OPERATIONAL ISSUES:

Corporate Structure of PRI

For the recommended strategic options to be properly implemented, the current
organizational structure should be realigned to accommodate the new objectives by
explicitly defining individual roles based on the new strategic options. We
recommend that the Board look into the possibility of assigning Jennifer and George
to work together and report to Martina on the e-commerce project due to their
previous experience on such project.

Updated Mission and Vision Statements

To reflect the new e-commerce initiative and other strategic directions to be
embarked upon by the Board, the mission and vision statements have been updated
as follows:
Vision Statement:
We make it easy for all our customers to shop with us.
Mission statement
To serve our customers through our well-located stores and great online sites by
providing a complete shopping experience and offering high quality and trusted
home and fashion retail brands.

Financial Accounting Issues

Branding Cost:
ASPE 3064 provides that research cost as well as advertising and promotional costs
should be expensed when incurred. As such, $500,000 deposit to undertake study
on Phoenix brand should be expensed. ASPE 3064 also states that expenditure on
an intangible item that was initially recognized as an expense shall not be
recognized as part of cost of intangible assets later. Hence the cost to be incurred for
rebranding should also be expensed.
Discontinued Product Line:
The right acquired for the product line of pots and pans for $1.2 million has been
amortized over 10 years. For an asset to be recognized as an intangible asset, it
must meet the criteria described in ASPE paragraph 3064.09 which are identifiability,
control over the resource and existence of future economic benefits. The right meets
the identifiability criteria because it is separable and arises from legal and other
contract rights. The cost of the right can be measured reliably and PRI is deemed to
have control over it. However, the future economic benefits criterion has been
impaired as it is believed that the rights that were of no value. Therefore, the balance
of the right for the remaining six years ($720,000 6 x $.12million) should be written
off into the income statement.

Internal Control Issues

Currently,ASPE standards are not being followed in preparing PRIs financials and as
such there are errors noted in the financial statement. Also, PRIs control

environment is weak because Jennifer was able to single-handedly authorize a $1.5

million branding cost contract and even approved it by issuing an upfront payment of
$500,000 without board approval. This resulted in the company losing $500,000
because it is a non-refundable amount.
We recommend that the company put in place internal control system which includes
authorization and contract limits. Also, the Board should consider putting in place
internal audit unit that will ensure exception reports are generated periodically for
managements review.

Balanced scorecard
For a performance measurement and management tool, we recommend the
adoption of a balanced scorecard to align business activities to the vision and
mission of PRI.

It will help PRI understand both the financial and non-financial

implications on the operations of the company. It will also create an understanding

for translating the strategy of the company into long-term shareholders value.
Please see Appendix xxx for balance scorecard performance measures.

Taxation Issues
PRI is a CCPC with QSBC shares and both James, and Stephen has not used any
of their lifetime capital gains exemption (LCGE), which is available to shelter up to
$824,177 for each of them in 2016.It will enable each to claim a capital gain
deduction of 50% of LCGE if other conditions are met as at the time of sale.

The shares exchange would be done tax-free as risks would be transferred to the
successors, but James and Stephen would be able to reduce their tax as much as
possible as the shares are being redeemed each year.
Lease payments are fully deductible for tax purpose whereas only interest portion of
the collateralized payments may be deducted. Also, capital gains and losses can be
created for the seller (PRI) which potentially diminishes the impact of unexpected tax
situations

Ethical Issues:
Adjusting Product Lines & Replacing Supplier Issue
We have assessed the effect of including lower-cost products into the existing
product lines and replacing the current supplier of Canadian Parka, Polar Tradition
Inc. with Winter Gear Ltd. Low-cost product may be substandard and will not portray
PRI as ethically responsibility. It is recommended that PRI still keep Polar Tradition
Inc.as their supplier, but they should negotiate the wholesale cost further.

APPENDIX xx Balanced Scorecard

OBJECTIVE
MEASURE
Financial Perspective
Revenue Growth
Income statement
Increase
Investment Return
Increase market
share (Growth)

Return on Capital
Employed
% of market share

Increase in
Projects
Profitability

Gross and net profit

as a % of revenue

Customer Perspective
Increase customer
% increase in
base (new
number of new
customers)
customers

TARGETS

INITIATIVES

Exceed $500
million sales by
year 2020
Maximize revenue
on each project
Capture 35% of the
6% online sales.
That is 21% of the
total online sale by
year 2025
Achieve gross
margin of 40% and
net margin of 15%
by 2025

Grocery Chain,
E-commerce

40% increase in
new customers
over 5 years

Improve innovation
and quality to meet
customers needs
through
E-Commerce
Engage highperformance
professionals

Increase customer
Survey/Feedback
retention
No of customer
(satisfaction)
complaints
Internal Perspective
Increase innovation IT innovation
to increase quality
of services

97% satisfaction
level

Increase social
responsibility

100% compliance

Number of fines and

lawsuits as result of
environmental and
regulatory breaches
Learning & Growth Perspective
Increased in
Staff turnover rate
technical and
managerial

1% defect rate

1% annual turnover
rate

Drop non- profitable or

low profitable projects
E- Commerce,
Invest in R&D,
advertising and adopt
aggressive growth
method.
Increase revenue and
adopt value for money
operations (Economyinputs, Efficiencyprocess and
Effectiveness-goal)

Increase R&D
investment that will
reduce maintenance
costs as well as
market research
Increase product
management and
quality control/audit
Adopting effective
performance
measures

competence
Introduction and
development of
new technology

Number of new
technology
innovation

Increased level of
new technology

Training, courses and

workshops