New Bookmarks
Year 2020 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://www.trinity.edu/rjensen/bookurl.htm 
For earlier edition of Tidbits go to  --- http://www.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://www.trinity.edu/rjensen/threads.htm

 

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Bob Jensen's New Additions to Bookmarks

March 2020

Bob Jensen at Trinity University 


My Latest Web Document
Over 500 Examples of Critical Thinking and Illustrations of How to Mislead With Statistics --
-
http://faculty.trinity.edu/rjensen/MisleadWithStatistics.htm

USA Debt Clock --- http://www.usdebtclock.org/ ubl

How Your Federal Tax Dollars are Spent ---
http://taxprof.typepad.com/.a/6a00d8341c4eab53ef01b7c8ee6392970b-popup

To Whom Does the USA Federal Government Owe Money (the booked obligation of $20+ trillion) ---
http://finance.townhall.com/columnists/politicalcalculations/2016/05/25/spring-2016-to-whom-does-the-us-government-owe-money-n2168161?utm_source=thdaily&utm_medium=email&utm_campaign=nl
The US Debt Clock in Real Time --- http://www.usdebtclock.org/ 
Remember the Jane Fonda Movie called "Rollover" --- https://en.wikipedia.org/wiki/Rollover_(film)
One worry is that nations holding trillions of dollars invested in USA debt are dependent upon sales of oil and gas to sustain those investments.

To Whom Does the USA Federal Government Owe Money (the unbooked obligation of $100 trillion and unknown more in contracted entitlements) ---
http://money.cnn.com/2013/01/15/news/economy/entitlement-benefits/
The biggest worry of the entitlements obligations is enormous obligation for the future under the Medicare and Medicaid programs that are now deemed totally unsustainable ---
http://faculty.trinity.edu/rjensen/Entitlements.htm

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 Scholar --- https://scholar.google.com/

Wikipedia --- https://www.wikipedia.org/

Bob Jensen's search helpers --- http://faculty.trinity.edu/rjensen/searchh.htm

Bob Jensen's World Library --- http://faculty.trinity.edu/rjensen/Bookbob2.htm

Possibly the Number 1 Resource for CPA Exam Candidates
AICPA:  Uniform CPA Exam Blueprints ---
http://www.aicpa.org/BecomeACPA/CPAExam/ExaminationContent/DownloadableDocuments/cpa-exam-blueprints-effective-20170401.pdf?utm_source=mnl:cpald&utm_medium=email&utm_campaign=07Apr2017

CPA exam will increase focus on higher-order skills
"What Higher Order Skills Will be Tested on the Next CPA Examination," by Ken Tysiac, Journal of Accountancy, April 4, 2016 ---

http://www.journalofaccountancy.com/news/2016/apr/new-cpa-exam-201614166.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=04Apr2016

Bob Jensen's CPA Exam Helpers ---
http://faculty.trinity.edu/rjensen/Bookbob1.htm#010303CPAExam

Find a corporate home page quite easily by going to
https://en.wikipedia.org/wiki/List_of_companies_of_the_United_States

Bob Jensen's search helpers ---
http://faculty.trinity.edu/rjensen/searchh.htm




US News Rankings of Graduate School Accounting Programs ---
https://goingconcern.com/u-s-news-2021-best-accounting-graduate-schools-ranking/

Jensen Comment
Some of the top-ranked schools are not good fits for aspiring CPAs who did not major in accounting as undergraduates. Other than Ph.D. programs having only a handful of students, some of the top-ranked schools above have only MBA programs that have too too few MBA accounting, auditing, and tax courses to meet state CPA exam candidacy requirements. Other schools like the top-ranked University of Texas graduate accounting programs have some type of masters in accountancy programs designed for CPA aspirants.

Also note that the AACSB has an accreditation program for accountancy studies with over 180 schools that are acredited ---
https://en.wikipedia.org/wiki/List_of_AACSB-accredited_schools_(accounting)
 

Some of the top US News graduate school accounting programs do not have AACSB-accredited accounting programs.

My point here is that if you are looked for a career in accountancy some of the US News top-ranked accounting programs are poor choices. They are better choices for MBA students and Ph,D. students in accounting who do not aspire to be CPAs. Of course it is possible to enroll elsewhere before or after graduation to take additional courses required to sit for the CPA examination.


Zachary Booker on bridge loans and bankruptcy ---
https://marginalrevolution.com/marginalrevolution/2020/03/zachary-booker-on-bridge-loans-and-bankruptcy.html


Why Are Airlines Pricing Below Marginal Cost? ---
https://viewfromthewing.com/13-cross-country-airfares-but-why-are-airlines-pricing-below-marginal-cost/
This article mentions some things that should be added to cost accounting courses and textbooks.

Jensen Comment
Much depends upon how "marginal cost" is defined. There's marginal cost of a flight between Miami and LA versus the marginal cost of the next passenger to board that flight versus marginal cost of all passengers on the flight. Marginal cost of the flight includes cost of the fuel consumed (which can be calculated in various ways such as FIFO vs. LIFO vs. average cost), possible marginal cost of the flight and ground crew for the part that they get paid extra for the flight, and all other costs that increase for making this one flight.

Marginal cost of adding the next passenger may be to the flight may be pennies added due to that passenger's weight and incremental baggage costs. Of course the marginal cost of all passengers on the flight varies between flying 1 passenger versus flying 200 passengers.

In cost accounting courses teachers and textbooks generally avoid the possible complexities of calculating marginal cost. This article mentions some things that should be added to cost accounting courses and textbooks.


How the coronavirus may affect financial reporting and auditing ---
https://www.journalofaccountancy.com/news/2020/mar/how-coronavirus-may-affect-financial-reporting-auditing-23087.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=18Mar2020


Read the Fine Print of Insurance Contracts:  A typical $500 million property insurance plan of a college could include a $1 million pandemic damages sublimit -https://www.insidehighered.com/news/2020/03/09/insurance-coverage-scarce-coronavirus-threatens-college-finances?utm_source=Inside+Higher+Ed&utm_campaign=143f931802-DNU_2019_COPY_02&utm_medium=email&utm_term=0_1fcbc04421-143f931802-197565045&mc_cid=143f931802&mc_eid=1e78f7c952

Jensen Comment
Since there's a fault line not far from our mountain home I added earthquake insurance to my home owners policy one year. Then I read the fine print that excluded basement, foundation, cement, and brick wall damages that made me doubt that the added earthquake coverage was worth the cost. My neighbor not far down the road who had a fully brick house got the same doubts after I told him what I found by reading the fine print. Since our earthquake risk is quite low I did not pursue the cost of getting coverage that does not have so many waivers.

“Potential losses are so large that commercial insurers no longer provide affordable liability insurance to the Big Four Auditing Firms. They are now self-insured through “captives,” or insurance firms owned by the global audit networks and funded with premiums paid by member firms. Yet the captives have limited capital and cannot cover the full risks faced by audit firms, according to a 2006 study by London Economics."
https://www.reuters.com/article/us-usa-accounting-lawsuits-idUSBRE92K0QB20130321

Jensen Comment
By "affordable" this means that insurance companies only offer policies with such miniscule liability sublimits that they are not worth the cost of buying. The result is that the the huge class action lawsuit settlements in recent years have been covered by the firms themselves and on occasion through capital calls from partners --- as in the case of the settlement fine of over $400 million imposed upon KPMG for fraudulent sales of tax shelters ---
http://faculty.trinity.edu/rjensen/fraud001.htm#KPMG
Scroll down to the tax shelter settlement of KPMG


California Public Employees' Retirement System (CalPERS) ---
https://en.wikipedia.org/wiki/CalPERS

CalPERS Legacy Assets: How Much in Overvaluation Has CalPERS Been Hiding?
https://www.nakedcapitalism.com/2020/03/calpers-legacy-assets-how-much-in-overvaluation-has-calpers-been-hiding.html


ERISA --- https://en.wikipedia.org/wiki/Employee_Retirement_Income_Security_Act_of_1974

Unbelievable: ERISA’s Broken Promise ---
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3430686

A central but generally neglected objective of federal regulation of pension and welfare benefit plans was to improve overall economic efficiency by providing workers with accessible and reliable information on which to base their career and financial planning. Simple dissemination of plan terms and financial data (full disclosure) cannot achieve that objective because few workers are equipped with the skills needed to evaluate the costs and benefits of complex retirement saving or health care programs. For that reason ERISA, the Employee Retirement Income Security Act of 1974, requires curated disclosure of plan-related information: it must be presented a format that is both understandable to the average plan participant and sufficiently complete to empower workers to make best use of the program. The length and complexity of most employee benefit plans creates tension between understandability and completeness, calling for tradeoffs to achieve optimal disclosure.


Cultural Biases in Equity Analysis ---
https://marginalrevolution.com/marginalrevolution/2020/02/cultural-biases-in-equity-analysis.html
Jensen Comment
In my opinion cultural bias is overstated in this instance since it is seldom (if ever) that two firms being compared from different companies are alike on all other more important criteria for investors.
 


CASE Introduces World's First Fully Electric Backhoe Loader ---
https://insideevs.com/news/403585/case-fully-electric-backhoe-loader/

Jensen Comment
The author discusses purchase costs superficially but totally ignores operating costs in this article. The way the article is pitched toward operation by electric utility companies leads me to believe that operating costs are quite high for users who cannon buy inexpensive power to recharge the batteries.

This might be a project for cost accounting students to compare purchase and operating costs of an electric backhoe with a comparable diesel backhoe. The comparison should be across different usage scenarios and climate conditions. For example, how well does the tractor do in terms of parking lot snow removal --- which is how such tractors are used in the winters where I live. Battery powered vehicles generally perform less efficiently in cold weather.


Cryptocurrency --- https://en.wikipedia.org/wiki/Cryptocurrency

MIT:  This is how North Korea uses cutting-edge crypto money laundering to steal millions ---
https://www.technologyreview.com/s/615324/north-korean-hackers-cryptocurrency-money-laundering/


The Taxation of Cryptocurrency ---
https://www.cpajournal.com/2020/02/06/icymi-the-taxation-of-cryptocurrency/

Bitcoin and several rival forms of cryptocurrency experienced record-breaking growth in recent years, leaving many investors and their CPAs grappling with uncertainty and surprise during tax season. Many returns were put on extension, awaiting further guidance from the IRS, while other taxpayers found themselves faced with an unexpectedly large tax bill as a result of misconceptions surrounding how these transactions are taxed.

Cryptocurrency is digital currency that uses encryption techniques, rather than a central bank, to generate, exchange, and transfer units of currency. Unlike cash transactions, no bank or government authority verifies the transfer of funds. Instead, these virtual transactions are recorded in a digitized public ledger called a “blockchain.” Individual units of the currency are called “coins.”

Introduced in 2009, Bitcoin was the first cryptocurrency and remains the most widely used. Other forms have grown tremendously in popularity since then, including Litecoin, Ethereum, and Ripple. While cryptocurrency exchanges have experienced booms and busts in the market, experts predict the use of cryptocurrency will continue to increase, making it imperative that CPAs are prepared to understand and educate their clients on the tax implications of these virtual transactions.

 IRS Treatment of Cryptocurrency

The IRS addressed the taxation of cryptocurrency transactions in Notice 2014-21, which provides that cryptocurrency is treated as property for federal tax purposes. Therefore, general tax principles that apply to property transactions must be applied to exchanges of cryptocurrencies as well. Notice 2014-21 holds that taxpayers must recognize gain or loss on the exchange of cryptocurrency for cash or for other property. Accordingly, gain or loss is recognized every time that cryptocurrency is sold or used to purchase goods or services. How the gain or loss is recognized depends largely on the type of transaction conducted and the length of time the position was held.

Continued in article


U.S. Accountant Pleads Guilty in Panama Papers Investigation ---
https://www.justice.gov/opa/pr/us-accountant-pleads-guilty-panama-papers-investigation


Catherine Pugh: Ex-Baltimore mayor handed three year prison term ---
https://www.bbc.com/news/world-us-canada-51667665


Question:  How is Evaluation of Auditors Like and Unlike Media Evaluation of Murder Investigations?

Jensen Answer

Media, academic, and other evaluations of murder investigation failures and audit failures both receive a lot of media attention.

Similar evaluations of murder investigation successes receive a lot of media attention. When's the last time you ever saw the reporting of an audit success? There are media reports of some audit investigation successes, but far more audit successes go unreported in the media relative to murder investigation successes.

Therein lies a problem. Most of the good things auditors do are taken for granted. Hence if you are doing an evaluation of the costs versus benefits of auditing you have a difficult time finding data on the benefits.

Murder investigations and audit investigations do have one thing in common. The "prevention benefits" of crimes and errors that never take place due to fear of both types of investigations cannot be measured. How do you measure the benefit of preventing every crime that never takes place.

Whistleblowing on shoddy investigations/audits of all types can be very important. However, databases exist for murder investigation outcomes to date that can be analyzed by sophisticated data analysis tools. Databases mostly exist for only auditing failures and not successes --- thus leading to very unbalanced data analyses and reporting. And credit is rarely given to crimes and errors prevented that do not take place due to fear of future audits.

Two whistleblowers say they've seen the accounting industry's problems up close, and they're willing to testify to Congress about the shortcomings of the Big Four ---
https://www.businessinsider.com/whistleblowers-big-four-mattel-pricewaterhouse-coopers-pwc-2020-2

Data compiled by watchdog groups has indicated that there are widespread problems in the accounting industry, but few industry insiders have spoken up publicly about those shortcomings

Two who have are Mauro Botta and Brett Whitaker, each of whom say they saw accounting problems and tried to report them internally only to be ignored and to eventually lose their jobs.

Botta says he observed problems with the accounting at multiple companies while working in the Silicon Valley office of auditing firm Pricewaterhouse Coopers; Whitaker, meanwhile, says he raised a red flag about accounting problems at Mattel that later resulted in the company restating its quarterly results.

Both have essentially offered to testify to Congress about what they saw and experienced.

Pricewaterhouse Coopers has largely denied Botta's assertions and is fighting against him in court. The firm declined to comment specifically on what Whitaker said he experienced.

The biggest accounting firms are doing a poor job of auditing public companies, data from their public regulator indicates.

But while the problems appear to be widespread, few insiders have talked about them publicly. Mauro Botta and Brett Whitaker are exceptions to that rule. Each says he encountered accounting problems at public companies and tried to get them addressed internally. Both say they were ignored and responded to that by trying to draw attention from the outside to the shortcomings they encountered, each in his own way.

Now they've each gone one step further, signing on to a letter sent by watchdog groups to the House Financial Services Committee earlier this month urging it to hold a hearing on the problems in the accounting industry and with its overseer, the Public Company Accounting Oversight Board. Essentially, both are offering to testify before Congress about what they see as the failings of the industry.

"I believe a hearing is needed," said Botta, a former accountant with PricewaterhouseCoopers, also known as PwC, told Business Insider. "It is very much needed because it seems one of those things that is under everyone's eyes."

The Public Company Accounting Oversight Board, or PCAOB, is the quasi-governmental body charged with overseeing the auditing industry. Periodically, it samples audits performed by the various accounting firms, most notably by the four biggest ones, which audit the vast majority of the largest public companies.

Between 20% and 50% of the latest audits the PCAOB sampled from the Big Four firms had critical errors in them and shouldn't have been relied on, according to a report by the Project On Government Oversight, or POGO. POGO is among the groups that sent the letter calling on Congress to examine and try to get to the bottom of such findings.

That so many audits are flawed is a big concern, because literally trillions of dollars are riding on the accuracy and veracity of companies' financial statements. Investors determine how much they will pay for particular stocks based in large part on the revenue and profits reported by the companies behind those shares.

The accounting firms are supposed to serve as watchdogs themselves, ensuring for investors that those reports are true and that the corporations have in place working processes to ensure that those statements are corrupted by mistakes or fraud. If investors can't trust those reports, the system can break down, leading to massive sell-offs in particular stocks or even to financial crises.

Accounting industry watchdogs point to widespread problems, and 2 whistleblowers say nothing gets fixed because insiders have good reason to fear speaking out
https://www.businessinsider.com/accounting-whistleblowers-face-personal-toll-for-speaking-out-insiders-say-2020-3

·        The accounting industry is doing a poor job of auditing public companies, according to watchdog groups, a problem that threatens to undermine public confidence in the stock market and could cause a financial crisis. 

·        The problems persist in part because few in the know are willing to speak out.

·        There's a reason for that, two former whistleblowers say — those who raise alarms about accounting problems face a personal toll, including to their careers and their family lives.

