How is the balance sheet of Rovio, the maker of Angry Birds, impacted by its Initial Public Offering?

Angry Birds screenshot

Source: Angry Birds game screenshot

Rovio Entertainment Corporation, the maker of the Angry Birds mobile games, recently made its Initial Public Offering (IPO) on the Helsinki NASDAQ stock exchange. Rovio stock is not available through U.S. stock exchanges. Rovio’s headquarters is in Finland. It also has offices in the United States, Sweden, China, and the United Kingdom.

Rovio’s IPO in September 2017 resulted in gross proceeds to the company of 30 million euros (roughly $35 US million.)

Rovio has stated that it wants to use the IPO proceeds to acquire other game makers and to reward employees.

Fun facts about Rovio: Rovio’s games have been downloaded more than 3.7 billion times as of June 30, 2017. In the second quarter of 2017, there were, on average, 80 million active monthly users of Rovio games.

NOTE: For the purpose of this blog post only, ignore any underwriting, professional, or other fees normally associated with an IPO. These costs are usually significant, but would overly complicate this situation at the introductory accounting level.

Questions

  1. Assume that Rovio received the proceeds from its IPO in cash. How would Rovio’s balance sheet be impacted by its IPO?
  2. Would there be any impact on Rovio’s income statement in 2017 from this IPO? Explain.
  3. What would be the impact on Rovio’s balance sheet if it used its cash to then purchase another game maker company as a long-term investment?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Copyright 2017 Wendy M. Tietz, LLC

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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