Gildan Activewear Inc. is a Montreal-based company that manufactures and sells activewear, socks, and underwear. The company’s brands include Gildan, Gold Toe, and Anvil. The company also manufactures products through licensing arrangements with Under Armour and New Balance brands. Exhibit 4.14 presents the company’s consolidated statements of earnings and comprehensive income for the years ended January 1, 2017, and January 3, 2016.
EXHIBIT 4.14 Gildan Activewear Inc.’s 2016 Consolidated Statements of Earnings and Comprehensive Income

Required

a. Gildan reports “net sales” on its consolidated statements of earnings. Explain what this means.

b. Calculate the amount of Gildan’s gross profit percentage for 2016 and 2015. Has it improved?

c. Using the financial statements in Appendix A, calculate Dollarama’s gross profit percentages for the same periods. How do they compare with Gildan’s percentages?

d. Does Gildan prepare its consolidated statements of earnings using a single-step or a multi-step approach?

e. Does Gildan present its expenses by function or by nature? Does this approach require a higher level of management judgement when preparing the statement?

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GILDAN ACTIVEWEAR INC. Consolidated Statements of Earnings and Comprehensive Income Fiscal years ended January 1, 2017 and January 3, 2016 (in thousands of U.S. dollars, except per share data) 2016 2015 (15 months) Net sales $2,585,070 $2,959,238 Cost of sales 2,229,130 1,865,367 Gross profit 719,703 730,108 336,433 387,963 Selling, general and administrative expenses (note 16(a)) Restructuring and acquisition-related costs (note 17) 11,746 14,908 327,237 Operating income 371,524 Financial expenses, net (note 14(c)) 17,797 19,686 Earnings before income taxes 351,838 309,440 Income tax expense (note 18) 5,200 4,526 Net earnings 346,638 304,914 Other comprehensive income (loss), net of related income taxes: Cash flow hedges (note 14(d)) 39,518 8,825 Actuarial loss on employee benefit obligations (note 12(a)) (5,239) (10,000) (1,175) 34,279 $ 380,917 $ 303,739 Comprehensive income Earnings per share: (note 19) Basic) 1.26 1.47 Diluteda 1.47 1.25 %24