Lazlo Ltd, a European-based telecommunications provider, follows IASB GAAP and capitalizes new product development costs. During 2007 they spent €25 million on new product development and reported an amortization expense related to a prior year’s new product development of €10 million. Other information related to 2007 is as follows: in € millions Net income 225 Average assets 1,875 Cash flow from operations 290 An analyst would like to compare Lazlo to a U.S.-based telecommunications provider and has decided to adjust their financial statements to U.S. GAAP. Under U.S. GAAP, and ignoring tax effects, the return on assets (ROA) and cash flow from operations (CFO) for Lazlo would be closest to: ROA CFO millions A. 10.70% 265 B. 10.70% 275 C. 11.20% 265 D. 11.20% 275



Can’t be C. gott be between B and D. cuz CFO = 290 - 25 + 10 I have assumed prior years amortization in play.


225-25+10/ 1875 = 11.2 Asumming amortization is not in play - 290-25 = 265 “C”

Can you give the numbers for CFO Assets NI

do niot have any additional info for this question

Think CFO is 265, NI is 210 and Assets is 1860 !!!

Why is your assets 1860? wouldn’t it be 1840? 25 less for this years, and 10 accumulated dep

Because had the firm always expensed the capitalized interest there won’t be any amortization required. So we add back 10 and then deduct 25 !!!

But that amortization is for last year. not for this year.