Based on the financial information of the machinery business (Table 5-1, Table 5-2, Table 5-3 and Table 5-4) and the description of business arrangements(Table 5-5) provided by H Group in the due diligence data room, (1) identify the three balance sheet items that had significant (over 20%) fluctuation and calculate the percentage of each fluctuation;(2) calculate the turnover days of trade receivables and inventory for both 2009 and 2010 with their year-end balances and the corresponding sales and cost amounts; (3) draft a list of questions to H Group regarding (i) the significant fluctuations in balance sheet items and (ii) the inconsistencies between the financial data (Table 5-2，Table 5-3 and Table 5-4) and the description of typical business arrangements (Table 5-5). (注:第(2)小题中一年按365天计算，答案四舍五入至整天。准备第(3)小题要求的问题清单时，应先指出有关的重大波动及信息不一致的情况，然后提出问题。)
参考答案：
Answers：
(1)Balance sheet items with significant fluctuation:
①Trade receivables.It increased by 50.85%.
②Advance from customers.It decreased by 47.10%.
③Trade payables.It increased by 41.53%.
(2) Calculations:
①Trade receivable turnover days = 365÷ (Sales÷ Trade receivables)
2009 trade receivable turnover days = 365 ÷ (69 470 ÷ 13 002) = 68 days
2010 trade receivable turnover days = 365 ÷ (65 380 ÷ 19 614) = 110 days
②
Inventory turnover days=365÷ (Cost of sales÷Inventory)
2009 inventory turnover days = 365÷ (49 324÷25 665) = 190 days
2010 inventory turnover days = 365 ÷ (47 074÷25 416) = 197 days
(3) Draft list of questions:
①Trade receivables increased by 50.85%.Please explain the reason for the significant increase in trade receivables. Whether there has been any major changes in sales terms or accounting treatment. According to the description of the business arrangements, normally the aging of trade receivables related to General and Special Machinery should be no longer than 3 years, and the aging of trade receivables related to Components and Services should be no longer than-l year. However, the aging analysis show.s that Euro 1 288 thousands of trade receivables related to Special Machinery were over 3 years, and Euro 900 thousands of trade receivables related to Components and Services were over l year. Please explain the reasoris for the
longoverdue, and confirm whether sufficient bad debt provision has been provided.
②Inventory. According to the description of the business arrangements;inventory aging should not be longer than 2 years. However, the aging analysis shows that Euro 3.09 million of inventory were over 2 years. Please explain the reasons for the long aging, and confirm whether proper obsolescence review has been performed.
According to the description of the-business arrangements, raw materials are usually purchased 3-6 months ahead of production. This indicates that usually the aging of raw materials should be within 6 months. However, the inventory aging analysis shows that more than Euro 1 million of raw materials were over 6 months. Please explain the reasons for the long aging, and confirm whether proper obsolescence review has been performed.
③Advance from customers decreased by 47.10%.Please explain the reason for the significant decrease in advance from customers. Whether there has been any major changes in sales terms or accounting treatment. According to the description of the business arrangements, 10% down payments are made upon the signing of the contract, and as at the end of 2010, H Group had sales backlog of Euro 58 million. So the advance from customer should be Euro 5.8 million (58×10%). However, the advance from customers shown on the balance sheet at the end of 2010 was only Euro 3.65 million, significantly less than 5.8 million. Please explain the reason for the inconsistency.
④Trade payables increased by 41.53%. Please explain the reason for the significant.increase in trade payables. Whether there has been any major changes in purchase terms or accounting treatment. According to the sales, cost and inventory data, there seems no indication of significant purchase volume increase, which might in turn cause the increase in trade payables. Please explain the inconsistency.