Noeleen Auto Mall. Ltd. recently completed an initial public offering (IPO) for $23,000,000 by listing its common shares on the New York Stock Exchange. Prior to its [PO. Noeleen was a privately held family business. As a public company, Noeleen faces increased reporting requirements, particularly those sanctioned by the Securities and Exchange Commission (SEC). Noeleen’s Controller. Donald Liemi, was surprised 10 learn that a Form 10-Q was required to satisfy the company’s first-quarter filing requirements with the SEC. Liemi lacked sufficient time to develop the “actual” numbers needed to prepare the report. meaning that he needed to make significant estimates before the 10-Q filing due date.
In addition, Noeleen now must satisfy a new group o f financial statement users with additional information needs. Noeleen expended resources t o meet the new reporting requirements and assess what information and disclosures to include/exclude from the financial reports. Liemi also learned that privately held companies are not subject to U.S. requirements like a publicly traded entity. Thai is, the company now muse follow additional U.S. standards and is required to change several of its accounting methods.
When considering his options. Liemi decides to take a “safe” approach and report the lowest income possible by adopting income-reducing standards. Here, the Controller proposes taking excessive write-downs for obsolete inventory and potentially impaired assets. He also decides to expense the cost of a significant investment in office equipment.
Finally, Noeleen created a separate legal entity lo handle its auto financing, Benedict Arnold Credit Company, during the same yeau it went public. The separate entity is not consolidated with the primary financial statements. Liemi decides t o keep this entity off of the and does not see any need for disclosure of Noeleen’s relationship with Benedict Arnold Credit.
Required
Based on the information provided, list and explain the application of the relevant components of the conceptual framework of accounting. Identify seven issues a n d use the following table to present your solution.
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