HUM Products Limited (HUM) is a consumer products company that designs, manufactures, markets, and distributes a diverse portfolio of consumer products, primarily in the recreational and leisure segments. The company’s products enjoy strong positive brand recognition and include consumer goods such as bicycles, car seats, small boats, and strollers.
As a public Canadian company, HUM complies with IFRS. The company is currently evaluating alternative presentations for the SCF. You are an independent accounting professional, hired to provide some expertise in the area. Your charge from the CFO: We’d like to take a fresh look at our SCF, with your help. We’d like to see what our SCF would look like if we used the direct method to present operating activities, rather than the indirect method that we have always used in the past. It would probably be helpful if your analysis also included an analysis of our strategic operating, investing, and financing decisions that are apparent from the SCF. I’ve provided you with the information you need (Exhibit1). You can piece it together from this, I expect. Document your assumptions and we’ll review it together next week. We’d also like you to evaluate the alternatives for presenting dividends and interest paid in the operating versus financing sections: a demonstration of the alternatives, and the impact on our key reporting numbers, would be helpful. We also struggle with the accounting policy for our development costs; they’re pretty steady from year to year, and we expense them. But that’s a judgement call; we’re evaluating the capitalization and amortization decision as well. Perhaps you should analyze that issue, as well. We are meeting with the audit committee next week, and we need to present an analysis to them.
Prepare a report that responds to the requests of the CFO.