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What Happened at Bally?
⚫Revenue growth slows and income turns negative
⚫Took a $55 million charge for membership receivable
reserve at the end of 2002. CEO resigns.
⚫Switched to modified cash-basis accounting at the end
Report (MD&A section)
Results of Operations
Comparison of the years ended December 31, 2002 and 2001
The special charges in 2002 included $55.0 million recorded as a reduction
to net revenues to strengthen our installment contracts receivable reserves. In
connection with our intentions to seek alternatives for the financing portion
be substantially monetized during the next 12 to 18 months, strengthening
our receivables reserves was warranted and resulted in the special charge.
Extracts from Press Release
Announcing Bally’s 2003 Results
collected or earned and costs associated with the sale of
memberships are no longer deferred but are recognized when
incurred. This change, which is an extension of the guidance in
EITF 00-21 "Revenue Arrangements with Multiple Deliverables"
pertaining to revenues from products and services embedded in
error in the recognition of prepaid dues. The accounting change
and these actions result in total non-cash charges of $675 million.
Key Takeaways
⚫Shifts in business strategies have both economic and
accounting consequences. Make sure that you
But they should be an integral part of a sound business
strategy and appropriately reflected in the financial
statements.
