AFM 182 Midterm Study Package

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Apr 3, 2024

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Chapter 1: Introduction to Accounting for Public Companies Conceptual Framework ● Conceptual framework of accounting is a place to ensure accounting standards are consistent and logical ● Private companies present financial data in accordance with ASPE and public companies use IFRS ● There are three assumptions under the ASPE conceptual framework: ○ Going Concern: assumption that business will continue to operate in future ○ Separate Entity: personal and company transactions must be separate ○ Historical Cost: assumption that transactions are recorded at their cost Qualitative characteristics of useful financial information ● ASPE requires four principal qualitative characteristics of financial information: ○ Understandability : Users should be able to understand financial statements ○ Relevance : Statements must contain relevant information ○ Reliability : Information on statements should be ﬂawless and unbiased ○ Comparability : Users should be able to easily compare financial statements of 2 different companies ● These characteristics are also part of IFRS, which requires the additional: ○ Faithful Representation : Information on statements should be ﬂawless and unbiased (Reliability) ○ Verifiability : Information results in a consensus among observers who confirm that the financial data is accurate and honest ○ Timeliness : Financial data is available to ensure informed decisions are made on time Below is a table comparing ASPE and IFRS Conceptual Frameworks: Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/.

Moving from ASPE to IFRS IFRS is much more stringent and requires more disclosure ● Some private companies must adopt IFRS such as non public financial institutions, but most private companies can choose whether to adopt IFRS ● Public companies have to follow IFRS and need to comply with all requirements ● Standards are organized into 3 components: Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Differences in Financial Statements Balance sheet/Statement of financial position Differences in Presentation ● Under ASPE, the statement is known as the “balance sheet”, under IFRS, the statement is known as the “statement of financial position” ● Under ASPE, items are not required to be presented in order of liquidity ● Under IFRS, items must be presented in order of liquidity only if it makes information more reliable and relevant ● Unlike ASPE, IFRS does not need to separate current and noncurrent assets ● IFRS requires a statement of financial position as at the beginning of the earliest comparative period in 2 specific circumstances: ○ When a company changes its accounting policy that restates/reclassifies items ○ When a company corrects a previously reported error

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Differences in Assets ● Biggest difference between ASPE and IFRS is the changes to plant, property, and equipment (PP&E) Below is a table comparing the differences in assets: Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Differences in Liabilities ● Biggest difference in liabilities between ASPE and IFRS is lease classification ○ Under IFRS, leases greater than 12 months in length are classified as capital leases (aka financing leases under IFRS) Income statement/Statement of profit or loss and other comprehensive income ● Under ASPE, the statement is known as “Income statement”, under IFRS, it is known as the “Statement of profit or loss and other comprehensive income” or “the statement of profit or loss (P&L)” ● IFRS requires that certain information be presented in “other comprehensive income (OCI)”, a concept that does not exist under ASPE. Differences in Revenue Recognition ● Under ASPE, there are 4 criteria for revenue recognition: ○ The significant risks and rewards of ownership are transferred to buyer ○ The amount of consideration can be measured ○ At the time of the transaction, collection of payment is reasonably assured ○ Delivery of goods/services have been performed ● IFRS has a series of steps that need to be verified before looking at recognizing revenue: ○ First, an entity must determine if it has engaged in a contract with a customer ○ The entity must identify performance obligations that are part of the contract

○ The entity must identify a transaction price promised by a customer ○ Entity must allocate transaction prices to each individual performance obligation ○ Revenue is recognized when the entity satisfies each performance obligation. Expense Classification ● ASPE does not have specific presentation requirements for expense classification, typically referred to as “by nature” ○ Simpler way to organize expenses for smaller organizations ● IFRS requires expenses to be classified either “by nature” or “by function” ○ By function organizes expenses into categories that reﬂect specific functions of the business (e.g., administrative, selling and distribution) Statement of retained earnings ● Under IFRS, there is no need for a separate statement of retained earnings ● IFRS requires a statement of changes in equity ○ A more detailed presentation of the retained earnings line item Cash ﬂow statement/Statement of cash ﬂows ● Under ASPE, the statement is known as the “cash ﬂow statement”, under IFRS, the statement is known as the “statement of cash ﬂows” ● Under ASPE: ○ Interest and dividends received must be classified as operating cash ﬂows ○ Interest and dividends paid must be classified as operating cash ﬂows ○ Dividends paid must be classified as financing activities ● Under IFRS: ○ Interest and dividends received can be classified as operating or investing activities ○ Interest and dividends paid can be classified as operating or financing activities Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Other Notable Comparisons ● If a company makes a significant error, previous statements must be corrected and restated ○ ASPE requires this but IFRS has an exemption allowing entities not to have to restate prior periods as they deem it is impractical to do so ● Public companies are required by law to disclose non financial information while private companies are not required to

Chapter 1 Practice Questions 1. Which of the following statements best defines the conceptual framework of accounting? a. It provides a platform for ensuring accounting standards are consistent and logical. b. It specifies the exact accounting standards to be followed by all companies. c. It outlines the procedures for conducting internal audits in accounting firms. d. It establishes guidelines for setting executive compensation in accounting firms. 2. Under ASPE, which of the following is NOT one of the three assumptions of the conceptual framework? a. Going Concern b. Matching Principle c. Separate Entity d. Historical Cost 3. Which of the following is a principal qualitative characteristic of useful financial information under both ASPE and IFRS? a. Verifiability b. Timeliness c. Reliability d. Disclosure 4. What additional qualitative characteristic is required by IFRS but not by ASPE? a. Understandability b. Comparability c. Faithful Representation d. Relevance 5. Which of the following companies is required to follow IFRS? a. A privately-owned retail store b. A publicly-traded technology company c. A family-owned restaurant d. A small consulting firm 6. Under IFRS, how are leases greater than 12 months in length classified? a. As operating leases b. As finance leases c. As capital leases d. As non-operating leases

