Case Beverly Inc Essay Example | Topics and Well Written Essays - 750 words

Case Beverly Inc - Essay Example The expansion plan involves the opening of three new stores each year in the next three years. Consequently, the company sought to borrow a loan in order to finance the expansion plan. The maximum amount accepted by the financier is $ 100 million. On that note, the cash inflows and cash outflows originating from receipt of the cash proceeds of the loan and payments of interest and the principal amount should be presented as financing activities. That is, the monetary value of these transactions should be recorded as financing activities of the company because it is a long-term credit (ASC-230 3-4). The company drew a portion in two instances, on the facility. It is provided that on July 15, 2010, the company drew $ 60 million on the facility; on August 30, 2010, the company drew an additional $ 40 million on the facility; and on September 30, 2010, the company paid down the draws by $ 50 million. All these transactions should be recorded based on their net values (ASC-230 8-9). The warehouse damaged by the Hurricane is considered as one of the company’s assets. The purchase of an insurance policy necessitates the payment of an annual premium. The value of the premium is estimated based on the degree of the risk covered. Insurance claims are paid to cover for damages and losses caused to a company’s assets. Therefore, the $ 15 million reimbursement to Beverly should be classified under the investment activities of the company. The classification is based on the fact that the premium payments are invested in an insurance company in order to indemnify the insured in case of a loss (ASC-230 5-6). This section contains a comparison of the accounting practices regulating the presentation of the cash flow statement as stipulated in IFRS and GAAP. First, the IAS and IFRS 5 regulate the presentation of financial statement under IFRS. On the other hand, the presentation of a similar financial statement under U.S GAAP is guided by the accounting