In 2017 my Website was migrated to the clouds and reduced in size.
Hence some links below are broken.
One thing to try if a “www” link is broken is to substitute “faculty” for “www”
For example a broken link
http://faculty.trinity.edu/rjensen/Pictures.htm
can be changed to corrected link
http://faculty.trinity.edu/rjensen/Pictures.htm
However in some cases files had to be removed to reduce the size of my Website
Contact me at 
rjensen@trinity.edu if you really need to file that is missing

 

New Bookmarks
Year 2015 Quarter 1:  January 1 - March 31 Additions to Bob Jensen's Bookmarks
Bob Jensen at Trinity University

For earlier editions of New Bookmarks go to http://faculty.trinity.edu/rjensen/bookurl.htm 
Tidbits Directory --- http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Threads --- http://faculty.trinity.edu/rjensen/threads.htm

574 Shields Against Validity Challenges in Plato's Cave ---
http://faculty.trinity.edu/rjensen/TheoryTAR.htm

 

 

Choose a Date Below for Additions to the Bookmarks File

2015
March 31

February 28

January 31

March 31, 2015

Bob Jensen's New Bookmarks for March 1-31, 2015 

Bob Jensen at Trinity University 


For earlier editions of Fraud Updates go to http://faculty.trinity.edu/rjensen/FraudUpdates.htm
For earlier editions of Tidbits go to http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm
For earlier editions of New Bookmarks go to http://faculty.trinity.edu/rjensen/bookurl.htm 
Bookmarks for the World's Library --- http://faculty.trinity.edu/rjensen/bookbob2.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Box in Upper Right Corner.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/

Bob Jensen's Blogs --- http://faculty.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://faculty.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm

 

Bob Jensen's Pictures and Stories
http://faculty.trinity.edu/rjensen/Pictures.htm

 

All my online pictures --- http://www.cs.trinity.edu/~rjensen/PictureHistory/

David Johnstone asked me to write a paper on the following:
"A Scrapbook on What's Wrong with the Past, Present and Future of Accountics Science"
Bob Jensen
February 19, 2014
SSRN Download:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2398296 




From the Chronicle of Higher Education
Search for Job Openings in Higher Education ---
https://chroniclevitae.com/job_search/new


Free of charge as the world turns
Real Time Economics
(a Wall Street Journal blog on the changing world of economics and finance) --- http://blogs.wsj.com/economics/
I find this more news than opinion, although the comments on postings are often more opinion than news

Bob Jensen's threads on listservs, blogs, and the social media ---
http://faculty.trinity.edu/rjensen/ListservRoles.htm


The Routledge Companion to Financial Accounting Theory
Edited by Stuart Jones
Forthcoming in 2015 for $325
Hb: 978-0-415-66028-0
http://www.routledge.com/books/details/9780415660280/?utm_source=adestra&utm_medium=email&utm_campaign=sbu1_rjb_4mx_1em_2bus_cla15_msc15_69785

Jensen Comment
Like virtually all accounting theory books this one appears to be long on history and short on accounting theory for complex contracts of the 21st Century. For example, the Table of Contents does not even mention derivative financial instruments accounting, lease accounting, or insurance accounitng. I don't think I will pay $325 for yet another history of accounting book. History to date is inadequate for providing guidance on accounting for modern financial transacting such as financial structures and hedging and operating leases.


March 3, 2015 message from Linda Kidwell (University of Wyoming)

I'm happy to report to my AECM colleagues that I am a Fulbright Scholar in Romania this spring, at the Bucharest University of Economic Studies, a.k.a. Academia de Studii Economice din Bucuresti. I'm hoping someone out there can give me a hand for my research.

I'm studying corporate governance in Romania as a transitional economy. There's lots of information about the anti-corruption commission's activities in the news (every night!), but this is focused on high level corruption in politics (e.g. bid-rigging, conflicts of interest, and undue pressure on judges). I am more interested in the governance issues faced by businesses. If any of you happen to have business contacts over here who might be willing to talk to me confidentially, please let me know if you'd be willing to make an introduction. You can private message me at lkidwell@uwyo.edu.

Thanks everyone, and buna ziua from Romania!


David M. Walker, the former Comptroller General of the United States and head of the U.S. Government Accountability Office, has joined PricewaterhouseCoopers as a senior strategic advisor in PwC’s public sector practice.
http://www.accountingtoday.com/news/firm-profession/former-comptroller-general-david-walker-joins-pwc-74045-1.html

David M. Walker's 2010 Accounting Hall of Fame Bio ---
http://fisher.osu.edu/departments/accounting-and-mis/the-accounting-hall-of-fame/membership-in-hall/david-michael-walker/

For almost two decades, this influential, articulate and seasoned professional has been the leading voice for transparency and accountability in government. With over 37 years of experience in the private, public and not-for-profit sectors, his extensive leadership experience spans numerous issues and organizations in all three sectors, including issues in the international and inter-governmental domains. He has been referred to as a modern day Paul Revere by Paul Volcker, Pete Peterson, and many others.

He currently serves as President and Chief Executive Officer of The Peter G. Peterson Foundation. The Peterson Foundation's mission is to promote greater federal financial responsibility and accountability today in order to create more opportunity tomorrow. This includes taking actions designed to enhance public understanding regarding the urgency of the fiscal and sustainability challenges that threaten America's future and to build public support for achieving the necessary changes.

In October 2010, he will leave his current position to launch the Comeback America Initiative, a new non-profit organization that will be supported by a three-year grant from the Peterson Foundation. He will serve as Founder and Chief Executive Officer of the new organization which will promote fiscal responsibility and sustainability by engaging the public and assisting key policy makers on a non-partisan basis in order to achieve solutions to the fiscal imbalances facing the federal, state and local governments.

Prior to joining the Peterson Foundation, he served as the seventh Comptroller General of the United States from 1998-2008. As Comptroller General, he was head of the U.S. Government Accountability Office (GAO) and the de-facto Chief Accountability Officer of the United States Government. During this period he was a non-partisan and outspoken advocate for fiscal responsibility and government transformation. While head of GAO, he led reforms that dramatically improved the agency's performance, productivity, credibility, visibility and reputation. He also led efforts to help modernize the government accountability profession both domestically and internationally.

Prior to his appointment as Comptroller General of the United States, he served from 1989 to 1998 as a Partner and Global Managing Director of the Human Capital Services Practice with Arthur Andersen LLP. In this position, he had responsibility for the firm’s human capital strategy, change management, compensation, pensions and health care services. During this time, he also served from 1990-1995 as one of two Public Trustees for the U.S. Social Security and Medicare programs.   

He has received Presidential appointments from Ronald Reagan, George Herbert Walker Bush, and William Jefferson Clinton. He was confirmed unanimously all three times by the U.S. Senate. Prior to Arthur Andersen, he served in several senior leadership positions within the U.S. Government, including as Assistant Secretary of Labor for Pension and Employee Benefit Programs and acting head of the Pension Benefit Guaranty Corporation. His initial professional and private sector experience was gained with Price Waterhouse, Coopers & Lybrand, and Source Services Corporation. 

In addition, he has experience with senior level government, private and independent sector officials in many states and a number of countries around the world. In November 2007, he was elected by the United Nations General Assembly to serve a four-year term as a member of the UN Independent Audit Advisory Committee (IAAC). He has also been elected Chairman of the IAAC each year by his colleagues from Russia, India, Uganda and Jamaica. He served as a member of the Board and Chair of the Strategic Planning Task Force for the International Organization of Supreme Audit Institutions. As Comptroller General, he also served as Chairman and the National Intergovenmental Audit Forum in the United States.  This forum is comprised of leaders from federal, state and local audit and accountability organizations throughout the U.S.   

He is a frequent speaker, Congressional witness, writer and media commentator. He has authored three books, including a National Best Seller entitled "Comeback America: Turning the Country Around and Restoring Fiscal Responsibility" (2010), as well as numerous articles and opinion pieces. He is the subject of the critically acclaimed documentary, I.O.U.S.A., and a 60 Minutes segment. He is also a member of several not-for-profit boards, advisory groups and other key organizations, including the PCAOB's Advisory Board and the Trilateral Commission.

He has won many awards for his leadership, accomplishments, writing and speaking, including Annual Financial Literacy Award from Wealth Watchers International (2010), the Presidential Award of Excellence from the President of Indonesia (2009), the Alexander Hamilton Leadership Award from the Center for the Study of the Presidency and the Congress (2009), the Gold Medal Award from the American Institute of Certified Public Accountants (2008), the Strategic Vision Award from the Center for Strategic and International Studies (2008), the Government Communicator of the Year Award from the Association of Government Communicators (2008), the Distinguished Service Award from the Secretary of Defense (2008), the Economic Patriot of the Year Award from The Concord Coalition (2007), the Presidential Achievement Award with Sash from the President of Austria (2006), and the George Romney National Public Administrator of the Year award (2006).

Born in 1951 in Birmingham, Alabama, he is a Certified Public Accountant (CPA) and holds a Bachelors Degree in Accounting from Jacksonville University (Florida), a Senior Managers in Government Certificate from the John F. Kennedy School of Government at Harvard University, and several honorary doctorate degrees from various universities, including The American University and his undergraduate alma mater.

He is married to the former Mary Etheredge of Jacksonville, Florida.  They have two grown children and three grandchildren.  They currently reside in the Black Rock section of Bridgeport, CT. 

 


Historic Stock Bubbles

1637 Tulipmania (historic stock market bubble in Holland in 1617) ---
https://www.rijksmuseum.nl/en/explore-the-collection/timeline-dutch-history/1637-tulipmania

1719 South Seas Bubble (historic stock market bubble in England in 1719) ---
http://en.wikipedia.org/wiki/South_Sea_Company

The South Seas Company scandal (reporting stock sales as income and paying dividends out of capital)

Bob Jensen's threads on accounting history ---
http://faculty.trinity.edu/rjensen/Theory01.htm#AccountingHistory


Tables Comparing Higher Education Salaries By Discipline and Rank ---
http://chronicle.com/article/Median-Salaries-of-Tenured-and/228435/?cid=at&utm_source=at&utm_medium=en

Jensen Comment
The title of this article is
"Median Salaries of Tenured and Tenure-Track Professors at 4-Year Colleges, 2014-15"

But if you scroll down there are tables comparing median salaries at the various faculty ranks in all universities, including R1 research institutions.

Keep in mind these are median salary comparisons where half the faculty in a give category make more and half make less. There can also be considerable variances. The data are skewed downward by thousands of colleges operating at the financial margin that pay very low salaries.

The databases do not drill down into sub-disciplines such as accounting versus finance versus marketing versus management under the category "Business." For these comparisons it may be better to use AACSB databases. The AACSB databases have the added advantage in that they exclude those colleges that are not accredited by the AACSB, thousands of financially struggling colleges paying low salaries.

The AACSB databases are not free.


"How Chicago has used Financial Engineering to Paper over its Massive Budget Gap," by Kristi Culpepper, Medium, March 26, 2015 ---
https://medium.com/@munilass/how-chicago-has-used-financial-engineering-to-paper-over-its-massive-budget-gap-872d911dd363

Chicago made headlines at the end of February after Moody’s downgraded the city’s general obligation bond rating to Baa2. Moody’s has cut Chicago’s rating five notches in less than two years. This downgrade, however, placed the city’s credit below the termination triggers on some of its outstanding interest rate swaps. The city has been working to renegotiate the terms of those contracts with its counterparties.

If Chicago’s general obligation rating falls below investment grade, the city’s credit deterioration will become a self-fulfilling prophesy. The city risks nearly $400 million of swap termination payments and the acceleration of its $294 million of outstanding short-term debt.

Unsurprisingly, some of Chicago’s bonds are already trading at junk levels. Chicago CUSIPs are listed here.

That said, the rating agencies and most other market participants still appear to be light years away from understanding the true scope of Chicago’s financial problems. The city has a very — well, let’s just call it unconventional — approach to borrowing money and probably should not be considered investment grade.

Some budget history

In order for you to follow my discussion of Chicago’s borrowing shenanigans, it is necessary to understand the fiscal machinery behind its bond issues. Please be patient with me here. This story will blow your mind shortly.

Chicago’s budget is divided into seven different fund classifications, but only three funds are relevant to our narrative: the Corporate Fund, Property Tax Fund, and Reserve Funds.

The Corporate Fund is Chicago’s general operating fund. This fund is used to pay for essential government services and activities (e.g. public safety and trash collection). Corporate Fund revenues are derived from a wide variety of sources, including: (1) local tax revenue from utility, transaction, transportation, recreation, and business taxes; (2) intergovernmental tax revenue, which represents the city’s share of the state’s sales and use taxes, income tax, and personal property replacement tax; and (3) non-tax revenue from fees, fines, asset sales, and leases.

Chicago’s property tax revenues do not go into its general operating fund. These revenues go into a Property Tax Fund, which is used to make debt service payments on the city’s general obligation bonds; make required employee pension contributions; and (to a minor extent) fund the library system. The fund also includes tax increment financing revenues that flow to projects in designated TIF districts.

The city used some of the proceeds from long-term leases of city assets to establish Reserve Funds. The Chicago Skyway reserve funds were established in 2005 in the amount of $975 million. The Metered Parking System reserve funds were established in 2009 in the amount of $1.15 billion. Of these funds, $475 million of the Skyway reserves were designated for budgetary uses. What remained was $500 million for the Skyway; $400 million for the Metered Parking System; and $326 million for a budget stabilization fund.

There has been a structural gap in Chicago’s Corporate Fund budget since at least 2003. Although most governments are required to balance their budgets on a cash flow basis each fiscal year, a structural budget gap can arise when recurring expenditures are greater than recurring revenues. Some of the city’s offering documents suggest that this gap is a legacy of the last economic downturn, but in reality the gap pre-dates the economic downturn by several years. The impact of economic downturns on tax collections tends to have a considerable lag anyway.

So, Chicago’s structural budget gap is a political, not economic, creature. Rather than cut expenditures to a level that could be supported by recurring revenues, the city mostly used non-recurring resources to fill the gap from one fiscal year to the next. This is not surprising. Most of Chicago’s Corporate Fund budget goes to salaries and benefits for its employees, and 90% of the city’s employees belong to around 40 different unions. Attempts to adjust expenditures tend to have well organized opposition.

Between fund transfers and drawing down its reserves, the city blew through its financial cushioning quickly. The $326 million budget stabilization fund was exhausted by 2010. From 2009 to 2011, the city used $320 million from the Metered Parking Reserves. The city’s budget gap was at its widest in the wake of the last economic downturn, at over $600 million.

Chicago’s dysfunctional debt program

Now things start to get interesting. Transfers from reserves and other funds have not been the only means Chicago officials (across administrations) have devised to subsidize the city’s Corporate Fund. The city has effectively been using its general obligation bond offerings and interest rate derivatives to accomplish the same thing.

State and local governments typically use the proceeds from their bond offerings to construct or renovate public buildings and infrastructure. These are projects that have long useful lives and will benefit residents for generations.

Dating back to at least 2003, however, Chicago has been issuing long-term tax-exempt and taxable bonds to:

(1) Roll over short-term debt used as working capital;

(2) Pay for maintenance activities that would otherwise be paid from the Corporate Fund;

(3) Pay for judgments and settlements that would otherwise be paid from the Corporate Fund, including wage increases and retroactive pension contributions for its employees; and

(4) Provide discretionary funds to each of the city’s 50 aldermen to pay for activities in their own districts.

The magnitude of tax-exempt bond proceeds used for judgments and settlements over this period is staggering. The Chicago Tribune estimated it at approximately $400 million:

In 2002, for example, the city used tax-exempt bonds to pay an arbitration award involving the Fraternal Order of Police. Rank-and-file officers rejected a city contract offer in 2001, but an arbitrator ruled in favor of the city’s wage proposal a year later.
The deal included raises of 2 to 4 percent a year, to be applied retroactively. In bond documents, city officials deemed the back pay the city owed an extraordinary expense and paid $164 million of it with tax-exempt bonds.
The city ultimately will need to pay bondholders $280 million to cover the loan …
Bonds also ended up covering the $28 million a jury awarded to Joseph Regaldo in 1999. The jury found that, years earlier, a Chicago police officer had beaten him in the back of the head and neck with a blunt object, which ripped apart an artery and cut off the blood supply to his brain. The injuries left Regaldo unable to walk, talk or care for himself.
The judgment won’t be paid off until 2019 at the earliest; by then, the total cost will have grown to $53 million.
City officials eventually switched to paying judgments with taxable bonds, which are even more costly in the long run.

That is, until 2012:

About $54 million from a tax-exempt bond helped cover a legal judgment awarded to African-Americans who were denied a chance to become firefighters by a 1990s entrance exam that favored white applicants. An additional $8 million in tax-exempt bond money went to pay legal fees related to the case, records show.
By using bond money, the city created an irony for many of those awarded damages, as their future property taxes will help pay interest on the debt. In 2033, when the city starts paying down the $54 million, interest will have more than doubled the total cost.

Stop and let that sink in for a moment. That police brutality case? Wage increases negotiated with labor unions? Not just financed, but financed with long-term debt.

So why haven’t the city’s 50 aldermen protested the use of bond proceeds for these purposes? It probably has something to do with the “Aldermen’s Menu,” which allows the aldermen to use a portion of the proceeds from the city’s general obligation bond issues to pay for whatever they want for their district.

Continued in article

Bob Jensen's threads on the sad state of governmental accounting and auditing ---
http://faculty.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting


Sorry to see you go Adrienne
Set 'em up Joe --- here's to our Junior Deputy Accountant!

Going Concern (accounting profession news) --- http://goingconcern.com/

Adriene Gonzalez said adios to Going Concern on March 12, 2015 ---
http://www.jrdeputyaccountant.com/2015/03/so-im-leaving-going-concern.html

I've been debating how best to handle this news and came to the conclusion it would be best to share this here. Here goes.

A little over 6 years ago, I started this humble little site. At the time, I was working in CPA review, helping future accountants get licensed. It just so happened that the economy was taking a big fat steaming dump at the same time, and hence this site was born.

Shortly after that, the folks at Breaking Media who run Above the Law, Dealbreaker, Fashionista and others thought an accounting site along those lines would be a good idea. So Going Concern was born. Its founding editor, my now colleague Caleb Newquist with whom I have happily shared the last 5+ years of our lives, was a fan of JDA and decided he wanted me on board as he assembled the GC team in those early days. A few years later, the site was sold to Sift Media, and is still there to this day.

It was August of 2009 when I wrote my very first post for that then-fledging website. I stayed on as a contributor and resident troll for years until late 2013, when I was brought on as Managing Editor.

It was a good run. GC does good work, if I may say so myself. No one else questions the status quo in accounting quite like Going Concern, and to that end, it's been great being a part of that.

Alas, tomorrow is my final day with the company. I'm not sure what happens from here or what will become of GC -- I suspect it will be, as it always has, a place for the profession to have candid conversations.

For all the crazy Big 4 farewell emails we shared over the years, I always thought when this day came I'd write a crazy farewell email myself, calling out my colleagues and stuffing in hashtags. So it's a little weird that I'm not going that direction.

Working for Going Concern for the last 5+ years, in whatever capacity, has been awesome. Most of all, I'll miss our loyal trolls. But things change and that means me moving on.

I'm not sure what's next. Consulting? Magazine work? I'm up for whatever.

Right now, I'm a free agent. The possibilities are endless. I'm going to miss the Fourth Estate of accounting I've come to know at Going Concern, but am pretty sure there's more to it than just trolling.

I plan to make the most of my last day as Managing Editor tomorrow. And then I'm off. Here's to bigger and better. Thank you to everyone who made GC what it was and made my time there so much fun. It hardly felt like work.

You can always find me on the Internet.

Adriene Gonzalez
Junior Deputy Accountant

Jensen Comment
I think those of us who have tracked her posts regularly over the years both on her original Junior Deputy Accountant Blog and on Going Concern will miss Adriene's enthusiasm, dedication, and humor.

Example of Adriene's Humor
One year on April 1 she reported that her boss (Caleb Newquist) was leaving to become a partner at KPMG. Now that was a funny April Fool's joke.

Sorry to see you go Adrience
Set 'em up Joe --- here's to our Junior Deputy Accountant!


Question
What does a Boeing 787-10 cost and why is it such a high price?

Answer
In round numbers $300 million for reasons outlined at
http://247wallst.com/aerospace-defense/2015/03/28/why-a-boeing-787-10-costs-298-million/

March 29, 2015 reply from Tom Selling

Bob, When I used to teach management accounting, which is now a long time ago, I used to begin the class discussion of cost allocation with the following question to the class: How would you measure the cost of the first Boeing 747 produced? (Attribution: John Shank used to ask this question in class also, and I took the idea from him.)

Nowadays, I teach accounting theory, and I will definitely use the article you have provided as the basis for a class discussion. I think we’ll be able to have a lively discussion about "program accounting.”

Thanks,
Tom

March 30m 2015 reply from Bob Jensen

Hi Tom,

An interesting point to build on with students is that this airliner is made 50% "composites." Read that as meaning "rare earth composites." The US Department of Energy claims demand for rare earth materials increased over 60% since 2003.

Rare Earth Elements That Were Added to the Periodic Table --- http://en.wikipedia.org/wiki/Rare_earth_element

 I really learned a lot from a recent CBS Sixty Minutes module on rare earth elements and their composites. Most of all I learned that rare earth elements in general are not all that rare. They can be found in a lot of places all over the world.

The problem is that they are usually embedded in only small amounts among other earth components such that it becomes both difficult and expensive to extract them with a lot of mining costs and environmental externalities. This has tended to give China a near-monopoly on their mining due to relatively low labor costs and low environmental regulations.

An enormous problem is that the USA military and airline industry are now highly dependent upon China --- a nation willing to exploit its monopolies for economic and political purposes. In times of dire emergencies such as WW III the USA could turn elsewhere for supply, but expanding mining operations elsewhere is both costly and subject to very long delays. There is at least on large mining operation in the USA but it is a drop in the bucket compared to output needs for both the USA and the rest of the world.

The outstanding Sixty Minutes link is at
http://www.cbsnews.com/news/rare-earth-elements-not-so-rare-after-all/

A blog post by 60 Minutes' Kevin Livelli, one of the producers who reported on rare earth elements this week:

Not long ago, if you had stopped me on the street and told me there was an interesting 60 Minutes story to be told about the lanthanide series of rare earth elements, I would have said you're crazy.

To begin with, who's ever heard of them? And even if you did manage to find them on that obscure bottom rung of the Periodic Table, you'd hit another hurdle - how to pronounce them. They have names only Dr. Seuss might have dreamt up. There's terbium, dysprosium, ytterbium, and lutetium. Neodymium, europium, cerium, and lanthanum. Not exactly the kind of thing that rolls off the tongue.

"...perhaps a little dose of pop culture might spark the imagination. After all, China's hold on rare earth elements is a running theme in 'House of Cards'..."

In this case, I stumbled on rare earths by accident. While doing some other reporting, I found that they were on the mind of the Director of National Intelligence, General James Clapper. He mentioned them in congressional testimony, as part of an annual "Worldwide Threat Assessment" -- a litany of threats to national security.

Clapper told Congress that rare earths are "essential" to the 21st century global economy, including the burgeoning green tech industry, and he emphasized that they are "critical" to advanced defense systems. That was intriguing, I thought. But there was more. One country - China - has been holding a "commanding monopoly" over world supply, at the time about 95 percent of the market, and things weren't going to change soon.

The light bulb went off. Here was something that touched people's lives not just in their everyday use (televisions, smartphones, tablets, computers, stereos, cars), but also had implications for U.S. energy security (hybrids, wind turbines, energy efficient lighting) and national security as well (precision-guided missiles, radar, night-vision goggles, lasers, satellites, fighter jets, submarines).

A little more digging revealed that the U.S. had actually once led the world in the rare earth industry and pioneered many of its common applications before ceding that dominance to China. I wanted to know how that happened and what it all meant. Here were good questions for our 60 Minutes story. My colleague, Graham Messick, and I set out to find the answers.

In doing so, we quickly found reporting on rare earths to be especially challenging. To begin with, we had to learn how rare earths are different from other metals and minerals - like iron or copper. What makes them rare? Turns out, as Lesley Stahl explains in our story, the name is a bit of a misnomer. Rare earths occur naturally in lots of places, but only a few have concentrations high enough to mine. You might think, then, that if the U.S. had more rare earth mines, the problem would be solved. You'd be wrong.

Even if you were to luck out and find a mine like the one owned by Molycorp out in Mountain Pass, California, and get it up and running, your work isn't finished. Unlike other metals, rare earths don't go to market in raw form. They have to be separated from one another and many are turned into metals first, which means they must be processed to exact specifications (sometimes up to several "9's" as in 99.9999 percent purity) that take into consideration their intended end use. And that is very hard to do. So to be successful in the rare earth business, you need to have not just access to the right rocks, but also access to the right know-how that will allow you to turn those rocks into something useful. That complex combination is what makes them "rare."

Another challenge in reporting on rare earths is understanding the supply chain. Rare earths feed the high tech industry around the world, and supply chains from mine to manufacturer can include as many as 12 stops along the way. So, for example, if you were to follow the dozen or so different rare earths metals that experts say are in each iPhone all the way back to the mine, you'd have an extremely hard time doing so. Same goes for the rare earths used in the F-35. The lengthy supply chains get very complicated very quickly.

What's more, lasting success in the rare earth industry, I learned, only comes when the supply chain companies choose to operate close to the source of rare earths and cultivate a symbiotic relationship. Today, China is on top not only because it has the biggest mine and the most know-how, but also as a result of having drawn manufacturers from around the world that use rare earths (i.e. supply chain customers) to Asia.

To help us understand how rare earths impact our lives and to show us where they can actually be found inside our gadgets, we interviewed Ed Richardson, the president of the U.S. Magnetic Materials Association, a trade group that represents American rare earth magnet makers.

In the video player above, you'll see that Richardson came to the interview with what looked at first to be a bunch of electronic junk. It turns out it really was his old stuff - an old cell phone, ear buds, and a toy helicopter -- but then we watched him dissect each object to reveal the rare earth magnets inside.

Along the way, he taught us a few other cool facts about rare earths. For instance, they can hold a thousand times their own weight, and they are a key technology behind the miniaturization of modern gadgets, enabling them to be smaller and lighter.

If, after watching our 60 Minutes story, you still think rare earths bring up too many bad high school chemistry memories, perhaps a little dose of pop culture might spark the imagination.

After all, China's hold on rare earth elements is a running theme in "House of Cards" (think of Raymond Tusk's push for "Samarium 149"). And defending the only U.S. rare earth mine is Jason Bourne's mission in "The Bourne Dominion." There's even a way, if you like to take matters into your own hands, to fight for global control of the rare earth supply in the video game "Call of Duty: Black Ops II." I guess the Periodic Table isn't so boring after all.

Jensen Comment
Rare earth minerals accounting presents wide-ranging research opportunities in at least two dimensions. One is the dimension of financial risks to the buyers and produces of rare earth minerals. The other dimension is environmental accounting in general.

It would appear disclosure guidance to date leaves a lot to be desired.

Making Rare Earth Element Disclosure Transparent and Compliant ---
http://post.nyssa.org/nyssa-news/2011/10/making-rare-earth-element-disclosure-transparent-and-compliant.html

For some links on this matter go to the SEC homepage --- http://www.sec.gov/
Then conduct a search for "rare earth"
 


Sorry to see you go Internet Explorer (IE will be replaced by another browser in Windows 10) ---
http://www.newsweek.com/eulogy-internet-explorer-314425


Question
In March 2015 what is the difference between earnings, revenue and valuation outlooks for Tesla Motors versus Carnival Cruise lines?

Answer
Who would have guessed three years ago?
In March 2015 these indices are plunging for Tesla and soaring for Carnival.

Why Carnival Is Sailing to Post-Recession Highs ---
http://247wallst.com/casinos-hotels/2015/03/27/why-carnival-is-sailing-to-post-recession-highs/

Tesla charging station Tesla Shares Plunge Toward 52-Week Low ---
http://247wallst.com/autos/2015/03/28/tesla-shares-plunge-toward-52-week-low/

Tesla Valuation Concerns Trump Its Growth Prospects ---
http://247wallst.com/autos/2015/03/27/tesla-valuation-concerns-trump-its-growth-prospects/


Six Ways The HTC Vive Will Freak Out Virtual-Reality Geeks ---
http://readwrite.com/2015/03/27/occipital-structure-sensor-virtual-augmented-reality


Zero-Based Budgeting --- http://en.wikipedia.org/wiki/Zero-based_budgeting

From the CFO Journal's Morning Ledger on March 26, 2015

Zero-based budgeting, an austerity measure that forces corporate managers to justify from scratch their spending plans every year, is getting its moment in the spotlight. The tactic is a critical element to 3G Capital Partners LP’s plan for making good with its roughly $49 billion deal to acquire Kraft Foods Group Inc. through its H.J. Heinz Co. unit, the WSJ reports. Zero-based budgeting has triggered sweeping cost cuts at 3G-related companies, including Heinz, ranging from the elimination of hundreds of management jobs to jettisoning corporate jets—and even requiring employees to get permission to make color photocopies.

And it isn’t just 3G adopting the cost-cutting measure. The budget tool has attracted a wide following among big food companies and has been used by many public agencies. But it does have its downsides. Employees may perceive it as harsh, especially when it eliminates office perks and leads to layoffs, and it can require staff training and sometimes painful discussions. Some experts also say that it doesn’t make sense for high-growth companies or those expanding into new regions.

 


Question
What government agencies art the biggest piñatas for millions of fraudster?

"GAO: Improper Government Payments Increased 18% in 2014, to $125 Billion;  EITC's 27% Error Rate Is Highest of Any Program," by Paul Caron, TaxProf Blog, March 18, 2015 ---
http://taxprof.typepad.com/taxprof_blog/2015/03/gao-improper-government-payments-increased-18-in-2014-to-125-billion-.html

Government-wide, improper payment estimates totaled $124.7 billion in fiscal year 2014, a significant increase of approximately $19 billion from the prior year’s estimate of $105.8 billion. The estimated improper payments for fiscal year 2014 were attributable to 124 programs spread among 22 agencies.

 

The increase in the 2014 estimate is attributed primarily to increased error rates in three major programs: the Department of Health and Human Services’ (HHS) Medicare Fee-for-Service and Medicaid programs, and the Department of the Treasury’s Earned Income Tax Credit program. These three programs accounted for $80.9 billion in improper payment estimates, or approximately 65 percent of the government-wide total for fiscal year 2014. Further, the increases in improper payment estimates for these three programs were approximately $16 billion, or 85 percent of the increase in the government-wide improper payment estimate for fiscal year 2014.

 

The EITC's 27.2% error rate is far greater than any of the listed government programs.

Jensen Comment
At best these can be considered educated guesses subject to enormous margins of error. One problem is that the GAO has deemed that auditing is impossible for some agencies prone to fraudulent spending such as the Pentagon and the IRS. Government agencies are enormous piñatas for millions of fraudsters.

I watched a woman being interviewed by CBS News who spent (tax free) her mother's Social Security payments that were automatically deposited into a checking account. Her mother has been dead for over 30 years.

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


PwC:  The March 2015 issue of Regulatory and standard setting developments ---
http://www.pwc.com/en_US/us/cfodirect/assets/pdf/regulatory-standard-setting-developments-march-2015.pdf

This document provides a summary of the activities of the FASB, PCAOB , and SEC , and describes related international developments that are of interest to audit committees, companies, and their stakeholders.


"Pulse of Internal Audit : Profession Fac ing Major Challenges Report raises red flags on dealing with emerging risks and growing talent shortasge,"Institute of Internal Auditors (IIA), March 9, 2015 ---
https://na.theiia.org/news/Documents/Pulse-of-Internal-Audit-news-release.pdf


Questions
Did the Fed really buy that old paper shredder in the Houston Office of Andersen?
Has Lois Lerner really surfaced at the Fed showing them how to use that shredder?

"The Fed Impedes GAO Audits by Destroying Source Documents," by Yves Smith, Naked Capitalism, March 13, 2015 ---
http://www.nakedcapitalism.com/2015/03/fed-impedes-gao-audits-destroying-source-documents.html

Jensen Comment
Don't get upset. The PCAOB assures us that auditors have not examined source documents in years.


Insights from Accounting History: Selected Writings of Stephen Zeff (New York, NY: Routledge, 2010, ISBN: 978-0-415-55429-9, pp. xxxiii, 522).1

Book Review by David Oldroyd
The Accounting Review, July 2011
http://aaajournals.org/doi/full/10.2308/accr-10045?=

This is an appropriate juncture to be reviewing a work on insights from accounting history, given the pressing need for accounting academics in the U.S. and internationally to rediscover the potential of history for gaining a fuller understanding of accounting practice and the environment in which it operates and which it has helped to shape. This was the view taken by the American Accounting Association (1970), whose report acted as a clarion call for American educators, with the support of the standard setter, to raise the profile of accounting history. Forty years on, the promise of an educational and research agenda informed by insights from accounting history has by and large faltered in U.S. schools, where accounting research has become dominated by ahistorical research methodologies (Mouck 1995; Lee 2006; Vangermeersch 2008). The situation persists despite the commitment of American accounting historians to rectifying the situation, but who find themselves obliged to seek publication outlets outside the mainstream U.S. journals. This compilation of historical writings by Stephen Zeff is unusual in that as many as six of the 15 post-1980 articles included in the collection were originally published in generalist American accounting journals, including two in The Accounting Review—proportions which, although seemingly low, bear witness to Zeff's high standing in the U.S. accounting academy.

The retreat from history by the mainstream is a wasted opportunity that this book, and the Routledge series on Historical Perspectives in Accounting of which it forms part, is attempting to address. Among its benefits, accounting history can show us the roots of present practice and help us to better understand human nature, better understand present social, economic, and organizational structures, be aware that the problems of the present are not unique, and finally give us a fuller appreciation of the patterns of regulation and abuse, including the likely reactions of the major players (Jones and Oldroyd 2009). All of these themes are explored in the book, which, in keeping with the rest of the Routledge series, focuses on the contemporary evolution of accounting thought, practice, and standard setting. Zeff's work is therefore highly pertinent to the challenges facing the modern world of accounting.

The book comprises a foreword by the distinguished accounting historian, J. R. Edwards, an introduction by the author, and 18 papers that were originally published between 1962 and 2007. The foreword places the work in its historiographical context, examines Zeff's research methods, and comments on his academic career. As Edwards observes, the collection does not fully reflect Zeff's historical research, as it necessarily omits his books and monographs. These are listed in an appendix. The introduction provides an overview of the collection, discusses the genesis of the various papers, and reveals their motivation.

Zeff identifies three broad themes running through the papers: “the historical development of the process of setting accounting standards, the evolution of accounting thought, and the evolution of the accountancy profession and of audit practice” (p. xxxii). Zeff's career-long interest in the standard setting process, especially the political lobbying involved, is signaled by the second paper in the collection, “The Rise of ‘Economic Consequences',” published in 1978 as part of the Stanford Lectures in Accounting. Here Zeff is referring to a growing realization by interest groups that accounting standards could produce economic consequences that they in turn could attempt to influence through lobbying (p. 17). The paper relates how such interventions affected the work of the Committee on Accounting Procedure (CAP), the Accounting Principles Board (APB), and the Financial Accounting Standards Board (FASB) in a number of instances between 1941and 1977. According to Zeff, an abridged version of the paper published in the Journal of Accountancy is the most widely cited article of his career (p. xxii).

The evolution of accounting thought is the theme of the first paper in the book which discusses replacement cost theory in the context of contemporary business practice and earlier 20th century writers on price-level accounting. Other theoretical issues discussed in the collection include Kenneth MacNeal's advocacy of market-based valuations and the evolution of the conceptual framework in the U.S., which Zeff traces back to Paton and Canning in the 1920s. The impact of Canning's magnum opus on accounting theory, The Economics of Accountancy, is assessed in a separate paper.

The evolution of the accountancy profession and audit practice is the final theme identified in the introduction. The establishment of accounting principles in the U.S. from 1917 to 1972 is linked to the profession's fear of government interference (p. 126). The decline in advocacy writing on standard setting and accounting principles by the Big 8 firms in the 1970s is explained in terms of a number of factors, including the loss of flexibility in the interpretation of GAAP that occurred as regulation became more systematic (p. 143). The earlier willingness of the profession to take a lead in matters of principle is explored further in a study explaining Arthur Andersen & Co.'s decision in 1946 to decouple “present fairly” and “conformity with generally accepted accounting principles” in the wording of their audit report (pp. 157–160). Indeed, looking back over his life's work, one of Zeff's main conclusions is the weakening in “the vitality and dedication to the public interest by the U.S. accountancy profession” occurring since the 1970s (p. xxxiii). This decline in professional values is explored in more detail in a two-part article analyzing the roots of the U.S. accountancy profession's transition from “professional firms that happened to be businesses” pre-1970 to “businesses that happened to render professional services” in the Enron era. Zeff recognizes a number of changes at work in the market for accountancy services and the regulatory environment, and identifies “the root cause of the questionable decisions attributable to audit firms in recent years” as the incentives given to their partners (p. 437). This is a good illustration of the value of history, as without a comprehension of the situation as it once was, how could one appreciate that a change had taken place and when, let alone understand the nature of the change and the causes? Studies relating to particular organizations include an explanation of DuPont's policy from 1910 to 1950 of rotating audit firms and an appraisal of the reporting changes of Unilever in the 1940s and their impact on U.K. regulation after the Second World War. In short, this is an interesting and eclectic collection of papers that it is difficult to do full justice to in a review.

Finally, if one of the lessons to be learned from the book is that history can provide useful insights into the world of accounting, another is of the value of engagement with professionals. A division now exists between professional and academic accountants whereby much of mainstream accounting research has come to be regarded as incomprehensible and irrelevant by the former, in contrast to the “vibrant dialogue” that once existed between the two communities (pp. 400, 402). The level of disengagement is compounded at the “critical” end of the academic research spectrum, where there is a tendency to disparage the profession as representing the antithesis of social justice. By contrast, Zeff's Insights from Accounting History is premised on the value of engagement, that the best way to uncover the facts is to persuade the people in the know either to speak to you or to make their papers available. Edwards comments on this aspect of the work in the foreword (p. viii), an approach that has gained Zeff access to privileged information relating to the AAA, CAP, APB, and Securities and Exchange Commission, among others (pp. xviii, xxi, xxv). There is a very valuable lesson for accounting researchers to learn here.

1The arrangements for this review were made by Professor Richard Macve, of the London School of Economics.

REFERENCES

  American Accounting Association (AAA). 1970. Report of the committee on accounting history. The Accounting Review 45 (Supplement): 5264.
  Jones, M. J ., and D. Oldroyd . 2009. Financial accounting: Past, present and future. Accounting Forum 33 (1): 110.
  Lee, T. A . 2006. The war of the sidewardly mobile corporate financial report. Critical Perspectives on Accounting 17: 419455
  Mouck, T . 1995. Irving Fisher and the mechanistic character of twentieth century accounting thought. Accounting Historians Journal 22 (2): 4483.
  Vangermeersch, R . 2008. The Academy of Accounting Historians 1973-2008-2023. Accounting Historians Notebook 31 (2): 18.

DAVID OLDROYD
Professor of Accounting
Newcastle University Business School


EY:  Final Joint Standard on Lease Accounting is Shaping Up (March 2015) ---
http://www.ey.com/Publication/vwLUAssetsAL/TechnicalLine_BB2952_Leases_25March2015/$FILE/TechnicalLine_BB2952_Leases_25March2015.pdf

What you need to know

• The FASB and the IASB have substantially completed redeliberations on new leases standards that would require lessees to recognize assets and liabilities for most leases.

• Lessees and lessors applying US GAAP would classify most leases using a principle generally consistent with that of IAS 17, which is similar to current US GAAP but without the bright lines.

• T he Boards have made different decisions about lease classification and the recognition , measurement a nd presentation of leases for lessees. In some cases, these differences would result in similar transactions being accounted for differently under US GAAP and IFRS

 . • The Boards will set effective date s before issuing the new standards . W e expect the Boards to issue the standards in the second half of 2015.

 

From the CPA Newsletter on March 23, 2015

Profits may look higher under IASB's lease accounting model
http://r.smartbrief.com/resp/gBhNBYbWhBCNxqePCidKtxCicNTVMx?format=standard
The International Accounting Standards Board's forthcoming model for lease accounting will make companies with material off-balance sheet leases look more profitable compared with the Financial Accounting Standards Board's model, according to an IASB comparison. Companies will amortize leased assets differently under the two models. "Accordingly, the IASB expects the carrying amount of lease assets, as well as reported equity, to be higher under the FASB model than under the IASB model, although those effects are not expected to be significant for most entities," the IASB found. Compliance Week/Accounting & Auditing Update blog (3/20)

Bob Jensen's threads on lease accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#Leases


"IMA RELEASES GLOBAL SALARY SURVEY FOR 2014," by Bob Schneider, Accounting Education, ( the 12/03/2015 date must be incorrect) ---
http://www.accountingeducation.com/index.cfm?page=newsdetails&id=153363

Results from the IMA® (Institute of Management Accountants) Global Salary Survey reveal that, in 2014, median total compensation for management accounting and finance professionals in the U.S. increased to $113,000 from $105,500 in the prior year – an increase of 7.1 percent. Globally, the data collected from IMA members in 81 countries indicate a median total compensation of $66,000.

Approximately 70 percent of survey respondents reported a pay raise following the 2013 Salary Survey. As the economic outlook continues to strengthen, the prospects for future raises also appear bright, with more than three-quarters of survey respondents anticipating a raise in the coming year.

Compensation by Responsibility
According to the survey, salaries remained largely the same or declined for professionals in traditional areas of responsibility such as corporate accounting, taxation, general accounting and internal audit. However, the need for budgeting, planning and cost-control skills has led to an increase in salary for professionals with responsibilities in these and related areas.

Based on median total compensation, the highest-paying areas of responsibility are as follows:
1. Information systems
2. Education
3. Corporate accounting
4. General management

In the United States, an especially large pay increase occurred in the area of risk management, reflecting greater corporate awareness of this issue. Public accounting remains the lowest-paid area globally.

Global Trends
Globally, the Netherlands and Switzerland continue to have the highest average salary and total compensation. Meanwhile Egypt holds the lowest rank for compensation, presumably in large part due to economic and political factors in the country. Asia continues as the region with the lowest average compensation; however, compensation values in Asia and the Middle East/Africa region are showing significant improvement.

“Overall, survey respondents in the Asia/Pacific region experienced gains in earnings. For CMA-certified professionals, the earnings opportunity is most pronounced,” said Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy and co-author of the survey. “CMAs in the Asia/Pacific region earn roughly 75 percent more than those without certification. Their employers also benefit by having highly qualified accounting talent capable of competing globally.”

The ROI of Education and Certification
The 2014 Global Salary Survey shows that while higher degrees are predictably linked with significantly higher compensation, certification leads to both increased pay and new career opportunities.

According to the survey, 83 percent of professionals holding the CMA® (Certified Management Accountant) certification believe it strengthens their ability to move across all areas of the business, and 80 percent are confident that certification creates new career opportunities. Globally, CMA-certified professionals earn 59 percent more in salary ($73,000) and 63 percent more in total compensation ($85,000) than the median rates for non-CMAs.


More information on the survey can be found in IMA's Strategic Finance publication.
The Report is Dated March 3, 2015 ---
http://sfmagazine.com/post-entry/special-report-imas-global-salary-survey-2014/

Jensen Comment
These surveys can be misleading unless other things are considers, especially cost of living. For example, the cost of living is very expensive in The Netherlands such that a high salary is not such a great deal.

I also criticize the IMA for continually suggesting that a CMA credential is a key to higher salary.
I think it is more likely that higher salaried accountants are more apt to get added credentials like CMA, IIA, CFE, and other credentials. Salary is a function of talent, education, training, motivation, and a lot of serendipity. There are some certificates that are required for getting or retaining a job such as when the CPA certificate is required to retain a job in most public accounting firms. But when the credential is more optional, getting that credential is not necessarily a major factor among more important factors leading to career success. All those extra letters signifying credentials behind a name sometimes are only indicative of good test takers rather than great employees.


University of North Carolina:  N.C.AA finds fake courses for 20 years ---
http://faculty.trinity.edu/rjensen/Plagiarism.htm#RebeccaHoward

University of Syracuse:  N.C.A.A. finds that university employees completed coursework for athletes -- and questions why it took 8 years to complete investigation into such a serious problem.

"Academic Fraud at Syracuse," by Jake New, Inside Higher Ed, March 9, 2015 ---
https://www.insidehighered.com/news/2015/03/09/ncaa-suspends-syracuse-u-basketball-coach-vacates-108-wins

In 2005, following a season of poor academic performance from his players, Syracuse University’s head basketball coach, Jim Boeheim, hired a new director of basketball operations and gave him an imperative: “fix” the academic problems of his athletes.

The director’s solution, according to the National Collegiate Athletic Association, was for athletics staff members to access and monitor the e-mail accounts of several players, communicate directly with faculty members as if they were the athletes, and then complete coursework for them. In one case, an athlete had his eligibility restored by turning in a paper to raise a grade he had earned the previous year. The paper was written by the director and a basketball facility receptionist.

This sort of fraud had lasted more than half a decade at Syracuse, finally coming to light after a lengthy series of investigations by the university and the N.C.A.A. On Friday, the N.C.A.A. announced a number of sanctions against Syracuse, including vacating more than 100 of Boeheim’s wins and suspending him for 9 conference games next season. "Over the course of a decade, Syracuse University did not control and monitor its athletics programs," the N.C.A.A. said in a statement. "And its head men's basketball coach failed to monitor his program."

The decision comes at a time when the N.C.A.A. is under increasing pressure to improve the academic integrity of big-time college sports. The association is currently investigating more than 20 institutions for academic misconduct, including the University of North Carolina, where some university employees knowingly steered about 1,500 athletes toward no-show courses that never met and were not taught by any faculty members, and where the only work required was a single research paper that received a high grade no matter the content.

During a press call Friday, Britton Banowsky, chief hearing officer and commissioner of Conference USA, said while the N.C.A.A. is attempting to be proactive, it still believes the onus for investigating cases of academic fraud should be on the institution. At the same time, Banowsky said, the sheer length of Syracuse’s investigation -- eight years -- does raise questions about how such probes are handled. The incident could lead to new rules that would bar investigations from dragging on for “an extremely excessive time," he said.

“As we have to sit back and wait for this to be self-reported, it is unacceptable for our membership to have cases go on this long,” Banowsky said. “Our first step is to be deferential to the university system, but ultimately we had a situation where the desire to achieve success on the basketball court overrides the academic integrity. It really demonstrated some clearly misplaced priorities, and that’s where the N.C.A.A. process comes in. I think you’ll see over the next several months a more focused dialogue about where those lines are drawn.”

In a series of statements released by administrators Friday, Syracuse admitted the investigation was too lengthy, saying it may in fact be the longest infractions investigation ever and that the blame is on both the university and the N.C.A.A. The university, which self-reported many of the violations, disagreed with several of the association’s other assertions, however, in particular that Boeheim was responsible for his staff’s actions, saying that their actions were "done in secret."

Boeheim, a revered and larger-than-life figure at Syracuse who has had a decades-long career coaching the university's storied basketball team, is expected to appeal the sanctions. Boeheim skipped his postgame press conference on Friday, what would have been the last of the season, saying in a statement that he was considering his "options moving forward."

Syracuse said that it would support the coach if he chooses to appeal. “Coach Boeheim has demonstrated that he is a person of character,” the university stated in a seven-page response to the N.C.A.A.’s report. “He is a coach who expects excellence and integrity, both on and off the basketball court. The university believes the N.C.A.A. was wrong to find that he failed in his responsibilities.”

During the press call Friday, Banowsky reiterated that the N.C.A.A. views the coach -- and the university -- as culpable. Boeheim hired the director of basketball operations to be his “academic point man,” making him responsible for the director’s actions, Banowsky said. The N.C.A.A. also faulted Boeheim and Syracuse for fostering an environment in which staff members who were aware of the fraud were too afraid to say anything.

The director of student-athlete support services, who suspected the misconduct, told the N.C.A.A. that he did nothing because he sensed that “men’s basketball might have a ‘little bit of special treatment,’” the association wrote in its report. "He acknowledged that he believed the director of basketball operations was behind the fact that a former academic support employee had been 'pushed out' after 20 years of service, and as a new employee, was mindful of that event.”

Continued in article

Jensen Comment
To be fair the NCAA should have given Syracuse 12 more years before taking corrective action.

Tennessee Athletics Accused of Pushing Leniency for Athletes ---
https://www.insidehighered.com/quicktakes/2015/03/09/tennessee-athletics-accused-pushing-leniency-athletes


"The weaker sex:  Boys are being outclassed by girls at both school and university, and the gap is widening," The Economist, March 7, 2015 ---
http://www.economist.com/news/international/21645759-boys-are-being-outclassed-girls-both-school-and-university-and-gap

Jensen Comment
This is certainly the case in accountancy higher education programs. Women are especially encouraged by 21st Century hiring of more women than men by CPA firms. Women must, however, be willing to accept the negatives of public accounting employment, including job stresses, overnight travel, and week ends away from home and families. Accountancy is somewhat conducive to work at home even when employed by the large firms, but this is not always an option for career advancement when working at home year after year after year.

There's some evidence in education, nursing, and accountancy that men, especially minority males, shy away from careers requiring licensing examinations. However, there are exceptions in engineering and technology where more males are still being licensed than females. Some of the real negatives of certain types of consulting work are the months away from home and families. Long-term absences from families are common in consulting engagements. Those occasional weekends at home just aren't enough for some mothers.

Bob Jensen's threads on higher education controversies ---
http://faculty.trinity.edu/rjensen/HigherEdControversies.htm


"Educators Point to a ‘Crisis of Mediocre Teaching’," by Vimal Patel, Chronicle of Higher Education, April 14, 2014 ---
http://chronicle.com/article/Educators-Point-to-a-Crisis/145901/?cid=at&utm_source=at&utm_medium=enW

Even elite institutions acknowledge that the classroom experience is not all it should be. Harvard University and the University of Michigan have dedicated tens of millions of dollars to support experiments to improve teaching, particularly at the undergraduate level.
"Teaching Revival Fresh attention to the classroom may actually stick this time," by Dan Barrett, Chronicle of Higher Education, March 9, 2015 ---
http://chronicle.com/article/Teaching-revival-Fresh/228203/?cid=at

Read More About 10 Key Trends in Higher Education ---
http://chronicle.com/section/The-Trends-Report/869/?cid=at&utm_source=at&utm_medium=en

What Students Are Not Getting --- The Teaching Enthusiasm of Top Researchers ---
http://faculty.trinity.edu/rjensen/HigherEdControversies.htm#Berkowitz

"Don’t Divide Teaching and Research," by Carolyn Thomas, Chronicle of Higher Education, March 9, 2015 ---
http://chronicle.com/blogs/conversation/2015/03/09/dont-divide-teaching-and-research/?cid=at&utm_source=at&utm_medium=en

We excel, in the research university, at preparing our students to do world-class research — everywhere except the classrooms in which they teach. From the beginning we insist that Ph.D. applicants explain their research plans. When they arrive we put them through their paces in methodology classes, carefully taking apart their ideas of what they want to accomplish and introducing them to the hard work of gathering data, performing analyses, testing and retesting hypotheses, and exploring all possible outcomes.

We want students to understand that what they think is true has to be questioned, repeatedly, and that their findings have to be defended. It is an iterative process, and we expect them to be rather poor at it when they begin — improving through honest critique and firm mentorship over time.

When it comes to teaching, however, the message they receive is very different. We don’t ask prospective students to address their teaching experience or philosophy in graduate-school applications, and we do not typically talk about teaching in coursework or qualifying examinations. Often it is not until graduate students enter the classroom, as teaching assistants responsible for their own sections, that they begin to think about what it might require to teach successfully.

In the midst of papers to grade and sections to prepare, conversations between even the best faculty instructors and assistants lean more toward the pragmatic. There is little room or incentive to see one’s time as a teaching assistant as an opportunity to simultaneously teach and analyze classroom success.

Some of this is because of the importance placed on graduate-student research. This makes a great deal of sense: Training the next generation of Ph.D.s to be world-class researchers in their chosen disciplines is a chief responsibility of modern universities. Time spent in the classroom is often seen as time spent away from one’s archive or laboratory, away from the process of inquiry and original analysis that leads to cutting-edge findings and future academic employment. This makes it all too easy to teach our graduate students that they must be skillful researchers, and only adequate teachers.

The fault line between teaching and research, however, is also created and maintained by our own misunderstanding, as largely 20th-century faculty, of the place of teaching in the 21st-century research university. With an increased national emphasis on graduation rates, student persistence, and student learning, rising undergraduate tuition costs, and the need to distinguish brick-and-mortar institutions from online offerings, teaching has become a much higher priority for all public institutions.

Merits and promotions are shifting to take teaching into greater account, new faculty are being given increased resources and encouragement to develop their pedagogy, and in some cases new positions are being created for tenure-track faculty who undertake what a recent National Research Council report has calledDiscipline-Based Education Research.”

Whether current graduate students ultimately apply for traditional tenure-track research positions or in such new positions as pedagogy experts, they will be well served if their time in the classroom is time when they are encouraged to study how students learn in their field and adapt their practices for greatest success. Studying how undergraduates learn in a field actually also strengthens graduate students’ research processes in their own work. Breaking down the barrier between “discipline-based research” and “research into teaching” offers a win-win.

Continued in article

Jensen Comment
If there were enormous accounting teaching databases to be purchased accountics scientists would jump on it with their GLM software. Sadly, accountics scientists don't like to create their own databases (with a few noteworthy exceptions like Zoe-Vonna Palmrose) ---
http://faculty.trinity.edu/rjensen/AccounticsWorkingPaper450.pdf

March 10, 2015 reply from Richard Sansing

For a commentary by accounting academics on this issue, I recommend the following.

Demski, J. and J. Zimmerman. 2000. On “Research vs. Teaching”: A Long-Term Perspective. Accounting Horizons 14 (September): 343-352.

The gist of their commentary is that teaching and research are complementary activities as opposed to substitutes.

Here is an excerpt from the first paragraph of their commentary.

In this commentary we argue that teaching and research are strong complements, not substitutes. Doing more of one increases the value of the other. Few important social- science research findings have come from think tanks. Virtually all leading academics are located at institutions dedicated to both teaching and research. To preview our conclusion, we reject any notion of separating research and teaching. Students demand relevant course content—questions and answers that enhance their human capital. This helps guide our research and helps prevent us from teaching irrelevant material. In parallel fashion, we stress generation and consumption of research as essential to understanding both the relevance of what we teach and what we research and hence the impact of relevance on research.

Richard Sansing

March 10, 2015 reply from Bob Jensen

Hi Richard,

I agree in theory, but accountics scientists seem to be very limited in their approach to education research. Interestingly, many top accountics scientists like yourself teach from cases such a Harvard-style cases. But their published articles in research journals, with the notable exception of Bob Kaplan's articles, seem to be limited to research using equations. Try getting a case without equations published in TAR, JAR, or JAE.

I can't find where TAR published a mainline research article in decades that does not have equations. Teaching research submissions that do not have equations are directed toward Issues in Accounting Education. This would be fine with me if IAE was an equal partner with TAR in terms of attaining tenure and promotions. But, in my opinion, hits in IAE just do not count as dearly as TAR hits for faculty in R! universities.

I find little focus on teaching in accountics science dissertations from R1 universities. Are there noteworthy accounting education and teaching research research dissertations in the past two decades from Chicago, Stanford, Wharton, MIT, Yale, University of Texas, University of Illinois, Northwestern, Michigan, etc.?

Thanks,
Bob

Added Jensen Comment

What we find happening in undergraduate accounting programs is that it's harder and harder to find North American accounting Ph.D. graduates who are knowledgeable about financial accounting and auditing and tax. The doctoral programs themselves teach a lot about the quantitative tools of research (like the General Linear Model and its software) and virtually nothing about accounting, auditing, tax, and teaching.

Teaching "professional: accounting increasingly is being transferred to adjuncts who are also not trained in teaching..

The Pathways Commission found a divide between teaching and research and carried this into its final recommendations ---
https://www.insidehighered.com/news/2012/07/31/updating-accounting-curriculums-expanding-and-diversifying-field

The report includes seven recommendations:

  • Integrate accounting research, education and practice for students, practitioners and educators by bringing professionally oriented faculty more fully into education programs.

     
  • Promote accessibility of doctoral education by allowing for flexible content and structure in doctoral programs and developing multiple pathways for degrees. The current path to an accounting Ph.D. includes lengthy, full-time residential programs and research training that is for the most part confined to quantitative rather than qualitative methods. More flexible programs -- that might be part-time, focus on applied research and emphasize training in teaching methods and curriculum development -- would appeal to graduate students with professional experience and candidates with families, according to the report.

     
  • Increase recognition and support for high-quality teaching and connect faculty review, promotion and tenure processes with teaching quality so that teaching is respected as a critical component in achieving each institution's mission. According to the report, accounting programs must balance recognition for work and accomplishments -- fed by increasing competition among institutions and programs -- along with recognition for teaching excellence.

     
  • Develop curriculum models, engaging learning resources and mechanisms to easily share them, as well as enhancing faculty development opportunities to sustain a robust curriculum that addresses a new generation of students who are more at home with technology and less patient with traditional teaching methods.

     
  • Improve the ability to attract high-potential, diverse entrants into the profession.

     
  • Create mechanisms for collecting, analyzing and disseminating information about the market needs by establishing a national committee on information needs, projecting future supply and demand for accounting professionals and faculty, and enhancing the benefits of a high school accounting education.

     
  • Establish an implementation process to address these and future recommendations by creating structures and mechanisms to support a continuous, sustainable change process.

Demski and Zimmerman wrote the following in the article you cited:

Students demand relevant course content—questions and answers that enhance their human capital. This helps guide our research and helps prevent us from teaching irrelevant material. In parallel fashion, we stress generation and consumption of research as essential to understanding both the relevance of what we teach and what we research and hence the impact of relevance on research.

I'm not sure most of our new accounting Ph.D. graduates know what is relevant to teach in intermediate and advanced accounting, auditing, and tax. In their accountics science research they pass over the hard professional and clinical and teaching research questions where there are no databases to purchase ---
http://faculty.trinity.edu/rjensen/AccounticsWorkingPaper450.pdf

Research shows that there's a considerable decline in the proportion of accounting Ph.D. graduates with CPA or other professional credentials ---
http://business.umsl.edu/seminar_series/Spring2012/Further Tales of the Schism - 3-01.pdf

. . .

This paper attempts to document and chart the trajectory of such a division by observing the extent to which academic accountants possess the essential practice credentials. The absence of such credentials suggests a gr owing departure in the training and values of the two groups. The results show a considerable decline in the tendency for accounting faculty to hold practice credentials such as the CPA. This trend occurs in most segments of the professoriate, but is more pronounced for the tenure track faculty or doctoral institutions, for more junior faculty and for faculty employed by more prestigious academic organizations. The paper shows this to be a problem experienced by individuals in the financial accounting sub-field of the discipline.

Continued in article

 

"Our Compassless Colleges," by Peter Berkowitz, The Wall Street Journal, September 5, 2007; Page A17 --- http://online.wsj.com/article/SB118895528818217660.html

At universities and colleges throughout the land, undergraduates and their parents pay large sums of money for -- and federal and state governments contribute sizeable tax exemptions to support -- "liberal" education. This despite administrators and faculty lacking, or failing to honor, a coherent concept of what constitutes an educated human being.

To be sure, American higher education, or rather a part of it, is today the envy of the world, producing and maintaining research scientists of the highest caliber. But liberal education is another matter. Indeed, many professors in the humanities and social sciences proudly promulgate doctrines that mock the very idea of a standard or measure defining an educated person, and so legitimate the compassless curriculum over which they preside. In these circumstances, why should we not conclude that universities are betraying their mission?

Many American colleges do adopt general distribution requirements. Usually this means that students must take a course or two of their choosing in the natural sciences, social sciences, and the humanities, decorated perhaps with a dollop of fine arts, rudimentary foreign-language exposure, and the acquisition of basic writing and quantitative skills. And all students must choose a major. But this veneer of structure provides students only superficial guidance. Or, rather, it reinforces the lesson that our universities have little of substance to say about the essential knowledge possessed by an educated person.

Certainly this was true of the core curriculum at Harvard, where I taught in the faculty of arts and sciences during the 1990s. And it remains true even after Harvard's recent reforms.

Harvard's aims and aspirations are in many ways admirable. According to this year's Report of the Task Force on General Education, Harvard understands liberal education as "an education conducted in a spirit of free inquiry undertaken without concern for topical relevance or vocational utility." It prepares for the rest of life by improving students' ability "to assess empirical claims, interpret cultural expression, and confront ethical dilemmas in their personal and professional lives." But instead of concentrating on teaching substantive knowledge, the general education at Harvard will focus on why what students learn is important. To accomplish this, Harvard would require students to take single-semester courses in eight categories: Aesthetic and Interpretive Understanding, Culture and Belief, Empirical Reasoning, Ethical Reasoning, Science of Living Systems, Science of the Physical Universe, Societies of the World, and The United States in the World.

Unfortunately, the new requirements add up to little more than an attractively packaged evasion of the university's responsibility to provide a coherent core for undergraduate education. For starters, though apparently not part of the general education curriculum, Harvard requires only a year of foreign language study or the equivalent. Yet since it usually takes more than a year of college study to achieve competence in a foreign language -- the ability to hold a conversation and read a newspaper -- doesn't Harvard, by requiring only a single year, denigrate foreign-language study, and with it the serious study of other cultures and societies?

Furthermore, in the search for the immediate relevance it disavows, Harvard's curriculum repeatedly puts the cart before the horse. For example, instead of first requiring students to concentrate on the study of novels, poetry, and plays, Harvard will ask them to choose from a variety of courses on "literary or religious texts, paintings, sculpture, architecture, music, film, dance, decorative arts" that involve "exploring theoretical and philosophical issues concerning the production and reception of meanings and the formation of aesthetic judgment."

