Business Combinations/IFRS/Foreign Currency Translation

Full details in the attached word document. This is a 3 part assignment on CM Corporation.

Part 1-SWOT Analysis

Presentation Mechanics should be as follows:

1. Prepare a 5-8 slide PowerPoint presentation, including slide notes.
2. Summarize the strengths, weaknesses, opportunities, and threats for CMC under each purchase option.
3. Explain the advantages and disadvantages of each option under both US GAAP and IFRS standards.
4. Explain how either the “goodwill recognition” or “bargain purchase” can impact an acquisition.

Part 2-Memorandom

Research the following topics and prepare a memorandum on your findings:

1. What are the major factors in converging from US GAAP to IFRS Standards?
2. Will switching accounting standards be costly for the firm? Explain your reasoning.
3. How does IFRS differ from GAAP regarding international transactions? Are there issues in accounting for international transactions?
4. What is your final recommendation on whether CMC should converge to IFRS or GAAP? Explain your reasoning.

Part 3-Foreign Currency

Presentation Mechanics should be as follows:

1. Prepare a 5-8 slide PowerPoint presentation, including slide notes.
2. Summarize foreign currency’s impact on a firm expanding internationally.
3. Explain the advantages and disadvantages to foreign currency translation of financial statements.
4. Explain different reasons for the firm to continue with accounting under US GAAP or switch to IFRS standards.

CM Corporation (CMC) was founded six years ago by Phil Connor and Eric Martin. The
company designs, installs, and services security systems for high-tech companies. The
founders, who describe themselves as “entrepreneurial geeks,” met in a computer lab when
they were teenagers and found they had common interests in working on security systems
for critical industries. CMC hired you as a junior accountant this year.
Lately, Connor and Martin have been working with “radio frequency identification” (RFID)
technology. They have developed a detailed system designed to track inventory items using
RFID tags embedded invisibly in products. This technology has numerous inventory
applications in multiple industries.
One of the most basic applications is tracking manufacturing components; if tagged
components “go walking” (if employees attempt to take them), companies can easily track
and find them. Connor and Martin have sold their system to several high-tech companies in
the area. These companies have a number of government contracts that require extensive
security systems to protect sensitive data from infiltration by terrorists and others. To date,
CMC’s cash flow from sales and services has adequately funded its operations.
CMC expects much growth potential for its products. As a result, they are considering going
public and expanding internationally in the near future.
Instructions
Connor and Martin are contemplating acquiring Adverse Systems, a smaller security
system manufacturer who is in the market to sell due to financial hardships. It is important
for CMC to analyze the internal and external factors that could possibly affect the
company’s future performance after acquiring another company. SWOT is a comprehensive
audit and competitive analysis that analyzes the Strengths, Weaknesses, Opportunities and
Threats facing an organization. CMC has asked you to be a part of the company’s
acquisition planning process to identify strategies, financial and operational goals. They
have requested that you outline the internal and external factors that are relative to the
acquisition and report the results using a SWOT analysis. CMC and Martin have the option
of recognizing goodwill or making a bargain purchase. Prepare a PowerPoint presentation
of a SWOT analysis comparing goodwill and bargain purchase. Please provide detailed notes
on each slide; recordings are not necessary for this assignment.
Part 1
Presentation Mechanics should be as follows:
1. Prepare a 5-8 slide PowerPoint presentation, including slide notes.
2. Summarize the strengths, weaknesses, opportunities, and threats for CMC under
each purchase option.
3. Explain the advantages and disadvantages of each option under both US GAAP and
IFRS standards.
4. Explain how either the “goodwill recognition” or “bargain purchase” can impact an
acquisition.
Use the FASB Codification and IFRS to address all technical accounting issues presented in
the requirements, being certain to reference the applicable sections of the Codification and
IFRS in your presentation. You will need to register for the basic service at these sites. It is
free.
Part 2
Connor and Martin are set on going international in their industry and feel that global
expansion is a great transition for the company. They do not feel as if they understand IFRS
and are in need of clarification of both implications and convergence factors that may affect
the expansion. They have asked you to prepare a memorandum to help them understand
the differences in US GAAP and IFRS Standards, as well as what the costs will be in making
the change.
Research the following topics and prepare a memorandum on your findings:
1. What are the major factors in converging from US GAAP to IFRS Standards?
2. Will switching accounting standards be costly for the firm? Explain your reasoning.
3. How does IFRS differ from GAAP regarding international transactions? Are there
issues in accounting for international transactions?
4. What is your final recommendation on whether CMC should converge to IFRS or
GAAP? Explain your reasoning.
Memorandum Mechanics should be as follows:
The body of the memorandum should be a professional presentation centered on clear
and concise writing. The responses to the questions should be detailed, well researched,
and specifically related to CMC’s industry.
Part 3
Connor and Martin have decided to go public and also expand internationally within the next two to
three years. With making such bold moves, they are also seriously considering a switch to IFRS as their
accounting standards for financial statements. Connor and Martin have requested your assistance in
creating a PowerPoint presentation that summarizes information on the impact of foreign currency
should the firm expand internationally. Please provide detailed notes on each slide; again, recordings are
not necessary for this assignment.
Presentation Mechanics should be as follows:
1. Prepare a 5-8 slide PowerPoint presentation, including slide notes.
2. Summarize the impact foreign currency will have on a firm expanding internationally.
3. Explain the advantages and disadvantages to foreign currency translation of financial statements.
4. Explain different reasons for the firm to continue with accounting under US GAAP or switching to
IFRS standards.