Mgt. Advisory Services Problem No. 2: YG Entertainment

Malapit na ang CPA Board Exam. Good luck and God bless sa inyong lahat na kukuha ngayon!

Yamang ngayon ay more on situational-type ang problems, try niyong i-solve ang problem na ito. Sana makatulong din ito para mahasa ang analytical skills, na kailangan para sa exam na ito.


YG Entertainment is home to various groups like Blackpink, Bigbang, IKon, Winner, and AKMU. It has been known for rarely releasing music for these artists, due to its belief of “quality over quantity.”

The scandals last March and April was a major blow to the company. Despite need for policy change to address problems, YG held to that belief and still gave few comebacks to artists.

The company recorded 2.1 billion won net loss (PHP 96.8 million) for Q1 and Q2 2019. Comparisons with big and small agencies still reveal that YG is losing bigtime. Even YG’s investor, Louis Vuitton, plans to withdraw its investment worth 67 billion won (PHP 2.89 billion).

As such, the company held a closed-door emergency meeting with its artists, including you. This was to plan something better for the company. As the Chief Accountant of YG, your task is to point out problems and offer solutions to management.

Discussion Questions

  1. Would YG be subjected to regular corporate income tax, minimum corporate income tax, or both? Explain.

YG will not be subjected to regular income tax, as it recorded losses. However, it is still subject to minimum income tax on gross album sales.

  1. What would be the immediate steps for YG to recover despite the scandals?

Steps: (1) Capitalize on existing groups, like BLACKPINK and BIGBANG. Provide more than one comebacks for them, plus iKON, Winner, and AKMU; (2) Suspend debuting new talents till the issues subside, and (3) Provide more solo debuts for other members.

(Bonus) To add, issue apology for lack of responses over scandals, and commitment to strengthen ethics.

  1. Aside from short-term solutions, what would be your long-term plans to be offered to management? Explain.

I’ll recommend that YG adopt values, and be flexible in decision-making. Lack of these things translate to substantial losses. Adopting values like building trust, and flexibility like sufficient comebacks translates to additional sales and ultimately, additional net income for YG.

  1. YG needs your help for LV not to withdraw its investment. What will be your action plan/s?

Action Plans: (1) Hold informal talks with LV on this issue, and present truthfully the company’s status; (2) Request LV not to withdraw first, and give assurance that management is fixing problems, and (3) Provide projected financial statements to LV, assuming that YG responds to these issues.

Solutions are indicated in white text. Only select it after answering these questions.


Management Advisory Services problem created by: TweetNewscaster. Photo image credit from Wikipedia.

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