Business Class C Should Not Continue

On December 31 2007, your company determined that a loss in connection to the claim was probable.

2. M should adjust its liability for the year-end December 31, 2009, financial statements. $1,500,000 should be recorded. And this adjustment should be considered a 2009 event.

The insurance industry’s performance is highly correlated with the state of the economy and specifically GDP growth. From the data outlined in this report, it is evident that the insurance industry flourishes alongside the economy where factors such as output, unemployment, and other variables are growing as well. Since the 2008 crisis, the Canadian economy has recovered quite well. One of the key concerns going forward is the current exchange rate of the Canadian dollar. Going forward, as the economy goes into a boom it will be crucial for the insurance industry to reach its potential.

1. According to the case, it shows that management of M determined that a loss would be “probable” and the estimate range would be $15 million to $20 million. However, they determined $17 million would be the “most likely” amount of loss.

As per ASC 450-20-25-2, entities should accrue an estimated loss from a loss contingency by a charge to expense and a liability recorded only if both of the following conditions are met:

Q6. XYZ Ltd is a publicly listed company which has suffered from major sales declines, due to increased foreign completion, and has made a succession of losses over the past three years. During the year, its CEO resigned and was replaced by Chief Operating Officer (COO). The trial balance reveals that sales were $10,000,000 and the company made a loss of $500,000. At what level

6. MB4 Profit and Loss Account 2: A worked example of your solutions to your identified problems in P&L1

This loss falls within our 2015 contract year, our cover is 27% of $750,000 xs $250,000 (Limit is $202,500). HAPI issued a Claims Made and Occurrence Medical Professional Liability policy with limits of $1,000,000 per occurrence and $3,000,000 aggregate effective 01/01/15 – 12/31/15

Disclaimer: The following notes are based on a fictitious company and the numbers have no bearing on any real data.

This is a question that requires judgment on the part of the student. Clearly, while the losses in 2005 are of concern given GM’s consistent profitability to that point, 2005 may have been viewed as an abnormal year and the loss judged to be a one-time occurrence. While GM had also experienced a net loss in 2006, the amount of this loss was lower than that in 2005 (likely because of the spin-off of GMAC). In both years, GM showed negative cash flow from operations, raising more questions as to GM’s ability to continue as a going concern.

Based on this information, only an immaterial amount of companies actually accrue a liability in their financial statement. Therefore, M Corporation will simply provide disclosure of the contingency and an estimate of the possible loss or range of loss for the future pending litigation in its 2007 financial statement under Note: Contingencies and Commitments. If M Corporation accrued a liability on its 2007 financial statements, then the company becomes too transparent to opposing counsel and it could have serious adverse effects on M’s operations.

They faced the potential that by that following April they had losses close to £250 million in two years.

The story is completely different in the credit cards only segment in Figure 2. As we can see, around 95% of the customers contribute to nearly 170% profitability. There are 5% customers who cause 70% decline in profits. If we put these numbers in the context of Figure A, we see that this curve fits the top right quadrant where a small number of customers are highly unprofitable. So there is room for action. If we look closely at the data, we find that these small numbers of customers are the ones who defaulted on payments. So the bank needs a strategy to ensure that defaults do not affect the segment profitability to such an extent.

Based on the text above, and the financial data provided (Tables 4.11-4.13), to what extent was it inevitable that Woolworths would fail as a business? Justify your view, using suitable ratios to support your judgment. (35 MARKS)

The main weakness in the current accounting standards was the delayed recognition of credit losses on loans. The existing model called the incurred model lead to delay in recognition of loss