Question

Consolidated Statements of

Financial Position (partial)

(In millions of Canadian dollars)

As at December 31

Note

2017

2016

Assets

Current assets:

Accounts receivable

14

2,041

1,949

Inventories

15

313

315

Other current assets

197

215

Current portion of derivative instruments

16

421

91

Total current assets

2,972

2,570

The receivables turnover and collection period for Rogers Communications Inc. were calculated in this chapter, based on the company's financial statements for the 2017 fiscal year. Portions of these financial statements are presented in Illustrations 8.11 and 8.12.

Instructions

a.  

Calculate Rogers' receivables turnover and collection period for the 2016 fiscal year. Gross accounts receivable for 2015 was $1,878 million.

b.  

Comment on any significant differences you observe between the ratios for 2017 (as calculated in the chapter) and 2016 (as calculated by you above).

c.  

The gross accounts receivable are used in the calculation of the receivable turnover ratio. What amount represents the realizable value of accounts receivable?

d.  

Rogers Communications reports the following regarding accounts receivable in the notes to consolidated statements: “As at December 31, 2017, $489 million (2016-$541 million) of gross accounts receivable are considered past due, which is defined as amounts outstanding beyond normal credit terms and conditions of the respective customers.”

1.  

Refer to the aging of customer records for Rogers Communications presented in Illustration 8.11. Which categories does the company use to determine the amount considered “past due”?

2.  

What percentage of total accounts receivable does this “past due” amount represent?

e.  

Using your answers in parts (a) through (d), what is your assessment of the company's effectiveness in collecting amounts owing from customers? Include in your assessment points about the accounts receivable turnover ratios, collection period, and the amount past due.

Answer 1

a.

($ in millions) 2017 2016 Receivables turnover = 6.9* times $13,702 [($2,008 + $1,878) = 2] = 7.1 times = 52.9 days* Collection period 365 days = 51.4 days 7.1

*Given in text

($ in millions)

Gross accounts receivable 2015   $1,878

End of year 2016

Accounts receivable (net) $1,949

Add: allowance balance 59

Gross accounts receivable 2016   $2,008

b.

The difference in the ratios demonstrates a slight deterioration. Receivables are slower in turning over. It took on average 1 more day in 2017 to convert receivables into cash.

c.

The gross accounts receivable used in the ratios for 2017 was $2,102 and the net amount is $2,041. The net amount is the realizable value of the receivables.

d.

1.

T he $489 million in gross accounts receivable that are considered past due include all accounts over 29 days in age ($303 + $113 + $73).

2.

This amount of $489 represents 23.3% of gross accounts receivable of $2,102 million.

e.

Almost one-quarter of the receivables are past due and the average age is well over 30 days. The allowance for doubtful accounts is about 3% of the total receivables, which seems reasonable.