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7. If a company makes a significant error in financial reporting, what action is required under ASPE? a. Restate prior periods and correct the error. b. Disclose the error in the footnotes without restating prior periods. c. Ignore the error if it does not materially affect financial statements. d. Request an exemption from the regulatory body. 8. Which statement is known as the "Statement of profit or loss and other comprehensive income" under IFRS? a. Income Statement b. Balance Sheet c. Cash Flow Statement d. Statement of Retained Earnings 9. What is a notable difference in revenue recognition between ASPE and IFRS? a. ASPE requires revenue to be recognized only when payment is collected. b. IFRS requires revenue to be recognized when a contract with a customer is identified and performance obligations are satisfied. c. ASPE recognizes revenue based on the delivery of goods/services without considering contract terms. d. IFRS recognizes revenue based on the risks and rewards transferred to the buyer. 10. Which of the following expense classification methods is required by IFRS? a. By nature b. By function c. By industry d. By size 11. True or False: Capital leases are less than 24 months a. True b. False

Chapter 2: Special Accounting Topics Inventory valuation and write-downs ● Both private and public companies are required to value inventory consistently using one of the following methods; specific identification method, FIFO, and weighted-average cost ● Accounting standards permit companies to change costing methods ○ Changes only occur if they result in more relevant and reliable information The lower of cost and net realizable value (LCNRV) rule ○ Common to both IFRS and ASPE ○ Requires that inventory owned by the company is measured and presented at either historical cost, or Net realizable value (whichever is lower) ○ Net realizable value is the selling price of the inventory less the estimated costs required to make the sale ● If NVR is lower than the historical cost, an inventory write-down will be required: DR. COGS $X CR. Inventory $X To record an inventory write-down ● Companies are permitted to reverse inventory write-downs up to an updated NRV (not exceeding original cost) DR. Inventory $Y CR. COGS $Y To record an inventory write-up to the original cost Inventory errors ● Inventory errors are directly caused by poor control by a company ● If inventory is counted incorrectly, the ending inventory balance reported will be incorrect ○ Due to the relationship between inventory and COGS, ending inventory errors resolve themselves over the span of two periods ■ E.g. if ending inventory is overstated in period 1, period 1’s COGS will be understated, resulting in an overstatement of gross profit in period 1 ○ This results in period 2 beginning in an overstatement in beginning inventory, resulting in an overstatement of COGS, and an understatement of gross profit

The table below demonstrates this self correcting inventory issue: Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Sale or disposal of of PP&E ● PP&E are depreciable and typically wear out after time. If an asset is discarded (assuming no residual value), the asset and amortization are removed from the books. E.g., DR. Accumulated depreciation - Truck $5000 CR. PP&E - Truck $5000 To recognize disposition ($0 residual value) of truck no longer in use ● Gain/Loss on sale of disposal or asset follows four steps: 1. Ensure accumulated amortization for asset is up to date at the time of sale or disposal of asset. 2. Calculate the asset’s carrying value immediately prior to the sale/disposal. 3. Calculate any gain or losses by comparing carrying value to proceeds of the sale or disposal. 4. Record disposal in the accounting information system.

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● E.g. Truck is fully depreciated with no residual value, initial cost was $20,000 and sold for $2000 1. Amortization is up to date, we know that truck is fully depreciated 2. Calculate carrying value prior to sale/disposal, we know carrying value was $0 3. Calculate gain/loss = Proceeds of sale/disposal - carrying value Gain/Loss = $2000-$0 Gain = $2000 4. Record entries DR. Accumulated depreciation Truck - $20,000 DR. Cash - $2000 CR. Truck - $20,000 CR. Gain/Loss on asset - $2000 To account for the sale of and resulting gain on delivery truck Impairment of PP&E ● PP&E is carried on the books at amortized cost. Iin certain circumstances this carrying value may be significantly different from the recoverable amount of the asset. ● Some indicators of this are: ○ A decline in market value ○ Major advances in technology ○ Physical damage ○ Asset idling ● These are all indicators of potential impairment , when an asset’s carrying value exceeds its recoverable amount ● An assets recoverable amount is the greater of: ○ Fair value less cost of disposal ○ Value in use: Present value of the estimated future cash ﬂows the asset will generate as a result of its use less costs of disposal ● If a company needs to impair/write down an asset, the following journal entry is used: DR. Loss on asset impairment $X CR. PP&E asset $X To record impairment of asset ● Assets are permitted to be written up to the original cost if NRV increases, and are also permitted to be written up through a reversal of asset impairment if recoverable amount increases in the future ● Under IFRS, PP&E must be tested for impairment when there are indicators of impairment, goodwill and certain intangible assets must be tested for impairment annually.

Depreciation ● Accounting method: allocates the depreciable cost of an asset over the asset’s estimated useful life ○ Most long-term assets need to be depreciated over useful life ○ Land is an exception due to its unlimited useful life ● New method of depreciation: Double Declining Balance (DDB) method 1. Calculate total acquisition cost of asset 2. Calculate straight line depreciation rate: 1/(estimated useful life in years) 3. Calculate DDB rate: SL rate (from Step 2) x2 4. Calculate depreciation: DDB rate x beginning period book value (carrying value!) a. *Must calculate depreciation in the last year to ensure ending book value = residual value Tax Basics Income Tax ● Taxes = source of revenue for the government and part of fiscal policy ○ Fiscal Policy: how government implements tax policies and allocates spending ● Income Tax: expense charged by government on income of people/companies ○ In Canada, we are taxed on a provincial and federal level ○ Our tax system is progressive; tax rate depends on income level ○ Corporate tax rates are lower than personal tax rates ○ If you worked in 2021, you have until the end of April 2022 to file your taxes ○ Companies pay taxes in installments to avoid one massive tax bill Goods and services tax (GST) ● GST, aka Value Added Tax (VAT) is tax imposed at each stage of the supply chain ○ Producer pays GST to shipping company, Retailer pays GST to producer, Consumer pays GST to retailer ● Ontario’s GST is called HST (Harmonized Sales Tax) and is 13% ○ Books and certain grocery items are exempt from HST ● Example: A company buys shirts for $100 + HST. The entry is: ○ DR. Shirts $100 DR. HST Receivable $13 CR. Cash $113 ○ HST is a receivable because the company is eligible for a HST refund unless they collect more HST than they pay.