·        Both Brett Whitaker and Maura Botta say their superiors tried to play down or cover up the errors they found, and each ended up losing his job after he blew the whistle.

 

To Brett Whitaker and Mauro Botta the failings of the accounting industry aren't just a matter of alarming statistics or fears about a potential financial crisis.

They're personal.

Both tried to raise the alarm about accounting problems at public companies. Both say their warnings were ignored. Worse, both lost their jobs, and Botta's been going through a contentious years-long court battle to try to vindicate himself.

Their experiences as whistleblowers are prime examples of why few in the industry speak up about its problems — and why the industry's failings persist, they say.

"Insiders certainly are very familiar [with] how the system works, but nobody talks," Botta told Business Insider in a recent interview.

Botta, previously an accountant with PricewaterhouseCoopers, or PwC, and Whitaker, the former director of tax reporting at Mattel, last month joined with a collection of watchdog groups to urge the House Financial Services Committee to hold a hearing on the accounting industry.

The coalition was following up on research from the Project On Government Oversight, or POGO, that indicated the four largest accounting firms are doing a sub-par job of auditing public companies and that the industry's quasi-governmental overseer was doing a poor job of watching over them. POGO's research found that in 20% to 50% of cases, the Big Four's audits of public company's financial statements had critical flaws that should have invalidated them, meaning that investors shouldn't have relied on the accounting firm's assertion that the statements were accurate and free of errors or fraud.

POGO also found that while the accounting industry's overseer, the Public Company Accounting Oversight Board, had discovered 808 cases of bad audits done by the Big Four firms since it was formed in 2003, it had only brought 18 enforcement actions against them and had only assessed them a small fraction of the potential fines it could have hit them with.

The accuracy and veracity of financial statements is crucial to the functioning of public markets. Investors determine how much they will pay for companies' stock based in large part on what's in those statements, including the companies' sales, earnings, and cash flow. Lack of trust in financial statements can lead to sharp sell-offs in individual companies' stocks and financial calamity for those companies. If the accounting problems are wide enough in scale, they can lead to financial crises, such as the savings-and-loan crisis of the 1980s.

Continued in Article

 

Bob Jensen's threads on audit failures of large international auditing firms ---
http://faculty.trinity.edu/rjensen/fraud001.htm

The above Website reports many, many instances where audit firms paid a huge price in civil lawsuits for audit failures. The many, many lawyers around the world do a great deal to prevent audit failures. The biggest problem auditors have is that very clever managers (think Enron and WorldCom) can dupe everybody, including the auditors ---
http://faculty.trinity.edu/rjensen/FraudEnron.htm
Another problem is that very, very high quality audits are so expensive that virtually all clients do not want to pay for the highest quality audits. By analogy every car on the road would be vastly safer if more than $100,000 was spent on each car for the greatest possible safety protections. Most buyers, however, refuse to to pay such a high price for safety. Similarly, audits would be much more effective if each client spent 1,000 times more for the audit. Expecting the client to do so is absurd.

And the IRS and Pentagon could be effectively audited if we doubled their budgets to pay for amazing-quality audits. Don't hold your breath for Congress to pay for that kind of auditing.


FASB makes narrow changes to financial instruments guidance
https://www.journalofaccountancy.com/news/2020/mar/fasb-changes-to-financial-instruments-accounting-23143.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=10Mar2020


Lease accounting standard requires new auditor judgments ---
https://www.journalofaccountancy.com/issues/2020/mar/lease-accounting-requires-new-auditor-judgments.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=02Mar2020   Tax Spotlight


Modern Monetary Theory (what I call garbage economics)  --- https://en.wikipedia.org/wiki/Modern_Monetary_Theory

Criticisms
A 2019 survey of leading economists by the
University of Chicago Booth's Initiative on Global Markets showed a unanimous rejection of assertions that the survey attributes to modern monetary theory: "Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt" and "Countries that borrow in their own currency can finance as much real government spending as they want by creating money".[61][62] Directly responding to the survey, MMT economist William K. Black said "MMT scholars do not make or support either claim."[63] Multiple MMT academics regard the attribution of these claims as a smear.[64]

The post-Keynesian economist Thomas Palley argues that MMT is largely a restatement of elementary Keynesian economics, but prone to "over-simplistic analysis" and understating the risks of its policy implications.[65] Palley denies the MMT claim that standard Keynesian analysis does not fully capture the accounting identities and financial restraints on a government that can issue its own money. He argues that these insights are well captured by standard Keynesian stock-flow consistent IS-LM models, and have been well understood by Keynesian economists for decades. He also criticizes MMT for "assum[ing] away the problem of fiscal–monetary conflict"[66] — that is, that the governmental body that creates the spending budget (e.g. Congress) may refuse to cooperate with the governmental body that controls the money supply (e.g. the Federal Reserve). In Palley's view the policies proposed by MMT proponents would cause serious financial instability in an open economy with flexible exchange rates, while using fixed exchange rates would restore hard financial constraints on the government and "undermines MMT’s main claim about sovereign money freeing governments from standard market disciplines and financial constraints". He also argues that MMT lacks a plausible theory of inflation, particularly in the context of full employment in the employer of last resort policy first proposed by Hyman Minsky and advocated by Bill Mitchell and other MMT theorists; of a lack of appreciation of the financial instability that could be caused by permanently zero interest rates; and of overstating the importance of government created money. Palley concludes that MMT provides no new insights about monetary theory, while making unsubstantiated claims about macroeconomic policy, and that MMT has only received attention recently due to it being a "policy polemic for depressed times."[66]

Marc Lavoie argues that whilst the neochartalist argument is "essentially correct", many of its counter-intuitive claims depend on a "confusing" and "fictitious" consolidation of government and central banking operations[13] — again what Palley calls "the problem of fiscal–monetary conflict."[66]

New Keynesian economist and Nobel laureate Paul Krugman argues that MMT goes too far in its support for government budget deficits and ignores the inflationary implications of maintaining budget deficits when the economy is growing.[67] Krugman described MMT devotees as engaging in "calvinball" — a game from the comic strip Calvin and Hobbes in which the players change the rules at whim.[22] Austrian School economist Robert P. Murphy states that MMT is "dead wrong" and that "the MMT worldview doesn't live up to its promises."[68] He observes that MMT's claim that cutting government deficits erodes private saving is true "only for the portion of private saving that is not invested" and argues that the national accounting identities used to explain this aspect of MMT could equally be used to support arguments that government deficits "crowd out" private sector investment.[68]

The chartalist view of money itself, and the MMT emphasis on the importance of taxes in driving money, is also a source of criticism.[13] Economist Eladio Febrero argues that modern money draws its value from its ability to cancel (private) bank debt, particularly as legal tender, rather than to pay government taxes.

 

Bernie Sanders is being advised by a fan of an economic theory called MMT: Here's a plain-English guide to what it is and why it's interesting ---
https://www.businessinsider.com/modern-monetary-theory-mmt-explained-aoc-2019-3

Jensen Comment
To me it's not interesting unless you focus on the disaster MMT can bring to a nation!

Actually, I'm even more worried about Bernie's plan to allow employees and labor unions take control over all large USA corporations without providing any capital investment in those companies---
https://berniesanders.com/issues/corporate-accountability-and-democracy/

Karl Marx must be dancing on his grave hoping for a Bernie Sanders takeover in November 2020.

 


GASB Exposure Draft—Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements: Notes to Financial Statements—an amendment of GASB Concepts Statement No. 3 ---
https://www.gasb.org/cs/Satellite?c=Document_C&cid=1176174242984&pagename=GASB%2FDocument_C%2FDocumentPage


How to Be a Better Teacher Online ---
https://www.chronicle.com/interactives/advice-online-teaching?utm_source=at&utm_medium=en&utm_source=Iterable&utm_medium=email&utm_campaign=campaign_1070631&cid=at&source=ams&sourceId=296279

Jensen Comment
Teachers who meet students during office hours often find that they are answering the same questions time and time again. The same can be true for students online. Sometimes these questions can be answered with group email messages or Website documents. However, often the questions about technical things are difficult to put into words and are better explained with videos such as videos of how to use software (think Excel or MatLab or SAS) or how to do a sequence of technical things like solving mathematics problems.

I answered many of my students' questions with Camtasia videos of computer screens while I solved complicated problems (you can also use cheaper screen and voice capture alternatives like SnagIt). After I started making these videos available on line I felt like the Maytag Repairman during office hours, but not entirely. Students still came in with their own unique questions such as when they were seeking career advice.


A 3-inch hook purchased for 56 cents around the end of World War I could help determine whether PG&E Corp. faces criminal charges for starting the deadliest wildfire in California history ---
https://www.wsj.com/articles/this-old-metal-hook-could-determine-whether-pg-e-committed-a-crime-11583623059?mod=djemCFO


LIBOR --- https://en.wikipedia.org/wiki/Libor

LIBOR Scandal --- https://en.wikipedia.org/wiki/Libor_scandal

FASB provides accounting relief for LIBOR transition ---
https://www.journalofaccountancy.com/news/2020/mar/fasb-accounting-relief-for-libor-transition-23162.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=13Mar2020


Excel:  Top 5 Excel functions you might not know ---
https://www.fm-magazine.com/news/2020/feb/helpful-excel-functions-aggregate-eomonth-formulatext-n-textjoin.html?utm_source=mnl:globalcpa&utm_medium=email&utm_campaign=18Mar2020&SubscriberID=119191126&SendID=265248


Brexit transition guidance for accountants released ---
https://www.accountancydaily.co/brexit-transition-guidance-accountants-released


Despite never having built a working product, Theranos accumulated hundreds of patents. These patents are now the only thing of value left but the patents aren’t valuable because of breakthrough science, the patents are valuable because they can be used to force people who do breakthrough science to cough up part of their return ---
https://marginalrevolution.com/marginalrevolution/2020/03/bullshit-patents.html


Required reading: These are the books (some) top professors at some of the top MBA programs in the country are having their MBA students read
None of the books are in accounting, but then again accounting professors are not even quoted in this article
https://www.businessinsider.com/books-mba-professors-business-school-harvard-stanford-kellogg-recommend?utm_source=Sailthru&utm_medium=email&utm_content=BIPrime_select&utm_campaign=BI Prime 2020-03-18&utm_term=BI Prime Select

Below I merely list the books. In the article, the professors briefly discuss reasons for their assigning or recommending each book. Many of these professors focus their classroom discussions on cases not mentioned below.

"Shackleton's Way: Leadership Lessons from the Great Antarctic Explorer" by Margot Morrell and Stephanie Capparell,

 "Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value" by Bill George,

"True North: Discover Your Authentic Leadership" by Bill George and Peter Sims,

"Living Into Leadership: A Journey in Ethics" by Buzz McCoy,

"Good Boss, Bad Boss: How to Be the Best ... and Learn from the Worst" by Robert Sutton,

"The Hard Thing About Hard Things" by Ben Horowitz, 

"Who Moved My Cheese?: An A-Mazing Way to Deal with Change in Your Work and in Your Life" by Spencer Johnson.

""Difficult Conversations: How to Discuss What Matters Most" by Douglas Stone,

"George Marshall: Defender of the Republic" by David Roll,

"Loonshoots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries" by Safi Bahcall,

"Grace Will Bring Us Home: The Charleston Church Massacre and the Hard, Inspiring Journey to Forgiveness" by Jennifer Berry Hawes,

"Red Plenty" by Francis Spufford,

"Why Nations Fail: The Origins of Power, Prosperity, and Poverty" by Daron Acemoglu and James Robinson,

"The Passions and the Interests: Political Arguments for Capitalism Before Its Triumph" by Albert Hirschman,

"How Much Land Does a Man Need" by Leo Tolstoy,

"O Pioneers!" by Willa Cather,

"Strangers Drowning: Impossible Idealism, Drastic Choices, and the Urge to Help" by Larissa MacFarquhar,

"Factfulness: 10 Reasons We're Wrong About the World — and Why Things Are Better Than You Think" by Anna Rosling Rönnlund, Hans Rosling, and Ola Rosling Cochran,

"Thinking Fast and Slow" by Daniel Kahneman, 

"Kellogg on Branding in a Hyper-Connected World" by The Marketing Faculty of The Kellogg School of Management, Northwestern University,

"How to Wash a Chicken — Mastering the Business Presentation" by Tim Calkins, 

"The Purpose Path: A Guide to Pursuing Your Authentic Life's Work" by Nicholas Pearce,

"From Values to Action: The Four Principles of Values-Based Leadership" by Harry Kraemer,

"Becoming the Best: Build a World-Class Organization Through Values-Based Leadership" by Harry Kraemer,

"Yes! 50 Scientifically Proven Ways to Be Persuasive" by Noah J. Goldstein, Steve J. Martin, and Robert Cialdini,

"The Choice Factory: 25 Behavioural Biases That Influence What We Buy" by Richard Shotton,

"Perfect Pitch: The Art of Selling Ideas and Winning New Business" by Jon Steel,

"Everybody Lies: Big Data, New Data, and What the Internet Can Tell Us About Who We Really Are" by Seth Stephens-Davidowitz,

"The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them" by Antony Lewis,

"Leaders Eat Last: Why Some Teams Pull Together and Others Don't" by Simon Sinek,

"Naked Economics: Undressing the Dismal Science" by Charles Wheelan,

"Unscaled: How AI and a New Generation of Upstarts Are Creating the Economy of the Future" by Hemant Taneja with Kevin Maney,

"Storytelling with Data: A Data Visualization Guide for Business Professionals" by Cole Nussbaumer Knaflic,

"Talk Like TED: The 9 Public-Speaking Secrets of the World's Top Minds" by Carmine Gallo,

"The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business" by Clayton Christensen,

"Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers" by Geoffrey Moore,

"Smart Business: What Alibaba's Success Reveals about the Future of Strategy" by Ming Zeng,

"Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers" by Alexander Osterwalder and Yves Pigneur,

"Where to Play: 3 Steps for Discovering Your Most Valuable Market Opportunities" by Marc Gruber and Sharon Tal, 

"Bad Blood: Secrets and Lies in a Silicon Valley Startup" by John Carreyrou, 

 

Jensen Comment
If I were teaching an MBA accounting course, my book recommendation would depend greatly upon the intended content of the course. But for a very general accounting course I would consider the following
:

"Warren Buffett Accounting Book: Reading Financial Statements for Value Investing" by by Stig Brodersen and Preston Pysh,

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)" by Benjamin Graham , Jason Zweig , et al.,

"The Tax and Legal Playbook: Game-Changing Solutions to Your Small Business Questions" by Mark J. Kohler,

 

If I were teaching an economics course my recommendation might be the following:

"Freakonomics Revised and Expanded Edition: A Rogue Economist Explores the Hidden Side of Everything (2020)" by Steven D. Levitt and Stephen J Dubner


Chatbot --- http://faculty.trinity.edu/rjensen/000aaa/thetools.htm#Chatbots

How a hospital chain's use of chat bots to speed up urgent care highlights the importance of adopting AI tools in a time of crisis ---
https://www.businessinsider.com/why-health-centers-tech-overhaul-was-key-coronavirus-plan-2020-3?utm_source=Sailthru&utm_medium=email&utm_content=BIPrime_select&utm_campaign=BI Prime 2020-03-18&utm_term=BI Prime Select

Times of crisis like the ongoing coronavirus pandemic can be a major roadblock for investments that companies make on digital transformations. 

But at Providence St. Joseph Health, a nonprofit healthcare system that operates in seven states, the epidemic is proving why those efforts are so critical. And it's even helping to accelerate the ongoing tech overhaul. 

"If we hadn't made the progress we made over the last 12 months on this digital transformation, we would be in severe jeopardy right now," chief information officer B.J. Moore told Business Insider. "We've had a couple hundred other pet projects that people insist we continue work on. It's given us the room to shut those down."

When Moore came onboard from Microsoft, he embarked on a "back to basics" mission that focused on seven core areas, including a pivot to the cloud from physical data centers and consolidating its electronic health records to one provider.

Those initiatives remain ongoing during the coronavirus crisis and employees working on them continue to travel to Providence's 51 hospitals. This is despite other projects falling off and the spread of the disease forcing other firms to prohibit non-essential travel. 

Like other tech leaders, Moore warned that halting projects could actually be more detrimental in the long term. Instead, he advised others CIOs to use the situation as a way to realign to the overall goals of the transformation.

"Use this as an opportunity to create focus on those vital few [projects]," he said. "Use this as an opportunity to shut down the 500 other non-critical activities we are asked to do."

The coronavirus outbreak has also given Moore the result he needed to justify to leadership the investments made so far and the need for those to continue. 

