Chapter 12, Problem 1FSAC

Financial Statement Analysis Case 1: Long-Lived Asset Impairments

BlackBerry Limited, the smartphone manufacturer reported a $2,748 million impairment loss on its income statement during the year ended March 1, 2014. You are interested in further examining this and any other impairment losses at BlackBerry and have identified the financial statement excerpts on the following pages to further analyze. Refer to these financial statements excerpts and Exhibit 12.2 in the text to answer the following questions:

Required

1. a. What types of long-lived assets does BlackBerry report? What is the dollar amount and percent change m total and by each type of long-lived asset from March 2, 2013, to March 1, 2014? What are long-lived assets in total and by type as a percent of total assets at March 1, 2014, and March 2, 2013?
2. b. What is the total amount of impairment losses BlackBerry reported in the years ended March 1, 2014, March 2, 2013, and March 3, 2012? To what types of assets do the impairment losses relate?
3. c. What is the amount of impairment losses on intangible assets that BlackBerry reported for the years ended March 1, 2014, March 2, 2013, and March 3, 2012? To what type of intangible asset do the losses relate?
4. d. Compute the percent change in operating income for all years. What would the percent change in operating income be excluding the impairment losses? Comment on how the inclusion or exclusion of impairment losses affects the percentage change in operating income and the trend in operating income.

BlackBerry Limited Incorporated under the Laws of Ontario (United States dollars, in millions)
	At
	March 1, 2014	March 2, 2013
Assets
Current
Cash and cash equivalents	$1,579	$ 1,549
Short-term investments	950	1,105
Accounts receivable, net	972	2,353
Other receivables	152	272
Inventories	244	603
Income taxes receivable	373	597
Other current assets	505	469
Deferred income tax asset	73	139
Assets held for sale	209	354
	5,057	7,441
Long-term investments	129	221
Property, plant and equipment, net	942	2,073
Intangible assets, net	1,424	3,430
	$7,552	$13,165

BlackBerry Limited (United States dollars, in millions, except per share data) Consolidated Statements of Operations
	For theYear Ended
	March 1, 2014	March 2, 2013	March 3, 2012
Revenue
Hardware and other	$3,880	$ 6,902	$14,031
Service and software	2,933	4,171	4,392
	6,813	11,073	18,423
Cost of sales
Hardware and other	6,383	7,060	11,217
Service and software	473	579	631
	6,856	7,639	11,848
Gross margin	(43)	3,434	6,575
Operating expenses
Research and development	1,286	1,509	1,556
Selling, marketing and administration	2,103	2,111	2,600
Amortization	606	714	567
Impairment of long lived assets	2,748	–	–
Impairment of goodwill	–	335	355
Debentures fair value adjustment	377	–	–
	7,120	4,669	5,078
Operating income (loss)	$(7,163)	$(1,235)	$ 1,497