A finished ACC-685 Topic 6 supplier comparability review example, removing a useful-life change, factored receivables and supplier finance from one supplier's figures and recommending the other for sole sourcing. Searches like "acc 685 topic 6 assignment example", "acc685 topic 6 sample" and "acc-685 topic 6 example" land here.
What a finished ACC-685 Topic 6 supplier comparability review looks like
The finished review opens with the decision, a hospital group's procurement committee choosing one supplier for five years, and with the reported figures that seemed to settle it, all illustrative. Supplier A shows an 11.2 percent operating margin on $420 million of revenue, 38 days of sales outstanding and $52 million of operating cash flow; Supplier B shows 8.9 percent, 61 days and $33 million. The review then reads A's notes. A change in estimate lengthened equipment lives and cut depreciation by $6.3 million, $29 million of receivables had been sold without recourse by year end, $12 million more than a year earlier, and its supplier finance obligations grew by $9 million. Adjusted, A's margin is 9.7 percent, its collection period about 63 days and its operating cash flow $31 million. The advantage largely disappears.
How an ACC-685 Topic 6 example is structured
The review is ordered from decision to recommendation, with each adjustment sourced to the note that permits it. It opens by naming what the committee needs from a sole supplier, continuity for five years, which makes cash generation and dependence on outside financing the measures that matter. The reported comparison follows in a table covering three years. A note-reading section then takes each of A's judgments in turn: the useful-life change and its disclosed effect, the factoring program and the receivables it removed, and the supplier finance disclosures showing obligations still outstanding. An adjusted table recomputes the ratios on a common basis. A section on B confirms that its notes show no comparable items, so the absence of adjustment is evidence rather than neglect. The recommendation favors B and states what A would need to show to be reconsidered.
The committee's decision defines the measures
A sole-source contract needs a supplier that can keep producing for five years, so the review weights cash generation and financing dependence above headline margin.
A useful-life change read from the notes
Lengthening equipment lives reduced A's depreciation by a disclosed $6.3 million, and removing that effect brings the operating margin from 11.2 to 9.7 percent.
Receivables that were sold, not collected
Adding back $29 million of factored receivables moves A's collection period from 38 to about 63 days, slightly slower than B's 61.
Payables stretched through a bank program
A's supplier finance disclosure shows obligations up $9 million, cash the program kept inside A's operating cash flow by extending the time A takes to pay.
No adjustments at B, confirmed
B's notes disclose no estimate changes, factoring or supplier finance, which the review records as a finding so the comparison does not look one-sided.
A recommendation with a reopening condition
The review recommends B and states that A would merit reconsideration if it showed three years of operating cash flow without the two financing programs.
Where marks go in ACC-685 Topic 6
Ranking the suppliers on reported ratios loses the most, because every advantage A showed traces to a judgment or an arrangement its notes disclose. Papers that spot the useful-life change and call it manipulation go beyond the evidence, since a change in estimate can be legitimate and the review's task is comparability, not accusation. Adding back factored receivables to the collection period while leaving operating cash flow untouched adjusts one ratio and not the figure it depends on. Supplier finance is often missed entirely, although the disclosures now required make it visible. An analysis that adjusts A and never examines B's notes assumes B is clean. Recommendations that never say what would change them leave the committee holding a verdict with no way to revisit it.
Get an ACC-685 Topic 6 example written to your instructions
Send your ACC-685 Topic 6 instructions, the rubric and the statements or companies your section assigned. A custom example comes back written to them, with the decision named, reported figures tabled, each judgment traced to its note, ratios recomputed on a common basis and a recommendation defended, in 24 to 48 hours. The first one is free.
ACC-685 Topic 6 questions, answered
Is a change in useful life a red flag?
Not by itself. Useful lives are estimates, and a company that finds its equipment lasting longer should revise them prospectively, disclosing the effect when it is material. The analytic issue is comparability: a reader comparing two companies needs their depreciation on a similar basis, so the review removes the effect of the change to compare like with like and draws no conclusion about motive.
Why does factoring change operating cash flow?
When receivables are sold without recourse and derecognized, the company collects cash from the factor sooner than its customers would have paid, and those proceeds are generally presented in operating activities. Growth in the factored balance therefore raises operating cash flow for the year without any change in customer behavior. Removing the year's increase shows what collections alone would have produced.
What do supplier finance disclosures reveal?
US GAAP now requires buyers in supplier finance programs to disclose the key program terms, the amount outstanding at period end and how that amount changed during the year. Those figures show how much of a company's payables sits in a bank-facilitated program, which matters because a program can be withdrawn. The review uses A's disclosed increase to estimate how much operating cash flow the program supplied.