Chapter 7, Problem 1FA

Focus on Analysis Under Armour, Inc.

LO 1, 3, 5, 7, 8

(Learning Objectives 1.3.5.7.8: Measure the cost of plant assets: explain plant asset activity; apply GAAP for intangible assets, explain an asset impairment analyze rate of return on assets: analyze the cash flow Impact of long-lived asset transactions) Retrieve the 2016 Under Armour financial statements at www.sec.gov by clicking or Filings and then searching for “Under Armour” under Company Filings. When you see the list of filings for the company, select the Form 10-K for 2016 Be sure to retrieve the 2016 financial statements, not another year. This case leads you through an analysis of the activity for some of under Armour’s long-term assets, as well as the calculation of its rate of return on total assets

Requirements

  1.    On the statement of cash flows how much did Under Armour pay for property and equipment during 2016? In what section of the cash flows statement do you find this amount?

  2.    Which depreciation method does under Armour use? Over what range of useful lives does under Armour depreciate various types of fixed assets? You can find discussions of this in Note 2 (Summary of Significant Accounting Policies).

  3.    Review the information in Note 3 (Property and Equipment, Net). List the categories of Under Armour's property and equipment as of December 31, 2016, and December 31.2015. How much depreciation expense is included in the calculation of net income for these two fiscal years? Does it appear that Under Armour’s properly and equipment was proportionately newer or older at the end of 2018 (vs. 2015)? Explain your answer. (Challenge)

  4.    Examine Note 4 (Goodwill and Intangible Assets, Net) and Note 2. Briefly describe Under Armour’s accounting 'or goodwill and other intangible assets. What other types of intangible assets aid Under Armour own as of December 31, 2016?

  5.    Using DuPent Analysis, calculate under Armour's rate of return on total assets for fiscal 2016 and fiscal 2015. Total assets at December 31, 2014 (the end of its 2014 fiscal year) were $2,095 million. Did the company perform better or worse in 2016 than in 2015? Use millions for ratios.