Restate Nuware’s Essay

1.) Restate Nuw bes 2013 earnings as if the come with had used the same accounting methods and assumptions as R.P. Stuart. Your answer should focus on, hardly not necessarily be limited to, Nuwares accounting for investments, receivables, inventory, and PP&E.From the discussions in Nuwares notes and the comparison with RP.Stuarts financial statement, we noticed that there are several different accounting policies being adopted, including receivables, inventory, advertisement cost and PP&E. Moreover, it seems that Nuware is development gains on investment to manipulate total income. Therefore, we made some allowance account to make the comparison between Nuware and R.P Stuart more(prenominal) reliable. For instance, we assumed the same admit/receivable ratios of these two companies to avoid potential offensive revenue credit entry by Nuwares way (see Appendix). However, there is not enough knowledge to make adjustment on PP&E depreciations.Then we can compare the performanc e of these two companies in 2013 (as shown below). However, we cannot get find enough culture to make a comprehensive adjustment on 2012 data (in particular, we adoptt have the estimation on 2011 inventory using first in first out method). As a result, we cannot calculate the growth rate of EPS precisely here.2.) respect the financial performance of Nuware versus R.P. Stuart. Nuware and R.P. Stuart are in the same industry and portion virtually identical business model, which make them comparable. Before adjustment, Nuware showed a often better financial performance than that of R.P Stuart regards to net income, gross profit margin, fall back on asset & equity, and EPS growth etc. After making needed adjustment, we found that Nuware still outperforms R.P.Stuart, but with a smaller margin. The real net income is only 71% of the original figure, which subsequently lowered the return on assets and equity. But due to the higher leverage ratio, Nuwares return on equity is still 2 x that of R.P.Stuart (originally 3x). However, what worries us most is the combination of a blackball earnings growth and slower trades growth.Using these criteria, Nuware is not lashing the industry (actually performed worse than R.P Stuart in terms of sales growth in 20131).3.) Would you characterize the accounting discretion applied by Nuwares management as aggressive? Why or why not?Nuwares Management accounting discretion can be seen as aggressive for several reasons 1. They artificially lower the allowance of account receivable to rising income and gross margin. Moreover, when estimating reserves, percentage of sales method is less accurate than the diminutive monthly review method adopted by R.P Stuarts. 2. Compared to R.P. Stuart, LIFO trim down the tax and LIFO liquidation in year 2013 resulting in artificially high net income as well. 3. The recognition of unrealized gains for available for sale investment assets also contributed to the higher net income, which shou ld be considered separately from income from its plaza business. 4. There might be some aggressive assumptions when depreciating PP&E, which deserves more detailed analysis.