Several of the milestones his team already hit are proving critical in helping the company respond to the pandemic.

The adoption of Microsoft Teams, the software giant's workplace chat platform, and other Office 365 productivity tools (along with improvements to the network infrastructure) made it possible for more employees to work remotely.

The hospital chain also created an online chatbot that is helping to field many initial questions from potential patients, which is reducing traffic to the hospitals and allowing those with the most urgent cases to get faster access to care.

The situation is even quickening the pace of the transformation.

"Things that we were going to spread out over the next two to three months, we're accelerating to the next four to six weeks," Moore said.

The chatbot, for example, had been in the works for six months. Once the coronavirus started to emerge, it went into production within a week.

Continued in article

Chatbots --- https://en.wikipedia.org/wiki/Chatbot

Chatbots 101 ---
https://www.businessinsider.com/intelligence/chatbots-101?IR=T&itm_source=businessinsider&itm_medium=content_marketing&itm_campaign=content_marketing_leadgen_link&itm_content=leadgen_teaser&itm_term=leadgen_teaser-chatbots-101-report-business-insider#!/

Jensen Comment
I think chatbot technology is perhaps the most important learning technology ever.
Here's a good place (not free) to start learning about their use in education ---
http://results.chronicle.com/AIChatbotsHE18  

When I was still teaching (now I'm retired) I made over 100 Camtasia short videos to teach technical modules in my courses. If I were still teaching my next move would be to develop chatbots.
Bob Jensen

Case studies on how three insurers are using chatbots to boost customer acquisition, slash claims processing times, and increase staff productivity ---
https://www.businessinsider.com/chatbots-insurance-playbook

MIT:  Google says its new chatbot Meena is the best in the world ---
https://www.technologyreview.com/f/615118/google-says-its-new-chatbot-meena-is-the-best-in-the-world/

Bob Jensen's threads on chatbots ---
http://faculty.trinity.edu/rjensen/000aaa/thetools.htm#Chatbots


Coronavirus relief bill contains tax credits for employers ---
https://www.journalofaccountancy.com/news/2020/mar/coronavirus-relief-bill-tax-credits-for-employers-23225.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=20Mar2020


Beyond Cheap Talk: Management's Informative Tone in Corporate Disclosures

Accounting & Finance, Vol. 59, Issue 5, pp. 2905-2959, 2019

55 Pages Posted: 19 Mar 2020

Maoliang Li

Xiamen University - Institute for Financial and Accounting Studies

Huiying Wu

Western Sydney University

Min Xiao

Xiamen University - Department of Finance

Jiaxing You

Xiamen University

Date Written: December 2019
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556748

Abstract

This study investigates the information content of Management Discussion and Analysis (MD&A) reports of listed Chinese companies. We develop a Chinese word dictionary and measure the tones of MD&As. Our results indicate that tone is positively associated with future earnings and is particularly useful when a firm's future prospect is uncertain, accounting information is difficult to understand, or board monitoring is strong. Further analyses show that tone also predicts future cash flow, future sales growth, market reactions, analysts’ revisions, and institutional investors’ shareholdings. Together, we provide robust evidence that in emerging markets such as China, management tone conveys valuable information beyond cheap talk.

Keywords: Qualitative disclosure, Linguistic tone, Management discussion and analysis, Incremental information


Qualitative Accounting Research: Special Issue Introduction

Accounting & Finance, Vol. 59, Issue 3, pp. 1449-1458, 2019
SSRH
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556109

10 Pages Posted: 19 Mar 2020

John Dumay

Macquarie University; Macquarie University, Macquarie Business School

Charl de Villiers

University of Auckland - Department of Accounting and Finance

Date Written: September 2019

Abstract

This special issue dedicated to qualitative accounting research shows the commitment of Accounting & Finance to support and publish qualitative research. This introductory piece explains the rationale behind this commitment and recounts the process followed with this special issue, before introducing the papers published in it. The first paper in the special issue, co‐authored by De Villiers, Dumay and Maroun, will be of interest to a large cross‐section of accounting researchers, even those with a quantitative bent, because it dispels some myths around qualitative research, and it sets a research agenda that others may pursue.

Keywords: Qualitative accounting research, Strategy, Management control, Accountability, Reporting

Qualitative Accounting Research: Dispelling Myths and Developing a New Research Agenda

Accounting & Finance, Vol. 59, Issue 3, pp. 1459-1487, 2019

29 Pages Posted: 19 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556108

Charl de Villiers

The University of Auckland

John Dumay

Macquarie University; Macquarie University, Macquarie Business School

Warren Maroun

University of the Witwatersrand

Date Written: September 2019

Abstract

This article deals with some common misconceptions about qualitative research. Qualitative studies are well suited to studying complex interconnections and relationships without reducing the complexity to simple numbers or variables. Rather than excluding outliers from a dataset, qualitative researchers are interested in these exceptions and often examine them in‐depth in order to develop better understandings and generate new theories on how accounting develops, functions and influences behaviour. New understandings and theory allow qualitative research to advance recommendations, extend the boundaries of accounting research, and make important contributions to both accounting theory and practice.

Keywords: Methods, Qualitative, Research paradigm


The Emergence of Management Controls in an Entrepreneurial Company

Accounting & Finance, Vol. 59, Issue 3, pp. 1805-1833, 2019

29 Pages Posted: 19 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556106

Ralph Kober

affiliation not provided to SSRN

Date Written: September 2019
 

Abstract

The dilemma faced by founders of entrepreneurial companies is how to scale their business while staying in control. While the accounting literature has found that financial controls are important to rapidly scale a business, we do not know how these controls emerge in entrepreneurial companies in relation to other management controls. Using a case study of an entrepreneurial company that rapidly scaled its business, this study examines the management controls that emerged to become a package of controls. We highlight the importance of the management control package remaining in balance, with controls working together interdependently in a complementary fashion.

Keywords: Complementarity, Culture, Entrepreneurial companies, Management control package, Organisational life cycle


Researcher Perceptions and Choices of Interview Media: The Case of Accounting Research

Accounting & Finance, Vol. 59, Issue 3, pp. 1489-1517, 2019

29 Pages Posted: 19 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556094

Basil P. Tucker

University of South Australia

Lee D. Parker

RMIT University

Date Written: September 2019

Abstract

This study offers foundational insights into the ways in which perceptions of different interview media—principally, face‐to‐face, telephone and videoconferencing channels of communication—may influence researcher choices and practices. Informed by the reflections of 23 senior accounting researchers, our evidence identifies a duality of practices in the usage of different interviewing media, influenced primarily through the role played by experience, which informs perceptions upon which practices are based. We discuss this duality of practices in terms of information richness theory and channel expansion theory and offer further insights into the factors that influence and shape researchers’ perceptions of the contextual suitability of particular media available to interview‐based accounting research.

Keywords: Interviews, Qualitative accounting research, Qualitative research, Research methods


How to Measure Capital Investment Efficiency: A Literature Synthesis

Accounting & Finance, Vol. 60, Issue 1, pp. 299-334, 2020

36 Pages Posted: 19 Mar 2020
SSRH
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556086

Ru Gao

University of Queensland

Xin Yu

University of Queensland

Date Written: March 2020

Abstract

This article reviews and integrates the empirical literature on the measurement of investment efficiency in the areas of accounting and finance. We identify the theories behind the measures and provide a framework which organises the measures of investment efficiency into three groups: those based on neoclassical theories, agency theory and real options theory. Furthermore, the advantages and disadvantages of each type of measure are discussed, allowing researchers to compare and then ascertain the most appropriate measure for their research purpose and research context.

Keywords: Agency theory, Capital allocation efficiency, Neoclassical investment theories, Real option theory


Accruals, Investment, and Future Performance

Abacus, Vol. 55, Issue 4, pp. 783-809, 2019

27 Pages Posted: 19 Mar 2020

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556027

Jenny Chu

University of Cambridge - Judge Business School

Date Written: December 2019

Abstract

It is well documented that accounting measures of investment, such as working capital and capital expenditures, negatively predict future stock returns. The earnings fixation hypothesis suggests that investors overestimate and overvalue the persistence of the accrual component of earnings. Another stream of the literature argues that since accruals capture growth, the accruals anomaly can be explained by the investment anomaly, which finds that firms that grow their assets tend to have lower future returns. As empirical proxies for accruals and investment are either positively correlated or interchangeably used, it is difficult to distinguish between the competing hypotheses in empirical tests. This study contributes to the debate by identifying two special economic settings in which the two explanations offer diverging predictions. First, investment in research and development (R&D) represents an investment expenditure that reduces earnings but is not subject to accrual accounting. Thus, the earnings fixation hypothesis predicts a positive relation between increases in R&D investments and future returns, whereas the investment anomaly predicts a negative relation. Second, firms operating with negative working capital have working capital accruals that are negatively correlated with other forms of investment and growth. Therefore, while the earnings fixation hypothesis still predicts a negative relation between accruals and future returns in this setting, the investment explanation predicts a positive relation. For both sets of tests, the empirical evidence supports the earnings fixation hypothesis for the accruals anomaly and is inconsistent with the notion that the investment anomaly subsumes earnings fixation in explaining future stock returns.

Keywords: Accruals anomaly, Earnings fixation, Investment anomaly, Negative working capital, Research and development (R&D) accounting


Failing Faithful Representations of Financial Statements: Issues in Reporting Financial Instruments

Abacus, Vol. 55, Issue 4, pp. 676-708, 2019

33 Pages Posted: 19 Mar 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556026

A. Rashad Abdel-Khalik

University of Illinois at Urbana-Champaign - Department of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: December 2019

Abstract

Both the International Financial Reporting Standards (IFRS) and the codified accounting standards (ASC) for the US GAAP categorize hedging relationships as falling into several buckets. The two buckets of relevance in this paper are (i) hedging the volatility of fair values, and (ii) hedging the volatility of future cash flow. In this paper, I argue that at least three accounting treatments of derivatives and hedging lead to creating serious distortion of reporting actual transactions, to combining hard and plastic valuations, and to violating adherence to the principle of ‘faithful representation’. The three accounting treatments are as follows: (1) creating the fictional Hypothetical Derivatives Method; (2) allowing for the establishment of purely discretionary valuation adjustments for all over‐the‐counter derivative assets (Credit Valuation Adjustment) and liabilities (Debt Valuation Adjustment) without any guides or constraints; (3) requiring subjective metaphysical separation of embedded derivatives with the main guide being the management's own perception of the instrument's embodiment of unrelated value and risk generators. To remedy the resulting distortion in financial reporting, significant revisions of certain accounting standards are sorely needed.

Keywords: Abnormal managerial discretion, Accounting for fake derivatives, Bifurcation, Credit valuation adjustment, Debt valuation adjustment, Earnings manipulation, Embedded derivatives, Fair value plasticity, Hypothetical method


Accounting for the Public Sector at a Time of Crisis

Abacus, Vol. 55, Issue 3, pp. 437-451, 2019

15 Pages Posted: 19 Mar 2020

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556022

Noel Hyndman

Queen's University Belfast; Queen's University Belfast - Queen's Management School

Donal G. McKillop

Queen's University Management School

Date Written: September 2019

Abstract

This Special Issue is based on papers initially presented at the ‘Accounting for the Public Sector at a Time of Crisis’ Conference at the Centre for Not‐for‐profit and Public‐sector Research, Queen's University Belfast, UK in 2018. The public sector consists of organizations that are owned and operated by government; organizations that exist to provide goods and services for a country's citizens. What is particularly distinctive about such organizations, and what makes them different from businesses, is that they are (or, at least perhaps, should be) not‐for‐profit. In addition, they frequently have wide social and cultural goals that are central to what they do. They are pervasive in most societies. Yet, it is argued, they face crisis on a number of fronts: in terms of the influence of potentially inappropriate, business‐like new public management ideas related to performance management and the embracing of related accounting and budgeting approaches; and in terms of the impact of austerity, following the Great Recession in 2008. In such a context it is suggested that public sector governance, accounting, and accountability systems are heavily involved. The papers included in this Special Issue present an opportunity to reflect on aspects of this crisis in terms of how it connects with accounting systems and accounting changes. Key arguments of these papers, and overarching themes of this Special Issue, are explored in this editorial.

Keywords: Public sector, Crisis, New public management, Austerity


The Uk's Exit Charge from the EU: Insights from Modes of Accounting

Abacus, Vol. 55, Issue 3, pp. 557-581, 2019

25 Pages Posted: 19 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3556018

David Heald

Adam Smith Business School, University of Glasgow

Iain Wright

CGIAR - International Livestock Research Institute (ILRI)

Date Written: September 2019

Abstract

Whatever the final charge on the UK for leaving the EU, the money itself is relatively marginal to the former's public finances. However, this charge is politically sensitive and financially aggravating during one of the longest periods of fiscal austerity in the UK's history. The ways in which leaving is conceptualized have implications for any continuing financial obligations that must be managed within the context of fiscal austerity and political uncertainty. Yet, leaving the EU is a unique transaction: it is not analogous, for example, to a divorce settlement, the leaving of a club, the termination of a commercial contract, the leaving of a treaty‐based international organization, or secession from a state. Analyzing the formulation of the charge in terms of the four modes of government accounting—financial reporting, statistical accounting, budgeting, and fiscal sustainability projections—enhances its fiscal transparency. It evidences not only the weakness and inconsistency of the UK's negotiating position but also the dominance in EU thinking of the short‐term budgetary calculations of the 2014–20 Multiannual Financial Framework over its long‐term sustainability without a large net contributor. The final amount paid by the UK will depend on the resolution of competing perspectives as well as on liabilities and contingent liabilities associated with the increasingly complex EU financial architecture.

Keywords: Modes of accounting, Brexit, Off‐balance sheet finance, Consolidation, Exit charge, European Union, Public sector accounting, Austerity


An Islamic Capital Asset Pricing Model

Selim, Tarek H. (2008). "An Islamic Capital Asset Pricing Model," Humanomics, Volume 24, Number 2, March.

15 Pages Posted: 19 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3543055

Tarek H. Selim

The American University in Cairo; Economic Research Forum of the Middle East

Date Written: March 23, 2008

Abstract

Purpose: In this paper, the Islamic financing method based on direct musharakah is applied to the conventional Capital Asset Pricing Model (CAPM) yielding several interesting hypotheses.

Methodology: Theoretical methodology, with maximin criteria, and rational economic optimization.

Findings: There are four major findings. First, an Islamic financing partnership based on complementary capital is proven to necessarily yield a lower beta-risk of investments than that compared to the market. Second, in order for the above conclusion to hold, capital lenders (such as banks) must abide by a maximum partnership share inversely proportional to project risk and increasing with opportunity cost of capital. Third, the sum of lender's share and relative risk level balances to unity at equilibrium. Hence, tradeoffs exist in risk-shares and not in risk-returns. Fourth, without accounting for inflation, and in contrast to predetermined fixed interest, a maximin strategy of financing partnerships (maximum return with minimum risk) imply an existence of an optimum zero risk-free rate.

Limitations: The paper's findings are limited to a Direct Musharakah Partnership.

Value: Theoretical conditions and a comparison between Islamic risks and returns to conventional risk management are derived. Several implications on the conduct of Islamic financing are discussed.

Keywords: Islam, Economics, Finance, Asset Pricing, Musharakah, Partnership


The Effect of Governmental Accounting Standards Board Statement 34 on Municipal Audit Fees

Allen, Arthur and George Sanders, “The Effect of Governmental Accounting Standards Board Statement 34 on Municipal Audit Fees.” Research in Governmental and Nonprofit Accounting, Vol. 12, pp. 215-232, 2009

Posted: 19 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3542906

Arthur C. Allen

Univ. of Nebraska - Lincoln

George Sanders

Western Washington University

Date Written: 2009

Abstract

We examined the change in audit fees after adoption of GASB 34 for a sample of 350 cities, correcting for audit fee inflation unrelated to GASB 34. We found that the mean (median) fee change for 2002 adopters was 4.9 (2.9) percentage points higher than for non-adopters. The mean (median) fee increase for 2003 adopters, smaller cities, was 11.6% (8.6%) over the non-adoption year fee increase. Overall, we found that the adoption of Statement 34 increased mean (median) fees approximately 9% (5%) for all cities, but that the effect was significantly larger for small cities. Overall, we documented an increase in fees associated with adoption that is both statistically and practically significant.

