The final project for this course is the creation of a white paper consisting of a report and spreadsheets. The final project represents an authentic demonstration of competency because you will be placed in a scenario in which you will take the role of an associate in a certified public accountant (CPA) firm. The CPA partners in this scenario ask you to create a report for the firm’s clients to help address some of the questions they ask. This exercise will task you with preparing the information necessary to address the client’s questions in report format. Topics addressed in the white paper will cover bankruptcy, interim and segment reporting, foreign currency transactions, and nonprofit and governmental accounting.
The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Three, Five, and Seven. The final project will be submitted in Module Nine.
In this assignment, you will demonstrate your mastery of the following course outcomes:
Imagine you have been working at an established CPA firm for two years. Your great work has not gone unnoticed, and the CPA partners have asked you to assemble a white paper for the firm’s clients to help address some key areas of concern. Your goal is to create the information necessary to address each of the topics as outlined below. You will prepare the information in a written report format, with accompanying spreadsheets as supporting documentation, for the partners and clients.
Specifically, the following critical elements must be addressed:
Milestone One: BankruptcyIn Module Three, you will submit a report covering Section I, Part A of the final project. In the paper, you will discuss the issue of bankruptcy, both voluntary and forced, as well as liquidation. This submission will be graded with the Milestone One Rubric.
Milestone Two: Interim and Segment ReportingIn Module Five, you will submit a report and the necessary spreadsheets for Section I, Parts B and C of the final project. You will discuss interim reporting requirements under GAAP and IFRS, and provide an example financial statement illustrating what the interim report should entail. You will also discuss reporting requirements for business segments and discuss transparency in financial reporting. This submission will be graded with the Milestone Two Rubric.
Milestone Three: Foreign Currency Transactions and StatementsIn Module Seven, you will submit a report and the necessary spreadsheets for Section I, Part D of the final project. You will consider the company’s potential international business deals, such as the impact of foreign exchange rates and the methods for translating financial statements. You will also create a hypothetical example demonstrating the translation process, using the two methods, to submit with your paper. This submission will be graded with the Milestone Three Rubric.
Final Project Submission: White Paper (Including Report and Spreadsheets)In Module Nine, you will submit your final project, which includes the report and spreadsheets. It should be a complete, polished artifact containing all of the critical elements of the final product, including Section II, Nonprofit and Governmental. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the
.
Your white paper should consist of a 7- to 10-page written report (excluding the title and reference pages) with accompanying spreadsheets as appendices within the report. Use double spacing, one-inch margins, 12-point Times New Roman font, and APA formatting.
Final Project Rubric
| Criteria | Exemplary | Proficient | Needs Improvement | Not Evident | Value | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Meets “Proficient” criteria and examines issues of bankruptcy with critical analysis, expertly applying the ethical implication arguments ( | 100% | Summarizes the key points of interest if the company had to file voluntary bankruptcy and discusses the ethical implications that should be considered (90%) | Summarizes the key points of interest if the company had to file voluntary bankruptcy, but does not discuss the ethical implications that should be considered, or discussion is cursory or has inaccuracies (70%) | Does not summarize the key points of interest if the company had to file voluntary bankruptcy (0%) | 6.3 | ||||||||||||||
| Meets “Proficient” criteria and expertly explains the corporate options and the limitations of creditors (100%) | Identifies the key areas of concern if the company was forced into bankruptcy and the defenses available in this situation (90%) | Identifies the key areas of concern if the company was forced into bankruptcy but does not identify defenses available, or identification is cursory or has inaccuracies (70%) | Does not identify the key areas of concern if the company was forced into bankruptcy (0%) | ||||||||||||||||
| N/A | Correctly illustrates hypothetical calculations (100%) | Illustrates hypothetical calculations but there are inaccuracies (70%) | Does not illustrate hypothetical calculations (0%) | ||||||||||||||||
| Meets “Proficient” criteria and provides relevant examples to illustrate claims (100%) | Describes the interim reporting requirements the company would have as a corporation and the guidance related to interim financial statements under GAAP and IFRS (90%) | Describes the interim reporting requirements the company would have as a corporation but does not describe the guidance related to interim financial statements under GAAP and IFRS, or description is cursory or has inaccuracies (70%) | Does not describe the interim reporting requirements (0%) | ||||||||||||||||
| Correctly generates a hypothetical financial statement illustrating what the interim reporting entails (100%) | Generates a hypothetical financial statement illustrating what the interim reporting entails, but there are inaccuracies (70%) | Does not generate a hypothetical financial statement (0%) | |||||||||||||||||