Instead of first requiring students to gain acquaintance with the history of opinions about law, justice, government, duty and virtue, Harvard will ask them to choose from a variety of courses on how to bring ethical theories to bear on contemporary moral and political dilemmas. Instead of first requiring students to survey U.S. history or European history or classical history, Harvard will ask them to choose from a variety of courses that examine the U.S and its relation to the rest of the world. Instead of first teaching students about the essential features of Judaism, Christianity, and Islam, Harvard will ask them to choose from a variety of courses on almost any aspect of foreign societies.

Harvard's general education reform will allow students to graduate without ever having read the same book or studied the same material. Students may take away much of interest, but it is the little in common they learn that will be of lasting significance. For they will absorb the implicit teaching of the new college curriculum -- same as the old one -- that there is nothing in particular that an educated person need know.

Of course, if parents, students, alumni donors, trustees, professors and administrators are happy, why worry? A college degree remains a hot commodity, a ticket of entry to valuable social networks, a signal to employers that graduates have achieved a certain proficiency in manipulating concepts, performing computations, and getting along with peers.

The reason to worry is that university education can cause lasting harm. The mental habits that students form and the ideas they absorb in college consolidate the framework through which as adults they interpret experience, and judge matters to be true or false, fair or inequitable, honorable or dishonorable. A university that fails to teach students sound mental habits and to acquaint them with enduring ideas handicaps its graduates for public and private life.

Moreover, properly conceived, a liberal education provides invaluable benefits for students and the nation. For most students, it offers the last chance, perhaps until retirement, to read widely and deeply, to acquire knowledge of the opinions and events that formed them and the nation in which they live, and to study other peoples and cultures. A proper liberal education liberalizes in the old-fashioned and still most relevant sense: It forms individuals fit for freedom.

The nation benefits as well, because a liberal democracy presupposes an informed citizenry capable of distinguishing the public interest from private interest, evaluating consequences, and discerning the claims of justice and the opportunities for -- and limits to -- realizing it in politics. Indeed, a sprawling liberal democracy whose citizens practice different religions and no religion at all, in which individuals have family heritages that can be traced to every continent, and in which the nation's foreign affairs are increasingly bound up with local politics in countries around the world is particularly dependent on citizens acquiring a liberal education.

Crafting a core consistent with the imperatives of a liberal education will involve both a substantial break with today's university curriculum and a long overdue alignment of higher education with common sense. Such a core would, for example, require all students to take semester courses surveying Greek and Roman history, European history, and American history. It would require all students to take a semester course in classic works of European literature, and one in classic works of American literature. It would require all students to take a semester course in biology and one in physics. It would require all students to take a semester course in the principles of American government; one in economics; and one in the history of political philosophy. It would require all students to take a semester course comparing Judaism, Christianity, and Islam. It would require all students to take a semester course of their choice in the history, literature or religion of a non-Western civilization. And it would require all students to demonstrate proficiency in a foreign language of their choice by carrying on a casual conversation and accurately reading a newspaper in the language, a level of proficiency usually obtainable after two years of college study, or four semester courses.

Such a core is at best an introduction to liberal education. Still, students who meet its requirements will acquire a common intellectual foundation that enables them to debate morals and politics responsibly, enhances their understanding of whatever specialization they choose, and enriches their appreciation of the multiple dimensions of the delightful and dangerous world in which we live.

It is a mark of the politicization and clutter of our current curriculum that these elementary requirements will strike many faculty and administrators as benighted and onerous. Yet the core I've outlined reflects what all successful individuals outside of academia know: Progress depends on mastering the basics.

Assuming four courses a semester and 32 to graduate, such a core could be completed in the first two years of undergraduate study. Students who met the foreign-language requirement through high school study would have the opportunity as freshman and sophomores to choose four elective courses. During their junior and senior year, students could devote 10 courses to their major while taking six additional elective courses. And students majoring in the natural sciences, where it is necessary to take a substantial sequence of courses, would enroll in introductory and lower-level courses in their major during freshman and sophomore years and complete the core during junior and senior years.

Admittedly, reform confronts formidable obstacles. The major one is professors. Many will fight such a common core, because it requires them to teach general interest classes outside their area of expertise; it reduces opportunities to teach small boutique classes on highly specialized topics; and it presupposes that knowledge is cumulative and that some books and ideas are more essential than others.

Meanwhile, students and parents are poorly positioned to affect change. Students come and go, and, in any event, the understanding they need to formulate the arguments for reform is acquired through the very liberal education of which universities are currently depriving them. Meanwhile, parents are too distant and dispersed, and often they have too much money on the line to rock the boat.

But there are opportunities. Change could be led by an intrepid president, provost or dean of a major university who knows the value of a liberal education, possesses the eloquence and courage to defend it to his or her faculty, and has the skill to refashion institutional incentives and hold faculty and administrators accountable.

Reform could also be led by trustees at private universities -- the election in recent years of T.J. Rodgers, Todd Zywicki, Peter Robinson and Stephen Smith to the Dartmouth Board of Trustees on platforms supporting freedom of speech and high academic standards is a start -- or by alumni determined to connect their donations, on which universities depend, to reliable promises that their gifts will be used in furtherance of liberal education, well understood.

And some enterprising smaller colleges or public universities, taking advantage of the nation's love of diversity and openness to innovation, might discover a market niche for parents and students eager for an education that serves students' best interests by introducing them in a systematic manner to their own civilization, to the moral and political principles on which their nation is based, and to languages and civilizations that differ from their own.

Citizens today are called on to analyze a formidable array of hard questions concerning war and peace, liberty and security, markets and morals, marriage and family, science and technology, poverty and public responsibility, and much more. No citizen can be expected to master all the issues. But liberal democracies count on more than a small minority acquiring the ability to reason responsibly about the many sides of these many-sided questions. For this reason, we must teach our universities to appreciate the aims of a liberal education. And we must impress upon our universities their obligation to pursue them responsibly.

Mr. Berkowitz, a senior fellow at Stanford University's Hoover Institution, teaches at George Mason University School of Law. This commentary draws from an essay that previously appeared in Policy Review.

"Three Radical Changes That Can Save Business Schools From Extinction," by Cory Weinberg, Bloomberg Businessweek, July 16, 2014 ---
http://www.businessweek.com/articles/2014-07-16/business-schools-will-go-out-of-business-unless-they-radically-reinvent-themselves

 


AAA Home Page --- http://aaahq.org/

Take a look at the new American Accounting Association Website and tell the AAA what you think about the new site. I think it's an awful mess and much preferred the old site. In fairness it is a work in progress. You can help by sending your suggestions to
 

Chief Operating Officer
Tamara Terry
Email: Tammy@aaahq.org

Ms Terry has been very understanding about the loss of any links to the AECM listserv in the new AAA Home Page. She's fully aware of that problem so you no longer need to complain about not having a link to  the AECM.  You cannot even find the AECM on the Home Page search engine.

The new AAA Home Page is too busy and cluttered.

The search engine is lousy and does not crawl over enough detail in the documents at the site. For example, search for "AECC." The Accounting Education Change Commission was a big deal in the history of the AAA, and the AAA still sells traditional publications (not digitized) of the AECC. But try finding and ordering those publications. The new Website needs a greatly expanded search engine.

When you dramatically change your site and links to the documents at that site, it's a great courtesy to either forward old links automatically  to the new documents or to have a message pop up giving you the new URL. For example, one of the venerable links to the AECC documents was
http://aaahq.org/AECC/history/cover.htm 
Go ahead. Click on the above link.
Yeah! Nearly all the old links are dead now.
At my own Website I have thousands of links to the AAA site that became dead overnight. I'm certain that those of you with Website links to AAA sites will now have dead links to AAA Websites.

I liked the old AAA Home Page. It was short, sweet, and uncluttered. About all that was really needed was a better search engine. Rather than redesign the Home Page I would have poured the resources into a fantastic search engine.

Maybe it's just a thing with me, but I like uncluttered home pages with links to more clutter on separate pages. For example, the old AAA Home Page had a single hot word called "Meetings." Clicking on it took you to a page of links to the many forthcoming regional, sectional, and national AAA meetings.

The new Home Page is cluttered with links to some but not all the forthcoming meetings. This type of clutter in not necessary on a Home Page when such clutter can be put at a separate site for forthcoming meetings.

I think home pages should be more like the Table of Contents of a book with links to the pages that have the details.

In any case, Ms. Terry is a very nice woman, and I'm certain the AAA would not have hired her if she wasn't very competent. I'm think she would love to hear your suggestions about how to improve the new site.

Update:
In an earlier message I complained about the search engine both the old and the new American Accounting Association Home Page
http://aaahq.org/

Note that at some Home Pages, such as that of Stanford University, one of the first things you see is a Search box with two buttons. One entitled "Web" versus another entitled "People."

This search button entitled Web lets you search for topics without first having to search on "Stanford University" in a Web crawler such as Google.

In order to illustrate go to the Search box at the AAA Home Page at
http://aaahq.org/

Type in the letters "AECC"
The search result will provide zero hits.

Next go to Google at
http://www.google.ca/advanced_search

Type in "American Accounting Association" AND "AECC"
You will get 10 pages of hits.
Not all hits are on the AAA server, but who cares? At least there are some hits to the AAA Web server.

Top Websites like Stanford University have learned how to make use of Web crawlers to search for pages on their Web servers.

This is an idea for the AAA's new Home Page. Perhaps the AAA can make better use of Web crawlers to find files on the AAA Web server.

Read more about search facilities for online databases at
http://en.wikipedia.org/wiki/List_of_search_engines

PS
By killing so many old links to documents on the AAA Web server, many of the searches by Web crawlers are killed as well. I repeat my earlier appeal that the AAA should bring back to life most of the links that it killed to pages on its Web server. If nothing else the hits should provide a popup that provides the new links to those old URLs that were changed.


"Learn math without fear, Stanford expert says," by Clifton B. Parker, Stanford News. January 29. 2015 ---
http://news.stanford.edu/news/2015/january/math-learning-boaler-012915.html 

Jensen Comment
For me it was age and maturation. I avoided math courses until I spent five years in Stanford's doctoral program. Then I took math courses every quarter, for four years because math became my favorite subject.

It was also perfect timing on my part.
 Math was a great part of my other coursework in the doctoral program. My fellow students in those courses, some of whom were engineers, struggled with the math because they had been away from math courses for so many years. I remember one statistics course final examination where the professor (Chuck Bonini) goofed in a problem that could not be solved without integrating the normal distribution. The other students didn't have a clue. But I was so current in advanced calculus that I could shift to polar coordinates and integrate the normal distribution. I looked like a genius, which was definitely not the case. I was simply more current in advanced calculus. Chuck later became my dissertation chairman.


"New York school abolishes homework. Does homework do any good? A growing number of schools are doing away with homework. Some experts think it's a step in the right direction," by Lisa Suhay, Yahoo News, March 6, 2015 ---
http://news.yahoo.com/york-school-abolishes-homework-does-homework-good-203439594.html

Jensen Comment
First we reduced the 7-8 hours of school to 4-5. Now we take away the homework.

Are kids really better off with video games, cold pizza and watching television?

The worst thing we can do is make students work at learning. Yeah Right!

The experimental Charter School evidence shows that students really learn more with more time (including Saturdays) in school and intense learning assignments. But we want happy and fat kids on welfare more than skinny kids sweating buckets to get into Harvard.

We'd rather be obese on benefits than thin and working.
Janice and Amber Manzur
http://www.telegraph.co.uk/news/uknews/11347454/Mother-and-daughter-weigh-a-total-of-43-stone-and-get-34k-a-year-handouts-but-refuse-to-diet.html 


Home Schooled
"17-year-old becomes one of the world’s youngest CPAs:   Through hard work and determination, Belicia Cespedes (an immigrant) earned the credential before she was even eligible to vote,"  by Samiha Khanna, Global CPA Report, February 17, 2015 ---
http://www.aicpa.org/InterestAreas/YoungCPANetwork/Resources/Career/Pages/worlds-youngest-cpa-belicia-cespedes.aspx 


Top 10 Blogs about Postsecondary Next Gen Learning ---
http://www.educause.edu/blogs/millichap/top-10-blogs-about-postsecondary-next-gen-learning

To these I would add the following favorites of mine:

"Blogging changes the nature of academic research, not just how it is communicated," by Patrick Dunleavy, London School of Economics, January 2015 ---
http://blogs.lse.ac.uk/impactofsocialsciences/2014/12/28/shorter-better-faster-free/

Academic blogging gets your work and research out to a potentially massive audience at very, very low cost and relative amount of effort. Patrick Dunleavy argues blogging and tweeting from multi-author blogs especially is a great way to build knowledge of your work, to grow readership of useful articles and research reports, to build up citations, and to foster debate across academia, government, civil society and the public in general.

One of the recurring themes (from many different contributors) on the LSE Impact of Social Science blog is that a new paradigm of research communications has grown up — one that de-emphasizes the traditional journals route, and re-prioritizes faster, real-time academic communication. Blogs play a critical intermediate role. They link to research reports and articles on the one hand, and they are linked to from Twitter, Facebook, Pinterest, Tumblr and Google+ news-streams and communities. So in research terms blogging is quite simply, one of the most important things that an academic should be doing right now.

But in addition, STEM scientists, social scientists and humanities scholars all have an obligation to society to contribute their observations to the wider world. At the moment that’s often being done

So the public pay for all or much of our research (especially in Europe and Australasia). And then we shunt back to them a few press releases and a lot of out-of-date, arcanely phrased academic junk.

Types of blogs

A lot of people think that all blogs are solo blogs, but this is a completely out of date view. A ‘blog’ is defined by Wikipedia as:

‘a truncation of the expression web log… [It] is a discussion or informational site published on the World Wide Web and consisting of discrete entries (“posts”) typically displayed in reverse chronological order (the most recent post appears first). Until 2009 blogs were usually the work of a single individual, occasionally of a small group, and often covered a single subject. More recently “multi-author blogs” (MABs) have developed, with posts written by large numbers of authors and professionally edited. MABs from newspapers, other media outlets, universities, think tanks, advocacy groups and similar institutions account for an increasing quantity of blog traffic. The rise of Twitter and other “microblogging” systems helps integrate MABs and single-author blogs into societal newstreams’. [Accessed 29 August 2014]. (Let me pause here to reassure some academic readers who may be bristling at being asked to read Wikipedia text – I know this passage is sound since I co-wrote much of it).

Actually the evolution of academic blogs specifically has now progressed even further, so that we can distinguish group or collaborative blogs as an important intermediate type between solo blogs and multi-author blogs. The two tables below summarize how these three types of blogs now work, drawing attention to their very different advantages and disadvantages.

Continued in article

The 15 best blogging and publishing platforms on the Internet today. Which one is for you?
http://thenextweb.com/apps/2013/08/16/best-blogging-services/

 

Bob Jensen's threads on listservs, blogs, and social networking ---
http://faculty.trinity.edu/rjensen/ListservRoles.htm


2015 Index of Economic Freedom --- http://www.heritage.org/index/ranking
The USA did not make the Top 10

The Open Utopia --- http://theopenutopia.org/


Wharton Offers Free MOOCs of the MBA Core Courses

PART OF WHARTON’S BUSINESS FOUNDATIONS SPECIALIZATION
Introduction to Financial Accounting---
https://www.class-central.com/mooc/769/coursera-introduction-to-financial-accounting
Especially note the comments

Bob Jensen's threads on thousands of free MOOCs from prestigious universities ---
http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI


Hoyle on Characteristics of Great Teachers
March 6, 2015 message from Joe Hoyle

. . .

I recently did an informal survey of my 77 students (77???). I asked them to describe the characteristics of great teaching. I was curious as to what they would tell me. I didn’t ask them about good teaching or okay teaching. I wanted to know how they viewed great teaching.

I wrote up the results and posted it to my teaching blog. Because it is so cold and snowy, I thought you might enjoy having something to read. The URL for this posting is below.

If you ever want to grab a coffee and discuss teaching (great or otherwise), let me know.

Joe

http://joehoyle-teaching.blogspot.com/2015/03/great-teaching-what-i-learned-from-my.html

Jensen Comment
Students also need other ingredients not found in motherhood and apple pie. Not mentioned are spinach, turnip greens, lemons, and caster oil. Are philosophy professors really doing you a favor by inspiring you to become a philosophy professor or a professor of music where the probabilities of eventually obtaining tenure track employment in the Academy are less than one percent? It's good to be inspirational as long as there's no deception about reality.

Not mentioned in-depth expertise of the subject matter, making us learn better by making us learn on our own, and tough grading to a point where even a B grade exceeds the grades of most students in the class.

Not mentioned is the fact that many of the best physicians often have lousy personalities. Many are arrogant and have very little empathy or chit chat time even though they are great at diagnostics and skills like surgical skills. I'm told (fortunately never needed one) that some of the best psychiatrists are tough with patients to a point where patients don't think their psychiatrists are empathetic.

Some of my best college professors rate poorly on many of the criteria listed by Joe.

My point is that trying to be what you are not should not detract from being the best in what counts for a parent or a teacher or a doctor or an accounting professor. More importantly the best parent or teacher or doctor or accounting professor may not be the most loved.

The proof in academe are the results of teaching evaluations at the end of a course versus teaching evaluations two decades later. Some worst-rated teachers occasionally move to the top two decades after graduation.

More evidence from the University of Virginia:  Where hated professors provide the best metacognitive learning ---
http://faculty.trinity.edu/rjensen/265wp.htm


Question
How are books similar to and different from wine bottles?

Harvard Library’s “Cold Storage” ---
http://lisnews.org/node/43371/

Jensen Comment
One difference between books and wine is the ability to digitally store books that really aren't worth paying to keep in hard copy storage.


Companies that used to pay the medical insurance for Workers Comp that covers employee injuries on the job are using the ACA to shift those insurance costs to taxpayers ---
"The Demolition of Workers’ Comp:  Over the past decade, states have slashed workers’ compensation benefits, denying injured workers help when they need it most and shifting the costs of workplace accidents to taxpayers," by Michael Grabell, ProPublica and NPR, March 4, 2015 ---
http://www.propublica.org/article/the-demolition-of-workers-compensation


Distance Education:  Stanford Center for Professional Development
Stanford University was probably the first prestigious university to offer an online masters degree in engineering in a video program called ADEPT. That has since been replaced by an expanded online program in professional development that offers certificates or full masters of science degrees in selected programs, especially engineering. The program is highly restrictive in that employers must be members of Stanford's Corporate Education Graduate Program. For example, to earn a masters of science degree the requirements are as follows:

For details go to
http://scpd.stanford.edu/home

I don't think the Stanford Graduate School of Business has anything comparable to this online professional development program. Most other top universities in the USA now have selected online certificate and degree programs offered in their extension programs. Go to a university of interest and search for "extension." It's still rare to find an online doctoral program at a top university. For-profit universities offer more online doctoral programs, but these tend not to be accepted very well for employment in the Academy. In fact it may be better to not mention such doctoral degrees when seeking employment in the Academy.

Bob Jensen's threads on fee-based education and training alternatives ---
http://faculty.trinity.edu/rjensen/CrossBorder.htm


"Apple Pay Stung by Low-Tech Fraudsters:  Transactions involved credit-card data stolen in retailer breaches," by Robin Sidel and Daisuke Wakabayashi, The Wall Street Journal, March 5, 2015 ---
http://www.wsj.com/articles/apple-pay-stung-bylow-techfraudsters-1425603036?tesla=y


How to Mislead With Statistics
EY best accountancy firm to work for
Economia, February 27, 2015 ---
http://economia.icaew.com/news/february-2015/ey-best-accountancy-firm-to-work-for

The Sunday Times has named EY as one of the top 25 best big companies to work for in 2015 - See more at: http://economia.icaew.com/news/february-2015/ey-best-accountancy-firm-to-work-for#sthash.qXUG0Zof.dpuf

Jensen Comment
I always warned my students to be skeptical of national rankings of employers. The main problem is that work life in local offices of big firms can be highly varied. In San Antonio, for example, virtually all Big Four CPA firm offices are relatively small and are usually dependent upon a relatively small number of  clients. The addition or loss of a client may impact the office considerably.

In comparison the Dallas and Houston offices of these same firms are enormous with many enormous clients. The offices are more shock proof in terms of additions to or losses from the client base.

Decisions about where to work should perhaps be more influenced by the big office versus small office dichotomy than the multinational Firm A versus multinational Firm B dichotomy. For example, for a graduate who is really interested in becoming an expert on some technical area of accounting such as insurance, leasing, or derivatives the San Antonio office is not the place to choose relative to offices in Hartford (for insurance), Chicago (for leasing), or Houston or NYC (for derivatives). San Antonio, however, is a good place to consider for opportunities to work with Latin American clients.

When it comes to working in foreign offices there are even more things to consider.


"Rules and Resources for ACA Due Diligence," by Gerard Schreiber Jr., AICPA Insights, February 27, 2015 ---
http://blog.aicpa.org/2015/02/rules-and-resources-for-aca-due-diligence.html#sthash.0C3AuUPO.OSPYDCcd.dpbs

The filing season is upon us and the question practitioners are asking themselves is “What due diligence steps are necessary for getting Affordable Care Act information from clients?”

The ACA provides a new challenge to practitioners in preparing 2014 returns, which will require more due diligence and effort to comply with these new rules.

Continued in article


Jensen Tax Question
Can the free-file software handle "special tax forms related to their health-care coverage?"

"H&R Block Helped Shape Obamacare, Now Set For Gigantic Payday." by  Nick Sorrentino, Townhall, February 26, 2015 --- Click Here
http://finance.townhall.com/columnists/nicksorrentino/2015/02/26/hr-block-helped-shape-obamacare-now-set-for-gigantic-payday-n1962430?utm_source=thdaily&utm_medium=email&utm_campaign=nl 

This is just off the top of my head.

And now we hear that H&R Block is poised to cash in big time (on its lobbying efforts for Obamacare) thanks to Obamacare. That’s awesome. Just what we need. Another corporate interest which will get in the way of simplifying the tax code.

(From The Daily Caller)

H&R Block’s decision to seek windfall profits from the Obamacare law also has riled some of its competitors, which are instead providing free help to low-income enrollees in filling out the complex tax forms.

Ryan Ellis, the tax policy director at Americans for Tax Reform and a former H&R Block senior preparer told TheDC that the company hopes to profit from the plight of Obamacare enrollees and those without health insurance who, for the first time, will have to file special tax forms related to their health-care coverage.

Ellis said the Obamacare participants are the “real target audience. It’s an alignment of interest.

Click here for the article.

Jensen Comment
Since a huge percentage of ACA insured have reported incomes low enough to file free using H&R Block or related free-file software I'm not certain that H&R Block stands to gain as much as the above article applies, especially for those insured by ACA exchanges --- Click Here
https://www.taxact.com/registration.asp?new=1&type=0&return_type=STD&product_type=1&at=0&l=v1o1w2x2y2z1&sc=1404263901048c&kw=sitelink-File Now Free-Taxact&ad=0&dev=c&utm_medium=cpc&src=google&gclid=CI3d1-Dt_8MCFWQV7Aod3RwAvA&mpch=ads&utm_source=google&utm_campaign=1404263901048c&utm_term=sitelink-File Now Free-Taxact

There are also software options for free filing at any income level, but these do not apply to complicated returns.

11 Options for Filing Tax Returns for Free (if joint income is less than $57,000 or your single-taxpayer income is less than $31,0-00)) ---
http://www.foxbusiness.com/personal-finance/2013/02/07/11-options-for-filing-tax-returns-for-free/

Jensen Tax Question
Can the free-file software handle "special tax forms related to their health-care coverage?"


Before reading the tidbits below you may want to watch a video on the Scenarios of Higher Education for Year 2020 ---
http://www.youtube.com/watch?v=5gU3FjxY2uQ
The above great video, among other things, discusses how "badges" of academic education and training accomplishment may become more important in the job market than tradition transcript credits awarded by colleges. Universities may teach the courses (such as free MOOCs) whereas private sector companies may award the "badges" or "credits" or "certificates." The new term for such awards is a
"microcredential."

Competency-Based Learning --- http://faculty.trinity.edu/rjensen/Assess.htm#ConceptKnowledge

"If B.A.’s Can’t Lead Graduates to Jobs, Can Badges Do the Trick?" by Goldie Blumenstyk, Chronicle of Higher Education, March 2, 2015 ---
http://chronicle.com/article/If-BA-s-Can-t-Lead/228073/?cid=at&utm_source=at&utm_medium=en

Employers say they are sick of encountering new college graduates who lack job skills. And colleges are sick of hearing that their young alumni aren’t employable.

Could a new experiment to design employer-approved "badges" leave everyone a little less frustrated?

Employers and a diverse set of more than a half-dozen universities in the Washington area are about to find out, through a project that they hope will become a national model for workplace badges.

The effort builds on the burgeoning national movement for badges and other forms of "micro­credentials." It also pricks at much broader questions about the purpose and value of a college degree in an era when nearly nine out of 10 students say their top reason for going to college is to get a good job.

The "21st Century Skills Badging Challenge" kicks off with a meeting on Thursday. For the next nine months, teams from the universities, along with employers and outside experts, will try to pinpoint the elements that underlie skills like leadership, effective storytelling, and the entrepreneurial mind-set. They’ll then try to find ways to assess students’ proficiency in those elements and identify outside organizations to validate those skills with badges that carry weight with employers.

The badges are meant to incorporate the traits most sought by employers, often referred to as "the four C’s": critical thinking, communication, creativity, and collaboration.

"We want this to become currency on the job market," says Kathleen deLaski, founder of the Education Design Lab, a nonprofit consulting organization that is coordinating the project.

No organizations have yet been selected or agreed to provide validations. But design-challenge participants say there’s a clear vision: Perhaps an organization like TED issues a badge in storytelling. Or a company like Pixar, or IDEO, the design and consulting firm, offers a badge in creativity.

If those badges gain national acceptance, Ms. deLaski says, they could bring more employment opportunities to students at non-elite colleges, which rarely attract the same attention from recruiters as the Ivies, other selective private colleges, or public flagships. "I’m most excited about it as an access tool," she says.

‘Celebrating’ and ‘Translating’

The very idea of badges may suggest that the college degree itself isn’t so valuable—at least not to employers.

Badge backers prefer a different perspective. They say there’s room for both badges and degrees. And if anything, the changing job market demands both.

Through their diplomas and transcripts, "students try to signal, and they have the means to signal, their academic accomplishments," says Angel Cabrera, president of George Mason University, which is involved in the project. "They just don’t have the same alternative for the other skills that employers say they want."

Nor is the badging effort a step toward vocationalizing the college degree, participants say. As Ms. deLaski puts it: "It’s celebrating what you learn in the academic setting and translating it for the work force."

Yet as she and others acknowledge, badges by themselves won’t necessarily satisfy employers who now think graduates don’t cut it.

That’s clear from how employer organizations that may work on the project regard badges. "We’re presuming that there is an additional skill set that needs to be taught," says Michael Caplin, president of the Tysons Partnership, a Northern Virginia economic-development organization. "It’s not just a packaging issue."

In other words, while a move toward badges could require colleges to rethink what they teach, it would certainly cause them to re-examine how they teach it. At least some university partners in the badging venture say they’re on board with that.

"Some of what we should be doing is reimagining some disciplinary content," says Randall Bass, vice provost for education at Georgetown University, another participant in the project.

Mr. Bass, who also oversees the "Designing the Future(s) of the University" project at Georgetown, says many smart curricular changes that are worth pursuing, no matter what, could also lend themselves to the goals of the badging effort. (At the master’s-degree level, for example, Georgetown has already begun offering a one-credit courses in grant writing.)

"We should make academic work more like work," with team-based approaches, peer learning, and iterative exercises, he says. "People would be ready for the work force as well as getting an engagement with intellectual ideas."

Employers’ gripes about recent college graduates are often hard to pin down. "It depends on who’s doing the whining," Mr. Bass quips. (The critique he does eventually summarize—that employers feel "they’re not getting students who are used to working"—is a common one.)

Where Graduates Fall Short

So one of the first challenges for the badging exercise is to better understand exactly what employers want and whether colleges are able to provide it—or whether they’re already doing so.

After all, notes Mr. Bass, many believe that colleges should produce job-ready graduates simply by teaching students to be agile thinkers who can adapt if their existing careers disappear. "That’s why I think ‘employers complain, dot dot dot,’ needs to be parsed," he says.

Mr. Caplin says his organization plans to poll its members to better understand where they see college graduates as falling short.

Continued in article

MOOCs --- http://en.wikipedia.org/wiki/MOOCs

Coursera --- http://en.wikipedia.org/wiki/Coursera

Coursera /kɔərsˈɛrə/ is a for-profit educational technology company founded by computer science professors Andrew Ng and Daphne Koller from Stanford University that offers massive open online courses (MOOCs). Coursera works with universities to make some of their courses available online, and offers courses in physics, engineering, humanities, medicine, biology, social sciences, mathematics, business, computer science, and other subjects. Coursera has an official mobile app for iOS and Android. As of October 2014, Coursera has 10 million users in 839 courses from 114 institutions.

Continued in article

Jensen Comment
Note that by definition MOOCs are free courses generally served up by prestigious or other highly respected universities that usually serve up videos of live courses on campus to the world in general.  MOOC leaders in this regard have been MIT, Stanford, Harvard, Penn, and other prestigious universities with tens of billions of dollars invested in endowments that give these wealthy universities financial flexibility in developing new ways to serve the public.

When students seek some type of transcript "credits" for MOOCs the "credits" are usually not free since these entail some types of competency hurdles such as examinations or, at a minimum, proof of participation. The "credits" are not usually granted by the universities like Stanford providing the MOOCs. Instead credits, certificates, badges or whatever are provided by private sector companies like Coursera, Udacity, etc.

Sometimes Coursera contracts with a college wanting to give its students credits for taking another university's MOOC such as the now infamous instance when more than half of San Jose State University students in a particular MOOC course did not pass a Coursera-administered final examination.
"What Are MOOCs Good For? Online courses may not be changing colleges as their boosters claimed they would, but they can prove valuable in surprising ways," by Justin Pope, MIT's Technology Review, December 15, 2014 ---
http://www.technologyreview.com/review/533406/what-are-moocs-good-for/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20141215

The following describes how a company, Coursera, long involved with the history of MOOCs, is moving toward non-traditional "credits" or "microcredentials" in a business model that it now envisions for itself as a for-profit company. Also note that MOOCs are still free for participants not seeking any type of microcredential.

And the business model described below probably won't apply to thousands of MOOCs in art, literature, history, etc. It may apply to subsets of business and technology MOOCs, but that alone does not mean the MOOCs are no longer free for students who are not seeking microcredentials. They involve payments for the "microcredentials" awarded for demonstrated competencies. However these will be defined in the future --- not necessarily traditional college transcript credits. A better term might be "badges of competency."  But these will probably be called microcredentials.

Whether or not these newer types of microcredentials are successful depends a great deal on the job market.
If employers begin to rely upon them, in addition to an applicant's traditional college transcript, then Coursera's new business model may take off. This makes it essential that Coursera carefully control the academic standards for their newer types of "credits" or "badges."

 

"Specializations, Specialized," by Carl Straumsheim, Inside Higher Ed, February 12, 2015 ---
https://www.insidehighered.com/news/2015/02/12/coursera-adds-corporate-partners-massive-open-online-course-sequences

Massive open online course providers such as Coursera have long pointed to the benefits of the data collected by the platforms, saying it will help colleges and universities understand how students learn online. Now Coursera’s data is telling the company that learners are particularly interested in business administration and technology courses to boost their career prospects -- and that they want to take MOOCs at their own pace.

As a result, Coursera will this year offer more course sequences, more on-demand content and more partnerships with the private sector.

Asked if Coursera is closer to identifying a business model, CEO Rick Levin said, “I think we have one. I think this is it.”

Since its founding in 2012, Coursera has raised millions of dollars in venture capital while searching for a business model. Many questioned if the company's original premise -- open access to the world's top professors -- could lead to profits, but with the introduction of a verified certificate option, Coursera began to make money in 2013. By that October, the company had earned its first million.

In the latest evolutionary step for its MOOCs, Coursera on Wednesday announced a series of capstone projects developed by its university partners in cooperation with companies such as Instagram, Google and Shazam. The projects will serve as the final challenge for learners enrolled in certain Specializations -- sequences of related courses in topics such as cybersecurity, data mining and entrepreneurship that Coursera introduced last year. (The company initially considered working with Academic Partnerships before both companies created their version of Specializations.)

The announcement is another investment by Coursera in the belief that adult learners, years removed from formal education, are increasingly seeking microcredentials -- bits of knowledge to update or refresh old skills. Based on the results from the past year, Levin said, interest in such credentials is "palpable." He described bundling courses together into Specializations and charging for a certificate as “the most successful of our product introductions." Compared to when the sequences were offered as individual courses, he said, enrollment has “more than doubled” and the share of learners who pay for the certificate has increased “by a factor of two to four.”

“I think people see the value of the credential as even more significant if you take a coherent sequence,” Levin said. “The other measure of effectiveness is manifest in what you’re seeing here: company interest in these longer sequences.”

Specializations generally cost a few hundred dollars to complete, with each individual course in the sequence costing $29 to $49, but Coursera is still searching for the optimal course length. This week, for example, learners in the Fundamentals of Computing Specialization were surprised to find its three courses had been split into six courses, raising the cost of the entire sequence from $196 to $343. Levin called it a glitch, saying learners will pay the price they initially agreed to.

The partnerships are producing some interesting pairings. In the Specialization created by faculty members at the University of California at San Diego, learners will “design new social experiences” in their capstone project, and the best proposals will receive feedback from Michel "Mike" Krieger, cofounder of Instagram. In the Entrepreneurship Specialization out of the University of Maryland at College Park, select learners will receive an opportunity to interview with the accelerator program 500 Startups.

As those examples suggest, the benefits of the companies’ involvement mostly apply to top performers, and some are more hypothetical than others. For example, in a capstone project created by Maryland and Vanderbilt University faculty, learners will develop mobile cloud computing applications for a chance to win tablets provided by Google. “The best apps may be considered to be featured in the Google Play Store,” according to a Coursera press release.

Anne M. Trumbore, director of online learning initiatives at the University of Pennsylvania’s Wharton School, said the capstone projects are an “experiment.” The business school, which will offer a Specialization sequence in business foundations, has partnered with the online marketplace Snapdeal and the music identification app Shazam, two companies either founded or run by Wharton alumni.

“There’s not a sense of certainty about what the students are going to produce or how the companies are going to use it,” Trumbore said. “Snapdeal and Shazam will look at the top projects graded highest by peers and trained staff. What the companies do after that is really up to them. We have no idea. We’re casting this pebble into the pond.”

Regardless of the companies' plans, Trumbore said, the business school will waive the application fee for the top 15 learners in the Specialization and provide scholarship money to those that matriculate by going through that pipeline.

“The data’s great, but the larger incentive for Wharton is to discover who’s out there,” Trumbore said.

Levin suggested the partnering companies may also be able to use the Specializations as a recruitment tool. “From a company point of view, they like the idea of being involved with educators in their fields,” he said. “More specifically, I think some of the companies are actually hoping that by acknowledging high-performing students in a couple of these capstone projects they can spot potential talent in different areas of the world.”

While Coursera rolled out its first Specializations last year, Levin said, it also rewrote the code powering the platform to be able to offer more self-paced, on-demand courses. Its MOOCs had until last fall followed a cohort model, which Levin said could be “frustrating” to learners when they came across an interesting MOOC but were unable to enroll. After Coursera piloted an on-demand delivery method last fall, the total number of such courses has now reached 47. Later this year, there will be “several hundred,” he said.

“Having the courses self-paced means learners have a much higher likelihood of finishing,” Levin said. “The idea is to advantage learners by giving them more flexibility.”

Some MOOC instructors would rather have rigidity than flexibility, however. Levin said some faculty members have expressed skepticism about offering on-demand courses, preferring the tighter schedule of a cohort-based model.

Whether it comes to paid Specializations versus free individual courses or on-demand versus cohort-based course delivery, Levin said, Coursera can support both. “Will we develop more Specializations? Yes. Will we depreciate single courses? No,” he said. “We don’t want to discourage the wider adoption of MOOCs.”

Continued in article

Bob Jensen's threads on MOOCs are at
http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI 


How to Reduce Federal Loan Fraud by Accounting for Risks

A great place to start (at reducing Federal loan fraud) is the accounting for federal lending programs which deliberately understates their risks. Readers may have noticed that every time federal student-loan subsidies expand, liberals like Senator Elizabeth Warren (D., Mass.) hail it as a taxpayer windfall. She gets away with this because administrative expenses and market risk aren’t included in the loan cost estimates.
http://www.wsj.com/articles/ending-federal-loan-fraud-1426030608?tesla=y

Measuring Student Debt and Its Performance PDF --- http://www.newyorkfed.org/research/staff_reports/sr668.pdf

In general student loans are subprime loans

Question
How do you repo a college education?

The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.
"Student-Loan Delinquencies Rise in U.S.," by Jeanna Smialek, Bloomberg News, February 17, 2015 ---
http://www.bloomberg.com/news/articles/2015-02-17/student-loan-delinquencies-rise-in-u-s-as-education-debt-swells?cmpid=BBD021715&alcmpid=

(Bloomberg) -- Student-loan delinquencies increased at the end of 2014, a troubling sign that Americans are failing to keep up with payments as education debt climbs, according to the Federal Reserve Bank of New York.

Data from the New York Fed released Tuesday showed 11.3 percent of student loans were delinquent in the final three months of 2014, up from 11.1 percent in the prior quarter. The share of auto loans at least 90 days overdue also rose, climbing to 3.5 percent from 3.1 percent the prior period, even as fewer credit card and mortgage loan payments were late.

“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student-loan balances and delinquencies is concerning,” Donghoon Lee, research officer at the New York Fed, said in an e-mailed statement. “Student-loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”

The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.

Education loan balances have skyrocketed over the past decade. In the first quarter of 2005, outstanding student debt stood at $363 billion -- about a third of the current level, based on a 2013 New York Fed report.

Delinquency rates for student loans probably understate the actual situation, according to today’s report. About half of the student loans are in deferment, in grace periods or in forbearance, temporarily removing them from the repayment cycle.

Education debt delinquency levels have come down since 2013, when the rate reached 11.8 percent, yet remain elevated from around 6 percent a decade ago, according to the New York Fed. Student loans are the type of debt most likely to be past-due, having surpassed credit-card delinquency rates in 2012.

Jensen Comment
When car and truck owners default a repo guy shows up in the dead of night and takes the vehicle to the bank. How do you repo a college education?


From the CPA Newsletter on March 11, 2015 ---

Uniform accounting for muni bonds urged by SEC official ---
http://www.bondbuyer.com/news/washington-enforcement/gallagher-mandate-gasb-standards-possibly-by-linking-to-tax-exempts-1071238-1.html
Accounting standards should be applied uniformly to municipal bonds to improve transparency, said Daniel Gallagher, a member of the Securities and Exchange Commission. About two-thirds of the 30,000 largest state and local government-bond issuers follow practices recommended by the Governmental Accounting Standards Board, Gallagher said, and there's probably a lower rate of compliance among the remaining 20,000 smaller issuers. Reuters (3/10), The Bond Buyer (free content) (3/10)


Dilbert on Beating the Averages --- http://www.ritholtz.com/blog/2015/02/dilbert-beating-the-average/

Warren Buffett's Golden Anniversary (actually Warren recommends against investing in gold because of insignificant societal economic benefits)
Warren Buffett's 50th letter to Berkshire shareholders
---
http://www.businessinsider.com/warren-buffett-2014-berkshire-hathaway-letter-to-shareholders-2015-2

Berkshire Hathaway just released its 2014 letter to shareholders

First things first, Berkshire Hathaway earned $2,412 per Class A share in the fourth quarter of 2014, missing expectations for earnings of $2,702. 

As of December 31, Berkshire Hathaway's book value per Class A share was $146,186. 

For the first time, Berkshire included the historical stock price in this year's annual letter.

And while Buffett said that the intrinsic value of the company and the price of the shares isn't always exact — in fact that relationship used to be closer than it is today — Buffett and his partner Charlie Munger believe the increase the share price and the increase and intrinsic value is roughly equal.

That increase over the last 50 years? 1,826,163%

Buffett said that Berkshire's "Powerhouse Five" — the company's largest non-insurance businesses — earned $12.4 billion pre-tax, up from $1.6 billion in 2013. These businesses include, Berkshire Hathaway Energy (formerly MidAmerican Energy), BNSF, IMC (I’ve called it Iscar in the past), Lubrizol and Marmon. If the US economy continues to improve in 2015, Buffett expects earnings for these companies will improve as well. 

BNSF's results, however, was the major spot of bad news for the company in 2014, and the company plans to spend $6 billion on plant and equipment in 2015, which Buffett says is nearly 50% more than any other railroad has spent in a single year. "A truly extraordinary amount," Buffett wrote. 

In all, Berkshire Hathaway's subsidiaries spent $15 billion on plants and equipment in 2015, with 90% of that money spent in the US. 

Berkshire Hathaway also completed its acquisition of Van Tuyl Automotive, a group of 78 auto dealerships with annual sales of $9 billion. With this deal, Buffett said, "we are now 'car guys.'"

And the company is clearly open to more acquisitions. 

Buffett wrote: "With the acquisition of Van Tuyl, Berkshire now owns 9 1/2 companies that would be listed on the Fortune 500 were they independent (Heinz is the 1/2). That leaves 490 1/2 fish in the sea. Our lines are out."


Read more:
http://www.businessinsider.com/warren-buffett-2014-berkshire-hathaway-letter-to-shareholders-2015-2#ixzz3T2vnzQLg
 

The 5 Greatest Letters Warren Buffett Has Ever Written ---
http://www.businessinsider.com/the-top-5-warren-buffett-letters-2013-3#ixzz3T2yxicav

Warren Buffett: 'The mother lode of opportunities runs through America' ---
http://www.businessinsider.com/warren-buffett-on-america-2015-2#ixzz3T2wkT0Tn
My apologies for posting something patriotic!


Harvard Business School hopes to fundamentally change online education with its new $1,500 pre-MBA program (only three non-credit courses for openers)

Wharton School of the University of Pennsylvania --- http://en.wikipedia.org/wiki/Wharton_School_of_the_University_of_Pennsylvania

Harvard Business School --- http://en.wikipedia.org/wiki/Harvard_Business_School

Jensen Comment
The Wharton School shocked the world when it commenced to provide free (non-credit) MOOCs of its actual MBA core courses. Aside from curiosity seekers and business faculty around the world wondering how the prestigious Wharton School teaches its core courses, many of the students taking these MOOCs are prospective MBA students who want to get an edge before entering MBA programs of their choice ---
http://knowledge.wharton.upenn.edu/article/moocs-upend-traditional-business-education/

Although Harvard provides hundreds of MOOCs in various disciplines, the Harvard Business School has not been providing MOOCs. Now the HBS is proposing a pre-MBA distance education program with a relatively low fee that may also shake up the MBA world. Since it is not free and has admission standards it cannot be called a MOOC.

"Harvard Business School hopes to fundamentally change online education with its new $1,500 pre-MBA program," by Richard Feloni, Business Insider, February 27, 2015 ---
http://www.businessinsider.com/harvard-business-school-hbx-1500-online-program-2015-2

This week, Harvard Business School launched an innovative new online education program to the public that it thinks is so far ahead of free online courses that it's worthy of a $1,500 price tag.

The 11-week pre-MBA program called CORe accepts about 500 students and is taught in the school's signature case-study method. The first official session started on Feb. 25, and applications are open for spring and summer sessions.

CORe is the flagship offering from HBS's new digital platform, HBX, which aims to become a full-fledged branch of the school rather than a place to dump video recordings of classroom lectures.

CORe is made up of three courses — economics for managers, business analytics, and financial accounting — and primarily targets young professionals with liberal arts backgrounds who aspire to rise to management or are considering getting an MBA.

Students who pass the program receive a certificate that carries the weight of one from HBS's executive education program.

HBX chair Bharat Anand tells Business Insider that most online course offerings are still in their infancy, where long video lectures posted alongside multiple choice questions is the norm.

Conversely, HBX CORe is built on a proprietary platform that uses the case-study technique that distinguishes HBS. "This has some very interesting and exciting potential for education," Anand says.

It started as a way to find an online tool to address the "non trivial" 20% to 30% of students accepted to HBS's MBA program who lacked the necessary background in "the language of business": accounting, economics, and data analysis. These students always had access to a two-week primer before matriculating in the fall, but Anand says the short time was insufficient for achieving a thorough understanding, and traveling to HBS's campus before the school year officially starts could be an inconvenience for many students.


Read more: http://www.businessinsider.com/harvard-business-school-hbx-1500-online-program-2015-2#ixzz3T3D8uxau

Jensen Comment
The Wharton set of free MOOCs will probably be a better choice for students wanting to learn a wider spectrum of business knowledge that includes things like marketing and finance that Harvard's pre-MBA program will not offer, at least not initially.

But there are advantages of Harvard's pre-MBA distance education program relative to MOOCs. Firstly, there's the prestige of being one of only 500 admitted to the program. Secondly, there will be more student-to-student learning interactions in Harvard's fee-based program. Unlike the HBS MBA program itself I doubt if there are writing assignments and examinations that are graded by faculty.

Given the low price and limited enrollments, I suspect that this pre-MBA program is not (at least not yet) intended to be a cash cow program relative to the massive cash cow MBA program and Executive MBA programs at the HBS.

"18 Free Online Business Courses That Will Boost Your Career," by John A. Byrne, Business Insider, December 18, 2014 ---
http://www.businessinsider.com/best-free-online-business-courses-in-january-2014-12

. . .

To learn more about these courses — and register for them — click on the links below.

Gamification / Wharton / January 26

Globalization of Business Enterprise / IESE / January 19

Entrepreneurship 101 and Entrepreneurship 102 / MIT / January 9

ContractsX: From Trust to Promise to Contract / Harvard / January 8

Technology Entrepreneurship / Stanford / January 6

Asset Pricing – Part One / University of Chicago / January 18

Innovation and Commercialization / MIT / January 13

Grow To Greatness: Smart Growth For Private Businesses – Part II / University of Virginia / January 12

Financial Analysis of Entrepreneurial Ideas / Babson College / January or February

Time to Reorganize! Understand Organizations, Act, and Build a Meaningful World / HEC Paris / January 13

Game Theory II: Advanced Applications / Stanford / January 11

U.Lab: Transforming Business, Society, and Self / MIT / January 7

Make An Impact: Sustainability for Professionals / University of Bath / January 12

Managing People: Engaging Your Workforce / University of Reading / January 12

Decision Making in a Complex and Uncertain World / University of Groningen / January 19

Project Management for Business Professionals / January 26

Subsistence Marketplaces / University of Illinois / January 26

DQ 101: Introduction to Decision Quality / Strategic Decisions Group / January 15

More from John A. Byrne:

This article originally appeared at LinkedIn. Copyright 2014. Follow LinkedIn on Twitter.

Read more: https://www.linkedin.com/pulse/best-mooc-courses-business-john-a.-byrne#ixzz3MLx1WEeQ

Most MOOCs are college courses that comprise part of the curriculum at a university, usually a leading university. The typical MOOC is the filmed version of a complete  live course on campus where onsite students get credits for taking the course in a campus classroom.

Online MOOC viewers usually watch the videos of an onsite course and may even get together in online learning teams, but viewers typically do not pay for or receive transcript credit unless they take competency examinations that are usually not administered by the MOOC professors. Prestigious universities created EdX and Udacity for purposes of competency testing and granting of transcript credits.

 
Most Webinars are much shorter training modules conducted live that were never intended to provide college course credits. They may be replayed as videos, but viewers can usually ask questions online and interact with the Webinar leaders only when the Webinar was first filmed.

Business firms like KPMG usually provide Webinars. Webinars are not commonly provided by colleges and universities. Typically Webinars are intended for employees, customers, or clients, but these Webinars may be shared freely with college faculty and students worldwide. Organizations like the FASB also conduct Webinars bit do not offer MOOCs. Webinars may also be conducted for continuing education (CEP) credits.

 
Bob Jensen's threads on thousands of MOOC courses and instructions on how to sigh up for (free) MOOCs ---
http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI

 
Contrary to popular belief, the typical MOOC is not an introductory course in a discipline. More commonly a MOOC is an advanced specialty course in a college. For example, MOOCs are available on the writings of great poets but not introductory courses how to write compositions or poems. There are exceptions of course and often the most popular MOOCs are less advanced such as an introductory MOOC in social psychology versus an advanced MOOC on memory and metacognition.

 

Bob Jensen's threads on thousands of free MOOCs from prestigious universities around the world ---
http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Bob Jensen's threads on tens of thousands of fee-based distance education courses around the world ---
http://faculty.trinity.edu/rjensen/CrossBorder.htm


EY:  FASB poised to make significant changes to credit impairment model ---
http://www.ey.com/Publication/vwLUAssetsAL/TothePoint_BB2942_CreditImpairment_12March2015/$FILE/TothePoint_BB2942_CreditImpairment_12March2015.pdf

What you need to know

The FASB substantially completed redeliberations on credit impairment and plans to issue a final standard that would apply to all entities , not just those in financial services.

• A n entity would recognize an allowance for management’s current estimate of lifetime expected credit losses for loans, trade receivables, held - to - maturity debt securities and certain other financial assets measured at amortized cost .

• Today’s other-than-temporary impairment model for available-for- sale debt securities would be modified to require an allowance for credit impairment rather than a direct write-down , among other things .

• Entities would be required to make disclosures about the credit quality of certain financing receivables by year of or origination ( i.e., vintage). This would significantly expand the volume of disclosures.

• The Board will decide on an effective date after the staff prepares a draft of the final standard. We expect the FASB to issue a final standard in the second half of 2015.

EY:  Accounting pronouncements effective for the first quarter of 2015 ---
http://www.ey.com/Publication/vwLUAssetsAL/EffectiveDates_BB2939_12March2015/$FILE/EffectiveDates_BB2939_12March2015.pdf

PwC:  IFRS News ---
http://www.pwc.com/us/en/cfodirect/publications/ifrs-news/march-2015.jhtml?display=/us/en/cfodirect/issues/accounting-reporting&j=731093&e=rjensen@trinity.edu&l=998250_HTML&u=25040986&mid=7002454&jb=0


The Econometric Theory (Historical) Interviews

"The ET Interviews," by David Giles, Econometrics Blog, March 2, 2015 ---
http://davegiles.blogspot.com/2015/03/the-et-interviews.html

 
Right from its inception in 1985, the journal Econometric Theory has featured the "ET Interviews". These are published interviews with key figures who have helped to shape the discipline of econometrics as we know it.

 
Many of these interviews have been conducted by ET Editor, Peter Phillips, but other interviewers ave also participated. This invaluable contribution provides us with a unique "window" on the history of econometrics, and the ET Interviews should be required reading for all of our graduate students.

 
The very first issue of ET included Peter's interview with Denis Sargan - one of the most influential British econometricians of all time, and Peter's Ph.D. supervisor at the LSE. Since then, interviews with 38 other econometricians and statisticians have been added to the collection. These recorded memories will become increasingly valuable with each passing year.

 
The majority of the interview articles can be downloaded freely from Peter's website (although they're not shown as links). In the following list of all of the "ET Interviews" to date, those articles that have to be accessed through the journal site itself are flagged with an asterisk (*):

 
The ET Interviewees

Takeshi Amemiya*

T. W. (Ted) Anderson

A. R. (Rex) Bergstrom

Herman Bierens*

Greogry C. Chow

Manfred Deistler*

Phoebus J. Dhrymes

James Durbin

Robert F. Engle (Nobel Laureate, 2003)

Eric Ghysels*

Arthur S. Goldberger

Christian Gourieroux & Alain Monfort*

Clive W. J. Granger (Nobel Laureate, 2003)

E. J. (Ted) Hannan

Michio Hatanaka

Sir David F. Hendry*

Cheng Hsiao*

Alan T. James

George G. Judge*

Joseph B. (Jay) Kadane

Lawrence R. Klein (Nobel Laureate, 1980)

Jan Kmenta*

G. S. Maddala

Edmmond Malinvaud

Marc L. Nerlove

B. L. S. Prakasa Rao*

C. R. Rao

Olav Reiersol

Peter M. Robinson*

J. D. (Denis) Sargan

Sir J. R. N. (Richard) Stone (Nobel Laureate, 1984)

Katsuto Tanaka*

George C. Tiao

Jan Tinbergen (Inaugural Nobel Laureate, 1969)

James Tobin (Nobel Laureate, 1981)

Herman O. A. Wold

Arnold 
Zellner

Jensen Comment
You can read more about most of the above scholars in Wikipedia.


"Give and Take Chapter 1: Good Returns–The Dangers and Rewards of Giving More Than You Get," by David Albrecht, Skills for Young Professionals Blog, February 26, 2015 ---
https://skillsforyoungprofessionals.wordpress.com/2015/02/25/give-and-take-chapter-1-good-returns-the-dangers-and-rewards-of-giving-more-than-you-get/

Today we start a series of blog posts on Skills for Young Professionals. The focus of this series is the best-selling and provocative book by Adam Grant, Give and Take: Why Helping Others Drives Our Success. We’ll cover one chapter per blog post. For those desiring an overview before embarking on the series, I recommend, How to Read a Book like Adam Grant’s ‘Give and Take,” by Ryan Quinn.

First a word about the author, Adam Grant. I personally don’t know the man. All I know of him can be found on his LinkedIn profile. His B.A. is from Harvard, received in 2003. His M.A. and Ph.D. are from UMichigan, received in 2006. 8.5 years later he has received numerous teaching and research publication awards, received fast promotions to Associate Professor and then Full Professor, and has written a best selling book. His rise has been meteoric.

He classifies a person’s approach to relationships as giver, taker or matcher. Giver and taker are opposites, a matcher is somewhere between. I have no clue as to whether Grant is a giver or taker. From what I can gather from his profile, he might be a giver as a teaching professor (a conclusion based on his receipt of teaching awards), and a taker with regards to his research and publishing efforts (a conclusion based on his exhaustive list of awards received).

A focus on the approach to interactions with other people.

Early on, Grant writes,

“According to conventional wisdom, highly successful people have three things in common: motivation, ability and opportunity. If we want to succeed, we need a combination of hard work, talent and luck. [We should add] a fourth ingredient, one that’s critical but often neglected: Success depends on how we approach our interactions with other people.” (p. 4)

A giver is defined by Grant as “other focused, paying more attention to what other people need from (him/her).” A taker is defined as:

“They like to get more than they give. They tilt reciprocity in their own favor, putting their own interests above others’ needs. Takers believe the world is a competitive, dog-eat-dog place. They feel that to succeed, they need to be better than others. To prove their competence, they self-promote and receive plenty of credit for their efforts.” (p. 4)

Matchers strive

“…. to preserve an equal balance of giving and getting. Matchers operate on the principle of fairness: when they help others, they protect themselves by seeking reciprocity. If you’re a matcher, you believe in tit for tat, and your relationships are governed by equal exchanges of favors.

Hmm. At Christmas time in the United States, it is frequently said that it is better to give than receive. Christians profess belief in the Golden Rule, you should treat others as you would have them treat you. But in the basic human makeup, pride runs amok. We are all self-centered to some degree.

Continued in article


Turbo Tax Insiders Reveal "Dubious Practices" in Their Company (Intuit)

"Do Not Use TurboTax This Tax Season," Newsfeed, February 26, 2015 ---
http://newsfeed.gawker.com/do-not-use-turbotax-this-tax-season-1688222595

. . .

Robert Lee and Shane MacDougall, both former security executives at Intuit, spoke with KrebsOnSecurity.com about the company's dubious practices: Identity thieves have been creating fake accounts in droves to cash in on strangers' legitimate refunds. It's a simple maneuver: plug in someone else's Social Security number and other tax identification, then go through the same TurboTax steps as normal—only they bank the refund deposit, not you:

Lee said he was mystified when Intuit repeatedly refused to adopt some basic policies that would make it more costly and complicated for fraudsters to abuse the company's service for tax refund fraud, such as blocking the re-use of the same Social Security number across a certain number of TurboTax accounts, or preventing the same account from filing more than a small number of tax returns.
 

"If I sign up for an account and file tax refund requests on 100 people who are not me, it's obviously fraud," Lee said in an interview with KrebsOnSecurity. "We found literally millions of accounts that were 100 percent used only for fraud. But management explicitly forbade us from either flagging the accounts as fraudulent, or turning off those accounts."
 

It's a near perfect online scam: with hacked social security numbers and other personally identifying fragments flooding the web, fraudsters need only create a free TurboTax account to siphon away someone else's refund. And because TurboTax allows filers to pay for the price of the software with their refund before they actually receive it, there's no need to submit or falsify a credit card number—it's free money for both Intuit and crooks.

Continued in article

TurboTax is Suspected Since the Other Tax Preparation Software Has Not Yet Been Compromised
"FBI to Probe Fraudulent Tax Filings:   As States Move to Contain Bogus Returns Through TurboTax, Signs Emerge That Fraud May Involve Federal Filings," by Laura Saunders. Liz Moyer in New York, and Devlin Barrett, The Wall Street Journal, February 11, 2015 ---
http://www.wsj.com/articles/fbi-to-probe-fraudulent-tax-filings-1423614826

The Federal Bureau of Investigation has opened a probe to determine whether a computer data breach led to the filing of false tax returns through TurboTax software, according to a person familiar with the case.

The move comes as states try to contain a wave of bogus state tax filings through TurboTax amid signs that the fraud may also involve federal returns, according to some security specialists and taxpayers.

FBI investigators are still working to determine exactly how personal information was obtained to file bogus returns in about 19 states and whether that information may have been stolen from TurboTax or somewhere else, the person said.

TurboTax parent Intuit Inc. says it believes recent instances of fraud didn’t result from a breach of its systems, based on a preliminary examination conducted with the assistance of independent security experts.

“Tax fraud is an industrywide issue and Intuit is actively engaged with federal and state governments, as well as industry associations, to fight fraud,” the company said in a statement. “Intuit has not been notified, nor are we aware, that we are the target of an FBI investigation. We work with law-enforcement agencies, including the FBI as appropriate, on matters such as identity theft.”

Continued in artile

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Young people earn less today than they did in 1989
"Bad News For The Class Of 2008," by Andrew Flowers, Nate Silver's 5:38 Blog, March 2, 2015 ---
http://fivethirtyeight.com/features/bad-news-for-the-class-of-2008/

. . .

But what’s worse, recession millennials like Joe, Richard and their friends are hard-pressed to make up the ground they lost, just because of their unlucky timing. Research from Yale University economist Lisa Kahn shows that when college graduates enter the labor market affects their lifetime earnings. Her 2009 article in Labour Economics studied the timing of college graduates in the early 1980s using the National Longitudinal Survey of Youth. Those who graduated in a bad economic year had lower earnings even 14 to 23 years later. Specifically, for each percentage-point increase in the unemployment rate when graduating from college, there was an average wage loss of 3 to 4 percent per year.

Kahn’s research on graduating in a recession indicates that Joe, Richard and other recent college graduates will feel the effects for decades.

Jensen Comment
Timing is all-important to almost everything in life. When I was on a battleship we played hide and seek games with Russian submarines. It was in those  "peaceful" Cold War years after the hot years in Korea and before the hot years in Viet Nam. Terrorism as we know it today had not been invented.

I got a free ride for five years in the Stanford University accounting doctoral program because the Ford Foundation poured money into colleges of business after the Gordon and Howell Report and the Pearson Report both concluded that business studies in major universities should be upgraded with more Ph.D. faculty and research in the Academy. My timing was perfect by sheer luck! I got funding for full tuition and living expenses and even savings for later years after graduation.,

And what good timing to choose accountancy for my doctoral studies as opposed to anything else I can think of, because those were the years of dire shortages of accounting Ph.D. faculty and soaring demand for accountancy as a career choice by university students. My timing was perfect by sheer luck!

I could go on in life about how so many good things in my life can be attributed to good timing on a serendipitous path.

Years later I even retired at a perfect time. In Year 2006 interest rates were still quite high and it was a perfect time convert all my TIAA-CREF accounts into lifetime annuities. Shortly thereafter came the economic crash followed by the Fed's decision to drive savings interest rates to almost zero. I didn't care personally because I was locked into those high pre-crash rates that may never return in the USA. My timing for retirement was perfect by sheer luck.

My life was and still is very good. I attribute almost all of this to very lucky timing. It was sheer luck! But I like to brag that it was all brains and personality. Yeah Right!

My Glimpse of Heaven ---
http://faculty.trinity.edu/rjensen/max01.htm


"More lawsuits in UNC academic scandal; whistleblower settles with university," by Sara Ganim, CNN, February 25, 2015 ---
http://www.cnn.com/2015/02/25/us/unc-academic-fraud/

Three more athletes who say they were scammed out of an education at the University of North Carolina are now suing over academic fraud, and the whistleblower who exposed the fake-class system has now settled her lawsuit with the university.

Former basketball player Kenya McBee has joined former football player Mike McAdoo's federal class-action lawsuit, claiming the university denied him and thousands of other athletes education when advisers forced him to take classes that never met.

Former basketball player Leah Metcalf, and former football player James Arnold filed a separate but similar class-action lawsuit in state court in North Carolina.

Ken Wainstein, who was hired by the university to act as an independent investigator, revealed in October that academic fraud had taken place at UNC for 18 years, and that UNC officials were wrong when they denied -- for nearly five years -- that anyone in athletics was involved.

Instead it was players, like McAdoo, who were blamed by the university for cheating and punished by the NCAA.

"All of these student-athletes were promised a legitimate UNC education, were implored to trust UNC academic advising, and were then guided into academically bereft courses against their interests," said attorney Jeremi Duru, one of the attorneys representing these athletes.

Earlier this year high-profile attorney Michael Hausfeld filed a class-action suit against UNC and the NCAA over the same scandal. About 3,100 students -- nearly half of them athletes -- who enrolled in the fake classes could easily join these lawsuits.

Mary Willingham, the whistleblower who began revealing details about the sham classes, accused UNC of retaliating against her before she quit last year, and then sued the university to get her job back.

Willingham told CNN that she reached a settlement agreement with the school this week, although it had not yet been approved by a judge. It would compensate her financially but not restore her job as a learning specialist and adviser.

Continued in article

"Former UNC Student-Athletes Detail Fake 'Paper Classes' (for nearly 20 years) In New Lawsuit Against School And NCAA," by Peter Jacobs, Business Insider, January 23, 2015 ---
http://www.businessinsider.com/lawsuit-against-unc-over-paper-classes-2015-1 

Cheated
by Jay M. Smith and Mary Willingham
Potomac, 280 pages, $26.95

Book Review of Cheated
Dark Days in Chapel Hill:  If you ran a college and knew there was substantial money to be had from sports but no requirement to educate athletes, you might cut corners—that’s exactly what the University of North Carolina did for nearly two decades.

