1 Financial Reporting Problem BYP13-1 The shareholders' equity section for Corus Entertain- ment Inc. is shown in the consolidated balance sheet in Appendix A. You will also find data related to this problem in the notes to the financial statements. Instructions (a) How many classes of shares does Corus have? For each class of shares, specify how many shares are authorized and issued at August 31, 2014. (Hint: Refer to Note 15.) (b) Refer to Note 15 again. What are the rights of each class of shares? (c) Did Corus issue any additional shares in fiscal 2014? If so, specify how many were issued, for what dollar amount, and for what purpose. (d) What was the average per share amount of each class of Corus's shares at the end of fiscal 2014? (e) Did Corus declare any cash dividends in fiscal 2014? If yes, how much? (f) Corus's return on equity was calculated for fiscal 2014 in Illus- tration 13-8. Calculate the company's return on equity for fiscal 2013. Did this ratio improve or worsen from 2013 to 2014? CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at August 31, 2014 As at August 31, 2013 As at September 1. 2012 In thousands of Canadian dolore ASSETS Current Cash and cash equivalents Accounts receivable notes 4 and 23) Promissory note receivable note 26) Income taxes recoverable Prepaid expenses and other 11,585 183,000 81.206 164 302 A%759 19.190 163,345 9,768 13,032 16.392 S 9,542 12,619 204,704 Total current assets 217,394 310.070 29,044 47,630 Tax credits receivable Investments and intangibles (note 5) Investment in joint ventures (note 26) Property, plant and equipment (note 6) Program and fim rights (note 7 Fim investments (note 8) Broadcast licenses (note 9) Goodwil(note 9) Deferred tax assets (note 20) 143,618 330,437 63,455 979,984 934,859 38,161 2,784,582 41.564 42,975 125,931 151.192 232.587 62 274 515.030 646.045 39.463 2,167,137 43.865 42,390 121,704 163,280 229,308 67 847 520.770 646,045 28.327 2,068.238 170,411 164,443 LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities (note 11) Income tacos payable (note 20) Provisions (note 12) Total current liabilities 177 367 1.303 2.322 180.992 3.941 5,314 175,725 168,384 874,251 171,793 252,687 1,474,456 538,966 93.241 145,713 518258 87 588 145,310 946,304 932.148 Long-term debt note 13) Other long-term liabilities (note 14 Deferred tax labilities (note 20) Total liabilities SHAREHOLDERS' EQUITY Share capital (note 15) Contbuted surplus Retained earnings Accumulated other comprehensive income foss) note 16) Total equity attributable to shareholders Equity attributable to non-controlling interest Total shareholders' equity 967,330 8,385 313,361 3,767 1,292,843 17,283 1,310,126 937.183 7.221 256.517 1.653 1.202.574 18,259 910,005 7.835 198.445 (812 1.115,473 20.617 1,220,833 1,136.090 2,784,582 2.167.137 2,058.238 Commitments, contingencies and guarantees notes 13 and 27 See accompanyng notes Consolidated Statements of Income and comprehensive Income APPENDOKA CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 2013 2014 833,018 543,378 24,068 751.556 SOS 26.812 For the years ended August 31, in odsot Canadian dost per she amounts Revenues Direct cost of sales, general and administrative expenses rote 17 Depreciation and amortization (notes and Interest expense note 18) Broadcasters and goodwill imporment notes 9 and 10) Debt refinancing note 13) Business acquisition integration and restructuring costs notes 12 and 26 Gain on acquisition (note 26) Gain on sale of associated company note 20 Other expense Income.net (note 19) Income before income taxes Income tax expenso note 20) Net income for the period 83,000 5.734 25.000 46,792 [127,884) 5,740 209,000 53.433 55.300 3.560 200.211 156,199 165.00 Net income attributable to Shareholders Non-controlling interest 150,400 5.761 159.996 5.854 156,169 185.7 Earnings per share attributable to shareholders Basic Diluted $ 1.77 $ 1.70 $1.91 $190 156.189 165.79 Net Income for the period Other comprehensive Income (loss), net of tax note 16) 2333 Items that may be reclassified subsequently to net income: Unrealed foreign currency translation adjustment Unrealized change in fair value of available for sale investments Unreal red change in fair value of cash flow hedges Actuarial oss) gain on employee future benefits 1,720 446 (52 12.188 616 174 3.081 156,095 168.830 Comprehensive income for the period 150,334 5,761 Comprehensive income attributable to: Shareholders Non-controling interest 162.976 5.864 168.530 156,095 Be accompanying notes SIX A Specimen Financial CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Share capital Contributed noto 169 surplus 937.183 7.221 Rotained earnings 256.517 150,408 12.188 191,376 Accumulated other comprehensive Total equity Income (os) attributable to note 16) shareholders 1.653 1.202.574 (74) 150,334 2.188 (91,376) Non- controlling shareholders' interest equity 18,259 1.220833 5,761 156,095 16.737) 198,113 On thousands of Canadian dolor Al August 31, 2013 Comprehensive incomo (los) Actuviolloss transfer Dividends declared Issuance of shares under stock option plan Issuance of shares under dividend reinvestment plan Share-based compensation expenso At August 31, 2014 4.603 4.800 5,465 (862) 24,682 24,582 24.682 2,026 2,026 8,385 2.026 1,310,126 967,330 17,283 3,767 313,361 1,292,843 910,005 7,835 (812) 3.081 (616) 1.115,473 162,976 20,617 5854 198,445 159,895 616 (84,452) 1.136,090 168,830 (84 452) 16,331) 190.783 1,156 (2.200) (1,045) (1.045 - I At August 31, 2012 Comprehensive incomo Actuarial gain transfer Dividends declared Issuance of shares under stock option plan Issuance of shares under dividend reinvestment plan Shares repurchased Share-based compensation exponse Acquisition of non-controlling interest (note 26) At August 31, 2013 See accompanying notes 26,731 (708) 26,731 (1,464) 26,731 (1,464 (756) 1.586 - 1.586 1,586 (17,231) (1.881) (19,112 (17,231) 256,517 937,183 7,221 1,653 1,202,574 18,259 1.220.833 15. SHARE CAPITAL AUTHORIZED The Company is authorized to issue, upon approval of holders of no less than two-thirds of the existing Class A shares, an unlimited number of Class A participating shares ("Class A Voting Shares"), as well as an unlimited number of Class B non-voting participating shares ("Class B Non-Voting Shares"), Class A Preferred Shares, and Class 1 and Class 2 Preferred Shares. Class A Voting Shares are convertible at any time into an equivalent number of Class B Non-Voting Shares. The Class B Non-Voting Shares are convertible into an equivalent number of Class A Voting Shares in limited circumstances. The Class A Preferred Shares are redeemable at any time at the demand of Corus and retractable at any time at the demand of a holder of a Class A Preferred Share for an amount equal to the consideration received by Corus at the time of issuance of such Class A Preferred Shares. Holders of Class A Preferred Shares are entitled to receive a non-cumulative dividend at such rate as Corus' Board of Directors may determine on the redemption amount of the Class A Preferred Shares. Each of the Class 1 Preferred Shares, the Class 2 Preferred Shares, the Class A Voting Shares and the Class B Non-Voting Shares rank junior to and are subject in all respects to the preferences, rights, conditions, restrictions, limitations and prohibitions attached to the Class A Preferred Shares in connection with the payment of dividends. The Class 1 and Class 2 Preferred Shares are issuable in one or more series with attributes designated by the Board of Directors. The Class 1 Preferred Shares rank senior to the Class 2 Preferred Shares. In the event of liquidation, dissolution or winding-up of Corus or other distribution of assets of Corus for the purpose of winding up its affairs, the holders of Class A Preferred Shares are entitled to a payment in priority to all other classes of shares of Corus to the extent of the redemption amount of the Class A Preferred Shares, but will not be entitled to any surplus in excess of that amount. The remaining property and assets will be available for distribution to the holders of the Class A Voting Shares and Class B Non-Voting Shares, which shall be paid or distributed equally, share for share, between the holders of the Class A Voting Shares and the Class B Non-Voting Shares, without preference or distinction. ISSUED AND OUTSTANDING Class A Voting Shares Chess Non-Wing Shoes 3.434280 2656 600410 910.00 Balance - September 1, 2012 Conversion of ass A Voting Sun to Non Voting Shoes ce of shares understock option of shares under duidend 1.000 4.500 50200 1.155 1.155 54.100 proa 10619 3.30.22 Balance - August 31, 2013 Conversion of A votre to Class B Non-Woong Sa ance of shares understoon plan sence of stres under didend 2.000 2.000 250 500 15 5.45 24 Balance - August 21, 2014 2,42 0781 967,330 No Class A Preferred Shares. Class 1 Preferred Shares or Class 2 Preferred Shares are outstanding at August 31, 2014 DIVIDENDS The holders of Class A Voting Shares and Class B Non-Voting Shares are entitled to receive such dividends as the Board of Directors determines to declare on a share-for-share basis as and when any such dividends are declared or paid. The holders of Class B Non-Voting Shares are entitled to receive during each dividend period, in priority to the payment of dividends on the Class A Voting Shares, a dividend which is $0.005 per share per annum higher than that received on the Class A Voting Shares. This higher dividend rate is subject to proportionate adjustment in the event of future consolidations or subdivisions of shares and in the event of any issue of shares by way of stock dividend. After payment or setting aside for payment of the additional non-cumulative dividends on the Class B Non-Voting Shares, holders of Class A Voting Shares and Class B Non-Voting Shares participate equally on a share-for-share basis, on all subsequent dividends declared. Class A 30.5 SO. 2014 Date of record September 18, 2013 October 15, 2013 November 15, 2013 December 13, 2013 January 15, 2014 February 14, 2014 March 14, 2014 April 15, 2014 May 15, 2014 June 16, 2014 July 15, 2014 August 15, 2014 Date ad September 30, 2013 October 31, 2013 November 20, 2013 December 30, 2013 January 31, 2014 February 28, 2014 March 31, 2014 April 30, 2014 May 30, 2014 June 30, 2014 July 31, 2014 Agt 2. 2014 Class No Voting Shares Amount paid 005000 50.000 30.085000 30.000 50.085000 SO ONORE 30.00033 $0.90RS 50.000 SONORES 50.000 $0.00 50017 50.000 $0.90417 50.000417 SO 0417 $1.0001 The total amount of dividends declared in fiscal 2014 was $91,375 2013 - $84452) On October 23, 2014 the Company declared dividends of $0.090417 per Class A Voting Share and $0.090833 per Class B Non-Voting Share payable on each of November 28, 2014 December 30, 2014 and January 30, 2015 to the shareholders of record at the close of business on November 14, 2014 December 15, 2014 and January 15, 2015, respectively EARNINGS PER SHARE The following is a reconciliation of the numerator and denominator (in thousands) used for the computation of the basic and diluted earnings per share amounts: 2014 2013 150,895 150,408 Net income attributable to shareholders (numerator) Weighted average number of shares outstanding denominator) Weighted average number of shares outstanding - basic Effect of dilutive securities Weighted average number of shares outstanding - diluted 84,993 334 83,860 330 85,327 84,190 The calculation of diluted earnings per share for fiscal 2014 excluded 12,618 (2013 - nil) weighted average Class B Non-Voting Shares issuable under the Company's Stock Option Plan because these options were not "in-the-money