Keywords: GASB 34, Audit Fees


The Accounting Treatment of Firms’ Valuation Based on IFRS and Greek GAAP for Appropriate Investment Decision Making Using ICT

Multinational Finance Conference Booklet (IF:0,58), 25: 150-151, 2018

40 Pages Posted: 17 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3535850

Maria Dimitriou

University of Macedonia

Date Written: 2018

Abstract

This detailed research proposal is an introduction to firm valuation and financial reporting under IAS/IFRS and Greek GAAP using ICT (Information and Communications Technology) for appropriate stock recommendation: Example of investment research /valuation report in the Food & Beverages Industry: Alcohol-free Beverage Sector. These recommendations include which stocks to buy, which stocks to sell, and which stocks to hold. The high complexity and diversity of the analysts’ valuation process today have far-reaching implications for investment decision-making and valuation practice. The increasing uncertainty during the financial crisis and the volume of risk that drive to analysts’ target price, earnings forecasts and stock recommendation often draws rigorous scientific search with the hope of finding winning formulas for firm or business units valuation in regions with different level of growth, margin and risk, and the way they contribute to value firm’s stock separately and totally, to find the secret to avoiding problems such as inaccurate forecasts or valuation errors.

Keywords: Institutional and Regulatory Framework (GAAP, IFRS/IAS), Firm/Stock Valuation, Investments /investment Decisions, Food-Beverage Sector, Exchanges/financial analysts, Informatics /Information /Applications


A Comparison of Living Standards across the States of America

 

47 Pages Posted: 16 Mar 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3539893

Elena Falcettoni

Board of Governors of the Federal Reserve System

Vegard Nygaard

University of Houston

Date Written: March 13, 2020

Abstract

While a large literature has examined how welfare, or living standards, vary across countries, much less is known about how welfare varies within a given country. We use an expected utility framework to examine how living standards vary across the United States and how each state’s living standards have evolved over time. Our welfare measure accounts for cross-state variations in mortality, consumption, education, inequality, and cost of living. We find that per capita income is a good indicator of living standards, with a correlation of 0.80 across states. Living standards in most states, however, appear closer to those in the richest states than their difference in per capita income would suggest. Whereas high-income states benefit from higher life expectancy, consumption, and college attainment, low-income states benefit from lower cost of living. All states experienced positive welfare growth, and hence rising living standards, between 1999 and 2015. The annual welfare growth rate, however, varied from 1.38 to 3.76 percent across states due to varying gains in life expectancy, consumption, and college attainment, with life expectancy accounting for 50.3 percent of the variation. Finally, the growth rate of per capita income is a poor proxy for how fast living standards are rising in a particular state since the correlation between welfare growth and per capita income growth is only 0.38, and deviations are often large.

 

 

Keywords: Welfare comparison; Expected lifetime utility; States of America

JEL Classification: D63, I31, O50, R13




EY:  Accounting for impairment of goodwill and indefinite-lived intangible assets due to the coronavirus ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---accounting-for-impairment-of-goodwill-and-indef

EY:  Comment letter on PCAOB’s Concept Release on quality control standards ---
https://www.ey.com/en_us/assurance/accountinglink/comment-letter---pcaob-s-concept-release-on-quality-control-stan

EY:  Financial Reporting Briefs - First quarter 2020 ---
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-briefs---first-quarter-2020

EY:  AICPA issues criteria for describing and reporting on controls over a production or manufacturing system ---
https://www.ey.com/Publication/vwLUAssetsPI/TothePoint_08551-201US_SOCSupplyChain_12March2020/$FILE/TothePoint_08551-201US_SOCSupplyChain_12March2020.pdf

EY:  Accounting and reporting considerations for the effects of the coronavirus outbreak ---
https://americas.ey-vx.com/e/riuk58m4ytod4q/658de226-fd33-4078-aaed-bff0ebe05711




From the CFO Journal's Morning Ledger on March 27, 2020

Treasury Secretary Steven Mnuchin indicated that the U.S. government would take stakes in airline carriers in exchange for billions in direct grants to the companies, part of a $2 trillion economic rescue package, according to people familiar with the matter.

Jensen Comment
That's a good way to handle corporate bailouts when possible. In the  2008 TARP bailout many of the bailout dollars were loans or grants accompanied by stock purchase leading to eventual gain on later stock sales and loan repayments. Taxpayers lost money in the bailouts, but not nearly as the biased media likes to admit ---
https://money.cnn.com/2011/07/21/autos/chrysler_government_exit/index.htm

Many critics lambasting the government bailout of business firms don't appreciate how much of the bailout money was eventually returned to the government ---
https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

As of June 30, 2012, $467 billion had been allotted, and $416 billion spent, according to a literature review on the TARP.[41] Among the money committed, includes:

·        $204.9 billion to purchase bank equity shares through the Capital Purchase Program
 

·        $67.8 billion to purchase preferred shares of American International Group (AIG), then among the top 10 US companies, through the program for Systemically Significant Failing Institutions;
 

·        $1.4 billion to back any losses that the Federal Reserve Bank of New York might incur under the Term Asset-Backed Securities Loan Facility;
 

·        $40 billion in stock purchases of Citigroup and Bank of America ($20 billion each) through the Targeted Investment Program ($40 billion spent). All that money had been returned.
 

·        $5 billion in loan guarantees for Citigroup ($5 billion). The program closed, with no payment made, on December 23, 2009.
 

·        $79.7 billion in loans and capital injections to automakers and their financing arms through the Automotive Industry Financing Program.
 

·        $21.9 billion to buy "toxic" mortgage-related securities.
 

·        $0.6 billion in capital for banks in Community Development Capital Initiative (CDCI) for banks serving disadvantaged communities.

·        $45.6 billion for homeowner foreclosure assistance. Only $4.5 billion had been spent at the time.
 

The Congressional Budget Office released a report in January 2009, reviewing the transactions enacted through the TARP. The CBO found that through December 31, 2008, transactions under the TARP totaled $247 billion. According to the CBO's report, the Treasury had purchased $178 billion in shares of preferred stock and warrants from 214 U.S. financial institutions through its Capital Purchase Program (CPP). This included the purchase of $40 billion of preferred stock in AIG, $25 billion of preferred stock in Citigroup, and $15 billion of preferred stock in Bank of America. The Treasury also agreed to lend $18.4 billion to General Motors and Chrysler. The Treasury, the FDIC and the Federal Reserve have also agreed to guarantee a $306 billion portfolio of assets owned by Citigroup.[4]

 

The CBO also estimated the subsidy cost for transactions under TARP. The subsidy cost is defined as, broadly speaking, the difference between what the Treasury paid for the investments or lent to the firms and the market value of those transactions, where the assets in question were valued using procedures similar to those specified in the Federal Credit Reform Act (FCRA), but adjusting for market risk as specified in the EESA.[4] The CBO estimated that the subsidy cost of the $247 billion in transactions before December 31, 2008 amounts to $64 billion. As of August 31, 2015, TARP is projected to cost approximately $37.3 billion total—significantly less than the $700 billion originally authorized by Congress.[42]

 

The May 2015 report of the TARP to Congress stated that $427.1 billion had been disbursed, total proceeds by April 30, 2015 were $441.8 billion, exceeding disbursements by $14.1 billion, though this included $17.7 billion in non-TARP AIG shares. The report predicted a total net cash outflow of $37.7 billion (excluding non-TARP AIG shares), based on the assumption the TARP housing programs' (Hardest Hit FundMaking Home Affordable and FHA refinancing) funds are fully taken up. Debt is still outstanding, some of which has been converted to common stock, from just under $125 million down to $7,000. Sums loaned to entities that have gone into, and in some cases emerged from bankruptcy or receivership are provided. Additional sums have been written off, for example Treasury's original investment of $854 million in Old GM.[43]

 

The May 2015 report also detailed other costs of the program, including $1.157 billion "for financial agents and legal firms" $142 million for personnel services, and $303 million for "other services".[43]

Jensen Comments
In retrospect the 2008 bailout is peanuts compared to the forthcoming 2020 bailouts.

The media complains about relief given to business firms, but how many of you prefer a long-time job to a few 2020 handouts. And yes the 2020 bailouts will probably give some tax relief to wealthy real estate owners in the form of accelerated depreciation write offs. However, the motivation here is revival of the economy with multiplier effects where the U.S. Treasury may come out ahead in the long run ---
https://en.wikipedia.org/wiki/Fiscal_multiplier

The biased media tends to leave that part out ---
https://www.msn.com/en-us/money/realestate/bonanza-for-rich-real-estate-investors-tucked-into-stimulus-package/ar-BB11L4im?ocid=se


From the CFO Journal's Morning Ledger on March 27, 2020

U.K. regulators are giving listed companies and their auditors a bit of relief against the backdrop of the coronavirus. The Financial Conduct Authority, Financial Reporting Council and Prudential Regulation Authority announced a series of measures to ease the burden of financial reporting, including an extra two months for listed companies to publish audited annual financial reports and guidance for auditors grappling with new uncertainties.

Jensen Comment
That's about the only relief U.K. regulators have given companies and their auditors in years.


From the CFO Journal's Morning Ledger on March 27, 2020

SEC Suspends Trading of Zoom Technologies Over Name Confusion

The Securities and Exchange Commission suspended trading of Zoom Technologies Inc. for two weeks because many traders have confused the company with the similarly-named, Zoom Video Communications.

Both stocks have soared this year because of traders betting on—or at least, trying to bet on—soaring demand for Zoom Video Communications’ online video-conferencing service. Much of the confusion appears to stem from the fact that Zoom Technologies nabbed the ticker “ZOOM” first. Zoom Video Communications, on the other hand, trades under the ticker “ZM.”

The SEC said it was concerned about not only the fact that investors have been mixing up the two but also worries about “the adequacy and accuracy of publicly available information concerning ZOOM, including its financial condition and its operations, if any, in light of the absence of any public disclosure by the company since 2015.”

Jensen Comment
Accountants like to think investors pour over financial statements and read company information from cover-to-cover before making portfolio decisions. Yeah right!

I've been thinking about forming a startup called Tesla Deals, but I suspect that almost any business name containing the work "Tesla" has been copyrighted --- just like every possible tune has now been copyrighted making it difficult for songwriters.


From the CFO Journal's Morning Ledger on March 26, 2020

Good morning. Finance executives at blue-chip companies looking to tap fresh funds amid the continued spread of the coronavirus are finding it easier to market new debt to investors, with Nike, McDonald’s and Pfizer all issuing bonds at significantly lower yields than their initial offers at the start of the day—contrary to last week, when companies were forced to offer high premiums for their debt.

This week’s bond sales, including those by Comcast and Mastercard on Tuesday, come after an announcement by the Federal Reserve on Monday that it would buy unlimited amounts of government debt and create new facilities to buy new and existing corporate bonds with investment-grade ratings.

It is mostly companies with high credit ratings that are expected to benefit from the Fed intervention. Ratings companies in recent days have downgraded corporate and government bonds as they reassess the ability of borrowers to repay their obligations, and took away pristine triple-A marks or moved other supposedly safe investment-grade bonds into junk territory.

S&P Global Inc. said it has now made more than 100 downgrades linked to the coronavirus, including on airlines like JetBlue Airways Corp., Southwest Airlines Co. and Spirit Airlines Inc. Corporates with big cash piles could therefore potentially come out stronger, said Ron Graziano, an accounting and tax analyst at Credit Suisse. “The ones going into it with the bigger cushion are better positioned to survive,” he said.


From the CFO Journal's Morning Ledger on March 25, 2020

Good morning. The oil industry has been hit particularly hard in this downturn. Not only are oil companies dealing with a decline of demand as a result of the outbreak, they're also grappling with an oil-price war between Russia and Saudi Arabia.

“It’s obviously more extreme than we expected,” Chevron’s chief financial officer, Pierre Breber, tells CFO Journal.

Chevron, which is resorting to a tested playbook that involves slashing capital expenditures and reducing costs, offers a glimpse into how some oil companies have sought to manage the one-two punch.

Mr. Breber’s  response focuses on preserving short-term cash, managing liquidity and protecting the dividend, a set of actions that mirror those taken by the company in response to the 2008 financial crisis and the 2014 oil-price drop. Chevron significantly cut staff during both periods, and in the latter case, reduced capital spending. Mr. Breber said he talked to predecessors Patricia Yarrington, who ran Chevron’s finances from 2009 to 2019, and Steve Crowe, who served as CFO before Ms. Yarrington, to discuss Chevron’s response to the steep decline in oil prices in recent weeks.

Chevron’s move follows similar actions by other oil companies, including Royal Dutch Shell, Total and Exxon Mobil. Total, for example, said it plans to cut $3 billion in spending, borrow $4 billion and suspend $2 billion in share buybacks.

Jensen Comment
Another sad outcome is that oil companies may reduce investments in the search for alternative energy. Virtually all are exploring alternatives such as Shell's recent announcement of investing $150 billion in the development of hydrogen energy.


From the CFO Journal's Morning Ledger on March 20, 2020

Good morning. The government intervention during the coronavirus pandemic brings renewed attention to what some current and former regulators say was a troubled effort after 2008.

In the week before the Federal Reserve stepped in to prop up money-market mutual funds, the assets of so-called prime funds held by institutional investors dropped by about 11%, according to Crane Data LLC. Prime funds are a key source of short-term financing for many U.S. companies, including banks. The funds buy the short-term IOUs, known as commercial paper, that issuers use to finance day-to-day operations.

“It is déjà vu,” said Jonah Crane, a former Treasury Department official in the Obama administration. “At this point, investors in money funds can just assume that the Fed is going to backstop them.”

The intervention brings renewed attention to what some current and former regulators say was a troubled effort to bolster the resilience of money-market funds after 2008. Some of the attempted fixes may have even made the funds more vulnerable to runs, they say.

“It’s just frustrating that we never really fixed this stuff to begin with,” said Sheila Bair, a former head of the Federal Deposit Insurance Corp., which regulates banks. “The industry lobbyists came in and persuaded regulators to do half measures. And we’re back in the soup again.

Jensen Comment
The Fed backstops funds of all types, including tax-free municipal bond funds, and plays a major role in making sure these funds have liquidity to meet huge requests (think bank runs) of investors to trade in their investments for cash dollars. On March 22, 2020 CBS Sixty Minutes had a great segment on this backstopping role, including the controversial quantitative easing
Coronavirus and the economy: Best and worst-case scenarios from Minneapolis Fed president ---
https://www.cbsnews.com/news/coronavirus-and-economy-best-and-worst-case-scenarios-60-minutes-2020-03-22/

The current uneasiness of investors in prime funds signals how difficult it will be for the government to borrow hundreds of billions (maybe trillions) of dollars to finance various stimulus proposals plus the greatly increased social spending being proposed by 2020 presidential election candidates. There are now great temptations to fund increased government spending with helicopter cash ---
https://en.wikipedia.org/wiki/Helicopter_money
I vote NO! Please read about helicopter cash.


From the CFO Journal's Morning Ledger on March 20, 2020

FDIC Chairman Asks for Accounting-Policy Changes Due to Virus

The chairman of the Federal Deposit Insurance Corp. urged an accounting rule maker to make delays or exceptions to certain accounting rules to help financial institutions tackle the fallout from the coronavirus pandemic.

 In a letter, FDIC Chairman Jelena McWilliams requested the Financial Accounting Standards Board, which sets U.S. accounting standards, to give large public lenders the option to defer implementing a new rule on expected future credit losses. The companies that decide to delay implementation would revert to the old model of recognizing losses once they had evidence the losses had been incurred.


From the CFO Journal's Morning Ledger on March 120, 2020

Good morning. Funding strains and sliding sales are forcing a growing number of companies to slash or suspend their dividend payouts.

Before the coronavirus pandemic hit the world, S&P Dow Jones Indices estimated dividend payouts for the year would top $500 billion to set a new record. But because the pandemic has upended the global economy, shutting down factories and stores around the world and forcing companies to throw out their profit forecasts, analysts expect dividend payouts to fall sharply. That could add to the woes of beaten-down stocks that have often relied on steady dividend payouts to compensate investors for less robust profit growth.


From the CFO Journal's Morning Ledger on March 19, 2020

PCAOB Suspends International Travel for Non-U.S. Firm Inspections

The Public Company Accounting Oversight Board said Wednesday it has suspended international travel for non-U.S. firm inspections and other purposes until at least the end of April due to the coronavirus pandemic, the latest example of how the virus has led to new obstacles in the auditing profession.

The organization, which regulates public-company audits, said it is positioned to conduct domestic firm inspections remotely as it coordinates with audit firms. The PCAOB will continue its enforcement and investigative efforts. The organization’s new mandatory work-from-home policy became effective late Wednesday.

The Securities and Exchange Commission, which oversees the PCAOB, this month granted public companies affected by the pandemic a 45-day extension to file certain financial disclosures.


