Case Study Athina
To: CFO of Athina Building Supplies Ltd.
From: IV Consulting Group’s consultants-
Purpose: Recommendations for the CFO of Athina Building Supplies Ltd.
We are writing to you on behalf of IV Consulting Group after closely examining the financial statements of your national retail and commercial building supplier chain, Athina Building Supplies Ltd.’s. We have stumbled upon several issues, which will be discussed in detail below.
We have prepared an insightful report on our findings and recommendations as asked for by the CFO of the national chain. Though the CFO is whom we are reporting too, we have considered how our advice will affect other key stakeholders of Athina such as the investors and CRA (assuming it is a Canadian firm), as it is inevitable to undermine the recommendations’ impact on them as well.
First and foremost, even though Athina Building Supplies Ltd. is now a private business it was once linked to a national chain. Assuming the national chain complied under IFRS, it would prove more reasonable to incur less costs of switching to ASPE and also to continue using IFRS in case Athina requires a bank loan or ultimately plans for an IPO in the future (since investors currently are foreseeing success and growth for Athina). Athina was sold to its present investors for $1,000,000 as they believed that the stores would be more successful if they were managed by companies with expertise in the particular department. If Athina earns a net income of over $500,000, it must pay 25% to the national chain up until 2019 (2017-2019). Athina has recently closed their 2017 financial statements and have a new income of $510,000. This reveals that according to Athina investors, the national chain is presently owed $2,500. The users of the financial statements would most importantly be the CFO, followed by the investors. The CFO and investors have two very contradicting objectives, on one hand, the investors will want to minimize their income because if
From: IV Consulting Group’s consultants-
Purpose: Recommendations for the CFO of Athina Building Supplies Ltd.
We are writing to you on behalf of IV Consulting Group after closely examining the financial statements of your national retail and commercial building supplier chain, Athina Building Supplies Ltd.’s. We have stumbled upon several issues, which will be discussed in detail below.
We have prepared an insightful report on our findings and recommendations as asked for by the CFO of the national chain. Though the CFO is whom we are reporting too, we have considered how our advice will affect other key stakeholders of Athina such as the investors and CRA (assuming it is a Canadian firm), as it is inevitable to undermine the recommendations’ impact on them as well.
First and foremost, even though Athina Building Supplies Ltd. is now a private business it was once linked to a national chain. Assuming the national chain complied under IFRS, it would prove more reasonable to incur less costs of switching to ASPE and also to continue using IFRS in case Athina requires a bank loan or ultimately plans for an IPO in the future (since investors currently are foreseeing success and growth for Athina). Athina was sold to its present investors for $1,000,000 as they believed that the stores would be more successful if they were managed by companies with expertise in the particular department. If Athina earns a net income of over $500,000, it must pay 25% to the national chain up until 2019 (2017-2019). Athina has recently closed their 2017 financial statements and have a new income of $510,000. This reveals that according to Athina investors, the national chain is presently owed $2,500. The users of the financial statements would most importantly be the CFO, followed by the investors. The CFO and investors have two very contradicting objectives, on one hand, the investors will want to minimize their income because if