● Example: A company sells shirts to a customer for $200 + HST. The entry is: ○ DR. Cash $226 CR. Shirts $200 CR. HST Payable $26 ○ HST is a payable because the company will pay this to the government Deferred tax assets & liabilities ● Deferred Tax Assets (DTA)/Deferred Tax Liabilities (DTL): balance sheet items which arise from differences in the calculation of income for accounting purposes and income for tax purposes ○ CRA (Canada Revenue Agency) may depreciate asset classes differently resulting in difference of income for tax purposes (typically lower). Company would pay less tax . ○ Commonly due to a difference in depreciation methods ○ However the amount of tax paid for accounting and tax purposes must be the same. ○ Hence, a deferred tax liability would be created for the amount of tax that would eventually need to be paid ● Fun fact: The CRA refers to depreciation as “Capital cost allowance (CCA)” Table below demonstrates differences between calculation of depreciation for accounting income and taxable income: Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Property tax ● Property tax is an expense paid for non-movable property owned by a corporation or individual. ○ Property tax is typically collected by the municipal government which the land/building resides on ● In Ontario, property tax is calculated with three variables: ○ General municipal tax rate (determined by municipality) ○ Education tax rate (set by provincial government) ○ Property value (determined by Municipal Property Assessment Corporation (MPAC))

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● Corporations are assessed for property taxes on an annual basis, recorded as an operating expense on the statement of profit or loss ● Corporations often record property tax via monthly installments, by pro-rating the annual expense

Chapter 2 Practice Questions 1. Which inventory valuation method allows for the specific identification of the cost of each item? a. FIFO (First-In, First-Out) b. LIFO (Last-In, First-Out) c. Weighted-average cost d. Specific identification method 2. According to accounting standards, when can companies change their inventory costing methods? a. Only if the change results in a decrease in reported inventory value b. Only if the change results in a more conservative financial position c. Only if the change results in more relevant and reliable information d. Only if approved by the company's shareholders 3. Assuming you have 310 jackets with an NRV of $48 and a Historical Cost of $57, what amount would the inventory write down be? a. $2790 b. $3410 c. $2970 d. $3140 4. What is the main purpose of the lower cost and net realizable value (LCNRV) rule in inventory valuation? a. To ensure that inventory is always valued at its historical cost b. To prevent companies from recognizing losses on inventory c. To ensure that inventory is not overvalued on the balance sheet d. To ensure that inventory is valued at its highest possible selling price 5. Which of the following best defines inventory's net realizable value (NRV)? a. The historical cost of inventory items b. The current market value of inventory items c. The selling price of inventory items less the costs required to make the sale d. The original purchase price of inventory items 6. If inventory's net realizable value (NRV) is lower than its historical cost, what type of journal entry is required to record an inventory write-down? a. Debit to Inventory, Credit to Cost of Goods Sold (COGS) b. Debit to Cost of Goods Sold (COGS), Credit to Inventory

c. Debit to Inventory, Credit to Retained Earnings d. Debit to Cost of Goods Sold (COGS), Credit to Retained Earnings 7. How are inventory write-downs treated if the net realizable value (NRV) of inventory increases in subsequent periods? a. They are reversed through a debit to COGS and a credit to Inventory b. They are reversed through a debit to Inventory and a credit to COGS c. They are not permitted to be reversed under accounting standards d. They are reversed through a debit to Retained Earnings and a credit to Inventory 8. Which of the following scenarios would trigger the impairment/write-down of property, plant, and equipment (PP&E)? a. An increase in the market value of the asset b. A decrease in the technological advancements related to the asset c. Physical damage to the asset resulting in decreased functionality d. A decrease in corporate taxes associated with the asset 9. Your company has a truck with two years of useful life left, depreciated based on a 5-year useful life. The truck's residual value is $5000, and its original cost was $25000. A customer offered to purchase the truck for $7000. What would be the gain/loss on the sale of the truck? a. Gain of $6000 b. Gain of $13000 c. Loss of $6000 d. Loss of $13000 10. A company had two years of useful life left on one of their tractors, with a 5-year useful life. The tractor originally cost $60,000 with a residual value of $11,000. If a customer offered to purchase the tractor for $20,000, how much would the company gain/lose? a. Loss of $10,600 b. Gain of $16,000 c. Loss of $14,600 d. Gain of $13,460 11. A business had total sales during the year subject to HST of $110,000,000 and total purchases subject to HST of $50,000,000. Which of the following statements accurately reﬂects the HST position at the end of the year? (13% HST) a. HST receivable of $7,800,000 b. HST payable of $7,800,000

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c. HST payable of $14,500,000 d. HST receivable of $6,800,000 12. Which of the following is NOT a common indicator of potential impairment for property, plant, and equipment (PP&E)? a. A decline in the asset's market value b. Major advances in technology c. An increase in corporate taxes associated with the asset d. Physical damage to the asset 13. How is the gain or loss on the sale or disposal of an asset calculated? a. By subtracting the asset's historical cost from its net realizable value b. By subtracting the asset's carrying value from the proceeds of the sale or disposal c. By adding the accumulated amortization to the original cost of the asset d. By adding the proceeds of the sale or disposal to the asset's carrying value 14. If a company is purchasing $25,000 +HST in Ontario of men’s leather belts inventory, what are the journal entries to account for this transaction? A. DR. Men’s Leather Belt inventory - $25,000 DR. HST Receivable - $3,250 CR. Cash - $28,250 B. DR. Men’s Leather Belt inventory - $21,750 CR. HST Receivable - $3,250 CR. Cash - $25,000 C. DR. Men’s Leather Belt inventory - $28,250 DR. HST Payable - $3,250 CR. Cash - $25,000 D. DR. Men’s Leather Belt inventory - $21,750 CR. HST Payable - $3,250 CR. Cash - $25,000

Chapter 3: Public Markets Differentiating Stakeholders Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. ● Private AND Public companies can be affected from any of the stakeholders listed above Stakeholders Unique to Public Companies: ● Public Shareholders - People or corporations (entities) that have an ownership stake in the business through the purchase of company shares through public markets ○ May own a small fraction (0.00001%) or a significant piece (25%) ● Market Analysts - Individuals employed by financial firms to predict future public company performance. ○ Predictions are publicly available and indirectly affect the market value of companies ● Satisfying shareholders is a top priority for public companies Why Public Markets Exist ● Public Markets (a.k.a. Capital markets) facilitate the mutually beneficial exchange between those who have capital and those who want or need capital (companies) ● In return for providing capital, investors receive shares which represent an ownership in the company For their willingness to invest, investors expect to profit in at least two ways: ● Share price appreciation - price of shares in the capital markets increasing over time, at which investors could sell them for a profit ● Dividends - expectation that a company will return profits to the shareholders through consistent payment of dividends Share price appreciation:

● Investors predictions ultimately drive a company’s share price ○ Outlook is positive: share price ↑ , Outlook is negative: share price ↓ ● Market Analysts predictions also affect a company’s share price: ○ Exceeds expectations: share price ↑ , Performs below expectations: share price ↓ ● Note: These factors above only affect the market value of a company’s shares (the price of the shares based on what the market believes the company is worth) ● Book Value - The value of a company’s shares listed in the equity section of the statement of financial position - the company’s net asset value (total assets - total liabilities) on a per-share basis ○ Initial cost of the shares ○ Almost always different from market value per share Dividends: ● Dividends are typically paid on a quarterly basis, but can also be paid monthly or semi-annually ● Companies can reverse their decision to payments, but this is perceived unfavorably by the public markets ● Stock dividends are the same in principle as dividends, but the investor receives additional shares of the company rather than cash Initial Public Offerings (IPOs) ● When private companies are created, the owners will deposit money into the corporate bank account in exchange for shares. ○ If two owners contribute $2,500 each in exchange for 25 shares of the company, the company balance sheet will show a cash position of $5,000 and common shares of $5,000, with 50 shares outstanding. ● Initial Public Offering - the first time a company sells newly issued shares in the public markets ● Investment banks play a significant role in pre-marketing an IPO to investors. ○ Inﬂuence demand and initial price of shares at the time of an IPO

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● Lawyers help facilitate the transactions of an IPO ● Auditors and securities exchange professionals observe that accounting records and paperwork meet requirements ● An IPO is almost exclusively sold to large private and institutional investors in large quantities. ○ Public investors, like yourself, purchase shares from another investor in the secondary market (not in the IPO) ● IPO share issuance isn’t much different than share issuance for private companies ○ Key difference: Price of IPOs are determined by what the owners set it at, but rather the primary market ● Company’s share balance increases by the number of shares sold multiplied by the price ○ Once all IPO shares are sold, common share balance on the balance sheet will only change unless additional shares are subsequently sold in the markets ( seasoned equity offering or follow-on public offering) or the company repurchases previously issued shares Types and Classes of Shares ● Preferred shares - other main type of stock that represent ownership, but does not have voting rights (typically). ○ Guaranteed consistent dividend payments for an indefinite period of time ○ In liquidation, preferred shareholders are entitled to the assets ahead of the common shareholders ● Cumulative Preferred Shares - class of preferred shares which include special dividend rights. ○ Entitled to receive all dividends in arrears(missed payment of dividends( plus the current year’s dividends, ahead of the common shareholders ● Common and preferred stock can be issued in multiple classes of each type (e.g., Class B common shares, Class A preferred shares)

○ Owners of companies, typically public ones, issue different classes of shares primarily to keep voting power within a partial group ● Redeemable shares, callable shares, convertible shares - classes of shares which fall into either common or preferred shares Dividends payment ● Definition ○ A dividend is the distribution of a company's earnings to its shareholders. ○ Distributed quarterly or annually as cash or additional shares (stock dividends). ● Formula ○ Ending retained earnings = Beginning retained earnings + net income - dividends declared. ● Common and preferred stock can be issued in multiple classes of each type (e.g., Class B common shares, Class A preferred shares) ○ Owners of companies, typically public ones, issue different classes of shares primarily to keep voting power within a partial group ● Redeemable shares, callable shares, convertible shares - classes of shares which fall into either common or preferred shares ● Cash Dividend Process : ○ Declaration Date : Board of Directors approves and declares a dividend. ○ Recorded as a liability on the balance sheet as "dividends payable." ○ DR. Retained earnings XX ○ CR. Dividends payable XX ○ To record dividend declaration. ○ List of current shareholders prepared. ○ Dividends paid to shareholders owning shares on the declaration date. ○ No journal entry required. ○ Payment Date: ○ Recognition of dividend payment to shareholders. ○ DR. Dividends payable XX ○ CR. Cash XX ○ To record payment of dividend. ● Dividends on Preferred Shares ○ Communication: Annual dollar figure (per share) or annual dividend percentage. ○ Examples: ○ Preferred Share as an Annual Dollar Figure: ○ E.g., 200,000 shares of $4 cumulative preferred shares = $4 dividend per share annually. ○ Preferred Share as a Dividend Yield: ○ E.g., 200,000 non-cumulative preferred shares with a 6% yield = $3 dividend per share annually. ○ Payment Priority:

○ Preferred shareholders receive current and prior period dividends first. ○ Cumulative preferred shares receive dividends in arrears if missed. Debt and Equity Decisions Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. ● Weighted-average cost of capital (WACC) - the cost to acquire additional financing (expressed as a %)

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○ Fluctuates based on the level of debt vs. equity a company holds ○ Companies attempt to minimize their WACC ● Corporations can issue bonds, a form of debt ○ Bonds can be sold in exchange for cash ○ Different to stock markets: Corporations are selling a promise to repay (with interest) rather than ownership in the company

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Chapter 3: Practice Questions 1. Which of the following is an example of an internal stakeholder? a. Federal government b. Competitors c. Regulatory bodies d. Employees 2. What is the role of a market analyst? a. Entities that have an ownership stake in the business b. Individuals who work for financial firms and make predictions about future public company performance c. Executives (e.g., CEO, CFO, COO) who control the day-day operations of a company d. A member of the board of directors which are responsible for hiring/firing the CEO 3. Share price appreciation is best defined as: a. The increase in the price of shares in capital markets over time, at which investors could sell them for a profit b. The expectation that a company will return profits to the shareholders through consistent payment of dividends c. The decrease in the price of shares in capital markets over time, at which investors are unable to sell them for a profit d. None of the above 4. True or False: Dividends are typically paid on an annual basis a. True b. False 5. When is a dividend recognized on the financial statements of a company? a. Declaration date b. Record date c. Payment date d. Both a and c 6. What is the purpose of issuing different classes of shares in a public company? a. To confuse investors b. To maximize dividend payments c. To keep voting power within a partial group d. To increase market volatility 7. What is the difference between dividends and stock dividends?

