"Manufactured Homes" Case Essay

1497 Words Mar 15th, 2013 6 Pages
16-02-2013 Study year 2012-2013
Prof. Dr. Brendan O’Dwyer Semester 2, Blok 1
Financial Statement Analysis Anahita Farokhi 6041949

Case 3: “Manufactured Homes” (MANH)
Question 1
Manufactured Homes is engaged principally in the retail sale of new and used manufactured single-family homes and targets individuals in the low income category. Manufactured Homes focuses on the lower end of the market, according to the company this has two advantages: 1. Since its customers were seeking to fulfil an essential housing need, its customers were less affected by changes in general economic conditions. 2. Repossession rates were significantly lower than those of the industry, since its customers were likely to work very hard
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77: 1. The seller unequivocally surrenders the receivables to the buyer 2. The seller’s remaining obligations to the buyer under the recourse provision must be subject to reasonable estimation on the date of the transfer of the receivable. For this purpose, the seller should be able to estimate: * The amount of bad debts and related costs of collection and repossession, and * The amount of prepayments. If the seller cannot make these estimates reasonably well, a transfer of the receivable cannot be reported as a sale. 3. The seller cannot be required to repurchase the receivable from the buyer except in accordance with the recourse provision.
If any of the above conditions is not satisfied, the seller of the receivable must report the proceeds from the transfer as a loan against the receivable.
Well I think that Manufactured homes proved until 1986 that it is been conservative in stating its provisions for losses on credit sales. We can see in Note 7 to the financial statements that the actual charges until now did not exceed the provisions made. However, the actual charges tended more towards the provision during the consecutive years. According to me the accounting treatment of sales not reasonable enough because it is dependent on estimates which the company actually is not capable of making accurately. Manufactured Homes should stay conservative in stating its provisions for losses on credit sales to save the company from any default.

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