The firm's recording accounts methods for its seismic data library is examined. Teaching Goal: Inventory accounting.
Cash Flow (Indirect Method)
1. Assume the company decided to take a 50% write down this year on its seismic inventory. Restate the Income Statement, Balance Sheet and Statement of Cash Flows.
2. You are the new CEO of Seitel. What, if anything, should you change about Seitel’s amortization policy?
3. If Ms. Lee treats Seitel’s seismic library as inventory, how will it impact the financial statements, financial ratios and Intrinsic Firm value?
4. What criteria should be used to judge your performance as CEO? Be specific.
5. Would it change any of your answers above if:
a. You believed energy prices would soon plummet?
b. You believed energy prices would soon soar?
c. You were leaving the company and had a large number of stock options?