RA 4-1 SHOPPERS DRUG MART
(a) The company uses the multi-step format for income statement.
(b) Relationship between business and Balance sheet and Income statement
Business
Reflect in the balance sheet and income statement
The company is the licensor of 1,199 Shoppers Drug Mart/Pharmacist full-service retail drug stores across Canada.
The company also licenses or owns:
+ 58 Shoppers Simply Pharmacy
+ 8 Murale beauty stores
+ 63 Shoppers Home Health Care stores
+ Shoppers Drug Mart Specialty Health Network Inc.
+ MediSystem Technologies Inc. Retail drug store so the inventory is 2,042,302 (27.97% / total asset and 31.83% cost of goods sold).
The majority of revenues come from retail stores and the payment of the customers are credit, debit or cash so the account receivable is small 493,338 (4.7%/total revenue)
Goodwill allocate to the store network 2,499,722 (34%/total asset)
(c) Income statement is presented by function because the expense are classified by functions as Operating and administrative expense, finance expenses.
(d) In comprehensive income, there are:
Effective portion of changes in fair value of hedges on interest rate derivatives.
Effective portion of changes in fair value of hedges on equity forward derivatives.
Net change in fair value of hedges on interest rate and equity forward derivatives transferred to earnings
Retirement benefit obligations actuarial losses
In the total of comprehensive income for current year, there are:
Other comprehensive income (loss)
Net earnings
How much of this income or loss is attributable to the shareholders of parent and to the non-controlling shareholders?
1. Shareholders of Parent: (21,571,000)
2. Non-controlling shareholders (minority shareholders) = 0
(e) EPS = (Net income – preferred dividends)/ Weighted Average Number of Common Shares Outstanding
There are 2 EPS figures are presented based on 2 kinds of weighted average common shares: basic and dilutes. Shoppers Drug Mart has the stock options so it has the diluted shares beside the basic shares.
EPS disclosed in the income statement.
RA 5-1
(a) What alternative formats could the company have used for its balance sheet? Which format did it adopt?
The alternative format that the company could use for its balance sheet is to list assets by section on the left side and liabilities and shareholder’s equity on the right side.
The company listed liabilities and shareholders’ equity directly below assets on the same page.
(b) Identify the various techniques of disclosure that the company could have used to disclosure additional financial information that is pertinent. Which techniques does it use in its financials?
The various techniques of disclosure:
+ Parenthetical explanations
+ Notes
+ Cross-references and contra items
+ Supporting schedules
+ Terminology
Shoppers Drug Mart uses notes technique in its financials.
(c) Which presentation method does the company use for its statement of cash flows (direct or indirect method)? What were the company’s cash flows from its operating, investing, and financing activities for the year ended December 31, 2011? What were its trends in net cash provided by operating activities significantly different from net earnings in both periods? Suggest why this might happen.
The company uses indirect method for its statement of cash flows.
Cash flows for the year ended December 31, 2011 from:
+ Operating activities: $973,838,000
+ Investing activities: $(349,172,000)
+ Financing activities: $(570,454,000)
The trends in net cash provided by operating activities and net earnings in 2011 and 2010:
Unit: thousands of Canadian dollars
2011
2010
% change
Value
Value
Net cash from operating activities (1)
973,838
828,201
17.58%
Net earnings (2)
613,934
591,851
3.73%
% (1) and (2)
63%
71.46%
+ The trends in net cash provided by operating activities and net earnings in 2011 and 2010 increased. However, the percentage of net cash increased 17.58% is higher