Mr. Smith is a history professor at the University of North Carolina, Ms. Willingham was for many years an academic counselor there who brought attention to the scandal by granting interviews to the Raleigh News & Observer. The authors accuse their state’s prestige public campus of “broad dishonesty” and of stocking its teams in football and men’s basketball—the “revenue sports”—with athletes to generate profit, then breaking its promise to educate them. Ms. Willingham resigned last year and later sued the school—a settlement was reached this week—and both authors recount being shunned in Chapel Hill for helping bring the scandal to light, so they may have an ax to grind. At times, their account flirts with a tone of “if only they’d listened to me.” Nonetheless “Cheated” sounds an important call for reform.

Details of the scheme confirm the worst fears about “student athletes,” at least as regards football and men’s basketball. (Other men’s and all women’s collegiate sports generally have good academic reputations.) Some Tar Heels men’s basketball players, Ms. Willingham contends, read at a third-grade level. (A university official last year dismissed her research as “a travesty.”) As a student at Chapel Hill, Green Bay Packers star Julius Peppers failed real courses but got B’s in what were known as “paper classes,” barely supervised independent-study courses that required only a single research paper. (Mr. Peppers claims that he “earned every grade” he got at UNC.) “Cheated” reports that Rashad McCants, key to the Tar Heels’ 2005 March Madness title, “saw his GPA rise significantly—he even made the dean’s list—after a semester in which he had done no academic work.”

Like many large universities, Chapel Hill has a committee that grants admission waivers to top sports recruits. “Cheated” says that the committee admitted players who scored below 400 on the verbal SAT—that’s the 15th percentile, barely north of illiterate—or who were chronically absent from high school except on game days. There is no chance that a student so poorly prepared for college will earn a diploma. All he can do is generate money for the university.

Most of the phony classes described in the report were in the African and Afro-American Studies Department, under Prof. Julius Nyang’oro and a departmental administrator. The department had multiple subject codes for its courses, including AFRI, AFAM and SWAH (for Swahili). This allowed transcripts to appear to satisfy Chapel Hill’s distribution requirement, even if most of an athlete’s “classes” were within the same department. Mr. Nyang’oro resigned in 2012 and was eventually indicted for fraud, accused of accepting pay for “teaching” that was imaginary. Charges were dropped when he agreed to assist investigators.

“Cheated” details how Mr. Nyang’oro liked to hang around with athletes: He was even invited to serve as a “guest coach” for the football team. Tutors and academic-support staffers also enjoyed friendly access to the jocks. At football-factory and basketball-power programs, teachers and tutors who avert their eyes from grade fixing may be rewarded with courtside seats and sideline passes.

The authors and the report agree that Mr. Nyang’oro and the administrator perceived that their role was partly to make academic problems go away so that stars could tape their ankles. University of North Carolina officials did not want to know how athletes who had barely bested chance on their SATs were suddenly pulling A’s at a selective college. “Cheated” recounts two instances when staffers told superiors that football or men’s basketball stars handed in plagiarized work. The university took swift, decisive action, the authors write: It punished those who made the reports.

Last year, according to Education Department data, UNC–Chapel Hill cleared $30 million in profit on football and men’s basketball, a number that does not include whatever part of the $297 million in gifts and grants received by the school last year was prompted by athletics, or $130 million in assets held by the athletic foundation affiliated with the college. Some of the gain is expended on sports that lose money, but football and men’s basketball are still profit centers. At a prestige university, the African-American studies department became a mechanism to exploit African-Americans. Players may as well have been picking cotton.

Across the big-college landscape, around $3 billion annually flows from networks to schools in rights fees for national TV broadcasts of football and men’s basketball. Ticket sales and local marketing add to the total. Meanwhile, the NCAA almost never sanctions colleges that don’t educate scholarship athletes.

Coaches and administrators make out well themselves even if their players don’t get educations. Tar Heels men’s basketball coach Roy Williams and football coach Larry Fedora each earn $1.8 million per year, according to the USA Today NCAA salary database. Speaking and endorsement fees for coaches rise with victory totals. Athletic director Lawrence Cunningham draws $565,000 annually, plus bonuses for wins.

Perhaps the reader is thinking: Why this worry about diplomas? Don’t big-college athletes go on to wealth in the pros? Surely starry-eyed teens with Greek-god physiques arriving at the University of North Carolina, or at any powerhouse program, believe they’re headed for professional glory in prime time.

Yet most scholarship players never receive a pro paycheck. “Cheated” reports that the Chapel Hill swindle went into full swing in 2003, when the school was trying to rebuild its basketball reputation. Since that year, 54 Tar Heels have been drafted by the NFL or NBA. That’s less than a fifth of University of North Carolina football and men’s basketball scholarship holders during the period. And Chapel Hill does better than most: Broadly across NCAA football and men’s basketball, only about 2% of athletic-scholarship recipients are drafted. Because a bachelor’s degree adds about $1 million to lifetime earnings, the diploma is the potential economic reward for the overwhelming majority of college athletes.

Of course, athletes have only themselves to blame for not taking their studies seriously. But many are encouraged by coaches to believe pipe dreams about the pros, to focus all their effort on winning so the coach gets his victory bonus. By the time NCAA athletes realize they’ve been duped, their scholarships are exhausted. Used up and thrown away, they are easily replaced by the next batch of starry-eyed teens who believe their names will be called on draft day.

After the Chapel Hill scandal went public, the school commissioned a flurry of reports, the two most prominent of which appeared to tell all but were at heart whitewashes. The first, overseen by former North Carolina Gov. Jim Martin, in 2012 declared “with confidence” that the Tar Heels athletic department knew nothing, nothing: “This was not an athletic scandal,” the report stated. “Sadly, it was clearly an academic scandal; but an isolated one.” Mr. Smith and Ms. Willingham write that in “an amazing display of evasiveness and dishonesty,” Chapel Hill chancellor Holden Thorp pretended that the Martin report concluded the matter. Later Mr. Thorp resigned and floated away to the provost’s post at Washington University in St. Louis. The best-case analysis of Mr. Thorp is that he was hopelessly incompetent; explanations go downhill from there. Yet he paid little professional price. If an NCAA athlete commits a petty violation, he can be thrown out of school. University leaders know that if their schools are caught systematically cheating, a wrist slap will be their fate.

The second report, conducted by a law firm and released in 2014, revealed that the first report was a fairy tale. Though Mr. Thorp denied knowing about the “paper classes,” it concluded that he knew Mr. Nyang’oro’s department “issued higher grades than most other departments and was popular among student-athletes.” Why wasn’t this a red flag? But this document, too, largely exonerated those who commissioned it. Thousands of students got A’s in fake classes. Yet “the higher levels of the university” were guilty only of “a loose, decentralized approach to management” that prevented “meaningful oversight,” even though the existence of “easy-grading classes with little rigor” was widely known.

The second report attached no blame to basketball coach Williams, the most marketable figure in Chapel Hill athletics, reporting his insistence that he “constantly preaches that [the] number one responsibility [of] coaches and counselors is to make sure their players get a good education.” The men’s basketball program has seven coaches for a roster that averages 16—the kind of instructor-to-student ratio normally found only in doctoral programs. Yet we’re asked to believe there’s no way the coaches could have noticed that many players never seemed to need to be in class. Mr. Williams should have been fired for presiding over an institutionally corrupt program. Instead he was given a pass.

Cheating may have gone over the top at Chapel Hill, but in collegiate sports, institutional corruption is a norm. The NCAA works assiduously to change the subject from football and men’s basketball graduation rates, a straightforward measure that anyone can understand. Instead it offers Academic Progress Rate, a hocus-pocus metric seemingly designed to be incomprehensible.

Currently the overall APR of big-college sports is 976 out of 1000. That sounds as if everyone’s nearly perfect. But on this scale, perfection is achieved if all players have at least a 2.0 GPA. Since the average GPA at public universities is 3.0, what the NCAA touts as “academic progress” may equate to significantly below-average outcomes in the classroom.

But the APR shifts the spotlight from actual grades. Last fall, Louisville announced to fanfare that football coach Bobby Petrino will receive a $500,000 bonus for his players’ academic performance. Sound enlightened? The bonus is triggered by the team hitting a 935 APR. Since the average for NCAA football programs is 951, academic excellence at Louisville is now defined down to below average.

Cynicism regarding athletics and education pervades the big-college system. The networks that are “broadcast partners” (their term) with the NCAA—ABC, CBS, ESPN, Fox, NBC and Turner—have a financial stake in college sports income and so steer clear of issues like grades and graduation rates.

Nobody much seems to care so long as money flows. Steven Spielberg is a member of the board of trustees at USC, where the graduation rate for African-American men’s basketball players is 25% and 38% for African-American football players. The reason these numbers are terrible isn’t that athletes are departing early for the pros—in the past decade, more than two-thirds of USC football and men’s basketball players were not drafted. The numbers are terrible because players are used for revenue without receiving educations. Mr. Spielberg has made two powerful movies depicting the historical exploitation of African-Americans, “The Color Purple” and “Amistad.” Where is his movie about present-day exploitation of African-Americans in college athletics? He need only look out the window at USC. Or he could buy the rights to “Cheated.”

Continued in article

Bob Jensen's threads on the UNC scandal and the many, many other athletics cheating scandals at major universities in the USA ---
http://www.cnn.com/2015/02/25/us/unc-academic-fraud/
We're led to believe that they nearly all cheated at one time or another. The UNC scandal was unique in that it entailed fake courses and grade changes for nearly two decades and covered multiple sports and even students who were not into athletics. The sad thing is that many of the principle coaches and faculty who cheated moved on from UNC before the scandal broke and are still thriving unpunished in their careers.

Most of the students now suing UNC were not innocent victims and were knowingly cheaters. They are victims in a larger sense that they were promised an education (such as learning how to read) that was denied them in their years at UNC.

Bob Jensen's threads on cheating ---
http://faculty.trinity.edu/rjensen/Plagiarism.htm


Nation faces almost $8T retirement income shortfall The Pension Rights Center estimates the U.S. retirement income deficit now stands at $7.7 trillion, up from $6.6 trillion five years ago
PlanAdviser.com (3/12)
http://www.planadviser.com/Retirement_Income_Gap_Projected_at_Nearly_Eight_Trillion.aspx


"Debt-Saddled Municipal Budgets Get a Lifeline:  A unanimous Supreme Court held that health benefits for retired workers can be renegotiated or reduced," by Robert C. Pozen And Ronald J. Gilson, The Wall Street Journal, March 1, 2015 ---
http://www.wsj.com/articles/robert-pozen-and-ronald-gilson-debt-saddled-municipal-budgets-get-a-lifeline-1425249172?tesla=y

While underfunded public-employee pensions capture the headlines, health-insurance benefits for retired state and local workers are also a huge problem. But a recent ruling by the Supreme Court may help state and local governments scale back these benefits.

Unlike public pension plans, retiree health benefits aren’t funded in advance; they are typically paid out of current tax revenues, so they compete with other budget priorities like schools and police. This competition will only grow more intense, as unfunded retiree health benefits are close to $1 trillion, according to a recent study in the Journal of Health Economics.

Several cities and states have tried to reduce the scope of retiree health-care services, or to increase the portion of the premiums paid by retired workers going forward. Public unions have frequently sued, claiming the benefits are vested for life—roughly parallel to the legal arguments the unions have made against efforts to curb future pension costs.

In late January, however, the Supreme Court issued an unanimous decision that will increase the chances of local governments winning such lawsuits. While the case involved a private business and its union, the principles should generally apply to public-sector agreements.

M&G Polymers vs. Tackett involved a collective-bargaining agreement that provided certain retirees, along with their surviving spouses and dependents, with a full company contribution toward the cost of their health-care benefits “for the duration of [the] Agreement.” The contract was subject to renegotiation after three years, but the critical legal question was whether the retirement health-care benefits continued even after the agreement expired—in effect whether the intent was to vest these benefits for life.

The union argued that the contract did vest these benefits for life and the Sixth Circuit Court of Appeals agreed. The Supreme Court reversed, noting that to prevail, the plaintiffs, in this case the union, had to supply concrete evidence—“affirmative evidentiary support”—that lifetime vesting of retiree health benefits was what both parties to the agreement intended.

Normally, the explicit terms of a contract are taken to reflect the parties’ intentions; only when a contract’s language is ambiguous does a court look to the parties’ intent. Here the Supreme Court followed a traditional rule of contract law: If a contract is ambiguous, proof requires evidence of what the parties intended, not what a court—in this case the appellate court—might infer from the ambiguous contract.

Two principles in Tackett should be especially relevant to reductions in retiree health-care benefits where the duration of these benefits is often unclear. The court, Justice Clarence Thomas wrote, supported the “traditional principle that courts should not construe ambiguous writings to create lifetime promises.” Similarly, he wrote that the court endorsed the traditional principle that “contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.”

This is where the Supreme Court’s decision is particularly significant for the public sector. There must be explicit proof that a collective-bargaining agreement intended long-term commitments to bind a city or state long past the incumbency of the public officials who signed the agreement.

Today elected officials trade generous retiree benefits in the future for current wages. By doing so, they avoid having to take responsibility for current cutbacks in state and municipal services that would accompany wage increases.

The Supreme Court’s ruling in Tackett means that lifetime benefits cannot be inferred but must be made explicit. As a result, if public officials now attempt to revise the benefits in a current or new collective agreement, unions will doubtless demand that any long-term promises be made explicit. But public officials who make these promises explicit send a strong signal that they are putting potentially enormous burdens on future taxpayers and elected officials. This makes it harder for current officials to make such promises. That is a step forward—not just in interpreting contracts but also in enhancing political accountability.

Mr. Pozen is a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution. Mr. Gilson is a professor of law at Columbia and Stanford law schools.

Bob Jensen's threads on accounting for pensions and post-employment benefits ---
http://faculty.trinity.edu/rjensen/Theory02.htm#Pensions


Return on Investment (ROI) --- http://www.businessinsider.com/nba-highest-salaries-2015-2

How to Mislead With Statistics
Most of the NBA's highest-paid players aren't worth it --- http://www.businessinsider.com/nba-highest-salaries-2015-2#ixzz3T30XleVh

Jensen Comment
The above article does not estimate ROI for these highest-paid players. The problem with both the article and ROI in general is that often factors contributing to financial returns have higher order effects called covariances, non-convexities, or whatever in mathematics. When these are significant in a positive or negative sense they make attributions of performance of a single factor extremely difficult or impossible. For example, when Cleveland brought back LeBron James this year the entire sports world refocused on Cleveland, including advertisers, ticket buyers, other players, etc. Because there are so many higher order positive and negative effects it's impossible to assess a single player's true worth to the team.

It's also impossible to judge the worth of a veteran player for a single season since players like Kobe Bryant had enormous impacts across many seasons.

It's also impossible to judge the value a a player because there are so many unknown opportunity values of alternative investments that might have been made. For example, if Cleveland had decided to not invest in LeBron for this season in favor of one or two of the best rookies who play elsewhere we cannot really be sure how well those rookies would be playing for Cleveland's team since there are so many team factors that affect a single performer. Exhibits A-Z are the many players let go by teams who become stars on other teams.


Institute of Managerial Accountants (IMA) --- http://en.wikipedia.org/wiki/Institute_of_Management_Accountants
Home Page --- http://www.imanet.org/

From the IMA
Conceptual Framework for Managerial Costing

February 2015
http://www.imanet.org/resources-publications/research-studies-and-resources/transforming-the-finance-function/mccf

Full Report --- http://www.imanet.org/PDFs/Public/Thought_Leadership/Transforming_the_Finance_Function/MCCF.pdf

Jensen Comment
I'm still looking for an operational concept of the most important measurement in all of accountancy (net earnings) from the IASB, FASB, or IMA. No luck.

Net earnings and EBITDA cannot be defined since the FASB and IASB elected to give the balance sheet priority over the income statement in financial reporting ---
"The Asset-Liability Approach: Primacy does not mean Priority," by Robert Bloomfield, FASRI Financial Accounting Standards Research Initiative, October 6, 2009 ---
http://www.fasri.net/index.php/2009/10/the-asset-liability-approach-primacy-does-not-mean-priority/

IMA to Endorse Universities Preparing Students for Careers in Management Accounting:  Pennsylvania State University and Washington State University Vancouver Endorsed in Pilot Program ---
http://www.businesswire.com/news/home/20130807005147/en

Jensen Criteria
I was disappointed that the criteria focused mostly on curriculum rather than placement. I would recommend the addition of the proportion of corporate accounting recruiters who visit a campus and the numbers of entry-level job offers to newly-minted accounting graduates in the four-year and five-year programs.

The IMA struggles to keep managerial accounting from dying in accounting programs. But without more entry-level job offers in corporate accounting it;s an uphill battle.

Sue Haka, former AAA President, commenced a thread on the AAA Commons entitled
"Saving Management Accounting in the Academy,"
--- http://commons.aaahq.org/posts/98949b972d
A succession of comments followed.

The latest comment (from James Gong) may be of special interest to some of you.
Ken Merchant is a former faculty member from Harvard University who form many years now has been on the faculty at the University of Southern California.

Here are my two cents. First, on the teaching side, the management accounting textbooks fail to cover new topics or issues. For instance, few textbooks cover real options based capital budgeting, product life cycle management, risk management, and revenue driver analysis. While other disciplines invade management accounting, we need to invade their domains too. About five or six years ago, Ken Merchant had written a few critical comments on Garrison/Noreen textbook for its lack of breadth. Ken's comments are still valid. Second, on the research and publication side, management accounting researchers have disadvantage in getting data and publishing papers compared with financial peers. Again, Ken Merchant has an excellent discussion on this topic at an AAA annual conference.

Bob Jensen's threads on cost and managerial accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#ManagementAccounting


This Has to Happen in All 50 States:  Electric Vehicles Should No Longer Contribute Zero Toward Road Building and Repairs
Oregon To Be First In Nation To Implement Per-Mile Road Tax Program ---
http://www.thetruthaboutcars.com/2015/03/oregon-first-nation-implement-per-mile-road-tax-program/#more-1017994

With EVs and other fuel-efficient vehicles saving consumers money at the pump, Oregon will be the first to issue a per-mile road tax to refill its coffers.

Automotive News reports the state will offer two options to its motorists: pay at the pump, or pay a 1.5-cent rate per mile traversed. The latter will be conducted through a device that plugs into a vehicle’s OBD port, then gathers mileage data to determine how much the motorist will pay in tax.

Right now, the program — set to begin July 1 — will be implemented by the Oregon DOT in partnership with Sanef ITS Technologies America and Intelligent Mechatronic Systems, the latter supplying the aforementioned OBD mileage reader.

Up to 5,000 volunteers will participate in the initial program, which will compare the tax paid at the pump to the miles driven. The results will be turned over to ODOT, which will then determine if a motorist is given a refund or an invoice based on said findings.

Oregon won’t be the only one to undergo a road tax program: over 10 other states are either in the process of passing legislation or conducting trials for such programs.

 


Relative Ethics

"Ethics Quizzes:  Does Context make a difference?" by Jim Martin, MAAW's Blog, March 7, 2015 ---
http://maaw.blogspot.com/2015/03/ethics-quizzes-and-context.html

Jensen Content
When I raised horses in Florida I used to ride for miles into pine woods across the road where my neighbor owned tens of thousands of acres clear into Georgia. I used to daydream about what I would do if I found a drug dealer's stash of cash deep in the woods, possibly where dealers transferred drugs for cash.  I wondered whether the fact that the cash belonged to a drug dealer made it more ethical to keep the cash.

My daydreams were never put to a test, because I never found a stash of cash. That's probably a good thing, because a mean dealer might've traced the horse tracks back to my pasture.

March 9, 2015 reply from Denny Beresford

This reminds me of a real life experience that I used a few times in the classroom. I stopped for a few items on the way home from work at a convenience store and when getting out of my car I looked down and saw a $50 bill sitting on the ground. I picked it up and went into the store thinking, should I ask in a loud voice, “did anyone in here drop a $50 bill in the parking lot?” I decided that would be a self- fulfilling prophecy and passed on that approach. Then I thought, perhaps I should leave it with the clerk in case someone who really needed it came back later and asked if someone had turned it in. But I figured that if I gave it to the clerk that was the last I would ever see of if!

My “ethical solution” was to wander around the store (a pretty small one) for an extra ten minutes or so and try to listen in to see if someone had returned to the store to claim the missing $50 bill. No one did during that time so I pocked the bill and went home. I still felt a little guilty although at the same time I thought that anyone carrying $50 bills couldn’t be that hard up so perhaps I shouldn’t feel too bad.

When I’ve discussed this with students most of the time they’ve thought I was crazy to be the least concerned. They thought I should have just pocketed the bill in the parking lot and that was that.

Denny

 

 


Contrary to popular opinion, the Texas State Board of Public Accountancy did not commence with the publication of George Orwell's Book "1984" in 1949 ---
http://en.wikipedia.org/wiki/Nineteen_Eighty-Four

History of the Texas State Board of Public Accountancy that began in 1915 (100 years ago) ---
http://www.tsbpa.state.tx.us/pdffiles/TSBPA_Act_History.pdf
Over the years the TSBPA has been one of the most restrictive state boards in terms of requirements to become a CPA and the requirements for a license to practice. It's also one of the most interfering state boards in terms of dictating content and pedagogy of accountancy courses in Texas institutions of higher learning.

For example, as Chuck Pier recently pointed out on the AECM. the TSBPA will not approve taking of the CPA examination in Texas unless about half of the required accounitng courses are taken face-to-face. This may be the least-friendly of all 50 state boards of accountancy towards distance education. It may also be the reason that Texas universities are the most behind in terms of innovative online education programs in accountancy.

Actually the Texas universities don't seem to mind because this drives out the online providers of accounting degrees and forces students with out-of-state online degrees to take courses in Texas universities such as transfers from out of state into the big accounting firms in Dallas, Houston, and San Antonio. It's one big and happy anti-distance education oligopoly.

When I was at Trinity University in Texas I did not practice as a CPA and did not do things as maintain CPE credits or anything else needed to maintain a Texas CPA license. The TSBPA at one time wanted me to take away the letters CPA on my resume and surrender my CPA Certificate into the TSBPA. It took some doing, but I finally convinced the TSBPA that it did not have jurisdiction to make me turn in my Colorado CPA Certificate or to remove the letters CPA from my resume as long as I did not practice as a CPA in Texas. Orwell's Big Brother lost this time.


Accountics Scientists Should Take Note
Alan Alda Uses Improv to Teach Scientists How to Communicate Their Ideas
---
http://www.openculture.com/2015/03/alan-alda-uses-improv-to-teach-scientists-how-to-communicate-their-ideas.html

Jensen Comment
Accountics scientists are very poor communicators of their research. Most of their sessions at annual meetings only need about ten chairs. One time I was on a panel with Bill Cooper and Yuji Ijiri. Only the panel showed up at the session.

One time when an accountics scientist received a Notable Contributions to the Literature Award at an American Accounting Association, he said that in a previous year when he presented his research at an AAA meeting the only people who showed up came to borrow chairs for the session next door.

Not one accountics scientist has a blog. Nor do they tell about their research on listservs or at Websites.

Some professors of mathematics, statistics, and econometrics have great blogs. Why doesn't a single accountics scientist have a blog?

"Richard Feynman on the Universal Responsibility of Scientists," by Maria Popover, Brain Pickings, March 6, 2013 ---
http://www.brainpickings.org/index.php/2013/03/06/richard-feynman-responsibility-of-scientists/

. . .

It is our responsibility as scientists, knowing the great progress and great value of a satisfactory philosophy of ignorance, the great progress that is the fruit of freedom of thought, to proclaim the value of this freedom, to teach how doubt is not to be feared but welcomed and discussed, and to demand this freedom as our duty to all coming generations.

Jensen Comment
Are accountics scientists living up to their responsibilities?

 

How Accountics Scientists Should Change: 
"Frankly, Scarlett, after I get a hit for my resume in The Accounting Review I just don't give a damn"
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm
One more mission in what's left of my life will be to try to change this
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm


Question
Citizenship for sale
Is there any assurance that a nation that grants tax freedom for citizen purchases will guarantee such tax freedom for a lifetime?

Jensen Comment
I doubt the lifetime assurance.

"Passports for a Price: The Business Showing Poor Countries How to Sell Citizenship Christian Kalin's business is showing poor countries they have at least one resource worth selling: citizenship." by Jason Clenfield, Bloomberg, March 11, 2015 ---
http://www.bloomberg.com/news/articles/2015-03-11/passport-king-christian-kalin-helps-nations-sell-citizenship

In 2006, the tiny Caribbean state of St. Kitts and Nevis was in deep trouble. Its sugar plantations had closed a year earlier, gang violence had given it the dubious distinction of having one of the world’s highest murder rates, and only two governments on Earth were more indebted. A three-hour flight south of Miami, the country of 48,000 people was more or less unknown. Certainly, the two specks of volcanic rock in the middle of the West Indies weren’t of much interest to the world’s rich. St. Kitts and Nevis had run a citizenship-by-investment program—had sold passports—since 1984, but it didn’t get much attention and was never a moneymaker.

Then a Swiss lawyer named Christian Kalin showed up.

Thanks to Kalin, St. Kitts has become the world’s most popular place to buy a passport, offering citizenship for $250,000 with no requirement that applicants ever set foot on the island’s sun-kissed shores. Buyers get visa-free travel to 132 countries, limited disclosure of financial information, and no taxes on income or capital gains. The program became so successful that St. Kitts emerged from the global financial crisis far ahead of its neighbors in the Caribbean. “It’s been a complete transformation,” says Judith Gold, head of an International Monetary Fund mission to the country.

Continued in article

Jensen Comment
This type of tax dodge is no assurance of tax avoidance or deferral for non-residents of St. Kitts. Even residents of St. Kitts have to be cautious about where they invest there money offshore.


Canada
"Deloitte sued for $384 million in lawyer class action," by Jillian Kestler-D’Amours, The Star, March 14, 2015 ---
http://www.thestar.com/news/gta/2015/03/13/deloitte-sued-for-384-million-in-lawyer-class-action.html?referrer=https%3A%2F%2Fnews.google.com%2F

A Toronto lawyer has launched a $384-million class-action lawsuit against Deloitte LLP, alleging that hundreds of lawyers were misclassified as independent contractors, depriving them of employee benefits.

The lawsuit claims that as independent contractors, the lawyers missed out on Employment Standards Act entitlements such as vacation or overtime pay, and the company was not required to provide termination notice.

Lawyer Shireen Sondhi has accused Deloitte and placement agency Procom Consultants Group Ltd. of misclassifying employees working in Deloitte’s document review branch, which formerly operated as ATD Legal Services Professional Corp.

Document review is the process of classifying documents relevant to a legal case.

Sondhi said she began doing contract work with ATD in November 2013, shortly before it was bought by Deloitte in January 2014.

The claim states Sondhi accepted work on a project at Deloitte on Jan. 15 that was expected to run for two to three weeks at an hourly rate of $47.

She alleges Deloitte unilaterally decided to administer the contract through Procom, which then deducted wages for administrative services, placement and Employment Insurance and Canadian Pension Plan contributions.

She said she was uncomfortable with these changes, and raised her concerns with management. After several back and forth emails, the lawsuit alleges Sondhi was told that if she didn’t accept the revised contract — at about $43 an hour — it would be terminated.

“I felt like Deloitte was in a power position and they knew it, and they were taking advantage of the document reviewers,” she told the Star.

None of the allegations have been proven in court, and Deloitte has denied them.

“We believe that the claim has no merit and we will vigorously defend the proposed class action. As the matter is now before the courts, it is not our intention to discuss the matter publicly,” Vital Adam, Deloitte’s senior manager of public relations, told the Star in an email.

The lawsuit states the lawyers should have been treated as employees since they worked under supervision in Deloitte’s offices, and the company provided them with computers, set their work schedules and barred them from hiring subcontractors.

The plaintiffs also argue that their duties as document reviewers did not constitute legal services, and therefore they should be covered under the Employment Standards Act.

“They have all the hallmarks of being employees,” said Andrew Monkhouse, a Toronto employment lawyer who filed the claim.

Most of the money being claimed in the lawsuit relates to pay “in lieu of reasonable notice” of termination, and a failure to remove statutory deductions, lost Employment Insurance benefits, and punitive damages, among other things.

“For many young lawyers, saddled with staggering student debt and desperate not to leave the field of law, document review is a last resort,” the statement of claim says. “Deloitte is one of only a few document review companies in Ontario, and for many Class Members, represents their sole source of income.”

The lawsuit was served on Tuesday on behalf of all persons that performed, or are performing, document review or e-discovery services for ATD or Deloitte, and were classified as independent contractors.

A certification motion is pending to determine whether there is a legal basis for a class action, Monkhouse said. If the case is certified, it could eventually include hundreds of people.

“We don’t know how many class members there are exactly, but it is certainly hundreds of lawyers,” he said, adding the case could lead to more class actions related to how workers are classified in other job sectors.

Continued in article

Bob Jensen's threads on Deloitte's legal troubles worldwide ---
http://faculty.trinity.edu/rjensen/Fraud001.htm


"What We Can Learn from Ancient Athens’ Manufacturing Industry:  A former vice president at Boston Consulting Group analyzes an ancient sector and how it parallels changes in today’s economy," by Theodore Kinni, Insights from the Stanford University Graduate School of Business, March 10, 2015 ---
http://www.gsb.stanford.edu/insights/what-we-can-learn-ancient-athens-manufacturing-industry


"Citi never reaps: Making money from a global banking network is as difficult as it is alluring, The Economist, March 5, 2015 ---
http://www.economist.com/news/finance-and-economics/21645811-making-money-global-banking-network-difficult-it-alluring-citi

WILLIAM BRADY (pictured, in the middle) and Howard Sheperd had each spent more than 30 years at National City Bank before becoming its leaders in 1948. But even after all that time, they were not really sure how the sprawling financial conglomerate that would become Citigroup made money. George Moore, who would later rise to chairman, was appointed head of a “New Look Committee” to unravel the mystery. His conclusion: “We have never really known just where we made our net profits, but have generally proceeded on the assumption that we should encourage the growth of all these businesses to the maximum, on the theory that the more they grow the more money we could make.”

The assumption under the current boss, Michael Corbat, is precisely the opposite. But working out how Citigroup makes its money—and therefore which parts of the business are most dispensable—is just as vexing. In total, Mr Corbat reckons 60 businesses have been sold since the crisis. Among them are brokerage arms in America and Japan, a student-loan operation and some credit-card units. The most visible contraction has been in Citi’s consumer business, which is shrinking from 50 countries to 24, and in America, from 14 cities to seven. This week, Citi announced the sale of OneMain Financial, a subsidiary that makes high-interest consumer loans, and a stake in Akbank, a Turkish lender.

In spite of all this restructuring, Citi’s performance remains dismal. Part of the problem is the endless restructuring itself: provisions related to it were $148m in the first quarter of 2013, $75m in the second, $133m in the third, $234m in the fourth, $211m in the first quarter of 2014, $397m in the second, $382m in the third and $655m in the fourth, according to S&P Capital IQ, a financial-data firm. Its return on equity last year was 3.4%. Regulators have frozen its dividend at one cent per share (a yield of less than 0.1%) since the crisis. Even as the share prices of other American banks approach or pass their pre-crisis peaks, Citi’s is down by 90% (see chart). Its market capitalisation is well below its book value, suggesting it would be more valuable if broken up.

On March 11th the Federal Reserve will reveal the results of the second of the two annual “stress tests” it conducts for big banks, which attempt to simulate downturns to make sure that banks have enough capital to withstand them. Citi failed this test in 2012 and in 2014, and as a result has not been allowed to raise its dividend. The first failure prompted the depature of its then chief executive, Vikram Pandit; a third one would probably put an end to Mr Corbat’s tenure.

Continued in article

Stress Test --- http://en.wikipedia.org/wiki/Stress_test_%28financial%29

From the CFO Journal's Morning Ledger on March 12, 2015

All but one of the six largest U.S. banks boosted their dividend payments after clearing the most recent Federal Reserve stress tests, but it wasn’t immediately clear whether the banks would reduce the amount of money the firms return to shareholders overall, the WSJ reportsBank of America Corp., though it failed to win an unqualified approval, did receive a conditional approval to return capital to shareholders after the Fed found “certain weaknesses” in its ability to measure losses and revenue and in other internal controls. BofA must now resubmit its capital plan by Sept. 30, and if the Fed isn’t satisfied, it can freeze its capital distributions.

Citigroup Inc., on the other hand, is raising its dividend for the first time since 2008, a milestone in the bank’s long recovery from the financial crisis. The Fed also approved revised dividend and stock-buyback plans from Goldman Sachs Group Inc. and Morgan Stanley after finding their initial requests would have left them both undercapitalized in a hypothetical severe recession.


From the CFO Journal's Morning Ledger on March 20, 2015

A Look at Potential Issues in Implementing the New Revenue Standard
http://deloitte.wsj.com/cfo/2015/03/20/a-look-at-potential-issues-in-implementing-the-new-revenue-standard/

Several potential issues related to the implementation of the new revenue standard issued jointly by the Financial Accounting Standards Board and the International Accounting Standards Board were discussed at the January 26, 2015, meeting of the joint revenue transition resource group (TRG). Deloitte summarizes several of the meeting’s important topics in its latest “TRG Snapshot.” Continue »

Read more Deloitte Insights »

EY:  Boards d ecide to make more changes to the ir new revenue standard s --- Click Here
http://www.ey.com/Publication/vwLUAssetsAL/TothePoint_BB2948_RevenueRecognition_19March2015/$FILE/TothePoint_BB2948_RevenueRecognition_19March2015.pdf

What you need to know

The FASB and the IASB agreed to amend the transition guidance in their new revenue standards but did not agree on the nature of those amendments .

• The Boards also reached different decisions on whether to amend the guidance on noncash consideration , presentation of sales taxes and collectibility .

• The staffs of both Boards provided updates on their research on how to address concerns about the guidance on principal versus agent considerations.

• Any changes to the standard s would be subject to the due process procedures of each Bo ard, including seeking public comment. T he FASB will decide at a meeting in April whether to propose delaying the effective date of its standard .

Bob Jensen's threads on revenue accounting controversies ---
http://faculty.trinity.edu/rjensen/ecommerce/eitf01.htm 


From EY:  EITF Updates, March 2015 ---
http://www.ey.com/Publication/vwLUAssetsAL/EITFUpdate_BB2951_20March2015/$FILE/EITFUpdate_BB2951_20March2015.pdf


From the CFO Journal's Morning Ledger on March 16, 2015

GE agrees to sell unit for nearly $6.3 billion
Click Here
General Electric Co
. has agreed to sell the consumer-lending business of GE Capital in Australia and New Zealand to an investor group including KKR & Co. and Deutsche Bank AG for about $6.26 billion. GE continues to shed consumer-finance businesses around the world amid investor pressure to focus on industrial operations.


Sort of like those rules on a young teenager that drive the teenager to run away from home
From the CFO Journal's Morning Ledger on March 16, 2015

Tax inversion curb turns tables on U.S
Click Here
A crackdown on “tax inversion” deals has had the effect of prompting a sharp increase in foreign takeovers of American companies, the Financial Times reports. Since the crackdown, there have been $156 billion of inbound cross-border U.S. deals announced, compared with $106 billion in the same period last year and $81 billion a year before that.


From the CFO Journal's Morning Ledger on March 13, 2015

Intel slashes revenue outlook on weak PC demand ---
http://www.wsj.com/articles/intel-cuts-revenue-outlook-1426165693?mod=djemCFO_h
The chipmaker credited the slowdown to economic and currency conditions in Europe and hesitancy on the part of small and medium-size businesses in making new PC purchases.  Analysts say the Europe economy is the primary factor.  PC makers have boosted their prices in Europe sharply to respond to the rapid downward move of the euro relative to the dollar, but those pricing changes hurt PC demand.

Jensen Comment
Teachers of CVP models most likely do not stress the importance of foreign currency translation rate changes on CVP outcome. The Intel example above is a good illustration that can be brought into the classroom.


title:
CVP Analysis:
Can a clever cost accountant save Intel from Attorney General of New York State?

citation:
"N.Y. files antitrust lawsuit against Intel:  Chipmaker used bribes, coercion to get PC makers to shun its rivals, Cuomo says," by Tomoeh Murakami Tse and Cecilia Kang, The Washington Post, November 5, 2009 --- Click Here

brief description:
Question
 Can a clever cost accountant save Intel from Attorney General of New York State?

Jensen Comment
One gray zone in such lawsuits is where the "bribes" in reality are volume discount pricings. Accountants often teach cost-volume-profit decision making with one of the decision variables being how to set prices on the basis of expected sales volumes at each of the various pricing alternatives (that affect contribution margins over variable costs). We seldom, however, bring into the CVP equation the possibility that certain types of discount pricing restrains competition. Also giving a $2 billion "bribe" is not quite the same as setting a lower price per unit that can be justified on the basis of economies of scale in production. A fixed $2 billion bribe falls more into the realm of a "fixed cost." Fixed costs are included in CVP analysis, but they're usually assumed, in our courses, to be legitimate fixed costs and not illegal bribes. It will be interesting to see how Intel (an Dell) presents a defense to this lawsuit. Ken Lay (at Enron) personally paid over a million dollars for an accounting professor from USC to be his expert witness. It did not do any good in Ken's trial where Lay was found guilty.

In the testimony below, defense witnesses for Skilling and Lay (Walter Rush and Jerry Arnold) "attribute Enron's descent into bankruptcy proceedings to a combination of bad publicity and lost market confidence" rather than accounting fraud. This places the Professor Arnold's opinion in conflict with that of Professors Hartgraves and Benston earlier analyses based upon the lengthy Powers Report commissioned by the former Chairman of the Board of Enron ---
http://faculty.trinity.edu/rjensen/FraudEnron.htm

Bob Jensen's fraud updates are at http://faculty.trinity.edu/rjensen/FraudUpdates.htm

 


Tips for Passing a Personal-Finance Stress Test ---
http://blogs.wsj.com/briefly/2015/03/11/5-tips-for-passing-a-personal-finance-stress-test/

Your household finances might be humming along just fine. But would they be able to withstand an unforeseen medical bill or sudden reduction in paid working hours? How about a job loss, furlough or unexpected tax assessment? As the Federal Reserve prepares to announce the results of this year’s stress tests on the nation’s largest banks Wednesday, we offer the following five stress tests for your own finances.

1 Debt-to-Income Ratio

Divide your debts, including credit cards, student-loan and car-loan balances, and your mortgage, by your pretax earnings. That will give you your debt-to-income ratio.

Sheryl Garrett, the founder of the Garrett Planning Network, says a good rule of thumb is to have a personal debt-to-income ratio of less than 28%, not counting mortgages, or household debt-to-household income of less than 36%, including mortgages.

A higher ratio is a warning that you have too much debt relative to your income and you either have to lower your debt or raise your income, or both.

2 Discretionary Expenses

It’s important to know what your discretionary expenses are and how quickly you can cut back on them in times of stress.

Start by sorting all your expenses into three categories: fixed, which are those payments you have to make regardless of circumstances; variable nondiscretionary, which are expenses such as groceries or air-conditioning bills over which you can exercise some level of control; and purely discretionary expenses such as gym memberships and vacations.

Discretionary expenses should make up a greater percentage of your overall expenses than your fixed expenses, says Eleanor Blayney, consumer advocate for the CFP Board in Washington, giving you room to defer, cut back or eliminate.

“Figure out what you could live without or whittle down quickly,” she says. Discretionary Expenses > Fixed Expenses

A good standard is for discretionary expenses to be two thirds of your overall expenses.

3 Emergency Savings

Financial planners tell clients to reserve enough cash in savings or other easily liquidated accounts to cover three to nine months of expenses—with three months being the bare minimum.

This stash will be the first place you turn for help because it is readily available. Getting at it shouldn’t require selling securities or taking an early-withdrawal penalty from a retirement account or certificate of deposit.

The greater your obligations, the more emergency cash you should have squirreled away, planners say. A single mother with a mortgage would want several months if not more than a year of cash to cover expenses, for example. A freshly graduated single person who has no student debt and who is renting an apartment might need only three months’ worth.

The National Foundation for Credit Counseling offers a program called “Sharpen Your Financial Focus” that has free online questionnaires for people to use in figuring out their own plans. 3 to 9 You should have enough cash to cover three to nine months of expenses in case of emergency.

4 Additional Income

Consider your options for generating additional income in a period of stress, says Bruce McClary, a spokesman for the National Foundation for Credit Counseling.

Wages or tips from a second part-time job or proceeds from selling personal possessions could raise enough to float you through a financially strapped period without spending down your emergency savings too quickly.

5 Total Assets

If banks are evaluated by the liquidity and quality of their balance sheets and their ability to weather a run on their deposits, consumers could be evaluated by the liquidity and quality of their assets and how well they could withstand an immediate call by all their creditors, Ms. Blayney says.

Add up your emergency savings, the equity in your home and the balances in your retirement savings accounts to get your total assets. Then divide that number by your monthly expenses to figure out how many months you could live with no investment appreciation and no income until you have completely depleted those assets.

Take two people, each with a net worth of $1 million. The first person has securities and cash accounts, the second has her money tied up in real estate. Which one could pay the bills more quickly with less of a discount to convert assets to cash?

“You need to look at the liquidity of the net worth and the quality of it,” she says.

Corrections & Amplifications

To calculate debt-to-income ratio, divide your debts by pretax earnings. An earlier version of this post incorrectly said the ratio was obtained by dividing pretax earnings by debts.

Jensen Comment
The article should have given more consideration to tax planning. For example, I would give consideration to combining savings liquidity with tax exempt income in a diversified tax exempt mutual fund such as a a low cost fund (with a checkbook) available from Fidelity or Vanguard. Care must be taken, however, to have long-term savings that are better protections against inflation such as CREF accounts.

Real estate is a tricky investment due to property taxes and insurance. If there's sufficient rental to cover these expenses such as in a condo or profitable farm then real estate is more attractive as a long-term investment. For example, I have a friend who kept his condo beside the Dartmouth College campus long after he moved on. He now calls this condo his cash cow.

However, I don't like being a landlord --- which is why I sold my inherited Iowa farm and invested mostly in our home and in a tax exempt mutual fund from Vanguard. However, I'm old now so that inflation is less of a worry in my remaining lifetime.


10 Retailer Chains Closing the Most Stores in 2015 ---
http://247wallst.com/special-report/2015/03/12/10-retailers-closing-the-most-stores/2/


"Illinois Bill Threatens Professors’ Cherished Perk: Tuition Breaks for Their Children," by Peter Schmidt, Chronicle of Higher Education, March 12, 2015 ---
http://chronicle.com/article/Illinois-Bill-Threatens/228437/?cid=at&utm_source=at&utm_medium=en

Illinois lawmakers have put a benefit commonly offered to college employees — tuition breaks for their children — on the chopping block at public universities in response to a big expected cut in state spending on higher education.

A measure pending before the Illinois House of Representatives’ State Government Administration Committee would phase out tuition waivers for public-university employees. Strongly opposed by the universities and unions representing their faculty and staff members, House Bill 403 calls for the repeal of laws that provide a 50-percent tuition waiver to the children of people who have been employed by one or more of the state’s public universities for at least seven years.

Continued in article

Jensen Comment
Many years ago when I was visiting Dartmouth College, a senior accounting professor named Len Morrissey remarked that he could not leave Dartmouth even if he had an opportunity to double his salary (salaries were much, much lower in those years). As I recall he had five sons, and Dartmouth had the most generous tuition deals for employees of any college in the USA. Dartmouth would pay for tuition of any faculty member's child up to the amount of the Dartmouth's very high tuition. And the child could attend any college in the world. I don't know if that benefit still exists at Dartmouth College.

Many private universities modified their plans to tuition exchange plans among only selected partners. When I was at Trinity university many of those partnership plans were dropped, but some of my Trinity colleagues still managed to send their children to Rice University free of charge.


Jensen Comment
When teaching accounting for share buybacks teachers sometimes struggle for giving real world reasons for buybacks. This is a good example of one of the reasons.  This particular reason is quite controversial.

From the CFO Journal's Morning Ledger on March 9, 2015

GM plans share buyback, averting proxy fight
http://www.wsj.com/articles/gm-plans-share-buyback-averting-proxy-fight-1425859605
As soon as Monday, General Motors Co. will disclose plans to return billions of dollars to shareholders, a move that is expected to avoid a potential proxy fight with investor Harry J. Wilson. Mr. Wilson will drop a previous request to join the Detroit auto maker’s board in light of the buyback plan, though GM plans to repurchase shares over time in an amount less than the $8 billion Mr. Wilson previously proposed.

March 9, 2015 reply from Ruth Bender

Interesting.

When I’m teaching buybacks I use a piece from the financial report of Next, the clothing company. I like their policy – and it makes a great pre-class question, to get them to reproduce the graph on p14.

http://www.nextplc.co.uk/investors/reports-and-results/2012.aspx  for the accounts; pages 12/14 .

Regards

Ruth

"GM’s Stock Buyback Is Bad for America and the Company," by William Lazonick Matt Hopkins, Harvard Business Review, March 11, 2015 ---  Click Here
https://hbr.org/2015/03/gms-stock-buyback-is-bad-for-america-and-the-company/?utm_source=newsletter_finance&utm_medium=email&utm_campaign=finance050611&cm_lm=rjensen%40trinity.edu&cm_mmc=email-_-newsletter-_-finance-_-finance050611&referral=00209&cm_ven=spop-email&cm_ite=finance-031215+%281%29

General Motors’ announcement that it will settle a fight with activist shareholders by buying back $5 billion in stock over the coming 21 months is a major loss for American taxpayers and GM’s workers. The investors’ leader, Harry J. Wilson, called the deal a ”win-win outcome.” But the only real wins are a victory for the hedge funds, and a Pyrrhic victory for GM in that it managed to keep Wilson off its board and reduced the size of the buyback from the $8 billion the investors had been demanding.

In 2009, Wilson was part of a Wall Street team that the Obama administration hired to structure the bailout of GM, after the company, once the world’s largest automobile producer, sustained over $88 billion in losses in the previous four years. During the bailout, financial firms, including hedge funds, were nowhere to be found. Instead, U.S. taxpayers put up $49.5 billion in rescue funding, and Canadian taxpayers pitched in another $10.9 billion, allowing GM to emerge from bankruptcy after just 40 days. In 2010 the “New GM” did one of the largest initial public offerings in history, with share sales to the public of $23.1 billion by the U.S. and Canadian governments as well as the United Automobile Workers (UAW) through its Voluntary Employee Beneficiary Association (VEBA) Trust. By the time the U.S. government sold off all of its GM holdings in December 2013, U.S. taxpayers had absorbed a $11.2 billion loss.

The UAW made big sacrifices, allowing GM to reduce labor costs by $11 billion. There were 21,000 layoffs; a wage freeze for current workers; a halved wage of $14 per hour for non-core new hires; elimination of a funding program for unemployed workers; a no-strike agreement until 2015; and the VEBA that shifted UAW retiree healthcare and pension benefits from GM to the UAW, saving the company $3 billion per year. (In early February, a day after she met with Wilson, Barra decided to grant 48,400 UAW workers as much as $2,400 each in extra profit-sharing bonuses that were over and above the amount stipulated in the union contract. But this “Barra bonus” totals only $116 million, a pittance compared with the $5 billion that GM will spend on the buyback.)

While the restructuring certainly helped GM return to profitability (its annual net income averaged $6.7 billion from 2010 through 2013), it would probably still be bankrupt but for the booming Chinese market. In 2013 GM produced 3 million cars in China, or 45% of its global car production; that was up from 1.1 million vehicles in 2008. Indeed, in 2013 GM produced only 12% of its passenger cars and 21% of its motor vehicles in the United States.

Going forward, GM will need all the financial resources it can muster to produce automobiles that buyers in diverse global markets want at prices that they are willing to pay. In an industry characterized by intense global competition and major technological challenges, GM cannot afford to be held hostage by hedge funds in the name of “maximizing shareholder value.”

One of us (Bill Lazonick) has been extremely critical of the kind of buybacks — open-market stock repurchases — that GM has pledged to undertake. Their only purpose is to give manipulative boosts to GM’s stock price. The winners will be public shareholders, including the hedge funds, who stand ready to gain by selling their GM shares. If U.S. corporate history of the past three decades is a guide, the $5 billion in buybacks won’t be the last. The pump-and-dump hedge funds will come back to GM’s buyback well year after year until the cash flow once again runs dry.

GM did $20.4 billion worth of buybacks from 1986 through 2002. If it had saved that money and earned a modest 2.5% on it, the company would have had $35 billion on hand when the financial crisis and Great Recession hit and probably would not have had to file for bankruptcy protection. As Bob Lutz, the veteran auto executive, said recently, stock buybacks are “always a harbinger of the next downturn…in almost all cases, you regret it later.”

So why is GM risking déjà vu all over again? Surely GM CEO Mary Barra understands the deadweight loss that stock buybacks pose for her company. She has been with GM since 1980 when, at the age of 18, she entered General Motors Institute to get an engineering degree. She must know that public shareholders, including the hedge funds, whose only relation to the company is to buy and sell outstanding shares, contribute nothing at all to the creation of high quality, low-cost vehicles. One would hope that Barra’s motivation in caving in to the hedge funds has nothing to do with her $10 million in stock awards waiting to vest.

Continued in article


From the CFO Journal's Morning Ledger on March 9, 2015

Muni bonds headed for a rough patch
http://www.wsj.com/articles/muni-bonds-headed-for-a-rough-patch-1425838695
Turbulence is in store for municipal-bond investors following a record run, as a gathering U.S. economic recovery pushes interest rates higher and issuance grows. The market this year is off to its worst start since 2008, returning 0.14%, including price appreciation and interest payments.

Jensen Comment
If you think interest rates will grow much it's also a good time to buy some ocean front property in Arizona.


Teaching Case:  The "new-look" GE 10-K annual report may be a good illustration for accounting students

From the CFO Journal's Morning Ledger on March 2, 2015

GE’s newly designed 10-K has lots of bells and whistles
http://blogs.wsj.com/cfo/2015/03/02/ges-newly-designed-10k-has-lots-of-bells-and-whistles/?mod=djemCFO_h
On Friday
, General Electric Co. showed investors, 40% of whom are of the mom-and-pop variety, a 10-K with a new look and feel, full of colorful charts and graphics, CFO Journal’s Noelle Knox reports. The radical makeover follows GE’s discovery that only 100 or so people downloaded the 10-K the prior year and only five investors called with questions.

March 3, 2015 reply from Linda Kidwell

Although I'm not seeing much discussion of it in the US, the international accounting folks are paying lots of attention to the Integrated Reporting <IR> Framework. A few American companies have begun implementing this approach - something akin to a balanced scorecard meets financial statements meets CSR. This GE report is clearly guided by the <IR> movement. It's a great illustration, so thank for bringing it to our attention!


From the CFO Journal's Morning Ledger on March 3, 2015

New standards for internal controls took effect late last year, but you wouldn’t know it from the regulatory filings of more than 300 companies, CFO Journal’s Maxwell Murphy reports. Those firms are still using the internal-control guidelines that were written more than two decades ago, and the number of laggards is expected to climb as more companies close their books on 2014 and disclose whether they have made the switch.

For the new standards, the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, added 17 related principles to the original set of five that were released in 1992. The new standards require companies to disclose more details about how they design and test their internal controls, which could range from requiring that two people sign off on purchasing orders to restricting access to sales systems.

“If you don’t have a good business reason for not making the move…that may be indicative” that management hasn’t put enough emphasis on controls, said Chuck Landes, a COSO board member. Has your firm made the switch?

Bob Jensen's threads on internal controls and managerial accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#ManagementAccounting


From the CFO Journal's Morning Ledger on March 3, 2015

GASB finalizes fair value measurement guidance for state and local governments
http://www.accountingtoday.com/news/accounting-news/gasb-finalizes-fair-value-measurement-guidance-state-local-governments-73794-1.html?
“The Governmental Accounting Standards Board has released finalized guidance…primarily applying to investments made by state and local governments,” Accounting Today reported. “Under the new statement, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date,” the report said.

Bob Jensen's threads on fair value accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#FairValue


Color Book Accounting
It's sad that neither the FASB nor the IASB can conceptualize "true cost" and "real value." But then most important things in life cannot be operationally conceptualized.  We saving those tasks for smart robots.

Short-term value changers can be very misleading about long-term value
We have a 6'7" grandson who was photographed and reported up in a local (California) newspaper nearly every month for his outstanding performances in both high school football and basketball. He was recruited by major universities (e.g., Cal and Oregon) for both sports but had to drop out due to a heart valve weakness. His younger brother was even taller in every grade. We all predicted his "value" in athletics would exceed that of his brother. We all drooled over the possible full-ride scholarships. Now he is a 6"8" freshman in high school. He's into the academics and could care less about sports. So much for predicting long-term "value" based upon short term value changers like growth spurts in childhood. So much for using transitory short-term price fluctuations to predict long-term value.

“What the SEC requires isn’t thorough enough to get to the numbers investors really want,” said Mike Kelly, an analyst with Global Hunter Securities in Houston. “What is the true cost of producing a barrel of oil? And what is the real value of the assets?”
"The Price of Oil Is About to Blow a Hole in Corporate Accounting," by Asjylyn Loder, Bloomberg, March 4, 2015 ---
http://www.bloomberg.com/news/articles/2015-03-04/oil-at-95-a-barrel-discovered-in-sec-rules-on-reserves?cmpid=BBD030415&alcmpid=

The U.S. Securities and Exchange Commission requires drillers to calculate the value of their oil reserves every year using average prices from the first trading days in each of the previous 12 months. Because oil didn’t start its freefall to about $45 till after the OPEC meeting in late November, companies in their latest regulatory filings used $95 a barrel to figure out how much oil they could profitably produce and what it’s worth. Of the 12 days that went into the fourth-quarter average, crude was above $90 a barrel on 10 of them.

So Continental Resources Inc., led by billionaire Harold Hamm, reported last month that the present value of its oil and gas operations increased 13 percent last year to $22.8 billion. For Devon Energy Corp., a pioneer of hydraulic fracturing, it jumped 31 percent to $27.9 billion.

This year tells a different story. The average price on the first trading days of January, February and March was $51.28 a barrel. That means a lot of pain -- and writedowns -- are in store when drillers’ first-quarter numbers are announced in April and May.

“It has postponed the reckoning,” said Julie Hilt Hannink, head of energy research at New York-based CFRA, an accounting adviser.

Cash Flow

Companies use the first-trading-day-of-every-month calculation to estimate future cash flow and to tally how much crude can be profitably pumped out of the ground. The SEC introduced the formula in 2009 as part of wider changes in how the regulator required drillers to report reserves. Prior to the shift, the value of the reserves was measured based on the oil price on the last day of the year, which also caused distortions.

There are no current plans to revisit or modify SEC reporting rules, Erin Stattel, an SEC spokeswoman, said in an e-mail. She declined to comment further.

Most shale drillers are reporting increases in what’s known as proved reserves. The SEC requires oil producers to submit an annual tally, along with an estimate of the present value of the future cash flow from those properties. The estimates are limited to what the firm is reasonably certain it can extract from existing wells and prospects scheduled to be drilled within five years. The reports are based on factors such as geology, engineering, historical production -- and price. To count as proved, the resources must be economic to develop given existing market conditions.

“What the SEC requires isn’t thorough enough to get to the numbers investors really want,” said Mike Kelly, an analyst with Global Hunter Securities in Houston. “What is the true cost of producing a barrel of oil? And what is the real value of the assets?”

A similar pricing formula helps determine whether some companies need to write off their oil and gas properties.

Market Value

West Texas Intermediate for April delivery fell 31 cents to $50.21 a barrel on the New York Mercantile Exchange at 12:30 p.m. local time. Brent dropped 52 cents to $60.50.

Continental provides one example of how much the price move matters. The company’s Feb. 3 press release announcing the $22.8 billion figure included a disclaimer saying the estimate didn’t represent market value.

Three weeks later, Continental published more detail in its annual financial report to the SEC. Using current prices instead of the SEC-prescribed $95 a barrel would erase $13.8 billion, or 61 percent, from the value of Continental’s oil and natural gas properties. It would also mean that 10 percent of the company’s reserves, the equivalent of 135 million barrels, would be too expensive to pump with prices where they are, the company said in the filing.

SEC Rules

“Continental just follows the rules like everyone else that are mandated by the SEC” and provided additional details to investors in its filing, John Kilgallon, the company’s vice president of investor relations, said in an interview.

Continental shares have risen almost 14 percent this year. Devon’s stock is little changed. That compares with the Bloomberg Intelligence North America Independent Exploration & Production Index, which has risen more than 2 percent since the beginning of 2015.

The drillers in the index will lose an estimated 89 cents per share in the first quarter of 2015, according to data compiled by Bloomberg Intelligence. The companies gained $1.13 in the first quarter of 2014 and 26 cents in the three months ended Dec. 31, the data show.

Devon follows SEC regulations and provides updates “in the course of regular disclosures under SEC rules,” Tim Hartley, a company spokesman, said in an e-mail.

The company’s Feb. 17 press release said that its proved oil reserves rose “to the highest level in company history.” Three days later, in its SEC filing, the Oklahoma City-based driller said it expects to take writedowns “beginning with the first quarter of 2015.” The company didn’t offer details except to say that it doesn’t expect the amounts to have an impact on cash flow or liquidity. However, they will be material to its net earnings.

Net earnings and EBITDA cannot be defined since the FASB and IASB elected to give the balance sheet priority over the income statement in financial reporting ---
"The Asset-Liability Approach: Primacy does not mean Priority," by Robert Bloomfield, FASRI Financial Accounting Standards Research Initiative, October 6, 2009 ---
http://www.fasri.net/index.php/2009/10/the-asset-liability-approach-primacy-does-not-mean-priority/

Bob Jensen's threads on fair value accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#FairValue


Aruba Networks (Number 2 in Wireless LANs) --- http://en.wikipedia.org/wiki/Aruba_Networks

"H-P to Buy Aruba Networks for $2.7 Billion Deal expands Hewlett-Packard’s wireless-networking business," by Tess Styness, The Wall Street Journal, March 2, 2015 ---
http://www.wsj.com/articles/hewlett-packard-to-buy-aruba-networks-1425303619?tesla=y

Hewlett-Packard Co. agreed to acquire wireless-networking company Aruba Networks Inc. in a deal valued at roughly $2.7 billion, expanding H-P’s capabilities in the mobile market.

H-P is offering $24.67 a share, a 1% discount to Aruba Network’s close on Friday, when the stock reached the highest level in nearly two years following a report about a possible deal. Including cash and debt, the companies valued the deal at roughly $3 billion.

H-P Chairman and Chief Executive Meg Whitman said the deal will combine Aruba’s wireless-mobility solutions with H-P’s switching portfolio, allowing the company to offer most secure networking solutions to help enterprises easily deploy next-generation mobile networks.

The planned acquisition complements H-P’s networking portfolio, Cantor Fitzgerald analysts said. H-P’s bigger push into the networking market over the past few years included the $2.7 billion acquisition of 3Com Corp. in 2010. However, Cantor also thinks H-P’s capital would be better spent on cloud and Big Data software-related vendors.

Analysts at Mizuho Securities USA Inc. added that despite Aruba’s strong revenue growth, the deal was unlikely to solve growth issues within H-P, and the firm estimated that Aruba’s potential revenue contribution would represent less than 2% of the revenue in H-P’s enterprise-technology business.

Aruba Networks, based in Sunnyvale, Calif., had revenue of $729 million in fiscal 2014.

The H-P and Aruba operation will be led by Aruba Chief Executive Officer Dominic Orr and Chief Strategy and Technology Officer Keerti Melkote. They will report to Antonio Neri, head of H-P Enterprise Group.

Both companies’ boards have approved the deal.

Hewlett-Packard in October unveiled plans to separate its personal-computer and printer businesses from its corporate hardware and services operations, which has been billed as the growth engine.

H-P’s strong market position in corporate hardware such as computer servers and personal computers hasn’t helped it in newer areas such as cloud software and mobile computing, where it remains largely irrelevant. Sales fell in its software segment, which is supposed to be a future growth engine for the company—an emblem of H-P’s tough market position.

Continued in article

Jensen Comment
This seems like a relatively small company for such an enormous price.


Embedded Derivatives:

portions of contracts that meet the definition of a derivative when the entire nonderivative contract cannot be considered a financial instruments derivative. Types of embedded derivative instruments are often indexed debt and investment contracts such as commodity indexed interest or principal payments, convertible debt, credit indexed contracts, equity indexed contracts, and inflation indexed contracts. Embedded derivatives are discussed in FAS 133, pp. 7-9, Paragraphs 12-16. Embedded derivatives such as commodity indexed and equity indexed contracts and convertible debt require separation of the derivative from the host contract in FAS 133 accounting. In contrast, credit indexed and inflation indexed embedded derivatives are not separable from the host contract. Also see FAS 133 Paragraphs 51, 60, 61, 176-178, and 293-311. The overall contract is sometimes referred to as a "hybrid" that contains one or more embedded derivatives. Embedded derivatives within embedded derivatives generally meet the closely-and-clearly related test and cannot be accounted for as separate derivatives. The concept of "closely related is also discussed in IAS 39: paragraph 23a. Rules for accounting for the host contract after an embedded derivative has be bifurcated are discussed in SFAS Paragraph 16). If an embedded derivative should bifurcated but the firm cannot do so for some reason, SFAS 16 requires that the entire contract be treated as a trading security that is adjusted to fair value at least quarterly with changes and fair value being charged to current earnings rather than OCI. See FAS 133 Paragraph 16 and IAS Paragraph 26.

