Read the case and write the report based on the following requirements:
1. SWOT analysis for the company: – strengths and weaknesses are internal aspects, Opportunities and Threats are external
-List the known strengths, weaknesses
-List the known opportunities, threats
2. Find and illustrate Accounting Issues: state the known accounting issues along with any you uncover in the case
Why is this an issue? Use the word BECAUSE
“This is an issue BECAUSE the accounting standard states…. And this violates the standard”
Analysis: state the analysis of the issues – why are they issues – what accounting standards come into play
-You need to do this for every issue
-All we want here is objectivity
For the accounting issues, mainly focus on point 3 of the case:
Point 3: “The file also contained a letter from CAP’s lawyer (Stonechild, Pilla, and Partners). The letter from the lawyers explained a current lawsuit undertaken against CAP. Apparently, a customer had asked for 50,000 parts to be produced and delivered no later than July 15, 2020. However, due to major downtime in July, CAP could not produce the parts as scheduled. In turn, the customer was late in delivering its vehicles to its distributors and had to pay a penalty equivalent of $600,000. This customer is now suing CAP for retribution for these costs. The letter goes on to state that retribution will be inevitable; however, it is believed that a settlement between $350,000 to $550,000 can be reached.”
Based on point 3, find accounting issues and analyze the issues, also to determine whether it’s a contingent liability or not and explain why.
3. Solutions – state your solutions
-Explain how your solutions fit within the accounting standards (by use ASPE)
-There ARE ALWAYS advantages/disadvantages to your solutions – be honest and explain how you mitigate the downsides
