Yakama Ltd. A Mid-Sized Manufacturing Case Assignment
Yakama Ltd. is a mid-sized manufacturing company owned by a group of private investors. Until five years ago Yakama
was a division of a public company. Yakama was sold off as part of a restructuring is now operated as a private
corporation. Yakama has continued to use IFRS although it is considering changing to ASPE. Yakama has borrowed
significant amounts of money both to finance its acquisition and to upgrade operations.
As a result, cash flow has been a concern and covenant violation has been an ongoing threat for several years. According to
its various borrowing arrangements, Yakama has to maintain minimum current ratio of 1:1 and a maximum debt-to-
equity ratio of 1.75 to 1 It is November 15, 2020.
The company’s yearend is December 31. The auditors have recently finished their interim work on the audit. In preparation
for the year-end the CFO has asked you, a CPA working in the finance and accounting department, to prepare a report on
some unresolved accounting issues and concerns including an assessment of the impact on the financial statements and
covenants. Information you have gathered on the issues is provided in Exhibit 1.
Exhibit 1 Information on Unresolved Accounting Issues: Provide recommendations for each accounting issue 1. In an effort
to increase sales, Yakama relaxed its credit policies. Management thought that its policies had been too tight thereby
making it difficult for customers to purchase the company’s products. Each customer’s credit limit was increased by 25%
to 50% and terms were relaxed so that credit was available to more customers