Jensen Comment
When FAS 133 first went into effect some firms complained that the most costly implementation issue for them was pouring over thousands of contracts worldwide in an effort to find embedded derivatives and then decide whether they had to be bifurcated and accounted for separately under FAS 133 rules. In one of my dog and pony shows on implementation of FAS 133 I had several executives discuss their biggest problems with implementation. Here are some audio files of their presentations that mention the bifurcation problem of embedded derivatives:

Detecting derivatives and embedded derivatives to account for worldwide (bifurcation)

The Subsequent FASB versus IASB Split on Embedded Derivatives and Bifurcation
After 2012 the FASB and the IASB dramatically split with respect to embedded derivatives accounting rules. The IASB essentially dropped the requirement to find embedded derivatives, thereby the FASB declared that bifurcation was no longer required even if it affects financial risk. The FASB id not change its detection and bifurcation requirements under FAS 133

 

"Proposed FASB disclosures would link bifurcated embedded derivatives to host contracts," by Ken Tysiac, Journal of Accountancy, February 26, 2015 ---
http://www.journalofaccountancy.com/news/2015/feb/hybrid-financial-instruments-201511873.html

A FASB proposal issued Tuesday is designed to provide more useful information to financial statement users about hybrid financial instruments that contain bifurcated embedded derivatives.

The amendments in the proposal would require an entity to disclose information in the notes to financial statements that links each bifurcated embedded derivative to its related host contract.

This information would be helpful to financial statement users because it would reflect the overall economics and cash flows for the entire hybrid financial instrument, according to the proposal.

Under current GAAP, Accounting Standards Codification Topic 815, Derivatives and Hedging, does not require an entity to provide information that explicitly links bifurcated embedded derivatives with their related host contracts. As a result, financial statement users often are unable to trace these derivatives to their host contracts.

The proposed amendments would apply to all reporting entities that issue or invest in hybrid financial instruments with embedded derivatives that are separated from their host contracts and accounted for as derivative instruments.

Under the proposal, an entity would be required to disclose in both interim and annual reporting periods the carrying amount, measurement attribute, and line item within the balance sheet and the income statement in which each bifurcated embedded derivative and its related host contract are presented.

The amendments would be applied on a prospective basis to hybrid financial instruments with bifurcated embedded derivatives that existed as of the beginning of the fiscal year for which the proposed amendments are effective.

The effective date will be determined by the board after hearing stakeholders’ comments, which can be submitted through April 30 at FASB’s website. The proposal is titled Proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Disclosures About Hybrid Financial Instruments With Bifurcated Embedded Derivatives.

In summary, bifurcation under FAS 133 is required in the following examples:

Bifurcation under FAS 133 is not allowed in the following examples:

 

 


From the CFO Journal's Morning Ledger on February 27, 2015

Electric-car resale prices tumble ---
http://www.wsj.com/articles/resale-prices-tumble-on-electric-cars-1424977378
With gasoline prices down 33% from a year ago and buyers cooling toward electric vehicles, Nissan Motor Co. dealers worry that weak demand for used electric Leaf cars will put a flood of used models on the market. Buyers who get a $7,500 federal tax credit on purchase of a new Leaf see little reason to shop for a preowned model.


Net Neutrality --- http://en.wikipedia.org/wiki/Net_neutrality

The Complex Accounting of Net Neutrality
From the CFO Journal's Morning Ledger on February 26, 2015

The Federal Communications Commission is expected to vote on Thursday to put carriers’ Internet lines under rules similar to the ones that govern more highly regulated phone service. Proponents of the new rules, dubbed “net neutrality” as they would require Internet service providers to treat all Web traffic equally, insist that the rules are good for consumers and would protect a level playing field for upstart businesses seeking entry into the online marketplace. But the WSJ’s Greg Ip writes  that the case is more complicated for several reasons and that the FCC rules could undermine investment in Internet infrastructure and new technology.

For big online firms like Netflix Inc., much is at stake, including issues not directly addressed in the rules but sure to surface in the near future. The least settled issue in the rules is how much carriers like Verizon Communications Inc. can charge companies like Netflix to connect with their networks. The call for net neutrality got a boost last year when Netflix, which accounts for a third of all Web traffic in North America during peak hours, picked a high profile fight with Verizon, AT&T Inc. and Comcast Corp., accusing them of slowing delivery of its movies to gain leverage in a pricing dispute. But the rules up for a vote Thursday aren’t clear on how much network owners can change companies to connect with them in the first place, and instead focus on the last stretch of infrastructure that reaches consumers.

Cablevision Systems Corp., for its part, played down the potential business effect of the proposed new rules. “The idea of more regulation is never great for us,” Cablevision CEO James Dolan said, “but to be honest, we don’t see at least what the chairman has been discussing as having any real effect on our business.” And as Mr. Ip notes, net neutrality, while not yet enforced, has basically been in practice all along, so it won’t mark a major change.


Pension Ponzi Fraud:  Chicago = Detroit = Stockton

"Rahm Emanuel's Chicago Nears Fiscal Free Fall," Investors Business Daily, March 2, 2015 ---
http://news.investors.com/ibd-editorials/030215-741568-emanuels-chicago-nears-fiscal-free-fall.htm

. . .

Chicago's finances are staggering under the weight of an unfunded pension liability that Moody's Investors Service has estimated at $32 billion, eight times the city's operating revenue.

Chicago has a $300 million structural deficit. And Illinois law requires the city to up its 2016 contributions to its police and fire pension funds by $550 million.

"This is an unfortunate wake-up call for anyone still asleep over the fiscal cliff facing the city of Chicago," said Laurence Msall, president of the Chicago-based government finance watchdog, the Civic Federation.

The steady financial decline of the nation's third-largest city prompted us recently to say that Chicago was well on its way to becoming the next Detroit.

In other words, it's another bankrupt monument to the perils of Democratic governance: a one-party town in one of the bluest states, whose mayor, former White House Chief of Staff Rahm Emanuel, learned financial discipline at the feet of President Barack Obama.

A large part of Chicago's problem is that the game of maintaining campaign armies by overpromising and underfunding pensions is over. Emanuel can expect little help from Illinois' new Republican governor, Bruce Rauner, who is trying to fix similar problems at the state level.

Chicago's pension funds are only 40% funded, and prospects aren't good, as people — particularly high-income individuals and businesses — flee the city's high taxes and stiff regulations.

Emanuel recently emerged from the Windy City's mayoral primary with just 45% of the vote against four opponents, forcing Chicago's first-ever mayoral runoff. A poll taken by local polling firm Ogden & Fry on Feb. 28 showed Emanuel leading second-place primary finisher Jesus "Chuy" Garcia, who serves on the Cook County Board of Commissioners, by a slim 42.9% to 38.5% margin. Chicago natives are clearly restless.

As Aaron Renn has noted in City Journal, Chicago lost 7.1% of its jobs in the first decade of this century. Its famous Loop, the second-largest business district in the nation, lost 18.6% of its private-sector positions.

Raising the city's minimum wage will not reverse that trend. People are leaving in droves, voting the only way they can in a one-party town — with their feet.

From 2000 to 2009, Chicago's population shrank by 200,000 — the only one of the nation's 15 largest cities to lose people. The city now has 145,000 fewer school-age children than it had more than a decade ago, according to district data, forcing the closure of about 100 schools since 2001.

Chicago may soon be forced to go to Washington for a bailout similar to New York City's 1975 rescue. The prospect of Emanuel begging his former boss, President Obama, for financial help would be ironic indeed.

The man who once said that a crisis is a terrible thing to waste now finds his city and President Obama's home town in fiscal crisis and his own political future teetering on the brink.

"Debt-Saddled Municipal Budgets Get a Lifeline:  A unanimous Supreme Court held that health benefits for retired workers can be renegotiated or reduced," by Robert C. Pozen And Ronald J. Gilson, The Wall Street Journal, March 1, 2015 ---
http://www.wsj.com/articles/robert-pozen-and-ronald-gilson-debt-saddled-municipal-budgets-get-a-lifeline-1425249172?tesla=y

While underfunded public-employee pensions capture the headlines, health-insurance benefits for retired state and local workers are also a huge problem. But a recent ruling by the Supreme Court may help state and local governments scale back these benefits.

Unlike public pension plans, retiree health benefits aren’t funded in advance; they are typically paid out of current tax revenues, so they compete with other budget priorities like schools and police. This competition will only grow more intense, as unfunded retiree health benefits are close to $1 trillion, according to a recent study in the Journal of Health Economics.

Several cities and states have tried to reduce the scope of retiree health-care services, or to increase the portion of the premiums paid by retired workers going forward. Public unions have frequently sued, claiming the benefits are vested for life—roughly parallel to the legal arguments the unions have made against efforts to curb future pension costs.

In late January, however, the Supreme Court issued an unanimous decision that will increase the chances of local governments winning such lawsuits. While the case involved a private business and its union, the principles should generally apply to public-sector agreements.

M&G Polymers vs. Tackett involved a collective-bargaining agreement that provided certain retirees, along with their surviving spouses and dependents, with a full company contribution toward the cost of their health-care benefits “for the duration of [the] Agreement.” The contract was subject to renegotiation after three years, but the critical legal question was whether the retirement health-care benefits continued even after the agreement expired—in effect whether the intent was to vest these benefits for life.

The union argued that the contract did vest these benefits for life and the Sixth Circuit Court of Appeals agreed. The Supreme Court reversed, noting that to prevail, the plaintiffs, in this case the union, had to supply concrete evidence—“affirmative evidentiary support”—that lifetime vesting of retiree health benefits was what both parties to the agreement intended.

Normally, the explicit terms of a contract are taken to reflect the parties’ intentions; only when a contract’s language is ambiguous does a court look to the parties’ intent. Here the Supreme Court followed a traditional rule of contract law: If a contract is ambiguous, proof requires evidence of what the parties intended, not what a court—in this case the appellate court—might infer from the ambiguous contract.

Two principles in Tackett should be especially relevant to reductions in retiree health-care benefits where the duration of these benefits is often unclear. The court, Justice Clarence Thomas wrote, supported the “traditional principle that courts should not construe ambiguous writings to create lifetime promises.” Similarly, he wrote that the court endorsed the traditional principle that “contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.”

This is where the Supreme Court’s decision is particularly significant for the public sector. There must be explicit proof that a collective-bargaining agreement intended long-term commitments to bind a city or state long past the incumbency of the public officials who signed the agreement.

Today elected officials trade generous retiree benefits in the future for current wages. By doing so, they avoid having to take responsibility for current cutbacks in state and municipal services that would accompany wage increases.

The Supreme Court’s ruling in Tackett means that lifetime benefits cannot be inferred but must be made explicit. As a result, if public officials now attempt to revise the benefits in a current or new collective agreement, unions will doubtless demand that any long-term promises be made explicit. But public officials who make these promises explicit send a strong signal that they are putting potentially enormous burdens on future taxpayers and elected officials. This makes it harder for current officials to make such promises. That is a step forward—not just in interpreting contracts but also in enhancing political accountability.

Mr. Pozen is a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution. Mr. Gilson is a professor of law at Columbia and Stanford law schools.


Whistleblower --- http://en.wikipedia.org/wiki/Whistleblower

"SEC Probes Companies’ Treatment of Whistleblowers:  Agency Officials Concerned About Corporate Backlash Against Whistleblowers," by Rachel Louise Ensign, The Wall Street Journal, February 25, 2015 ---
http://www.wsj.com/articles/sec-probes-companies-treatment-of-whistleblowers-1424916002?tesla=y

The Securities and Exchange Commission is probing whether companies are muzzling corporate whistleblowers.

In recent weeks the agency has sent letters to a number of companies asking for years of nondisclosure agreements, employment contracts and other documents, according to people familiar with the matter and an agency letter viewed by The Wall Street Journal. The inquiries come as SEC officials have expressed concern about a possible corporate backlash against whistleblowers.

Some of these types of documents sometimes include clauses that impede employees from telling the government about wrongdoing at the company or other potential securities-law violations, according to lawyers who handle whistleblower cases and some members of Congress. In some cases, the firms require employees to agree to forgo any benefits from government probes, effectively removing the financial incentive for participating in the SEC program.

In a separate January letter to Rep. Maxine Waters (D., Calif.) that was reviewed by the Journal, SEC Chairman Mary Jo White said she was concerned about the agreements.

The SEC has made a push to bring more whistleblower cases since the 2010 passage of the Dodd-Frank financial-reform bill, which created the agency’s whistleblower program.

Whistleblowers have flocked to the SEC program, with the number of tips increasing each year. The agency fielded 3,620 tips on potential securities-law violations in the 2014 fiscal year, up 21% from two years before.

As part of the program, tipsters can get between 10% and 30% of the sum of penalties collected if their information leads to an SEC enforcement action with sanctions of more than $1 million. The program handed out an award for more than $30 million last year to an undisclosed foreign tipster, which was its largest ever.

Dodd-Frank regulations prohibit companies from interfering with employees reporting potential securities-law violations to the agency.

An SEC spokesman declined to comment.

Continued in article

From the CFO Journal's Morning Ledger on February 20, 2015

A whistleblower’s horror story
Recent exposés of less than proprietary behavior in government and in business has led 
Rolling Stone Magazine  to call this era the age of the whistleblower. As Matt Taibbi writes, “whistleblowers are becoming to this decade what rock stars were to the Sixties — pop culture icons, global countercultural heroes.” But today’s whistleblowers tend to partake in little of the spoils and almost none of the glamour. In fact their lives are very often almost destroyed in the process.

From the CFO Journal's Morning Ledger on December 18, 2014

BofA whistleblower to get nearly $58 million
http://www.wsj.com/articles/bofa-whistleblower-to-get-nearly-58-million-filing-1418858087
Edward O’Donnell, the former Countrywide Financial Corp. executive who filed a whistleblower lawsuit against his former firm, will collect nearly $58 million. The U.S. Attorney’s Office in Manhattan used Mr. O’Donnell’s allegations as the basis of its $16.65 billion lawsuit against Bank of America Corp., which acquired Countrywide.

SEC gives internal auditor $300,000 whistleblower award
The Securities and Exchange Commission is giving a $300,000 whistleblower award to a corporate internal auditor who provided information that directly resulted in an enforcement action. The auditor had reported the wrongdoing internally, but when no action was taken within 120 days, the auditor turned to the SEC. Awards to whistleblowers range from 10% to 30% of the money collected from an enforcement action. CFO.com (8/29)

Jensen Comments
Such puny settlements might be beneficial to career advancement, but they are more likely to be just the opposite if they are the cause of getting fired and the cause of troubles finding other jobs.  Whistleblowers are seldom heroes in USA except where national security is involved.

Bob Jensen's threads on other whistleblower horror stories ---
http://faculty.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing




Jensen Comment
Faculty researchers who teach cost accounting and/or AIS are often looking for new topics for research. Health care costs are now a wide open field for new research. For example, the case below points out that small business owners are having a terrible time tracking employee health care costs.

The above topic could also qualify for clinical research under the new Pathways Commission initiatives for getting more academic accounting researchers to address practitioner problems in the field.

Teaching Case on Small Business Taxation
From The Wall Street Journal Weekly Accounitng Review on March 13, 2015

Small Business Owners Scramble to Prepare for New Tax Form
by: Angus Loten
Feb 05, 2015
Click here to view the full article on WSJ.com
 

TOPICS: ACA, Corporate Taxation

SUMMARY: Small employers are facing an unexpectedly onerous task: tallying their individual employees' monthly health-care costs. Starting in 2016, under the Affordable Care Act, employers with 50 or more full-time workers are required to file new tax forms laying out what individual employees are being charged for their employer-sponsored plans. The Internal Revenue Service released the new forms on Feb. 8, 2015. Though completed forms aren't due until January 2016, many employers are scrambling to get procedures in place now to collect the data. The new process entails measuring every individual full-time worker's total monthly out-of-pocket cost for an employer health plan this year.

CLASSROOM APPLICATION: This an excellent article to share in class regarding taxation and reporting requirements of businesses, especially small businesses.

QUESTIONS: 
1. (Introductory) What are the details of the new reporting requirements under the Affordable Care Act? What businesses are impacted? What is the effective date?

2. (Advanced) What are the challenges of complying with the tax requirements detailed in the article? What burdens does it place on businesses, both large and small? What types of businesses are affected more than others?

3. (Advanced) Who will use the new information that must be reported? How will it be used? Are there other ways to gather this information or to achieve this same purpose?

4. (Advanced) What options does a business have to facilitate compliance with these requirements? What are examples of the costs involved?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Small Business Owners Scramble to Prepare for New Tax Form," by Angus Loten, The Wall Street Journal, February 5, 2015 ---
http://www.wsj.com/articles/small-business-owners-scramble-to-prepare-for-new-tax-form-1425518055?mod=djem_jiewr_AC_domainid

Employers are finding the task of tracking employee health-care costs confusing, time-consuming.

Small employers are facing an unexpectedly onerous task: tallying their individual employees’ monthly health-care costs.

Starting in 2016, under the Affordable Care Act, employers with 50 or more full-time workers are required to file new tax forms laying out what individual employees are being charged for their employer-sponsored plans. The Internal Revenue Service released the new forms on Feb. 8.

Though completed forms aren’t due until next January, many employers are scrambling to get procedures in place now to collect the data. The new process entails measuring every individual full-time worker’s total monthly out-of-pocket cost for an employer health plan this year.

The IRS says tax officials will use this information to figure out whether employers are complying with the law’s requirement that businesses offer affordable health coverage to full-time employees and their dependents. Federal penalties for failing to provide an affordable health plan can run up to $3,000 an employee.

But small employers, especially those who keep their own books and prepare their own tax returns, say they’re finding the task of tracking employee costs for the plans to be confusing and time-consuming.

Rather than simply ask employers to record the price tag for a given health plan, the forms require employers to calculate the lowest-cost plan available to each full-time worker on a month-by-month basis—a figure that can vary as wages or working hours change, tax lawyers and workplace benefits consultants say.

That can be especially hard for retailers, restaurants, day-care services or other businesses where workers’ hours can vary from part-time to full-time, or so-called variable hour employees, they add. Under the law, employers aren’t required to offer coverage to part-timers.

“It’s a labor intensive process,” says Adam Okun, a senior vice president of Frenkel Benefits in New York, about completing the new IRS paperwork, Form 1095C. Employers who don’t start collecting this information today are heading for a “real nightmare next year,” he adds.

As of January 2015, employers with more than 100 full-time workers are required under the health law to offer affordable coverage plans to their employees, or face penalties. Employers with 50 to 99 full-time workers have until 2016 to offer such plans.

Yet even these smaller businesses, which are otherwise exempt from the law this year, are required to submit the new tax forms in 2016, according to the 84-page guidelines issued by the Treasury Department last year.

Barbara Weltman, a Florida-based lawyer who specializes in small-business tax issues, says small-business owners who manage payroll themselves “may want to outsource this to a payroll company” to avoid any costly errors down the road.

Some outside payroll services are charging extra fees to complete the new forms—in some cases as high as a $400 “set up” fee, and 40 cents per employee, according to Victoria Braden, an accountable care certified specialist and president of Braden Benefit Strategies Inc., in Johns Creek, Ga.

Ms. Braden calls the fees “crazy,” adding that, in most cases, a good spreadsheet is all employers need to track the data, provided they start collecting the data now.

“Anytime an employer sees a new IRS form number, it send chills up their spine because they don’t know what is required, it is one more thing to keep up with and one more potential place to make a mistake,” Ms. Braden says.

Some payroll services are opting not to handle the new IRS paperwork. For instance, Intuit Inc., one of the biggest providers of financial and tax preparation software for small businesses, recently posted on its website that it “will not support” the new tax forms, because of the detailed benefits and human resources information required to correctly complete them.

“The vast majority of our customers are not required to comply with this mandate, and the data required by these forms is not fully collected in our payroll application,” says Stephen Sharpe, a spokesman for Intuit.

Tommy Cain, owner of T. Cain Grocery Inc., a Fairhope, Ala.-based operator of five Piggly Wiggly stores along the Gulf Coast, says in recent weeks he has worked with staff to develop a system for recording the necessary data on the chain’s 250 employees.

“We’re keeping a list that we can update every month,” says Mr. Cain, who offers employees both a low-cost and a premium health plan. “It means logging extra hours” for the store’s accountant, “and it’s just one more thing we’ve got to worry about.”

Roughly 80 of the Piggly Wiggly workers have signed up for one of the company’s two health plans. Many of the remainder are covered by a spouse’s plan or have purchased plans on the individual market.

Mr. Cain says complying with the health law is challenging because so far “it’s a moving target.” He cited some recent changes in deadlines for business owners under the law, including a move last month by the IRS to delay tax penalties on small employers that provide cash to their workers to cover the cost of purchasing their own health plans.


Teaching Case on How Staples Swings To Loss on Write-down of International Businesses
From The Wall Street Journal Weekly Accounitng Review on March 13, 2015

Staples Swings To Loss on Write-down of International Businesses
by: Chelsey Dulaney
Mar 07, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Financial Reporting, Mergers and Acquisitions, Write-Down

SUMMARY: Staples Inc. reported another quarter of declining sales and dwindling store traffic, deepening the chain's challenges while it awaits regulatory approval for its $6.3 billion takeover of rival Office Depot Inc. In North America, Staples suffered a 4% sales drop at stores open at least a year, excluding the effect of currency-exchange rates, its 11th straight quarter of sales declines. Store traffic fell 1%, and shoppers spent 4% less per visit for the three months through January. Online sales grew 9%, but that wasn't enough to offset the declines in the chain's store base. For the quarter ended Jan. 31, Staples reported a loss of $260.4 million, down from $212.4 million in profit a year earlier. Total sales fell 3.7% to $5.66 billion. Most of the loss stemmed from a $410 million write-down tied to Staples' businesses in Australia, China and South America. The charge resulted from an annual review that values the businesses partly based on what they could theoretically fetch in a sale. Weak results in all three markets forced Staples to trim those valuations.

CLASSROOM APPLICATION: This article offers many accounting factors and issues you could use in a financial accounting course.

QUESTIONS: 
1. (Introductory) What is Staples? What is its line of business? What is its overall condition?

2. (Advanced) What are Staples plans regarding Office Depot? What is the reasons for those plans? If that deal occurs, what accounts would be affected? How would the transaction be booked?

3. (Advanced) What are the various segments of Staple's business mentioned in the article? Which of the segments are relatively strong and profitable; which are problematic or in decline? What is the company doing to address these issues? What should the company be doing?

4. (Advanced) What is the company's forecasts for this year? What factors came into play in formulating these forecasts?

5. (Advanced) What is a write-down? What are the accounting rules related to a write-down? Why did Staples have a recent write-down? How did the write-down affect the company's financial statements?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

RELATED ARTICLES: 
Staples Inks Deal to Buy Office Depot for $6.3 Billion
by Drew Fitzgerald and Liz Hoffman
Feb 04, 2015
Online Exclusive

Office Depot Reports Narrower Loss
by Chelsey Dulaney
Feb 24, 2015
Online Exclusive

"Staples Swings To Loss on Write-down of International Businesses," by Drew Fitzgerald and Chelsey Dulaney, The Wall Street Journal, March 7, 2015 ---
http://www.wsj.com/articles/staples-swings-to-loss-on-write-down-of-international-businesses-1425642964?mod=djem_jiewr_AC_domainid

Staples’ continuing slump points up impetus behind proposed takeover of Office Depot

Staples Inc. reported another quarter of declining sales and dwindling store traffic, deepening the chain’s challenges while it awaits regulatory approval for its $6.3 billion takeover of rival Office Depot Inc.

In North America, Staples suffered a 4% sales drop at stores open at least a year, excluding the effect of currency-exchange rates, its 11th straight quarter of sales declines. Store traffic fell 1%, and shoppers spent 4% less per visit for the three months through January. Online sales grew 9%, but that wasn’t enough to offset the declines in the chain’s store base.

Staples shares fell 3% to $16 in recent trading after the company swung to a fourth-quarter loss.

Staples has been hit by shifts in office needs where basics like paper folders and printer toner are no longer in high demand. In response, the retailer broadened its range of products to include tablet computers and phones as well as coffee makers and cleaning supplies. But sales of computers and tablets fell short of executives’ expectations.

Staples and Office Depot have responded to slower store traffic by proposing combining into a single office-supply chain to compete with the discounters and Web retailers that have invaded their turf. The acquisition, however, will have to win approval from regulators who shot down a merger of the same companies 18 years ago.

Both chains have suffered from declining sales for nearly a decade. In February, Office Depot warned that its sales for the year would be lower because of its previously-announced plans to close stores, ongoing market challenges and foreign-exchange effects.

For the quarter ended Jan. 31, Staples reported a loss of $260.4 million, down from $212.4 million in profit a year earlier. Total sales fell 3.7% to $5.66 billion.

Most of the loss stemmed from a $410 million write-down tied to Staples’ businesses in Australia, China and South America. The charge resulted from an annual review that values the businesses partly based on what they could theoretically fetch in a sale. Weak results in all three markets forced Staples to trim those valuations.

The company has meanwhile come under fire from activist investor Starboard Value LP. Earlier this week, Starboard, which pushed for the Office Depot deal, urged Staples to improve the composition of its board, a move the company said it has already pledged to do by adding two Office Depot directors.

“Certainly I’m not going to apologize for our board because I think it’s been a terrific board for a long time,” Chief Executive Ron Sargent said during a conference call with analysts.

 


Teaching Case
"Using the Codification to Research a Complex Accounting Issue: The Case of Goodwill Impairment at Jackson Enterprises," by Casey J. McNellis, Ronald F. Premuroso, and Robert E. Houmes, Issues in Accounting Education, February 2015 ---
http://aaajournals.org/doi/full/10.2308/iace-50949

Abstract
This case is designed to help students develop research skills using the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (Codification or ASC). The case also helps develop students' abilities to analyze and recommend alternatives for a complex accounting issue, goodwill impairment, which is very relevant in today's business world. This case can be used in an undergraduate or graduate accounting class, either in groups of students or as an individual student project.

. . .

Shortly after the case was tested in the graduate course, it was administered to undergraduate students enrolled in an Intermediate I course (n = 50). These students had learned the basics of the two-step impairment test in the week preceding the assignment of the case. As indicated in Table 1, the undergraduate class averaged 57.33 percent on the six-question post-case assessment. These students did not receive the six-question assessment prior to reading the case. This was done partially out of necessity because of the time constraints imposed by the intermediate-level curriculum. The Intermediate I course contains a fixed amount of material that must be learned by students prior to their enrollment in the Intermediate II course.7 Given the demands of the curriculum, the instructor only had a portion (approximately 60 minutes) of one class period in which to devote to the case. This class period was used to discuss the case and to administer the case-related survey items (see paragraph below) after the students read the case and answered the case requirements.8 However, given the pre-test scores that we observed in the graduate class, we also felt this course of action was appropriate, as it was deemed unlikely that the undergraduate students' pre-case knowledge of the in-depth issues would be greater than the graduate students, who had already taken the Intermediate I course. As such, we believe the undergraduate post-case assessment average provides additional evidence of the efficacy of this case.

After the case study was completed and the results and the answers to the case study were discussed and reviewed with the students in each respective class, the instructors had each student complete a five-question survey found in Appendix A. The results of the survey are summarized in Table 2. In general, the mean responses to the five survey questions exceeded 4 on a scale of 1 (disagree) to 5 (totally agree) for the students performing this case study.

Bob Jensen's threads on impairment ---
http://faculty.trinity.edu/rjensen/Theory02.htm#Impairment

 


Teaching Case on a Q&A With Former FASB Chairman Bob Herz
From The Wall Street Journal Weekly Accounitng Review on February 20, 2015

Small Business Owners Scramble to Prepare for New Tax Form
by: Angus Loten
Feb 05, 2015
Click here to view the full article on WSJ.com
 

TOPICS: ACA, Corporate Taxation

SUMMARY: Small employers are facing an unexpectedly onerous task: tallying their individual employees' monthly health-care costs. Starting in 2016, under the Affordable Care Act, employers with 50 or more full-time workers are required to file new tax forms laying out what individual employees are being charged for their employer-sponsored plans. The Internal Revenue Service released the new forms on Feb. 8, 2015. Though completed forms aren't due until January 2016, many employers are scrambling to get procedures in place now to collect the data. The new process entails measuring every individual full-time worker's total monthly out-of-pocket cost for an employer health plan this year.

CLASSROOM APPLICATION: This an excellent article to share in class regarding taxation and reporting requirements of businesses, especially small businesses.

QUESTIONS: 
1. (Introductory) What are the details of the new reporting requirements under the Affordable Care Act? What businesses are impacted? What is the effective date?

2. (Advanced) What are the challenges of complying with the tax requirements detailed in the article? What burdens does it place on businesses, both large and small? What types of businesses are affected more than others?

3. (Advanced) Who will use the new information that must be reported? How will it be used? Are there other ways to gather this information or to achieve this same purpose?

4. (Advanced) What options does a business have to facilitate compliance with these requirements? What are examples of the costs involved?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

Sustainability Accounting for Investors: Q&A with Robert H. Herz
by: Gregory J. Millman
Feb 19, 2015
Click here to view the full article on WSJ.com
 

TOPICS: SASB, Sustainability Accounting

SUMMARY: Robert H. Herz served as chairman of the Financial Accounting Standards Board from 2002 through 2010. In January 2015, he joined the board of the Sustainability Accounting Standards Board, an organization working to develop industry-specific environmental, social and governance accounting standards for investment analysis. The SASB aims at producing metrics on key sustainability issues that impact company performance over time. The idea is to develop standardized metrics across an industry so companies can benchmark themselves and investors can benchmark them. They are non-financial metrics but they are metrics that drive financial performance and answer the question, "If I were going to make a big investment or buy a company, what would I look at besides the financial statement?"

CLASSROOM APPLICATION: This is a very informative piece regarding Sustainability Accounting and the Sustainability Accounting Standards Board.

QUESTIONS: 
1. (Introductory) What is sustainability accounting? What is the SASB? For whom is this information intended?

2. (Advanced) Why is sustainability accounting important? How can this information be used? What value does it add?

3. (Advanced) How are the metrics developed? How could they differ between different industries?

4. (Advanced) How does sustainability accounting different from financial and managerial accounting? How is it similar?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Sustainability Accounting for Investors: Q&A with Robert H. Herz," by Gregory J. Millman, The Wall Street Journal, February 19, 2015 ---
http://blogs.wsj.com/riskandcompliance/2015/02/19/sustainability-accounting-for-investors-qa-with-robert-h-herz/?mod=djem_jiewr_AC_domainid

Robert H. Herz served as chairman of the Financial Accounting Standards Board from 2002 through 2010. In January of this year, he joined the board of the Sustainability Accounting Standards Board, an organization working to develop industry-specific environmental, social and governance accounting standards for investment analysis. Mr. Herz has spent much of his career studying non-financial metrics relevant to value creation, and in 2001 co-authored a book on the subject, entitled The ValueReporting Revolution: Moving Beyond the Earnings Game. In a conversation with Risk & Compliance Journal, Mr. Herz explained why and how he expects to see adoption of such standards.

What is sustainability accounting?

Mr. Herz: The SASB aims at producing metrics on key sustainability issues that impact company performance over time. This reporting is for investors, not aimed at the broader group of people interested in corporations from an ESG point of view, but rather at providing a set of information on ESG issues that matter from an investment point of view.

How do you develop such standards?

Mr. Herz: You’ve got to do it industry by industry, because in a particular industry or sector, some issues matter more than others. For example, in service and some types of manufacturing industries, labor policies matter an awful lot. With services it’s being able to attract and retain the best people. In manufacturing, you get to the issues of child labor overseas and things like that. In some industries, the key issues are environmental, for example related to carbon emissions. What the SASB does is research which issues in the array of all ESG issues seem to matter most to a particular industry and its value proposition. Then comes a thorough due diligence process to develop metrics that capture those key issues.

How would the metrics be used?

Mr. Herz: The idea is to develop standardized metrics across an industry so companies can benchmark themselves and investors can benchmark them.  They are non-financial metrics but they are metrics that drive financial performance and answer the question, “If I were going to make a big investment or buy a company, what would I look at besides the financial statement?”

For example, in the pharmaceutical industry, it might be the proportion of your business from new products aimed at improving health and welfare. Unilever has had a whole initiative the last five years to grow their line of products in that area and it now constitutes a significant and fast-growing part of their revenue. The counter example would be pharmaceutical products that cause lots of adverse side effects beyond the benefits, have been taken off the market, and similar matters.

What have investors had to say to you about such metrics?

Mr. Herz: What I hear from investors is that they are very interested in these issues but they have to sift through so much data that is unstandardized, not comparable, aimed at a broader social responsibility community. They’ve been saying that if they could have a set of more standardized metrics, targeted at the issues that really matter to a particular industry, that’s what they want. They don’t care very much about the carbon emissions of an investment bank for example; it is not key to their investment thesis, but for a utility it probably is.

Do you expect a regulatory push for this disclosure?

Mr. Herz: My view is that it has to be market-driven to begin with, driven by investor pull, and by  companies seeing the advantage of doing it.

What stage of development are the standards now and what is the timeframe for adoption?

Mr. Herz: The SASB is well into issuing provisional standards, and once they finish that there’s going to additional due process, including talking to people industry by industry, then finalizing. There’s been a lot of interest. A number of these metrics are already reported by companies in their sustainability reports and other venues, but not in as targeted a way. I would hope to get to a broad expectation of such disclosure by the market within five years.  A lot of companies are intrigued but cautious; there are always questions of whether it exposes me to more legal risk, do I really want to be first, those kinds of questions.

Why is such disclosure important?

Mr. Herz: I’m not a tree hugger or an environmental activist. I’ve devoted a lot of my career to provide better information to help the capital markets work. I believe that what you measure matters and how you report it matters and that this is important to the investment analysis.


Teaching Case (possible)
This could be informative to students when teaching cost accounting. Returns vary by location and entrepreneurial skills.

"Here's what it costs to open a Subway restaurant," by Hayley Peterson, Business Insider, March 19, 2015 ---
http://www.businessinsider.com/what-it-costs-to-open-a-subway-2015-3

Subway is one of the cheapest major fast-food restaurants to franchise.

To open one restaurant, the company requires that potential franchisees have liquid assets of at least $30,000 and a net worth of $80,000 to $310,000, according to Entrepreneur.

By comparison, McDonald's requires its franchisees to have at least $750,000 in liquid assets.

Subway franchisees need less money because the sandwich chain's restaurants are cheaper to open.

Subway's startup costs, which include construction and equipment leasing expenses, range from $116,200 to $262,850, according to the company.

Opening a McDonald's restaurant requires as much as $2.3 million in startup costs alone, by comparison.

But Subway restaurants generate less revenue than McDonald's units.

A Subway restaurant, on average, generates $490,000 in sales annually, compared to $2.5 million in average annual revenue for McDonald's restaurants, according to QSR magazine.

Subway also charges its franchisees hefty fees.

The company charges an ongoing royalty fee equal to 8% of gross sales, as well as an advertising fee equal to 4.5% of gross sales. That means 12.5% of each restaurant's revenues go to Subway corporate.

Here's a breakdown of startup costs, from the company:

Continued in article

Read more: http://www.businessinsider.com/what-it-costs-to-open-a-subway-2015-3#ixzz3UqrlqOCq


Teaching Case on How Longer Lives Hit Companies With Pension Plans Hard
From The Wall Street Journal Weekly Accounitng Review on March 1, 2015

Longer Lives Hit Companies With Pension Plans Hard
by: Michael Rapoport
Feb 24, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Pension Accounting

SUMMARY: When General Motors Co.'s pension plan took a big hit in February 2015, it joined hundreds of companies facing growing pension shortfalls as Americans keep living longer. Longevity has a downside for those paying the bills, and the higher costs now have to be reflected on corporate balance sheets because of new mortality estimates released in October 2014. The new estimates won't affect many U.S. companies, which long ago shifted their employees to defined-contribution plans like 401(k)s, which leave workers on their own after retirement. But they are hitting other big companies with defined-benefit plans that have to make payments to some former employees for as long as they live.

CLASSROOM APPLICATION: Use this when covering pension accounting.

QUESTIONS: 
1. (Introductory) What are the recent changes to life-expectancy estimates? Why do those estimates affect accounting for pensions?

2. (Advanced) How does increased longevity affect a company's income statement and balance sheet? How are those changes calculated? What are the appropriate journal entries?

3. (Advanced) Which companies are most likely to be affected by these changes? Why? What companies will not be affected by the change?

4. (Advanced) Do you think these changes will cause more companies to change their retirement options for employees? Why or why not? How could a company change the options to lessen the impact? What benefits would those changes bring to employers?

5. (Advanced) How have the companies mentioned in the article dealt with the changes in life expectancy? What announcements have they made? How have some of these companies differed?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Longer Lives Hit Companies With Pension Plans Hard," by Michael Rapoport, The Wall Street Journal, February 24, 2015 ---
http://www.wsj.com/articles/longer-lives-hit-firms-with-pension-plans-hard-1424742593?mod=djem_jiewr_AC_domainid

When General Motors Co. ’s pension plan took a big hit earlier this month, it joined hundreds of companies facing growing pension shortfalls as Americans keep living longer.

Longevity has a downside for those paying the bills, and the higher costs now have to be reflected on corporate balance sheets because of new mortality estimates released in October.

In its first revision of mortality assumptions since 2000, the Society of Actuaries estimated the average 65-year-old man today will live 86.6 years, up from the 84.6 it estimated a decade and a half ago. The average 65-year-old woman will live 88.8 years, up from 86.4.

The new estimates won’t affect many U.S. companies, which long ago shifted their employees to defined-contribution plans like 401(k)s, which leave workers on their own after retirement. But they are hitting other big companies with defined-benefit plans that have to make payments to some former employees for as long as they live. The changes may also prompt more companies to take steps to reduce the risks associated with their pension plans, experts say.

When GM announced fourth-quarter earnings Feb. 4, it said the mortality changes had caused the funding of its U.S. pension plans to fall short by an additional $2.2 billion and contributed to significant pension losses that will be filtered into its earnings over a period of years.

Verizon Communications Inc. and AT&T Inc. recorded big charges to earnings tied to their pension and retiree-benefit plans partly as a result of the new estimates, and the changes could have a significant impact across corporate America. Consulting firm Towers Watson estimates the funding status of 400 large U.S. companies could weaken by a total of $72 billion as a result.

The cost is another weight on pension-plan operators already wrestling with the impact of declining interest rates. Lower rates boost the current value of the future payments the plans have promised to retirees because the value of future pension obligations isn’t discounted back to the present as dramatically. That raises the current value of pension obligations, making pension plans more underfunded.

Continued in article

Jensen Comment
The biggest disaster of longevity will be on entitlement programs like Medicare and Medicaid.
These programs are not sustainable.

Bob Jensen's threads on pension and post-employment benefits accounting ---
http://faculty.trinity.edu/rjensen/Theory02.htm#Pensions


Teaching Case on Profit Margins
From The Wall Street Journal Weekly Accounitng Review on February 20, 2015

High Profit Margins Aren't Going Anywhere, Says RBC
by: Saumya Vaishampayan
Feb 17, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Financial Accounting, Profit Margin, SG&A

SUMMARY: High profit margins have been a mainstay of the last several earnings seasons, but they're not shrinking any time soon, according to RBC Capital Markets. In the third quarter of 2014, profit margins for the S&P 500 were at a record 10.1% of sales. Those sky-high margins have helped companies beat earnings expectations. The biggest drivers of higher margins in 2015 will be SG&A - an accounting term that refers to the costs of running a business, such as administrative expenses - and interest expense, he says. In particular, it's the declining ratio of those expenses to sales that will push margins higher.

CLASSROOM APPLICATION: This article would be appropriate for a financial accounting class.

QUESTIONS: 
1. (Introductory) What is profit margin? What does the article say about recent and future trends in profit margins?

2. (Advanced) What is SG&A? How does it impact profit margins? What are the benefits of analyzing SG&A in management and planning?

3. (Advanced) How does SG&A affect profitability during economic recoveries? Why? Would it have the opposite effect during economic declines? Why or why not?

4. (Advanced) How have recent interest rates affected the financial performance of companies? How are the rates affect expected to affect future financial performance?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"High Profit Margins Aren't Going Anywhere, Says RBC," by Saumya Vaishampayan, The Wall Street Journal, February 17, 2015 ---
http://blogs.wsj.com/moneybeat/2015/02/17/high-profit-margins-arent-going-anywhere-says-rbc/?mod=djem_jiewr_AC_domainid

High profit margins have been a mainstay of the last several earnings seasons, but they’re not shrinking any time soon, according to RBC Capital Markets.

Profit margins represent how much money a company keeps from its sales. Back in the third quarter, profit margins for the S&P 500 were at a record 10.1% of sales. Those sky-high margins have helped companies beat earnings expectations, says Jonathan Golub, chief U.S. market strategist at RBC Capital Markets.

“The vast majority of earnings beats over the last two, three years have been on margins,” he says.

The biggest drivers of higher margins in 2015 will be SG&A — an accounting term that refers to the costs of running a business, such as administrative expenses — and interest expense, he says. In particular, it’s the declining ratio of those expenses to sales that will push margins higher.

SG&A mainly consists of total compensation costs and tends to rise slower than revenues during economic recoveries.

Interest expense, or the cost from borrowing, is likely to remain stable as revenues rise. Interest expense depends on how much a company has borrowed and what interest rates are doing. Historically low interest rates have led companies to push out when their debt becomes due, locking in low interest rates for the next several years.

“These are two areas that people are overlooking,” says RBC’s Mr. Golub. “What we’re saying is that if you analyze the data…[it shows margins] will be at new all-time highs,” he adds.


Teaching Case on Earnings Analysis of Apple Corporation Financial Outcomes
From The Wall Street Journal Weekly Accounitng Review on February 20, 2015

What Icahn Thinks Investors Are Missing in Apple's Earnings
by: Maureen Farrell
Feb 18, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Corporate Taxation, Financial Reporting, International Business, Valuation

SUMMARY: Carl Icahn says analysts and investors have constantly overestimated the tax obligations of Apple Inc., causing them to consistently underestimate the tech giant's earning power and undervalue the company. In his latest missive on Apple, Mr. Icahn outlined the discrepancy he sees between what Apple pays in taxes and what it says it might pay. That was one of the reasons he increased his forecast for Apple's fiscal 2015 earnings to $9.70 per share from $9.60 and boosted his price target for Apple's stock to $216. U.S. companies have a right to pay taxes on foreign earnings in the jurisdiction where they are generated. In most parts of the world where foreign cash is held, that amounts to a much lower rate than the U.S.'s 35% nominal corporate tax rate.

CLASSROOM APPLICATION: This is an interesting article that combines the accounting concepts of financial reporting, corporate tax, and stock valuation. It is excellent to show how areas of accounting interrelate.

QUESTIONS: 
1. (Introductory) Who is Carl Icahn? Why are his views on Apple featured in the Wall Street Journal?

2. (Advanced) What is Mr. Icahn's views on Apple's tax obligations? What are the applicable tax laws? What options does a U.S. company have in classifying international profits?

3. (Advanced) How do Apple's tax obligations impact the company's financial reporting results? Why?

4. (Advanced) How do Apple's tax obligations impact the company's stock valuation? What is Mr. Icahn's point on Apple's value?

5. (Advanced) How did Mr. Icahn arrive at his estimate of Apple's tax rate? Is that reasonable? Why or why not?

6. (Advanced) What is Mr. Icahn's opinion of Apple's stock price? How did he estimate the company's value?

7. (Advanced) What are others saying about Mr. Icahn's views on Apple's financial position? Which viewpoint seems more reasonable?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

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"What Icahn Thinks Investors Are Missing in Apple's Earnings," by Maureen Farrell, The Wall Street Journal, February 18, 2015 ---
http://blogs.wsj.com/moneybeat/2015/02/18/what-icahn-thinks-investors-are-missing-in-apples-earnings/?mod=djem_jiewr_AC_domainid

Carl Icahn thinks the world has missed something big about the world’s biggest company.

The billionaire investor says analysts and investors have constantly overestimated the tax obligations of Apple Inc., causing them to consistently underestimate the tech giant’s earning power and undervalue the company.

In his latest missive on Apple, released last week, Mr. Icahn outlined the discrepancy he sees between what Apple pays in taxes and what it says it might pay. That was one of the reasons he increased his forecast for Apple’s fiscal 2015 earnings to $9.70 per share from $9.60 and boosted his price target for Apple’s stock to $216.

The Street expects Apple’s fiscal 2015–which ends in September–to come in at $8.54 per share on a fully reported basis, according to Thomson Reuters. The most bullish analyst on the Street has a $165 per share price target on Apple’s stock, according to FactSet. On Wednesday afternoon, Apple’s shares traded at $128.41.

Mr. Icahn says that looking at Apple’s actual tax rate on its overseas earnings is a key of how he gets to his $216 per share valuation for the stock. As he wrote:

We believe it’s important to note that we assume a 20% tax rate for the purpose of forecasting Apple’s real cash earnings, not the 26.2% “effective” tax rate used by Apple. We consider this an essential adjustment that many analysts and investors simply fail to understand.

But how did Mr. Icahn arrive at that 20% rate?

U.S. companies have a right to pay taxes on foreign earnings in the jurisdiction where they are generated. In most parts of the world where foreign cash is held, that amounts to a much lower rate than the U.S.’s 35% nominal corporate tax rate.

But Jennifer Blouin, a professor at the Wharton School of the University of Pennsylvania, explained that U.S. companies have a right to treat the tax on foreign earnings in two different ways for accounting purposes. One way is to hold the earnings as “permanently reinvested earnings,” which means the company, for accounting purposes, is saying that it never plans to bring these earnings back to the U.S. and in turn doesn’t have to accrue so-called repatriation taxes. The broad majority of companies have some foreign earnings permanently reinvested abroad for tax purposes, Ms. Blouin said.

Apple treats roughly half of its overseas earnings–or $69.7 billion–as permanently reinvested earnings.

Apple says in its regulatory filing that “substantially all” of its permanently reinvested earnings are held in its Irish subsidiaries, which have a statutory tax rate of 12.5%. (That’s not what Apple actually pays on those Emerald Isle earnings, but that’s fodder for another post). The company says in its filing that it has not accrued an expense for the cost of bringing those earnings back to the U.S. but if it did, the repatriation liability would be $23.3 billion.

But the permanently reinvested earnings aren’t where Mr. Icahn is focusing. He’s looking at the other half, where Apple has booked a $21.5 billion liability for the remainder of the earnings it has accumulated overseas. In 2014, it added $3.5 billion to this liability.

Importantly, Apple, as Mr. Icahn points out, has never said that it plans to repatriate these overseas earnings.

Mr. Icahn wrote in his letter: “It is a non-cash tax since Apple likely will not repatriate the international cash at today’s tax rate. Therefore, we believe the correct way to treat this non-cash tax for the purpose of valuation is to add it back to earnings, reflected in our EPS forecast.”

Continued in article

More Bites of the Apple


Teaching Case on How to Protect Yourself From Tax Identity Theft
From The Wall Street Journal Weekly Accounitng Review on March 6, 2015

Protect Yourself From Tax Identity Theft
by: Laura Saunders
Feb 28, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Fraud, Taxation

SUMMARY: While the IRS publishes little data on tax identity theft, information released by others points to a serious issue. According to Government Accountability Office reports, the IRS lost an estimated $5.8 billion to fraudulent refund claims in 2013, the most recent data available, while blocking about $24 billion in attempts. In 2013 there were almost 2 million suspected tax identity theft incidents, compared with about 440,000 in 2010. Curbing this type of theft may require multiple efforts by businesses, the IRS and Congress. But there are steps people can take to help prevent tax identity theft-and to cope after it happens.

CLASSROOM APPLICATION: This article is appropriate for use in tax classes, both as an explanation of recent tax-return fraud for use as a future tax preparer and adviser, as well as to alert students to protect themselves.

QUESTIONS: 
1. (Introductory) What are some of the problems taxpayers have experienced regarding identity theft?

2. (Advanced) What company was linked to some of the fraudulent returns? What parties became involved? How has that issue been addressed?

3. (Advanced) What is an IP PIN? How does a taxpayer obtain one? What protection does it offer? Is this something everyone should get?

4. (Advanced) What advice does the article offer regarding emails? Have you ever received an email purporting to be from the IRS? If so, did it seem credible?

5. (Advanced) What suggestions does the article offer regarding taxpayers staying proactive? How could you use this information to advise your future clients?

6. (Advanced) What should taxpayers do if they suspect fraud? How long does it take to resolve the matter?

7. (Advanced) What can Congress and the IRS do to combat and limit fraud and tax identity theft? Why haven't they taken steps to do this?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

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by Laura Saunders and Liz Moyer
Feb 14, 2015
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"Protect Yourself From Tax Identity Theft," by Laura Saunders, The Wall Street Journal, February 28, 2015 ---
http://www.wsj.com/articles/protect-yourself-from-tax-identity-theft-1425056152?mod=djem_jiewr_AC_domainid

Robert Scott Jack took precautions most people never dream of to prevent tax identity theft.

Mr. Jack, a retired federal cybersecurity expert in Alexandria, Va., who now works as a consultant, shunned online tax-preparation programs that store data on the Internet. He researched the security features of different software programs and opted for a packaged—not downloaded—product. He checked the package for signs of tampering before loading it into his secure home computer.

Yet soon after he tried to electronically file his federal tax return through TurboTax on Feb. 14, the company told him it been rejected because someone already had filed using his Social Security number.

“I was disappointed and frustrated,” Mr. Jack says. He knew that “sweeping up the broken glass” would take three days of scrambling to lock down financial accounts, plus many more months of waiting for resolution.

Plenty of other taxpayers are feeling the same frustration.

In early February, a surge of fraudulent state tax returns forced Intuit , the maker of TurboTax—by far the most popular tax-prep program—to suspend state e-filings for 24 hours.

Several states, including Utah, Kentucky, North Dakota and Minnesota, suspended processing returns for a few days. State officials were alarmed because many of the false filings included data apparently drawn from taxpayers’ 2013 tax returns.

Since then there have been many reports of fraudulent federal returns linked to TurboTax that also apparently used 2013 information.

Both the Federal Bureau of Investigation and the Internal Revenue Service’s criminal division are probing the issues at TurboTax, according to a person familiar with the matter, and Congress is looking into them as well. A spokeswoman for Intuit says the company isn’t the target of an FBI investigation, and Chief Executive Brad Smith says that the company hasn’t had a data breach.

Much remains unclear about this year’s rash of fraudulent filings—especially how they compare in size or success to others, or whether they affected a disproportionate number of TurboTax users.

While the IRS publishes little data on tax identity theft, information released by others points to a serious issue. According to Government Accountability Office reports, the IRS lost an estimated $5.8 billion to fraudulent refund claims in 2013, the most recent data available, while blocking about $24 billion in attempts. In 2013 there were almost 2 million suspected tax identity theft incidents, compared with about 440,000 in 2010, according to the Treasury Inspector General for Tax Administration.

Curbing this type of theft may require multiple efforts by businesses, the IRS and Congress, says Neal O’Farrell, a cybersecurity specialist at the Identity Theft Council, a nonprofit advocacy group in Walnut Creek, Calif. But there are steps people can take to help prevent tax identity theft—and to cope after it happens.

Ask for an IP PIN. The IRS issues victims of tax identity theft a six-digit Identity Protection PIN for use in filing returns once cases have been resolved. Returns can’t be filed without the number, and the taxpayer receives a new one every year.

But you don’t have to be a victim to obtain such a PIN. Starting this year, an IRS pilot program is giving PINs to people who filed federal returns as residents of Georgia, Florida and the District of Columbia last year. (These are the areas with the highest percentage rate of tax identity theft.) To get one, apply at www.irs.gov.

The IRS also recently sent letters offering PINs to about 1.7 million people who were selected because the agency had seen suspicious activity in their accounts.

In addition, people who are potential victims of identity theft—be it from a stolen purse or a data breach—can notify the IRS by filing Form 14039, “Identity Theft Affidavit,” and checking Box 2. The IRS may or may not grant a PIN, but filing the form could qualify taxpayers for other heightened security measures, according to an IRS spokeswoman.

Andy Mattson, a certified public accountant at Moss Adams in Campbell, Calif., hasn’t been a victim of identity theft. But he received a PIN from the IRS after a 2012 data breach of South Carolina’s tax system exposed the information of 3.8 million individuals, including his—because he prepares corporate tax returns filed there.

Mr. Mattson urges everyone who is at risk to file Form 14039. “It only takes a few minutes and could save many hours of your time or a professional’s,” he says.

Shun email links and attachments. Realistic-looking emails can harbor malware that could steal your information—a practice known as phishing. The massive South Carolina data breach, for example, occurred after state tax employees opened links in phishing emails, according to an official report.

Experts say it’s unfortunate that many legitimate offers from financial firms come with embedded links. “Marketers are looking for reactions they can measure, but as a result consumers become less cautious and fall prey to malicious emails that seem real,” says Mr. O’Farrell, who also advises consumer-credit firm Credit Sesame. Instead of clicking a link, he says, enter through the company’s website.

The IRS reminds taxpayers that it never initiates contact by email, text messages or social media.

Stay proactive. As of now, there is no way to find out if someone has already filed a tax return using your Social Security number until you send in your own. Filing early can beat thieves to the punch, but taxpayers with investments or complex returns often must wait for paperwork to arrive.

Meanwhile, practice cyber-hygiene—especially in the wake of data breaches such as the massive one at health insurer Anthem, which may have exposed the sensitive personal information of nearly 80 million people, according to the company.

“There’s so much stolen information out there now, and it’s all for sale,” says Mr. O’Farrell.

Experts advise using strong passwords and changing them frequently. Update computer applications, especially antivirus software, and make sure that Wi-Fi access is password-protected.

If you prepare your own taxes using a commercial product, make sure your personal information is accurate when you log into the account—especially the bank account number listed for direct deposit of a refund. Inaccurate information could be a telltale sign of a fraudster.

Be careful with paper mail, especially during tax season, when sensitive documents arrive. Guard against theft of such documents and be careful when disposing of them, as thieves can make use of partial information such as a date of birth or bank account number.

Think twice before paying for ID-protection services, experts say. Typically they don’t claim to prevent tax identity theft, which is the most common type of such theft, according to Federal Trade Commission statistics. Most services actually help more with recovery than prevention.

What about filing a paper tax return? That may not help either. If thieves can get your Social Security number and other information via another source, they can still file a false return. An e-filing rejection notice from the IRS is often the first sign of identity theft, Mr. Mattson says, so the extra time it takes to process a paper return delays the discovery and could compound the damage.

If you are a victim, act fast—and then plan to wait. The IRS has a list of steps for victims to take at www.irs.gov before calling the agency. They include filing a police report, an affidavit with the IRS and a complaint with the Federal Trade Commission; contacting one of the three major credit-reporting companies to place a 90-day fraud alert on your credit records; and closing any fraudulent accounts opened in your name.

Victims may want to impose a credit freeze with the credit-reporting firms, which can prevent extensions of credit using their identity. They should also file their tax returns on paper, the IRS says.

After taking these steps, Mr. Jack contacted the firms holding every financial account he and his wife had, including pension and 401(k) plans. He didn’t close the accounts, but the sponsors did issue fraud alerts and in some cases added an extra layer of security.

Victims say the mad dash to deal with tax identity theft typically takes two to three days, followed by a long wait while the IRS completes its investigation. How long? A spokeswoman for the agency say 120 days is the norm, but Mr. Jack and other recent victims say they have been told to expect resolution in 180 days.

In complex cases, the wait can be longer and the process more frustrating. National Taxpayer Advocate Nina Olson has chided the IRS because taxpayers in such cases don’t have a single contact person within the agency, among other issues. Taxpayers “shouldn’t have to navigate the maze of IRS operations, recounting their experience time and again,” she said.

In response, the IRS says that the current system allows taxpayers to get help when they need it and doesn’t depend on a particular employee’s availability.

Tax refunds aren’t paid until a case is closed, which is one more reason to minimize them by not having too much money withheld from paychecks.

Urge Congress to act. Top lawmakers in both the House and Senate are probing this year’s spate of tax identity thefts, and the Senate Finance Committee is expected to focus on them in a hearing on tax scams in March.

Experts say the fraudulent-filing epidemic is partly of the government’s own making, because easy e-filing and rapid refundsboth priorities in Washington—also offer myriad opportunities to criminals. The IRS often doesn’t get wage data until late spring, long after many tax refunds have been paid, so it is at a disadvantage.

Legislation is required, however, to change key elements of the current system, such as speeding up data delivery or allowing employers to mask a portion of an employee’s Social Security number on a W-2.

The IRS, which has had its budget cut by $1.2 billion over the past five years, recently estimated that $82 million more spent on identity theft prevention could save nearly $1 billion in revenue by 2018.

Keep perspective. Experts say tax identity theft can actually be one of the least harmful types of ID theft. Although the process is painful and slow, taxpayers can work out their problems with the IRS.

Continued in article

 


Teaching Case on New Efforts to Clarify the Forthcoming Revenue Standard
From The Wall Street Journal Weekly Accounitng Review on March 6, 2015

FASB and IASB Tentatively Decide to Clarify the New Revenue Standard
by: Deloitte Risk Journal Editor
Feb 27, 2015
Click here to view the full article on WSJ.com
 

TOPICS: FASB, IASB, Intellectual Property, Licensing, Revenue Recognition

SUMMARY: In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued a new revenue standard that will replace most of the current guidance on revenue recognition. Since its issuance, however, stakeholders have raised a number of implementation questions, many of which have been discussed at meetings of the boards' joint transition resource group (TRG) on revenue recognition. The FASB directed its staff to draft a proposed Accounting Standards Update for possible ratification by the Board at a future meeting.

CLASSROOM APPLICATION: This article offers an update to the FASB and IASB revenue recognition guidance, especially in the area of licenses for intellectual property. It offers comparisons of the rules under each board.

QUESTIONS: 
1. (Introductory) What is FASB? What is its area of authority? What is IASB? What is its area of authority? How do the two organizations overlap? How are they different?

2. (Advanced) What are the specifics of the new revenue standard? To whom to they apply?

3. (Advanced) What is intellectual property? What is another name for that type of asset? What is licensing? How does licensing relate to intellectual property? How is licensing reflected in the accounting records?

4. (Advanced) What tentative decisions are reported in the article? How do FASB's decisions compare with IASB's decisions?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

 

"FASB and IASB Tentatively Decide to Clarify the New Revenue Standard," by Deloitte Risk Journal Editor, The Wall Street Journal, February 27, 2015 ---
http://deloitte.wsj.com/riskandcompliance/2015/02/27/fasb-and-iasb-tentatively-decide-to-clarify-the-new-revenue-standard/?mod=djem_jiewr_AC_domainid

In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB)  issued a new revenue standard¹ that will replace most of the current guidance on revenue recognition. Since its issuance, however, stakeholders have raised a number of implementation questions, many of which have been discussed at meetings of the boards’ joint transition resource group (TRG) on revenue recognition.²

For example, certain aspects of accounting for licenses of intellectual property (IP) and the identification of performance obligations have made repeat appearances on the TRG’s meeting agendas. To better understand the issues related to these topics, the boards’ staffs have undertaken research projects. At the January 2015 TRG meeting, the FASB staff noted that it would discuss its recommendations publicly with the FASB in February 2015.

The summary below compares the tentative decisions made at the boards’ joint meeting on February 18, 2015, related to licenses of IP and identifying performance obligations. The appendix discusses the FASB staff’s recommendations and the FASB’s tentative decisions in greater detail. For more information, see the meeting materials on the IASB’s website.

Tentative Decisions

The following summarizes and compares the boards’ tentative decisions related to IP:

Topic: Determining the nature of an entity’s promise in granting a license

FASB’s Tentative Decision: The FASB tentatively agreed with its staff’s recommendation to update the standard to include “Articulation B,” which would require an entity to characterize the nature of a license as either functional or symbolic.

IASB’s Tentative Decision: The IASB tentatively agreed with its staff’s recommendation to update the standard to include “Articulation A,” which would potentially require an entity to assess the utility of a license before characterizing it as functional or symbolic.

Comparison: The decisions are different, but the differences are currently expected to affect only a small subset of licenses.

Topic: Sales-based and usage-based royalties

FASB’s Tentative Decision: The FASB tentatively agreed with its staff’s recommendation to update the standard to clarify that rather than splitting a royalty (and applying both the royalty and general constraints to it), an entity would apply the royalty constraint if the license is the predominant feature to which the royalty relates.

IASB’s Tentative Decision: The IASB tentatively agreed with its staff’s recommendation, which was the same as the FASB staff’s.

Comparison: The decisions are the same; continued convergence is expected.

The following summarizes and compares the boards’ tentative decisions related to identifying performance obligations:

Topic: Identifying promised goods or services

FASB’s Tentative Decision: The FASB tentatively agreed with its staff’s recommendation to amend the standard to permit entites to evaluate the materiality of promises at the contract level and that, if the promises are immaterial, the entity would not need to evaluate such promises further.

IASB’s Tentative Decision: The IASB tentatively agreed with its staff’s recommendation that no updates or standard setting should be undertaken.

Comparison: The decisions are different but because they are intended to clarify the guidance, divergence is currently not expected.

Topic: Distinct in the context of the contract

FASB’s Tentative Decision: The FASB tentatively agreed with its staff’s recommendations to update the standard to (1) define the term “separately identifiable,” (2) reframe the separation criteria to focus on a bundle of goods or services, and (3) add illustrative examples.

IASB’s Tentative Decision: The IASB tentatively agreed with its staff’s recommendation to add illustrative examples but otherwise not amend the standard’s guidance.

Comparison: The decisions are the same except for what were termed “minor” wording differences. As a result, divergence is currently not expected.

Topic: Shipping and handling services

FASB’s Tentative Decision: The FASB tentatively agreed with its staff’s recommendation to add guidance that (1) clarifies that shipping and handling activities that occur before control transfers to the customer are fulfillment costs and (2) allows entities to elect a policy to treat shipping and handling activities as fulfillment costs if they do not represent the predominant activity in the contract and they occur after control transfers.

IASB’s Tentative Decision: The IASB tentatively agreed with its staff’s recommendation that no updates or standard setting should be undertaken at this time because the staff was unclear about whether and, if so, the extent to which shipping and handling is an issue for IFRS constituents.

Comparison: It is unclear whether the different decisions will lead to divergence because it appears that the boards may need further information to finalize their views. Specifically, the boards may later decide to make changes on the basis of future feedback from their constituents or the revised text.

Next Steps

The FASB directed its staff to draft a proposed Accounting Standards Update for possible ratification by the Board at a future meeting.

Editor’s Note: While the IASB tentatively agreed to certain revisions of IFRS 15, it did not decide on the timing of a draft for exposure. However, on the basis of some of the discussions, a draft may be exposed in June or July of 2015.