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a. Stock dividends allow the investor to receive exclusive voting rights, holding more power than any common shareholder b. There is no difference c. Dividends allow investors to receive cash; stock dividends allow the investor to receive additional shares d. A and C 8. If two owners invest $7,000 each in exchange for 80 shares of the company, the company balance sheet will show common shares of _________ with _____ shares outstanding a. $7,000 ; 80 b. $10,000 ; 160 c. $14,000 ; 160 d. $7,000 ; 100 9. True or false: Investment banks ultimately inﬂuence the demand and initial price of the shares at the time of the IPO a. True b. False 10. In the context of preferred shares, what does "cumulative" mean? a. Guaranteed consistent dividend payments for an indefinite period b. Dividends paid annually c. No voting rights for shareholders d. Shareholders receive dividends only when the company is profitable 11. Which of the following shares likely has voting rights? a. Class A cumulative preferred shares b. Class A common shares c. Class B preferred shares d. None of the above 12. What is the main difference between the price of shares in an IPO and a private share issuance? a. IPO prices are determined by the primary market b. Private share issuance prices are set by market analysts c. Both IPO and private share issuance prices are set by the owners d. IPO prices are always lower than private share issuance prices 13. Which of the following is an advantage of issuing more shares (equity) compared to taking on more debt? a. No dilution of ownership / control b. Tax savings

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c. Will require new governance, reporting, processes, regulatory requirements, etc. d. No legal requirement of continuous repayment 14. Which of the following statements are true? a. Bonds can be sold in exchange for cash b. Bond markets are far larger than the global stock markets c. A and B d. None of the above 15. True or False: Investors like you and I are able to purchase shares of a company as soon as they go public. a. True b. False 16. What value is written in the equity section of a statement of financial position? a. Market Value b. Book Value c. Company Value d. Equity Value 17. On payment date, what is the journal entry for when the company recognizes the payment of the dividend to the shareholders? a. DR. Dividends payable XX CR. Cash XX b. DR. Retained Earnings XX CR. Dividends Payable XX c. DR. Cash XX CR. Dividends Payable d. DR. Retained Earnings XX CR. Dividends Payable XX 18. True or False: a company should attempt to maximize their Weighted Average Cost of Capital (WACC) a. True b. False

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Chapter 4: Corporate Governance and Organizational Structures Corporate Governance ● Corporate Governance - system of rules, practices, and processes by which a company is directed and controlled Board of Directors: ● Board of Directors - a group of highly qualified and experienced individuals that serve as advisors and provide oversight for public companies ○ Chair of the board (COB) - an individual that holds the most authority and power on the board of directors ● Private companies are not required to have a board of directors, but many decide to have an advisory board or a formal board of directors. ● Boards support a company’s governance structure and provide advice ● In preparation for an IPO, it is common for private companies to put in place a formal independent board of directors ● Public companies must have a formal board of directors. ○ The board ensures that the senior management (a group of executives that lead a company’s day-day operations) will maximize the value of the shares purchased by a company’s investors ● Level of corporate governance through a company’s life cycle: Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/.

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Board Committees: ● Board committee - a smaller group of directors that are in charge of sub-components of the overall board responsibilities (e.g., audit committee) ● Compensation committee - group of directors that observe and determine how much senior management should be paid Corporate Governance in Public Companies ● Corporate Governance as a System in Public Companies ● Public companies must establish a good corporate governance system for shareholders to have confidence that their best interests are being considered and protected. ● Three key groups: board of directors, CEO and senior management, and external stakeholders ● Board of Directors: ○ Selected by shareholders to represent them in company decision-making ○ Hires, fires and replaces the Chief Executive Oﬃcer (CEO). ● CEO and Senior Management: ○ CEO is responsible for hiring senior management team ○ Senior management sets corporate strategy and manages day-day operations ○ CEO and senior management provides periodic (usually quarterly) updates to the board of directors. The board will vote to approve or reject major decisions set ● External Stakeholders (i.e., investors): ○ Purchase a company’s share in exchange for cash ■ Senior management uses the capital to grow the company

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○ Shareholders expect accurate and transparent financial reporting on a quarterly and yearly basis (provided by senior management) ○ Management discussion and analysis (MD&A) - a discussion document that alongside quarterly and yearly financial statements that outlines a company’s performance in greater detail. ○ Annual Information Form (AIF) - Disclosure document that discusses relevant background information regarding the company’s operations and its future plans Corporate Governance in Public Vs Private Companies

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Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Compliance with Securities Regulations ● Securities regulators - group of individuals that are responsible for designing policies and regulations that public companies must comply with to protect investors that purchase securities in capital markets ● In Canada, the Canadian Securities Administrators (CSA) manage and develop securities regulation across the country. ● Public companies in Canada must: ○ Comply with IFRS ○ Hold annual general meetings ○ Prepare a management’s discussion and analysis (MD&A) ○ Prepare an annual information form (AIF) Board of Directors and Board Committees ● Most of the board directors must be independent: 1) Does not have a material relationship with the company 2) Is not part of the company’s executive team

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3) Not involved with day-day operations ● Public company boards must have a chair of the board, voted into the position by other directors ● The following applies to an audit committee of a public company: ○ Every company must have an audit committee with at least 3 members, all of whom are independent and financially literate ○ Directors are independent if they do not have a material relationship with the company or could reasonably interfere with exercise of independent judgment ○ Financial literacy - the ability to read and understand a set of financial statements with comparable breadth and complexity of accounting issues ● A compensation committee is recommended as executive compensation disclosure is required for public companies Investor Relations (IR) in Public Companies: ● Purpose ○ Build strong relationships with investor groups. ○ Provide transparent and accurate information. ● Responsibilities ○ Keep investors well-informed about the company's performance and prospects. ○ Act as storytellers, effectively communicating the company's narrative. ○ Critical Role: Attract additional investors to secure vital capital for company growth. ○ Enhance the company's market reputation and appeal to potential investors. ● Functions ○ Serve as a bridge between the company and investors, fostering a positive and communicative relationship. ○ Conduct investor meetings, presentations, and conferences to convey the company's financial health and future plans. ○ Respond promptly to investor inquiries and concerns, maintaining transparency and trust. Organizational Structures ● Organizational Structure - a system that outlines how certain activities are directed to achieve the goals of an organization (e.g., rules, roles and responsibilities) ○ A successful organization structures promotes accountability, eﬃciency, and timely decision-making ● Factors that a management team needs to consider when establishing an organizational structure: ○ Identify key decisions which need to be made for the company to be successful ○ High-quality and experienced business leaders are in positions that require them to make key decisions, allowing them to be accountable and responsible for decisions made

