annotated-Allscripts_Software_FY2021_completed

.pdf

School

University Of Chicago *

*We aren’t endorsed by this school

Course

20100

Subject

Business

Date

Feb 20, 2024

Type

pdf

Pages

2

Uploaded by BailiffRabbitPerson818

Report
The University of Chicago Booth School of Business Financial Accounting 20100 Allscripts Healthcare Solutions, Inc. Software Development Costs Allscripts Healthcare Solutions, Inc. (Allscripts) is engaged in providing information technology management software and solutions for healthcare industry. It works with physician practices, hospitals, and other healthcare providers. Allscripts was founded in 1986 and is headquartered in Chicago, Illinois. 1. How does Allscripts currently account for its internally developed software products to be sold? How does it currently account for its internally developed software products to be used internally? For products to be sold, they capitalize incurred labor development costs after technological feasibility is established. For internal use software, they do the same but only after the preliminary project phase is completed. In both cases, they estimate useful life and amortize the software over this life. 2. During the year, Allscripts sold some of its assets and the proceeds are included in cash from “Sale of businesses and other investments, net of cash divested, and distributions Received.” This sale also included some of Allscripts’ software products that were included in “Software development costs” assets. In addition, Allscripts provides the following disclosure related to the software development costs: “During the year ended December 31, 2021, […] We recorded $31.2 million of non-cash asset impairment charges related to the write-off of capitalized software due to the asset values exceeding the product’s net realizable value.” a. What is the gross carrying amount of software products disposed as a part of this sale? EB = BB + capitalized costs - dispositions 338,677 = 327,519 + 73,265 - dispositions Dispositions = 62,107 b. What is the accumulated amortization associated with these products? EB = BB + capitalized costs - amortization - impairments - dispositions
172,104 = 193,202 + 73,265 - amortization - 31,200 - 62,107 = 1,056 c. What is their net book value? 62,107 - 1,056 = 61,051 3. A number of competitors of Allscripts do not capitalize software development costs. How would Allscripts’ financial statements for 2021 change if software development costs were not capitalized? Ignore the effect of taxes . a. What is the effect on net income? Net income would decrease by 172,104 b. What is the effect on total assets, total liabilities, and total shareholders’ equity? Total assets would decrease by 172,104; no effect on total liabilities, total shareholders’ equity would decrease by the same amount c. What is the effect on total cash flow, cash flow from operations, cash flow from investing, and cash flow from financing? CFO would decrease by 338,677; CFI would increase by the same amount; CFF would not change, so total cash flow would not change 1
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help