Produced by Joe DiLeo, Scott Streaser, and Jiaojiao Tian, Deloitte & Touche LLP

The new Revenue Recognition Standard in accounting is costing billions to implement

Teaching Case on New Revenue Recognition Rules
From The Wall Street Journal Weekly Accounting Review on January 30, 2015

For New Revenue-Recognition Rules, It's Ready vs. Not
by: Maxwell Murphy
Jan 27, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Deferred Revenues, Revenue Recognition

SUMMARY: Will sweeping revisions in revenue-recognition rules take effect as scheduled? The planned changes, part of a broader effort to align U.S. and international accounting standards, involve so-called deferred revenue-money companies have already collected from their customers but which they recognize as revenue over time. The change is set to start Jan. 1, 2017, but officials at the FASB received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts and adjust past financial results. A group of U.S. software companies asked the FASB for more guidance and a two-year delay.

CLASSROOM APPLICATION: This is an excellent update regarding new revenue-recognition rules.

QUESTIONS: 
1. (Introductory) What accounting rules are changing? When is the change set to begin? Who is changing the rules?

2. (Advanced) What is revenue recognition? What is deferred revenue? How are the financial statements impacted by each of these? How will the new rules affect company's financial statements? Will different companies or industries be affected differently?

3. (Advanced) What is the reasoning behind the change in rules? Who will be benefited by the change?

4. (Advanced) What parties are concerned about the effective date of the new rules? What challenges are they reporting? What did they request?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

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"For New Revenue-Recognition Rules, It's Ready vs. Not," by Maxwell Murphy, The Wall Street Journal, January 27, 2015 ---
http://www.wsj.com/articles/for-new-revenue-recognition-rules-its-ready-vs-not-1422316175?mod=djem_jiewr_AC_domainid

Call it the $360 billion question: whether to delay one of the biggest accounting changes in decades.

The answer isn’t expected until early in the second quarter.

The sweeping revisions in revenue-recognition rules “will represent a change for many industries,” said Christine Klimek, a spokeswoman for the Financial Accounting Standards Board, after a joint meeting Monday with its international counterparts. “There are bound to be questions. The answers to most of those questions can be found within the standard itself.”

The final draft of the new rules, unveiled last May after years of deliberations, would change the way thousands of companies book revenue. They would affect how auto makers account for car sales and telephone companies account for mobile-phone contracts.

The planned changes, part of a broader effort to align U.S. and international accounting standards, involve so-called deferred revenue—money companies have already collected from their customers but which they recognize as revenue over time. The idea is to make it easier for investors to compare companies across countries and industries.

Companies in the S&P 500 index have about $360 billion of such revenue on their books, according to S&P Capital IQ. Boeing Co. , Microsoft Corp. and International Business Machines Corp. have a combined $60 billion in deferred revenue, and the new rules will determine how much of that they will move to the top line—and when.

The accounting shakeup is set to start Jan. 1, 2017, but officials at the FASB received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts and rejigger past financial results.

Last Wednesday, a group of U.S. software companies, including Adobe Systems Inc., Symantec Corp. and VMware Inc., asked the FASB for more guidance and a two-year delay.

Exactly what deferred revenue will be counted as sales will vary widely between companies and industries. According to the Securities and Exchange Commission, as many as 250 questions linger as to how to implement the rules.

Auto makers such as Ford Motor Co. and General Motors Co. say the rules might force them to account separately for each car sold around the world, rather than group them into comparable transactions. They estimate they might have to spend as much as $300 million each on accounting technology, and they claim new financial figures based on per-car accounting will provide little benefit for investors.

AT&T Inc. and Verizon Communications Inc. said the current deadline doesn’t give them enough time. Both companies cited difficulty in restating results for prior periods.

Microsoft signaled investors over the summer that the rules “will have a material impact” on its financial results. A company spokesman declined to elaborate.

“The amount of work that it will mean for an accounting team can be overwhelming,” said Ken Goldman, chief financial officer of Fiksu Inc., a mobile marketing company that is preparing its books to potentially go public. He agrees with the rules conceptually, but said they could be more complicated and costly for companies than the Sarbanes-Oxley financial reforms of 2002.

Moreover, if companies don’t adequately prepare Wall Street, the revenue changes could be jarring.

When Apple Inc. changed the way it accounted for software updates for the iPhone in early 2010, the company’s financial results surpassed analysts’ expectations by billions of dollars. Though Apple was simply complying with new accounting rules that affected the way it booked the sales, the Nasdaq Stock Market had to temporarily halt after-hours trading of Apple’s shares to give investors time to digest the news.

Some big companies say they plan to be ready if the new revenue-recognition rules take effect as scheduled. “We do not need an extension,” said Liesl Nebel, accounting-policy controller at Intel Corp. “If they do allow an extension, we would like to early adopt.”

Defense contractor General Dynamics Corp. said any delay would cause it to spend more time and money to run parallel books with two different standards. “Do not penalize the companies that have moved forward,” wrote Kimberly Kuryea, its controller, in a letter to the FASB this month. “[The] costs will naturally and inevitably grow if the implementation period is extended.” The company declined to comment further.

The FASB needs to consider that argument “very seriously,” said Prabhakar Kalavacherla, a partner at auditor KPMG LLP who was a board member of the International Accounting Standards Board and worked on the project to align global revenue rules.

But smaller public companies with fewer resources generally will have a harder time getting their books in order, even though they wouldn’t have to report comparative figures for farther back than the prior year. Most large companies expect to produce figures for the previous two years.

Continued in article

Bob Jensen's threads on revenue accounting controversies ---
http://faculty.trinity.edu/rjensen/ecommerce/eitf01.htm 


Teaching Case on Forthcoming Lease Accounting Rules
From The Wall Street Journal Weekly Accounting Review on March 20, 2015

Avolon CFO: Untangling New Lease Accounting Rules
by: Noelle Knox
Mar 13, 2015
Click here to view the full article on WSJ.com
 

TOPICS: FASB, GAAP, Lease Accounting

SUMMARY: U.S. accounting regulators are debating sweeping changes for long-term capital leases; Avolon Chief Financial Officer Andy Cronin is interviewed on the issue.

CLASSROOM APPLICATION: This article would be useful in a financial accounting course when covering long-term capital leases.

QUESTIONS: 
1. (Introductory) What is lease accounting? What are the current rules? What are the proposed changes?

2. (Advanced) What is FASB? Why is it involved with lease accounting?

3. (Advanced) What are International Financial Reporting Standards? What is GAAP? How are they similar? How do they differ?

4. (Advanced) What are the similarities and differences between GAAP And IFRS on lease accounting? How will the rules compare if the proposed change are made?

5. (Advanced) How could the proposed changes for lease accounting influence or impact how management makes decisions? How would it affect company financial statements?

6. (Advanced) How do interest rates affect lease accounting? Would the proposed change in the rules affect that aspect of lease accounting?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Avolon CFO: Untangling New Lease Accounting Rules," by Noelle Knox, The Wall Street Journal, March 13, 2015 ---
http://blogs.wsj.com/cfo/2015/03/11/internal-auditors-face-pressure-over-results-survey-says/?mod=djem_jiewr_AC_domainid

Internal audits of companies are fraught with political tension, and a new survey shows many auditors are under inappropriate pressure.

A little more than half of North American chief audit executives have been directed to change or ignore results of their investigations, according to the Institute of Internal Auditors Research Foundation.

The survey of 500 audit executives found that many of the auditors had been threatened either physically or with being fired, while others suffered cuts in internal audits staff and budgets as part of concerted efforts to neutralize them.

The results underscored the extent to which chief audit executives “encountered some form of political pressure, almost on a daily basis, said Larry Rittenberg, one of the authors of the report and professor emeritus at the University of Wisconsin-Madison.

The foundation interviewed the auditors last year through in-person meetings, focus groups and surveys. The report doesn’t name companies or government entities.

Of those questioned, 55% reported pressure to change their audit reports, while 49% said their managers or executives directed them to avoid high-risk areas of the business.

The report also found 32% of the auditors reported that executives used audits to attack others in the company, by asking investigations to focus on low-risk areas to find dirt on specific people.

The results will be used to raise awareness of issues auditors face and make recommendations for improvement, Mr. Rittenberg said.

“We’re talking about how we build a good support structure for confident internal auditors,” he said.


Teaching Case on Internal Auditing Issues
From The Wall Street Journal Weekly Accounting Review on March 20, 2015

Internal Auditors Face Pressure Over Results, Survey Says
by: Vipal Monga
Mar 11, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Auditing, Internal Audit

SUMMARY: The survey of 500 audit executives found that many of internal auditors had been threatened either physically or with being fired, while others suffered cuts in internal audits staff and budgets as part of concerted efforts to neutralize them.

CLASSROOM APPLICATION: This article would be interesting for an auditing class for coverage of internal auditing.

QUESTIONS: 
1. (Introductory) What is internal auditing? Who performs these duties? Who supervises internal auditing? What is the purpose of internal auditing?

2. (Advanced) What were the findings of the survey discussed in the article? Who was surveyed?

3. (Advanced) How are internal auditors pressured? If internal auditors are pressured, who could be harmed by these pressures?

4. (Advanced) What are the problems associated with political pressure imposed on internal auditors? How should these challenges be addressed by management? Should other parties be involved in addressing the situation and resolving these problems?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Internal Auditors Face Pressure Over Results, Survey Says," by Vipal Monga, The Wall Street Journal, March 11, 2015 ---
http://blogs.wsj.com/cfo/2015/03/11/internal-auditors-face-pressure-over-results-survey-says/?mod=djem_jiewr_AC_domainid

Internal audits of companies are fraught with political tension, and a new survey shows many auditors are under inappropriate pressure.

A little more than half of North American chief audit executives have been directed to change or ignore results of their investigations, according to the Institute of Internal Auditors Research Foundation.

The survey of 500 audit executives found that many of the auditors had been threatened either physically or with being fired, while others suffered cuts in internal audits staff and budgets as part of concerted efforts to neutralize them.

The results underscored the extent to which chief audit executives “encountered some form of political pressure, almost on a daily basis, said Larry Rittenberg, one of the authors of the report and professor emeritus at the University of Wisconsin-Madison.

The foundation interviewed the auditors last year through in-person meetings, focus groups and surveys. The report doesn’t name companies or government entities.

Of those questioned, 55% reported pressure to change their audit reports, while 49% said their managers or executives directed them to avoid high-risk areas of the business.

The report also found 32% of the auditors reported that executives used audits to attack others in the company, by asking investigations to focus on low-risk areas to find dirt on specific people.

The results will be used to raise awareness of issues auditors face and make recommendations for improvement, Mr. Rittenberg said.

“We’re talking about how we build a good support structure for confident internal auditors,” he said.


Humor March 1-31, 2015

Abbott and Costello --- http://abbottandcostello.net/

Timothy McSweeney's Internet Tendency --- http://www.mcsweeneys.net/tendency

Umberto Eco’s How To Write a Thesis: A Witty, Irreverent & Highly Practical Guide Now Out in English ---
http://www.openculture.com/2015/03/umberto-ecos-how-to-write-a-thesis.html

29 Clever License Plates that Slipped by the DMV ---
http://www.odometer.com/lifestyle/5787/29-clever-license-plates-that-slipped-past-the-dmv#slide/0

Imprint of license plate in snowbank at crime scene leads to arrest of 2 burglary suspects ---
http://www.usnews.com/news/offbeat/articles/2015/03/10/imprint-of-license-plate-in-snow-leads-to-burglary-suspects

Nun and the Priest --- https://www.youtube.com/embed/Dn7RzXDsjYY
There are multiple humor videos at this link.

Kitten and the Scary Thing --- https://www.youtube.com/watch?v=_MqHN-4okZ4&


Forwarded by Mary Jo

WHY ST. PATRICK'S DAY IS CELEBRATED EACH YEAR IN AMERICA
  

The reason the Irish celebrate St. Patrick's Day is because this is when St. Patrick drove the Norwegians out of Ireland.
It seems that some centuries ago, many Norwegians came to Ireland to escape the bitterness of the Norwegian winter. Ireland was having a famine at the time, and food was scarce. The Norwegians were eating almost all the fish caught in the area, leaving the Irish with nothing to eat but potatoes.

St. Patrick, taking matters into his own hands, as most Irishmen do, decided the Norwegians had to go. Secretly, he organized the Irish IRATRION (Irish Republican Army to Rid Ireland of Norwegians) Irish members of IRATRION passed a law in Ireland that prohibited merchants from selling ice boxes or ice to the Norwegians, in hopes that their fish would spoil. This would force the Norwegians to flee to a colder climate where their fish would keep.

Well, the fish spoiled, all right, but the Norwegians, as everyone knows today, thrive on spoiled fish.

So, faced with failure, the desperate Irishmen sneaked into the Norwegian fish storage caves in the dead of night and sprinkled the rotten fish with lye, hoping to poison the Norwegian invaders. But, as everyone knows, the Norwegians thought this only added to the flavor of the fish, and they liked it so much they decided to call it "lutefisk", which is Norwegian for "luscious fish".
Matters became even worse for the Irishmen when the Norwegians started taking over the Irish potato crop and making something called "lefse".

Poor St. Patrick was at his wit's end, and finally on March 17th, he blew his top and told all the Norwegians to "GO TO HELL". So they all got in their boats and emigrated to Minnesota, the only other place on earth where smelly fish, old potatoes and plenty of cold weather can be found in abundance.
The End.


Forwarded by Maureen
A RETIREE'S LAST TRIP TO COSTCO
Yesterday I was at Costco buying a large bag of Purina dog chow for my loyal pet, Necco, the Wonder Dog, which weighs 191 lbs. I was in the check-out line when a woman behind me asked if I had a dog. What did she think I had an elephant?

So because I'm retired and have little to do, on impulse I told her that no, I didn't have a dog, I was starting the Purina Diet again. I added that I probably shouldn't, because I ended up in the hospital last time, but that I'd lost 50 pounds before I awakened in an intensive care ward with tubes coming out of most of my orifices and IVs in both arms.

I told her that it was essentially a Perfect Diet and that the way that it works is, to load your jacket pockets with Purina Nuggets and simply eat one or two every time you feel hungry. The food is nutritionally complete so it works well and I was going to try it again. (I have to mention here that practically everyone in line was now enthralled with my story.)

Horrified, she asked if I ended up in intensive care, because the dog food poisoned me. I told her no, I stopped to Pee on a Fire Hydrant and a car hit me I thought the guy behind her was going to have a heart attack he was laughing so hard.

Costco won't let me shop there anymore. Better watch what you ask retired people. They have all the time in the World to think of crazy things to say.


Forwarded by Paula

Little Thelma comes home from first grade and tells her father that they learned about the history of Valentine's Day. And, "Since Valentine's Day is for a Christian saint and we're Jewish," she asks, "Will God get mad at me for giving someone a valentine?

Thelma's father thinks a bit then says "No, I don't think God would get mad. Who do you want to give a valentine to?”

"The Isis group," she says.

"Why them?" her father asks in shock.

"Well," she says, "I thought that if a little American Jewish girl could have enough love to give them a valentine, they might start to think that maybe we're not all bad, and maybe start loving people a little bit. And if other kids saw what I did and then they sent valentines to them, they'd love everyone a lot. And then they'd start going all over the place telling everyone how much they loved them and how they didn't hate anyone anymore.”

Her father's heart swells and he looks at his daughter with newfound pride. "Thelma, that's the most wonderful thing I've ever heard.”

"I know," Thelma says, "and once that gets them out in the open, the Marines could blow the shit out of them."

 




 

Humor Between February March 1-31, 2015 --- http://faculty.trinity.edu/rjensen/book15q1.htm#Humor033115

Humor Between February 1-28, 2015 --- http://faculty.trinity.edu/rjensen/book15q1.htm#Humor022815

Humor Between January 1-31, 2015 --- http://faculty.trinity.edu/rjensen/book15q1.htm#Humor013115

Humor Between December 1-31, 2014 --- http://faculty.trinity.edu/rjensen/book14q4.htm#Humor123114

Humor Between November 1-30, 2014 --- http://faculty.trinity.edu/rjensen/book14q4.htm#Humor113014

Humor Between October 1-31, 2014 --- http://faculty.trinity.edu/rjensen/book14q4.htm#Humor103114

Humor Between September 1-30, 2014 --- http://faculty.trinity.edu/rjensen/book14q3.htm#Humor093014

Humor Between August 1-31, 2014 --- http://faculty.trinity.edu/rjensen/book14q3.htm#Humor083114

Humor Between July 1-31, 2014 --- http://faculty.trinity.edu/rjensen/book14q3.htm#Humor073114

Humor Between June 1-30, 2014 --- http://faculty.trinity.edu/rjensen/book14q2.htm#Humor063014

Humor Between May 1-31, 2014 --- http://faculty.trinity.edu/rjensen/book14q2.htm#Humor053114

Humor Between April 1-30, 2014 --- http://faculty.trinity.edu/rjensen/book14q2.htm#Humor033114

 




And that's the way it was on March 31, 2015 with a little help from my friends.

 

Bob Jensen's gateway to millions of other blogs and social/professional networks ---
http://faculty.trinity.edu/rjensen/ListservRoles.htm

Bob Jensen's Threads --- http://faculty.trinity.edu/rjensen/threads.htm

Bob Jensen's Blogs --- http://faculty.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://faculty.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm
Bob Jensen's past presentations and lectures --- http://faculty.trinity.edu/rjensen/resume.htm#Presentations   

Free Online Textbooks, Videos, and Tutorials --- http://faculty.trinity.edu/rjensen/ElectronicLiterature.htm#Textbooks
Free Tutorials in Various Disciplines --- http://faculty.trinity.edu/rjensen/Bookbob2.htm#Tutorials
Edutainment and Learning Games --- http://faculty.trinity.edu/rjensen/000aaa/thetools.htm#Edutainment
Open Sharing Courses --- http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Bob Jensen's Resume --- http://faculty.trinity.edu/rjensen/Resume.htm
 

Bob Jensen's Homepage --- http://faculty.trinity.edu/rjensen/

Accounting Historians Journal --- http://www.libraries.olemiss.edu/uml/aicpa-library  and http://clio.lib.olemiss.edu/cdm/landingpage/collection/aah
Accounting Historians Journal
Archives--- http://www.olemiss.edu/depts/general_library/dac/files/ahj.html
Accounting History Photographs --- http://www.olemiss.edu/depts/general_library/dac/files/photos.html


 

For an elaboration on the reasons you should join a ListServ (usually for free) go to   http://faculty.trinity.edu/rjensen/ListServRoles.htm

AECM (Accounting Educators)  http://listserv.aaahq.org/cgi-bin/wa.exe?HOME
The AECM is an email Listserv list which started out as an accounting education technology Listserv. It has mushroomed into the largest global Listserv of accounting education topics of all types, including accounting theory, learning, assessment, cheating, and education topics in general. At the same time it provides a forum for discussions of all hardware and software which can be useful in any way for accounting education at the college/university level. Hardware includes all platforms and peripherals. Software includes spreadsheets, practice sets, multimedia authoring and presentation packages, data base programs, tax packages, World Wide Web applications, etc

Roles of a ListServ --- http://faculty.trinity.edu/rjensen/ListServRoles.htm
 

CPAS-L (Practitioners) http://pacioli.loyola.edu/cpas-l/  (closed down)
CPAS-L provides a forum for discussions of all aspects of the practice of accounting. It provides an unmoderated environment where issues, questions, comments, ideas, etc. related to accounting can be freely discussed. Members are welcome to take an active role by posting to CPAS-L or an inactive role by just monitoring the list. You qualify for a free subscription if you are either a CPA or a professional accountant in public accounting, private industry, government or education. Others will be denied access.

Yahoo (Practitioners)  http://groups.yahoo.com/group/xyztalk
This forum is for CPAs to discuss the activities of the AICPA. This can be anything  from the CPA2BIZ portal to the XYZ initiative or anything else that relates to the AICPA.

AccountantsWorld  http://accountantsworld.com/forums/default.asp?scope=1 
This site hosts various discussion groups on such topics as accounting software, consulting, financial planning, fixed assets, payroll, human resources, profit on the Internet, and taxation.

Business Valuation Group BusValGroup-subscribe@topica.com 
This discussion group is headed by Randy Schostag [RSchostag@BUSVALGROUP.COM

 


 

Concerns That Academic Accounting Research is Out of Touch With Reality

I think leading academic researchers avoid applied research for the profession because making seminal and creative discoveries that practitioners have not already discovered is enormously difficult. Accounting academe is threatened by the twin dangers of fossilization and scholasticism (of three types: tedium, high tech, and radical chic)
From http://faculty.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm
 

“Knowledge and competence increasingly developed out of the internal dynamics of esoteric disciplines rather than within the context of shared perceptions of public needs,” writes Bender. “This is not to say that professionalized disciplines or the modern service professions that imitated them became socially irresponsible. But their contributions to society began to flow from their own self-definitions rather than from a reciprocal engagement with general public discourse.”

 

Now, there is a definite note of sadness in Bender’s narrative – as there always tends to be in accounts of the shift from Gemeinschaft to Gesellschaft. Yet it is also clear that the transformation from civic to disciplinary professionalism was necessary.

 

“The new disciplines offered relatively precise subject matter and procedures,” Bender concedes, “at a time when both were greatly confused. The new professionalism also promised guarantees of competence — certification — in an era when criteria of intellectual authority were vague and professional performance was unreliable.”

But in the epilogue to Intellect and Public Life, Bender suggests that the process eventually went too far. “The risk now is precisely the opposite,” he writes. “Academe is threatened by the twin dangers of fossilization and scholasticism (of three types: tedium, high tech, and radical chic). The agenda for the next decade, at least as I see it, ought to be the opening up of the disciplines, the ventilating of professional communities that have come to share too much and that have become too self-referential.”

 

What went wrong in accounting/accountics research? 
How did academic accounting research become a pseudo science?
http://faculty.trinity.edu/rjensen/theory01.htm#WhatWentWrong

Avoiding applied research for practitioners and failure to attract practitioner interest in academic research journals ---
"Why business ignores the business schools," by Michael Skapinker
Some ideas for applied research ---
http://faculty.trinity.edu/rjensen/theory01.htm#AcademicsVersusProfession

 

Clinging to Myths in Academe and Failure to Replicate and Authenticate Research Findings
http://faculty.trinity.edu/rjensen/theory01.htm#Myths

 

Poorly designed and executed experiments that are rarely, I mean very, very rarely, authenticated
http://faculty.trinity.edu/rjensen/theory01.htm#PoorDesigns
 

Discouragement of case method research by leading journals (TAR, JAR, JAE, etc.) by turning back most submitted cases --- http://faculty.trinity.edu/rjensen/000aaa/thetools.htm#Cases
 

Economic Theory Errors
Where analytical mathematics in accountics research made a huge mistake relying on flawed economic theory and interval/ratio scaling

http://faculty.trinity.edu/rjensen/theory01.htm#EconomicTheoryErrors

 

Accentuate the Obvious and Avoid the Tough Problems (like fraud) for Which Data and Models are Lacking
http://faculty.trinity.edu/rjensen/theory01.htm#AccentuateTheObvious

 

Financial Theory Errors
Where capital market research in accounting made a huge mistake by relying on CAPM

http://faculty.trinity.edu/rjensen/theory01.htm#AccentuateTheObvious

 

Philosophy of Science is a Dying Discipline
Most scientific papers are probably wrong
http://faculty.trinity.edu/rjensen/theory01.htm#PhilosophyScienceDying

 

Accountancy, Tax, IFRS, XBRL, and Accounting History News Sites  --- http://faculty.trinity.edu/rjensen/AccountingNews.htm

Accounting Professors Who Blog --- http://faculty.trinity.edu/rjensen/ListservRoles.htm

Cool Search Engines That Are Not Google --- http://www.wired.com/epicenter/2009/06/coolsearchengines

Free (updated) Basic Accounting Textbook --- search for Hoyle at
http://faculty.trinity.edu/rjensen/ElectronicLiterature.htm#Textbooks

CPA Examination --- http://en.wikipedia.org/wiki/Cpa_examination
Free CPA Examination Review Course Courtesy of Joe Hoyle --- http://cpareviewforfree.com/
 


Bob Jensen's Pictures and Stories
http://faculty.trinity.edu/rjensen/Pictures.htm

 

Bob Jensen's Homepage --- http://faculty.trinity.edu/rjensen/

 

 

February 28, 2015

Bob Jensen's New Bookmarks for February 1-28, 2015 

Bob Jensen at Trinity University 


For earlier editions of Fraud Updates go to http://faculty.trinity.edu/rjensen/FraudUpdates.htm
For earlier editions of Tidbits go to http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm
For earlier editions of New Bookmarks go to http://faculty.trinity.edu/rjensen/bookurl.htm 
Bookmarks for the World's Library --- http://faculty.trinity.edu/rjensen/bookbob2.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Box in Upper Right Corner.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/

Bob Jensen's Blogs --- http://faculty.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://faculty.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm

 

Bob Jensen's Pictures and Stories
http://faculty.trinity.edu/rjensen/Pictures.htm

 

All my online pictures --- http://www.cs.trinity.edu/~rjensen/PictureHistory/

David Johnstone asked me to write a paper on the following:
"A Scrapbook on What's Wrong with the Past, Present and Future of Accountics Science"
Bob Jensen
February 19, 2014
SSRN Download:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2398296 




Google URL Shortener --- http://goo.gl/
Thank you Scott Bonacker for the heads up


Information content of nonverbal vocal communication
Note that in these days of video transmission across the Internet, nonverbal communication does not ipso facto require physical presence. Much depends upon whether video captures the nonverbal communication.

Book Review by Michael Minnisis (University of Chicago)
The Accounting Review, January 2015, Vol. 90, No. 1, pp. 395-398 ---
http://aaajournals.org/doi/full/10.2308/accr-10411

Speech Analysis in Financial Markets, Foundations and Trends® in Accounting (Hanover, MA: now Publishers Inc., 2013, ISBN 978-1-60198-652-8, Vol. 7, No. 2, pp. ix, 60)
Authors
WILLIAM J. MAYEW and MOHAN VENKATACHALAM,

Mayew and Venkatachalam's monograph (hereafter, MV) reviews the budding literature examining the information content of nonverbal vocal communication. The monograph defines nonverbal vocal communication as “the communication process that is distinct from verbal usage,” which “includes facial expressions, gestures, postures, body movements, vocal tone” among other features (p. 2). The monograph focuses on features of the vocal tone portion of nonverbal communication.

While the objective of my review is to critically assess MV, not to review the literature per se, I ultimately do a bit of both. My overarching assessment of the monograph is that it provides the critical starting point for any researcher interested in investigating nonverbal communication in finance and accounting. The monograph is thorough (conditional on a focus of nonverbal vocal communication within the accounting and finance literatures, with a specific focus on vocal tone) and is clearly written. It includes citations to, and a very useful discussion of, both the linguistics and human behavior literatures, allowing readers who are even relatively ignorant of this area, admittedly including me, an expedient foray into the literature. While the initial results of the literature are certainly intriguing, I agree with MV that this research is in an “embryonic state” (p. 47). Causal interpretations and the relative economic importance of the statistical results need to be assessed, and I also agree with the authors that theoretical frameworks need to more rigorously motivate the research. Collectively, though, MV describes a research area with potentially exciting research possibilities, and the monograph provides an excellent starting line.

MV contains five chapters, with Chapters 2 and 3 containing the overwhelming majority of the substantive content. Chapter 2 sets the stage for the monograph by describing the elements of nonverbal research analysis. The authors describe two elements that are required for empirical nonverbal vocal research: a recording of speech, and a method to encode the speech. MV highlights various possibilities for both elements. A laboratory setting (providing a high-fidelity recording) and an intensively trained human judge may provide ideal circumstances, but the authors argue that corporate finance provides a novel setting, in the form of earnings conference calls, to study how humans' nonverbal communication is related to capital allocation in the economy. Corporate earnings conference calls are high-stakes events, occurring relatively frequently, and catalogued by data providers. While alternative settings may exist to study executives—such as analyst days and annual meetings—the interaction between analysts and managers (and between managers within the firm) provided during earnings conference calls provides a sufficiently high-quality recording to researchers in a relatively inexpensive format. With the minor exception of the statement on page 9, which states a common misperception that “every major corporation in America” offers a quarterly conference call, the authors describe this setting well and provide ample motivation for studying conference calls.1

After introducing the reader to the prerequisites of nonverbal vocal communication research in Chapter 2, the authors present and discuss extant empirical research in Chapter 3. Over half of the content of the monograph resides in this chapter. Framed mostly around the authors' own research, they discuss three themes that have been examined in nonverbal vocal research: market reaction to executive vocal tone, deception prediction, and managerial trait assessment. I will discuss each.

The authors articulate that tests of market reaction to managers' nonverbal cues require three factors: (1) the presence of nonverbal cues that are informative about either the discount rate or a firm's future cash flows (which are orthogonal to the text and numbers presented by the manager); (2) a process to measure the nonverbal cues; and (3) the ability of the market to recognize the cues and impound them into price (i.e., low frictions to receiving the message or trading on it). If one of the necessary conditions does not exist—e.g., managers are not sending information in their vocal cues, or analysts are not able to interpret it, or researchers cannot measure the cues effectively—then the null hypothesis of no relation between managers' nonverbal vocal cues and the market reaction is credible. The authors then discuss the results of Mayew and Venkatachalam (2012a), which finds that a manager's positive (negative) affective state as measured from vocal cues using LVA software is positively (negatively) associated with the firm's abnormal returns around the conference call date. Moreover, they extend and reinforce the results of Mayew and Venkatachalam (2012a) by replicating the results with a more recent sample of conference calls and find very similar results.

The monograph does a thorough job of describing the main result of Mayew and Venkatachalam (2012a), and the replication results are a useful reinforcement; however, the monograph is certainly not a substitute for reading the research paper itself (given the length of the original research paper, this is understandable). The monograph omits discussion of long-term return results and analyst reaction results, which are included in the original paper. Moreover, the monograph does not go much beyond discussing the statistical relation between CAR and measured managerial affect. For example, it does not provide much discussion about why this relation may exist. What is the news that the affect is revealing—cash flow or discount news? Is the market reacting in the right direction, or is the market temporarily misled by the manager's affect? The authors also do not provide the reader with much interpretation of the economic magnitude of the relation. For example, Table 2 in MV shows that the coefficient on PAFF (the measure of the manager's positive affect in his or her vocal cues) is 0.1690. Using the standard deviation from Table 1 of 0.0373, I calculate that a one standard deviation increase in PAFF results in an increase in CAR of only about 0.6 percent, or about 5 percent of one standard deviation of CAR. In comparison, a one standard deviation in POSWORDS (the number of positive words spoken by the manager) results in a 1.4 percent increase in CAR, or about 12 percent of one standard deviation. These results suggest that what is said has a stronger relation than how it is said. Of course, this could simply indicate that measurement of managerial affect is still in its infancy, with much more noise than the measurement of what is said. Regardless, discussion of the economic meaning would be helpful to the reader throughout the monograph.

Regarding the measurement of the manager's affect, the authors do a commendable job throughout highlighting weaknesses in the measures and reinforcing the idea that causal interpretations are limited. However, the monograph does not reference an informative exchange of unpublished work and blog posts between the authors and Francisco Lacerda, a linguistic academic, which occurred subsequent to the publication of Mayew and Venkatachalam (2012a). Because the monograph includes the concerns of Lacerda (2009)—wherein Lacerda asserts that the LVA software is essentially useless and does little more than generate noise—the omission of the subsequent exchange between the authors and Lacerda is not a serious gap; however, the exchange is informative, and future researchers in this area will likely want to be aware of both the concerns of Lacerda and the authors' response.

Continued in article

REFERENCES
  Hobson, J., W. Mayew, and M. Venkatachalam. 2012. Analyzing speech to detect financial misreporting. Journal of Accounting Research 50 (2): 349392. [CrossRef] OpenURL TRINITY UNIV LIBRARY
  Lacerda, F. 2009. LVA-Technology—The illusion of “lie detection.” In FONETIK 2009, 220226. Stockholm, Sweden: Department of Linguistics, Stockholm University. OpenURL TRINITY UNIV LIBRARY
  Lacerda, F. 2012. Money Talks: The Power of Voice: A Critical Review of Mayew and Venkatachalam's The Power of Voice: Managerial Affective States and Future Firm Performance. Available at: http://su.diva-portal.org/smash/record.jsf?pid=diva2:509721 OpenURL TRINITY UNIV LIBRARY
  Lisowsky, P., and M. Minnis. 2013. Financial Reporting Choices of U.S. Private Firms: Large Sample Analysis of GAAP and Audit Use. University of Chicago Booth Research Paper No. 14-01. Available at: http://ssrn.com/abstract=2373498 OpenURL TRINITY UNIV LIBRARY
  Mayew, W., and M. Venkatachalam. 2012a. The power of voice: Managerial affective states and future firm performance. The Journal of Finance 67 (1): 143. [CrossRef] OpenURL TRINITY UNIV LIBRARY
  Mayew, W., and M. Venkatachalam. 2012b. A Reply to: Money Talks: The Power of Voice. A critical review of Mayew and Venkatachalam's The power of voice: Managerial affective states and future firm performance. Unpublished manuscript. Available at: https://faculty.fuqua.duke.edu/∼vmohan/bio/files/Lacerdaresponse.pdf OpenURL TRINITY UNIV LIBRARY

1  Of course, the definition of “major corporation” is arbitrary, but in recent research with Pete Lisowsky, we use confidential IRS tax returns and find that there are three times as many privately held than publicly held U.S. firms with more than $100 million in revenues, suggesting that, in fact, most major corporations in the U.S. do not host quarterly conference calls, because they are privately held (Lisowsky and Minnis 2013).

2  Note that the omission of this exchange could have been a result of publication timelines for the monograph rather than an editorial choice. The exchange that I am referring to includes Lacerda (2012) and Mayew and Venkatachalam (2012b). Further responses are located at: http://stockholmuniversityphonetics.com.

 


"More On My Reuters Breakingviews Column: The Andersen Tax Name Grab," by Francine McKenna, re:TheAuditors, September 8, 2013 ---
http://retheauditors.com/2014/09/08/more-on-my-reuters-breakingviews-column-the-andersen-tax-name-grab/

News broke on September 2 that a firm, made up of ex-Arthur Andersen tax partners and called Wealth and Tax Advisory Services LLC, bought the Andersen portion of the Arthur Andersen name from what’s left of that firm and will now call itself Andersen Tax.

The news, as you would expect, garnered much media attention. It says something—but maybe not what the firm’s partners think— that so many years after the destruction of Arthur Andersen by criminal indictment—twelve years—so many people care. Every major media and trade publication as well as several blogs wrote about it. I am quite sure, however, that this attention does not mean the general public has forgotten what the Andersen name stood for.

Better to be talked about than not talked about at all?

The US Editor at Reuters Breakingviews, Jeff Goldfarb, asked me to write an OpEd about the name change for that site.  He may have seen this tweet:

Continued in article

Jensen Comment
There must be a hundred or more local firms with the "Andersen" name. I don't see how you can buy a single name even if it was used by a well-known firm. For example, can Ralph Andersen in Denver name his firm Andersen Bookkeeping?


"Using the Codification to Research a Complex Accounting Issue: The Case of Goodwill Impairment at Jackson Enterprises," by  Casey J. McNellis, Ronald F. Premuroso, and Robert E. Houmes, Issues in Accounting Education, Volume 30, Issue 1 (February 2015) ---
http://aaajournals.org/doi/full/10.2308/iace-50949

This case is designed to help students develop research skills using the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (Codification or ASC). The case also helps develop students' abilities to analyze and recommend alternatives for a complex accounting issue, goodwill impairment, which is very relevant in today's business world. This case can be used in an undergraduate or graduate accounting class, either in groups of students or as an individual student project.

The requirements for assessing the valuation of goodwill subsequent to acquisition have significantly changed over the past 15 years, most recently with the option to perform qualitative assessments prior to the commencement of the two-step impairment test and the amortization alternative now available for private companies. Furthermore, the valuation of goodwill requires significant judgment, and thus the authoritative literature is accompanied by significant implementation guidance. The standards surrounding goodwill and the following case provide students the opportunity to (1) obtain a further understanding of the related concepts learned from textbooks, (2) sharpen their professional research skills, and (3) apply judgment in a relevant scenario.
 

Company Overview—Jackson Enterprises

Jackson Enterprises (JE), a publicly traded company, produces and sells products in several sectors of the U.S. economy. One of JE's major segments, which meets the Financial Accounting Standards Board (FASB) definition of an operating segment, is its semiconductor business comprised of two subsidiary companies: Dynamic Technologies (80 percent owned and publicly traded), and ZD Systems (wholly owned). Dynamic Technologies (hereafter, Dynamic) is headquartered in the northeastern section of the U.S. and specializes in the manufacture of electronic sensors and indicators used on automated production systems in North America, Europe, and Asia. In 2011, JE acquired 80 percent of Dynamic's common stock, a transaction resulting in $150 million of recognized goodwill. ZD Systems (hereafter, ZD), a company headquartered in the mid-western section of the U.S., manufactures sensor-type devices used solely for agricultural machines and systems in the U.S. At the time of the acquisition of ZD in early 2006, JE recorded $50 million of goodwill. While the two subsidiaries are classified within the same segment for segment reporting purposes, they are distinct entities and have no intercompany transactions.

Continued in article


February 6, 2014 Week's Top Five SSRN Downloads ---
http://ssrnblog.com/2015/02/06/weekly-top-5-papers-february-06-2015/

January 30, 2014 Week's Recent Accounting SSRN Postings ---
http://ssrnblog.com/2015/01/30/weekly-top-5-papers-january-30-2014/

Recent Accounting Downloads

Social Security Trust Fund Cash Flows and Reserves
Social Security Bulletin, 75(1): 1-34, 2015
David Pattison
Government of the United States of America - Social Security Administration
 
Date posted: 
15 Feb 2015

Accepted Paper Series
2 Downloads
 

Using Unstructured and Qualitative Disclosures to Explain Accruals
Richard M. Frankel , Jared N. Jennings and Joshua A. Lee
Washington University in Saint Louis - Olin Business School , Washington University in St. Louis and Florida State University - Department of Accounting
 

Date posted: 
15 Feb 2015

working papers series
3 Downloads
 

Short-Selling with a Short Wait: Trade- and Account-Level Analyses in Korean Stock Market
Kuan-Hui Lee and Shu-Feng Wang
Seoul National University Business School and Seoul National University - College of Business Administration
 

Date posted: 
14 Feb 2015

working papers series
2 Downloads

 

Fundamental Relations between Market and Accounting Values
Victoria J. Clout , Michael Falta and Roger J. Willett
University of New South Wales, UNSW Business School , University of Otago and University of Tasmania
 
Date posted: 
14 Feb 2015

working papers series
8 Downloads

 

Financial Crises, Debt Financing, and Default Risks
Wan-Chien Chiu , Juan Ignacio Peña and Chih-Wei Wang
Adam Smith Business School, University of Glasgow , Universidad Carlos III de Madrid - Department of Business Administration and Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development
 
Date posted: 
14 Feb 2015

working papers series
3 Downloads

Logarithmic Transformations in Cross Section Regression Models of the Long Run Relation between Market and Accounting Values
Roger J. Willett
University of Tasmania
 

Date posted: 
14 Feb 2015

working papers series
4 Downloads

 

Firm-Level Conditions to Engage in Public-Private Partnerships: What Can We Learn?
Journal of Economics and Business, Vol. 79, 2015
Ana Isabel Lopes and Tânia Caetano
ISCTE-IUL Instituto Universitário de Lisboa and ISCTE-IUL
 
Date posted: 
14 Feb 2015

Accepted Paper Series

 

Solving Semi-Linear Risky-Closeout PDE by Discount Boundary Optimization
Vladimir Piterbarg
Independent
 
Date posted: 
14 Feb 2015

working papers series
1 Downloads

 

Corruption in Bank Lending: The Role of Timely Loan Loss Provisioning
Brian Akins , Yiwei Dou and Jeffrey Ng
Rice University - Jesse H. Jones Graduate School of Business , New York University (NYU) - Department of Accounting, Taxation & Business Law and Singapore Management University - School of Accountancy
 

Date posted: 
13 Feb 2015

working papers series
7 Downloads
 

The Nonlinear Relationship between Accruals Persistence and Accounting Conservatism
Journal of Accounting Review, 2015
Chichuang Hsieh and Shu-hua Lee
Chung HuaTaipei University - Department of Accounting
 

Date posted: 
13 Feb 2015

Accepted Paper Series
4 Downloads

 

What Can We Learn About the Effects of Food Stamps on Obesity in the Presence of Misreporting?
Lorenzo Almada , Ian M. McCarthy and Rusty Tchernis
Columbia University - School of Social Work , Emory University - Department of Economics and Georgia State University - Department of Economics
 
Date posted: 
13 Feb 2015

working papers series
3 Downloads

 

Accounting for the Influence of Overall Justice on Job Performance: Integrating Self‐Determination and Social Exchange Theories
Journal of Management Studies, Vol. 52, Issue 2, pp. 231-252, 2015
Samuel Aryee , Fred O. Walumbwa , Reuben Mondejar and Chris W. L. Chu
Hong Kong Baptist University (HKBU) , University of Nebraska at Lincoln - Department of Management , City University of Hong Kong (CityUHK) and University of Surrey
 

Date posted: 
13 Feb 2015

Accepted Paper Series

Continued at SSRN (search on the word accounting)


From the Stanford University Encyclopedia of Philosophy
Science and Pseudo-Science --- http://plato.stanford.edu/entries/pseudo-science/

"Is Economics a Science," by Robert Shiller, QFinance, November 8, 2013 --- Click Here
http://www.qfinance.com/blogs/robert-j. shiller/2013/11/08/nobel-is-economics-a-science?utm_source=November+2013+email&utm_medium=Email&utm_content=Blog2&utm_campaign=EmailNov13
Also see
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm#Pseudo-Science

"Overreliance on the Pseudo-Science of Economics," by Ethan Fosse and Orlando Patterson, The New York Times, February 9, 2015 ---
http://www.nytimes.com/roomfordebate/2015/02/09/are-economists-overrated/overreliance-on-the-pseudo-science-of-economics

Every year a Nobel Prize in Economics is awarded when in fact there is no “Nobel Prize in Economics.” There is only a “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” That prize, which was invented by the Swedish central bank nearly 75 years after Alfred Nobel’s death, is an annoyance to the recipients of the five actual Nobel Prizes, those scholars from excluded scientific disciplines such as astronomy, and a living descendant of the donor, Peter Nobel, who has denounced it as a “PR coup by economists.”

This raises the question: Have we given economists too much authority based on mistaken views about their scientific reputation among established scientists and the public?

When asked about the degree to which various academic fields can be considered “scientific,” the American public is decidedly more mixed toward economics, ranking it well below established scientific fields such as physics or biology, and even below sociology.

It’s not the statistical models used by economists that is the problem, but the rejection of qualitative methods, other fields and viewpoints. The gulf between the economic view of the world and that of the lived experiences of the general population is often vast. For example, in June 2009, the National Bureau of Economic Research declared that the United States was no longer in a recession, in stark contrast with the felt, economic experience of 88 percent of Americans the following year.

It’s no wonder, then, that the real-world implementation of mainstream economic ideas has been a string of massive failures. Economic thinking undergirded the “deregulation” mantra leading up to the Great Recession of 2007-2009, and has fared no better in attempts to “fix” the ongoing crisis in Europe. However, nowhere is the discipline’s failure more apparent than in the area of development economics. In fact, the only countries that have effectively transformed from the “Third” to the “First World” since World War II violated the main principles of current and previous economic orthodoxies: China plus the “East Asian Tigers” of Singapore, Hong Kong, Taiwan and South Korea, whose policies entailed extensive state intervention into the economy, institutional reforms and the manipulation of prices and markets. Only recently have economists come to accept the primacy of institutions in explaining and promoting economic growth, a position long held by sociologists and political scientists.

The dominance of economistic thinking in domestic policymaking has similarly led to expensive, frequently disastrous failures. In many of these instances the expertise of sociologists and other academics more suited to the topics at hand were ignored or thoroughly rejected. A clear case in point is the Moving to Opportunity program, a randomized experiment in the 1990s that moved poor families to slightly less poor neighborhoods. Controversially, the researchers found no impact on earnings or educational attainment. The backlash was severe and swift, as sociologists, many of whom had been studying the impact of neighborhoods on poverty for decades, appropriately criticized the limited intervention and narrow focus on a small set of outcomes over a relatively short time period. It also meant scuttling policies that might have resulted in desegregation and real improvements in the housing and life chances of residents of America’s most impoverished neighborhoods.

While the annual ritual of economists awarding themselves a "Nobel Prize in Economics" may seem purely academic, the devastating consequences of placing too much authority in the ideas and policies of economists is too important to ignore.

Jensen Comment
I was tempted to write "ditto for accountics science," but pseudo science is more problematic in economics than accounting, because the media and practice world in economics often pays attention to "scientists" in economics. The media and practice world virtually ignores academic research in accountics science. There are quite a lot of citations in accountics science but those are accountics scientists citing each other. It's more or less a closed loop in the "Cargo Cult" world of accoutics science.
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm#CargoCult

How Accountics Scientists Should Change: 
"Frankly, Scarlett, after I get a hit for my resume in The Accounting Review I just don't give a damn"
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm
One more mission in what's left of my life will be to try to change this
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm

By way of illustration there are many blogs by economics scientists attempting to communicate with the economics profession and the public in general.  I don't know that a single accountics scientist maintains a blog trying to communicate with anybody..

The New York Times Debate
Are Economists Overrated?
February 9, 2015
http://www.nytimes.com/roomfordebate/2015/02/09/are-economists-overrated

 


Wall Street's brightest minds reveal the most important charts in the world ---
http://www.businessinsider.com/bi-most-important-charts-in-the-world-2015-2?op=1#ixzz3SOBmAzjV



There are only 9 states in the US with little-to-no income tax ---
http://www.businessinsider.com/there-are-only-9-states-in-the-us-with-little-to-no-income-tax-2015-2

Jensen Comment
Property taxes are considered high in New Hampshire, but I think the property taxes were slightly higher in Texas. Property taxes valuations do not change very often in New Hampshire, whereas in Bexar County where I lived in Texas the valuations changed every year at a minimum. My valuations never went down in New Hampshire or Texas even when the values of my homes clearly declined. I just recently got a slight valuation downward adjustment in New Hampshire but the valuation is still much higher than what I could sell this home and land for in the dismal real estate market up in these mountains. NH does not in general re-value homes to the sales prices of recent transactions. This tends to frustrate buyers who bought their homes in arms length honest transactions and much less than property tax valuations. Our village tax assessor insists that when anybody buys property for less than the tax valuation amount it is, by definition, a "bahgain purchase."

Vermont taxes everything under the sun, but the loudest complaint I hear from Vermonters is about property taxes. Actually the property taxes are not any worse than those of New Hampshire, but New Hampshire does not tax everything else.  For example, NH has no regressive sales tax --- which is one of the reasons people in Vermont come to NH to shop for big ticket items like HDTVs and new sets of tires. New cars registered in Vermont must pay a sales tax whereas cars registered in NH have no sales tax no matter where they are purchased. This slightly helps car dealers in Vermont, Maine, and Massachusetts survive.

What I don't understand in the above article is the claim that Wyoming property owners pay a 9.5% property tax. That is a whopping rate relative to most states that have less than a 2%-5% property tax rate. Perhaps the base in in Wyoming is not truly the current fair value of the property.


Liberty University --- http://www.liberty.edu/

"An Online Kingdom Come:  How Liberty U. became an unexpected model for the future of higher education," by Jack Stripling, Chronicle of Higher Education, February 23, 2015 ---
http://chronicle.com/article/How-Liberty-U-Became-an/190247/?cid=wc

Maybe Jerry Falwell was right.

The late evangelist always figured that most people would dismiss anything that started in this little city, where he founded Liberty University.

"They think of my hometown as a rather primitive Blue Ridge Mountain village, a backwater on the James River," he wrote in his autobiography, Strength for the Journey.

More than four decades after Liberty’s founding, in 1971, few in higher education would count the Rev. Falwell among academe’s historic visionaries. But college leaders, grappling with how to position their institutions for the future, might want to take a closer look at the legacy of Mr. Falwell, who is often better remembered for his divisive reputation as a firebrand conservative.

The little experiment that Mr. Falwell started in his hometown is a pretty big deal now, and the residential campus here does not begin to tell the story. Liberty’s online program boasts nearly 65,000 students, more than any other nonprofit college in the United States, according to federal data. Only the University of Phoenix, the for-profit behemoth with an enrollment of 207,000, trumps Liberty.

At most colleges, the question about online education is no longer so much about whether it will play a role, but rather how big a role and how soon. Nearly three-quarters of academic leaders describe online education as crucial to their institutions’ long-term strategies, a recent national survey found. Yet the traditional classroom experience still dominates. Professors, concerned that face-to-face instruction is pedagogically imperative, can be particularly dubious about scaling up an educational operation to reach a mass audience online.

Continued in article

Jensen Comment
I doubt that every college trying to expand its ratio of online students to onsite students will achieve the success of Liberty University. Liberty is tied into a population of Christian families seeking a college culture of Christianity among students and faculty. The small town location does not hurt recruitment of onsite students as well where crime rates are lower than in most colleges located in larger cities. There are certain advantages to recruitment of faculty in small towns as well, faculty seeking shorter commutes and safer neighborhoods. Acreages may be more reasonably priced for living with a few horses. Of course, other faculty will prefer some of the life style advantages afforded by larger cities.

And certainly a large block of faculty will shy away from the religious and political culture of Liberty University. But not all small town colleges are religious and conservative. For example, nearly all the small colleges in Vermont are to the left of liberal. But the student recruiting base of liberal colleges is not as well defined as that of the recruiting base of Liberty University.

One problem with many small liberal arts colleges seeking to expand their online degree programs is that they may not have the undergraduate feeder programs into career. For example, I always look to see if a small liberal arts college has an accounting degree program. Since accounting faculty get paid more than most other faculty (aside from faculty in medical schools) many liberal arts colleges avoid having accounting degree programs.

Liberty currently has 45 degree programs (including certificate and associate degree alternatives)  ---
http://www.liberty.edu/academics/
I noticed that Liberty has both onsite and online accounting degree programs. Keep in mind that in most states an accounting graduate has to take at least one more year to satisfy the 150-hour requirement to sit for the CPA examination.  In also noticed that Liberty now has a masters (MS) program in accounting as well.

I might add that Liberty apparently has not yet attained AACSB business school accreditation. Perhaps Liberty has not yet put the resources into faculty and programs required to be part of the AACSB.


Question
What will the new initiative by the New York Times to "offer courses" really bring to higher education?

Answer
It's only bringing its brand name and not its resources. The real purpose is to sell its brand name for desperately needed cash.

"The New York Times to Offer Courses as Part of New Education Effort," by Casey Fabris, Chronicle of Higher Education, February 19, 2015 ---
http://chronicle.com/blogs/ticker/the-new-york-times-to-offer-courses-as-part-of-new-education-effort/94351?cid=wc&utm_source=wc&utm_medium=en

The New York Times is re-entering the world of education with a new effort called NYT EDUcation, the company announced on Wednesday, though officials revealed few details.

The Times is collaborating with the CIG Education Group, which helps create branded academic institutions like Sotheby’s Institute of Art, to develop the program. Michael Greenspon, general manager of news services and international for the Times, said the effort had come from the business side rather than the newsroom.

Journalists on the Times staff are busy with their day jobs and would not be required to participate, though he said he could see them offering guest lectures or particularly interested staff members becoming otherwise involved—as long as it did not conflict with their editorial duties.

The Times has tried and failed at such educational efforts before. Its Knowledge Network, an online-education program the newspaper started in 2007 in collaboration with Stanford University, the University of Southern California, and other colleges, was suspended in 2012.

NYT EDUcation differs from the Knowledge Network primarily in its business model. “The Knowledge Network relied primarily on the New York Times brand alone, and I think the combination of the New York Times brand with the educators and the practitioners that CIG brings just is a combination that we alone could not beat,” Mr. Greenspon said.

When the Times suspended the Knowledge Network, it wasn’t trying to get out of the education game completely, he said.

“We took a step back, we didn’t take a step out,” Mr. Greenspon said. “For us, it was really just trying to figure out what was the right way to get back in.”

Though the plan is to offer courses starting this fall, the development of the courses is still in its very early stages. Officials did not say what topics would be covered, who would be teaching them, or how much the courses would cost.

“All the options are on the table,” said Michael Chung, chief executive of CIG. Some courses could be online, others could meet face to face, or they could be hybrids, he added.

Jensen Comment
This begs the question of what the NYT will bring to the colleges and college courses. It would seem that mostly it's bringing a brand name that, in theory, is a stamp of quality. But how rigorous will be the tests of quality? Is the NYT really entering the accreditation business. I don't think so. Is the NYT trying to raise revenue from its brand. I think so.

The Washington Post went even further by buying the for-profit Kaplan University. We must ask what the name name "Washington Post" did for the profits of Kaplan University and vice versa. I don't think it was a whole lot since The Washington Post was going down the tubes until the founder of Amazon, Jeff Bezos, bought The Washington Post and Kaplan University that now operate under a new name called Graham Holdings ---
http://en.wikipedia.org/wiki/Graham_Holdings_Company#2013_sale_of_The_Washington_Post

Instead of bringing an image of quality of The Washington Post name Kaplan University dragged The Washington Post name down with legal battles over admission scams and poor academic quality of Kaplan University ---
http://en.wikipedia.org/wiki/Kaplan_University#Criticisms

Question
What is the biggest deceit in the NYT re-emergence in higher education?

Answer
The biggest deceit is that the NYT is bringing resources to bear on higher education. It's quite the opposite. The NYT is trying to sell its brand name to higher education.

The fact of the matter is that the NYT has no spare resources to bring to anything.

"New At Forbes Online: The Precarious Financial Position Of The New York Times," by Francine McKenna, re:TheAuditors, November 11, 2014 ---
http://retheauditors.com/2014/11/11/new-at-forbes-online-the-precarious-financial-position-of-the-new-york-times/

Update: The New York Times Public Editor Margaret Sullivan published a column, Shaky Times, Strong Journalism”, shortly after the 3rd Quarter earnings announcement with several critiques of the results and commentary.  My column in Forbes was cited. She said I provided a provided “a tough, and rather dire, analysis of the issues.”

This post was originally published on October 29,2014.

I published some New York Times numbers over at Forbes.com, Time Is Running Short For The New York Times”, in anticipation of the company’s 3Q earnings announcement on October 30. I plan to write a followup when we know if the company’s own predictions about its third quarter have come true.

The Times telegraphed its expected 3Q results to the market on October 1 when it filed a notice with the SEC regarding upcoming staff voluntary buyouts that may convert to involuntary layoffs later. Anything can happen. More important than the third quarter is how the company will end the year and move forward. Even its own predictions are less than encouraging, regardless of how much Paid Post-type storytelling they can put on the books.

I did put a nice link to PwC thought leadership in the piece.

To say the trend for print advertising is very negative would be an understatement. In a just published essay for the Brookings Institution, “The Bad News about the News,” veteran Washington Post reporter and editor Robert Kaiser says nearly 20 percent of advertising dollars still go to print media but “Americans only spend about 5 percent of the time they devote to media of all kinds to magazines and newspapers.” Revenue from print ads will nearly disappear when advertisers catch on.

Circulation revenues rose globally in 2013 after years of decline, but advertising revenue continued to crater, says PricewaterhouseCoopers in its latest Global and Media Entertainment Outlook. By 2018, circulation or subscription revenue will likely match advertising revenue. Consumers will have to become news media’s biggest source of revenue.

Read the rest at Forbes.com, “Time Is Running Short For The New York Times”.


From the CFO Journal's Morning Ledger on February 26, 2015

The tax inversion wave receded after new Treasury rules sharply reduced the tax benefits to U.S. companies that relocate abroad through an acquisition. But Uncle Sam is still scrutinizing tax structures used by multinationals for evidence that companies are unfairly cutting their tax bills. For instance, the IRS is still reviewing Caterpillar Inc.’s tax filings since 2009, and some experts warn that the heavy-equipment maker’s tax liabilities could grow beyond the $1 billion in penalties and additional taxes the company has already disclosed by the time the agency is done.

At issue for Caterpillar is a 1999 restructuring that shifted profits on sales of replacement parts for its excavators, bulldozers and other equipment outside the U.S. from the company’s U.S. operations to a newly created Swiss subsidiary, a maneuver that sharply reduced its U.S. taxes. In some recent years, Caterpillar’s Swiss tax structure has yielded annual tax savings of about $300 million, according to a report last year by the U.S. Senate’s permanent subcommittee on investigations. If tax savings on that scale are disallowed, the company could face additional payments of as much as $1.5 billion for 2010 through 2014.

Caterpillar has repeatedly said it complied with tax laws, and said in a filing that it would “vigorously contest” the IRS’s position. University of Michigan professor of tax law Reuven Avi-Yonah said that to be blessed by the IRS, a restructuring like Caterpillar’s Swiss maneuver must have a business rationale that goes beyond tax savings. A law professor engaged by Caterpillar testified that the Swiss tax structure indeed was “a sensible business decision to remove a redundant middleman,” but Prof. Avi-Yonah said the IRS has uncovered “a lot of smoking guns,” suggesting the move was a pure tax play.


From the CFO Journal's Morning Ledger on February 26, 2015

What clever robots mean for jobs ---
http://www.wsj.com/articles/what-clever-robots-mean-for-jobs-1424835002
Experts are rethinking the belief that technology always lifts employment as machines take on skills once thought uniquely human. Technology has long displaced humans, always creating new, often higher-skill jobs in its wake. But recent advances including driverless cars and computers that can read facial expressions have pushed experts to consider that automation may be nearing a tipping point, when machines master traits that have kept human workers irreplaceable. But we’re not there yet. Tasks that require dexterity, such as folding laundry, are still simple for people but difficult for robots to master.

Map: The Most Common Job in Every State (changing times 1978-2014) --- 
 http://www.npr.org/blogs/money/2015/02/05/382664837/map-the-most-common-job-in-every-state

Jensen Comment
It's interesting to see how some professions declined since the 1970s. I guess word processing software and answering machines have taken their toll on secretaries.

Robotics are going to change careers even more in the future. I anticipate a time when covered lanes for drones and robot trucks will be developed in an effort to replace those parked delivery trucks blocking traffic on the streets. Farmers no longer will be in their tractors working in the fields. And students will be going one-on-one with robotic teachers.

Amazon now sells over 100,000 books that were written by computers.

Where will people find jobs?


 

Subprime Lending --- http://en.wikipedia.org/wiki/Subprime_lending

In finance, subprime lending (also referred to as near-prime, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks such as unemployment, divorce, medical emergencies, etc.[1] Historically, subprime borrowers were defined as having a FICO scores below 640, although "this has varied over time and circumstances."[2]

These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.[3] Many subprime loans were packaged into mortgage-backed securities (MBS) and ultimately defaulted, contributing to the financial crisis of 2007–2008.[4]

Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market. Professor Harvey S. Rosen of Princeton University explained, "The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated-against, the people without a lot of money in the bank to use for a down payment."

From the CFO Journal's Morning Ledger on February 19, 2015

The proportion of loans awarded to subprime borrowers has risen to its highest level since the beginning of the financial crisis. As the Wall Street Journal’s Alan Zibel and Annamaria Andriotis report, the rise of a new breed of company extending credit to applicants with relatively low credit scores and the growth in car financing has fuelled the boom in subprime loans. These finance firms targeting subprime borrowers are often backed by Silicon Valley cash and subject to less scrutiny than conventional banks.

Almost four of every 10 loans for autos, credit cards and personal borrowing in the U.S. went to subprime customers during the first 11 months of 2014, according to data compiled by Equifax . That amounted to more than 50 million consumer loans and cards totaling more than $189 billion, the highest levels since 2007, when subprime loans represented 41% of consumer lending outside of home mortgages. Equifax defines subprime borrowers as those with a credit score below 640 on a scale that tops out at 850.

Lenders’ interest in customers hardest hit by the financial crisis reflects both the relative health of the U.S. economy and firms’ desires to take more risks at a time when ultralow interest rates are depressing profits. It also shows Americans are willing to take on more debt: a New York Fed report released Tuesday that showed total household debt increased $306 billion, or 2.7%, in the fourth quarter of 2014 from the year-ago period, to the highest level since the third quarter of 2010.

Jensen Comment

There's generally a huge difference with respect to subprime loans on assets that can  increase or decrease in value (such as houses and education) versus assets that will only go down in value (e.g., cars and trucks). The real estate bubble that burst in 2007 led borrowers to take out mortgages before 2007 that they had zero hope if repaying before subprime rates jumped up to market rates. The house flipping strategy was based on an assumption by home buyers that their home values would soon jump in value so they could sell it for a profit before the subprime mortgage rate jumped up.

Subprime borrowers on auto loans are not buying those automobiles for purposes of flipping gains because those automobiles will increase in value. Automobiles do not increase in value unless they've reached the status of being antiques. Generally such buyers either assume that they will have sufficient income to eventually pay the higher interest rates or that they will trade in the vehicle for a new vehicle with another subprime loan. However, generally frequent trading in for new vehicles does not pay except for commercial users that put lots and lots of miles on a vehicle every year.

Subprime borrowers on credit cards are sometimes desperate for cash. They borrow at subprime rates thinking they will change their spending habits so they can draw down credit card debt before the credit card rates jump to higher levels. Some succeed, but the majority fail to change their spending habits. Some take on partners (e.g., girl friends or husbands) hoping that the partnership will draw down old credit card debts. Sometimes this works, but often the new partners refuse to take on old debts of partners. This leads to a lot of dissolved partnerships. For example, divorces are caused more by money problems than problems in bed.

Student loans are generally subprime loans with rates that kick up after students graduate. These students assume that the added training or education will sufficiently increase their incomes so that they can afford the higher rates that kick in. However, when those hoped for increases in income do not kick in (beyond the income that would be earned without a diploma) then graduates often default on their loans. For example, college majors that graduate and are still waiting on tables and flipping burgers are highly likely to default or live with their parents because almost everything they earn goes toward paying back their student loans.