From the CFO Journal's Morning Ledger on March 19, 2020

IASB Considers Changing Rules on Company Acquisitions, Goodwill

The International Accounting Standards Board is considering adding new rules on how companies account for acquisitions and goodwill as part of its effort to provide more useful information to investors and lower the cost of compliance to businesses.

The organization, which sets accounting standards in more than 140 countries, on Thursday is expected to release a discussion paper featuring suggestions for potential new requirements for companies. The IASB is seeking public comments by Sept. 15, after which point it will decide whether to develop an exposure draft containing proposals.

The IASB is weighing requiring companies to disclose information about their objectives for an acquisition. In subsequent periods, companies would have to provide information on how that acquisition is performing in comparison with their objectives. The global accounting-rule system known as International Financial Reporting Standards doesn’t currently require companies to provide that information.


From the CFO Journal's Morning Ledger on March 18, 2020

Marriott International said it is starting to furlough what it expects will be tens of thousands of employees as it ramps up hotel closings across the globe. Meanwhile, the U.S. hotel industry asked the Trump administration for a $150 billion bailout, joining the growing ranks of businesses appealing to the federal government to stave off insolvency after getting hammered by the fallout of the coronavirus

. . .

The sheriff’s office in the county home of Tesla’s California car factory said the auto maker must halt production, putting a brake on Chief Executive Elon Musk’s plans to work despite statewide efforts to mitigate the effects of the novel coronavirus pandemic

 


From the CFO Journal's Morning Ledger on March 17, 2020

The coronavirus pandemic sparked unprecedented economic and financial gyrations Monday, putting businesses across the world on edge. Here’s the latest on the unfolding crisis, and what professionals across a range of industries can do to help steer their companies through the turmoil.

Here's where things stand:

·        Stocks lost more than 12% of their value, with the Dow falling  3,000 points.

·        Turmoil in the credit markets is just as profound. The Federal Reserve's moves to calm the markets are not working and investors are pushing for more action.

·        Schools are closed for nearly 30 million children across the U.S.; the Bay area of northern California is on lockdown;

·        The Trump administration announced new guidelines encouraging the public to end discretionary travel and to avoid gatherings of more than 10 people; the European Union moves to restrict travel into the bloc. 

 

Apollo Global Management Inc. and other firms are backing off a commitment to finance shale driller EP Energy Corp.’s exit from chapter 11, people familiar with the matter said, the second major bankruptcy deal to falter over the turmoil in U.S. energy markets.

Shares in alternative asset managers, including Blackstone Group Inc., Carlyle Group Inc. and Apollo Global Management Inc. have been hit by a broad market selloff, with the stocks down 25%, 28% and 22%, respectively, from the March 6 close as of Monday afternoon, writes William Louch from WSJ Pro Private Equity. 

Finance executives, mostly at Fortune 1000 companies, are concerned that the pandemic could lead to a global economic downturn, disrupting their businesses, reports Mark Maurer for CFO Journal. 

Companies around the world are drawing down their credit lines, saying it's a precautionary measure and not because they are facing liquidity strains.  

Startups too are facing falling valuations and a potential struggle to raise money just to stay in business.

Online Incubation

Y Combinator, the prominent Silicon Valley startup accelerator, held its first online Demo Day online Monday. The twice-yearly event is typically a popular San Francisco event for top venture capitalists to see some of the industry's best new startups pitch for venture funding.

Now, amidst a “shelter in place” order, that has all moved online in what is an early test of changes in the venture capital and startup world. The 197 companies in this batch come from 32 countries in areas ranging from remote work tools to artificial intelligence to biotech to consumer tech. Y Combinator partners expect funding to continue for these startups, but it will be worth watching as an indicator of activity in the startup world. 
--Tomio Geron, WSJ Pro Venture Capital


From the CFO Journal's Morning Ledger on March 11, 2020

The Securities and Exchange Commission canceled a vote this week in which officials were expected to give some companies relief from audit requirements after an employee was referred for novel coronavirus testing.

The vote was related to an SEC proposal that sought to exempt public companies with less than $100 million in annual revenue from a component of outside audits, part of a broader effort to entice more companies to go public.

Under the plan, smaller public companies such as those in the health-care, information technology and biotech industries would get a pass from outside audits of their systems for preventing accounting errors and fraud, easing rules put in place nearly two decades ago in response to the Enron and WorldCom accounting frauds.


From the CFO Journal's Morning Ledger on March 4, 2020

Good morning. The SEC is investigating sales and accounting practices at Newell Brands, the consumer-products giant said.

The federal investigation is another setback for the maker of Rubbermaid containers and Sharpie markers, as it tries to turn around its fortunes under a new leadership team. The SEC issued a subpoena to Newell in January, after making several informal requests for information, the company said in a securities filing after the stock market closed Monday.

One focus of the probe, Newell said, is its treatment of goodwill—the premium a company pays when it buys another for more than the value of its net assets. The SEC’s subpoena relates primarily to the company’s “sales practices and certain accounting matters” from the start of 2016 onward, the company said.

Newell wrote down more than $9 billion of goodwill and trade names in 2018, one of the biggest goodwill impairments that year, according to valuation firm Duff & Phelps LLC. Newell at the time said most of the write-down reflected a decline in its market value.

The impairment was tied to Newell’s troubled acquisition of rival Jarden Corp. for about $20 billion, which added $8.3 billion of goodwill to its books and quadrupled its debt load. Despite failed efforts to meet its debt-reduction targets, Newell until recently was allowed to keep its investment-grade status


From the CFO Journal's Morning Ledger on February 29, 2020

U.K. Regulator Asks Accounting Firms to Wall-Off Audit Practice

A U.K. regulator for audit and accounting is asking professional services firms to ringfence their audit practices and put in place independent boards amid increased concerns around audit quality in Britain.

“We expect the firms to put in place independent governance for the audit practice and ensure that the audit practice is appropriately ring fenced from the rest of the firm so that financial results are clear and transparent,” Claire Lindridge, the FRC’s director of audit firm monitoring and supervision, said Thursday in a press release.

 That means audit units at these seven companies have to be financially independent from other business units, thereby ending profit-sharing between audit and other entities, and that they have to have separate boards, a spokesman for the FRC said Friday.


From the CFO Journal's Morning Ledger on February 29, 2020

Email scams—often riddled with typos and written by non-native English speakers in Africa—were once crude attempts to steal money from inexperienced computer users. No more. Federal investigators say these scams have become sophisticated frauds that are costing American businesses and individuals billions of dollars a year.

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


From the CFO Journal's Morning Ledger on February 29, 2020

Wells Fargo agreed to pay $35 million to settle regulatory claims its financial advisers recommended exchange-traded funds that were too risky for some clients.

Jensen Comment
I think financial risk matters like this should be left to civil litigation and not regulators.


From the CFO Journal's Morning Ledger on February 29, 2020

The Federal Communications Commission is seeking hundreds of millions of dollars in fines from the country’s top cellphone carriers after officials found the companies failed to safeguard information about customers’ real-time locations, according to people familiar with the matter.

The telecommunications regulator in recent weeks informed AT&T, Sprint, T-Mobile US and Verizon Communications of pending notices of apparent liability, the people said. Such notices aren’t final, and the companies can still argue they aren’t liable or should pay less. It would ultimately fall on the U.S. Justice Department to collect any penalties.


From the CFO Journal's Morning Ledger on February 29, 2020

Accounting Group Says SEC Proposal Might Let Violations Linger

The National Association of State Boards of Accountancy worries a proposal by the U.S. Securities and Exchange Commission to loosen auditor independence rules could let inadvertent violations linger longer than necessary after a merger or acquisition.

The SEC in December proposed changes to its rules that include giving companies and their auditors up to six months after the effective date of a merger or acquisition to transition out of a prohibited relationship or service that arose inadvertently. The SEC doesn’t currently provide a maximum period for the transition.

The SEC has said it proposed a six-month period because, in certain situations, it might not be possible for a company and auditor to correct immediately the violation without significantly disrupting the company’s operations. It is unclear how long firms now take, on average, to transition after a violation. An SEC spokeswoman declined to comment.

NASBA, which serves more than 50 U.S. boards that issue licenses and regulate accountants, thinks that is too much time. Some firms might believe they can take that full period regardless of whether it’s needed, Catherine Allen, director-at-large on NASBA’s board, said in a statement.

NASBA submitted a letter to the SEC this week in which it said it agreed with many of the SEC’s proposed changes, including the addition of the transition framework. The proposal is available for public comment until March 16.


From the CFO Journal's Morning Ledger on February 29, 2020

Good morning. Finance chiefs could face an uptick in litigation costs over retirement plans after a Supreme Court decision in a case against Intel alleging problems in the company’s 401(k) plan.

The court’s unanimous decision, which concerned a statute of limitations for filing lawsuits under a federal law that applies to private employers’ retirement plans, is likely to pave the way for more litigation over retirement plans, industry watchers say. In recent years, employees have launched a wave of lawsuits that have resulted in multimillion-dollar settlements against companies. Many of those suits alleged the plans had high fees.

At issue is a provision in the law that gives 401(k) participants three years to file a lawsuit after obtaining “actual knowledge” that an employer has allegedly breached its fiduciary duty to manage the plan in employees’ best interests, said the opinion, written by Justice Samuel Alito.

The decision means it isn’t enough for an employer to send disclosures to start the three-year statute of limitations, said Michael Kreps, a principal at Groom Law Group. Instead, an employee has to have read the information and understood it for the window for filing lawsuits to begin, he added.

The decision may encourage companies to outsource their 401(k) plans by joining so-called multiple-employer plans, in which companies jointly offer a retirement plan managed by a third party, such as a brokerage firm, said Lew Minsky, president of the Defined Contribution Institutional Investment Association, a research and advocacy organization for consultants and others in the 401(k) industry.


From the CFO Journal's Morning Ledger on February 25, 2020

General Electric last year (2019) shed roughly 78,000 employees, or more than a quarter of its workforce, leaving the American industrial giant with the same number of employees as it had back in 1951.

The company ended 2019 with about 205,000 global workers, down from about 283,000 a year ago, according to GE’s annual report filed on Monday. In the U.S., its workforce dropped to 70,000.

The 2019 reduction is almost entirely explained by GE’s decision to part with two units: the oil-and-gas division and the transportation business. The oil business had more than 65,000 employees, while the transportation unit had more than 9,000.

GE Capital --- https://en.wikipedia.org/wiki/GE_Capital#Recent_news

On March 13, 2014, GE Capital announced that it would spin its North American consumer finance division off under the new name Synchrony Financial through an initial public offering (IPO).[66] On July 31, 2014, Synchrony Financial raised $2.9 billion in its IPO when GE sold 125 million shares (15%) of the company.

On April 10, 2015, it was announced that GE would sell most of GE Capital's commercial and consumer businesses within two years, focusing instead on its leasing businesses connected with GE's manufacturing businesses. The company reached an agreement to sell the majority of its property business to Wells Fargo and Blackstone, valued at $26.5 billion. GE Chairman and CEO, Jeff Immelt, announced the plan in a letter to shareholders. It is "a big change for GE," but he said it is "right for the company." Under the plan, Immelt said that GE expects more than 90% of its earnings will be generated by its industrial businesses by 2018, up from 58% in 2014.GE Capital, meanwhile, will make up 10% of the company's revenues by 2018, down from 46% in 2001.[70] Shareholders applauded the announcement, pushing shares in G.E. up nearly 11 percent, to $28.51, levels unseen since the financial crisis. However, the downsizing is no small matter for a company whose empire encompasses 175 countries and employs about 305,000 people.

In June 2015, the Canada Pension Plan Investment Board announced it would acquire GE Capital's private equity lending portfolio for $12 billion.[




Teaching Case:  Lego Products and Pricing ---
http://www.realityprose.com/what-happened-with-lego/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

Jensen Comment
The above article is not yet a case, but it is a great foundation for a case if combined with cost accounting modules. For example it could be combined with the  Extraterrestrial Transport, Inc. Case written by Burns and Mills.

In 1996 Texas Tech's Cathleen Burns and Sherry Mills won the American Accounting Association Innovation in Accounting Education Award for their use of Legos when teaching cost accounting ---
https://www.questia.com/library/journal/1G1-19052254/bringing-the-factory-to-the-classroom

In the 21st century, managers will continue to face global competition, sophisticated information technology and continuous process improvement initiatives. As cross-functional teams do their work, management accounting information will play an integral role in supporting the teams' decision-making processes. How can accounting educators prepare students for such a future? At New Mexico State University, we have our students use the latest techniques to understand emerging business issues and to actively learn. To accomplish these goals, we use LEGO[R] building materials to help teach management accounting concepts.

The context is Extraterrestrial Transport, Inc. ([ET.sup.2]), a hypothetical business that manufactures and sells 21st century lunar transportation vehicles. This setting sparks students' imaginations about business in the future while they learn--in simulations--to integrate management accounting concepts with marketing, engineering, purchasing and production issues. To help do this, we create production line simulations with untrained workers, unbalanced workloads, end-of-shift inspections and unreliable suppliers. Students identify prevention and appraisal activities that could help avoid the high cost of failing to do a job right the first time. This lets the students see the value of measuring the cost of poor quality.

HOW IT ALL WORKS

[ET.sup.2] helps students realize that management accounting serves managers in a variety of situations within a single business context. Moving through this context, students learn cost terms and concepts, job order costing, activity-based costing, just-in-time

 Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 28, 2019
https://www.wsj.com/articles/apple-says-wont-meet-revenue-guidance-in-quarter-due-to-coronavirus-11581974923

 

Streaming Surge Turns Recorded-Music Sales Up to $11 Billion

By Anne Steele | February 25, 2020

Topics: Revenues, Business Segments

Summary: The article describes the rebound in U.S. recorded music revenue with growth in the last four years from a low point in 2015. Different sources of revenues—from paid streaming subscriptions and advertisers for on-demand free streaming services—are discussed. Questions specifically lead students to financial statement filings by Spotify, available at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1639920&accession_number=0001564590-20-004357&xbrl_type=v#

Classroom Application: The article may be used in any level of accounting course to tie revenues, profits, and segment disclosures to an industry with which the students are familiar. It may be used to discuss the difference between revenues and profits, different sources of revenues, and segment reporting by referring to the Spotify financial statement filings on the EDGAR database.

Questions:

·         From what source(s) do music streaming services generate revenue?

·         Access the filings to the SEC by Spotify at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1639920&accession_number=0001564590-20-004357&xbrl_type=v# In what currency does Spotify report? Where is the company located?

·         Refer again to the Spotify financial statements at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1639920&accession_number=0001564590-20-004357&xbrl_type=v# Click on Financial statements, then consolidated statement of operations. Do you see evidence of the positive trends described in this article? Explain.

·         Do the positive trends described in the article show in the company’s profits? Explain.

·         Refer again to the Spotify financial statements at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1639920&accession_number=0001564590-20-004357&xbrl_type=v# Click on Notes to Financial Statements, then Segment reporting. What information is provided? Is this information similar to or dissimilar from the information in the article? Explain your answer.

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Streaming Surge Turns Recorded-Music Sales Up to $11 Billion," by Anne Steele, The Wall Street Journal, February 25, 2020
 https://www.wsj.com/articles/streaming-surge-turns-u-s-recorded-music-sales-up-to-11-billion-11582657202

Revenue grew 13% in 2019 to the highest point in more than a decade, with streaming accounting for 80% of overall revenue

Recorded-music sales in the U.S. grew 13% last year to $11.1 billion—their highest point in more than a decade—as revenue continued to surge from streaming services such as Spotify and Apple Music.

Streaming accounted for 80% of overall revenue in 2019, the industry’s fourth consecutive year of growth, according to a report from the Recording Industry Association of America, a trade group for record companies.

That includes premium subscription services, ad-supported on-demand services, such as YouTube, Vevo and Spotify’s ad-supported tier, and streaming radio services such as Pandora and SiriusXM. With revenue of $8.8 billion in 2019, streaming alone was larger than the entire U.S. recorded-music market in 2017, according to the RIAA.

The immense growth comes primarily from Americans opting to pay a monthly fee for unlimited access to vast catalogs of music on services such as those offered by Spotify Technology SA, SPOT 1.94% Apple Inc. and Amazon.com Inc. Subscriptions topped 60 million in 2019, with revenue up 25% to $6.8 billion, as paid services added more than one million new customers a month.

Revenue from ad-supported on-demand streaming services such as Alphabet Inc.’s GOOG 1.61% YouTube and Spotify’s free tier, meanwhile, grew 20% year-over-year to $908 million.

