1 / 19

Accenture: Module 10

Accenture: Module 10. Kevin Overholt 3/30/2014. Agenda. Background of Accenture Operating Leases Share Incentive Plans Adjustments. Background. Accenture is a global leader in the information technology services industry. Spinoff of Arthur Andersen’s consulting branch.

dacian
Download Presentation

Accenture: Module 10

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Accenture: Module 10 Kevin Overholt 3/30/2014

  2. Agenda • Background of Accenture • Operating Leases • Share Incentive Plans • Adjustments

  3. Background • Accenture is a global leader in the information technology services industry. • Spinoff of Arthur Andersen’s consulting branch. • Three core businesses are technology consulting, software development, and outsourcing services. • Most recent share price is $78.14 with a market cap of $52.05 billion.

  4. Accenture’s Financial Statements • Balance Sheet • Relatively small Total Assets and Total Liabilities • Zero Long-Term Debt • Largest account balance is Cash • In reality, largest asset is people-not located on the Balance Sheet • Conclusion: NEA = 0 • Income Statement • ~70% of revenues go directly to salary/service expense • Steady growth in Net Income (roughly 10% annually) • 93-94% of income comes from services, 6-7% from non-enterprise activities

  5. Operating Leases

  6. Operating Leases – Discount Rate • Because Accenture does not currently utilize any capital leases, it is impossible to determine the IRR. • Assuming a 8% rate:

  7. Operating Leases: Effect • Assuming a 35% marginal tax rate: • EPAT is increased by the Rent Expense adjustment • FEAT is increased by the depreciation expense and interest expense from the lease obligation • Net Income receives the net of these adjustments

  8. Employee Stock Options

  9. Employee Stock Options

  10. Employee Stock Options Step 1: Value of options exercisable at 8/31/2012 5,715,100 * (59.46-24.32) =$200,828,614

  11. Employee Stock Options Step 2: Value of options exercisable at 8/31/2012 using end-year prices 5,715,100 * (71.30-24.32) =$268,495,398

  12. Employee Stock Options Step 3: Estimated Value of Exercised Options 2,071,005 * (65.38-23.43) =$86,878,660

  13. Employee Stock Options Step 4: Value of Options Forfeited During the Year 51,248 * (65.38-18.06) =$2,425,055

  14. Employee Stock Options Step 5: Value of Options Exercisable at 8/31/2012 3,660,375 * (71.30-25.04) =$169,328,948

  15. Employee Stock Options 5. Value of Options Exercisable at 8/31/2013 $169,328,948 -2. Value of Options Exercisable at 8/31/2012 w/ end year prices $268,495,398 +3. Value of Exercisable Options $86,878,660 +4. Value of Cancelled Options $2,425,055 =6. Share Based Compensation $(9,862,735) Adjustments: Decrease Net Financial Assets: $200,828,614 Decrease Ending Net Financial Assets: $169,328,948 Decrease EPAT: $9,862,735 Decrease FEAT: 67,666,784 - 84,453,605 $16,786,821

  16. Restricted Share Units • Estimated Additional Liability not on Balance Sheet = (78.14-52.32)*31,709,044 = $818,727,516

  17. Restricted Share Units • Adjustment: Add the Estimated Future Liability to the Deferred Revenues account on the Balance Sheet = $818,727,516 • Other side can flow through Income Statement  Retained Earnings

  18. Summary • Accenture has no inventory to consider using LIFO/FIFO. • They only utilize operating leases. After capitalization of these leases, the following adjustments occur: • EPAT Increases by $168,224, or 5.23% • FEAT Increases by $81,561, or 5477% • Net Income Increases by 86,663, or 2.44% • Properly accounting for Stock Options creates the following adjustments: • NFA decreases by $169,328, or 4.6% • EPAT decreases by $9,863, or 0.3% • FEAT decreases by $16,786, or 1127% • Long-Term Deferred Revenues increase by $818,727 • Net Income Decreases by $818,727

  19. Questions?

More Related