inc. (SI) is a public corporation incorporated in 20X2. SI operates a professional soccer team and related activities. New bank financing was obtained in 20x9 for the construction of a new stadium. The bank requires annual audited financial statements and SI has a covenant with a maximum debt-to-equity ratio. SI's players have an agreement with SI that entitles them to a bonus if SI Page 1216 exceeds net income of $25 million in the year. They agreed to this new bonus arrangement in 20X9 instead of a salary increase. Net income before any adjustments on 31 December 20X9 was $24 million. The players are upset, since the games have been well attended and they anticipated a substantial bonus payment. Management has stated that they have invested in the future, which will provide healthy bonuses in later years. Exhibit 1 includes the income statement. EXHIBIT 1 STATEMENT OF COMPREHENSIVE INCOME Soccer Incorporated Income Statement $ 50 (22) 28 (7) 3 (unaudited) Year Ended 31 Dec. 20X9 (in millions) Revenues Operating expenses Operating profit Finance costs Finance income Net income Other Comprehensive Income Unrealized gain on investments recordedFVTOCI Fair value changes on cash flow hedge Foreign exchange gain - subsidiary Actuarial gain pension plan Comprehensive Income $24 5 (1) 2 3 $33 Soccer Inc. (SI) is a public corporation incorporated in 20X2. SI operates a professional soccer team and related activities. New bank financing was obtained in 20x9 for the construction of a new stadium. The bank requires annual audited financial statements and SI has a covenant with a maximum debt-to-equity ratio. SI's players have an agreement with SI that entitles them to a bonus if SI Page 1216 exceeds net income of $25 million in the year. They agreed to this new bonus arrangement in 20X9 instead of a salary increase. Net income before any adjustments on 31 December 20X9 was $24 million. The players are upset, since the games have been well attended and they anticipated a substantial bonus payment. Management has stated that they have invested in the future, which will provide healthy bonuses in later years. Exhibit 1 includes the income statement. EXHIBIT 1 STATEMENT OF COMPREHENSIVE INCOME Soccer Incorporated Income Statement $ 50 (22) 28 (7) 3 (unaudited) Year Ended 31 Dec. 20X9 (in millions) Revenues Operating expenses Operating profit Finance costs Finance income Net income Other Comprehensive Income Unrealized gain on investments recordedFVTOCI Fair value changes on cash flow hedge Foreign exchange gain - subsidiary Actuarial gain pension plan Comprehensive Income $24 5 (1) 2 3 $33