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○ Leaders at various levels of the company with autonomy to call the shots and make decisions for their level of responsibility while minimizing lengthy processes ○ Clear policies that outline decisions that need approval/sign-off ○ Decision makers have access to timely and accurate data and information ○ Decision makers have access to resources they need (e.g, human resources, training system, data sources) Functional Structure ● Functional Structure - an organizational structure where a company is organized by departments such as Human Resources, Finance, Marketing, etc. ○ Might work for a small or medium-sized company with a relatively simple, predictable, and stable business Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Product/Service Structure ● Provide/service structure - an organizational structure where a company is organized by the various product it offers ○ Works well for a large dynamic company with many distinct product and/or services which may change and evolve

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Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Customer Structure ● Customer structure - an organizational structure where a company is organized by different customer segments ○ May work well in companies that have significantly different customer profiles, distinct customer needs

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Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Geographical Structure ● Geographical Structure - an organizational structure where a company organizes itself by geographical location ○ Leader for each geographical segment and each segment acts as a separate standalone business with autonomy to make decisions ○ Works well in companies that function in various geographical locations with differences in customers, products/services, regulations, suppliers Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Matrix Structure ● Matrix Structure - an organizational structure where a company combines two structures to organize itself (e.g., a functional structure is combined with a product/service, customer, or geographical structure) ○ Can be very cost eﬃcient

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○ Adds complexity ○ Important to set clear roles and responsibilities ○ Works well for a large company where interdependence between cross-functional teams is essential for innovation and success Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/. Segmented Contribution Margin Income Statement ● Each segment within the structure should prepare financial reports to understand the financial performance of each segment ○ Promotes accountability ○ Example: In the geographical structure below, the company should produce financial reports for North America, Europe, and Asia. Each executive would be responsible and accountable for the performance of their geographical segment. ● Contribution Margin: The difference between revenue and and variable costs ○ Contribution --> Amount left to contribute to cover the fixed costs ○ CM - Fixed Costs = EBIT ○ EBIT - Interest, taxes and other income = Net Income ● Traceable fixed expenses: Costs which directly relate to a specific segment; No Segment = No Cost

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○ Advertising Costs ● Common fixed expenses: Costs that are incurred by a company to support ALL segments but are not traceable to any specific segments ○ Administrative salaries, rent, utilities, and insurance Gamez, H., Pawlak, K. et al. (2022). Introductory Accounting for Public Companies . [Interactive E-Text]. Top Hat. https://app.tophat.com/e/626983/.

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Chapter 4: Practice Questions 1. What is corporate governance? a) Financial Reporting System b) System of rules, practices, and processes directing and controlling a company c) Marketing Strategy d) Human Resource Management 2. ______ is a system of rules, practices, and processes by which a company is directed and controlled a. Board of Directors (BOD) b. Weighted average cost of capital (WACC) c. Corporate Governance d. Chair of the Board (COB) 3. True or False: the majority of the BOD is required to be independent from the company a. True b. False 4. True or False: Both public companies and private companies in Canada are required to have a board of directors a. True b. False 5. What is the primary responsibility of the board of directors in public companies? a) Maximizing shareholder value b) Hiring external stakeholders c) Controlling day-to-day operations d) Setting executive compensation 6. A(n) ________ is a discussion document that alongside quarterly and yearly financial statements that outlines a company’s performance in greater detail. a. Annual Information Form (AIF) b. Management discussion and analysis (MD&A) c. Mutual Agreement of Understanding (MOU) d. Income Statement 7. Who holds the most authority on the Board of Directors? a) CEO b) Independent Directors c) Chair of the Board (COB) d) Senior Management

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8. How does the chair of the board get to that position? a. Being voted into the position by other directors b. Getting hired by the CEO c. Through promotion d. None of the above 9. An independent director is described by: a. Not having a material relationship with the company b. Not part of the executive team c. Not involved with day-to-day operations d. All of the above e. None of the above 10. ________ is a group of individuals that are responsible for designing policies and regulations that public companies must comply with to protect investors that purchase securities in capital markets a. Stakeholders b. Securities Regulators c. Securities Directors d. Audit Committee 11. What is the role of the Investor Relations (IR) team? a) Conduct financial audits b) Foster strong relationships with investor groups c) Manage day-to-day operations d) Develop marketing strategies 12. What does the Investor Relations team aim to achieve? a) Reduce transparency b) Attract additional investors for company growth c) Minimize communication with investors d) Decrease market reputation 13. Which organizational structure would work best for a large company where interdependence between cross-functional teams is essential for innovation and success? a. Geographical b. Functional c. Matrix d. Product 14. What would a disadvantage be if a company were to follow a functional structure?

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a. May create competition between products and services b. Focus only on short term routine tasks instead of long-term strategy c. More complex to monitor and control d. Reduces function duplication within the company 15. (Written answer) Company XYZ has multiple locations/oﬃces around the world. They currently sell to customers but also want to expand their business by selling to other companies. What organizational structure would you recommend? 16. True or False: A pro of a customer structure is that it may cause competition between different customer departments a. True b. False 17. Which of the following best defines Common Fixed Expenses? a. Costs that are incurred by a company to support all segments but are not traceable to any specific segment b. Costs which directly relate to a specific segment c. Costs found on the income statement d. None of the above 18. ABC company is creating a contribution margin income statement. The contribution income for oﬃce equipment was 9,000,000 and its traceable fixed expenses were 3,900,000. What is the operating income for oﬃce equipment? a. 9,000,000 b. 12,900,000 c. 5,100,000 d. 6,100,000 19. What is the formula to calculate operating income for segment X of a company? a. Segment X revenue - Segment X variable cost = Segment X contribution margin - Segment X fixed expenses b. Segment Y revenue - variable cost = Segment X contribution margin + Segment Y fixed expenses c. Segment X COGS - Segment X variable cost = Segment X fixed expenses - Segment X fixed expenses d. None of the above