Americans streamed more than 1.5 trillion songs in 2019.

The music industry has been on an accelerating tear since 2016, when growth from streaming services began to outweigh a 15-year decline in compact-disc sales. Still, overall sales are about 75% of their 1999 peak of $14.6 billion.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 21, 2019

 

CFOs Could Change Pension Accounting Style to Avoid Drag on Earnings

By Mark Maurer | February 26, 2020

Topics: Mark-to-Market Accounting, Pension Accounting

Summary: “When discount rates go down, companies’ pension debt grows because the present value of future payments rises. That puts pressure on companies to boost their pension assets with investment gains in stocks and bonds to offset liabilities…Most companies choose to amortize these gains and losses over several years, causing old pension losses to linger.” But many companies have switched to the mark-to-market method instead, which is also allowed under GAAP reporting. The article discusses factors influencing this accounting policy choice based on concerns about confusing analysts and other financial statement readers. “But many executives have been resistant to the mark-to-market approach because they say the technique adds volatility from year to year.” NOTE: INSTRUCTORS MAY WANT TO DELETE THE FOLLOWING: The ASC section allowing this policy choice is ASC 715-30-35-25: Compensation—Retirement Benefits—Defined Benefit Plans—Pension—Subsequent Measurement—Gains and Losses.

Classroom Application: The article may be used when covering pension accounting to address the difference between corridor amortization through OCI of gains and losses on the projected benefit obligation (PBO) or the plan assets and the mark-to-market method for handling these gains and losses. It may also be used to address the judgment inherent in deciding upon accounting methods used in pension accounting.

Questions:

·         What is a projected benefit obligation (PBO) in a defined benefit pension plan?

·         What current market trend has created changes in the value of companies’ projected benefit obligations (PBOs) for their defined benefit pension plans?

·         What factors do large company chief financial officers (CFOs) weigh in deciding on the accounting policy choice related to reporting gains and losses from changes in their defined benefit plan PBOs?

·         What accounting policy choice is available to companies in reporting these gains and losses on projected benefit obligations (PBOs) in their defined benefit pension plans?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"CFOs Could Change Pension Accounting Style to Avoid Drag on Earnings," by Mark Maurer, The Wall Street Journal, February 26, 2020
 https://www.wsj.com/articles/cfos-could-change-pension-accounting-style-to-avoid-drag-on-earnings-11582713001

 Low interest rates could spur a shift to the mark-to-market method, in which companies immediately recognize gains or losses, pension experts say

Low interest rates could spur more U.S. finance chiefs to overhaul how they account for pensions in their financial statements, a move that could prevent increased plan liabilities from weighing on earnings per share, pension experts say. The decline in interest rates for high-quality corporate bonds has caused companies’ pension-plan obligations to grow and offset their returns on plan assets.

If a company’s total pension expenses were to rise significantly, CFOs might be motivated to switch to an accounting method that helps put a substantial loss behind them rather than amortizing it over several years, said Dan Mahoney, an analyst at CFRA LLC, a New York-based investment-research firm.

When discount rates go down, companies’ pension debt grows because the present value of future payments rises. That puts pressure on companies to boost their pension assets with investment gains in stocks and bonds to offset liabilities.

The Financial Accounting Standards Board allows companies to choose when they recognize gains and losses from pension plans.

Most companies choose to amortize gains and losses over several years, causing old pension losses to linger. But dozens of companies, many of which have massive pension obligations, have switched to another FASB-approved option—the mark-to-market method—over the past decade, particularly in the years after the Federal Reserve lowered interest rates to effectively zero.

Honeywell International Inc. in 2010 was among the first major U.S. businesses to switch to mark-to-market, followed by AT&T Inc., International Business Machines Corp. and Verizon Communications Inc.

Using the mark-to-market method, companies can recognize actuarial gains and losses related to pension plans in the fourth quarter of their fiscal year, making operating performance more transparent to investors.

Mark-to-market accounting, which also allows companies to record estimates of future profits as current earnings, came under scrutiny almost two decades ago in the aftermath of the Enron Corp. accounting scandal. The technique is still a generally accepted accounting principle.

Finance executives have complained for years that amortizing corporate pensions can lead to confusing analyses from investors and analysts.

But many executives have been resistant to the mark-to-market approach because they say the technique adds volatility from year to year. Companies tend to report a large loss in one quarter, rather than spreading it out over years. Companies also could theoretically report a fourth-quarter gain if interest rates were higher.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 28, 2019

 

Investors Grapple With Coronavirus Impact on Largest U.S. Firms

By Paul J. Davies | February 25, 2020

Topics: global supply chains

Summary: The article discusses the impact of the coronavirus outbreak on U.S. companies’ stock prices. The impact through companies’ supply chains is emphasized. Specific industries are highlighted.

Classroom Application: The article may be used in any level of accounting class to discuss the impact of the coronavirus on supply chains and U.S. stock prices. The discussion focused on supply chains is particularly useful in a managerial accounting course.

Questions:

·         What is a supply chain?

·         Why is the coronavirus outbreak affecting the largest U.S. firms? Are they the only companies affected? Explain your answers in terms of a supply chain.

·         View the graphic entitled “Average share-price decline over the five days ended Monday Feb. 24.” Summarize your interpretation of the information presented.

·         Describe the connection between U.S. companies’ supply chains and their stock prices.

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"Investors Grapple With Coronavirus Impact on Largest U.S. Firms," by Paul J. Davies, The Wall Street Journal, February 25, 2020
 https://www.wsj.com/articles/investors-grapple-with-coronavirus-impact-on-largest-u-s-firms-11582639572

 Disruption may deepen for American companies that rely heavily on overseas revenue and supply chains

The U.S. may have so far avoided the worst impacts of coronavirus. But for companies with major operations abroad, the calculus is changing quickly.

The spread of the virus to the industrial heartland of Europe represents the latest shoe to fall as global efforts to contain it ramp up. Disruption to the supply chain for U.S. firms could worsen should countermeasures be needed across Europe, having been introduced in some towns in northern Italy this week, and if parts of Asia remain on lockdown.

For many U.S. companies there are overseas sales to worry about too. S&P 500 companies collectively generate almost 30% of revenue in Asia and Europe, where coronavirus cases have been most prevalent so far. And many of the companies with more reliance on foreign sales have performed worse than average.

 

More than 120 companies in the S&P 500 generate less than 50% of revenue from the U.S., according to data from FactSet, which has regional sales breakdowns for nearly 380 companies in the index. These firms saw average share price declines of 4.7% over the five days to the end of Monday—worse than the 3.7% average decline among all companies in the index, according to FactSet data.

Performance was even worse among those with greater exposure to non-U.S. markets: The average price decline among 27 companies with less than 25% of revenue from the U.S. was 5.5%.

“I think that the smart money is saying that this will last longer and the economic effects will be deeper than people were thinking,” said Mark Stoeckle, chief executive and senior portfolio manager at Adams Funds in Baltimore.

He added long-term investors could look to pick up stocks they already liked if values had got relatively cheap, but “we think it’s too early to nibble at some more gaming companies, or cruise lines.”

Wynn Resorts Ltd., Las Vegas Sands Corp. and Booking Holdings Inc. are among the biggest fallers over the past five days, each having lost between nearly 9% and nearly 10%. All make less than 25% of their revenue in the U.S.

Cruise ship operators Carnival Corp., which makes slightly more than half its revenue outside the U.S., and Norwegian Cruise Line Holdings Ltd., which makes just less than half outside the U.S., were also big fallers, down 12% and 17.6% respectively over the past five days.

Chip makers and electronics companies have also been hit hard because of their direct exposure to Asian markets and their roles in global supply chains. This includes not just well-known names such as Advanced Micro Devices, Texas Instruments and Nvidia, but also companies like Lam Research, KLA Corp., Cadence Design Systems Inc. and Synopsys Inc.

The U.S. purchasing managers’ survey Friday showed that manufacturers are having to wait longer for supplies. Normally, longer supplier delivery times signals a pickup in production activity and as such it leads to a stronger overall PMI reading. Right now, however, it is because of delays caused by the coronavirus.

“In the U.S., half of all reasons given for [supplier delays] were related to the coronavirus,” said Chris Williamson, chief business economist at IHS Markit, which compiles the purchasing managers’ indexes.

The slowdown in supplier delivery times was even sharper in the eurozone and Japan, and Mr. Williamson said China and the virus accounted for 80% and 90% of the reasons given in those regions respectively.

There is also evidence that investors have been happier to buy companies with a more domestic focus: More than 40 companies’ shares rose in the five days to the end of Monday, slightly more than half of which have good regional sales data in FactSet. On average about two-thirds of their sales are in the U.S.

Only three gainers have more than half their sales overseas: Mosaic Co., the potash producer, Albemarle Corp., which is in the fashionable business of lithium production, and Equinix Inc., which runs data centers.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 6, 2019

Supreme Court Ruling Opens Door for More 401(k) Suits

By Anne Tergesen | February 27, 2020

Topics: 401(k)

Summary: The article reports on a Supreme Court ruling which establishes the start of a clock for the statute of limitations on when an employee may sue an employer for breach of fiduciary duty in managing a 401(k) plan. The ruling begins to count the three-year statute of limitations from when an employee reads disclosures about investments made by the plan and the fees associated with those investment vehicles. “The decision means it isn’t enough for an employer to send disclosures to start the three-year statute of limitations….”

Classroom Application: The article may be used in financial reporting classes discussing pension related items, payroll related items, or disclosures required of corporations in addition to financial reports. It also may be used in a tax class or managerial accounting class discussing pensions and payroll-related benefits and responsibilities.

Questions:

·        What is a fiduciary responsibility? Cite your source for this definition.

·        What is a 401(k) plan? Cite your source for this definition.

·        How does a 401(k) plan impose fiduciary responsibilities on an employer?

·        How has a ruling by the Supreme Court affected the timing of when an employee may file a lawsuit against employers offering 401(k) plans?

·        How can issuing electronic documents help companies to manage the timing associated with these lawsuits and the Supreme Court ruling?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Supreme Court Ruling Opens Door for More 401(k) Suits, by Anne Tergesen, The Wall Street Journal February 27, 2020
https://www.wsj.com/articles/supreme-court-ruling-opens-door-for-more-401-k-suits-11582828762

The decision ‘has pretty significant ramifications for people’s ability to bring lawsuits over fiduciary breaches,’ one specialist in retirement-plan law said

A Supreme Court decision Wednesday in a case against Intel Corp. alleging problems in its 401(k) plan is likely to pave the way for more litigation over retirement plans, industry watchers say.

The decision “has pretty significant ramifications for people’s ability to bring lawsuits over fiduciary breaches,” said Michael Kreps, a principal at Groom Law Group who specializes in retirement-plan law.

In recent years, employees have launched a wave of lawsuits that have resulted in multimillion-dollar settlements against companies. Many of those suits alleged the plans had high fees.

Wednesday’s unanimous decision in Intel v. Sulyma concerned a statute of limitations for filing lawsuits under the Employee Retirement Income Security Act, a federal law that applies to private employers’ retirement plans.

At issue is a provision in the law that gives 401(k) participants three years to file a lawsuit after obtaining “actual knowledge” that an employer has allegedly breached its fiduciary duty to manage the plan in employees’ best interests, said the opinion, written by Justice Samuel Alito.

The case alleges Intel breached its fiduciary duties when it invested a portion of employees’ contributions in higher-fee investments, including hedge funds, private equity and commodities, within the target-date funds that serve as the plan’s default investments. Intel argued the case should be dismissed, citing the three year deadline after Christopher Sulyma received disclosures.

The court sided with Mr. Sulyma, who worked at Intel from 2010 to 2012 and “testified that he did not remember reviewing the relevant disclosures,” the opinion said.

The case will return to a lower court. A spokeswoman for Intel declined to comment.

The decision means it isn’t enough for an employer to send disclosures to start the three-year statute of limitations, Mr. Kreps said. Instead, an employee has to have read the information and understood it for the window for filing lawsuits to begin, he added.

The decision may encourage companies to outsource their 401(k) plans by joining so-called multiple-employer plans, in which companies jointly offer a retirement plan managed by a third party, such as a brokerage firm, said Lew Minsky, president of the Defined Contribution Institutional Investment Association, a research and advocacy organization for consultants and others in the 401(k) industry.

Mr. Kreps said the decision may hasten the adoption of electronic delivery of disclosures, which makes it easier for employers “to determine whether individuals opened a particular mailing.” That could be considered evidence in favor of starting the three-year window to file a lawsuit, he said.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 6, 2019
https://www.wsj.com/articles/apple-says-wont-meet-revenue-guidance-in-quarter-due-to-coronavirus-11581974923

Companies Find Ways to Keep Their Annual Reports From Being a Bore

By Nina Trentmann | March 3, 2020

Topics: Annual Reports

Summary: “Executives increasingly are producing year-end summaries that allow for more reader engagement and easier consumption on mobile devices and computer screens.” The article begins with an example of German chemicals maker Covestro AG producing a digital version of its annual report with “video messages, interactive graphics and even a quiz” which is available at https://report.covestro.com/annual-report-2019/ The article concludes with that company’s chief financial officer’s opinion that “the annual report overhaul…appears to have led to more engagement with investors…Research published by a consulting firm in the U.K. on FTSE 100 companies finds better communication in 2019 reports than previously.” Comments by several executives indicate that SEC requirements limit companies’ ability to innovate in the U.S. but other viewpoints also are discussed.

Classroom Application: The article may be used when discussing the purpose of an annual report, developments in financial reporting, or the topic of environmental social and governance (ESG) reporting which is also discussed in the article.

Questions:

·        What are the components of a corporate annual report? Cite your source for this information, whether it is from your textbook or elsewhere.

·        What is the purpose of requiring an audit of financial reports?

·        What innovations in European financial reporting are discussed in the article?

·        How do those European innovations in annual reports compare to U.S. reporting? Who makes this assessment?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"Companies Find Ways to Keep Their Annual Reports From Being a Bore," by Nina Trentmann, The Wall Street Journal, March 3, 2020
 
https://www.wsj.com/articles/companies-find-ways-to-keep-their-annual-reports-from-being-a-bore-11583231402

Videos, graphics and other elements can provide information in ways that engage and go beyond what regulators request

When German chemicals maker Covestro AG began drafting its 2019 annual report in August, executives opted for a change. Instead of producing a text-heavy report, the company decided to publish a digital version with video messages, interactive graphics and even a quiz.

It wasn’t just the format of the annual report that changed—the purpose did too. Covestro turned what many companies view simply as a regulatory requirement into a resource for a broader audience to learn more about the company. “Behind our figures are emotional stories that we want to tell, regardless of time, place and device,” said Thomas Toepfer, the company’s finance chief.

For many companies, annual reports are no longer simply tomes of legalese, tables and footnotes. Executives increasingly are producing year-end summaries that allow for more reader engagement and easier consumption on mobile devices and computer screens.

Annual reports for 2019 from FTSE 100 companies provided better explanations of their business, potential threats to their operations and how they created value for stakeholders compared with previous years, according to research released in January by U.K. consulting firm Radley Yeldar Ltd.

“The trend in corporate reporting is toward providing a more complete picture of a company’s business model, performance and prospects,” said Lisa French, chief technical officer at the International Integrated Reporting Council, a coalition of regulators, standard setters, investors, companies and other groups that focuses on corporate reporting.

The evolution, which has been more pronounced in Europe than in other parts of the world, has been driven in part by changing regulation. The European Union, for example, enacted a nonfinancial reporting directive forcing large listed companies to report on social and environmental issues. The shift also stems from greater investor demand for granular details presented in a way that is easy to digest.

British Land Co., for instance, has sought to produce a more readable annual report by eliminating jargon while still giving stakeholders information for a comprehensive understanding of the company.

“We operate in an industry which can be very technical and has been prone to using technical industry language and lots of three-letter acronyms,” said David Walker, head of investor relations at British Land, one of the U.K.’s biggest property real-estate investment trusts.

In 2019, Mr. Walker and a team of about 10 spent half a year drafting, writing and revising the report, striving to use straightforward language while avoiding abbreviations such as ERV, short for estimated rental value. “We asked ourselves, ‘Is everybody familiar with ERV?’ Maybe not,” he said. British Land now talks about “future rents” to make things easier for readers.

In the U.S., strict reporting requirements mean that public companies tend to stick to a more formal, text-heavy approach, lawyers and executives say. Companies reporting to the Securities and Exchange Commission whose shareholders vote on the appointment of directors remain required to put out a printed version of the Form 10-K annual report and send it to shareholders in the mail.

