I teach Intermediate I. This is a tough class to keep students focused on the issues. I believe one of the problems is that the students have little business experience and they have a hard time connecting most of what we are covering to real life business circumstances. For example, last week we covered the measurement of inventories. One important Learning Objective in this topic is for students to be able to demonstrate an understanding of what items should be included in the inventory at the end of the period. Inventory (purchases or sales) in-transit as well as on-consignment have to be considered. When I talk about consignment most students start tuning out because to them that doesn’t seem relevant.
I decided to check to find some concrete examples of disclosures relating to consignment issues in recent 10-K filings using the Search, Extraction & Normalization Engine. The search illustrated below is for all documents that are 10-K filings and have some form of the word root consign.
We require the TI-BAII calculator so all of the students are at least familiar with Texas Instruments. Their disclosure reports that 55% of their revenue comes from sales on inventory that is held on consignment by their customers. The nice thing about this is it provides a nice segue into a discussion about how critical integrity is to successful business relationships.
Another interesting disclosure that students could relate to was made by Sirius XM Holdings. Here is a screen shot of their disclosure:
Many students have satellite capable radios in their cars and like most people (including me) have probably not thought about the supply line from the auto manufacturer to Sirius and how that radio was sourced. Again – this disclosure provides some substance for a more interesting class disclosure about what students have historically seemed to think is a real non-issue. I could tell students were paying more attention when I related this to the problem we were working.
Finally, probably the most interesting disclosure I found about consignment sales was from Calavo Growers Inc (CIK: 1133470). Here is their disclosure:
This was interesting for me as I would never have imagined that kind of relationship with respect to the sale of a perishable product. Does this mean that payment to the grower for that bag of avocados I bought at Costco was dependent on my purchase?
While our platform is designed for intense data collection for research and analysis – one of the clear side-benefits is the opportunity to bring timely disclosures to class to link the issues covered to real world business problems.