A finished ACC-670 Topic 4 adjusted net debt restatement example, reclassifying supplier finance payables and sold receivables as debt, showing a guarantee separately and restating leverage and operating cash flow. Searches like "acc 670 topic 4 assignment example", "acc670 topic 4 sample" and "acc-670 topic 4 example" land here.
What a finished ACC-670 Topic 4 adjusted net debt restatement looks like
Reported net debt of $900 million against EBITDA of $400 million gives leverage of 2.25 times, the figure the company's covenant uses, all amounts illustrative. The restatement then adds what the notes disclose. Payables of $310 million sit in a supplier finance program, under which a bank pays suppliers early and the company repays the bank later on extended terms; they are reclassified as debt. Receivables of $150 million sold into a revolving securitization and removed from the balance sheet are returned to it, with matching debt. Adjusted net debt reaches $1.36 billion and leverage 3.4 times. The joint venture guarantee of $120 million appears on a separate line, taking leverage to 3.7 times if included. Operating cash flow of $520 million falls to $395 million once the year's growth in both programs is moved to financing.
How an ACC-670 Topic 4 example is structured
The restatement runs from the reported figure to the adjusted one in visible steps. It opens with the company's own net debt definition and the covenant ratio built on it, so the starting point is the one management publishes. Each arrangement then gets its own block: what the note discloses, why the arrangement behaves like borrowing and the adjustment made. The supplier finance block cites the program's year-end balance and the payment terms before and after it began. The securitization block shows receivables returned and collection days restated. The guarantee is kept apart, since its economic weight depends on the joint venture's condition, which a short paragraph assesses. Lease liabilities, already recognized under current lease accounting, are named and left where they are so nothing is counted twice. Restated leverage and operating cash flow close the example, each beside the reported figure.
The company's own definition first
Starting from management's net debt and covenant ratio fixes a baseline the reader can find in the filing before any adjustment is layered on top.
Supplier finance treated as borrowing
Payables funded through the bank program carry extended terms the suppliers never offered, so the $310 million behaves as financing and moves into debt.
Sold receivables returned with their debt
The $150 million securitized balance goes back into receivables with an equal liability, which also restores the collection period the sale had shortened.
The guarantee shown on its own line
Whether the $120 million guarantee belongs in leverage depends on the joint venture's ability to repay, so the restatement reports it separately instead of adding it silently.
Operating cash flow restated too
Growth of $85 million in supplier finance and $40 million in sold receivables flattered operating cash, and moving both to financing leaves $395 million.
Leases left alone deliberately
Lease liabilities already sit on the balance sheet under current standards, and the restatement says so explicitly to show that no obligation has been counted twice.
Where marks go in ACC-670 Topic 4
The largest deductions here follow from describing an arrangement without restating anything. A paper noting that the company uses supplier finance, and then quoting the reported 2.25 times, has seen the issue and left the leverage figure unchanged. Adding the guarantee at full value with no view on the joint venture overstates exposure as surely as ignoring it understates it. Restating the balance sheet while leaving operating cash flow alone misses that both programs moved cash between categories, which is much of their appeal to a preparer. Some papers add lease liabilities on top of balances already recognized, counting the same obligation twice. Others call supplier finance concealment, although the note discloses it; the analytical point is classification rather than secrecy, and graduate rubrics reward that distinction.
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ACC-670 Topic 4 questions, answered
What is a supplier finance program?
An arrangement in which a bank pays a company's suppliers early, often at a discount the supplier accepts, and the company pays the bank on the original or an extended due date. The obligation usually stays in accounts payable. Because it can lengthen the company's payment terms well beyond normal trade practice, analysts often treat the balance as debt-like, and companies now disclose program balances in the notes.
Why does supplier finance affect operating cash flow?
Because the company keeps its cash longer while its payables grow, and that growth shows up as an operating inflow in the indirect-method reconciliation. When the program expands, operating cash flow looks stronger than the underlying business would produce on normal terms. Moving the year's increase in the program balance to financing activities treats it as the borrowing it resembles, which is what the restatement does.
Should a guarantee always count as debt?
Not automatically. A guarantee becomes a cash obligation only if the joint venture fails to pay its lender, so the weight it deserves depends on the venture's own condition. The restatement reads the venture's disclosed results and debt service, reports leverage with and without the guarantee, and states which figure it considers more representative and why.