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First View Theatres Inc. (Summative (Analyze Major Issues) (AO#2 -…
First View Theatres Inc.
Summative (Situational Analysis)
Elements
KSF
SWOT
Strength
Weaknesses
Opportunities
Threats
Quantitative Analysis
Summative (Analyze Major Issues)
AO#2 - Develops Decision Criteria
Growth of Market Share
Profitability
Risk
Reputation
AO#3 - Expansion Option - Northern Ontario
Quantitative Factors
Qualitative Factors
Pros
Expansion to less competitive market
Film clubs' connection to the community
Training Included
Geographical Expansion
Familiar with Ontario Laws and Regulations
Cons
Regular Theatres, not PPV
No experience with customers in this region
Difficulty with permits may delay opening
Customers may not be loyal attendees
Decision Criteria
Assesses against Decision Criteria
Integrates at least 7 situational analysis factors
AO#4 - Expansion Option - Cinema Royale
Quantitative Factors
Qualitative Factors
Pros
Theatres have been upgraded
PPV has been installed
Theatres are a going concern
Loyal Staff
Cinema Royal has a strong reputation
Geographical expansion
Purchase Price is below current valuation
Minimum wage increase could be avoided
Similar customer demographics
Cons
No experience in Quebec
No training is planned
Need different insurance in Quebec
Management constraints
Not sure if operations could continue after lease expires
No bump in asset values with a share purchase
Different regulations in Quebec
Significant capital required
Shorter exhibition period will reduce revenues
Blockbuster movies may not be released via theatres
Decision Criteria
Assesses against Decision Criteria
Financial Reporting Implications
Identifies Cinema Royal would be a subsidiary
Identifies the options under ASPE (consolidation, equity, or cost)
Discusses the pros and cons of the options for recording the subsidiary
Discusses the users of the financial statements and their needs, including management and the bank
AO#5 - Expansion option - Installation of PPV Units
Quantitative factors
Qualitative Factors
Pro
Distribution rights
No capital outlay
Leverage expertise from installing PPV
Decrease in costs for PPV installed at theatres
Public is embracing PPV
Diversify operations
Industry is moving more home viewing
Con
Management resource constraint
No experience in selling PPV Units
Warranty costs and/or responsibility is unknown
No experience with a distribution agreement
Any dispute could impact the installation of PPV in theatres
Decision Criteria
Assesses the option against decision criteria
Financial Reporting Implications
Identifies there are separately identifiable components
Discusses how the revenue will be determined for each of the separately identifiable components
Identifies the three revenue recognition criteria for the PPV units
Discusses when the revenue recognition should occur for the PPV units, applying case facts against each criterion
Identifies the revenue recognition criteria for the installation of the units
Discusses when the revenue recognition should occur for the installation of the units
AO#6 - Additional Issues
Financing Options
Alternative Pricing Proposal
Interpretation of the audit report
Ethical use of data
Summative - Conclude and Advise
Cinema Royale
Northern Option
Installation of PPV