U.S.-listed companies also have steadily increased the number of words used in footnotes to better explain financials, according to Audit Analytics, a research firm that analyzes financial filings. The average number of words in footnotes per 10-K was 22,905 in 2019, up from 18,821 in 2014, Audit Analytics said.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 6, 2019

Companies Wrestle With What to Disclose About Coronavirus Risk

By Kristin Broughton Nina Trentmann | February 26, 2020

Topics: Risk and uncertainty, Disclosures

Summary: The article begins with the example of Cole Haan’s paperwork for its initial public offering (IPO) of securities. The coronoavirus has disrupted supply chains primarily through its extensive outbreak in China and has resulted in store closings. Companies are challenged with how to comply with risk assessment reporting in their filings of annual reports due in March for those with year-end dates around December 31 as well as in other documents.

Classroom Application: The article may be used in any level of course covering financial reporting with or without addressing detailed requirements for risk assessments.

Questions:

·        In what reports are companies discussing risks associated with the coronavirus?

·        Why must companies discuss the risks associated with a worldwide medical event?

·        What are the challenges corporations are facing in describing the risks associated with the coronavirus outbreak?

·        What are the potential implications if companies fail to adequately disclose potential risks associated with the coronavirus outbreak?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"Companies Wrestle With What to Disclose About Coronavirus Risk," by Kristin Broughton Nina Trentmann,", The Wall Street Journal,February 26, 2020 
https://www.wsj.com/articles/companies-are-grappling-with-how-to-report-coronavirus-risks-11582761493

Challenge lies in disclosing details of future impact in financial filings, when information about the current outbreak is evolving

Companies are puzzling over what to tell investors about how the still-developing global coronavirus outbreak could affect future performance.

The outbreak has disrupted supply chains, closed stores and resulted in quarantines across the globe. For many companies, the outbreak has coincided with deadlines for filing annual reports due in March, and decisions about filing paperwork for initial public offerings.

Typically, the risk disclosures in these filings would contain information on factors that could materially affect their financial operations. Companies are drafting language to explain how the outbreak could affect their future operations, securities lawyers said. The challenge is providing investors with accurate information about the future when information about the outbreak is changing by the day.

“When there is a threat that has never been analyzed before, how it can impact a business—that is a very difficult challenge to get it right,” said Tom Sporkin, a former U.S. Securities and Exchange Commission lawyer who is now a partner at Buckley LLP.

And, the cost of not getting it right is high. Companies could face lawsuits from investors if they aren’t sufficiently forthcoming about their financial ties to infected regions, or if they describe the virus as a hypothetical risk when it has in fact affected operations, lawyers said.

“You want to give a feel of likely outcomes, even though you can’t know exactly where this is going,” said John Bason, the finance chief at Associated British Foods PLC, the U.K.-based owner of Twinings tea and other grocery brands.

Deciding what to disclose depends on what companies view as financially material. In the case of coronavirus outbreak risks, a big part of that calculation so far has involved looking at a company’s business ties in China, where the outbreak began. Another important factor is the type of insurance coverage that companies have to cover business disruptions, according to David Martin, senior counsel at Covington & Burling LLP.

But the scope of risk can expand as the outbreak spreads.

Associated British Foods earlier this week sent a detailed statement to investors on its exposure to the outbreak, and how it is working to mitigate risks related to it. The statement required the company’s management team to examine the outbreak’s possible impact on the economy and the supply chains of the U.K. conglomerate’s business units.

The company sought to address short-, mid-, and long-term risks and contingencies. It noted that it is operating food-processing factories in China at reduced capacity. It sought to reassure investors by saying its Primark fast-fashion unit had built up inventories in advance of the Lunar New Year and, as a result, ABF doesn’t expect any short-term impact. The company also said it is looking for alternative suppliers to prepare for the potential of a prolonged slowdown in garment production.

“The ramifications have become huge,” Mr. Bason said.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 13, 2019

Newell Brands Is Investigated by SEC

By Gunjan Banerji Jean Eaglesham | March 3, 2020

Topics: Securities and Exchange Commission, Goodwill Impairments

Summary: Newel Brands, Inc. has announced that the Securities and Exchange Commission is investigating its sales and accounting practices. “The SEC issued a subpoena to Newell in January, after making several informal requests for information….One focus of the probe, Newell said, is its treatment of goodwill…” The company’s debt rating by S&P Global, Inc., has fallen to junk-bond status thought“Moody’s still rates Newell the lowest rung of investment-grade.” One bond research firm’s director of research is quoted in saying “I doubt that too many investors pay much attention to or care about goodwill and intangible impairments…” but she does call the company’s reporting “messy and opaque.” The company took a $9 billion goodwill impairment write-down in 2018.

Classroom Application: The article may be used to discuss regulatory investigations of accounting and/or goodwill impairment testing. The sales practices question is not very well detailed in the article. An article discussing managerial problems with the Newell Brands/Jarden business combination was covered in this review on May 3, 2018. It can be found in the archive by searching for “business combinations.”

Questions:

  • What does Newell Brands, Inc. make and sell? Cite your source for this information.
  • Click on the highlighted link on the words Newell Brands in the article to access the Wall Street Journal’s summary page for this company. It is also available directly at https://www.wsj.com/market-data/quotes/NWL/company-people Click on YTD above the stock price chart. Describe the year-to-date performance of this stock for 2020. What factors described in the article associate with this performance?
  • Now click on 1Y and then 3Y. Compare the performance trend for the past year and 3 years. What factors described in the article are associated with the trends you see?
  • What is a goodwill impairment?
  • Consider the statements by Carol Levenson, director of research at a bond research firm, quoted in the article. Do her statements seem to be supported in this particular case of Newell Brands? Explain your answer.

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"Newell Brands Is Investigated by SEC, by Gunjan Banerji Jean Eaglesham |, The Wall Street Journal, March 3, 2020
 
https://www.wsj.com/articles/newell-brands-is-investigated-by-sec-11583275613

Consumer-products company says probe focuses on sales, accounting practices

The Securities and Exchange Commission is investigating sales and accounting practices at Newell Brands Inc., NWL 14.69% the consumer-products giant said.

The federal investigation is another setback for the maker of Rubbermaid containers and Sharpie markers, as it tries to turn around its fortunes under a new leadership team.

The SEC issued a subpoena to Newell in January, after making several informal requests for information, the company said in a securities filing after the stock market closed Monday.

Representatives of Newell and the SEC declined to comment on the investigation.

One focus of the probe, Newell said, is its treatment of goodwill—the premium a company pays when it buys another for more than the value of its net assets. The SEC’s subpoena relates primarily to the company’s “sales practices and certain accounting matters” from the start of 2016 onward, the company said.

Newell wrote down more than $9 billion of goodwill and trade names in 2018, one of the biggest goodwill impairments that year, according to valuation firm Duff & Phelps LLC. Newell at the time said most of the write-down reflected a decline in its market value.

The impairment was tied to Newell’s troubled 2016 acquisition of rival Jarden Corp. for about $20 billion, which added $8.3 billion of goodwill to its books and quadrupled its debt load.

After the deal, Newell failed for years to meet its debt-reduction targets. Nonetheless, it was until recently allowed to keep its coveted investment-grade status, The Wall Street Journal reported last year. Newell was downgraded to junk-bond status by rating firm S&P Global Inc. in November.

Moody’s still rates Newell the lowest rung of investment-grade, a group that has swelled in recent years.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 13, 2019

SEC Provides Filing Extension to Companies Affected by Coronavirus

By Mark Maurer | March 4, 2020

Topics: Securities and Exchange Commission, Coronavirus

Summary: Securities and Exchange Commission (SEC) Chairman Jay Clayton “… said the agency recognizes some companies hit by the effects of the coronavirus epidemic may not able to file reports within required time frames.” The SEC has therefore decided to give a 45-day extension for filings due between March 1 and April 30; companies will have to explain in reports the reasoning for taking advantage of the extension. The SEC also may decide to further extend the 45-day period.

Classroom Application: The article may be used to discuss timing for filing financial reports and the extensive process for filing audited annual reports.

Questions:

·        When must a U.S. publicly-traded company with a December 31 year-end file its annual report with the Securities and Exchange Commission (SEC)? What is the filing called? Cite your source for this information.

·        What are the components of an annual report? Again cite your source for this information.

·        What components, or steps in creating components, of the annual report could be impacted by the coronavirus pandemic?

·        Why do you think that the SEC requires filing entities to disclose the reasons for taking advantage of a deadline extension due to the coronavirus outbreak?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"SEC Provides Filing Extension to Companies Affected by Coronavirus." by Mark Maurer | The Wall Street Journal, March 4, 2020 
https://www.wsj.com/articles/sec-provides-filing-extension-to-companies-affected-by-coronavirus-11583361746

Executives must explain in reports why their companies need the relief, the SEC says

The U.S. Securities and Exchange Commission said Wednesday it will give public companies affected by the coronavirus epidemic a 45-day extension to file certain financial disclosures, the agency’s first act of regulatory relief since the virus surfaced.

The additional time will allow the companies to file certain reports that would otherwise have been due between March 1 and April 30. Companies that take the extension must explain in the reports why they needed the relief.

The SEC also said it may extend the 45-day period or provide additional types of relief if doing so is deemed appropriate.

“While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within required time frames,” SEC Chairman Jay Clayton said in a statement.

Companies that take advantage of the 45-day extension and file their reports before it expires will be considered to have filed on-time, the SEC said.

Companies that miss filing deadlines aren’t usually allowed to use certain simplified registration forms that the SEC permits some businesses to use if they have met other reporting requirements.

The SEC can also revoke securities registrations of companies that repeatedly miss deadlines for filing annual or quarterly reports.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 13, 2019

CFOs Look to Boost Cash Holdings, Cut Costs Amid Coronavirus Outbreak

By Nina Trentmann | March 5, 2020

Topics: Managerial Accounting, Coronavirus

Summary: The article focuses on the impact of the coronavirus outbreak on cash management strategies. Chief financial officers (CFOs) are “…boosting cash holdings, slashing costs and collecting outstanding payments to ensure their companies remain sufficiently capitalized to withstand financial hits from the coronavirus epidemic.” Specific strategies such as offering unpaid leaves of absence to slash costs, increasing monitoring of cash budgets, and monitoring data points such as customer foot traffic are discussed.

Classroom Application: The article may be used in a managerial accounting class covering cash budgets. Opening questions ask students to describe monthly cash budgets.

Questions:

  • What is a cash budget?
  • What are the components of a monthly cash budget? How does a monthly cash budget tie to quarterly and annual cash budgets?
  • Name one impact of the coronavirus outbreak discussed in this article which could affect the amounts included in a monthly or quarterly cash budget.
  • What steps discussed in this article to help preserve cash should also be evaluated for their impact on monthly or quarterly cash budgets?

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

"CFOs Look to Boost Cash Holdings, Cut Costs Amid Coronavirus Outbreak," by Nina Trentmann, The Wall Street Journal, March 5, 2020  
https://www.wsj.com/articles/cfos-look-to-boost-cash-holdings-cut-costs-amid-coronavirus-outbreak-11583447858

Finance executives assess forecasts, funds and scenarios as the virus spreads

Finance chiefs are boosting cash holdings, slashing costs and collecting outstanding payments to ensure their companies remain sufficiently capitalized to withstand financial hits from the coronavirus epidemic.

Companies across sectors are exposed to outbreak-related losses and challenges, including in the manufacturing, retail and travel industries amid factory closures, travel restrictions and changes in consumer behavior.

Sabre Corp., a Southlake, Texas-based travel technology company that builds reservation systems for airlines and hotels, began implementing expense control measures last month in response to the anticipated impact of the virus, according to a spokeswoman. “While we hope its impact will be short-term in nature, coronavirus will have a material impact on our 2020 financial results,” the company said in February.

United Airlines Holdings Inc. said Wednesday it plans to store some wide-body jets and is offering staff unpaid leaves of absence in April. The airline scrapped its full-year guidance citing uncertainty about how the virus outbreak could impact its business.

Lufthansa AG said in February it would start slashing costs to offset a coming hit to revenue and profit from canceled flights. Among other measures, Lufthansa is offering its staff voluntary, unpaid leave. Other carriers, including Cathay Pacific Airways Ltd. and Singapore Airlines Ltd., have taken similar steps. European budget airline easyJet PLC also vowed to bring down costs.

Many other companies are expected to announce cost-cutting measures in the weeks and months to come. Car manufacturers, technology companies, retailers and luxury-goods makers—including many U.S. companies—have all reported lower sales because of the spread of the virus.

“It’s important to think in scenarios, for example about what would happen if there was a vaccine, or if the virus went away like a flu,” Craig Bailey, an associate principal at consulting firm Hackett Group Inc., said.

Fort Lauderdale, Fla.-based software company Citrix Systems Inc., for instance, keeps a business continuity plan for natural disasters, credit-market challenges and health issues. “You are prepared for these kinds of situations,” said Arlen Shenkman, finance chief at Citrix.

Mr. Shenkman has regular meetings with the company’s internal audit team and evaluates sales and cash forecasts, he said. “You monitor your cash balances and make sure that you have working capital,” Mr. Shenkman said.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 20, 2019

Is It Worth Investing in Unprofitable Companies? We Ran the Numbers

By Derek Horstmeyer | March 8, 2020

Topics: Profitability

Summary: The author is an associate professor of finance at George Mason University. He reports on an analysis assessing profitable versus unprofitable companies as measured by rolling quarterly reported earnings and (1) their stock returns and return volatility over the ensuing year, (2) evidence of their interest rate risk as shown by 30 day stock returns following each of nine rate increases in five years. The results demonstrate overall poor performance by unprofitable firms, though they may be appealing when considered to be “disrupters” in their industries.

Classroom Application: The article may be used to discuss the relation between earnings and stock returns. It also highlights the role of academic research and analysis for practice applications.

Questions:

  • Who is Derek Horstmeyer?
  • How does Dr. Horstmeyer’s skills and position support his ability to provide the analysis described in the article?
  • How does the author, Dr. Horstmeyer, measure whether companies are considered “unprofitable”?
  • Do you think that is the only possible way to make this measurement? Explain your answer.
  • What conclusion does the author, Dr. Horstmeyer, reach from his analysis?

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Is It Worth Investing in Unprofitable Companies? We Ran the Numbers," by Derek Horstmeyer, The Wall Street Journal, March 8, 2020
https://www.wsj.com/articles/the-allure-and-risk-of-unprofitable-companies-11580843071

Uber, UBER +9.60% Pinterest, PINS -0.32% Peloton, PTON +0.04% Lyft, LYFT +5.89% Snap SNAP +6.76% —the list of unprofitable companies trading on U.S. exchanges is a long one.

In fact, of listings on the New York Stock Exchange and Nasdaq with at least one year of the relevant earnings data, more than 35% were unprofitable in their cumulative results for the four quarters ended Sept. 30, 2019.

While some of these unprofitable companies may be perceived as disrupters of future business and embraced by certain investors, most of their shareholders probably don’t fully realize the set of risks they are taking on. Indeed, while there will always be investors who wind up looking smart for investing in, say, an Amazon.com, when the chips were down, in most cases the stocks of unprofitable companies eventually head in one direction: lower.

These companies exhibit greater risk than profitable companies across the board: Their shares on average return less, are more volatile and are prone to a type of risk more typically associated with bonds—interest-rate risk.

Taking the full set of all NYSE- and Nasdaq-listed companies disclosing earnings for the past five years, and using the cumulative net income over the prior four quarters in a given year, I deemed those with positive net income as “profitable,” and those with negative net income as “unprofitable.” To avoid any look-ahead bias in the data, measures of profitability were based on the year preceding the start date of any one-year stock returns calculated.

First, the shares of unprofitable companies have vastly underperformed those of profitable companies over the past five years. No surprise there. Among the profitable companies, the median annualized share return was 16.0%, compared with 4.2% for the unprofitable firms. This amounts to an annualized difference of 11.8 percentage points.

That the average share return of the unprofitable companies was positive at all will perhaps surprise some. But this can be attributed to two things: One, there are a lot of shareholders who don’t want to miss “the next big thing,” so they bet on the riskiest companies; and two, markets are imperfect.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 20, 2019

SEC Votes to Ease Audit Requirements for Smaller Companies

By Paul Kiernan | March 12, 2020

Topics: Auditing, Securities and Exchange Commission, Internal Controls

Summary: On Thursday, March 12, 2020, the U.S. Securities and Exchange Commission (SEC) voted to relax the requirements for publicly-traded smaller firms to have an auditor examine their accounting systems and internal controls (in sum, internal controls over financial reporting or ICFR). SEC Commissioner Hester Peirce is quoted in the article emphasizing that corporate resources, both liquid assets and management time and attention, are now focused on product and services production rather than obtaining an internal controls audit. An alternative view is presented through a discussion of accounting research showing that twelve companies who wrote letters supporting this regulatory change had filed earnings restatements, reported material weaknesses in internal controls, or both.

