T education.pptx

Ppt of T EDUCATION CO LTD

1. T Education Co., Ltd

2. INTRODUCTION Mr. Zhang is the founder and CEO of T Education Co., Ltd (hereinafter referred to as T Education). T Educa - tion is currently listed on the New York Stock Exchange, although its main business is to provide China’s pri - mary and middle school students with extracurricular coaching, including course counseling and competition training. The 2015 fiscal year witnessed T Education’s aggressive expansion into new businesses segments. During that year, T Education made great strides into the auxiliary teaching industry and the online education market. However, the new business model resulted in new accounting issues for the firm. Zhang’s managerial team currently has differing opinions on how to finalize the profit figures for 2015.

3. As the CEO of T Education, Mr. Zhang has a draft of the financial report prepared by the accountants on his desk (see Exhibit 1 and Exhibit 2). This preliminary version of the report is based on the firm’s 2015 financial performance. In the draft, accounting personnel have dealt with most of the accounting problems. However, the provision for doubtful accounts, also known as the “bad debt allowance,” and depreciation for new fixed assets are still awaiting Mr. Zhang and his team’s final confirmation. Bad debt allowance is a valua - tion account used to estimate the portion of accounts receivable (or other receivables) that may ultimately be uncollectible. Firms routinely estimate bad debt losses and make provision for this, recording it as a current year expense. The depreciation of fixed assets refers to the systematic allocation of a portion of the total cost of long-term assets (those that are used for a period longer than a year) to periods in which those assets are used. The bad debt allowance and depreciation of fixed assets are dealt with as expenses and, therefore, directly reduce the firm’s profits.

4. HISTORY T Education is one of the leading education firms in China. It regards being “driven by science and technol - ogy ,” “intimate environment” and “quality leadership” as its core guiding principles.2 Since its establishment, the firm has been committed to creating better learning experiences for children. The predecessor of T Ed- ucation , X Education, was founded in Beijing in 2003 and initially provided only math tutoring for school-age children. Over the past 10 years, its business has expanded and now covers almost every aspect of education.

5. STRUCTURE OF FIRM The overseas IPO of T Education was accomplished through the variable interest entities (VIE) framework. The T Education group is a firm registered in the Cayman Islands that has established domestic subsidiaries through controlling chains in different sections and of different length. These domestic subsidiaries include Beijing X Education Technology Co. Ltd and Beijing DFRL Technology Trade Development Co. Ltd (these companies are known as VIE). They indirectly control domestic operation entities, namely the training institu - tions and schools.

6. VIE are not directly controlled by the T Education group, but instead, via controlling chains. When preparing financial statements, according to U.S. GAAP, since T Education group is the ultimate con- troller and major beneficiary of the VIE, T Education group should consider the profit and loss of those VIE in its consolidated financial statements.

7. Research And Teaching Team T Education established an independent (teaching) R&D team in its early stage. Currently, it has nearly 450 professional R&D team members, composed of outstanding graduates from famous universities and senior teachers with many years of teaching experience.

8. In addition, T Education has cooperated extensively with well-known specialists, scholars and institutions both domestically and abroad. It regularly invites tutors of famous Chinese universities, national preschool educa - tion experts and internationally acknowledged education specialists to make presentations. In addition, it also cooperates with the education division of the well-known U.S. publishing firm, McGraw Hill, in researching teaching materials.

9. Business Scope After more than 20 years of development, T Education’s business has expanded from a college entrance ex- amination review business to cover the entire educational timeline, from preschool to university. For preschool children, T Education established Pre school specifically for the education of young children. It is dedicated to providing services for children three to six years old who are in their “critical period” of think- ing development

10. For primary and secondary school students, aged 6 to 18, T Education employs the original X Education brand name. This brand has the longest history and is the most influential brand within T Education. It adheres to the concept of talent-nurturing, provides high quality extracurricular training and helps students further ex- plore the world of knowledge. At present, T Education has more than 10 branches in China, and the total annual training reaches 400,000 person-times. A large number of X Education’s students have achieved ex- cellent results in their annual exams and competitions.

11. Challenges Entrance to these two new business sectors has allowed the firm to gradually generate new and improved lines of profit. However, the firm also began to face new challenges associated with this increase in new busi - ness. First is the bad-debt problem caused by credit sales. In the traditional (person to person) education market, the firm generally requires students to pay the full fee before enrollment, so there were no accounts receiv - able. In the auxiliary teaching industry, credit sales are relatively common

12. After the seller and the buyer sign the purchase contract, the buyer receives the products or services first, then pays the bill by the “payment due” date or makes payments by installment. Credit sales are essentially a form of loan; they make the seller a lender and the buyer become the borrower.

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