Reference no: EM132690735

ACC 543 Financial Accounting Theory and Practice - DePaul University

FASB Codification and Data Analytics Assignment

Learning Objective 1. Understand the FASB codification system and research accounting issues to find the relevant parts of the codification that provide information on each issue.
Learning Objective 2. Understand how to use Excel to perform data analysis on data sets.
Learning Objective 3. Use critical thinking skills to analyze the data and summarize the results.
Learning Objective 4. Use critical thinking skills to determine a new way to analyze the data to provide insightful information about the data set.

Instructions:

Part A: FASB Codification
You are working for Mindak LLP, an accounting consulting firm, as a research and accounting specialist. Your client is a car manufacturer and has asked you to research and explain the U.S. GAAP rules for some accounting transactions. The client wants you to reference and explain the rules in the FASB codification for this topic. The client will then use your business professional memo to look up the rules in the codification.

Please make sure you include in your memo discussion about all three items (a) to (c) below. Reference the relevant topic, subtopic, section and paragraph(s). You should reference the codification by using "FASB ASC XXX-XX-XX-XX". Your grade will primarily focus on whether you are identifying the proper topics, subtopics, sections and paragraphs in the codification. If you do not get all the way to identifying the specific paragraphs that are most relevant, you will lose points. You can summarize each reference in 1-2 sentences. You should not be copying any of the codification into your memo as the client can go look directly at the codification reference.

a) The company is offering an extended product warranty with the sale of each product. The product is not sold separately from the extended warranty. How does the company figure out how to allocate the transaction price to performance obligations? Determine the reference(s) from the codification system that explain(s) the GAAP guidance on this topic.

b) What information should the company disclose about product warranties in a company's financial statements and footnote disclosures? Determine the reference(s) from the codification system that explain(s) the GAAP guidance on this topic.

c) The company believes they have a related party transaction with a vendor they use for auto parts and they believe the transaction is material to users for the financial statements. How should the company deal with a potential related party transaction in their financial statements? Determine the reference(s) from the codification system that explain(s) the GAAP guidance on this topic.

Part B: Use the "ACC 543 Data File - Fall 2020" Excel file to answer the following questions.

The file consists of sales and warranty expense data for 16 car models from 2004 to 2018 (note that the time periods vary by car model). You should use a professional memo format and incorporate any relevant data via tables or charts to provide a summary of your analysis and findings. Your memo and supporting data must address all the following questions and will be graded for both content accuracy and professionalism. You must upload both your memo and Exel file to the submission folder at d2l.

Most if not all automobiles and trucks sold are subject to some kind of manufacturer warranty, which covers manufacturing defects in factory-supplied materials or factory workmanship. According to recent estimates, global warranty spending in the automotive industry alone surpasses $25 billion annually.

Warranty expense is recognized in the same period as the sales for the products that were sold. Warranty costs can be wildly unpredictable, and thus, GAAP allows warranty issuers to make reasonable estimates of the costs of meeting product warranties. A company may determine the historical percentage of warranty expense to sales for the same types of vehicles, apply the same percentage to the sales for the current accounting period to derive the warranty expense to be accrued. If there's no change in product quality, the percentage rate should remain relatively unchanged and then warranty accruals should remain proportional to sales. No sale, no warranty.

However, the warranty expense may be adjusted to account for unusual factors related to the vehicles that were sold, such as initial indications that a recent model has an unusually high repair cost. When a company initially underestimates its warranty costs, it has to later adjust its estimates and add more funds to cover the increased cost of warranty work. Most of the time, these adjustments are minor, but during a crisis they can become as large as the regular amounts. Customer complaints, recall, high claim costs are all indictors that the manufacturers may need to adjust the account to avoid underestimation of warranty expense. National Highway Traffic Safety Administration (NHTSA) of the United States Department of Transportation maintains a website about safety recall information.

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Part A: Data Summarization
Use Pivot Tables and create the tables in excel to show these five accounts: sales, warranty expense current and prior year, warranty claims current year and prior year. If you do not know how to use Pivot Tables, you can use the LinkedIn Learning resource to learn more about Excel Pivot Tables.
1) Provide different tables and graphics to show totals by company, model, country and year (Use "summarize values by sum").
a. Identify the highest and lowest amount for each account.
2) Provide different tables and graphics to show averages by company, model, country and year (Use "summarize values by average").
a. Identify the highest and lowest amount for each account.

Part B: Critical Thinking and Additional Analysis
1) Compare by company/brand (e.g., Ford vs. GM), model, and country across years and identify which company has the highest and which company has lowest (a) current year sales, (b) current year warranty expenses and (c) current year warranty claims.
a. Perform the analysis using a Pivot Table by performing the following analysis:
i. Show the data for the current year sales, warranty expenses and warranty claims for each company/brand on a country by country analysis over the years. (higher level analysis)
ii. Show data for the current year sales, warranty expenses and warranty claims for each company/brand and model on a country by country basis across years. (more detailed analysis)
2) Do you see any correlation between current year sales and warranty expense? Please explain. Provide an analysis that shows the correlation between the two variables.
a. If you do not know how to perform a correlation analysis, use the LinkedIn Learning tool to figure out a way to analyze the correlation between current year sales and warranty expense. Using the search term "Excel correlation" will provide you with analysis options.
3) How much is current year warranty expense as a percentage of current year sale by company, model, and country? Identify the companies with the lowest and highest percentages.
a. In addition to analyzing the numbers and calculating the percentage by company, model and country, you also need to develop a chart (bar graph or alternative visualization tool) that shows the data analysis.
4) Do you see any trend for warranty expenses and warranty claims? Do you observe any obvious patterns? What conclusion can you draw based on the data from 2004 to 2018?
a. This should be a detailed answer. Your answer should incorporate the above data and provide other creative ways to analyze the data and answer the questions. A two sentence answer is not an adequate response.

Part C: Create your own data analysis on the warranty data.
1) Determine a way to further analyze the data with other resources online about warranty costs. You can also find other information online to incorporate in your study, it does not have to be from this resource. Be creative and think outside the box on how to do a new analysis that will help in understanding the data.
2) Describe what additional data you are going to use and why it will be a helpful addition to the analysis already performed.
3) Perform the analysis and provide a summary of your results.

Attachment:- Financial Accounting Theory and Practice.rar