Here is the capitalized product cost footnote.
Again, in the interest of time I'm not gonna read it to you, but It's available
on the course platform if you wanna download it and read it at your leisure.
The key part of this footnote is the last sentence, where they say that in 2015,
the company determined it was appropriate to extend the amortization period for
content cost, resulting in a decrease in cost of sales of $3.8 million.
So that's $3.8 million expense they saved by increasing the amortization period.
Here's the PP&E footnote, same thing, you can look at it on your own.
The key sentence is the last sentence.
During 2015, the company completed an assessment of its capital investment plans
and determined the useful life of its computers should be extended by two years,
resulting in a decrease in selling general administrative expense of $3.6 million.
So more expense that's saved by increasing the amortization lives.
The last tab of the spreadsheet summarizes everything that we've looked at.
So you can see in this first row, the two losses in 2013 and 2014, and
then they have a profit in 2015.
But then if we pull out the benefits due to the reduction in
the AR allowance ratio, the reduction in the warranty rate,
the delayed inventory write-off, they would have actually had a loss.
Then if we pull out the benefits due to increasing the useful lives of
the capitalized costs in the computers, they would have had a even bigger loss.
Now it's not as big of a loss as they had the prior two years, but
it's still a loss.
And so by these five changes, Dogamer was able to turn a third consecutive
year of losses into a nice turnaround where they were profitable in 2015,
showing that their turnaround strategy is really [COUGH] [COUGH] working.
>> Honey, can y’all tell me whether this is good or bad?
Seems bad because they manipulated their earnings.
However, they saved the business.
>> Yes, they even tricked some new customers into doing business with them!