| Meets “Proficient” criteria and includes cogent insights or opinions on the value or impact of the critical differences between GAAP and IFRS (100%) | Determines if the interim reporting requirements are the same under GAAP and IFRS and provides an academic example to support response (90%) | Determines if the interim reporting requirements are the same under GAAP and IFRS but does not provide an academic example, or example provided does not support response (70%) | Does not determine if the interim reporting requirements are the same under GAAP and IFRS (0%) | ||||||||||||||||
| Meets “Proficient” criteria and example provided demonstrates a complex grasp of separately reported segments (100%) | Appraises one of the processes used to identify which segments would have to be reported separately and provides academic example to support response (90%) | Appraises one of the processes used to identify which segments would have to be reported separately but does not provide academic example to support response, or appraisal is cursory or has inaccuracies (70%) | Does not appraise one of the processes (0%) | ||||||||||||||||
| Meets “Proficient” criteria and defense is insightful, well supported and logical (100%) | Evaluates the effectiveness of the process in supporting transparency in financial reporting and academically defends response (90%) | Evaluates the effectiveness of the process in supporting transparency in financial reporting but does not defend response, or defense is weak or illogical (70%) | Does not evaluate the effectiveness of the process in supporting transparency in financial reporting (0%) | ||||||||||||||||
| Provides suggestions to improve the process for transparency and academically defends rationale (90%) | Provides suggestions to improve the process but does not defend rationale, or defense is weak or illogical (70%) | Does not provide suggestions to improve the process (0%) | |||||||||||||||||
| Meets “Proficient” criteria and examples to illustrate claims demonstrate a complex grasp of the topic (100%) | Summarizes the impact of foreign exchange rates on the financial statements and determines the risks they pose, providing academically supported example (90%) | Summarizes the impact of foreign exchange rates on the financial statements but does not determine the risks they pose, or summary is cursory, not supported, or has inaccuracies (70%) | Does not summarize the impact of foreign exchange rates on the financial statements (0%) | ||||||||||||||||
| Meets “Proficient” criteria and description is exceptionally clear and contextualized (100%) | Describes the two methods used to translate financial statements and how the functional currency plays a role in determining which is used, with academic support (90%) | Describes the two methods used to translate financial statements but does not describe how the functional currency plays a role in determining which is used, or description is cursory or has inaccuracies (70%) | Does not describe the two methods of translation (0%) | ||||||||||||||||
| Composes a hypothetical example demonstrating the translation process using the two methods and ensures all information is entered accurately (100%) | Composes a hypothetical example demonstrating the translation process using the two methods but contains inaccuracies (70%) | Does not compose a hypothetical example (0%) | |||||||||||||||||
| Meets “Proficient” criteria and uses multiple academic sources and industry-specific language to establish expertise (100%) | Explains how to address compliance with GAS in nonprofit and governmental financial statements, with academic support (90%) | Explains how to address compliance with GAS in nonprofit and governmental financial statements, but explanation is cursory, has no academic support or has inaccuracies (70%) | Does not explain how to address compliance with GAS in nonprofit and governmental financial statements (0%) | ||||||||||||||||
| Meets “Proficient” criteria and shares key insights or points of comparison in order to make a useful assessment of the differences between the types of financial statements (100%) | Explains how the analysis of nonprofit and governmental financial statements differs from analysis of traditional financial statements, providing academic examples to support response (90%) | Explains how the analysis of nonprofit and governmental financial statements differs from analysis of traditional financial statements but does not provide academic examples to support response, or explanation is cursory or has inaccuracies (70%) | Does not explain how the analysis of nonprofit and governmental financial statements differs from analysis of traditional financial statements (0%) | ||||||||||||||||
| Composes example financial statements for the company as a nonprofit entity and as a governmental entity, ensuring that all information is correct and compliant (100%) | Composes example financial statements for the company as a nonprofit entity and as a governmental entity, but statements contain inaccuracies or are not compliant (70%) | Does not compose example financial statements for the company as a nonprofit entity and as a governmental entity (0%) | |||||||||||||||||
| Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to-read format (100%) | Submission has no major errors related to citations, grammar, spelling, syntax, or organization (90%) | Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas (70%) | Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas (0%) | 5.5 | |||||||||||||||
| Total: |
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Bankruptcy and Foreign Currency Transactions
Christine Sarkissian
Southern New Hampshire University
ACC-690: Advanced Topics in Financial Reporting
Professor Wendy Achilles
December 31, 2023
2
Bankruptcy
The financial operations of different companies are plagued by different market forces
that predispose businesses to risks related to financial losses and bankruptcy. Challenging
economic situations predispose businesses to scenarios that necessitate restructuring for optimal
debt management. Liquidation and bankruptcy are critical concerns that clients raise during
consultations due to their relevant implications on companies’ financial health. In this view,
clients seeking certified public accountant services must gain more insight into bankruptcy,
foreign currency transactions, accounting practices, and interim and segment reporting.