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Chapter 5: Environmental, Social, And Governance (ESG) Corporate Social Responsibility ● Including stakeholders in company decisions and looking beyond profits made in a legal fashion as the only measure of success. ○ Interacting with stakeholders, giving back to communities, considering social, environmental issues. ○ Ideas of social responsibility originated in the 1800s with CSR created by economist Howard Brown. ○ Grown in use from 1950s-1990s and became an essential part of all companies in the 2000s. ● In 1991, Professor Archie B. Caroll created the Pyramid of Corporate Social Responsibility , showing important areas of CSR. Included (from bottom to top): ○ Economic: Responsibility of businesses is to be profitable, which is the only way for it to survive and benefit society in the long term ○ Legal: Responsibility to obey laws and other regulations (Employment, competition, etc) ○ Ethical: Responsibility to act morally and ethically while going beyond the narrow requirements of the law (treating employees and suppliers well) ○ Philanthropic: Responsibility to give back to society (donations, staff time on projects, etc) ■ Donating time, resources or money ■ Only applicable if the other three are being followed well

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Advantages Disadvantages Easy to understand Debate whether ethics should be on top Simple message (more than one element in CSR) Businesses may lie about their contributions to CSR Enhances the importance of profit Triple Bottom Line (TBL) Reporting ● Measures company’s commitment to CSR and environmental impact. Included: ○ States that companies should commit to focusing as much on social and environmental concerns as they do on profits and instead of one bottom line (profit or net income), there should be three: ○ Profit → Economic : Familiar and identified from income statement; quite reliable ○ Planet → Environment : Impact of business activities on environment (carbon emissions, use of sustainable products, etc); more tangible and hard to measure ○ People → Social : Extent to which business is socially responsible; hard to calculate and report reliable and consistently ● Created in 1994 by consultant John Elkington, Elkington believed that companies should focus on environmental and social impact the same as profits. Advantages Disadvantages Encourages businesses to think beyond narrow measures of performance (profit). Not useful as an overall measure of business performance. Encourages CSR reporting. Hard to reliably and consistently measure People & Planet bottom-lines. Supports measurement of environment impact & sustainability. No legal requirement to report it (poor reporting rates). Environmental, Social, And Governance (ESG) ● Key factors in identifying sustainability and ethicality of a company through quantifiable metrics. ● Reasons why companies should adopt ESG: ○ Climate change (governments and businesses doing their best to reduce their environmental impact) ○ Change in shareholder expectations (shareholders and corporate investors expect companies to achieve long-term sustainability and expect transparent reporting relating to ESG performance) ○ Change in Demand (customers are demanding sustainable products and services) ○ Change in employee expectations (talented employees are seeking employment from purpose-driven companies)

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○ Requirements (sustainability reporting will be a requirement for public companies in the future) ○ Capital raising reasons (debt or equity lenders prefer ESG businesses) ● Benefits of ESG include: ○ Achieves stronger revenue growth by offering customers more sustainable products and services and achieving better access to resources ○ Drives cost reduction through lower energy consumption, reduction in waste and resources required within a company’s value chain ○ Earns subsidies and support from the government ○ Increases employee productivity and attracts top talent ○ Enhances returns by allocating capital to investments that will be more sustainable in the long term (we will learn more about allocating capital later) “E” In ESG ● Exists because of climate change: ○ Long-term shift of climate patterns globally and regionally from the mid-20th century to present. ○ Can be solved through a collaborative effort between companies, communities, and individuals. ○ Countries, governments, and corporations can go “Net Zero” ■ Equally balancing greenhouse gasses going into the atmosphere removing greenhouse gasses out of the atmosphere. ○ Some companies who are doing their part towards reducing climate change are Lego, Patagonia, Ikea, and Telus. ● Environmental Case Studies ○ Companies leading and setting good standards: ■ Patagonia: In business to save our home planet ■ IKEA: Climate positive company that inspires other furniture retailers to take action towards doing business in a way that is planet and people positive ■ TELUS Agriculture: Technology to brew a more sustainable, tech-traceable beer ○ Greenwashing: When a company spends resources to market themselves as environmentally friendly rather than actually minimizing their environmental impact (Fiji Water) ○ Companies that damaged the environment: ■ BP paid ~$60B in criminal and civil penalties, natural resource damages, economic claims, and cleanup costs after one of the biggest oil spills in history as a result of their cost cutting and risk taking strategy ■ Volkswagen used software to manipulate emission testing to side-step pollution standards in millions of cars has cost them billions of dollars and loss in customers

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● Environmental Provisions and Contingent Liabilities ○ Provision : Liability with uncertainty about the timing and amount of future expenditure required ■ Only recognized if reliable estimate can be made ○ Recognize a provision when: ■ Entity has a present obligation as a result of a past event ■ Probable that an outﬂow of resources (e.g. cash) will be required to settle the obligation ■ Reliable estimate can be made to understand the amount of the obligation ○ If criteria is not met, contingent liability is disclosed in the notes ○ Contingent Liability: A possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of uncertain future events , which are outside of management's control ■ Disclosed in notes but not recognized as liabilities ○ If costs are estimated to be incurred in the future, they should be discounted to consider TVM ○ Decommissioning provision : Present value of future cash outﬂows that will be incurred to close mines at the end of their life and restore the environment to its original condition before mining operations commenced ● Journal Entries: Provision of $100 DR. Expense (E) $100 CR. Provision (L) $100 Increases to $150 DR. Expense (E) $50 CR. Provision (L) $50 Decreases to $75 DR. Provision (L) $100 CR. Expense (E) $100 Payoff for the provision DR. Provision (L) $100 CR. Cash (A) $100 “S” In ESG ● Companies need to build high quality relationships with stakeholders , including customers, suppliers, lenders, shareholders, communities, governments, regulators and more ● Staff stay for 40% longer and 30% are more innovative