President Obama is now forgiving tens of millions of those student loans for the most unfortunate borrowers. However, the majority of graduates who default will not have their loans automatically forgiven by the President. A Republican Congress is less likely than a Democratic Congress to expand the student loan forgiveness program.


"SEC Probes Companies’ Treatment of Whistleblowers:  Agency Officials Concerned About Corporate Backlash Against Whistleblowers," by Rachel Louise Ensign, The Wall Street Journal, February 25, 2015 ---
http://www.wsj.com/articles/sec-probes-companies-treatment-of-whistleblowers-1424916002?tesla=y

The Securities and Exchange Commission is probing whether companies are muzzling corporate whistleblowers.

In recent weeks the agency has sent letters to a number of companies asking for years of nondisclosure agreements, employment contracts and other documents, according to people familiar with the matter and an agency letter viewed by The Wall Street Journal. The inquiries come as SEC officials have expressed concern about a possible corporate backlash against whistleblowers.

Some of these types of documents sometimes include clauses that impede employees from telling the government about wrongdoing at the company or other potential securities-law violations, according to lawyers who handle whistleblower cases and some members of Congress. In some cases, the firms require employees to agree to forgo any benefits from government probes, effectively removing the financial incentive for participating in the SEC program.

In a separate January letter to Rep. Maxine Waters (D., Calif.) that was reviewed by the Journal, SEC Chairman Mary Jo White said she was concerned about the agreements.

The SEC has made a push to bring more whistleblower cases since the 2010 passage of the Dodd-Frank financial-reform bill, which created the agency’s whistleblower program.

Whistleblowers have flocked to the SEC program, with the number of tips increasing each year. The agency fielded 3,620 tips on potential securities-law violations in the 2014 fiscal year, up 21% from two years before.

As part of the program, tipsters can get between 10% and 30% of the sum of penalties collected if their information leads to an SEC enforcement action with sanctions of more than $1 million. The program handed out an award for more than $30 million last year to an undisclosed foreign tipster, which was its largest ever.

Dodd-Frank regulations prohibit companies from interfering with employees reporting potential securities-law violations to the agency.

An SEC spokesman declined to comment.

Continued in article

From the CFO Journal's Morning Ledger on February 20, 2015

A whistleblower’s horror story
Recent exposés of less than proprietary behavior in government and in business has led 
Rolling Stone Magazine  to call this era the age of the whistleblower. As Matt Taibbi writes, “whistleblowers are becoming to this decade what rock stars were to the Sixties — pop culture icons, global countercultural heroes.” But today’s whistleblowers tend to partake in little of the spoils and almost none of the glamour. In fact their lives are very often almost destroyed in the process.

Bob Jensen's threads on other whistleblower horror stories ---
http://faculty.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing


From the CFO Journal's Morning Ledger on February 23, 2014

SEC Commissioner Aguilar critiques agency with sharp edge ---
http://blogs.wsj.com/cfo/2015/02/20/sec-commissioner-aguilar-critiques-agency-with-sharp-edge/?mod=djemCFO_h
Luis Aguilar, the longest-serving commissioner of the Securities and Exchange Commission laid into the agency on Friday, CFO Journal’s Maxwell Murphy reports. Among his complaints to the audience at the Practising Law Institute’s SEC Speaks conference in Washington, D.C., Mr. Aguilar lamented the SEC’s slow progress on implementing Dodd-Frank reforms, and a dearth of bans on officers and directors that have committed fraud.

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


In general student loans are subprime loans

Question
How do you repo a college education?

The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.
"Student-Loan Delinquencies Rise in U.S.," by Jeanna Smialek, Bloomberg News, February 17, 2015 ---
http://www.bloomberg.com/news/articles/2015-02-17/student-loan-delinquencies-rise-in-u-s-as-education-debt-swells?cmpid=BBD021715&alcmpid=

(Bloomberg) -- Student-loan delinquencies increased at the end of 2014, a troubling sign that Americans are failing to keep up with payments as education debt climbs, according to the Federal Reserve Bank of New York.

Data from the New York Fed released Tuesday showed 11.3 percent of student loans were delinquent in the final three months of 2014, up from 11.1 percent in the prior quarter. The share of auto loans at least 90 days overdue also rose, climbing to 3.5 percent from 3.1 percent the prior period, even as fewer credit card and mortgage loan payments were late.

“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student-loan balances and delinquencies is concerning,” Donghoon Lee, research officer at the New York Fed, said in an e-mailed statement. “Student-loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”

The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.

Education loan balances have skyrocketed over the past decade. In the first quarter of 2005, outstanding student debt stood at $363 billion -- about a third of the current level, based on a 2013 New York Fed report.

Delinquency rates for student loans probably understate the actual situation, according to today’s report. About half of the student loans are in deferment, in grace periods or in forbearance, temporarily removing them from the repayment cycle.

Education debt delinquency levels have come down since 2013, when the rate reached 11.8 percent, yet remain elevated from around 6 percent a decade ago, according to the New York Fed. Student loans are the type of debt most likely to be past-due, having surpassed credit-card delinquency rates in 2012.

Jensen Comment
When car and truck owners default a repo guy shows up in the dead of night and takes the vehicle to the bank. How do you repo a college education?


EY To the Point: New consolidation guidance will affect entities in all industries ---
http://www.ey.com/Publication/vwLUAssetsAL/TothePoint_BB2932_Consolidation_19February2015/$FILE/TothePoint_BB2932_Consolidation_19February2015.pdf

What you need to know

• The FASB issued final guidance that eliminates the deferral of FAS 167 and makes changes to both t he variable interest model and the voting model .

• While t he new guidance is aimed at asset managers , all reporting entities involved with limited partnerships or similar entities will have to re - evaluate these entities for consolidation and revise their documentation .

• In some cases, consolidation conclusions will change. In other cases, a reporting entity will need to provide additional disclosures if an entity that currently isn’t considered a variable interest entity ( VIE ) is considered a VIE under the new guidance .

• Under the new guidance, a general partner will not consolidate a partnership or similar entity under the voting model.

• For public business entities, the guidance is effective for annual and interim periods beginning after 15 December 2015. Early adoption is permitted


Clawback --- http://en.wikipedia.org/wiki/Clawback

"Study: Companies Taking Own Action on Clawbacks," by Tammy Whitehouse, Compliance Week, February 10, 2015 ---
http://www.complianceweek.com/blogs/accounting-auditing-update/study-companies-taking-own-action-on-clawbacks#.VNuDsi7K2bt


What Makes Us Human?: Chomsky, Locke & Marx Introduced by New Animated Videos from the BBC ---
http://www.openculture.com/2015/02/what-makes-us-human-chomsky-locke-marx.html


Before reading the tidbits below you may want to watch a video on the Scenarios of Higher Education for Year 2020 ---
http://www.youtube.com/watch?v=5gU3FjxY2uQ
The above great video, among other things, discusses how "badges" of academic education and training accomplishment may become more important in the job market than tradition transcript credits awarded by colleges. Universities may teach the courses (such as free MOOCs) whereas private sector companies may award the "badges" or "credits" or "certificates." The new term for such awards is a
"microcredential."

MOOC (including how to sign up for a free MOOC) --- http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Coursera --- http://en.wikipedia.org/wiki/Coursera

Coursera /kɔərsˈɛrə/ is a for-profit educational technology company founded by computer science professors Andrew Ng and Daphne Koller from Stanford University that offers massive open online courses (MOOCs). Coursera works with universities to make some of their courses available online, and offers courses in physics, engineering, humanities, medicine, biology, social sciences, mathematics, business, computer science, and other subjects. Coursera has an official mobile app for iOS and Android. As of October 2014, Coursera has 10 million users in 839 courses from 114 institutions.

Continued in article

Jensen Comment
Note that by definition MOOCs are free courses generally served up by prestigious or other highly respected universities that usually serve up videos of live courses on campus to the world in general.  MOOC leaders in this regard have been MIT, Stanford, Harvard, Penn, and other prestigious universities with tens of billions of dollars invested in endowments that give these wealthy universities financial flexibility in developing new ways to serve the public.

When students seek some type of transcript "credits" for MOOCs the "credits" are usually not free since these entail some types of competency hurdles such as examinations or, at a minimum, proof of participation. The "credits" are not usually granted by the universities like Stanford providing the MOOCs. Instead credits, certificates, badges or whatever are provided by private sector companies like Coursera, Udacity, etc.

Sometimes Coursera contracts with a college wanting to give its students credits for taking another university's MOOC such as the now infamous instance when more than half of San Jose State University students in a particular MOOC course did not pass a Coursera-administered final examination.
"What Are MOOCs Good For? Online courses may not be changing colleges as their boosters claimed they would, but they can prove valuable in surprising ways," by Justin Pope, MIT's Technology Review, December 15, 2014 ---
http://www.technologyreview.com/review/533406/what-are-moocs-good-for/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20141215

The following describes how a company, Coursera, long involved with the history of MOOCs, is moving toward non-traditional "credits" or "microcredentials" in a business model that it now envisions for itself as a for-profit company. Also note that MOOCs are still free for participants not seeking any type of microcredential.

And the business model described below probably won't apply to thousands of MOOCs in art, literature, history, etc. It may apply to subsets of business and technology MOOCs, but that alone does not mean the MOOCs are no longer free for students who are not seeking microcredentials. They involve payments for the "microcredentials" awarded for demonstrated competencies. However these will be defined in the future --- not necessarily traditional college transcript credits. A better term might be "badges of competency."  But these will probably be called microcredentials.

Whether or not these newer types of microcredentials are successful depends a great deal on the job market.
If employers begin to rely upon them, in addition to an applicant's traditional college transcript, then Coursera's new business model may take off. This makes it essential that Coursera carefully control the academic standards for their newer types of "credits" or "badges."

 

"Specializations, Specialized," by Carl Straumsheim, Inside Higher Ed, February 12, 2015 ---
https://www.insidehighered.com/news/2015/02/12/coursera-adds-corporate-partners-massive-open-online-course-sequences

Massive open online course providers such as Coursera have long pointed to the benefits of the data collected by the platforms, saying it will help colleges and universities understand how students learn online. Now Coursera’s data is telling the company that learners are particularly interested in business administration and technology courses to boost their career prospects -- and that they want to take MOOCs at their own pace.

As a result, Coursera will this year offer more course sequences, more on-demand content and more partnerships with the private sector.

Asked if Coursera is closer to identifying a business model, CEO Rick Levin said, “I think we have one. I think this is it.”

Since its founding in 2012, Coursera has raised millions of dollars in venture capital while searching for a business model. Many questioned if the company's original premise -- open access to the world's top professors -- could lead to profits, but with the introduction of a verified certificate option, Coursera began to make money in 2013. By that October, the company had earned its first million.

In the latest evolutionary step for its MOOCs, Coursera on Wednesday announced a series of capstone projects developed by its university partners in cooperation with companies such as Instagram, Google and Shazam. The projects will serve as the final challenge for learners enrolled in certain Specializations -- sequences of related courses in topics such as cybersecurity, data mining and entrepreneurship that Coursera introduced last year. (The company initially considered working with Academic Partnerships before both companies created their version of Specializations.)

The announcement is another investment by Coursera in the belief that adult learners, years removed from formal education, are increasingly seeking microcredentials -- bits of knowledge to update or refresh old skills. Based on the results from the past year, Levin said, interest in such credentials is "palpable." He described bundling courses together into Specializations and charging for a certificate as “the most successful of our product introductions." Compared to when the sequences were offered as individual courses, he said, enrollment has “more than doubled” and the share of learners who pay for the certificate has increased “by a factor of two to four.”

“I think people see the value of the credential as even more significant if you take a coherent sequence,” Levin said. “The other measure of effectiveness is manifest in what you’re seeing here: company interest in these longer sequences.”

Specializations generally cost a few hundred dollars to complete, with each individual course in the sequence costing $29 to $49, but Coursera is still searching for the optimal course length. This week, for example, learners in the Fundamentals of Computing Specialization were surprised to find its three courses had been split into six courses, raising the cost of the entire sequence from $196 to $343. Levin called it a glitch, saying learners will pay the price they initially agreed to.

The partnerships are producing some interesting pairings. In the Specialization created by faculty members at the University of California at San Diego, learners will “design new social experiences” in their capstone project, and the best proposals will receive feedback from Michel "Mike" Krieger, cofounder of Instagram. In the Entrepreneurship Specialization out of the University of Maryland at College Park, select learners will receive an opportunity to interview with the accelerator program 500 Startups.

As those examples suggest, the benefits of the companies’ involvement mostly apply to top performers, and some are more hypothetical than others. For example, in a capstone project created by Maryland and Vanderbilt University faculty, learners will develop mobile cloud computing applications for a chance to win tablets provided by Google. “The best apps may be considered to be featured in the Google Play Store,” according to a Coursera press release.

Anne M. Trumbore, director of online learning initiatives at the University of Pennsylvania’s Wharton School, said the capstone projects are an “experiment.” The business school, which will offer a Specialization sequence in business foundations, has partnered with the online marketplace Snapdeal and the music identification app Shazam, two companies either founded or run by Wharton alumni.

“There’s not a sense of certainty about what the students are going to produce or how the companies are going to use it,” Trumbore said. “Snapdeal and Shazam will look at the top projects graded highest by peers and trained staff. What the companies do after that is really up to them. We have no idea. We’re casting this pebble into the pond.”

Regardless of the companies' plans, Trumbore said, the business school will waive the application fee for the top 15 learners in the Specialization and provide scholarship money to those that matriculate by going through that pipeline.

“The data’s great, but the larger incentive for Wharton is to discover who’s out there,” Trumbore said.

Levin suggested the partnering companies may also be able to use the Specializations as a recruitment tool. “From a company point of view, they like the idea of being involved with educators in their fields,” he said. “More specifically, I think some of the companies are actually hoping that by acknowledging high-performing students in a couple of these capstone projects they can spot potential talent in different areas of the world.”

While Coursera rolled out its first Specializations last year, Levin said, it also rewrote the code powering the platform to be able to offer more self-paced, on-demand courses. Its MOOCs had until last fall followed a cohort model, which Levin said could be “frustrating” to learners when they came across an interesting MOOC but were unable to enroll. After Coursera piloted an on-demand delivery method last fall, the total number of such courses has now reached 47. Later this year, there will be “several hundred,” he said.

“Having the courses self-paced means learners have a much higher likelihood of finishing,” Levin said. “The idea is to advantage learners by giving them more flexibility.”

Some MOOC instructors would rather have rigidity than flexibility, however. Levin said some faculty members have expressed skepticism about offering on-demand courses, preferring the tighter schedule of a cohort-based model.

Whether it comes to paid Specializations versus free individual courses or on-demand versus cohort-based course delivery, Levin said, Coursera can support both. “Will we develop more Specializations? Yes. Will we depreciate single courses? No,” he said. “We don’t want to discourage the wider adoption of MOOCs.”

Continued in article

"The Credit System in Science is Outdated," by Terry McGlynn, Chronicle of Higher Education, February 13, 2015 ---
https://chroniclevitae.com/news/905-the-credit-system-in-science-is-outdated?cid=at&utm_source=at&utm_medium=en

As scientists, we get credit by having our names on journal articles. Authorship of a scientific paper is binary: Either you are one of the authors, or you aren’t. That coarse system is central to the practice of science but does not reflect the complex weave of collaborative work on which most scientific papers are built.

We are far more than just our papers, but those papers count, in the literal sense. How many papers you publish, and where they are published, affects who gets hired, who gets tenure, who gets funded, and with whom we collaborate. Other factors matter (such as gender, money, and personality), but authorship is foundational.

Now that authorship system is so outdated that it’s holding science back. We have the tools and volition to broadly collaborate and share information, but the formation of collaborations is hindered because the credit system does not adequately represent actual contributions.

What are the types of authorship? That varies among fields, but I can generalize quite a bit. The first author listed on a scientific paper did the most work and gets the most credit. That person usually ran the project and wrote most of the paper. Being first author is a big deal, so much so that we have invented a bizarre phenomenon: co-first authorship. In a co-first-authored paper, the first two authors allegedly share the honor of first authorship, by the grace of two asterisks indicating, “These authors contributed equally to this work.”

The final author named on the paper is often the senior scholar on the project. For scientists building their profile as a PI, being a senior author is important because it shows successful leadership in the laboratory and mentorship of junior scientists. Sometimes senior authors work really hard on the papers and are instrumental in the research. Other times, the senior author gets last position because he or she graciously let the first author use a shared desk in their lab.

But it’s not that simple. Sometimes the last author is not the senior author. The last author might have made the least contribution to the paper. How do you know? Unless you’re well involved in that subfield, I wish you luck. Sometimes the second-to-last author position is saved for the second-most senior scientist on the project. But you might not know for sure, because we don’t label senior authors as such. That would be uncouth.

What is middle authorship? It could mean almost anything. Someone listed in the middle could be instrumental or incidental. As a middle author, my contribution has ranged from a few hours to several weeks of working round-the-clock in challenging conditions. But there’s no way to tell just by looking at these papers or at my CV.

After a paper comes out, credit is harvested via citations.Suddenly authorship order no longer matters. I get the same measure of credit for a well-cited, single-authored paper as I do for a well-cited article in which I’m buried as middle author among dozens of other co-authors.

I hope I have convinced you that this nonsensical system is a hot mess. Is this truly how people who make career-altering decisions decide the magnitude of our scientific achievements? Oy.

To be fair, I do see some concern in scientific circles about preventing trivial co-authorships. Some journals list minimum criteria or have prescriptive publishing guidelines. An increasing proportion of journals require an “author contributions” section, wherein the individual contributions of each of the authors are specified. Nevertheless, as far as I can tell, these efforts haven’t changed the modus operandi within science.

There is a glaring disparity between what we claim about authorship, and how people actually become authors in practice. It is standard operating procedure to trade a contribution for authorship. Since authorship is the currency for credit, and few want to work for no credit, the only way to share effort is to make sure that all contributors are authors. That practice might subvert the official definition of authorship, but it is also the glue that keeps fertile collaborations intact.

When you help someone out, what qualifies as a professional courtesy and what constitutes grounds for middle authorship?

That depends on your altruism and negotiation skills. If a systematist publishes a paper with a taxonomic revision of a group of rare organisms, you don’t get authorship for sending especially needed rare samples. That’s just an expected courtesy. But if you have similar samples already sitting in your lab that are needed for a certain kind of specialized experimental project, then you can probably ask for authorship -- but not if you’ve already deposited those samples in a museum collection. - See more at: https://chroniclevitae.com/news/905-the-credit-system-in-science-is-outdated?cid=at&utm_source=at&utm_medium=en#sthash.a95RtVNZ.dpu

Continued in article

Bob Jensen's threads on MOOCs are at
http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI


Monopoly: How the Original Version Was Made to Condemn Monopolies ---
http://www.openculture.com/2015/02/the-original-monopoly-was-made-to-condemn-monopolies.html 

The Many and Varied Applications of the Monopoly Game in Accounting in Accounting, Economics, and Other College Courses ---
http://faculty.trinity.edu/rjensen/000aaa/thetools.htm#Edutainment


Ex-Wells Fargo banker gets 5 years for insider trading ring ---
http://www.seattlepi.com/news/crime/article/Ex-Wells-Fargo-banker-gets-5-years-for-insider-6080183.php

Federal prosecutors say a former Wells Fargo Securities investment banker, his stockbroker friend and a network of friends and family were sentenced to prison after using insider information to pocket $11 million.

The U.S. attorney's office in Charlotte said Friday that 33-year-old former banker John Femeni of Greenwich, Connecticut; 34-year-old Shawn Hegedus of Centerreach, New York; and his 34-year-old wife Danielle Laurenti of Massapequa Park, New York, were sentenced to between 1 ½ and 10 years in prison. Thirty-four-year-old Matthew Musante of Miami, Florida, was sentenced to 3 ½ years.

All pleaded guilty to insider trading and money laundering conspiracy. Four others were sentenced earlier.

Continued in article

Bob Jensen's fraud updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


"IASB proposal would clarify how entities classify a liability," by Ken Tysiac, Journal of Accountancy, February 10, 2015 ---
http://www.journalofaccountancy.com/news/2015/feb/iasb-debt-classification-201511793.html 

The International Accounting Standards Board (IASB) issued a proposal Tuesday that is intended to clarify how entities classify debt, particularly when it is coming up for renewal.

The proposal is designed to improve presentation in financial statements by clarifying the criteria for the classification of a liability as either “current” or “non-current.” The proposed amendments would accomplish this by:

  • Clarifying that the classification of a liability as either “current” or “non-current” is based on the entity’s rights at the end of the reporting period, and
  • Clearly describing the link between the settlement of the liability and the outflow of resources from the entity.

The proposed amendments are contained in the exposure draft Classification of Liabilities (Proposed Amendments to IAS 1). The IASB is seeking comments, which can be made at the board’s website.

Jensen Comment
Some types of "clarification" may not be possible. For example, one thing that's really hanging up the new accounting standard for operating lease contracts is the seemingly impossibility of booking operating lease renewals, especially when companies will react to the new leasing standard by shortening the lease terms with high probabilities of renewal of short-term lease contracts..

Another problem of liability accounting standards is that they may sometimes just be fiddling when firms like coal-burning power companies literally burn. We can try to measure and classify debt of a coal company balance sheets. But the future for coal-based energy is so uncertain that things like debt/equity rations may be almost nonsense in terms of measuring the real and uncertain "liabilities" of these power companies.

That of course does not mean that standard setters like the IASB should not be constantly seeking to fine tune existing standards. A little fine tuning could have made Nero's fiddle much sweeter sounding.


Jensen Note
Entry level accountants are usually called "staff accountants." Upon graduation some of the most plentiful jobs in the world are for staff accountants. Note that in the USA, however, CPA firms generally require that students become qualified to immediately take the CPA examination, and that generally takes a fifth year of study, usually but not always for a masters degree. The same can be said for chartered accountants in many other nations.

Staff Accountants are in the Top Ten Below
"10 jobs with the best salary potential," Jada A. Graves, US News & World Report, February 3, 2015 ---
http://www.businessinsider.com/jobs-with-the-best-salary-potential-2015-2

Jensen Comment
Also important is job-change opportunity. Many college graduates go to work for CPA firms never intending to stay with those firms. Those firms offer terrific opportunity for technical training and exposure to clients needing accounting, internal auditing, forensics, information technology, and tax services. More often than not those that leave the CPA firms and stay in the work force go with clients.

Salaries may or may not be higher, but there is often less travel and job stress when working for a client. Making partner with a CPA firm often entails long hours and public relations skills requiring special talents. Partners are paid well, but less than 15% of the new hires in large CPA firms become partners. Partners generally have skills in obtaining and retaining clients. The same, by the way, is true of law firms where much of the technical work is often performed by lower-paid non-partners.

My point is that students hoping to become partners in CPA firms and law firms should take courses in communications. Foreign languages can also help since sometimes the path to partnership is easier for USA accounting graduates to work in off shore offices of multinational CPA firms such as working in offices in Moscow, Mexico City, and various cities in South America and Asia.

Bob Jensen's threads on careers ---
http://www.businessinsider.com/jobs-with-the-best-salary-potential-2015-2


Map: The Most Common Job in Every State (changing times 1978-2014) --- 
http://www.npr.org/blogs/money/2015/02/05/382664837/map-the-most-common-job-in-every-state


From the Chronicle of Higher Education
Search for the Latest Job Openings in any Discipline of Interest ---
https://chroniclevitae.com/job_search/new?cid=VTECHNJOBSL1

Jensen Comment
When I search for "Accounting" and "Faculty & Research" today there are 256 jobs posted in the past 30 days. However, not all of these jobs seem property classified as both "Accounting" and "Faculty & Research." Also I know of some job openings for accounting professors that are not listed for major universities.

For persons seeking jobs as accounting faculty in the USA perhaps a better place to look might be the American Accounting Association Career Center ---
http://aaahq.org/Career-Center
Job seekers may also post their resumes at this center.

Since there are so many faculty vacancies in accountancy, job seekers with Ph.D. degrees from AACSB-accredited universities are advised to contact colleges and universities where they would most like to be employed.

Bob Jensen's threads on careers are at
http://faculty.trinity.edu/rjensen/Bookbob1.htm#careers


Careers Getting a Boost from Foreign Experience

Jensen Comment
On infrequent occasions I've witnessed how foreign experience seemed to improve the odds of my former students being admitted to a Big Four partnership. These were not top students, and on graduation day I would not have predicted that they would become partners in Big Four firms. I might add that some of these students also took double majors in foreign languages such as Russian, Chinese, and Spanish. That is perhaps why they were afforded opportunities to work for the Big Four in Moscow, China, and Latin America.

From the CFO Journal's Morning Ledger on February 10, 2015

How many stamps are in your passport? Or perhaps more importantly, how many work visas? Nearly 40% of CFOs at the largest 1,000 public and private companies in the U.S. have worked abroad, and that figure is expected to rise, CFO Journal’s Kimberly S. Johnson reports.

The trend follows the money: Companies in the S&P 500 got roughly half their sales outside the U.S. in 2013, up about 10% over the past decade, according to S&P Dow Jones Indices. And recent earnings figures underscore the value of understanding the local consequences of extreme volatility in currencies, commodities and politics.

Years spent in the trenches abroad can help an executive navigate cultural mores, regulations and supply-chain disruptions. “I don’t believe you can get there by being there a week or two and flying back out,” said Thomas Mangas, CFO of Starwood Hotels & Resorts Worldwide Inc.

 

"Does the College Major Really Matter?" by Jeffrey J. Selingo, Chronicle of Higher Education, February 10, 2015 ---
http://chronicle.com/article/Does-the-College-Major-Really/172011/?cid=at

Jensen Comment
This begs the question of when majors do matter, and they matter most when choosing the wrong one can add a year or more to taking licensing examinations for careers. For example, it now takes five years (150 credits) to sit for the CPA examination. Not choosing accounting as a major in the second year can add more semesters to getting a degree.

When my university added the fifth year masters program in accounting, however, it did so in what I consider the correct way. It moved some of the advanced accounting courses to the masters program, thereby leaving more flexibility in the first four years for double majoring or at least taking minors in other disciplines like mathematics, communications, computer science, and even another language.

Not choosing engineering as a major can put a student out of synch in a curriculum plan. The same can be said of other majors like nursing and pharmacy and other careers with licensing examinations.

Of course the world does not come to an end if a student has to take more time to graduate due to uncertainty about a career plan. But often the trial and error process does not add a whole lot to critical reasoning skills that often come in more advanced courses like courses in philosophy, economics, etc.

Bob Jensen's threads on careers ---
http://faculty.trinity.edu/rjensen/Bookbob1.htm#careers


From the CFO Journal's Morning Ledger on February 18, 2015

Foreign Corrupt Practices Act (FCPA) --- http://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act

Rash of civil suits complicates FCPA cases
http://blogs.wsj.com/cfo/2015/02/17/rash-of-civil-suits-complicates-fcpa-cases/?mod=djemCFO_h
Companies that disclose their entanglement in foreign corruption cases are increasingly exposing themselves to problems far beyond the need to settle with government regulators. Now, more and more, they also have to contend with being sued by their own investors – who say they have been harmed by their company’s alleged misconduct overseas. These lawsuits may have questionable success rates, but they are influencing the timing and degree of disclosure of possible misconduct by corporate counsels to the U.S. Justice Department. The suits are often filed soon after news breaks that a company is conducting an internal investigation into allegations that its employees bribed foreign officials, even when few facts have been established.

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Word of Advice
If you cook the books, serve them up HOT!

"Former accountant pleads guilty to cooking the books for adult entertainment businesses," by Nina Lincoff, South Florida Business Journal, February 17, 2015 ---
http://www.bizjournals.com/southflorida/news/2015/02/17/former-accountant-pleads-guilty-to-cooking-books.html

Bob Jensen's recipes for book cooking ---
http://faculty.trinity.edu/rjensen/Theory02.htm#Manipulation


From the CFO Journal's Morning Ledger on February 17, 2014

A nine-month workers dispute that has hamstrung West Coast port activity is starting to bite into business sectors across the U.S. and beyond. The standoff between the Pacific Maritime Association, which represents port employers, and the International Longshore and Warehouse Union saw ships remain unloaded over the holiday weekend. The White House announced Saturday that Labor Secretary Tom Perez will meet with both parties on Tuesday.

In the meantime, the economic cost of the dispute is mounting, the Wall Street Journal reports. The Agriculture Transportation Coalition estimates that port delays and congestion have reduced U.S. agricultural exports by $1.75 billion a month, while the North American Meat Institute put losses to U.S. meat and poultry producers at more than $85 million a week. For retailers, the rerouting and carrying costs and other expenses could bring the industry’s total costs to $7 billion this year, according to analysis by consulting firm Kurt Salmon.

The port delays also are causing problems for auto makers. On Monday, Honda Motor Co. said it was experiencing parts shortages at plants in Ohio, Indiana and Canada that will affect its production on multiple days over the next week. Small-business owners with limited inventory to cover sales are also being pummeled.


GM is just trying to do the right thing --- Yeah Right!

From the CFO Journal's Morning Ledger on February 17, 2014

GM heads back into court
http://www.wsj.com/articles/gm-heads-back-into-court-1424128905
Genhttp://www.wsj.com/articles/gm-heads-back-into-court-1424128905eral Motors Co. is in court Tuesday fighting to maintain a bankruptcy shield blocking legal claims from customers seeking compensation for declining resale values and injuries stemming from a defective ignition switch linked to at least 56 deaths. The legal battle, with plaintiffs seeking billions of dollars in damages, is largely the result of a significant concession GM made more than five years ago to expedite its emergence from bankruptcy proceedings. The auto maker is now back in court because that deal weakened the very bankruptcy shield that GM is now trying to keep.

Jensen Comment
An illustration of how difficult it is to measure contingent liabilities.


Not Democracy in Theory But Democracy in Action

From the CFO Journal's Morning Ledger on February 11, 2015

Companies with a healthy revenue stream must routinely balance between returning cash to shareholders through buybacks and dividends and spending more on themselves to fuel future growth—or simply hoarding the cash for a rainy day. But for General Motors Co., if an architect of its 2009 bailout gets his way, its hand will be forced and $8 billion will go toward reducing its outstanding share count.

Harry J. Wilson, a former hedge-fund executive who helped usher GM through a government-led restructuring that ultimately cost taxpayers about $10 billion, has emerged as one of the auto maker’s chief antagonists. Mr. Wilson, who holds GM shares and represents hedge funds collectively holding more than 34 million shares, nominated himself as a GM board candidate and wants the nation’s largest car maker to spend on buybacks.

Mr. Wilson’s move is the latest challenge to hit America’s biggest companies. Activists have collected record amounts of cash to launch campaigns against blue chips including Procter & Gamble Co., DuPont Co. and even Apple Inc. As for GM, the company says it has had regular contact with Mr. Wilson’s group and would evaluate him as a board nominee, making a recommendation “based on the best interest of all shareholders.”


From the CFO Journal's Morning Ledger on February 11, 2015

2015 Technology Industry Outlook
http://deloitte.wsj.com/cfo/2015/02/11/2015-technology-industry-outlook/

Enterprise quests for greater efficiency and competitive advantage through IT will drive significant tech sector growth in 2015 and beyond, says Paul Sallomi, vice chairman and U.S. Technology leader, Deloitte Tax LLP. Mr. Sallomi points to the Internet of Things and digital disruption as major trends that will create new tech sector opportunities this year and explains why being a large technology conglomerate could become a competitive disadvantage in the sector.

Continue Reading Today's Article »

Read more Deloitte Insights »


From the CFO Journal's Morning Ledger on February 11, 2015

Denmark’s negative rates spark creativity
http://www.wsj.com/articles/danish-lenders-take-unprecedented-steps-to-combat-negative-interest-rates-1423576590
Banks in Denmark are taking highly unusual steps to deal with negative interest rates arising from the central bank’s efforts to defend its currency peg to the euro. FIH Erhvervsbank announced plans to charge retail customers to hold money in their deposit accounts, the first Danish bank to do so.

Jensen Comment
Try that old under-the=mattress trick.


Instructor Indicted Over Textbook Sales ---
https://www.insidehighered.com/quicktakes/2015/02/11/instructor-indicted-over-textbook-sales

Jensen Comment
Colleges should be very explicit about policies in this regard. It's common for authors of textbooks to adopt their own textbooks in classes they teach. However, the ethical thing to do is not to profit from those sales. It's difficult to refund textbook royalties to students. Some authors donate the funds to the university or charities, but they still might be capitalizing on tax breaks. Some authors, however, simply pocket the royalties from sales of the books to their own students.

In accounting it's common for publishers to seek out coauthors in their largest markets such as universities where thousands of students buy the textbook every term. With eBook publishing there are added incentives since there's no market for used eBooks.

I was at a university where there were two accounting professors who were coauthors on different basic accounting texts. To be "fair to the authors," the departmental policy became to alternate the basic textbook every year. Yeah right!

It's quite another matter to promote your own publishing company within a college. This may even intimidate assistant professors if the owner of the company is also the Department Chair or sits on the P&T Committee.

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Harvard Business School students list the best and worst parts of their experience there ---
http://www.businessinsider.com/harvard-business-school-students-experience-2015-2

Jensen Comment
The word "push" in relation to student assignments and examinations needs to be defined with more precision. The Harvard Business School is noted for extensive writing assignments each week that are generally graded by professors themselves. The HBS is noted for its case study assignments and competitive pedagogy in case discussion courses.

However, without knowing the facts my hunch is that flunking out of the Harvard Business School, apart from voluntarily dropping out, is probably a rare event. Hence the term "push" is a relative term. The same can probably be said for the Harvard Law School. In both the HBS and Harvard Law the hardest thing is getting into these programs. Students who are admitted usually have high academic skills plus unique talents and backgrounds.

To date there are 83 HBS professors rated on RateMyProfessor. Sometimes the ratings tell more about the students than their professors. However, keep in mind that students who send in evaluations to RMP are self-selecting. This is not a random sample of the thousands of HBS graduates. The numerical ratings are generally nonsense due to a sparse number of evaluations sent in for given professors. The most revealing information can sometimes be in the added commentaries.

An example of a commentary on one HBS professor:

too easy after all this is harvard dammit. we were featured in legally blonde with reese witherspoon

 


"Time to Get Better," by Joe Hoyle, Teaching Blog, February 4, 2015 ---
http://joehoyle-teaching.blogspot.com/2015/02/time-to-get-better.html

Jensen Comment
I think how well students read/memorize textbooks depends both upon how you teach classes (e.g., by calling on students to answer questions from the chapters) and how you test (e.g., model problems directly after textbook illustrations). Many teachers teach directly from textbooks. This is sad, because students can learn from textbooks on their own such that the teacher is not much value added in the course other than his or her role in forcing textbook learning.

Risk averse students often give high teaching evaluations to textbook teachers, because those students do no like uncertainty in quizzes, examinations, and class call outs. This also is sad, because life on the job is full of uncertainties that are not covered in textbooks.


This makes me wonder how much of our future popular textbooks and textbook supplements will be written by robots
"America’s oldest news agency wrote 10X more articles by having robots do what reporters used to do," by Eugene Kim, Business Insider, January 30, 2015 ---
http://www.businessinsider.com/aps-partnership-with-automated-insights-2015-1

If you thought robots could never replace journalists, think twice.

That’s certainly been the case at The Associated Press, America’s oldest 24-hour news agency. AP produced roughly 3,000 articles on company earnings last quarter, 10X more than it used to, by using automated technology.

According to The Verge, AP has been able to do it by partnering with Automated Insights, a company that specializes in “robot journalism.” Automated Insights uses artificial intelligence and Big Data analysis to automatically generate data-heavy articles, such as earnings reports.

Initially there was some human editing involved, but now most of the articles are fully automated — with far fewer errors than human reporters and editors. In theory, it could crank out 2,000 articles per second.

But AP says the purpose of having "robot journalists" is not about replacing its reporters, at least in the foreseeable future. Instead, it is to allow the reporters to spend more time on high-quality journalism.

Of course, this is not the first time we’ve seen a computer software do a better job than its human counterparts. Last year, we wrote about Narrative Science, another story automation company, that claims it can do the type of deep analysis a $250,000 per year consultant would do.


Read more: http://www.businessinsider.com/aps-partnership-with-automated-insights-2015-1#ixzz3QOhsNCuG
 

The Quill Pen Isn't What it Used to Be by a Long Shot:  Software That Turns Data into a Narrative Story
"Robot Journalist Finds New Work on Wall Street:  Software that turns data into written text could help us make sense of a coming tsunami of data," by Tom Simonite, MIT's Technology Review, January 9, 2015 ---
http://www.technologyreview.com/news/533976/robot-journalist-finds-new-work-on-wall-street/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20150114

"The Newest Employees at Lowe’s Hardware Store: Robots," by Mae Anderson, Yahoo Tech, October 28, 2014 ---
https://www.yahoo.com/tech/the-newest-employees-at-lowes-hardware-store-robots-101180704939.html

No More Jobs on the Farms or Most Anywhere Else
"Get Ready for Robot Farmers,"  by Jodi Helmer, CNNMoney via Yahoo Tech, October 24, 2014 ---
https://www.yahoo.com/tech/get-ready-for-robot-farmers-100613764059.html

"Patented Book Writing System Creates, Sells Hundreds Of Thousands Of Books On Amazon," by David J. Hull, Security Hub, December 13, 2012 ---
http://singularityhub.com/2012/12/13/patented-book-writing-system-lets-one-professor-create-hundreds-of-thousands-of-amazon-books-and-counting/

 

Jensen Comment
This makes me wonder how much of our future popular textbooks and textbook supplements will be written by robots.


Question
Before looking up one estimated answer, try to figure out what Tom Brady will owe when both receiving the now-famous truck award plus what he owes for giving it to his teammate Malcomb Butler.

Hint
The truck's value is estimated at $34,000. "Assuming Brady has made [$5.43] million of taxable gifts up to this point in his life (a safe bet), "

One Answer
http://taxprof.typepad.com/taxprof_blog/2015/02/the-tax-consequences-of-tom-bradys-gift-.html#more

Will Butler also have to pay a tax on the gift?


"Advances in Accounting: Incorporating Advances in International Accounting 2014 Update," by Jim Martin, MAAW's Blog, February 4, 2015 ---
http://maaw.blogspot.com/2015/02/advances-in-accounting-incorporating.html
List of articles from the 2014 issues of Advances in Accounting: Incorporating Advances in International Accounting.

"Behavioral Research in Accounting 2014 Update," by Jim Martin, MAAW's Blog, February 6, 2015 ---
http://maaw.blogspot.com/2015/02/behavioral-research-in-accounting-2014.html

For a complete bibliography from 1989-2014 see http://maaw.info/BehavioralResearchInAccounting.htm


"When Auditors Get Mixed Up In M&A, Smaller Clients Get Hurt," by Francine McKenna, re:TheAuditors, February 3, 2015 ---
http://retheauditors.com/2015/02/03/when-auditors-get-mixed-up-in-ma-smaller-clients-get-hurt/

Over at Medium.com I’ve written about a new academic study, Shared Auditors in Mergers and Acquisitions, to be published soon in the Journal of Accounting and Economics that documents an interesting, rarely commented on auditor conflict of interest. The data suggests that when an acquiring company and its target share the same auditor, the audit firms favor acquirers at the expense of the smaller target audit clients. The researchers are also more bold than I have ever seen in an academic study in alleging that auditors prioritize their own self-interest and larger clients by using confidential information about the smaller clients to benefit the big ones.

From the study:

“Results suggest that auditors frequently violate their duty to put the interests of their clients ahead of their own in what appears to be a failure to protect confidential client information within their practice offices.”

There are plenty of studies that talk about shared advisors in M&A like investment banks and lawyers. (There is also a study cited in the above paper and also to be published soon in the Journal of Accounting and Economics that focuses solely on the finance impact of this shared auditor scenario, Cai, Kim, Park and White (2014)) Banks and lawyers are well known to favor the larger clients. But companies choose those advisors for the deals and, I assume, do so willingly and knowing that conflicts must be managed.

From the study:

We anticipate that shared auditors may favor acquisitive clients over targets for at least two reasons. First, an auditor’s long-term incentives (even within an auditor’s practice office) are more closely aligned with those of their acquisitive clients. Our intuition follows that applied to shared investment bank advisors who are more likely to favor acquiring firms when representing both a target and an acquirer in the same deal (Agrawal et al., 2013).

And…

We do not incorporate selection into our main analysis as selection issues with shared auditors in M&A appear to be less of a concern as compared to shared advisors in M&A deals (Agrawal et al., 2013). This is because both an acquirer and a target make the explicit choice to have a shared investment bank advise each of them for a specific transaction. In contrast, a shared auditor is a result of both a target and acquirer independently contracting with an audit firm to receive audit services prior to a bid being announced.

Recently the New York State Department of Financial Services (NYSDFS) fined and sanctioned Deloitte and PricewaterhouseCoopers for sacrificing independence, integrity and objectivity while providing consulting services to Standard Chartered and Bank of Tokyo-Mitsubishi, respectively, that were mandated by regulatory sanctions against the banks. These regulatory actions go beyond a typical focus by the SEC and PCAOB on the audit relationships of public accounting firms only.

From my article at Medium:

Continued in article

Bob Jensen's threads on professionalism in auditing and accounting ---
http://faculty.trinity.edu/rjensen/Fraud001c.htm


"The Rich Man’s Dropout Club:  Whatever happened to the teenage entrepreneurs whom Peter Thiel paid to forgo college?" by Beth McMurtrie, Chronicle of Higher Education, February 8, 2015 ---
http://chronicle.com/article/The-Rich-Mans-Dropout-Club/151703/?cid=at&utm_source=at&utm_medium=en#

Jensen Comment
This article is too long and too complicated to summarize here. In the late 1960s a colleague of mine named Jack Muth taught operations at Michigan State University where I taught accounting as an assistant professor. Jack put off getting getting his Ph.D. diploma at Carnegie-Mellon University because he saw no need for the foreign language requirement. He continued working at CMU as a research associate ABFL (All-But-Foreign-Language).

As a ABFL research associate Jack had an opportunity at some point to go to France. He then saw a need to learn some French, took some coursework, met the language requirement for his Ph.D. at CMU, and picked up his diploma. He then worked for several years as an assistant professor but was not awarded tenure at CMU. He later joined the faculty at MSU, was given tenure in advance, had almost no record of research and publication beyond his famous rational expectations model developed when he was still at CMU, and spent much of his time pursuing his obsession with playing in a string quartet ---
http://en.wikipedia.org/wiki/John_Muth
 

My point is that some people, often brilliant people with resources to be financially independent, are upset over time wasters that include requirements in college curriculum and job duties that they view as a waste of time for themselves. In college they're in a hurry to go places and do things. In Jack's case Bill Gates and many other well-known college dropouts had not yet entered college so they were not his role models. I'm not sure Jack had a role model. Unlike Bill Gates and the Thiel Fellows discussed in the above article Jack Muth did not have entrepreneurial aspirations ---
http://en.wikipedia.org/wiki/Thiel_Fellowship
What Jack really wanted was to what he was good at but not brilliant --- playing the viola.

Some brilliant students try to avoid the traditional role models of graduating from college, going to work for an organization, and performing according to job specifications. For example, some view joining a tenure track as a waste of time if it entails counting publications in research journals to get tenure and pay raises. Many like Jack Muth who who do get tenure early on do so on the basis on one noted contribution and don't play the career game like us other drudges had to play the publish or perish game. Jack was a bit problematic at MSU. He did not make noted research contributions beyond those contributions before he joined MSU. Students avoided his classes like the plague, because he was seldom prepared for class and often wandered over their heads on tangents that were not intended parts of the course.

When I was at Stanford there was a famous professor in the mathematics department that even the best math majors avoided like the plague. He was so ill prepared for his classes that students generally considered taking his courses to be a waste of their time. Maybe he was burned out. When he tried to explain solutions to problems he generally became all muddled up to to lack of preparation. Jack was a bit like that back at MSU, although I could still recognize brilliance that was not burned out. I think Jack just lost interest in mathematical economics. He loved his music.

As a colleague I thought Jack was brilliant. On occasion I became hopelessly lost in the mathematics of my own research. I would take my troubles down to Jack and without the least bit of preparation he would reveal his brilliance by showing me a way. Jack was an outstanding colleague that most of my other colleagues and MSU students failed to appreciate because they did not tap his brilliance in the right way.

I advise students to avoid anything like a Thiel Fellowship that tempts them to bypass a college degree. The odds are against becoming a Bill Gates or anything like Bill Gates. Being a Thiel Fellow is an invitation to fail and being left with nothing but failure. And returning to college later in life often gets complicated by such things as having children and losing that drive to compete in college --- where being in college is even more painful later in life than it was when being young.


"Replications in Economics: A Progress Report," by Maren Duvendack Richard W. Palmer - Jones W. Robert Reed, WORKING PAPER No. 2 6 /201, Department of Economics and Finance, University of Canterbury, December 3, 2014 ---
http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1426.pdf

Abstract: This study reports on various aspects of replication research in economics. It includes (i) a brief history of data sharing and replication; (ii) the results of the authors’ survey administered to the editors of all 333 “Economics” journals listed in Web of Science in December 2013; (iii) an analysis of 155 replication studies that have been published in peer - reviewed economics journals from 1977 - 2014; (iv) a discussion of the future of replication research in economics, and (v) observations on how replications can be better integrated into research efforts to address problems associated with publication bias and other Type I error phenomena.

. . .

23 economics journals is unreliable. The task o f identifying which results are reliable, and which are not, should be an important priority for the economics discipline. The future of replications . The fields of science and political science have been very active in calling for an increase in replication activities . For example, the Center for Open Science received 1.3 Million USD to start the Reproducibility Initiative 42 , 43 , which aims to independently verify the results of major scientific experiments. There have also been renewed calls for replication in the political sciences, e.g. Gary King’s website 44 is a good resource, the political science replication blog 45 is another. More recently the Berkeley Initiative for Transparency in the Social Sciences (BITSS) 46 was started with the objective to make empirical social science research more transparent which includes promoting replications.

The area of economics has seen some but relatively few replication initiatives, one is the “Replication in Economics” project at Goettingen University which is funded by the Institute for New Economic Thinking and which has compiled a wiki containing an extensive number of replication studies published in economic journals. Another replication initiative in the field of development economics has been launched by 3ie.

. . .

We expect that elite journals will likely continue to find little benefit to publishing replication studies, as they receive high quality , original research with much citation potential. However, journals of lesser quality may find that replications of widely - cited papers can be expected to produce more citations than original research submitted to those journals. If that is the case, the pursuit of citations may help replication studies to establish a niche within the hierarchy of economics journals

Technological innovation also affects journal demand. The Journal of Applied Econometrics’ practice of publishing summaries of replications allows it to allocate less journal space for a replication study relative to an original research study. The increasing sophistication of online publishing also creates opportunities for journals to use their scarce journal space more efficiently. Public Finance Review publishes a summary version of a replication study in its print edition, but attaches the full - length manuscript as “ Supplemental material” that can be accessed at the journal’s online website. These innovations increase the ratio of citations/journal page, and hence can shift the demand for replication studies relative to original studies at some journals

Finally, widespread attention directed towards the replicability of scientific research may affect journal editors’ and researchers’ “tastes” for replication studies. This also generates dynamic externalities that simultaneously increases the demand and supply of replication studies.

Continued in article

Economics has met the enemy, and it is economics," by Ira Basen, Globe and Mail, October 15, 2011 ---
 http://www.theglobeandmail.com/news/politics/economics-has-met-the-enemy-and-it-is-economics/article2202027/page1/ 
 Thank you Jerry Trites for the heads up.

Bob Jensen's threads on the lack of replication in accountics science are at
http://faculty.trinity.edu/rjensen/TheoryTAR.htm
There is little interest in replication since top journals will not publish replications, summaries of replications, or even commentaries on published research outcomes.

There is great interest in the models and methods of accountics science but little interest findings of those models.
The Cargo Cult of Accountics Researchers ---
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm#CargoCult

The second is the comment that Joan Robinson made about American Keynsians: that their theories were so flimsy that they had to put math into them. In accounting academia, the shortest path to respectability seems to be to use math (and statistics), whether meaningful or not.
Professor Jagdish Gangolly, SUNY Albany

How Accountics Scientists Should Change: 
"Frankly, Scarlett, after I get a hit for my resume in The Accounting Review I just don't give a damn"

http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm
One more mission in what's left of my life will be to try to change this
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm


"The Story of the First Female African-American CPA in the United States," by Adrienne Gonzalez, Going Concern, February 19, 2015 ---
http://goingconcern.com/post/tbt-story-first-female-african-american-cpa-united-states

From the Chicago Tribune on July 14, 2005 ---
http://articles.chicagotribune.com/2005-07-14/news/0507140293_1_cpa-exam-arthur-j-wilson-public-accountant
By all accounts, Mary T. Washington Wylie's search for perfection made her a tough, but kind, taskmaster.

It also helped propel her into becoming the first African-American woman in the U.S. certified as a public accountant. And it helped the Chicago accounting company she founded to become one of the largest black-owned CPA firms in the country, while serving as a gateway for dozens of African-Americans into the field.

"Mary was a very driven woman but also very conscious of people and their feelings," said Frederick Ford, vice chairman of the board at Draper and Kramer Inc. He cut his accounting teeth as a staff auditor with her firm in the late 1940s and early '50s. "She was a stickler for details and for getting it right, and, for me anyhow, it was a wonderful place to get a start. I learned how important it was to do as nearly to perfect work as you could."

Born in Vicksburg, Mississippi, Mary T. Washington first became interested in accounting in high school and worked for Douglas National Bank after school and on weekends. At the bank, she was mentored by Arthur J. Wilson, the first black CPA in Illinois and 2nd in the country overall.

While studying for her degree, she opened an accounting firm, Mary T. Washington and Co., in 1939 in a corner of her basement. Most of her clients were small black-owned businesses and non-profit groups. But her firm also came to design and maintain accounting systems for such large black-owned firms as Fuller Products and Seaway National Bank.

Her office became a destination for young black men looking for apprenticeships and jobs in accounting.

During the 1960s, there were more black CPAs in Chicago than elsewhere in the country because of her assistance to them, colleagues said.

Ms. Washington remained the only female black CPA in the United States until 1968.

Eight Special Women of Accounting --- http://www.journalofaccountancy.com/Issues/2007/Aug/EightSpecialWomenInAccounting.htm

Among the AICPA-donated volumes at Ole Miss are two binders containing photographs of individuals appearing in the JofA or at accounting conventions from 1887 to 1979. Of the 446 individuals featured, eight are women—Christine Ross, Ellen Libby Eastman, Miriam Donnelly, Mary E. Murphy, Helen Lord, Helen H. Fortune, Mary E. Lewis and Beth M. Thompson. In a time when the profession was the all-but-exclusive domain of men, they stood out not only because of their gender but in many cases because of their accomplishments and contributions to accounting. Consider that in 1933, slightly more than 100 CPA certificates had been issued to women. By 1946, World War II had changed traditional notions of gender in the workplace, and female CPAs had more than tripled to 360—still a small contingent but, as information gleaned from the AICPA Library indicates, one capable of exerting a strong and beneficial influence on the profession.


Christine Ross

Born about 1873 in Nova Scotia, Ross took New York by storm in the late 1890s. New York state enacted licensure legislation in 1896 and gave its inaugural CPA exam in December 1896. Ross sat for the exam in June 1898, scoring second or third in her group. Six to 18 months elapsed while her certificate was delayed by state regents because of her gender. But she had completed the requirements and became the first woman CPA in the United States, receiving certificate no. 143 on Dec. 21, 1899.

Ross began practicing accounting around 1889. For several years, she worked for Manning’s Yacht Agency in New York. Her clients included women’s organizations, wealthy women and those in fashion and business.

Helen Lord
Lord received her CPA certificate from New York in 1934 and in 1935 joined the American Society of Certified Public Accountants, which merged with the American Institute of Accountants (later AICPA) the following year. In 1937, she was a partner with her father in the New York firm of Lord & Lord and a member of the AIA. She served in the late 1940s as business manager of The Woman CPA, published by the American Woman’s Society of Certified Public Accountants–American Society of Women Accountants. Lord reported the journal then had a circulation of more than 2,200.

Helen Hifner Fortune
Fortune, one of the first women CPAs in Kentucky, received certificate no. 174 in 1935 and was admitted to the AIA the following year. She became a member of an AIA committee in 1942 and by 1947 was a partner in the Lexington, Ky., firm of Hifner and Fortune.

Ellen Libby Eastman
Eastman began her career as a clerk in a Maine lumber company, eventually becoming chief accountant. She studied for the CPA exam at night and became the first woman CPA in Maine, receiving certificate no. 37 dated 1918. She was also the first woman to establish a public accounting practice in New England. Arriving in New York in 1920, Eastman focused on tax work and audited the accounts of the American Women’s Hospital in Greece. In 1925, she was a member of the ASCPA. In 1940, Eastman began working with the law firm of Hawkins, Delafield & Longfellow in New York.

She was outspoken and eloquent regarding a woman’s ability to succeed in accounting. In a 1929 article in The Certified Public Accountant, Eastman recounted her adventures:

One must be willing and able to endure long and irregular hours, unusual working arrangements and difficult travel conditions. I have worked eighteen out of the twenty-four hours of a day with time for but one meal; I have worked in the office of a bank president with its mahogany furnishings and oriental rugs and I have worked in the corner of a grain mill with a grain bin for a desk and a salt box for a chair; I have been accorded the courtesy of the private car and chauffeur of my client and have also walked two miles over the top of a mountain to a lumber camp inaccessible even with a Ford car. I have ridden from ten to fifteen miles into the country after leaving the railroad, the only conveyance being a horse and traverse runners—and this in the severity of a New England winter. I have done it with a thermometer registering fourteen degrees below zero and a twenty-five mile per hour gale blowing. I have chilled my feet and frozen my nose for the sake of success in a job which I love. I have been snowbound in railroad stations and have been stranded five miles from a garage with both rear tires of my car flat. I have ridden into and out of open culvert ditches with the workmen shouting warnings to me. And always one must keep the appointment; “how” is not the client’s concern.
 

Mary E. Murphy
A long-lived pioneer, Murphy (1905–1985) lectured, researched and taught in the United States and abroad, retiring in 1973. The Iowa native earned her bachelor of commerce degree with a major in accounting from the University of Iowa in 1927, then obtained a master’s in accountancy in 1928 from Columbia University Business School. In 1938, she received a doctorate in accountancy—only the second woman in the United States to do so—from the London School of Economics.

In 1928, Murphy began working in the New York office of Lybrand, Ross Bros. & Montgomery. Two years later, she took the CPA exam in Iowa and received certificate no. 67, to become the first woman CPA in Iowa. She joined the AIA in 1937.

Following her public accounting stint, she served for three years as the chair of the Department of Commerce at St. Mary’s College in Notre Dame, Ind. Murphy also was an assistant professor of economics at Hunter College of the City University of New York until 1951. In 1952, she received the first Fulbright professorship of accounting, with assignments in Australia and New Zealand. In 1957, she was appointed as the first director of research of the Institute of Chartered Accountants in Australia. Murphy retired in 1973 from the accounting faculty at California State University.

She published or collaborated on more than 20 books and 100 journal articles and many book reviews and scholarly papers. From 1946 to 1965 she was the most frequently published author in The Accounting Review. Murphy investigated the role of accounting in the economy, made the case for accounting education improvements and paved the way for other aspiring women accountants to prosper. More than half her publications explored international accounting, often advocating standardization. She also emphasized accounting history and biographies.

Mary E. Lewis
Lewis received California CPA certificate no. 1404 in 1939. She was admitted to the AIA that year and by 1947 had her own firm in Los Angeles.
 

Beth M. Thompson
Thompson worked as the office manager in the Kentucky Automobile Agency she and her husband, Charles R. Thompson, owned. After closing the car business, they moved to Florida, where she worked for an accounting firm. She passed the CPA exam in 1951 with the encouragement of her husband and opened her own accounting business in Miami. In 1955, Thompson was one of only 900 women CPAs and the only female president of a state association chapter—the Dade County chapter of the Florida Institute of CPAs.

Miriam Donnelly
From 1949 to 1955, Donnelly was head librarian of the AIA library. (In 1957, the AIA was renamed the AICPA.) She began her career with the library as assistant librarian and cataloger in 1927, after working for two governmental libraries and the New York Public Library.

 

History of women accountants in the 1880. US Federal Census ---
http://repository.usfca.edu/cgi/viewcontent.cgi?article=1001&context=acct

Christine Ross (The First Woman CPA) --- Click Here
http://books.google.com/books?id=W8Z2a53DJ2cC&pg=PA151&lpg=PA151&dq=%22First+Woman+CPA%22&source=bl&ots=irXssMWzFN&sig=0AneWv1qO-MB6_ixatHq-mMerRQ&hl=en&sa=X&ei=N8o8UY3XBYrK0AHngoCYBw&ved=0CDgQ6AEwAQ#v=onepage&q=%22First%20Woman%20CPA%22&f=false

Mary Jo McCann (First Woman CPA in Kansas) ---
http://www.kscpa.org/about/news/119-mary_jo_mccann_first_woman_cpa_in_kansas_passes

Bertha Aldrich (First Woman CPA in California) --- http://boards.ancestry.com/surnames.aldrich/600/mb.ashx

Accounting Reform (search for women) --- http://en.wikipedia.org/wiki/Accounting_reform

American Society of Women Accountants --- http://en.wikipedia.org/wiki/University_of_Cambridge#Women.27s_education

Bob Jensen's threads on the history of women in accountancy ---
http://faculty.trinity.edu/rjensen/bookbob2.htm#Women


"Deloitte’s Engelbert to be first female U.S. CEO of a Big Four firm," by Ken Tysiac, Journal of Accountancy, February 9, 2015 ---
http://www.journalofaccountancy.com/news/2015/feb/deloitte-ceo-cathy-engelbert-201511762.html 

Bob Jensen't threads on the history of women professionals in accountancy ---
http://faculty.trinity.edu/rjensen/bookbob2.htm#Women


"38 Percent Of Women Earn More Than Their Husbands," by Mona Chalabi, NPR via Nate Silver's 5:38 Blog, February 8, 2015 ---
http://fivethirtyeight.com/datalab/38-percent-of-women-earn-more-than-their-husbands/

Jensen Comment
I don't know how this study factored for misleading statistics, but here are a few considerations. It's quite common for women to support husbands who are students such as students or residents in medical school. For example, surgical residents get paid, but they get paid very little relative to what their wives may be still earning to support the completion of their husband's training requirements. Of course sometimes it is husbands who support aspiring female physicians.

Many men are in the USA military. Their wives who work are almost certain to have higher income, although the benefits of a military are substantial --- including free family medical care, base housing, base schools, and lifetime pensions commencing at a young age, sometimes before reaching 40 years of age.

Times are changing for professional women at work. The big CPA firms now hire more female accounting graduates than male accounting graduates. There are also cracks in the glass ceiling. Deloitte, one of the top Big Four firms, just appointed a woman CEO.

Bob Jensen's threads on the history of working women ---
http://faculty.trinity.edu/rjensen/bookbob2.htm


A Totally Different Kind of "Audit" by PwC

"Review ‘Validates’ a Controversial Ranking, Missouri University Says," by Charles Huckabee, Chronicle of Higher Education, February 2, 2015 ---
http://chronicle.com/blogs/ticker/review-validates-a-controversial-ranking-missouri-university-says/93173?cid=at&utm_source=at&utm_medium=en

The University of Missouri at Kansas City says in a news release that an independent audit and review have validated an academic journal’s ranking of its Henry W. Bloch School of Management as first in the world in innovation-management research. The Kansas City Star, however, reports that the audit also confirms many details of a newspaper investigation last year that described “a pattern of exaggerations, misstatements, and cherry-picking data” by officials of the Bloch School in pursuit of top rankings.

 

The audit, by the international accounting firm PricewaterhouseCoopers LLP, was commissioned by the University of Missouri system’s Board of Curators at the request of Gov. Jay Nixon in response to the newspaper’s report. The Board of Curators released a report on the auditor’s findings on Friday. The curators also released an analysis of the auditors’ findings by Robert D. Hisrich, a professor emeritus of entrepreneurship at the Thunderbird School of Global Management, in Arizona, whom the board hired to review and comment on the audit report.

 

The audit focuses in part on data submitted by Bloch School officials to Princeton Review, a test-preparation-services company that publishes rankings of universities and academic programs. Princeton Review, which is not affiliated with Princeton University, has ranked the Bloch School’s graduate and undergraduate entrepreneurship programs in its top 25 every year since 2011.

 

The auditors also examined interactions among Bloch School officials and the authors of a 2012 article in the Journal of Product Innovation Management, “Perspective: Ranking of the World’s Top Innovation Management Scholars and Universities.” The journal article ranked the Kansas City institution’s entrepreneurship program as No. 1 worldwide.

 

Among the audit’s findings are that an official at the Bloch School had, under pressure from his boss, submitted flawed or false data to Princeton Review, and that another Bloch official had participated in the editing of the journal article. The audit does not challenge whether the article’s or the company’s rankings were deserved.

 

Mr. Hisrich, in his review, acknowledged that information provided to Princeton Review “was inaccurate in three subject-matter areas” but added, “I cannot conclude that the inaccurate information made a material difference in UMKC’s rankings.” Regarding the journal article, he concluded that the methodology the authors used and the circumstances surrounding the article’s publication “were consistent with generally acceptable professional practices.”

 

Leo E. Morton, chancellor of the University of Missouri at Kansas City, said he was “pleased to have the Bloch School’s No. 1 ranking in innovation-management research validated,” but asserted that he also took seriously the findings about flawed data submitted to Princeton Review. “We have already implemented changes and will continue to seek ways to improve our data collection,” Mr. Morton said.

"Fibbing for Rankings," by Scott Jaschik, Inside Higher Ed, February 2, 2015 ---
https://www.insidehighered.com/news/2015/02/02/audit-finds-u-missouri-kansas-city-business-school-gave-false-information-princeton

The University of Missouri at Kansas City gave the Princeton Review false information designed to inflate the rankings of its business school, which was under pressure from its major donor to keep the ratings up, according to an outside audit released Friday.

The audit -- by PricewaterhouseCoopers -- described the process by which business school officials came up with creative reasons to provide data that many at the school believed to be false, and that the audit found to be false. In one case, for example, the university created a wish list of clubs that it might support to promote entrepreneurial students. The university then reported that its wish list was reality and that it had all of those clubs, which in fact did not exist.