Forms of Bankruptcy
Esteemed clients should be in a position to understand the three common forms of
bankruptcy in contemporary firms: Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13
bankruptcy. Chapter 7 bankruptcy entails paying creditors using asset liquidation strategies.
Notably, it is the most common bankruptcy form due to its alignment with various company
needs. Organizations using this strategy aim to clear their debt to optimize financial operations.
On the other hand, for businesses and entities aiming to restructure and reorganize business
practices rely on Chapter 11 bankruptcy (Corbae & D’Erasmo, 2021). This bankruptcy form
facilitates the effective reorganization of credit repayment plans for gradual debt clearance.
Lastly, clients should also comprehend the relevance of Chapter 13 bankruptcy. This bankruptcy
requires debtors to make monthly payments to a court-appointed trustee who then distributes the
money to creditors. Unlike other bankruptcy and restructuring strategies, Chapter 13 bankruptcy
involves specified periods of debt clearance (3-5 years) (Corbae & D’Erasmo, 2021).
Understanding these forms of bankruptcy and restructuring enables clients to decide on whether
3
to file for voluntary or involuntary bankruptcy to facilitate restructuring for financial health
restoration.
Voluntary Bankruptcy
Challenging economic times necessitate clients to file for voluntary bankruptcy after
considering the ethical implications. According to Corbae and D’Erasmo (2021), Chapter 11
bankruptcy allows individuals to file for voluntary bankruptcy. In this view, key points to
consider include the relevance of Chapter 11 bankruptcy form in guiding debt and asset
reorganization. Ethical considerations focusing on how the declaration will affect creditors,
stakeholders, and employees are also relevant (Hynes & Walt, 2019). Vital ethical implications
include considering alternatives before filing for bankruptcy and professional obligations to
satisfy shareholder needs.
Involuntary Bankruptcy
Similarly, challenging economic times may necessitate organizations to file for
involuntary bankruptcy. For instance, in cases where clients are forced to file for bankruptcy by
creditors, it is essential to focus on key concerns. These include loss of company control. This
concern is relevant since it predisposes organizations to impulsive liquidation and asset
management (Hynes & Walt, 2019). Company control is a relevant concern since it influences
the clients’ restructuring approach. In such situations, debt repayment ability demonstration
without incorporating bankruptcy declaration is a solid defense that will enable it to avoid
involuntary bankruptcy.
Challenging financial events necessitate organizations to engage in debt management
strategies that optimize their financial health without filing for bankruptcy. While liquidation and
4
restructuring are relevant strategies that clients can engage in to enhance financial operations, it
is essential to understand the concerns and ethical implications related to voluntary and
involuntary bankruptcy. A critical practice implication of this report entails promoting a focus on
clients’ comprehension of relevant defenses to impede involuntary bankruptcy focusing on
demonstrating debt management ability.