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● CSR is a component of "S" “S” In Companies ● Organizational Culture - Collection of values, expectations, and practices that guide and inform the actions of all team members (differentiates themselves from competitors). ○ Key differentiation factor among competition ○ Happier employees = 3x Revenue Growth and 50% reduced employee turnover ○ Trust and Respect is important ○ Fairness is important (treat them the same as others) ○ Listening to your employees is important ● Diversity and Inclusion - Celebrating differences in ethnicity, gender, sexual orientation, background, train of thought and authenticity of people. ○ Greater diversity means different experiences/perspectives, creating a better product/service. ○ Inclusion : How people feel and a celebration of people feeling great as their unique authentic selves while still being part of a bigger cause and contributing to that ○ Diversity: Celebrating differences like ethnicity, gender and backgrounds of different people ■ Different perspectives and experiences ● Mental Health ○ Crucial that companies support employees through mental health issues and encourage a work environment that listens to, understands , and supports team members going through diﬃcult times (e.g. Bell) ○ COVID pandemic brought a lot of issues for many employees ■ Ginger is a company that provides on-demand mental health support “G” In ESG ● How companies are directed and the decisions they make and provide structure, accountability, and transparency. ○ Strong corporate governance needs to in place for companies to successfully adopt environmental and social best practices ■ Tone from the top! ○ Do business ethically while protecting the planet, and truly considering all stakeholders in the decision-making process ○ E and S depend on G as governance has power to make decisions ○ 91% of investors say G is the main driving factor behind their decisions Sustainability Reporting ● Efforts made to ○ Measure progress towards ESG goals ○ Enable transparent sustainability reporting

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○ Compare ESG performance from one company to another ● Expected but not mandatory for public companies (as of now in many jurisdictions) ● Problem: Different approaches for different companies (some are great, some are bad) ● Many companies follow the Global Reporting Initiative (GRI) ○ Independent , international organization that helps businesses and other organizations take responsibility for their impacts, by providing them with the global common language to communicate those impacts ○ Provides the world’s most widely used standards for sustainability reporting ● IFRS has tried to make a plan to consolidate multiple sustainability reporting frameworks to develop comprehensive sustainability disclosure standards. Timeline: ○ June 2021: Integrated Reporting Council ( IRC ) and the Sustainability Accounting Standards Board ( SASB ) merged and created Value Reporting Foundation (offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value) ○ November 2021: IFRS Foundation created the International Sustainability Standards Board (ISSB), which tries to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs ○ January 2022 : IFRS consolidated the Climate Disclosure Standards Board (CDSB) into the IFRS Foundation. Will try to consolidate the global mainstream corporate reporting model to make Natural Reporting = Financial Reporting (make companies report natural impacts with the same rigor as financials, benefitting investors and regulators) ○ August 2022: IFRS consolidated the Value Reporting Foundation into the IFRS and began collaborating with GRI ● Timeline from bottom to top

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Chapter 5 Practice Questions 1. True or False: An idea of Corporate Social Responsibility is to only keep shareholders in mind when making company decisions. a. True b. False 2. What are the three components to the triple bottom line? a. Diversity, Inclusion, and Mental Health b. Environmental, Social, and Governance c. Legal, Ethics, and Philanthropy d. Profit, Planet, and People 3. What is a disadvantage of the Triple Bottom Line? a. Does not encourage business to think beyond profit b. It does not support measurement of environment impact & sustainability. c. It is hard to be objective d. A and C 4. What does going “Net Zero” mean? a. Reducing greenhouse gasses to ensure ongoing emissions are balanced by equal amounts of emissions removal. b. Increasing greenhouse gasses emissions to ensure the emission of greenhouse gasses are higher than the removal of greenhouse gasses. c. Equally balancing greenhouse gasses going into the atmosphere by removing equal amounts of greenhouse gasses out of the atmosphere. d. All of the above. e. Both A and C. 5. _________ is a collection of values, expectations, and practices that guide and inform the actions of all team members. a. Diversity and Inclusion b. Corporate Governance c. Organizational Culture d. None of the above 6. True or false: Sustainability reporting is mandatory for public companies but not for private companies. a. True b. False 7. How does a strong corporate governance benefit companies?

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a. Creates long-term successes in financial measures. b. Helps companies adopt positive environmental and social practices. c. Creates accountability between employees in a company. d. All of the above. 8. What is “greenwashing” a. When a sustainable company encourages others to be more eco friendly as well b. When a company markets themselves to be more sustainable instead of minimizing environmental impact c. When a company participates in philanthropic activities that help the environment d. None of the above 9. What conditions must be met to recognize a provision? a. An entity has a present obligation as a result of a past event b. it is probable that an outﬂow of resources will be required to settle the obligation c. a reliable estimate can be made to understand the amount of the obligation d. A and B only e. All of the above 10. What are contingent liabilities? a. a liability with uncertainty about the timing of the amount of future expenditure required. b. possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of uncertain future events c. Provides improvements to corporate reporting for environmental information with the same focus as financial information. d. All of the above

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Answer Key Chapter 1: Introduction to Accounting for Public Companies 1.A 2.B 3.C 4.C 5.B 6.C 7.A 8. A 9.B 10.B 11.B Chapter 2: Special Accounting Topics 1.D 2. C 3.A 4.C 5.C 6.B 7.A 8.C 9.C 10.A 11.B 12.C 13.B 14.A Chapter 3: Public Markets 1.D 2.B 3.A 4.B 5.D 6.C 7.C 8.C 9.A 10.A 11.B 12.A 13.A 14.C 15.B 16.B 17. A 18. B Chapter 4: Corporate Governance and Organizational Structures 1. B 2.C 3.A 4.B 5.A 6.B 7.C 8.A 9D. 10.B 11.B 12. B 13.C 14.B 15. Written 16.B 17.A 18.C 19.A Written Answer Question: *Answers will vary Possible answers: The company should use a customer to adhere to consumer needs. This will also increase the ability for company XYZ to react to client expectations or rapid changes in demand. The company should use a geographical structure to organize themselves as they have many oﬃces around the world. This way, it will make it easier for local management to respond to market changes around them. The company should use a matrix structure, combining both the customer organizational structure and the geographical structure. The combination will make it better for them to react to changes within local markets while still prioritizing customers' needs. Chapter 5: Environmental, Social, and Governance 1.B 2.D 3.C 4.E 5.C 6.B 7.D 8.B 9.E 10.B

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AFM 182 Midterm Study Package

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