KGIC Inc LGLTF

Loyalist explains tuition fee revenue accounting

[purse]

2015-06-10 09:34 ET - News Release Shares issued 179,169,923 LOY Close 2015-06-09 C$ 0.16 Mr. David McAdam reports LOYALIST PROVIDES ADDITIONAL INFORMATION RELATED TO TUITION FEE REVENUE AND DEFERRED REVENUE FOR Q4 2014 AND Q1 2015 Loyalist Group Ltd. is providing additional information related to tuition fee revenue and deferred revenue in response to a number of investor and analyst inquiries seeking clarification of the company's overall business activity levels during fourth quarter 2014 and first quarter 2015. ACCOUNTING POLICIES FOR REVENUE RECOGNITION AND DEFERRED REVENUE As described in the notes to the audited financial statements for the year ended December 31, 2014, Loyalist's accounting for tuition fees revenue recognition is on a straight-line basis over the period of instruction. Tuition fees paid in advance of course offerings are recorded as deferred revenue and set up as a liability on Loyalist's balance sheet and later recognized into revenue over the period of instruction. From a timing perspective, tuition fees which are paid in advance of course offerings during a particular reporting period may span several reporting periods depending on (i) timing of start date and (ii) length of study period. This can result in volatility between quarters when reviewing either deferred revenue or tuition fee revenue in isolation. TREND ANALYSIS The following table highlights the trend between tuition fees, which were recognized as revenue in the statement of earnings during each of the past five quarters and deferred revenue recognized as a liability on the balance sheet at the end of each respective quarter: Deferred Tuition Fee Quarter Revenue Revenue Total Q1/14 $7,639,323 $13,900,009 $21,539,332 Q2/14 $7,819,874 $14,628,440 $22,448,314 Q3/14 $5,422,743 $16,059,663 $21,482,406 Q4/14 $9,686,323 $7,692,264 $17,378,587 Q1/15 $12,506,815 $7,501,981 $20,008,796 During the fourth quarter of 2014 and the first quarter of 2015, Loyalist experienced a significant increase in deferred revenue at the end of each period. This resulted in a lower level of tuition fee revenues recognized during the quarter than would have otherwise been the case if deferred revenue had remained relatively constant between quarters. Total activity level (deferred revenue plus tuition fee revenues), declined during the fourth quarter of 2014 when compared to the first three quarters of 2014. There has been a significant recovery in total activity during the first quarter of 2015 when compared the fourth quarter of 2014. TIMING OF COURSE START DATES FOR TUITION FEE REVENUE RECOGNITION In order to better understand the underlying driver of the sharp divergence between tuition fee revenue recognized and overall activity level during Q4 2014 and Q1 2015, management further reviewed the underlying data on a student by student basis during these periods. Management determined that the timing of start dates were heavily weighted towards the end of Q1 2015. This timing resulted in significantly higher deferred revenue balances and lower tuition fees recognized when compared to the first three quarters of 2014. Based on the $12.5 million of deferred revenue as at March 31, 2015, management reviewed the timing of tuition fee revenue to be recognized into the statement of earnings over the scheduled period of instruction as follows: Q2 2015: 57% Q3 2015: 28% Q4 2015: 10% Q1 2016 and beyond: 5% As noted above, approximately 85% of the $12.5 million deferred revenue balance as at March 31, 2015 will be recognized into revenue during Q2 2015 and Q3 2015. We seek Safe Harbor.

[kijiji]

its goin down like the titanic...