Another part of the audit found that an article published in The Journal of Product Innovation Management -- an article that ranked the university's business school as the top institution in the world in the field of innovation management -- did not violate professional norms. However, the audit also found that the journal was unaware when accepting the article that it was written by scholars with ties to the university.

UMKC issued a news release Friday that reads: "Independent review upholds No. 1 research ranking."

But the audit also confirmed many of the findings of an August article in The Kansas City Star that found "a pattern of exaggerations and misstatements" by the business school. At the time, the university disputed the Star's report, but Missouri governor Jay Nixon requested an investigation, and that request led to the report issued Friday.

'By All Means Necessary'

PricewaterhouseCoopers officials had access to senior UMKC officials (including some who left positions they had held in the period covered by the audit) and to relevant e-mail messages. The e-mail revealed a focus on finding ways to do well in the rankings in order to keep happy the business school's largest donor (of $32 million), for whom the school, the Henry W. Bloch School of Management, is named.

An e-mail from the then dean to colleagues said, for example: "Henry Bloch gets very upset when our rankings go down. We must do everything we can to increase it when we can by all means necessary.”

The audit then describes some of the things UMKC did to rank high in the Princeton Review's evaluation of business schools' (undergraduate and graduate) entrepreneurial programs.

For example, in answering a question about how many students are enrolled in an entrepreneurship program, the university started counting anyone who was taking a class in entrepreneurship. Not surprisingly, the numbers jumped. For example, UMKC reported that undergraduate enrollment in entrepreneurship programs increased in a year (the year in which the university changed how it was filling out the form) from 99 to 438. A dean told the auditors that he knew that figure "isn't right."

Another change UMKC made helped it inflate answers on another Princeton Review question: about what percentage of students launch a business while enrolled. The university, the audit found, started using primarily data from its e-scholar program (a certificate program for entrepreneurs in which they must develop a business plan). The e-scholar program students are not degree students or enrolled in the university, but officials said they believed it was legitimate to use this group for reporting, even though the Princeton Review ranks degree programs. Since all of the e-scholar students must create business plans, the proportion of undergraduates reported as launching a business increased from 44 percent to 100 percent from 2010 to 2011.

And then there was the question on clubs. The Princeton Review asks: “How many officially recognized clubs/organizations do you offer that are specifically for entrepreneurship students?”

The answers in 2009 were three each for undergraduates and graduate students, and in 2010 were four each. In 2011 the figure jumped to 29 for graduate students and 28 for undergraduates.

Here's how the number of clubs "grew," according to the audit. A business school official asked a colleague to put together a wish list of clubs that might show an entrepreneurial focus at the university. A second official "then instructed a UMKC graduate student to populate these clubs onto the university’s webpage." UMKC "used the clubs' existence on the university’s webpage as the only proof the club existed." Officials believe "these additional 20-plus clubs never actually existed at UMKC." Since the Star article, the number of clubs being reported is down to five each for graduate students and undergrads.

The PricewaterhouseCoopers report says the Princeton Review does not review the accuracy of information submitted to it by colleges and universities and so did not do any independent analysis of UMKC data. The audit also said it was not clear that any of the false information would affect the business school's overall ranking.

But on Sunday night, Robert Franek, senior vice president and publisher of the Princeton Review, said in an email to Inside Higher Ed that Princeton Review would be removing UMKC from the lists of best colleges and business schools for entrepreneurial programs.

“At The Princeton Review, for the past 34 years we have provided accurate and timely information to students and parents to help them make decisions about colleges and graduate schools. We were extremely disappointed to learn that  the University of Missouri-Kansas City falsified data about the school per a report from PricewaterhouseCoopers on January 30. As a result of this new information, we are removing the University of Missouri-Kansas City from our 2014 ranking lists of the best college and business school entrepreneurial programs," said a statement Franek released. "Schools earn a spot on our entrepreneurship ranking through school-reported data. Every school signs an affidavit to ensure their information is accurate. We take these affidavits and this news very seriously.”

Questions on a Journal Article

Another major part of the audit was a look at the journal article published in The Journal of Product Innovation Management.

On this question, the audit found that the article was based on data analysis and that no shortcomings could be found in it. But the article has been questioned from the time it was published. The original Star article quoted a professor (anonymously, because he feared speaking out) as saying that “We all knew that this was bullshit. We knew that UMKC was not better than MIT and Stanford.”

While the audit didn't question the article's findings, it did note concerns about it. The authors who asserted that UMKC was tops in the world in innovative management did not disclose to the journal that they were both visiting scholars at the university and knew some of the players. Because the article was based on data (number of articles written in journals of various influence, etc.), the journal's editor said that the article's findings still stood. However, he said he wished he had known about the authors' ties to the institution they praised.

The authors are two scholars from China. They gave a letter to the auditor in which they said that there was no need to identify their UMKC connections because the "double-blind" peer review process -- in which they don't know who reviews their work, and the reviewers don't know the author -- prevented conflict of interest. The audit, however, found that at the journal in question "papers are solely reviewed by the editor and not subject to the typical double-blind review of other research papers."

Continued in article

Bob Jensen's threads on ranking controversies ---
http://faculty.trinity.edu/rjensen/HigherEdControversies2.htm#BusinessSchoolRankings

Jensen Comment
Perhaps we should be more precise in using the term "audit" versus the term "review." The article content uses the word audit whereas the title more appropriately uses the term review. Then again maybe this was an audit since it validated the numbers.

Price Waterhouse years ago was willing to lend its name to the possible limits of the term "review." Over ten years before its merger with Coopers & Lybrand, PW signed off on a review in 1987 of Days Inn financial statement forecasts prior to a planned IPO of Days Inn. This was not an audit of the forecast numbers themselves. But it was a "review" of the forecast procedures of Days Inn and a review of the "underlying assumptions" in those forecasts.

I still have a prized copy of that 1987 Days Inn annual report in which PW audited the 1987 financial statements and reviewed the financial statement forecasts. A real estate appraisal company, Landhauer Associates, signed off on the estimates of over 300 hotel exit values based on a sampling of the real estate appraisals. I provide more details at
http://faculty.trinity.edu/rjensen/Theory02.htm#FairValue
Perform search on the phrase "Days Inn"

Update
Princeton Review Strips U. of Missouri at Kansas City of Its Controversial Ranking ---
http://chronicle.com/blogs/ticker/jp/princeton-review-strips-missouri-university-of-its-controversial-ranking?cid=at&utm_source=at&utm_medium=en


"Here's The Painstakingly Detailed Budget Of A Couple Who Earns Nearly $15,000 A Month," by Libby Kane, Business Insider, January 26, 2015

Question
Suppose you were teaching a financial literacy course and used the following monthly budget for a couple. What would you focus on to stimulate student debates on the issues.

 

Hints

·        The couple earns $180,000 after-tax withholdings and tax estimated additional payments per year (assuming both adults work giving rise to the day care allowance).

 

·        My calculation assuming a 4% APR 30-year mortgage initially is that the couple owns a home originally costing $345,150 plus whatever they made in a down payment. This price would be relatively high in a decadent farming town in Iowa and relatively low in a suburb of most major cities. It would be a tent in Silicon Valley. It would not be much of a house within a walking distance of virtually all major universities in the USA.


The house probably cost a lot less if the $1,647.80 payment also covers property taxes and mortgage insurance. Have your students estimate the original cost of the home if the payments on the mortgage itself are only $1,000 per month. They must be living in an old shack or a cramped town house.

 

·        The life insurance seems relatively low for a family with young children.

 

·        The "out-to-eat" budget is relatively low and can be used up entirely with two nights out at nice restaurants per month. The family must eat out mostly at fast-food and pizza joints. One way to save money plus eat healthy meals is to eat at a nearby hospital like we did in both San Antonio (where the Northeast Baptist Hospital was only a block away). Eating at the hospital was cheaper than cooking at home. Erika worked full time at this hospital.


 

·        The electric bill of $200 would not cover our electric bill with heating and air conditioning while we lived in San Antonio where the electricity and gas bill was over $400 per month. In the White Mountains of New Hampshire electricity, propane and heating oil would be more like $1,000 per month. It's very cold up here.

 

·        I think for a younger family not of Medicare the medical, dental, and prescription drug allowance is way too low in the budget shown in the article below. For retired folks like us on Medicare the medical, dental and prescription outlays would be much, much higher --- more like $1,500 per month. Younger folks naively think Medicare is "free"  after you retire. It's not free when you add in the cost of Medicare itself, the cost of Medicare supplemental insurance, and the out-of-pocket costs of medicine not covered by Medicare D.

 

·        How about the other monthly estimates?
Are they realistic for the USA?
Are important items deleted in terms of most families?

 

o   In San Antonio where I watered my lawn with a sprinkling system my water and sewer bills were over $200 per month

o   My Time Warner cable bill is now over $160 per month

o   What about those monthly iPhone usage fees?

o   How about home owner insurance and umbrella (liability) insurance?

o   How about lawn and garden equipment such as a garden tractor and lawn mowers and snow throwers?

o   What about furniture and appliance costs? Up here in the boondocks I spend quite a lot on extended on-site warranties.

 

When you teach from this budget you might go into more details regarding possible tax strategy and retirement strategy  pros and cons.

 

"Here's The Painstakingly Detailed Budget Of A Couple Who Earns Nearly $15,000 A Month," by Libby Kane, Business Insider, January 26, 2015 ---
http://www.businessinsider.com/detailed-budget-of-high-earning-couple-2015-1 

 

February 1, 2015 reply from Patricia Walters

Bob

Not every place charges for water. We had a well in VA and we paid electricity and maintenance for the pump, not for the water.

We had a lawn mower in VA. Here we have someone come and cut our grass who has the equipment, about 100 per month in the growing season only. No snow. Even in VA we had shovels, not power tools.

No TV, only cable for internet. Biggest utility charges electricity (we have big OLD house) and phones.

We don't know where these people live. Costs vary widely depending on location, even within counties.

Are there homes in Fort Worth that cost over a million? Sure. But there are also homes in reasonable neighborhoods for less than $150,000. I live in one of those neighborhoods.

I've lived in NYC, NJ, VA and now TX. Costs vary widely across those places and within those places.

One if their biggest expenditure was school, which seemed likely to me.

Why do you doubt the truth of their budget?

Pat

 

February 2, 2015 reply from Bob Jensen

Hi Patricia,

I did not doubt the truth of their budget, but I did think they left a few things out or were ambiguous about some things that need to be clarified by a teacher or students using this budget in a financial literacy course.

For example, the $1,687 mortgage payment could be the mortgage alone or it could also cover property taxes, homeowner insurance, and mortgage insurance. Take those away from the payment and you are left with a fairly low-sized mortgage.

In my case the property taxes are $1,000 per month but they are not part of my mortgage payment in these mountains. In fact the property tax payment and the mortgage payment only differ by $200 because I paid over 60% down at the time of purchase. Later I refinanced the remaining mortgage for 3.6% for 30 years. I pay the homeowners insurance separately, and that's not cheap up here.

Most people cannot afford such a large down payment unless they're retired. In rural mountain and ocean properties the banks typically require larger down payments than in towns. In many instances former owners must finance the homes they sell.

When I taught at the University of Maine I had an ocean cottage that could not be financed except by an owner. Banks would not loan on shore property in those days. That made interest rates highly variable, because they were part and parcel to sales price negotiations. Owners also typically demand large down payments when they finance sales properties.

I also wanted a mortgage so I could play the game of having more itemized tax deductions plus invest more in a long-term insured tax-exempt mutual fund that pays only slightly less than by mortgage interest rate. The standard deduction sucks, but you have to have a sizable amount of itemized deductions to cover the minimum threshold for itemized deductions..

I could pay the mortgage off any time, but I don't want to due to a tax strategy that might be debated by students in a financial literacy course. That's why I suggest having students debate alternate tax strategies at the same time they are discussing household budgeting.

Having a deep water well makes me not concerned about the cost of water usage. Wells only get expensive when you have to replace the well and or the pressure tank and pump. Two of my neighbors had to replace their wells, and it cost each of them thousands of dollars.

With a well also comes a septic system. The risk here is having to replace the drain fields for broken tiles. That expense depends a lot on having sufficiently high ground for another field. You can't put a new drain field over an old drain field or in low land that does not drain well from rain and snow melt.

A B&B down the road is having all sorts of troubles finding a suitable place for a new drain field. The small hotel has been empty for over a year in part because of this problem and the need for a new well.

In San Antonio you could get housing relatively close to Trinity University for less than $200,000 but most faculty who do so either do not have children or send their children to private schools (which is really expensive). Also crime risks are higher near campus relative to most outer northern parts of the city. By higher crime risk I mean that I don't recommend walking near campus at night and having to have high quality home security systems.

Trinity has very safe and well lighted walking, jogging, and biking trails on campus that are heavily patrolled by officers on bicycles. These trails are used a lot by neighbors not affiliated with the University. It's a public service.

Thanks for your thoughts,
Bob

Added Later
I think the bottom line of a study of this budget is that if budgeting is difficult for a family making $180,000 after taxes think about the "poor" family trying to do it on half as much income per year after income taxes.

The real bottom line is that you cannot divide each line item in this $180,000 budget by two for a family making half as much ($90,000) after-tax income.

Times have changed. In the 1970s when I lived in Maine I had a beautiful and huge house beside the Eastern Maine Medical Center plus an ocean cottage on 12 acres of shore front near Acadia National Park.

The cost of the ocean property was $37,500 that I financed with the former owner. My wife only worked at home in those days, and my income was about $50,000 per year from the University of Maine --- and we could still afford two cars, attend NYC theater, etc. I was writing accountics research articles in those days and earned zip in consulting.

In Florida I owned an acreage with horses while earning less than $80,000 per year. Only in Texas did my income jump to over $200,000 per year such that I could get more serious about retirement savings for 24 years.

I don't know how a family earning less than $100,000 can make it in a city like San Antonio, send the kids to decent schools, and still save for retirement.

It's no wonder that in the 21st Century both parents must work outside the home to make it all work.

PS It was a mistake to sell (in 1978 when we moved to Florida) the Maine shore property for about what I paid for it in 1972. Today this shore property most likely is worth more than a million dollars since it is so close to Acadia National Park. In those days my property taxes on this parcel were about $25 per month. Today they are more than likely to be over to $2,000 per month on the shore.

When I think about it, keeping the shore property may have been a bad deal because eventually the property taxes would've eaten me alive over the decades. The cottage was and still is inaccessible in the winter and would not obtain enough in summer rental to pay for the annual property taxes.

Thanks for your thoughts,
Bob

 

Bob Jensen's personal finance helpers ---
http://faculty.trinity.edu/rjensen/Bookbob1.htm#InvestmentHelpers


Professor Albrecht reveals quitting school to prevent a string of F grades and his "beloved" Professor Donald Johnson

"The Ripple Effect," by David Albrecht, Skills for Young Professionals Blog, February 4, 2015
https://skillsforyoungprofessionals.wordpress.com/2015/02/04/the-ripple-effect/

Bob Jensen's threads on careers ---
http://faculty.trinity.edu/rjensen/Bookbob1.htm#careers

PwC US Launches CareerAdvisor, January 7, 2015
New platform of tools to provide students with resources they need for the career they want
http://www.pwc.com/us/en/press-releases/2015/pwc-us-launches-careeradvisor.jhtml


Academic careers --- http://www.academiccareers.com/

 

LibraryCareers.org --- http://www.ala.org/ala/educationcareers/careers/librarycareerssite/home.cfm

 

Careerzone --- http://careerzone.ny.gov/cz/stem/index.jsp

 

JobApps --- http://www.myjobapps.com/

 

Careers in Logistics ---
http://academic.rcc.edu/logisticsmanagement/PDF/Careers In Logistics by CSCMP.pdf

 

Resume Writing Helpers and Samples --- http://www.resumesamples.info/


My Next Move (career change helpers) --- http://www.mynextmove.org/
For example feed in the word "accountant"

 

Science Careers --- http://sciencecareers.sciencemag.org/


Accounting Career Network --- http://www.searchaccountingjobs.com/

 

AccountingCareersNow.com --- http://www.accountingcareersnow.com/

The Big Four Accounting Firms Are All in the Ten:  Who dares say that accounting is a dull career?
"Fifty Most Popular Employers for Business Students," Bloomberg Businessweek, May 9, 2013 ---
http://images.businessweek.com/slideshows/2013-05-09/fifty-most-popular-employers-for-business-students

"How To Get Hired If You Have A Tattoo," by J.T. O'Donnell, Business Insider, October 22, 2013 ---
http://www.businessinsider.com/how-to-get-hired-if-you-have-a-tattoo-2013-10

 


If they lost government jobs you know they had to be really awful on the job.

"IRS Rehires Hundreds Of Problem Former Employees," by Robert W. Wood, Forbes, February 6, 2015 ---
http://www.forbes.com/sites/robertwood/2015/02/06/irs-rehires-hundreds-of-problem-former-employees-just-in-time-for-obamacare/

As an employer, would you rehire a former employee guilty of misconduct? Say, someone you caught falsifying official forms, peeking at secured confidential files, or misusing company property? How about rehiring hundreds of such misbehaving workers? These aren’t trick questions. Most employers breathe a sigh of relief when such an employee departs. You don’t hire them back.

Rehiring is for someone you want back, not someone who was a problem. But the IRS may be different from your average employer. So suggests a new report by the Treasury Inspector General for Tax Administration. The watchdog report says the IRS rehired hundreds of former employees with prior substantiated conduct or performance issues.

The Inspector General identified hundreds of rehires despite prior substantiated conduct or performance issues. Some were serious. They ranged from unpaid taxes, unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct. The Treasury Inspector General for Tax Administration concluded that the rehires pose increased risks to the IRS and taxpayers.

Continued in article

U.K. Lawmakers Accuse PwC of Promoting Multinational Tax Dodges ---
http://www.bloomberg.com/news/articles/2015-02-06/u-k-lawmakers-accuse-pwc-of-promoting-multinational-tax-dodges


February 3, 2015 message from Elliot Kamlet

To All Lazy Professors Out There

Wisconsin GOP Gov. Walker Takes Aim at College Outlays, Professors Likely Presidential Candidate Proposes a $300 Million Cut to State’s University System ---
http://www.wsj.com/articles/wisconsin-gop-gov-walker-takes-aim-at-college-outlays-professors-1423011790?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth

Elliot

February 4, 2015 reply from Bob Jensen

Hi Elliot,

Having been one of those "lazy" professors who taught five hours per week (two three credit courses) most of my career and worked 60+ hours per week in academic tasks I view myself as the opposite of "lazy," I typically was in my faculty office before 6:00 am. On days when I was back home at 4:00 pm I was in my home office doing academic work. I also did not "waste" weekend time.

However, I'm sure we all know professors who abused the tenure system. In the gray zone are those who got paid for full time work by the university but worked more hours each week on supplementary-income tasks such as textbook writing and consulting. Quite a lot of my colleagues over the years, before the days of tax and accounting software, had full-time tax and bookkeeping businesses on the side.

In the red zone are professors who got paid for full-time by the university, but worked many more hours per week in less professional activities such as farming as a full-time hobby or sometimes as a full-time business. I recall two acquaintances who were relatively big-time hog farmers --- one at Kansas State University and the other at a Canadian university.

As an MBA student at Denver University one of my hero professors showed up on campus about 12-15 hours a week and spent much more time tending his cattle and horses on a 4,000 acre ranch in South Park, Colorado. That was how I hoped to live when I first went into a doctoral program.

By far the most common abuse of the tenure system came from lifetime associate professors who, for one reason or another, became disgruntled faculty members. Often they were unhappy due to low pay raises for lackluster performance. They took out their unhappiness by abusing the system henceforth and forever more --- spending as little time as possible for the university that still paid them for full-time work. Many just gave up on trying to do research and writing. That's the main reason they never were promoted to full professor status.

Our profession is one of the most lenient in terms of parenting. I've seen some parents abuse the system by spending as little time as possible on campus during their years of child rearing.

Faculty members also take advantage of employers when they are chronically ill. In other lines of work they would have to seek disability status. For example, in most lines of work workers cannot put in 12 hours a week for full-time pay when they are chronically depressed or bipolar or whatever absentees on the job.

A depressed professor might go on "working" 12 hours per week with a medical condition that would lead to termination in most other jobs.. I'm very close with one such faculty member who only after ten years finally took a pay cut to be declared disabled. That professor was usually badly prepared for class, hopelessly out of date, and did not do a whole lot for students in those ten years.

My point is that many faculty members in this profession are not "lazy" so much as they are teaching on automatic pilot for 12 or less hours per week while drawing full time pay for less than full time effort.

I don't think Governor Walker will get a whole lot of benefit from increasing teaching loads of faculty from 6-12 hours per week to 12-18 hours per week.
Those putting in minimal effort in the classroom will still put in minimal effort and otherwise abuse the spirit of their full-time faculty jobs.

The best hope for college students will be from innovations in the combination of faculty and technology for getting more learning for the dollars expended.

My beef is more at the K-12 level.
I think the average time spend by students in school is now about 4.5 hours per day plus meal times. The school bus returning two little children down the road goes by my house around 1:30 pm each afternoon. These kids are home alone, probably watching cartoons and playing video games, until their parents return after 5:00 pm.

In contrast, our minister's children are home schooled for roughly seven intense hours per day. Which children will be better prepared for college?

When I was in school we were in school 8:30 am to 4:30 pm with less than an hour for lunch (that we brought from home in a bag) and one class period in study hall. I think that those longer hours spent in school contributed greatly to what I still proudly call my work ethic.

Thanks,
Bob

 


Questions
With all the horror publicity about taxes in Manhattan why aren't the wealthiest residents leaving for more tax friendly residences?
Why doesn't Wall Street move to Houston?

"New York’s $100 million penthouse is getting a 95% tax break," by Megan Willett, Business Insider, February 2, 2015 ---
http://www.businessinsider.com/one57-has-a-95-tax-break-2015-2 

The wealthy have lots of good reasons to invest their money in New York's residential real estate market, panoramic views and strong returns among them.

But another perk, incredibly low taxes for some penthouse buyers, have people furious.

The latest, most egregious example is the  penthouse at ultra-luxury highrise One57, which just sold for a record $100.5 million. That apartment will receive a 95% tax cut, saving the mystery buyer an estimated $360,000 in taxes annually, according to The New York Times.

The tax cut comes from a controversial housing program known as 421-a. It offers huge tax breaks for luxury properties that can last up to 25 years as long as the developers also build affordable and moderate-income apartments.

But the 44-year-old program has been criticized for only stimulating the luxury market, costing the city billions in lost taxes, and allowing developers to “double-dip” by receiving benefits for future luxury projects with previously-built affordable housing units. 

In fact, the tax cuts are so extreme that US Attorney Preet Bharara launched an investigation into the 421-a program after a state investigation on whether developers were receiving tax breaks in exchange for political contributions was abruptly shut down by Governor Andrew Cuomo.

Continued in article

Jensen Comment
And there are other ways to avoid personal income taxes, business income taxes, sales taxes, and property taxes in New York, including Manhattan.

New York Gives the Most Tax Breaks in the USA ---
http://www.lohud.com/story/news/politics/albany-watch/2014/10/19/new-york-tax-breaks/17539053/

New York may have among the highest taxes in the nation, but it also gives out the most tax breaks, too.

New York has 71,759 tax-subsidy deals worth $21 billion on its books — more than five times any other state, found a review Wednesday by the Mercatus Center at George Mason University.

"Corporate welfare is a significant problem at the state level, with New York state leading the rest," wrote Veronique de Rugy, a researcher for the conservative group based in Arlington, Virginia.

New York is one of the highest-taxed states in the nation, so political leaders have long relied on tax breaks to keep businesses and lure new ones.

It gives out about $7 billion a year in tax breaks, the largest being more than $1 billion to help clean up old industrial sites.

The biggest subsidy in the state was $5.6 billion awarded by the state Power Authority in 2007 to aluminum-maker Alcoa, the center's report said. The company received a 30-year break on energy costs for its plant in St. Lawrence County..

The deal ranks on a variety of lists as the second biggest subsidy a state has ever given to a private company; only the $8.2 billion in incentives Washington state gave in 2013 to Boeing through 2040 for the assembly of a new jet ranks higher.

New York has given out some other big ones in recent years: $1.2 billion in 2006 went to AMD, now GlobalFoundries, for its semiconductor plant in Saratoga County. That ranked 14th on the center's list. Another was $660 million to IBM in 2000 for its Dutchess County plant. IBM now appears close to selling the plant to GlobalFoundries.

Gov. Andrew Cuomo in January started one of the largest tax-break programs in state history: Start-Up NY, which offers tax-free zones for 10 years to businesses. About two dozen small businesses have already signed up. Earlier this month, Cuomo launched Global NY to promote the state's improved tax climate internationally.

"With companies already thriving and creating jobs on the heels of programs like Start-Up NYSTART-UP NY, the Empire State has quickly become a top choice for companies of all kinds," Kenneth Adams, president of Empire State Development, the state's business arm, said in a statement Oct. 7.

Republican gubernatorial candidate Rob Astorino, the Westchester County executive, has blasted Cuomo's tax policies.

He has proposed cutting income-tax rates and lowering business taxes further, arguing that Cuomo's strategy picks certain industries for tax breaks.

Astorino said he would get rid of the $420 million a year the state provides in tax breaks for film and movie productions — one of the largest incentives offered to any industry in New York and one of the most generous tax breaks for films.

"Why are we giving tax breaks to an industry that doesn't need it?" Astorino said in a radio interview Wednesday.

Jensen Comment
A lot of wealthy people live in or move to New York for the tax breaks. The little guys, however, move to Florida when they retire. Of course one of the reasons is sunshine. And another reason is to be closer to older friends and relatives. But NY taxes on the little guy are more onerous, including such things and state income taxes and state inheritance taxes for those whose estates are just large enough to get hit by NY


"Physics in finance: Trading at the speed of light," by Mark Buchanan, Nature, February 11, 2015 ---
http://www.nature.com/news/physics-in-finance-trading-at-the-speed-of-light-1.16872

Financial traders are in a race to make transactions ever faster. In today's high-tech exchanges, firms can execute more than 100,000 trades in a second for a single customer. This summer, London and New York's financial centres will become able to communicate 2.6 milliseconds (about 10%) faster after the opening of a transatlantic fibre-optic line dubbed the Hibernia Express, costing US$300 million. As technology advances, trading speed is increasingly limited only by fundamental physics, and the ultimate barrier — the speed of light.

Through glass optical fibres, information travels at two-thirds of the speed of light in a vacuum (300,000 kilometres per second). To go faster, data must travel through the air. The corridors between Chicago and New York and New Jersey, and between London and Frankfurt, are bristling with efficient microwave and millimetre-wave links. An even more efficient network of lasers — based on military technology for in-flight signalling between aeroplanes — has been installed to link the New York and New Jersey as well as the London and Frankfurt financial exchanges1.

Next up may be hollow-core fibre cables, through which light would travel in a tiny air gap at light speed. Trading firms speculate about a fleet of balloons or uncrewed solar-powered drones carrying signal repeaters to support a network of links across the oceans. In a decade or so, firms may even communicate using neutrinos, which travel at the speed of light and can go through obstacles, including Earth. It all spells big profits for high-tech trading firms, which now account for around 50% of equity trading in the United States and in Europe.

But some firms claim that uneven access to extreme speed erodes trading fairness. And system-wide failures occur when algorithms interact in unforeseen ways — such as in the 'flash crash' of 6 May 2010, when the Dow Jones Industrial Average fell by the largest daily amount ever within minutes (see 'Flash crash'). No one knows when a similar event might spill over into global markets.

Avoiding these risks will require intensive research on how markets work — as complex ecologies of interacting algorithms — and how countermeasures could avert disasters. Getting ahead

High-frequency trading relies on fast computers, algorithms for deciding what and when to buy or sell, and live feeds of financial data from exchanges. Every microsecond of advantage counts. Faster data links between exchanges minimize the time it takes to make a trade; firms fight over whose computer can be placed closest; traders jockey to sit closer to the pipe. It all costs money — renting fast links costs around $10,000 per month.

Communications technology is a limiting factor. Fibre-optic cables carry the most data, but do not give the speed required. The fastest links carry information over a geodesic arc — the shortest path on Earth's surface between two points. So line-of-sight microwaves are a better option; millimetre waves and lasers are better yet, because they have higher data densities.

Open-air communications systems are prone to weather disruption. Anova Technologies, a network provider for trading firms headquartered in Chicago, Illinois, has augmented its New York laser network with millimetre waves to overcome rain, fog and snow. Adaptive alignment mechanisms keep the links working even if winds make towers twist by up to 3°. But microwaves and lasers cannot be used over long distances without repeaters. They attenuate quickly in the atmosphere and do not curve around Earth.

Continued in article

History of High Frequency Trading ---
http://www.ritholtz.com/blog/2015/02/history-of-high-frequency-trading/

The big investors cheating the small investors
High Frequency Trading and Its Insider Trading Frauds (not exactly insider trading but, yeah, insider trading)
---
http://en.wikipedia.org/wiki/High-frequency_trading

"Is High-Frequency Trading Insider Trading?" by Matthew Philips, Bloomberg Businessweek, April 4, 2014 ---
 http://www.businessweek.com/articles/2014-04-04/is-high-frequency-trading-insider-trading?campaign_id=DN040414
Watch the Video

Ever since Michael Lewis went on 60 Minutes Sunday night to accuse high-frequency traders of rigging the stock market, it has been hard to avoid the debate over HFT’s merits and evils. Some of it’s been useful; most has been a lot of angry yelling. The peak of the frenzy came on Tuesday afternoon in a heated segment on CNBC with IEX’s Brad Katsuyama and BATS Chief Executive Officer William O’Brien.

To me, this debate is just circling the ultimate question: Should high-frequency trading be considered insider trading?

Classically defined, insider trading means having access to material, non-public information before it reaches the rest of the market; it’s like getting a heads-up about a merger before it’s announced, or maybe a phone call from a Goldman Sachs (GS) board member saying that Warren Buffett is about to invest $5 billion in the bank. Over the past few years, federal prosecutors have collected a number of big insider-trading convictions of people who got early word about a piece of highly valuable information and made a lot of money as a result.

To its most vehement critics, high-frequency trading is not terribly dissimilar. The most common accusation is that these traders get better information faster than the rest of the market. They do this through three primary methods:

First, they put computer servers next to those of the exchanges, cutting down the time it takes for an order to travel from their computers to the exchanges’ electronic matching engines. Second, they use faster pathways—fiber-optic cables, microwave towers, and yes, even laser beams—to trade more quickly between far-flung markets such as Chicago and New York.

Last, they pay exchanges for proprietary data feeds. This is where it gets really complicated. These proprietary feeds are different than the public, consolidated data feed maintained by the public exchanges, called the securities information processor, or the SIP. Though it’s now a piece of software, the public feed is the modern-day equivalent of the ticker tape that provided stock price data to brokers, traders, and media outlets. It’s what feeds the stock quotes crawling along the bottom of the screen on CNBC (CMCSA) Bloomberg TV, or on financial websites; when the public feed broke in August, trading on NASDAQ stopped for 3 hours.

While the purpose of the public feed is to ensure that everyone gets the same price information at the same time, the playing field isn’t as level as it would seem since exchanges sell proprietary feeds. And not just to HFT firms. Lots of different types of investors buy proprietary market data from exchanges. By law, prices must be entered into the SIP and the proprietary feeds at the same time, but once the data leaves the exchanges, the proprietary systems often process and transmit the information faster. These feeds arrive sooner and contain more robust information—including all prices being offered, not just the best ones.

From 2006 to 2012, Nasdaq’s proprietary market data revenue more than doubled, to $150 million. The money it earns from the public feed fell 21 percent over roughly the same period. So while Nasdaq used to earn more money from its public feed, it now makes more from proprietary ones. Especially after the August outage, this has stirred a lot of complaints from market players that the SIP has been neglected in favor of prop feeds. For its part, Nasdaq has been lobbying the committee that oversees the SIP to beef it up.

Speed traders spend a lot of money for faster access to better information. This allows them to react more quickly to news and, in some cases, jump in front of other people’s orders by figuring out which way the market is going to move. So is that insider trading?

New York Attorney General Eric Schneiderman has called HFT “insider trading 2.0″ on a number of occasions. His office is looking into the relationships between traders, brokers and exchanges and asking whether it all needs to be reformed. The FBI spent the last year looking to uncover manipulative trading practices among HFT firms; the federal agency is now asking speed traders to come forward as whistleblowers.

U.S. laws dealing with insider trading were first passed 80 years ago. Some restrict the way corporate executives and board members can trade in and out of their company’s shares. Others deal with the fair disclosure of important information—which, when it comes to high-frequency trading, is what we’re talking about here. These laws essentially require companies to release material information, such as earnings, to everyone at the same time. No playing favorites.

Bob Jensen's Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Racial and Other Social Inequality in the Acdemy
"Systematic inequality and hierarchy in faculty hiring networks," by Aaron Clauset, Samuel Arbesman, and Daniel B. Larremore, Science Advances, February 1, 2015

The faculty job market plays a fundamental role in shaping research priorities, educational outcomes, and career trajectories among scientists and institutions. However, a quantitative understanding of faculty hiring as a system is lacking. Using a simple technique to extract the institutional prestige ranking that best explains an observed faculty hiring network—who hires whose graduates as faculty—we present and analyze comprehensive placement data on nearly 19,000 regular faculty in three disparate disciplines. Across disciplines, we find that faculty hiring follows a common and steeply hierarchical structure that reflects profound social inequality. Furthermore, doctoral prestige alone better predicts ultimate placement than a U.S. News & World Report rank, women generally place worse than men, and increased institutional prestige leads to increased faculty production, better faculty placement, and a more influential position within the discipline. These results advance our ability to quantify the influence of prestige in academia and shed new light on the academic system.

INTRODUCTION

Faculty hiring is a ubiquitous feature of academic disciplines, the result of which—who hires whose graduates as faculty—shapes nearly every aspect of academic life, including scholarly productivity, research priorities, resource allocation, educational outcomes, and the career trajectories of individual scholars . Despite these fundamental roles, a clear and systematic understanding of the common patterns and efficiencies of faculty hiring across disciplines is lacking.

From the institutional perspective, faculty hiring is an implicit assessment: when an institution u hires as faculty the graduate of another institution v, u makes a positive assessment of the quality of v’s teaching and research programs. Similarly, when an individual accepts a job offer from u, he or she makes a positive assessment of u’s quality. As a collection of such pairwise assessments, a discipline’s faculty hiring network (Fig. 1) represents a collective assessment (5) of its own educational and research outcomes. When institutions are unequally successful in faculty placement, achieving more placements at other successful institutions implies a more positive collective assessment of that institution’s outcomes.

 
Fig. 1 Prestige hierarchies in faculty hiring networks. (Fig. 1 not quoted here)

(Top) Placements for 267 computer science faculty among 10 universities, with placements from one particular university highlighted. Each arc (u,v) has a width proportional to the number of current faculty at university v who received their doctorate at university u (≠v). (Bottom) Prestige hierarchy on these institutions that minimizes the total weight of “upward” arcs, that is, arcs where v is more highly ranked than u.

 

Differential success rates in such competitions are a hallmark of social hierarchy, which may emerge from either physical dominance or social prestige mechanisms (6). Among academic institutions, physical dominance may be neglected, leaving social prestige, in which less prestigious institutions seek to emulate the successful behaviors of more prestigious institutions in an effort to bolster their own prestige (7, 8). In this context, prestige in faculty hiring is an operational variable that encompasses differences in both scholastic merit and nonmeritocratic factors such as social status or geography. If such factors are irrelevant, then prestige is equivalent to merit. More realistically, nonmeritocratic factors play a role, and the greater their importance, the lesser the correlation between prestige and merit.

Continued in article

"NLJ: Minorities Gain at Less Prestigious Law Schools," by Paul Caron, TaxProf Blog, February 17, 2015 ---
http://taxprof.typepad.com/taxprof_blog/2015/02/nlj-minorities-gain-.html

The percentage of African-American and Hispanic students enrolled in law school increased between 2010 and 2013, but those gains came almost exclusively at less prestigious law schools with lower admission standards, according to new research.

Aaron Taylor, an assistant professor at the Saint Louis University School of Law, examined application trends, Law School Admission Test (LSAT) scores and enrollment figures for minority and white students in both 2010 and 2013. He hoped to better understand how the dramatic downturn in law school applications nationwide has affected diversity.

He found that law schools at the bottom of the prestige ladder — those with the lowest median LSAT scores for incoming students — have relied disproportionately on African-American and Hispanic students to fill their classes. That shift may have served as an economic lifeline for law schools during a difficult period, but bolstered the racial stratification that already existed. Elite law schools with higher median LSAT scores actually saw a proportional decrease in African-American and Hispanic students between 2010 and 2013, Taylor found.

"You've got more black and Hispanic students attending schools that are considered less prestigious in 2013," he said of his paper, Diversity As A Law School Survival Strategy, which will appear in the Saint Louis University Law Review.

Continued in article

Bob Jensen's threads on
Controversial Issues in Affirmative Action Hiring and Pay Raises
http://faculty.trinity.edu/rjensen/HigherEdControversies2.htm#AffirmativeAction


Most outstanding claims for FICA tax refunds will be denied, IRS announces ---
http://www.journalofaccountancy.com/news/2015/feb/fica-tax-refunds-201511794.html


From the CFO Journal's Morning Ledger on February 6, 2015

Sprint takes $1.9 billion write-down
http://www.wsj.com/articles/sprint-loss-widens-but-subscriber-losses-slow-1423141407
Sprint Corp
. wrote down the value of its brand name by $1.9 billion, helping drag the wireless carrier to a wider loss than a year ago. The wireless carrier also lost 205,000 mainstream “postpaid” cellphone customers in the final three months of the year and posted a higher monthly customer loss rate. The results extended a streak of customer losses, and revenue declined 1.8% over the past year.

Jensen Comment
Among the most difficult things to value are brand names and goodwill, especially when that value becomes impaired and must be written down. The Sprint case might be a useful topic for academic research into why and how the write down was so huge.

Could this be an earnings bath this year in an effort to show earnings growth in future years?

Arthur Levitt --- http://en.wikipedia.org/wiki/Arthur_Levitt

. . .

In September 1998 at New York University, he gave a speech entitled "The Numbers Game". It addressed five ways in which corporations were managing earnings (big bath charges, creative acquisition accounting, cookie-jar reserves, materiality, revenue recognition). In his speech, Levitt advocated improving the transparency and comparability of financial statements

Continued in article.

 


From the CFO Journal's Morning Ledger on February 3, 2015

U.S. multinationals with major Chinese operations, as well as U.S.-traded Chinese firms, may soon breathe a sigh of relief regarding their audit procedures. A tentative deal in the works between the Securities and Exchange Commission and the Chinese arms of the Big Four accounting firms tosses out a six-month suspension from auditing U.S.-traded companies, the WSJ reports. The suspension, which has been on hold while the firms appeal the ruling, was levied last year after an SEC administrative judge ruled the firms violated U.S. law by not handing over requested documents on their clients. The audit firms said that by doing so, they would have risked jail time in China, where the documents are treated as state secrets.

Overturning the suspension means U.S. multinationals operating in China would be able to continue using the Chinese Big Four firms to assist with their audits, without worrying a suspension will preclude them from doing so. It also should spare more than 90 Chinese clients the possibility of having to seek new auditors.

Most multinationals have kept quiet about the potential effects the audit-document dispute might have had on them. But if a suspension had gone into effect, it could have forced them to scramble for new auditors. Companies can’t sell securities in the U.S. or stay listed on U.S. exchanges without audited financial statements. The settlement also includes a strong framework for the firms to cooperate with the SEC and for the agency to obtain audit documents in the future, though the details of the framework weren’t clear Wednesday.


From the CFO Journal's Morning Ledger on February 3, 2015

Audit Committees: Issues to Consider for 2015
http://deloitte.wsj.com/cfo/2015/02/05/audit-committees-issues-to-consider-for-2015/

The responsibility to oversee financial reporting and compliance and to monitor management activities remains fundamental for audit committees. However, items such as information technology, regulatory matters, globalization, risk oversight and tax issues have recently played a significant role in many audit committees' activities, and may become more prominent in 2015, as discussed in a recent edition of Deloitte's Audit Committee Brief.

Continue Reading Today's Article »

Read more Deloitte Insights »

 


From the CFO Journal's Morning Ledger on February 3, 2015

U.S. firms agree that corporate tax reform belongs at the top of the legislative agenda. But many financial chiefs disagree with President Obama’s proposed remedies—and are doubtful about his ability to find agreement with a Republican Congress, write Vipal Monga and Joann S. Lublin for CFO Journal. While Obama’s proposed 14% tax rate on overseas cash and 19% rate on future foreign earnings represent a significant discount to the 35% standard corporate rate, businesses remain clear on what they think would be a fair rate on foreign earnings—zero. Only then, many argue, would the playing field be leveled with rivals in most other developed countries.

And it isn’t just large multinationals that are unhappy with the White House proposal. Small exporters say that the move would make them unable to compete with foreign competitors, and require them to pivot to focus on domestic markets. Those firms are already struggling with a stronger U.S. dollar making their products more expensive overseas.

Although many proclaimed the proposal to be dead on arrival, the plan also ignited a push for dealmaking. Mr. Obama’s call for sweeping tax increases in a budget proposal dropped any quest for fiscal grand bargains with Congress, but also laid out narrower domestic priorities that may appeal to Republicans, including a boost to military spending and the possibility of a corporate-tax revamp.

Jensen Comment
I don't quite understand the jurisdictional rights the USA has to familiar companies that have really become foreign corporations. For example, isn't Burger King now a Canadian company? Isn't Accenture an Irish corporation?

It would seem that the President's tax proposal would motivate many USA multinationals to relocate their headquarters off shore if this proposal was not already DOA in the Republican-controlled House and Senate. Otherwise would this a good time for Exxon to move to Ireland or Canada?

Also most of this cash parked off shore was not tax free cash. The multinationals paid taxes to other countries when earning this cash earned by operations outside the USA.

I would rather commence a fight to eliminate corporate taxation in favor of a VAT taxation ---
http://en.wikipedia.org/wiki/Value-added_tax

From the CFO Journal's Morning Ledger on February 3, 2015

Companies too big to invert would take brunt of Obama tax plan
http://www.accountingtoday.com/news/government-news/companies-too-big-to-invert-would-take-brunt-of-obama-tax-plan-73563-1.html
If President Obama’s attempt to get some of companies’ foreign money back in the U.S. comes to pass, “business leaders and tax lawyers” said it “could encourage all but the largest companies” to invert, Accounting Today reported. Those biggest companies that stay stateside “would take a big one-time hit to earnings,” the report said.


Audit Committee --- http://en.wikipedia.org/wiki/Audit_committee

New Definition of the Audit Committee as the Corporate Board's "Kitchen Junk Drawer"

From the CFO Journal's Morning Ledger on February 3, 2015

Meet the corporate board’s “kitchen junk drawer” ---
http://www.wsj.com/articles/meet-the-corporate-boards-kitchen-junk-drawer-1422933078
As new risks multiply, the audit committee has become the “kitchen junk drawer” for many corporate boards, expanding its workload sharply beyond its core role of overseeing a company’s financial reporting, write Michael Rapoport and Joann S. Lublin for CFO Journal. Audit-committee members are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. The SEC is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.


"Olympus Under Investigation By U.S. Justice Department:  U.S. Subsidiary Investigated Under Anti-Kickback, False Claims Laws," by Takashi Mochizuki, The Wall Street Journal, February 6, 2015 ---
http://www.wsj.com/articles/olympus-under-investigation-by-u-s-justice-department-1423218031?tesla=y

Bob Jensen's threads on Olympus Scandals that involved Ernst & Young ---
http://faculty.trinity.edu/rjensen/Fraud001.htm
Search for "Olympus"


"KPMG and chief operating officer fined over ethical standards breach,"  Catherine Neilan, CityA.M., February 2, 2015 ---
http://www.cityam.com/208577/kpmg-and-chief-operating-officer-fined-over-ethical-standards-breach

KPMG and its chief operating officer James Marsh have been fined by the Financial Reporting Council for breaching ethical standards

The auditing firm and its executive were taken to tribunal over Marsh's failure to sell shares in Cable and Wireless Worldwide when he became a partner of KPMG in 2011.

The telecoms giant, where Marsh had previously “been in a position to exert significant influence over the financial statements” was a client of the Dutch financial firm.

The tribunal agreed this was a form of misconduct, and fined Marsh £60,000, though this has been reducd to £39,000 to reflect his admissions.

KPMG was fined £350,000, though this was similarly reduced to £227,000. In addition KPMG agreed to pay the majority of the FRC’s costs.

Paul George, executive director of conduct at the FRC, said: “I welcome the sanctions imposed by the tribunal in these matters which serve to emphasise the central importance of the ethical standards for auditors to the audit process.

“As the tribunal observes, they are at the very heart of trust in the audit process on which public confidence in capital markets and the conduct of public entities depends.”

Bob Jensen's threads on KPMG ---
http://faculty.trinity.edu/rjensen/Fraud001.htm

 


Teaching History with 100 Objects

Humanity is forgetting its history more rapidly. And celebrities are losing their fame faster than ever.
Marc Parry, "Scholars Elicit a 'Cultural Genome' From 5.2 Million Google-Digitized Books," Chronicle of Higher Education, December 16, 2010 ---
http://chronicle.com/article/Scholars-Elicit-a-Cultural/125731/?sid=wc&utm_source=wc&utm_medium=en

 

"A Very Short History Of Data Science," by Gil Press, Forbes, May 28, 2013 --- Click Here
http://www.forbes.com/sites/gilpress/2013/05/28/a-very-short-history-of-data-science/?utm_campaign=techtwittersf&utm_source=twitter&utm_medium=social

 

Go to the article itself to see the historic paintings
"The vanished grandeur of accounting Once, bookkeepers were valorized in great art. Sound funny now? The joke might be on us," by Jacob Soll, Boston Globe, June 8, 2014 ---
http://www.bostonglobe.com/ideas/2014/06/07/the-vanished-grandeur-accounting/3zcbRBoPDNIryWyNYNMvbO/story.html

 

Teaching History with 100 Objects --- http://www.teachinghistory100.org

One hundred objects from museums across the UK with resources, information and teaching ideas to inspire your students’ interest in history.
More about this project

Jensen Comment
As I scanned the above site it dawned on me how we might add historical objects (or pictures or videos) of those objects into some of our accounting courses, especially when teaching topics where accounting history is virtually ignored.

For example rather than just define the term "ledger" in bookkeeping the rich history could be taught with images or even objects of this history such as papyrus, quill pens, etc.---
http://en.wikipedia.org/wiki/Ledger   (note some of the early history)

Or when teaching modules from "data science" there are various objects that might be visualized ---
http://en.wikipedia.org/wiki/Data_science
For examples perhaps objects of machine learning, signal processing, etc. could catch student's attention.

For example, one possible assignment on a give topic might be to ask teams of students to discover possible objects of historical interest on this topic.

I kick myself for having given or thrown away a succession of six of early laptop computers that I owned over the years.

A good place for accounting teachers to start when looking for history "object" ideas is the Accounting Historians Journal with now has free archives of articles about old stuff ---
http://www.olemiss.edu/depts/general_library/dac/files/ahj.html

Some Accounting History Sites

Accounting History Libraries at the University of Mississippi (Ole Miss) --- http://www.libraries.olemiss.edu/uml/
The above libraries include international accounting history.
The above libraries include film and video historical collections.
Accounting Historians Journal --- http://www.libraries.olemiss.edu/uml/aicpa-library  and
http://clio.lib.olemiss.edu/cdm/landingpage/collection/aah

Accounting Historians Journal Archives --- http://www.olemiss.edu/depts/general_library/dac/files/ahj.html
Accounting History Photographs --- http://www.olemiss.edu/depts/general_library/dac/files/photos.html

MAAW Knowledge Portal for Management and Accounting --- http://maaw.info/

Academy of Accounting Historians and the Accounting Historians Journal ---
http://www.accounting.rutgers.edu/raw/aah/

Sage Accounting History --- http://ach.sagepub.com/cgi/pdf_extract/11/3/269

A nice timeline on the development of U.S. standards and the evolution of thinking about the income statement versus the balance sheet is provided at:
"The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards (1930-1973)," by Stephen A. Zeff, CPA Journal, January 2005 --- http://www.nysscpa.org/cpajournal/2005/105/infocus/p18.htm
Part II covering years 1974-2003 published in February 2005 --- http://www.nysscpa.org/cpajournal/2005/205/index.htm 

A nice timeline of accounting history --- http://www.docstoc.com/docs/2187711/A-HISTORY-OF-ACCOUNTING

From Texas A&M University
Accounting History Outline --- http://acct.tamu.edu/giroux/history.html

Canadian Printer and Publisher (history of various trades and industries) ---  http://link.library.utoronto.ca/cpp/
You can search for various industry terms such as accounting, cost, bookkeeping, etc.

Bob Jensen's timeline of derivative financial instruments and hedge accounting ---
http://faculty.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds

History of Fraud in America --- http://faculty.trinity.edu/rjensen/415wp/AmericanHistoryOfFraud.htm
Also see http://faculty.trinity.edu/rjensen/Fraud.htm

Archive of the History of Financial Regulation --- http://www.sechistorical.org/

American Accounting Association  Past Presidents are listed at
http://www.cs.trinity.edu/~rjensen/temp/PastPresidentsAAA.htm 

Accounting History Journals

September 1, 2012 message from Jim McKinney

Accounting History Review was formerly titled Accounting, Business & Financial History is based out of Cardiff  University. Accounting History is a journal published by Sage as a journal of the Accounting History Special Interest Group of the Accounting and Finance Association of Australia and New Zealand. The Accounting Historians Journal a publication of the Academy of Accounting Historians is independently published (and as a result far cheaper in price) than the other two. The Accounting Historians Journal is much older than the other two having entered its 39th year of publication.  Older editions of the AHJ are available on JSTOR and other databases, with older back issues available for free at the University of Mississippi Libraries website that also maintains the AICPA libraries. I know editors at all three journals and all are quite capable and respected individuals. There is a considerable debate which of the journals are considered better than the other with arguments made for each of the three.

 

Jim McKinney, Ph.D., C.P.A.
Accounting and Information Assurance
Robert H. Smith School of Business
4333G Van Munching Hall
University of Maryland
College Park, MD 20742-1815

http://www.rhsmith.umd.edu


Go to the article itself to see the historic paintings
"The vanished grandeur of accounting Once, bookkeepers were valorized in great art. Sound funny now? The joke might be on us," by Jacob Soll, Boston Globe, June 8, 2014 ---
http://www.bostonglobe.com/ideas/2014/06/07/the-vanished-grandeur-accounting/3zcbRBoPDNIryWyNYNMvbO/story.html

In Washington’s National Gallery of Art hangs a portrait by Jan Gossaert. Painted around 1530, at the very moment when the Dutch were becoming the undisputed masters of European trade, it shows the merchant Jan Snouck Jacobsz at work at his desk. The painter’s remarkable gift for detail is evident in Jacobsz’s dignified expression, his fine ermine clothes and expensive rings. Rendered just as carefully are his quill pen, account ledger, and receipts.

This is, in short, a portrait of not only wealth and material success, but of accounting. It might seem strange that an artist would lavish such care on the nuts and bolts of something so mundane, like a poet writing couplets about a corporate expense report. But the Jacobsz portrait is far from unique: Accounting paintings were a significant genre in Dutch art. For 200 years, the Dutch not only dominated world trade and portrayed themselves that way, but in hundreds of paintings, they also made sure to include the account books.

This was not simply a wealthy nation crowing about its financial success. The Dutch were the leading merchants of their time, and they saw good accounting as the key to both their wealth and the moral health of their society. To the audience of the time, the paintings carried a clear message: Mastering finance was an achievement requiring both skill and humility.

Today when we see accountants in art or entertainment, they are marginal figures—comically boring bean-counters or fraudsters cooking the books. Accounting is almost a synonym for drudgery: from the hapless daydreamer Walter Mitty to the iconic nerd accountant Rick Moranis plays in “Ghostbusters.” Accounting is seen as less a moral calling than a fussy brake on the action.

In the wake of decades of financial scandal—much of it linked to creative accounting, or to no accounting all—the Dutch tradition of accounting art suggests it might be us, not the Dutch, who have misjudged accounting’s importance in the world. Accounting in the modern sense was still a new idea in the 1500s, one with a weight that carried beyond the business world. A proper accounting invoked the idea of debts paid, the obligation of nightly personal reckonings, and even calling to account the wealthy and powerful through audits.

It was an idea powerful enough to occupy the attention of thinkers in religion, art, and philosophy. A look back at the tradition of accounting in art shows just how much is at stake in “good accounting,” and how much society can gain from seeing it, like the Dutch, not just as a tool but as a cultural principle and a moral position.

***

Scratches on ancient tablets show us that accounts have been kept for as long as humans have been able to record them, from ancient Mesopotamians to the Mayans. This kind of accounting was about measuring stores: Merchants and treasurers recorded how much grain, bread, gold, or silver they had. Most ledgers were simple lists of assets or payments.

Accounting in the modern sense started around 1300 in medieval Italy, when multipartner firms had to calculate their investments in foreign trade. We don’t know who, if anyone, can take credit for the invention, but it was around this time that double-entry bookkeeping emerged in Tuscany. Instead of a simple list, it consisted of two separate columns, recording income in one against expenditures in the other. Every transaction of expenditure could be checked against corresponding income: If one sold a goat for three florins, one gained three florins and, in the other column, lost a goat. It was a kind of self-checking mechanism that also helped calculate profit or loss. In Hogarth’s “Marriage a la Mode: The Tête a Tête,” the man with the account books walks off in disgust (left).

HIP/Art Resource, New York

In Hogarth’s “Marriage a la Mode: The Tête a Tête,” the man with the account books walks off in disgust (left).

It would come to change finance, but was not an immediate hit. Any system of enforcing fiscal discipline is an incursion against the absolute control of the account-holder, and kings and the powerful tended to see themselves above the merchant-like calculations of bookkeeping. They not only hid their wealth and debts: They often did not bother to calculate them. In the end, they saw themselves as only accountable to God; if they needed more ready cash, they could always lean on their inferiors. At least in the short run, it was far more comfortable to govern without the constraints of financial accountability.

But in one place, the idea of financial accountability did take hold. By the early 1500s, Holland had become the center of global trade, with Antwerp and later Amsterdam acting as the most important ports in the world. Ships arrived laden with spices, exotic fruit, minerals, animals, whale oil, cloths, and other luxury goods. In 1602, the Dutch government in essence created modern capitalism by founding both the first publicly traded company—the Dutch East India Company, or VOC—and the Amsterdam Stock Exchange.

Accounting was central to managing not only these companies, but also the Dutch government itself. While not all tax collectors or company managers kept perfect double-entry books, it represented an ideal. It was also seen as a necessary skill for civic participation. Most members of Dutch society were fluent in accounting, having studied at home or in publicly funded city accounting schools.

Double-entry accounting made it possible to calculate profit and capital and for managers, investors, and authorities to verify books. But at the time, it also had a moral implication. Keeping one’s books balanced wasn’t simply a matter of law, but an imitation of God, who kept moral accounts of humanity and tallied them in the Books of Life and Death. It was a financial technique whose power lay beyond the accountants, and beyond even the wealthy people who employed them.

Accounting was closely tied to the notion of human audits and spiritual reckonings. Dutch artists began to paint what could be called a warning genre of accounting paintings. In Jan Provost’s “Death and Merchant,” a businessman sits behind his sacks of gold doing his books, but he cannot balance them, for there is a missing entry. He reaches out for payment, not from the man who owes him the money, but from the grim reaper, death himself, the only one who can pay the final debts and balance the books. The message is clear: Humans cannot truly balance their books in the end, for they are accountable to the final auditor.

This message rubbed off on political and financial leaders. They were expected to keep good books, and they could expect to be publicly audited—a notion fiercely resisted in the great monarchies of the Continent. In the 17th century, another genre of paintings emerged, showing public administrators holding their books open for all to see. More than 100 of these paintings were produced between 1600 and 1800. Transparency became a cultural ideal worthy of art.

The Dutch also appreciated that ledgers, bills of exchange, and files, like any tool in human hands, were liable to misuse in the interest of wealth or pride. Dutch painters like Marinus van Raemerswaele warned against hubris and greed with paintings of bookkeepers as twisted, grotesque figures in absurd hats who would be as likely to commit fraud as to keep good books.

The value the Dutch placed on accounting made a large impression on the English, who sought to emulate “the Mighty Dutch” in many ways, including this new business technique. By the 1700s, they were also the only other nation to paint accounting pictures. The English celebrated the wealth of their Industrial Revolution and Empire with portraits of successful merchants smiling over their books—and, like the Dutch, also used account books as a way to wag a finger. In one scene from William Hogarth’s “Marriage à la Mode,” a popular series of paintings from the 18th century, a noble couple squanders their lives on parties and gambling. In a final signal of disapproval, almost like a punctuation mark, their accountant walks away in disgust.

***

By the late 19th century, accounting had become a profession of its own, rather than fundamentally a shared practice and value. It receded from the lives of individuals, and began to take on more the reputation it holds today.

Continued in article


"Stock Prices and Earnings: A History of Research," by Patricia M. Dechow, Richard G. Sloan, and Jenny Zha, SSRN
(no longer available free as a download from SSRN), 
Annual Review of Financial Economics, Vol. 6, pp. 343-363, 2014
December 2014 ($32 unless accessed free via your university's library subscription)
http://www.annualreviews.org/doi/full/10.1146/annurev-financial-110613-034522

Abstract:
Accounting earnings summarize periodic corporate financial performance and are key determinants of stock prices. We review research on the usefulness of accounting earnings, including research on the link between accounting earnings and firm value and research on the usefulness of accounting earnings relative to other accounting and nonaccounting information. We also review research on the features of accounting earnings that make them useful to investors, including the accrual accounting process, fair value accounting, and the conservatism convention. We finish by summarizing research that identifies situations in which investors appear to misinterpret earnings and other accounting information, leading to security mispricing.

Jensen Comment
AAA Members may want to accompany this paper with Bill Beaver's recollections of his own pioneering research on stock prices and earnings --- recollections given at the American Accounting Association Annual Meetings as the 2014 Presidential Scholar.
Video (free to AAA members who are subscribed to the AAA Commons) ---
http://commons.aaahq.org/hives/8d320fc4aa/summary

It is somewhat surprising that a predictor variable its extended versions (e.g., earnings per share) that cannot be defined by the FASB and IASB can be an effective predictor after it no longer can be defined. By not being definable, there is little assurance that earnings, eps, etc. are consistently measured over time for a single firm and across firms at a point in time.

Net earnings and EBITDA cannot be defined since the FASB and IASB elected to give the balance sheet priority over the income statement in financial reporting ---
"The Asset-Liability Approach: Primacy does not mean Priority," by Robert Bloomfield, FASRI Financial Accounting Standards Research Initiative, October 6, 2009 ---
http://www.fasri.net/index.php/2009/10/the-asset-liability-approach-primacy-does-not-mean-priority/

Bob Jensen's threads on accounting history ---
http://faculty.trinity.edu/rjensen/Theory01.htm#AccountingHistory


JournalTOCs (Tables of Contents and Article Titles) --- http://www.journaltocs.hw.ac.uk/ 

Jensen Comment
I was not impressed by the search engine, but note the categories under the search box such as "Accounting and Finance"


From the CFO Journal's Morning Ledger on February 2, 2015

President Obama’s 2016 budget lays out his vision for a corporate tax overhaul, including a one-time 14% tax on the approximately $2 trillion of overseas earnings that businesses have accumulated, the WSJ reports. Companies would face a 19% minimum tax on future foreign profits, but could reinvest those funds in the U.S. without paying additional tax.

Some conservative commentators voiced optimism that the proposal could mark the opening of productive negotiations with Republicans, who control both houses of Congress. Still, Mr. Obama linked the one-time tax to spending on infrastructure, and Rep. Pat Tiberi (R., Ohio) said in a statement “Changes to our tax code just to fund more spending by our already bloated government is not the way to boost our economy and encourage job creation.��

While a mandatory tax on existing overseas profits is at odds with some recent proposals in Congress, some leading Republican tax writers have embraced such an approach in recent years. That suggests that it could become a part of a final deal with Congressional Republicans. How would a mandatory tax on overseas earnings affect your plans for cash held abroad? Let us know.


From the CFO Journal's Morning Ledger on February 2, 2015

Amazon makes a push on college campuses ---
http://www.wsj.com/articles/amazon-makes-a-push-on-college-campuses-1422825521
Amazon.com Inc.
 has struck deals with Purdue University, the University of Massachusetts, Amherst, and the University of California, Davis, to operate co-branded websites selling textbooks and other student related-items. While the deals aren’t exclusive, they acknowledge the reality that students already shop on Amazon.  The websites will offer next-day delivery service, giving students one fewer reason to head to a brick-and-mortar store. And the hope is that when they graduate, they will spend more with Amazon.


Societal Cost Versus Company Costs

I needed an adapter plug that I ordered from Amazon for less than $2 and had it shipped "free" as an Amazon Prime member. I say "free" because if I was not an Amazon Prime member my total shipping costs from Amazon would greatly exceed the $95 2015 annual flat rate ---
http://en.wikipedia.org/wiki/Amazon.com#Amazon_Prime

In the past I would have driven about 30 miles round trip to a Radio Shack that's been out of business for years.

On Friday UPS delivered the adapter plug to my garage. UPS probably had stops along the way before the hill to our cottage, but chances are that there were no stops on Friday for about four miles up our hill and four miles back down. UPS got paid for this tiny shipment that only weighed about three ounces.

It dawned on me that the real value of delivery of this $2 item hardly justified the costs of the fuel, driver time, etc. to custom deliver a $2 item. The issue of course is that UPS will deliver one item up this hill no matter what is the value of the item itself. And even if Amazon had a minimum cost per order, chances are I would have ordered other things that arrive at UPS on different days. To my knowledge UPS delivers five days a week up here without consolidating orders that arrive on different days before delivering up our hill.

This may be something to think about when teaching cost accounting. Who gets paid and who gets screwed?


