Now that CPA Canada has finally released their CFE Board of Examiners’ report for September 2022, I feel comfortable posting my experience and debrief of the exam.
Editor’s Note: Although I’m publishing this in June 2023, this journal entry has not been edited since I wrote it on September 7 (right after the Day 1 exam). After you read this post, check out my Day 2 and Day 3 writeups for more insights!
I’ve been breaking the unspoken CFE “rules” left and right this week.
- I studied the weekend before the CFE even though everyone said to take it off.
- I reviewed material right up until 10pm the night before Day 1.
- I went onto the /r/accounting CFE Day 1 threads after writing the exam.
But overall, I don’t feel too bad. Still in a good mindset for tomorrow. Kind of excited to see what kind of company we’ll get, actually. And my bet is on IFRS for tomorrow, but knowing my luck with gambling that probably means it’ll be ASPE.
Day 1 Debrief
Here’s my mini debrief of the case I wrote today:
- I identified the main issue as profitability (specifically, EBITDA margin).
- Strategic issue 1 was whether to modernize gyms to target under-40 age group or specialize them to target the over-55 group. EBITDA margin was higher for the over-55 option due to less equipment expenditures, so I recommended that option.
- Strategic issue 2 was whether to extend the Zenfit distribution/streaming agreement or sell the rights to a third party. EBITDA did not increase much with the extended agreement and there was high risk attached to the minimum sales target, plus the high-tech offerings of Zenfit didn’t align with the over-55 demographic, so I recommended to sell the rights.
- Strategic issue 3 was whether to expand or sell the climbing gyms (I guess a third option would be to do nothing, though I didn’t discuss this one). The valuation of the gyms was higher than what the purchase bid was offering, and climbing was a growing market opportunity and it was CFL’s most successful and fastest-growing segment, so I recommended to expand using the proceeds from selling Zenfit.
- Strategic issue 4 was whether or not to purchase RJ, a struggling gym chain in Eastern Canada. I recommended against it because the asking price was too high based on a capitalized EBITDA valuation and the location didn’t fit with the shareholders’ locations. Besides, there wouldn’t be enough cash left after expanding the climbing facilities.
- Strategic issue 5 (and after reading the /r/accounting thread, this may have been better off in the operational issues section) was deciding between Louisa and Albert as replacements for Rosa, the shareholder who resigned. I recommended Albert because his focus was more aligned with the over-55 demographic and he had a corporate finance background which was appropriate for replacing Rosa’s CFO position.
- Side note: Could not tell you how many times I mistyped “Alberta” instead of “Albert” FFS.
- The main thing that bothers me is how I handled the operational issues. After reading the Reddit thread, I realize that one issue was that the mission/vision statements were outdated and should be updated. How did I miss this!! I skimmed the case a few times, desperately trying to find any operational issues, but the only ones I came up with (and these were a reeaaach) were:
- Phillip still has unequal voting rights
- Brand confusion over gym vs climbing wall memberships
- Succession planning for the aging shareholders
Preparing for Day 2
Going to quickly review three more sections today just in case they show up on tomorrow’s case:
- Leases for lessor
- Biological assets
- Crypto assets