Blockbuster Case

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A Case Analysis on

BLOCKBUSTER ENTERTAINMENT CORPORATION (B)

In partial fulfillment of the course requirements in

BA 219 Corporate Financial Reporting

WF Class 1830 – 1950, Section WFP

Term 1, A.Y. 2014-2015

October 22, 2014

Submitted by:

AÑORA, Maria Wilvenna

DELLAMAS, Gina

LAGUARDIA, Carlo Gerard

PANCHO, Mildred

REGIDOR, Jonas

RICAFORT, Allan Cris

Submitted to:

Dr. Arthur S. Cayanan

EXECUTIVE SUMMARY

The main concern of the case is in the evaluation and analysis of the Company’s 1988 financial statements and its adherence to International Accounting Standards along with considering issues presented in the Bear Stearns report citing criticisms of Blockbuster’s accounting particularly in the accuracy and fairness of their stock valuation and financial performance. The analysis specifically focused on the following: (a) mergers through the pooling method, (b) very slow goodwill amortization, (c) changes in the amortization period of videotapes and (d) sales to franchisees and franchise fees.

Moreover, the following steps were carried out for the analysis of the abovementioned focus areas: (1) review and analyze the Company’s financial statements along with considering issues presented in the Bear Stearns report citing criticisms of Blockbuster’s accounting procedures, (2) cite references from the 1988 and current financial reporting standards that support or refute claims of irregularities in the Company’s financial statements as presented in the Bear Stearns report, (3) pinpoint the effects of these irregularities, if any, on the Financial Statements, and (4) suggest how it should be reported for a more accurate and fair presentation of the Company’s financial position and performance.

With regards to analysis carried out on the indicated focus areas, a combination of good accounting practices with a few minor discrepancies in the 1988 Financial Statements of Blockbuster Corporation were evident if we base it on the...