IASB Proposed amendments to IAS 7 Statement of Cash Flows ---
http://www.ifrs.org/Current-Projects/IASB-Projects/Debt-disclosures/Exposure-Draft-December-2014/Pages/Exposure-Draft-and-comment-letters.aspx

IASB Classification and Measurement of Share-based Payment Transactions (Proposed amendments to IFRS 2) ---
http://www.ifrs.org/Current-Projects/IASB-Projects/IFRS-2-Clarifications-Classification-and-Measurement/ED-November-2014/Pages/Exposure-Draft-and-Comment-letters.aspx

IESBA Improving the Structure of the Code of Ethics for Professional Accountants ---
http://www.ifac.org/publications-resources/improving-structure-code-ethics-professional-accountants

PwC:  IFRS news - February 2015 ---
http://www.pwc.com/us/en/cfodirect/publications/ifrs-news/february-2015.jhtml?display=/us/en/cfodirect/publications/ifrs-news&j=701466&e=rjensen@trinity.edu&l=974263_HTML&u=24554865&mid=7002454&jb=0


Jensen Comment
The outcome of this lawsuit could have very expensive ramifications on tens of millions of online videos and live broadcasts. Many learning videos will simply be withdrawn from the Internet. It might be a good time to consider downloading and archiving the videos most likely to be withdrawn from the Internet such as those on YouTube learning channels and those now available at links provided at
http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI
 

What I think is at issue here is whether free learning materials should be subject to the same criteria as fee-based materials.

For example, providers of fee-based courses and learning materials can factor in the extra cost of learning aids such as when a live course factors in the cost of employing "signers" when delivering a live course on campus or over the Internet ---
http://en.wikipedia.org/wiki/Hearing_loss#Sign_language

"Harvard and MIT Are Sued Over Closed Captioning for Online Materials," by Andy Thomason, Chronicle of Higher Education, February 12, 2015 ---
http://chronicle.com/blogs/ticker/jp/harvard-and-mit-are-sued-over-closed-captioning-for-online-materials?cid=wc&utm_source=wc&utm_medium=en

A new lawsuit accuses Harvard University and the Massachusetts Institute of Technology of failing to provide closed captioning in online teaching materials, in violation of federal antidiscrimination laws, The New York Times reports. The lawsuits were filed by the National Association of the Deaf, and seek an injunction requiring that closed captioning be provided for all online materials.

Both colleges provide extensive educational resources free online, including through their membership in edX, which offers dozens of MOOCs to students around the world.

Advocates for the deaf on Thursday filed a federal class action against Harvard and M.I.T., saying both universities violate antidiscrimination laws by failing to provide closed captioning in their online lectures, courses, podcasts and other educational materials.

Bob Jensen's links to free learning materials, videos, tutorials, and complete courses provided free ---
http://faculty.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Bob Jensen's threads on new technology tools for disabled students, including the hearing and sight impaired, ---
http://faculty.trinity.edu/rjensen/000aaa/thetools.htm#Handicapped

 

 


Moochers are Losers
Moody's: Default rates show government aid didn't solve corporate financial problems 
"Repeat Default Rates Rise Since Great Recession, Says Moody’s," by Vipal Monga, The Wall Street Journal, January 29, 2015 ---
http://blogs.wsj.com/cfo/2015/01/29/repeat-default-rates-rise-since-great-recession-says-moodys/

Kicking the can down the road doesn’t seem to work for many distressed companies.

The percentage of repeat defaulters since the Great Recession is more than double the historical average. That suggests that lax credit markets allowed troubled companies to paper over their problems without fixing them, according to a report Thursday by Moody’s Investors Service MCO -0.56%.

Nearly 39% of companies that defaulted between Sept 1, 2010 and Sept. 30, 2014, did so more than once, according to Moody’s. That’s more than twice the 17% historical average of repeat defaulters, going back to 1987.

Many companies that either sought Chapter 11 bankruptcy protection or missed bond payments during the Great Recession used the wide-open credit markets to borrow more money or restructure their debt.

“They were pushing off the inevitable,” said David Keisman, a Moody’s analyst.

Moody’s tallied 72 companies registering a default during the 2010 to 2014 timeframe.

Repeat defaulters include casino operator Caesars Entertainment Corp.CZR -1.79%, formerly Harrah’s Entertainment Inc., which filed for Chapter 11 bankrupt protection earlier this month, after several debt exchange offers.

Texas power company Energy Future Holdings Corp., the former TXU Corp., which is reorganizing under Chapter 11, was another repeat defaulter, after making a series of deals to exchange existing debt for other bonds with longer maturities and higher rates


The judge was brutal on the Venezuelan financier who ran the biggest Ponzi scheme in Connecticut history ---
http://www.businessinsider.com/financial-advisor-insights-january-30-2015-1

Jensen Comment
Note that in Club Fed it is less likely than in state prisons to get off early on parole even if the living is easier.

Bob Jensen's Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm


That some bankers have ended up in prison is not a matter of scandal, but what is outrageous is the fact that all the others are free.
Honoré de Balzac

Bankers bet with their bank's capital, not their own. If the bet goes right, they get a huge bonus; if it misfires, that's the shareholders' problem.
Sebastian Mallaby. Council on Foreign Relations, as quoted by Avital Louria Hahn, "Missing:  How Poor Risk-Management Techniques Contributed to the Subprime Mess," CFO Magazine, March 2008, Page 53 --- http://www.cfo.com/article.cfm/10755469/c_10788146?f=magazine_featured .

Jensen Question
Why do stockholders take a beating while the bad guys just go on scheming new crimes?

"JPMorgan is about to shell out $99.5 million to settle a currency rigging lawsuit," by Jonathan Stempel, Reuters, January 31, 2015 ---
http://www.businessinsider.com/r-jpmorgan-to-pay-995-million-to-resolve-currency-rigging-lawsuit-2015-1 

Bob Jensen's Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm


EMC Corporation (Data Strorage, Security and mining) --- http://en.wikipedia.org/wiki/EMC_Corporation

New IBM Business Model
"In another brilliant move, IBM just budgeted $1 billion to take down EMC," Julie Bort, Business Insider, February 17, 2015 ---
http://www.businessinsider.com/ibm-budgets-1-billion-to-take-down-emc-2015-2

On Tuesday, IBM announced that it is investing $1 billion over the next five years in a hot new area of enterprise tech called "software-defined storage."

This is important and interesting for a whole bunch of reasons — and shows that CEO Ginni Rometty has her competitive game on.

She's got a plan to move her massive 400,000-ish strong workforce from shrinking businesses and towards growth areas, even though it's painful, with a number of quiet layoffs involved.

To understand why this new $1 billion investment is cool, you need to know two things:

  1. "Software-defined" is a huge trend in the $3 trillion enterprise technology market.
  2. This is the second big move that IBM has made that puts it on a collision course with storage giant EMC, and the $17 billion storage market that it dominates with about 30% market share, according to IDC as reported by Forbes.

Software is eating the enterprise data center

"Software-defined" is a term that refers to taking expensive hardware, removing the all the fancy features from it that makes it expensive and putting those fancy features into software apps that run on special computers. You still need the hardware, but you need less of it, less expensive varieties and your data center becomes faster, more efficient, and less expensive — important for today's cloud computing needs.

Software-defined networking (SDN) is already happening, forcing market leader Cisco to respond.

Continued in article


Self Proclaimed “Queen Of IRS Tax Fraud” Gets 21 Years In Prison ---
http://thesource.com/2015/01/30/self-proclaimed-queen-of-irs-tax-fraud-gets-21-years-in-prison/

A Florida resident who taunted authorities as she stole millions from the IRS, has been jailed for 21 years

It’s tax season again, and everyone is waiting on the big refund check from good old Uncle Sam. For those who don’t save receipts, or think they can outsmart the IRS; think again.

Rashia Wilson, who pleaded guilty to wire fraud and aggravated identity theft earlier this year, admitted to stealing over $3 million from the IRS. Tampa police were first alerted to the fraud in 2010 when they noticed a drop in drug dealing in the area. Wilson’s fraud was discovered during a two-year investigation called ‘Operation Rain Maker’. The multi-agency investigation included Hills­borough County Sheriff’s Office, Tampa Police Department, IRS-Criminal Investigations, the Secret Service, and the U.S. Postal Inspection Service.

Wilson became a prime suspect in the investigation. Her mother was addicted to cocaine when she was born, while her father was in prison while she was growing up. She came up from a life of poverty, having been diagnosed as Bi-Polar when she was 14; and then suddenly becoming rich.

Those involved in the tax fraud operation used stolen social security numbers to file returns. The scam caused ordinary taxpayers to have to wait for up to a year to even receive their refunds.

She still claimed food stamps, and became reckless spending money she supposedly didn’t have…$90,000 on an Audi A8, $30,000 on her son’s first birthday party, designer handbags from Prada, Gucci, and Louis Vuitton, and custom jewelry. Then she wore a diamond studded piece holding racks of money, and put herself on blast on social media. When police searched her residence in Wimauma they removed electronic goods, including large flat-screen TV’s, and designer goods. Police say the number of security cameras around the property had raised suspicions.

Continued in article


"Shelly Silver’s Asbestos Gold A case study in the links between politicians and the plaintiffs bar," The Wall Street Journal, February 1, 2015 ---
http://www.wsj.com/articles/shelly-silvers-asbestos-gold-1422832863?tesla=y

The recent corruption charges against New York Assembly Speaker Sheldon Silver reveal the rot that has long plagued Albany. But the story deserves more national attention for exposing the links between politicians and the asbestos-plaintiffs bar.

The 70-year-old Mr. Silver, among the state’s most powerful Democrats, stands accused of five counts of extortion, fraud and conspiracy. But the core of U.S. Attorney Preet Bharara’s 35-page complaint is the allegation that Mr. Silver engaged in an asbestos kickback scheme for more than decade. He allegedly used his Albany power to steer taxpayer money to an asbestos doctor, who in return gave him the names of patients for high-dollar asbestos lawsuits.

As some courts have grown more skeptical about asbestos claims that are often bogus, the trial bar has focused on mesothelioma cases. Mesothelioma is a cancer linked to asbestos and has long been considered a legitimate tort claim. The Silver complaint is a case study in how lawyers, doctors and politicians conspire to recruit mesothelioma victims and pump up court payouts.

Prosecutors say Mr. Silver recruited plaintiffs through Robert Taub, who until recently led a research center for mesothelioma at Columbia University. Mr. Silver used his discretionary power over state funds to direct $500,000 in grants to Dr. Taub’s center. He also sent $25,000 to a nonprofit associated with Dr. Taub’s wife, sponsored a state Assembly resolution honoring the doctor, and helped get the doctor’s son a job, according to the complaint.

In return, the complaint says, Dr. Taub gave Mr. Silver names of mesothelioma patients who could be plaintiffs in asbestos lawsuits. Mr. Silver passed the names to Weitz & Luxenberg, a powerhouse asbestos firm where Mr. Silver worked as a lawyer and was paid a salary of $120,000. Weitz & Luxenberg also paid Mr. Silver a fee for mesothelioma patient referrals, totaling $3.2 million.

Mr. Silver has resigned as Speaker but says he will be “vindicated.” Dr. Taub is serving as a witness in the government’s case against Mr. Silver and hasn’t been charged, though he resigned from the Columbia center after the Silver complaint became public. Weitz & Luxenberg says it is “shocked” by the charges against Mr. Silver, who has taken a leave of absence from the firm. Prosecutor Bharara says the firm was unaware that Mr. Silver directed state money to Dr. Taub in return for referrals.

But it’s important to recognize that a contributions-for-patients arrangement isn’t rare. The complaint against Mr. Silver refers to “law firms” that have contributed to mesothelioma researchers. The complaint also refers to “the Other Asbestos Firm” whose affiliated foundation donated to Dr. Taub’s center and also received the names of potential plaintiffs. News reports have identified that other firm as the Simmons Law Firm of Illinois and the donation amount as $3.2 million. The Simmons firm has not been charged and the New York Times reports the firm said in a statement that it is proud to fund research at Columbia.

Though it is not part of the criminal case, Mr. Silver also used his political influence to promote judges who look favorably on asbestos claims. Mr. Silver appointed Arthur Luxenberg, a founder of Weitz & Luxenberg, to a state judicial screening committee that vets candidates for appointed judicial posts.

One state judge who has advanced during Mr. Silver’s tenure is Sherry Klein Heitler, now chief judge of New York City Asbestos Litigation (NYCAL). More than half the cases in the NYCAL docket are Weitz & Luxenberg’s. In the past four years the firm won $273.5 million of the $313.5 million (87% of the total) awarded in 15 mesothelioma verdicts—$190 million in 2014.

The American Tort Reform Association’s most recent report on “judicial hellholes” notes that this windfall was aided by Judge Heitler’s ruling last year, made at the request of Weitz & Luxenberg, to reverse a 20-year policy deferring punitive damages in asbestos cases. Judge Heitler’s predecessor had explained in a legal paper that punitive damages for wrongs committed 30 years ago serve no corrective purpose, and money could be better used to compensate genuine victims.

Judge Heitler’s ruling opened the cases to fatter verdicts and settlements that allow bigger paydays for plaintiffs firms. Judge Heitler has said that only the legislature can “deny plaintiffs the opportunity to seek punitive damages.”

NYCAL judges have also allowed the consolidation of cases, which stacks the deck against defendants who feel compelled to settle rather than risk a jackpot verdict. The consultants at Bates White report that the average NYCAL asbestos award is now $16 million—two to three times the average in courts nationwide. Sixty percent of Weitz & Luxenberg’s revenue comes from asbestos cases, much of it from mesothelioma patients.

Media commentary about the Silver case is playing as a familiar morality play about money in politics. But the real problem is a New York state government that protects incumbents with gerrymandered seats and provides enormous and largely unchecked power to bestow political favors. The link between politicians and the asbestos bar is one example that is ripe for further investigation. The Silver case isn’t an aberration.

Bob Jensen's fraud updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm

 


From the CFO Journal's Morning Ledger on February 24, 2015

Longevity isn’t all it’s cracked up to be, especially if you’re trying to balance the books for a defined benefit plan. The Society of Actuaries’ revised mortality assumptions, released in October, now have to be reflected on corporate balance sheets, the WSJ’s Michael Rapoport reports. According to the new estimates, the average 65-year-old man today will live 86.6 years, up from 84.6 the Society of Actuaries estimated a decade and a half ago. The average 65-year-old woman will live 88.8 years, up from 86.4. Good news for humanity, but bad news for recent earnings reports.


Teaching Case on Pension Write Downs
From The Wall Street Journal Accounting Weekly Review on January 23, 2015

AT&T to Take $7.9 Billion Pension Hit
by: Josh Beckerman and Vipal Monga
Jan 20, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Mark-to-Market, Pension Accounting

SUMMARY: AT&T Inc. said it would take a $7.9 billion charge for pension-related costs at least partially because people are living longer. The telecommunications giant said the losses were in part due to "updated mortality assumptions" in addition to a decrease in the rate it uses to measure its pension obligations. AT&T, along with about 30 other companies, in the past few years has switched to mark-to-market pension accounting to make it easier for investors to gauge plan performance. With the switch, pension gains and losses flow into earnings sooner than under the old rules, which are still in effect and allow companies to smooth out the impact over several years. Companies that switch to valuing assets at up-to-date market prices may incur more volatility in their earnings, but it offers a more current picture of a pension plan's health.

CLASSROOM APPLICATION: This is a good article to use when covering accounting for pensions.

QUESTIONS: 
1. (Introductory) What are the details of AT&T's announcement? What is the reason for the changes?

2. (Advanced) Please explain how the changes will impact each of the financial statements. Will those changes be material?

3. (Advanced) In general, what is mark-to-market? How does mark-to-market affect pension accounting? What are the benefits of mark-to-market? What are potential challenges?

4. (Advanced) How have AT&T pensions adjustments changed from year-to-year? How does this impact financial statement analysis?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

RELATED ARTICLES: 
AT&T Posts Pension Hit As Rates Fall and Mortality Increases
by Vipal Monga
Jun 26, 5081
Online Exclusive

"AT&T to Take $7.9 Billion Pension Hit," by Josh Beckerman and Vipal Monga, The Wall Street Journal, January 20, 2015 ---
http://www.wsj.com/articles/at-t-estimates-some-fourth-quarter-charges-1421449286?tesla=y?mod=djem_jiewr_AC_domainid 

AT&T Inc. on Friday said it would take a $7.9 billion charge for pension-related costs at least partially because people are living longer.

The telecommunications giant said the losses were in part due to “updated mortality assumptions” in addition to a decrease in the rate it uses to measure its pension obligations.

The nonprofit Society of Actuaries recently updated its mortality tables for the first time since 2000 to reflect the longer lifespans, estimating today’s retirees will live about two years longer than in 2000. That means companies will have to sock away more money to pay benefits for those added years.

Mercer LLC estimates that corporate pension liabilities totaled about $2 trillion at the end of 2013. The increased life expectancy will add about 7% to the pension obligations on balance sheets, according to consulting firm Aon Hewitt. The increased costs may be enumerated in the coming weeks as companies report earnings.

AT&T, along with about 30 other companies, in the past few years has switched to mark-to-market pension accounting to make it easier for investors to gauge plan performance.

With the switch, pension gains and losses flow into earnings sooner than under the old rules, which are still in effect and allow companies to smooth out the impact over several years.

Companies that switch to valuing assets at up-to-date market prices may incur more volatility in their earnings, but it offers a more current picture of a pension plan’s health.

A year ago, AT&T posted a $7.6 billion pretax gain tied to pension accounting.

AT&T also said it would take a $2.1 billion noncash charge in the fourth quarter after it determined that certain copper assets won’t be necessary to support future network activity, because of lower demand for legacy voice and data services and the move toward new technology. It said those copper assets will be abandoned in place.

Continued in article

Bob Jensen's threads on pension accounting are at
http://faculty.trinity.edu/rjensen/Theory02.htm#Pensions

 


Teaching Case on Tax Return Preparation
From The Wall Street Journal Accounting Weekly Review on January 23, 2015

What Tax Preparers Are Really Charging for 2014 Returns
by: Laura Saunders
Jan 16, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Individual Taxation

SUMMARY: How much will it cost to have a professional prepare your tax return this year? The national average fee for 2014 returns will be $273, according to a survey by the National Society of Accountants. Tax-preparation fees vary widely based on an individual's circumstances and also the preparer-who could have a great deal of formal training or none at all. The National Society of Accountants says its members are "owners, principals and partners of local 'Main Street' practices who hold a variety of credentials." That average $273 fee is for a Form 1040 plus Schedule A (for itemized deductions such as mortgage interest and charitable donations), plus a state return. This year's average fee is 11% higher than two years ago.

CLASSROOM APPLICATION: This is an interesting look at the price of tax return preparation to use in tax class.

QUESTIONS: 
1. (Introductory) What are the ranges of tax return preparation fees reported in the article?

2. (Advanced) What group collected the fee data? How are the member described? Does this survey give an accurate representation of tax preparers? What groups of preparers or companies are missing? How might the reported data change if all paid preparers were included?

3. (Advanced) What are some possible explanations for fees varying in different parts of the country? Must this work be done locally? Could national competition affect and reduce local differences? Why or why not?

4. (Advanced) Review the prices for the various schedules and types of returns. Are those price reasonable? Would you be willing to do that work for those prices? How could preparers justify higher prices?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

RELATED ARTICLES: 
IRS Woes Keeping Taxpayers on Hold
by John D. McKinnon
Jan 15, 2015
Online Exclusive

TurboTax Triggers a Revolt
by Laura Saunders
Jan 17, 2015
Online Exclusive

 

"What Tax Preparers Are Really Charging for 2014 Returns," The Wall Street Journal, January 16, 2015 --- 
http://blogs.wsj.com/totalreturn/2015/01/16/what-tax-preparers-are-really-charging-for-2014-returns/?mod=djem_jiewr_AC_domainid

How much will it cost to have a professional prepare your tax return this year?

The national average fee for 2014 returns will be $273, according to a survey by the National Society of Accountants.

Tax-preparation fees vary widely based on an individual’s circumstances and also the preparer—who could have a great deal of formal training or none at all. The National Society of Accountants says its members are “owners, principals and partners of local ‘Main Street’ practices who hold a variety of credentials.”

That average $273 fee is for a Form 1040 plus Schedule A (for itemized deductions such as mortgage interest and charitable donations), plus a state return. This year’s average fee is 11% higher than two years ago, the last time the survey was conducted.

(In other tax news, increased charges for TurboTax tax-preparation software provoked a revolt among some users, and taxpayers should expect the worst service from the Internal Revenue Service since at least 2001.)

The average cost reported by the National Society of Accountants conceals a wide variation among regions, as seen in the graphic below. The group found that the highest average fee, $348, will be charged by survey participants in the Far West—a region encompassing California, Oregon and Washington, as well as Hawaii and Alaska.

The lowest average fee, $198, is expected in the upper Midwest—Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.

Graph Not Exhibited Here

The survey also reported average fees for preparing additional tax forms. They include:

$174 for Schedule C (business)
$115 for Schedule D (investment gains and losses)
$126 for Schedule E (rental income)
$158 for Schedule F (farm)
$634 for Form 1065 (partnership)
$817 for Form 1120 (corporation)
$778 for Form 1120S (S corporation)

According to the survey, many tax preparers offer prospective clients a free consultation that could be worth $100 or more—but they also charge an average fee of $114 for dealing with disorganized or incomplete records.

The average fee for expediting a return is $88, and there’s often a charge the client does not provide information by an agreed-upon deadline.

The average hourly rate to handle an Internal Revenue Service audit is $144.

Continued in article


TurboTax is Suspected Since the Other Tax Preparation Software Has Not Yet Been Breached
"FBI to Probe Fraudulent Tax Filings:   As States Move to Contain Bogus Returns Through TurboTax, Signs Emerge That Fraud May Involve Federal Filings," by Laura Saunders. Liz Moyer in New York, and Devlin Barrett, The Wall Street Journal, February 11, 2015 ---
http://www.wsj.com/articles/fbi-to-probe-fraudulent-tax-filings-1423614826

The Federal Bureau of Investigation has opened a probe to determine whether a computer data breach led to the filing of false tax returns through TurboTax software, according to a person familiar with the case.

The move comes as states try to contain a wave of bogus state tax filings through TurboTax amid signs that the fraud may also involve federal returns, according to some security specialists and taxpayers.

FBI investigators are still working to determine exactly how personal information was obtained to file bogus returns in about 19 states and whether that information may have been stolen from TurboTax or somewhere else, the person said.

TurboTax parent Intuit Inc. says it believes recent instances of fraud didn’t result from a breach of its systems, based on a preliminary examination conducted with the assistance of independent security experts.

“Tax fraud is an industrywide issue and Intuit is actively engaged with federal and state governments, as well as industry associations, to fight fraud,” the company said in a statement. “Intuit has not been notified, nor are we aware, that we are the target of an FBI investigation. We work with law-enforcement agencies, including the FBI as appropriate, on matters such as identity theft.”

Continued in article

Some States (e.g. Minnesota) Are Refusing eFiled TurboTax Returns

"Minnesota stops taking TurboTax returns due to possible fraud," by Mary Lynn Smith and Ricardo Lopez, Minneapolis Star Tribune, February 6, 2015 ---
http://www.startribune.com/politics/statelocal/291008561.html

Possible fraud activity tied to the software will be investigated.

Minnesota has stopped accepting tax returns filed through TurboTax, a popular tax preparation software, because of possible fraudulent activity.

Just as tax season is ramping up, Revenue Department officials made the urgent announcement late Thursday after two taxpayers reported that they had logged into Intuit’s TurboTax to file but were advised a return had already been filed. Because it could indicate fraud, state officials are blocking new TurboTax returns from coming in. They also are reviewing a “couple of thousand” returns that have already been filed using TurboTax.

“If we identify a problem, we will contact the taxpayer,” said Revenue Commissioner Cynthia Bauerly.

Meanwhile, TurboTax says it has temporarily stopped processing state tax returns due to the increase in fraudulent fillings. Intuit Inc., the company behind the popular tax preparation software TurboTax, said it is working with security company Palantir to investigate the problem. So far, Intuit says there was no security breach of its systems. Instead, it believes personal information was taken elsewhere and used to file returns on TurboTax.

Intuit says state tax returns already filed since Thursday will be transmitted as soon as possible. Users can still submit their federal income tax returns.

Utah state tax officials also announced Thursday that they have discovered 28 fraudulent filings from third-party vendors. Some taxpayers there also reported logging into TurboTax to file and then getting a message that their returns already had been filed.

Utah officials said 18 other states have identified similar problems.

Minnesota officials said Intuit, which is based in Mountain View, Calif., will open a dedicated phone number beginning at 8 a.m. Friday for people with concerns about the issue. TurboTax users can call 1-800-944-8596.

Minnesota Revenue Department officials said they were made aware of the issue with TurboTax on Wednesday night and “worked around the clock” to investigate the problem. They will continue to accept returns filed with Intuit professional preparer products, including Lacerte, Intuit Tax Online and ProSeries.

Bauerly said the Department of Revenue systems have not been breached and that the state has a “robust fraudulent protection system in place.”

Bauerly said her department has contacted Intuit and requested information on their security solutions and any other issues the company has discovered, along with solutions to resolve them.

Efforts to reach Intuit for comments Thursday night were not successful.

Continued in article

February 6, 2015 messagte from Scott Bonacker

Krebs on Security has posted a new item.

TurboTax owner Intuit Inc. said Thursday that it is temporarily suspending the transmission of state e-filed tax returns in response to a surge in complaints from consumers who logged into their TurboTax accounts only to find crooks had already claimed a refund in their name.


http://krebsonsecurity.com/2015/02/citing-tax-fraud-spike-turbotax-suspends-state-e-filings/


Teaching Case on Tax Strategies Using Trusts
From The Wall Street Journal Accounting Weekly Review on January 23, 2015

Trusts That Can Trim State Income Tax
by: Liz Moyer
Jan 24, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Incomplete Nongrantor Trust, State Taxation, Tax Planning, Trusts

SUMMARY: Incomplete nongrantor trusts are serious tax-minimization tools. They are often formed in Delaware, Nevada and sometimes Wyoming, chosen because they don't tax the income of trusts established there, even by people who live elsewhere, or have favorable tax rules. In a typical scenario, an individual would put into the trust an asset or assets that already have gone up a lot in value or that he or she hopes will appreciate sharply, such as shares in a private company that plans to go public. The aim is usually to sell the securities, at which point federal tax would be due-but not state tax. Alternatively, the trust could be used to hold assets that throw off a lot of income each year, sheltering that income from state tax.

CLASSROOM APPLICATION: This article is appropriate for an individual taxation class.

QUESTIONS: 
1. (Introductory) What is an incomplete nongrantor trust? How are they structured? What is the purpose of those trusts? What are the benefits?

2. (Advanced) Where are incomplete nongrantor trusts formed? Why? Where do the taxpayers who utilize these trusts reside?

3. (Advanced) In general, how do states tax residents? Do states tax nonresidents? How do these trusts work for taxpayers in high-tax states?

4. (Advanced) How are incomplete nongrantor trusts eligible for the tax-saving treatment? Who owns the trust? Who owns the assets?

5. (Advanced) What are private-letter rulings? For what are they used? What is the IRS changing regarding private-letter rulings?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Trusts That Can Trim State Income Tax," by Liz Moyer, The Wall Street Journal, January 24, 2015 ---
http://www.wsj.com/articles/trusts-that-can-trim-state-income-tax-1422032933?mod=djem_jiewr_AC_domainid

These trusts may have funny-sounding names, but for some high-net-worth individuals, they are serious tax-minimization tools.

Known as incomplete nongrantor trusts, they are often formed in Delaware, Nevada and sometimes Wyoming, hence their acronyms “DING,” “NING” and “WING.” Those states are chosen because they don’t tax the income of trusts established there, even by people who live elsewhere, or have favorable tax rules.

In a typical scenario, an individual would put into the trust an asset or assets that already have gone up a lot in value or that he or she hopes will appreciate sharply, such as shares in a private company that plans to go public. The aim is usually to sell the securities, at which point federal tax would be due—but not state tax. Alternatively, the trust could be used to hold assets that throw off a lot of income each year, sheltering that income from state tax.

At some point, the dollars in the trust would typically be distributed to the person who created the trust and other beneficiaries.

Advisers say the strategy is especially in demand with residents of California and New Jersey, where top marginal income-tax rates are 13.3% and 8.97%, respectively. (Those rates apply to capital gains as well as to ordinary income.)

New York, another high-tax state, clamped down on the practice last year and won’t let New York residents use the trusts to avoid state taxes.

One risk is that additional states could negate the tax benefits for their residents. In California, Denise Azimi, a spokeswoman for the state Franchise Tax Board, says, “We are aware of the trust instruments. We are actively monitoring them. We will evaluate the situation to determine the best course of action.”

Says Andrew Katzenstein, a lawyer at Proskauer Rose in Los Angeles: “There’s a pretty good bet that the [California tax authority] is going to try to blow this up, but with careful planning there are opportunities to avoid California tax using these.”

A spokesman for New Jersey’s Office of Legislative Services says, “There is no pending legislation on this subject.”

Even before President Barack Obama proposed raising federal taxes on high earners in his State of the Union address this past week, earlier increases imposed by a 2012 law had encouraged high-net-worth people to look hard for tax savings.

“People are being crushed by the effect of federal and state taxes and looking for ways to reduce their effective rate,” says Brent Lipschultz, an accountant and adviser at EisnerAmper in New York.

To see the benefits of a DING or related trust, consider an example from Suzanne Shier, the chief tax strategist at Northern Trust, of a hypothetical individual who has a $10 million asset he originally acquired at a $1 million cost basis. He wants to sell it, but lives in a state where the tax is 10%.

If he puts the asset in a DING trust and then sells it, he avoids a state-tax bill of $900,000. He would still owe $2,142,000 in federal tax, assuming the top capital-gains rate of 20% plus the 3.8% surtax on net investment income. The assets remaining after the federal tax bill was paid would be $7,858,000 compared with $6,958,000 if it weren’t in a DING trust.

To pull this off, a little legal maneuvering is needed, because the trust has to accomplish two things. It has to be designed so that the individual gives up enough control of the asset to not be considered an owner under federal income-tax rules; that nonowner status is indicated by “nongrantor.” But the individual must retain enough control of the asset so as not to trigger gift taxes.

A gift is considered “incomplete” if the person giving it retains some level of control. With a DING, NING or WING, the individual usually sits on a committee of beneficiaries that has the power to change or direct the distribution of the assets, including making distributions back to him or herself.

A number of taxpayers have gotten private-letter rulings from the Internal Revenue Service OK’ing aspects of their particular arrangements for U.S. tax purposes, including verifying that gifts are incomplete, says William Lipkind, a partner at the New Jersey law firm Lipkind Prupis & Petigrow. He has obtained letter rulings on these trusts for several clients, including residents of New Jersey and California. He recently helped form a trust for three individuals who have a $30 million private business.

Advisers say people contemplating the creation of such trusts should think about timing. If an asset put into a trust is immediately sold and the money distributed back to the person forming it, that is likely to raise red flags with state tax authorities as a sham.

But setting up a trust, selling the assets a few years down the road and then distributing them some time after that is less likely to raise negative attention, especially if the person obtains a private-letter ruling from the IRS, Mr. Lipkind says.

On that note, the fees for an IRS private-letter ruling are going up as of Feb. 1, to $28,300 from $19,000 now. And if multiple beneficiaries want an identical IRS letter for their files, the cost for those will increase to $2,700 each next month from $1,800.

 


Mysteries of Human Memory
Does this explain the helicopter memory lapse of NBC's news anchor Brian Williams?

"You Have No Idea What Happened," by Maria Konnikova, The New Yorker, February 4, 2015 ---
http://www.newyorker.com/science/maria-konnikova/idea-happened-memory-recollection


Fraud --- http://en.wikipedia.org/wiki/Fraud

Ethics --- http://en.wikipedia.org/wiki/Ethics

"A few thoughts on teaching Ethics:  Are Business Schools using the Best Approach to Teach Ethics?" by Steven Mintz, Ethics Sage, January 27, 2015 --- http://www.ethicssage.com/2015/01/a-few-thought-on-teaching-business-ethics.html 

Jensen Comment
For me role playing did not work so well in teaching ethics or most any other topic. I think it went too slow and got boring.  There are tons of cases, but these also tend to get boring.

For me short videos seemed to work the best, especially when followed by review discussions. At the time the IMA had some very good videos for classroom use.

I think it's important to stress the occasional murky line between unethical acts and illegal acts. You can teach both, but it's important to stress when behavior is possibly unethical but probably not illegal.

CGMA Portfolio of Tools for Accountants and Analysts --- http://www.cgma.org/Resources/Tools/Pages/tools-list.aspx
Includes ethics tools and learning cases.

Ethics Games and Puzzles --- http://www.ethics.org/resource/ethics-games-and-puzzles

Scruples Game --- http://en.wikipedia.org/wiki/Scruples_%28game%29

Ethics Training for the Workplace --- http://www.ehow.com/facts_5957733_ethics-training-workplace.html

The bottom line is that both ethics and political leanings more often than not are impacted more by what is learned growing up at home and possibly by what is learned in church and K-12 schooling.  Sometimes we learn ethics best by watching our teachers, coaches, and supervisors recommending things that are not ethical.

For example, my high school football coach encouraged playing dirty ---
http://faculty.trinity.edu/rjensen/Assess.htm#Randy


Apple's Tax Bill in Australia Doubles (suspicions of profit shifting)
http://www.smh.com.au/business/apples-803-million-australian-tax-bill-revealed-20150127-12yrqq.html

Apple paid just $80.3 million in Australian tax last year, despite making more than $6 billion in local revenue, accounts filed with the corporate regulator show.

While a fraction of its overall income, Apple's tax bill was more than double what it paid the previous year.  

The tax-expense figure, disclosed in accounts filed with the Australian Securities and Investments Commission, comes as a Senate inquiry prepares to grill the heads of Australian and multinational corporations over their tax affairs.

It also comes amid an investigation by the Australian Tax Office of tech companies suspected of shifting profits out of Australia.

While the actual amount of tax a company pays is confidential under Australian law, an expense figure is calculated for the purpose of annual accounts.

Professor Antony Ting, at the University of Sydney Business School, said Apple's latest accounts suggested it was continuing to shift profits overseas.

"It appears that Apple is still able to shift most of its profits from Australia with its tax structure, which most likely is perfectly legal under the current tax law," he said.

"That leaves little profits, after deducting sales and marketing costs in Australia, to be taxed in Australia."

An Apple spokeswoman declined to comment on whether the accounts reflected tax paid accurately.

Apple has been in the spotlight over its taxes in Australia, after an investigation by Fairfax Media last year showed it had shifted $8.9 billion in untaxed profits from its Australian operations to Ireland in the past decade.

It is one of the companies expected to be hauled in front of a Senate inquiry into corporate tax avoidance, with hearings due to start as soon as March.


Read more: http://www.smh.com.au/business/apples-803-million-australian-tax-bill-revealed-20150127-12yrqq.html#ixzz3R0QJtj9X
 


Teaching Case on Tax Reform
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Obama Aims to Change Tax System Many Call Worst of All Worlds
by: John D. McKinnon
Feb 02, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Corporate Taxation

SUMMARY: Mr. Obama wants U.S. companies to pay a 14% tax on the approximately $2 trillion of overseas earnings they have accumulated as part of a plan to overhaul the federal corporate tax system. They would face a 19% minimum tax on future foreign profits. Many Republicans ultimately want to largely forgo U.S. tax on future foreign earnings altogether. That is the direction most other developed countries have gone in recent years. GOP lawmakers believe their plan would do more to restore U.S. firms' competitiveness.

CLASSROOM APPLICATION: This article and the related ones would be an excellent update to share with students in a corporate tax class.

QUESTIONS: 
1. (Introductory) What are the details of the president's proposal to overhaul the corporate tax system?

2. (Advanced) Why do some companies have so much money "parked" in other countries? What encourages this behavior? How do these activities affect U.S. tax revenues?

3. (Advanced) How does the current U.S. corporate tax system compare with those in other countries? How does this affect competitiveness of corporations around the world? Corporations in which countries are benefited, and which corporations are at a disadvantage?

4. (Advanced) How does this proposal compare with what members of Congress want? Is Obama's proposal likely to pass? Why or why not?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

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Obama Proposes One-Time 14% Tax on Overseas Earnings
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by CFO Journal Staff
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by Vipal Monga and Joann S. Lublin
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5 Areas for Possible Compromise in Obama Budget
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New Taxes Would Hit Wealthy, Companies
by John D. McKinnon
Feb 03, 2015
Online Exclusive

"Obama Aims to Change Tax System Many Call Worst of All Worlds," by John D. McKinnon, The Wall Street Journal, February 2, 2015 ---
http://www.wsj.com/articles/obama-aims-to-change-tax-system-many-call-worst-of-all-worlds-1422836990?mod=djem_jiewr_AC_domainid

The administration proposal to tax foreign earnings of U.S. companies have parked offshore fills in important details of a plan that officials have been discussing in broad terms for several years.

One prominent feature is that it would be mandatory. Instead of relying on ultralow tax rates to induce companies to bring their money home voluntarily, as some lawmakers have recently proposed, President Barack Obama wants to impose a 14% tax on those profits. He also would tax future foreign profits at 19%—far lower than his proposed 28% top rate for corporate profits and the existing 35% top rate, but still significant given the direction many other developed countries have taken.

While a mandatory tax on existing overseas profits is at odds with some recent proposals in Congress, some leading Republican tax writers have embraced such an approach in recent years. That suggests it could become part of a deal to overhaul the tax system and help pay for big new domestic infrastructure investments.

Read More in Capital Journal

·        Obama Opens Bidding on Corporate Taxes

·        Q&A: What the $18 Trillion National Debt Means for the U.S. Economy

·        Obama Aims to Change Tax System Many Call Worst of All Worlds

·        Obama Budget Proposes 7% More in Spending Above Sequestration Caps

·        GOP Split Over Expected Obama Request for More Defense Outlays

Mr. Obama generally wants to make the U.S. system of taxing its multinationals more world-wide in scope, by imposing tax immediately on firms’ future foreign earnings as well as their existing ones.

Many Republicans ultimately want to largely forgo U.S. tax on future foreign earnings altogether. That is the direction most other developed countries have gone in recent years. GOP lawmakers believe their plan would do more to restore U.S. firms’ competitiveness, a concern that Democrats say is overblown.

At a minimum, Mr. Obama’s proposals help to bring a long-running debate over U.S. company taxation to an important crossroad. While it is still unclear which direction Washington will take, almost nobody wants to keep slogging down the current path when it comes to taxing U.S. multinational corporations.

For years, many other countries have been slashing corporate-tax rates in an effort to hold on to company headquarters and jobs and attract new investment. They also have moved to a system known as territorial taxation that generally seeks to tax firms only on their domestic profits, not their global earnings, as a further inducement to firms.

As a partial concession, the U.S. for many years has allowed firms to defer federal tax on their foreign earnings until the money is brought home—a sort of hybrid of world-wide and territorial taxation. But the result has been anything but a happy medium.

As the tax differential has grown between the U.S. and the rest of the world, U.S. firms have chosen to leave more earnings offshore, where the U.S. tax is deferred. That means they typically can’t make use of the cash for dividends, stock buybacks or domestic reinvestment. Some have even sought to move overseas to escape the U.S. tax system and reunite with their cash.

Many experts regard it as the worst of both worlds: a system that scares off new investment because of a high statutory rate, yet also collects relatively little money for the government. The system’s daunting complexity also adds to compliance costs for everyone. And multinationals often pay very little in tax, while domestic-focused companies sometimes pay a lot.

The Obama plan appears unconnected to a separate effort by some lawmakers of both parties to declare a temporary tax holiday, allowing multinationals to bring home foreign profits at a special low rate, to spur domestic investment. The administration warned that it still opposes such measures.


Teaching Case on Warranty Accounting
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Beazer Homes Loss Widens Amid Warranty Charge
by: Chelsey Dulaney
Jan 31, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Warranty Expenses

SUMMARY: Beazer Homes USA Inc.'s loss widened in its December 2012 quarter as home closings fell and the company was hit by unexpected warranty costs that eroded profitability. Chief Executive Allan Merrill said that the quarter's results were weighed by a low backlog conversion rate and an unexpected $13.6 million charge stemming from stucco installation issues in some of its Florida homes that resulted in water intrusion. Shares were down 2.3% at $16.85 in premarket trading.

CLASSROOM APPLICATION: This article could be used when discussing financial reporting related to warranty expenses.

QUESTIONS: 
1. (Introductory) What facts did the article report regarding Beazer Homes December quarter's results? What impact have warranty costs had on Beazer Homes?

2. (Advanced) How are warranty expenses usually booked? When are those expenses accrued? What accounts are increased or decreased?

3. (Advanced) What should a company do if it unexpectedly experiences an unusually large number of warranty claims or a large dollar amount? How would that be recorded in journal entries? How would it affect the financial statements?

4. (Advanced) What has been the impact of the warranty expense information on the market price of the company's shares? Why did that happen?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

"Beazer Homes Loss Widens Amid Warranty Charge," Chelsey Dulaney, The Wall Street Journal, January 31, 2015 ---
http://www.wsj.com/articles/beazer-homes-loss-widens-amid-warranty-charge-1422627932?mod=djem_jiewr_AC_domainid

Beazer Homes USA Inc. ’s loss widened in its December quarter as home closings fell and the company was hit by unexpected warranty costs that eroded profitability.

Chief Executive Allan Merrill said Friday that the quarter’s results were weighed by a low backlog conversion rate and an unexpected $13.6 million charge stemming from stucco installation issues in some of its Florida homes that resulted in water intrusion.

Shares were down 2.3% at $16.85 in premarket trading.

Mr. Merrill said Friday that an improving sales environment and a higher backlog should help boost the company’s future performance.

At the end of the quarter ended Dec. 31, Beazer’s backlog was up 1.2% to 1,771 homes, with a sales value of $560.5 million.

Overall, Beazer reported a loss of $22.3 million, or 84 cents a share, compared with a loss of $5.14 million, or 21 cents a share, a year earlier.

Revenue fell 9.3% to $265.8 million.

Analysts polled by Thomson Reuters had expected a per-share loss of 12 cents on revenue of $296.4 million.

Total home closings fell 14.7% in the quarter, as the average sales price from closings grew 5.8%.

The home-building gross margin, excluding impairments and abandonments, and interest, fell to 16.6% from 21.2%. Excluding the aforementioned items and the Florida warranty costs, margins would have edged up to 21.8% from 21.2%.

New home orders increased 7.9% in the quarter.

Question
How would you account for warranty obligations of Tesla electric automobiles?
Note that Tesla has an eight-year unlimited mileage warranty.

"Tesla's Earnings Quality Is Sketchy, But Its Stock Keeps Soaring," by Herb Greenberg, Business Insider, May 16, 2013 ---
http://www.businessinsider.com/teslas-stocks-keep-soaring-2013-5

If profits matter going forward, so does earnings quality. And according to Gradient Analytics, the earnings quality gets a grade of 'F."

What stands out the most?

"So many things," says Gradient research director Donn Vickrey. "By declaring themselves profitable, I said there is just no way. How can this be at this point in the cycle? It has to be purely a paper profit and at that some elements of the paper may be lower quality than usual."

Paper or not, Vickrey believes whatever Tesla's profitability, it isn't sustainable.

Rather than go through all of his points, let's focus on just one: warranty accruals. This is the amount the company puts aside for expected warranty expenses — a non-cash charge that hits earnings as a cost of goods sold. The lower the provision, the less of a hit to earnings.

It's highly subjective, and Tesla current reserves at a rate, relative to sales, in-line with Ford and General Motors. But its warranty is longer than mainstream auto companies and "its product is based on new technology with unproven reliability," according to Gradient's report on Tesla." Of particular concern: The firm's eight-year, 100,000 mile battery warranty could prove to be extremely costly."

But what if the company is so new it simply doesn't know — so uses existing auto companies as a benchmark?

Under accounting rules, Vickrey says, if you don't know what they'll be "they should be higher, not lower."

Continued in article

Bob Jensen's threads on warranty accounting
http://faculty.trinity.edu/rjensen/Theory02.htm#LifetimeWarranties


Teaching Case on Audit Committees and Corporate Governance
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Meet the Corporate Board's 'Kitchen Junk Drawer'
by: Michael Rapoport and Joann S. Lublin
Feb 03, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Audit Committees, Sarbanes-Oxley

SUMMARY: As new risks multiply, the audit committee has become the "kitchen junk drawer" for many corporate boards. The workload of the powerful committees has expanded sharply beyond their core role of overseeing a company's financial reporting. They are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. In addition, the Securities and Exchange Commission is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

CLASSROOM APPLICATION: This is an excellent article on audit committees for financial accounting classes, as well as for auditing and forensic accounting classes.

QUESTIONS: 
1. (Introductory) What is an audit committee? What are their duties? Why are audit committees important?

2. (Advanced) What is the Sarbanes-Oxley Act? How has it affected the work of audit committees?

3. (Advanced) How have the duties of audit committees expanded in recent years? What are the reasons for this?

4. (Advanced) What qualifications should a company seek in a member of the audit committee? As top management in a business, how would you attract these kinds of people? What benefits could they add to your business?

5. (Advanced) What does the SEC expect to release regarding the activities of audit committees? What could this change? Would it increase responsibilities of the audit committee or relieve some of their burdens?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Meet the Corporate Board's 'Kitchen Junk Drawer'," by Michael Rapoport and Joann S. Lublin, The Wall Street Journal, February 3, 2015 ---
http://www.wsj.com/articles/meet-the-corporate-boards-kitchen-junk-drawer-1422933078?mod=djem_jiewr_AC_domainid

Workload of the Audit Committee Has Expanded Well Beyond Oversight of Financial Reporting.

As new risks multiply, the audit committee has become the “kitchen junk drawer” for many corporate boards.

The workload of the powerful committees has expanded sharply beyond their core role of overseeing a company’s financial reporting. They are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. In addition, the Securities and Exchange Commission is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

“It’s not the favorite committee,’’ says Fredric Reynolds, a retired CBS Corp. chief financial officer and audit committee chairman at Mondelez International Inc. To attract committee members, he sometimes promises relatively short stints: “You’ll be released for time served and good behavior,’’ he tells directors.

Mr. Reynolds estimates he spends 100-plus hours a year on Mondelez’s audit committee. One key part of that is the audit committees’ oversight of whistleblower complaints, which is required by the 2002 Sarbanes-Oxley Act. The vast majority are from people frustrated with their work colleagues, he adds. But when there’s smoke, “you don’t know if it’s fire.”

The speed and complexity of business and risk oversight “are stretching and straining many audit committee agendas,” according to a global survey of audit committee members released last week by accounting firm KPMG. Three-quarters of the 1,500 respondents said the amount of time required to carry out their responsibilities has increased at least “moderately” over the past two years.

Serving on an audit committee “has taken more time than I expected,’’ says a former tech-industry finance chief who sits on the board of a fast-growing community bank.

In August, he became interim chief executive of a closely held aerospace company, and says he warned the bank he didn’t have enough time for both roles. But, he says, the bank’s chairman told him, “We want you to stay involved in the audit committee.” He concedes that he has since skipped two board meetings.

Some boards appear to view the audit committee as a place to hand off any internal oversight issues, even if they are outside the committee’s traditional purview.

“Sometimes the audit committee is viewed as the kitchen junk drawer,’’ says Cindy Fornelli, executive director of the Center for Audit Quality, an accounting-industry group. Boards feel “if we don’t know what to do with it, we’ll give it to the audit committee.”

Some directors remain unfazed by the heavy workload because they enjoy being where the action is. “It’s where you have a very broad access to management time and information about the business,” says James Quigley , audit committee chairman for Wells Fargo & Co.

For some, however, the increased demands are taking a toll. E. Follin Smith resigned as audit committee chairman and a director of Discover Financial Services last spring because of the intense demands, according to people familiar with the situation. The retired CFO of Constellation Energy Group already was Ryder System Inc. ’s lead director, as well as an audit panel member there and at Kraft Foods Group Inc.

Ms. Smith told Discover Financial directors that she had more board work than she wanted, recalls one person with knowledge of the matter. “She had a lot on her plate.’’

Ms. Smith didn’t respond to phone calls seeking comment.

Government investigations can boost an audit committee’s work. Wal-Mart Stores Inc. ’s audit committee held an additional 13 meetings during fiscal 2014, because of probes into allegations that the big retailer had bribed officials in Mexico and other countries, according to its proxy. Wal-Mart has said it is cooperating with U.S. and Mexican government investigations in the matter.

Christopher Williams, head of Wal-Mart’s audit committee, couldn’t be reached.

Sarbanes-Oxley contributed to the more expansive view of the audit committee’s role. In addition to requiring such committees to establish procedures to handle whistleblower complaints, the law made it clear the audit committee hires the outside auditor, and that it must be made up entirely of independent directors.

“From the perspective of the board, the audit committee looks like the entity that has the most expertise on anything related to risk,” says Daniel Goelzer, a Baker & McKenzie lawyer and former interim chairman of the Public Company Accounting Oversight Board, the government’s audit regulator.

The SEC plans to issue a “concept release” by the end of March on what audit committees should tell investors—a step toward revamping disclosure requirements for the first time since 1999.

Accounting and corporate-governance groups have urged audit committees to voluntarily disclose more to shareholders, but the SEC thinks the voluntary disclosures lack uniformity. Only 13% of companies in the S&P 500 disclosed to investors their audit commitees’ specific considerations in approving their auditor, such as qualifications and geographic reach, according to a recent analysis by the Center for Audit Quality and consulting firm Audit Analytics.

Continued in article

Bob Jensen's threads on audit committee professionalism ---
http://faculty.trinity.edu/rjensen/Fraud001c.htm#AuditCommittee


Teaching Case on ACA Health Care Tax Issues
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

The ACA and Other Changes to Watch Out for This Tax Season
by: Tom Herman
Feb 02, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Individual Taxation

SUMMARY: Before firing off a 2014 income tax return, taxpayers should take some time to master a few important, but easily overlooked, deductions, credits and other breaks-including a few that were revived at the end of last year. Even if a taxpayer considers him or herself a tax wizard who loves studying the Internal Revenue Code, it's increasingly easy to make costly bloopers. Also, taxpayers should watch out for a few new wrinkles in 2015, notably those stemming from the Affordable Care Act. The article offers some areas that deserve extra attention.

CLASSROOM APPLICATION: This article offers insight on some areas of individual taxation, especially areas that have experienced recent changes.

QUESTIONS: 
1. (Advanced) What are the tax issues involving health insurance for 2014 tax returns? Will the changes affect all taxpayers, some, or just a few? Why is health insurance a part of tax returns?

2. (Introductory) What is the income ceiling for the Social Security tax? How could this be a problem for people who have more than one job?

3. (Advanced) How is income taxed if capital losses exceed capital gains? How does that differ from when capital gains exceed capital losses? How are gains and losses from a personal residence different from other capital gains and losses?

4. (Advanced) What is the standard deduction? How many taxpayers elect to claim it? What is the other alternative? Why do the majority of the taxpayers choose the option they choose?

5. (Introductory) What taxpayers should choose to deduct sales taxes? What is the other option?

6. (Introductory) What is the simplified calculation for the home office deduction? Why did the IRS develop this calculation? What is the other option?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

Before firing off your 2013 income tax return, take some time to master a few important, but easily overlooked, deductions, credits and other breaks—including a few that were revived at the end of last year.
"The ACA and Other Changes to Watch Out for This Tax Season," by Tom Herman, The Wall Street Journal, February 2, 2015 ---
http://www.wsj.com/articles/the-aca-and-other-changes-to-watch-out-for-this-tax-season-1422849612?mod=djem_jiewr_AC_domainid

The complexity and questions that arise from the nation’s ever-changing tax laws are as certain as taxes themselves. So we introduce a new column, written by Tom Herman, a former tax columnist for The Wall Street Journal, that will look at developments affecting taxpayers and individual investors. We welcome your thoughts and questions about tax issues, big and small. Send them to reports@wsj.com.

Early birds, be careful.

Before firing off your ... income tax return, take some time to master a few important, but easily overlooked, deductions, credits and other breaks—including a few that were revived at the end of last year.

Even if you consider yourself a tax wizard who loves studying the Internal Revenue Code, it’s increasingly easy to make costly bloopers. Also, watch out for a few new wrinkles this year, notably those stemming from the Affordable Care Act.

Here are some areas that deserve extra attention:

HEALTH INSURANCE Get ready for some new lines on this year’s forms because of the Affordable Care Act. For most, this should be fairly simple. “The majority of taxpayers—more than three out of four—will simply need to check a box to verify they have health-insurance coverage,” the IRS says. Others will face trickier issues. Some may be eligible to claim an exemption from the coverage requirement. But those who don’t have qualifying coverage or who don’t qualify for an exemption will need to make “an individual shared responsibility payment.” Others may qualify for a “premium tax credit.” See irs.gov/aca for details. For some “this will be very complicated,” warns Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting U.S.

SOCIAL SECURITY TAX Some people who worked for two or more employers last year may have paid too much in Social Security tax. The maximum amount that should have been withheld by all your employers for 2014 was $7,254. (That’s 6.2% of $117,000, the maximum amount of wages subject to the Social Security tax.) If you had too much withheld, you typically can claim the excess as a credit. See IRS Publication 17 for details.

INVESTMENT LOSERS Did you lose money on stocks, bonds and other investments you sold last year? Use your capital losses to offset capital gains. But what if your losses exceeded your gains? You can deduct as much as $3,000 a year ($1,500 for married taxpayers filing separately) of net losses against your wages and other ordinary income. Carry over excess losses into future years. Warning: You can’t deduct a loss on the sale of your personal residence.

IRA CHARITABLE TRANSFERS Late last year, lawmakers revived a provision that allowed many people age 70½ or older to transfer as much as $100,000 directly from an IRA to charity, tax-free, during 2014. The transfer counted toward the taxpayer’s required minimum distribution. You’re supposed to report your “qualified charitable distribution” on your return even if it’s tax-free. Just make sure you don’t put it on the wrong line. For example, if you file Form 1040, report your “QCD” on Line 15a. Don’t include any of that distribution on the line for “taxable amount” (Line 15b). Instead, write “QCD” next to the line.

HIGHER STANDARD About two out of every three returns typically claim the standard deduction. For 2014, the basic standard deduction is $12,400 for those married and filing jointly, or $6,200 if single or married and filing separately. There are additional amounts for people who were 65 or older, or blind. Before taking the standard deduction, check to see if you might be better off itemizing.

SALES TAXES Late last year, Congress revived a law that gives taxpayers who itemize an important choice: They can deduct either state and local income taxes paid in 2014—or their state and local sales taxes. (But they can’t deduct both.) The sales-tax option offers welcome relief for people in states with no income tax, such as Texas and Florida. But taxpayers in other states may benefit from taking the sales-tax deduction, says Mr. Luscombe, including those who paid large amounts of sales tax on major purchases such as cars or boats or those who reside in states with high sales-tax rates.

HOME OFFICE Many people who work at home don’t bother deducting their home-office expenses because the rules can be fiendishly complex and because of fears it would increase their chances of getting audited. But if you qualify to deduct home-office expenses, you may benefit from a simplified calculation method allowed by the IRS. Multiply the square footage of the home used for your home office (but not more than 300 square feet) by an IRS-approved rate of $5 a square foot. Thus, the maximum deduction in this case would be $1,500.

Mr. Herman is a writer in New York City. He was formerly The Wall Street Journal’s Tax Report columnist.

IRS ACA Health Insurance Site --- http://irs.gov/aca


Teaching Case on New Revenue Recognition Rules
From The Wall Street Journal Weekly Accounting Review on January 30, 2015

For New Revenue-Recognition Rules, It's Ready vs. Not
by: Maxwell Murphy
Jan 27, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Deferred Revenues, Revenue Recognition

SUMMARY: Will sweeping revisions in revenue-recognition rules take effect as scheduled? The planned changes, part of a broader effort to align U.S. and international accounting standards, involve so-called deferred revenue-money companies have already collected from their customers but which they recognize as revenue over time. The change is set to start Jan. 1, 2017, but officials at the FASB received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts and adjust past financial results. A group of U.S. software companies asked the FASB for more guidance and a two-year delay.

CLASSROOM APPLICATION: This is an excellent update regarding new revenue-recognition rules.

QUESTIONS: 
1. (Introductory) What accounting rules are changing? When is the change set to begin? Who is changing the rules?

2. (Advanced) What is revenue recognition? What is deferred revenue? How are the financial statements impacted by each of these? How will the new rules affect company's financial statements? Will different companies or industries be affected differently?

3. (Advanced) What is the reasoning behind the change in rules? Who will be benefited by the change?

4. (Advanced) What parties are concerned about the effective date of the new rules? What challenges are they reporting? What did they request?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

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"For New Revenue-Recognition Rules, It's Ready vs. Not," by Maxwell Murphy, The Wall Street Journal, January 27, 2015 ---
http://www.wsj.com/articles/for-new-revenue-recognition-rules-its-ready-vs-not-1422316175?mod=djem_jiewr_AC_domainid

Call it the $360 billion question: whether to delay one of the biggest accounting changes in decades.

The answer isn’t expected until early in the second quarter.

The sweeping revisions in revenue-recognition rules “will represent a change for many industries,” said Christine Klimek, a spokeswoman for the Financial Accounting Standards Board, after a joint meeting Monday with its international counterparts. “There are bound to be questions. The answers to most of those questions can be found within the standard itself.”

The final draft of the new rules, unveiled last May after years of deliberations, would change the way thousands of companies book revenue. They would affect how auto makers account for car sales and telephone companies account for mobile-phone contracts.

The planned changes, part of a broader effort to align U.S. and international accounting standards, involve so-called deferred revenue—money companies have already collected from their customers but which they recognize as revenue over time. The idea is to make it easier for investors to compare companies across countries and industries.

Companies in the S&P 500 index have about $360 billion of such revenue on their books, according to S&P Capital IQ. Boeing Co. , Microsoft Corp. and International Business Machines Corp. have a combined $60 billion in deferred revenue, and the new rules will determine how much of that they will move to the top line—and when.

The accounting shakeup is set to start Jan. 1, 2017, but officials at the FASB received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts and rejigger past financial results.

Last Wednesday, a group of U.S. software companies, including Adobe Systems Inc., Symantec Corp. and VMware Inc., asked the FASB for more guidance and a two-year delay.

Exactly what deferred revenue will be counted as sales will vary widely between companies and industries. According to the Securities and Exchange Commission, as many as 250 questions linger as to how to implement the rules.

Auto makers such as Ford Motor Co. and General Motors Co. say the rules might force them to account separately for each car sold around the world, rather than group them into comparable transactions. They estimate they might have to spend as much as $300 million each on accounting technology, and they claim new financial figures based on per-car accounting will provide little benefit for investors.

AT&T Inc. and Verizon Communications Inc. said the current deadline doesn’t give them enough time. Both companies cited difficulty in restating results for prior periods.

Microsoft signaled investors over the summer that the rules “will have a material impact” on its financial results. A company spokesman declined to elaborate.

“The amount of work that it will mean for an accounting team can be overwhelming,” said Ken Goldman, chief financial officer of Fiksu Inc., a mobile marketing company that is preparing its books to potentially go public. He agrees with the rules conceptually, but said they could be more complicated and costly for companies than the Sarbanes-Oxley financial reforms of 2002.

Moreover, if companies don’t adequately prepare Wall Street, the revenue changes could be jarring.

When Apple Inc. changed the way it accounted for software updates for the iPhone in early 2010, the company’s financial results surpassed analysts’ expectations by billions of dollars. Though Apple was simply complying with new accounting rules that affected the way it booked the sales, the Nasdaq Stock Market had to temporarily halt after-hours trading of Apple’s shares to give investors time to digest the news.

Some big companies say they plan to be ready if the new revenue-recognition rules take effect as scheduled. “We do not need an extension,” said Liesl Nebel, accounting-policy controller at Intel Corp. “If they do allow an extension, we would like to early adopt.”

Defense contractor General Dynamics Corp. said any delay would cause it to spend more time and money to run parallel books with two different standards. “Do not penalize the companies that have moved forward,” wrote Kimberly Kuryea, its controller, in a letter to the FASB this month. “[The] costs will naturally and inevitably grow if the implementation period is extended.” The company declined to comment further.

The FASB needs to consider that argument “very seriously,” said Prabhakar Kalavacherla, a partner at auditor KPMG LLP who was a board member of the International Accounting Standards Board and worked on the project to align global revenue rules.

But smaller public companies with fewer resources generally will have a harder time getting their books in order, even though they wouldn’t have to report comparative figures for farther back than the prior year. Most large companies expect to produce figures for the previous two years.

Continued in article

Bob Jensen's threads on revenue recognition ---
http://faculty.trinity.edu/rjensen/ecommerce/eitf01.htm


Teaching Case on the SEC's Surrender to the Big Four in China
From The Wall Street Journal Weekly Accounting Review on February 13, 2015

SEC, Big Four Accounting Firms in China Settle Dispute
by: Michael Rapoport
Feb 07, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Auditing, Big Four Accounting, China, SEC

SUMMARY: The Chinese affiliates of the Big Four accounting firms agreed to pay $500,000 each to settle a yearslong dispute with the Securities and Exchange Commission over their reluctance to give the agency documents about Chinese companies under investigation. The settlement also allows the firms to avoid a temporary suspension of their right to audit U.S.-traded firms - a potential outcome of the dispute that would have complicated life for dozens of Chinese companies and many U.S. multinationals with significant operations in China. Under the $2 million agreement, the Chinese arms of PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG and Ernst & Young also agreed to follow procedures designed to ensure that the SEC is able to obtain audit documents from them in the future. The settlement follows a judge's ruling that the accounting firms had violated U.S. law when they refused to give the SEC the audit-work papers about some Chinese clients the SEC was investigating. Even though the clients' securities traded in the U.S., the firms had argued they were prevented from sharing the work papers by strict Chinese laws that treat such documents as akin to state secrets.

CLASSROOM APPLICATION: This is a good article to use in an auditing class, or to use when covering accounting for international business.

QUESTIONS: 
1. (Introductory) What are the details of the settlement described in the article? Who are the parties involved in the settlement?

2. (Advanced) What are the details of the dispute that led to this settlement? Why is it important for the SEC to gather information?

3. (Advanced) What defense did the Chinese firms present? How were those issues and co