Osim’s 2006 Financial Report

1. What is the nature of business undertaken by the company?

OSIM is a Singapore-based international brand marketing business famous for its flagship luxury massage chairs that aims to be the world’s leading healthy lifestyle product manufacturers. It has a wide product line that is diversified across four business themes: Health, Hygiene, Nutrition and Fitness. Its activities involve marketing, franchising and selling. OSIM is a public listed company listed in the Singaporean Stock Exchange.

What are the company’s main types of revenues and expenses?

OSIM’s main type of revenue is from its sale of goods which contributes a massive 98% of its total revenue (Consolidated Profit and Loss statement, page 92, note 23 on pg. 120). Other sources of revenue include other operating income and changes in inventories of finished goods which contributes about 2% of OSIM’s revenue.

Their main types of expenses are from the purchase of finished goods which was almost 50% of their total expense. (Consolidated Profit and Loss statement, page 92). OSIM’s other operating expense also contribute near to 40% of OSIM’s total expense.

Source Revenue (2004) Percentage of Revenue

Turnover

Less elimination Retail $263,050,000 97.81 %

Distribution $194,951,000

Other operating income $5,138,000 1.51%

Changes in Inventories of finished goods $2,290,000 0.68 %

Table 1. Distribution of OSIM’s revenue

Source (add in %) Expenses (2004) Percentage of Expenses

Finished goods purchased $142,361,000 46.3%

Personnel Expenses $ 43,102,000 14%

Depreciation & amortization of goodwill arising on consolidation $9,724,000 3.2%

Other operating expenses $112,404,000 36.5%

Table 2. Distribution of OSIM’s expense

2. What is meant by the term “revenue recognition”?

Revenue Recognition is a concept that revenues are recognized in the time frame they are earned. In other words, a company should not recognize revenue until realized or realizable and earned by the company. Revenue must be realized when the service is finished or the transaction is completed. For instance, a magazine company was to receive $1500 from customer for one year of subscription; they should not include the total amount as revenue in the income statement.

When does a company recognize revenue?

Revenue