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Accounting Rules
Finance Drools
•
•CEt= CEt-1 + NIt–Divt, or Divt= NIt–DCEt
+
=t
e
t
r
Div
Value
)1(
BC Accounting Analysis
•What are the accounting distortions in
BC’s financial statements?
•How can we correct them?
•When will the distortions reverse?
Fiscal Years Ended
Revenue:
Royalties and franchise related fees....... $43,603 $ 74,662 $115,510
Company stores............................. 40,916 51,566 83,950
Interest income............................ 11,632 33,251 65,048
------- -------- --------
Provision for relocation................... 5,097 - -
------- -------- --------
Total costs and expenses................ 71,540 92,241 173,179
------- -------- --------
Income From Operations...................... 24,611 67,238 91,329
Total other income (expense)............ (4,161) (12,865) 23,854
------- -------- --------
Income Before Income Taxes and Minority
Interest.................................... 20,450 54,373 115,183
Income Taxes................................. 4,277 20,814 42,990
Minority Interest in (Earnings) of
Subsidiary.................................. - - (5,235)
------- -------- --------
Net Income................................... $16,173 $ 33,559 $ 66,958
======= ======== ========
CONSOLIDATED BALANCE SHEETS
December 31, December29,
1995 1996
------------ -----------
ASSETS
Goodwill, net........................... - 190,439
Other Assets, net....................... 5,195 58,087
---------- ----------
Total assets.................. $1,073,877 $1,543,616
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred Income Taxes................... 16,631 40,216
Other Noncurrent Liabilities............ 833 6,292
Minority Interest....................... - 153,441
Stockholers' Equity 716,831 935,840
---------- ----------
Total liabilities and
BC As Reported
DECEMBER 31, DECEMBER 29,
1995 1996
- ---------------------------------------
Total number of financed area developers......................... 15 14
Total number of financed area developer stores open............ 627 841
Balance sheet data:
Total gross assets......................................... $513,926 $ 640,534
Statement of operations data:
Gross revenue.......................................... $ 491,341 $ 865,082
Income (loss) from continuing operations............... (148,338) (156,505)
Statement of cash flows data:
Consolidating the ADs
Chicken Sales
Note Receivables
As Reported Consolidate AD Allowance
Revenue:
Royalties and franchise related fees.....
115510 0115510
Company stores.................................
83950 83950 83950
Interest income.................................
65048 065048
Area Developer Revenues:
Boston Market 865082
ENBC 109940
Total revenue................................ 264508 1058972 264508
BOSTON CHICKEN INC 1996 Income Statement Restated
Correcting for AD loans and losses
As Reported Consolidate
Allowance
Revenue:
Royalties and franchise related fees..........
115510 0115510
Company stores.................................. 83950 83950 83950
Interest income................................. 65048 065048
Costs and Expenses:
Operating costs and expenses, corporate.
-173179 -173179 -173179
bad debt expense (.20x800519) 0 0 -160104
Boston Market Operating costs (rev+loss) -1021587
ENBC Operating costs (rev+loss) -150532
add back Royalties etc. 115510
As Reported Consolidate AD Allowance
Revenue:
Royalties and franchise related fees............ 115510 0115510
Company stores.................................. 83950 83950 83950
Interest income................................. 65048 065048
Area Developer Revenues:
Boston Market 865082
ENBC 109940
Boston Market Operating costs (rev+loss) -1021587
ENBC Operating costs (rev+loss) -150532
add back Royalties etc. 115510
add back Interest pd to BC 65048
Income From Operations............................ 91329 -105768 -68775
Other Income (Expense):
Income Taxes (37.3% ETR)...................................... 42990 -30554 -16755
Minority Interest in (Earnings) of Subsidiary..........................
-5235 -5235 -5235
Net Income........................................ 66958 -56595 -33400
Net Income Per Equiv shrs Outstdg 1.01 -0.85 -0.50
Equiv. shrs Outstdg 66501 66501 66501
BOSTON CHICKEN INC 1996 Income Statement Restated
Gain (+ equity plug) 38.2
