(Solution) 10K/A Http://www.gov/Archives/edgar/data/885639/000119312511246851/d221132d10ka.ht M 10Q/A... | Snapessays.com


(Solution) 10K/A http://www.gov/Archives/edgar/data/885639/000119312511246851/d221132d10ka.ht m 10Q/A...


What key categories of ratios were affected by the restatement (liquidity, solvency, profitability, efficiency)? Use ratio definitions in the Appendix as a reference. Please provide details on ratio definition and calculations in your report. For each of the categories affected, choose 1 or 2 key ratios, compute the ratio, and discuss changes in the ratio from pre- to post-restatement. Compute and compare these ratios for each year affected by the restatement.10­K/A

 

http://www.sec.gov/Archives/edgar/data/885639/000119312511246851/d221132d10ka.ht

 

m

 

10­Q/A

 

http://www.sec.gov/Archives/edgar/data/885639/000119312511246857/d221130d10qa.ht

 

m

 

Leases

 

KOHLS Corp*

 

885639

 

9/13/11

 

2/1/05

 

4/30/11

 

1.

 

Explain the underlying accounting issue(s) behind the restatement. If there was more

 

than one cited reason for the restatement, be sure to discuss each underlying

 

accounting issue. Make sure you study and cite the relevant accounting literature

 

(ASC).

 

(Brandon)

 

In 2011, Kohls determined a need to restate their financial statements to fix numerous

 

accounting errors in regards to leases. The restatement dates back to 2008, which resulted

 

from “improper application of the sale­leaseback provisions” of ASC 840. (10­K) Kohls is

 

heavily invested in the construction of leased stores. During construction, Kohls typically

 

covers construction cost overruns and additional improvements, such as roofing costs. Thus

 

for accounting purposes, Kohls was determined to be the “owner” during the construction

 

period, and forced to capitalize construction costs on their Balance Sheet. Once construction

 

was completed, ASC 840 requires Kohls to do a sale­leaseback analysis to find out if Kohls

 

can eliminate the assets from their Balance Sheet. Kohls typically reimburses a portion of the

 

costs by adjusting rental and cash payments, or had terms that fixed the rental payments for a

 

significant portion of the leased asset’s useful life. These were usually deemed “continuing

 

involvement”, thus preventing Kohls from derecognizing the constructed assets from their

 

Balance Sheet post­construction. In addition, many store and equipment leases were capital

 

leases but were recorded as operating leases.

 

In regards to lessee involvement with construction, FASB code 840­40­05­5 states:

 


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