Liquidate
In the event of a bankruptcy, the company’s creditors would be keen on understanding
how much they might recover from the assets of the company. The creditors would be interested
in assessing the value of the company’s assets, secured debts (backed by collateral), unsecured
debts, tax owed, wages and priority of payments. Based on the data provided in Exhibit 13.2, the
following calculations may be used to determine how much money creditors would receive
during liquidation:
Before settling for creditors, the company must deal with liabilities with priority. The
liabilities with priority include administrative expenses, salaries payable and payroll taxes
payable, recorded as $20,500, $15,000, and $2,000. The liabilities with priority are subtracted
from the available assets, recorded as $94,500.
Total amount available for pay liabilities with priority and unsecured creditors =$94,500.
Total available to pay for unsecured creditors = $94,500 – ($20,500 + $15,000 + $2,000)
= $57,000
Unsecured claims = Partially secured creditors + Unsecured creditors = $30,000 +
$65,000 = $95,000
5
Liquidation = Free assets – unsecured claims = $57,000 – $95,000 = ($38,000)
Therefore, with unsecured claims standing at $95,000 and the available assets to liquidate
for unsecured creditors at $57,000, the creditors in the company would be subjected to a $38,000
loss if the company is liquidated.
6
References
Corbae, D., & D’Erasmo, P. (2021). Reorganization or liquidation: Bankruptcy choice and firm
dynamics. The Review of Economic Studies, 88(5), 2239-2274.
https://doi.org/10.1093/restud/rdaa091
Hynes, R. M., & Walt, S. D. (2019). Revitalizing involuntary bankruptcy. Iowa Law Review, 105,
1127-1184. https://ilr.law.uiowa.edu/sites/ilr.law.uiowa.edu/files/2023-02/Hynes_Walt.pdf
ZYX Corporation
Condensed Interim Balance Sheet For the Quarter Ended 3/30/2023
ASSETS ($’000s)
LIABILITIES AND EQUITY ($’000s)
Current assets
Current Liabilities
Cash and Cash equivalents
120,000
Accounts Payable
400,250
Accounts receivable
145,450
Short Term Debt
300,780
Inventory
80,150
Accrued Liabilities
650,000
Prepaid expenses
53,550
Total
1,351,030
Total
399,150
Long term debt
500,000
Property, Plant and Equipment
Land
550,000 Equity
294,410
Buildings
765,500
Equipment
245,000
Total
1,560,500
Other Assets
Intangible assets
Investments
Total
TOTAL ASSETS
65,230
120,560
185,790
2,145,440 TOTAL LIABILITIES AND EQUITY
2,145,440
ZYX Corporation
Condensed Interim Balance Sheet For the Quarter Ended 3/30/2023
ASSETS ($’000s)
LIABILITIES AND EQUITY ($’000s)
Current assets
Current Liabilities
Cash and Cash equivalents
120,000
Accounts Payable
400,250
Accounts receivable
145,450
Short Term Debt
300,780
Inventory
80,150
Accrued Liabilities
650,000
Prepaid expenses
53,550
Total
1,351,030
Total
399,150
Long term debt
500,000
Property, Plant and Equipment
Land
550,000 Equity
294,410
Buildings
765,500
Equipment
245,000
Total
1,560,500
Other Assets
Intangible assets
Investments
Total
TOTAL ASSETS
65,230
120,560
185,790
2,145,440 TOTAL LIABILITIES AND EQUITY
2,145,440
Beginning Balance
Ending Balance
Acto Manufacturers – Mexico
Translation Process (Temporal Method)
US Dollar (USD)
Exchange Rate
Mexican Peso (MXN)
10,000 1 MXN = 0.050 USD
200,000
?
1 MXN = 0.055 USD ?
Ending Balance (USD) = Beginning Balance (GBP) * Exchange Rate (1 MXN = 0.055 USD)
Ending Balance (USD) = 200,000 * 0.055 = $11,000
Beginning Balance
Ending Balance
Acto Manufacturers – Mexico
Translation Process (Temporal Method)
US Dollar (USD)
Exchange Rate
Mexican Peso (MXN)
10,000 1 MXN = 0.050 USD
200,000
?
1 MXN = 0.055 USD ?
Ending Balance (USD) = Beginning Balance (GBP) * Exchange Rate (1 MXN = 0.055 USD)
Ending Balance (USD) = 200,000 * 0.055 = $11,000
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