Case studies

Threadneedle Investments, a leading UK Investment management company, was engaged in strategic discussions about future growth in its retail mutual funds business. The firm's Vice Chairman, Alan Ainsworth, was leading the discussion of strategic alternatives. The following options were being considered: expanding distribution of its funds in the UK by distributing directly; expanding its presence in the UK through the independent financial advisor (IFA)network; and/or building a larger presence in Germany, where Threadneedle was already established. The case takes place in June 2000 and draws much of its rationale and immediacy from the great bull market of the 1990's and the arrival of a new millennium. Investors were looking for new investment media to capture these returns. The case is based on field research including conversations with Mr. Ainsworth and his associates, internal company documents, interviews with experts in the field and library research.

Arizona Snowbowl, a ski area located in northern Arizona, experienced several years of inadequate snowfall resulting in both operating losses and negative cash flows. The CEO had to decide whether to commit $750,000 for an Environmental Impact Statement (EIS) related to a proposed $19.77 million snowmaking project that uses reclaimed wastewater. U.S. Forest Service approval was required. Data for this case were obtained from the EIS that the Snowbowl submitted to the U.S. Forest Service (USFS). Estimated skier days, revenue levels, capital costs and interest rates are provided to facilitate the decision modeling process. Students are expected to analyze the financial information and decide whether or not undertaking the EIS project is cost effective while taking into account the possibility that the regulatory and legal system might not allow the project to go forward.

Fonkoze is the largest Microfinance Institution in Haiti whose clients are mostly poor women. The authors had access to documents and meetings of the organization for an extended period, and observed the growth of the organization from a single office to 21 branch offices. In so doing, their staff had to spend increasing time in fundraising so that they could make more loans to the existing and new customers. This case presents the decisions of the Board and the management to alleviate some of those problems. Against a backdrop of political and civil turmoil, the case could be instructive for students and instructors alike. The Board had to decide whether to apply for status as a regulated bank, or to transform into some other financial entity.

The financial statements of public companies located in the United Arab Emirates provide excellent examples of the impact that reporting investments at fair value can have on net income. This is because of the wide fluctuations in securities prices and real estate prices in recent years. Using an actual company, National General Insurance, which is located in Dubai in the United Arab Emirates, this case provides examples of the impact of fair value accounting for investments under International Financial Reporting standards (IFRS), for both securities and property investments. As US financial reporting moves towards harmonization with IFRS, it is critical to understand how reporting for investments under US Generally Accepted Accounting Principles (US GAAP) compares with international reporting standards. Specific learning objectives include gaining an understanding of the reporting requirements for investments under IFRS, understanding the difference between reporting requirements for investments under US GAAP and IFRS, and understanding both the positive and negative impacts on reported net income from using fair values for reporting investments.

Doug Scovanner, CFO of Target Corporation, was about to present his proposal at the November 2008 Board meeting. He was prepared to discuss immediate strategic actions which would provide support for working capital for the discount retailer. The retail community was about to suffer their worst fourth quarter in recent memory. Consumer spending had contracted, unemployment was rising and the deflated housing market had driven the economy into a recession. Although discount retailers had fared better than other industries during the second and third quarters, they were not immune to the overall economic downturn which had become a global crisis. To further complicate matters, Target's largest competitor, Wal-Mart, just posted third quarter growth even though Target was bracing for a busy holiday season. Scovanner anticipated further strain on working capital before year-end as cash flow tightened and the capital markets remained at a virtual stand-still.

Traditional Craft Designs is a sole proprietorship located in Trinidad and Tobago, West Indies. The firm's owner, Ms. Debra Atwell was recently offered an attractive opportunity to lease space at the Crown Point International Airport, Trinidad and Tobago to establish a retail outlet. She then met with an officer of the National Entrepreneurship Development Company to discuss the opportunity and seek a $40,000 loan to finance the capital and operating costs associated with the proposed retail outlet. Students are required to assist Ms. Atwell with the preparation of historical financial statements and a financial analysis that must accompany her loan application.

Accounting, corporate governance, business ethics.

MBA and EMBA.

China has largely changed its accounting practice in line with international norms. But its corporate governance structure continued to be administratively driven. Many Chinese-listed companies, especially big ones, are transformed from state-owned enterprises, with the government as their largest shareholder. It is no exception to Company C. Then what is the common pattern of accounting behaviour in China? An insight could be drawn by analysing this case.

Highlight two issues in point, namely accounting issue and governance issue. Chinese companies are now allowed to choose their accounting policies, while their top decisions are subject to government policies. Identify Company C's creative accounting by discussing China's accounting reform. In this regard, China has been relatively robust in terms of dropping its own practice and adopting western one. Discuss the corporate governance issues unveiled. What are company's performance criteria? Are they clearly established and enforced? And what about government's decision to change CEO twice in less than one year? What are the impacts on CEO's behaviour?

Teaching note.

International management control and organisational behaviour.

This case is suitable for final year undergraduate and Master's students as well as for the general practitioner. It is suitable for the university course program and for in-company training seminars. For company training seminars, the human resources department and finance would most probably benefit from the discussion of the case.

This case was about a company that was eager to expand its business internationally as it gains success in the home market. Having being entrusted by the company CEO to lead the project, the enthusiastic “project champion” lavishly spent the company investments with minimal control from the parent company.

After carrying out this exercise, students are expected to be able to: first, decide a firm mode of entry, scale of entry and strategic commitment; second, determine the market potential of a particular business venture; third, suggest the management structure and control for international subsidiaries; fourth, decide the possible exit strategy of a business venture.

Teaching notes.

The subject areas for this case are auditing, fraud and investigations. It is also relevant for teaching aspects of corporate governance.

This case consolidates techniques and methodologies of special investigations and demonstrates weaknesses in governance and internal controls. It is appropriate for final year undergraduate students and graduate students who have attended classes on basics of accounting and financial reporting.

The case is about institutional governance and the effects of ineptness at different levels of an organization that resulted in TAS. 133 billion being “improperly” paid out to 22 firms in the financial year 2005/2006.The case is structured to focus at the dilemma of the Director of Finance as an individual who featured in the latter stages of an extensive fraud where old unclaimable debts were revived and were being claimed and paid to fictitious assignees involving a number of Central Bank officials. However, the case seeks to interrogate issues related to financial records and controls in which the position of Director of Finance had more relevance.

Working on this case should result in enabling students to acquire expertise necessary for forensic accounting. It should also enable students to learn to gain an understanding of the practice of investigative and forensic accounting as well as an understanding of the interrelationships of the parties involved in forensic investigations.

Teaching note.