Classroom Application: The article may be used in an auditing or information systems class discussing the regulatory process, SOX requirements in general or specifically for audits of internal controls, and/or the impact of regulation on smaller firms.

Questions:

·        What types of entities have been excluded from the requirement to file an auditor’s opinion on their systems of internal control over financial reporting (ICFR)?

·        According to the discussion in the article, what are the benefits of relaxing this requirement for these entities?

·        According to an academic accounting researcher cited in the article, what are the concerns with some companies affected by this regulatory change writing comment letters to the SEC in its regulatory rulemaking process?

·        The article ends with the following two statements: “For the average company in 2018 now covered by the exemption, an additional dollar of revenue raised its market value by $93. The compares to a $2.47 increase in market value for companies with more than $100 million in revenue.” What is the significance of these statements?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"SEC Votes to Ease Audit Requirements for Smaller Companies," by Paul Kiernan, The Wall Street Journal, March 12, 2020
https://www.wsj.com/articles/sec-votes-to-ease-audit-requirements-for-some-companies-11584034423

Supporters say move will aid investment; critics see risks for financial standards

WASHINGTON—Hundreds of small, publicly traded companies, including biotechnology firms, will see their audit requirements eased under a rule approved by the Securities and Exchange Commission.

Advocates said the change will allow those firms to cut costs and invest the savings in new products and technology, such as life-saving vaccines. But one researcher found that many of the firms that supported the rule had accounting problems of their own.

The rule, which was approved Thursday, applies to companies with annual revenue below $100 million and public shares worth less than $700 million. Those companies will no longer need to have an auditor examine their accounting systems and safeguards known as internal controls, a requirement that has been in place since the Enron and WorldCom scandals of the early 2000s.

With the change, “a company trying to develop a vaccine for a fast-spreading virus, something that is now on all of our minds, will be able to pour resources and—importantly—management’s time and attention into that effort rather than into obtaining an internal-controls audit,” SEC Commissioner Hester Peirce said in a statement.

Ms. Peirce said comment letters from companies supporting the rule had encouraged her to vote for it.

One of them was Teligent, Inc., whose chief financial officer, Damian Finio, wrote that the rule would give it more time “to develop high quality and competitive products to treat the nation’s most dire public health concerns.”

But an analysis by Joe Schroeder, an accounting professor at Indiana University, found that at least a dozen companies that wrote letters of support had disclosed accounting problems of their own. Some had to restate earnings reports due to errors, while at others auditors flagged “material weaknesses” in their internal controls over financial reporting.

In Teligent’s case, both were true. In an annual report filed last April—less than four months before it sent a letter to the SEC—the drugmaker disclosed the need to “perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements.”

Among other problems, the company said it lacked personnel and resources to implement a new financial system. Teligent’s stock price has fallen 97% since mid-2017.

Teligent’s investor relations department didn’t immediately respond to an email or a phone message requesting comment.

Mr. Schroeder said the companies he flagged are saying, in effect, “We have accounting issues, and we’re asking to get rid of regulation that tells us to improve our accounting.”

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on March 20, 2019

Companies Have Discretion Over Whether to Disclose Coronavirus Infections

By Kristin Broughton | March 13, 2020

Topics: Business Ethics, Disclosures, Coronavirus

Summary: The Wall Street Journal reports that “through late Friday, no major U.S. company had appeared to make a disclosure about an executive with Covid-19. But BT Group PLC, one of Europe’s largest telecommunications companies, disclosed Thursday that its chief executive, Philip Jansen, tested positive for the coronavirus.” The discussion refers back to U.S. investors’ discontent with Apple’s lack of disclosure about the severity of the sickness of Steve Jobs who died nine months after taking medical leave from the company he founded. The definition of materiality in the U.S. accounting literature can be found in two places: FASB Concepts Statement 8, chapter 3, paragraph QC11 and U.S. Securities and Exchange Commission Staff Accounting Bulletin: No. 99 – Materiality. They differ slightly in wording but the SEC emphasizes it interprets the two to imply the same meaning. The U.S. SEC requirement applies in this case which questions disclosure by publicly traded companies.

Classroom Application: The article may be used when discussing the concept of materiality in accounting or auditing classes. It specifically helps to emphasize that the nature of the item being considered for disclosure is a factor just as important as the dollar amount—which is this case is not applicable. It also may be used in a business ethics class discussing a balance between corporate executives’, and their families’, privacy against current and potential investor and creditor interest in material developments.

Questions:

  • “There has been no consistent practice on how…companies have provided disclosures [about the medical condition of a chief executive officer].” What competing viewpoints, ethical or otherwise, should be considered in decision-making about the impact of the coronavirus on specific individuals such as a corporate chief executive?
  • What is the definition of materiality as it relates to corporate disclosures? Cite your source for this information.
  • How does the concept of materiality impact decision-making about disclosures in the face of the inconsistency across companies discussed in question 1?

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Companies Have Discretion Over Whether to Disclose Coronavirus Infections," by Kristin Broughton, The Wall Street Journal, March 13, 2020
https://www.wsj.com/articles/companies-have-discretion-over-whether-to-disclose-coronavirus-infections-11584143963

Firms may have a strong incentive to disclose medical information to prevent leaks or questions from investors

Companies are thinking through how or even whether they would disclose potential Covid-19 infections of executives.

U.S. companies aren’t required to tell investors if their executives test positive for the infection that comes from the novel coronavirus, but they may have a strong incentive to do so, securities lawyers say.

U.S. companies have wide discretion when it comes to disclosing medical information about top executives, lawyers said, and there is no legal requirement compelling companies to do so. Instead, companies are guided by the concept of materiality—that is, whether a reasonable investor would find the information important in making an investment decision, lawyers said.

But how companies interpret that concept has varied, at times prompting backlash from investors.

Through late Friday, no major U.S. company had appeared to make a disclosure about an executive with Covid-19.

But BT Group PLC, one of Europe’s largest telecommunications companies, disclosed Thursday that its chief executive, Philip Jansen, tested positive for the coronavirus. The diagnosis set off an internal effort to alert staff and prompted a wave of self-disclosures from executives at other telecom companies who recently had come in contact with Mr. Jansen.

While companies have leeway on executive medical disclosures, they often have a strong incentive to provide timely information, said David Martin, a securities lawyer at Covington & Burling LLP. Doing so prevents employees from leaking information and investors from raising questions about why a CEO is no longer appearing in public, he said.

“There’s a practical issue: Does the company feel like it has to communicate with employees?” Mr. Martin said.

Symptoms from coronavirus infections are mild for most people and include a fever, cough or aches. The risk of severe symptoms or death are higher for older people or those with underlying medical conditions.

A Securities and Exchange Commission spokesperson declined to comment.

The way Apple Inc. handled disclosures about the health of Steve Jobs prompted backlash from investors, stirred debate about what boards should tell investors about ill leaders and CEO succession plans, and fueled a push for greater federal oversight.

Apple said in January 2011 that Mr. Jobs, its CEO and co-founder, would go on medical leave, providing little indication at the time about the severity of his sickness, though he had previously battled pancreatic cancer. He died nine months later.

Continued in article

 




Humor for March 2020

Video:  George Carlin, Germs, the Immune System ---
https://www.youtube.com/watch?v=X29lF43mUlo&feature=share&fbclid=IwAR3KcE_vjdko6bVabsEAzYfvW6ICbxjnTZaUeYVVIXJCR8ex-UYP3wkklus

San Antonio Zoo Valentine’s day markets in everything ---
https://marginalrevolution.com/marginalrevolution/2020/02/san-antonio-zoo-valentines-day-markets-in-everything.html

The 9 Craziest Things Seized by Customs and Border Protection ---
https://www.foxnews.com/us/the-9-craziest-things-seized-by-customs-and-border-protection

BBC News, Delhi
A 27-year-old Indian man plans to sue his parents for giving birth to him without his consent ---
https://www.bbc.com/news/amp/world-asia-india-47154287#aoh=15822110572909&referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s

Forwarded by Reverend Hahn

In the program “Laugh In”  a man dressed like a minister said. “The Bible days the Lord lovest a cheerful giver; but He will be willing to take from an old grouch, too”.

The three ministers told how they handled the offering.
The first said he drew a line down the middle of the aisle and threw the offering on the floor. He said, “All that landed on the right belongs to the Lord; all on the left goes to me. God is good; I receive half the collection”.
 The second said, “I draw a circle and all that falls in the circle is the Lord’s, that outside the circle is mine. God is good; I have been getting three-fourths of the oggering”.
The third minister said, “I pray about it. I toss the money in the air and say, “Lord, grab what you want and throw the rest back to me. God is very good. He has given 100% of the offering”.

Mother: Son, here is your allowance. Remember to put some of it in the offering next Sunday
Son:`` Why can’t I buy Ice Cream and the Ice Cream man put the money in the offering?

Monty Python Pays Tribute to Terry Jones: Watch Their Montage of Jones’ Beloved Characters in Action ---
http://www.openculture.com/2020/01/monty-python-pays-tribute-to-terry-jones.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OpenCulture+%28Open+Culture%29

Rescued owl found to be too obese to fly [UK] ---
https://www.upi.com/Odd_News/2020/01/29/Rescued-owl-found-to-be-too-obese-to-fly/9281580330158/?sl=3
Jensen Comment
When I lived in Tallahassee a huge rattlesnake crawled under my neighbor's fence, swallowed the pet rabbit, and then had such a big hump it could not back it back under the fence.

Fattest Squirrel in the U.K. ---
https://www.foxnews.com/science/pictures-fattest-squirrel-in-uk-cant-stop-eating

CollegeHumor Helped Shape Online Comedy. What Went Wrong?
https://www.wired.com/story/collegehumor/

Kids' Questions ---
https://theconversation.com/we-asked-kids-to-send-us-their-burning-questions-here-are-5-of-our-favorites-from-2019-129130

A Walk Down Memory Lane for Some of Us ---
https://www.pinterest.com/?show_error=true
Also see
https://www.pinterest.com/jennt1970/a-walk-down-memory-lane/

Dave Barry's Year 2019 (a really long review of things that are better forgotten) ---
https://www.washingtonpost.com/magazine/2019/12/29/dave-barrys-year-review/?arc404=true

UW-MADISON CAMPUS HUMOR PUBLICATIONS ---
https://uwdc.library.wisc.edu/collections/uwmadison/uwhumor/

Campus Jokes ---
http://www.jokebuddha.com/Campus

Here's a humorous and serious TED talk that seriously argues why the world needs billionaires
https://www.ted.com/talks/harald_eia_where_in_the_world_is_it_easiest_to_get_rich

Unlike in Australia, Venezuela, and Cuba
There’s plenty of toilet paper in the US – so why are people hoarding it?
https://theconversation.com/theres-plenty-of-toilet-paper-in-the-us-so-why-are-people-hoarding-it-133300

Jensen Comment
The above article notes that Costco and other stores are running out of TP in the USA. I can vouch that yesterday I noticed there was not one roll available in our nearby Walmart store in these mountains where it appears there are more shoppers from Vermont than New Hampshire on any day (due mostly to both Vermont's ban on non-union stores like Walmart and New Hampshire's zero sales tax).

New Hampshire is a weird state that strongly supports Bernie Sanders (probably because of his promise of $100+ trillion in freebies paid for by wealthy states like NY, CA, TX, and MA). But the Democratic Party legislature in NH will not even consider a sales tax or a state income tax or most any other new or increased tax. Some legislators would like to introduce new NH taxes, but they know they will be voted out in a NY minute if they even whisper the word "tax."

Since I have ample storage space in our basement, studio, and barn, I've carried more than a year's supply of toilet paper since moving to these mountains in 2006. My worry really hasn't been pandemic shortages. If you have storage space, TP is an essential item that's easy to store and probably will never go down in price as forest lands are encroached upon and diminished by global warming. My reason for storing so much TP is that this is a bulky item that's not a great product for shipping from Amazon. As I grow older I prefer to shop in stores for less and less --- my wife's health leaves me with most of the shopping in our fading years. I store non-perishable things that I will like less and less to shop for in future years. Yeah I know that at my age it's risky to buy green bananas.

I'll bet you did not even know that a roll of Scott's 1,000 sheet TP was heavier in 2006 than in 2020. You don't have to use up the 2006 roll as fast, because each sheet on a 2006 roll is thicker. TP is an investment that I had not even considered in my retirement planning.

My house came with a 4,000 gallon heating oil tank, so I am prepared for Armageddon with a four-year supply of home heat. Actually the big tank does allow me to avoid years of high oil price spikes that I worry more about than the price of toilet paper.

Besides TP is something I can leave the kids without having to worry so much about inheritance tax. I figure TP will be the first thing to go when my kids have our estate sale. If they're smart the price will be higher for old rolls of TP.


USA Today:  100 Things to Do When You're Stuck Inside With What You Thought Was Nothing to Do ---
https://www.usatoday.com/story/life/health-wellness/2020/03/16/coronavirus-quarantine-100-things-do-while-trapped-inside/5054632002/

Forwarded by Tina

There's a plane with 5 passengers on board: Donald Trump, Boris Johnson, Pope Francis, Angela Merkel, and a 10-year-old schoolboy. The plane is about to crash and there are only 4 parachutes. Trump says: "I need one. I’m the smartest man in the world and am needed to make America great again." He takes one and jumps. Johnson says, "I’m needed to sort out Britain." He takes one and jumps. The Pope says, "I need one as the world needs the Catholic Church." He takes one and jumps. Merkel says to the 10-year old boy: "You can have the last parachute. I've lived my life, yours is only just starting." The 10-year-old replies: "Don’t worry, there are 2 parachutes left. The smartest man in the world took my school bag.


People are sharing hilarious home haircut fails during coronavirus isolation ---
https://www.foxnews.com/lifestyle/home-haircut-fails-coronavirus
Jensen Comment

I bought a barber's clipper for over $200 from Amazon.

The hardest part was getting my wife to try the clipper on me --- she feared I would look like a plucked chicken. But with a lot of gentle persuasion she gave it a try.

Erika actually did quite a good job. With a little more practice on the top I think I will be able to save $20 plus gas money every two weeks from now on. The key was having a good clipper plus a good wife.

Today I'm going to reward her with lobster roll take outs from one of our more popular restaurants called 99. They're even 20% off this weekend.


Stockpiling Condoms and Toilet Paper
There may be a worldwide condom shortage as factories are forced to shut down during the coronavirus pandemic ---
https://www.businessinsider.com/worldwide-condom-shortage-inevitable-production-hubs-shut-down-2020-3
Jensen Comment
Our nearby Walmart is now restricting shoppers to one of almost everything. Yesterday I brought multiple items of a few things to the cashier who then picked out my extra items, including two extra bottles of dish washing soapand two extra bottles of spaghetti sauce.

CDC Warns Against Washing or Otherwise Reusing Condoms ---
https://www.youtube.com/watch?v=nVwaCmfUy1Q 
Your neighbors will probably laugh or sigh in envy if you hang them outdoors to dry.


From Beginning to End
Illinois restaurant offers free toilet paper with every takeout, delivery order amid COVID-19 outbreak ---
https://www.foxnews.com/food-drink/illinois-restaurant-offers-free-toilet-paper-takeout-delivery-order-coronavirus


USA Today:  Working people frequently ask retired people what they do to make their days interesting ---
https://forum.thaivisa.com/topic/43002-what-retired-folks-do-for-fun/

A guy went to the store the other day. I was only in there for about 5 minutes. When I came out there was a city cop writing out a parking ticket. I went up to him and said "Come on, Buddy, How about giving a senior a break?"

He ignored me and continued writing the ticket. I called him a name. He glared at me and started writing another ticket for having worn tires. So I called him a worse name.

He finished the second ticket and put it on the windshield with the first. Then he started writing a third ticket. This went on for about 20 minutes. The more I abused him the more tickets he wrote.

I didn't really care. My car was parked around the corner and this one had a "HILLARY IN '08" bumper sticker on it


31 of the Best Retirement Jokes ---
https://www.thinkadvisor.com/2015/09/16/31-of-the-best-retirement-jokes/

 

 




Humor March 2020 --- http://faculty.trinity.edu/rjensen/book20q1.htm#Humor0320.htm  

Humor February 2020 --- http://faculty.trinity.edu/rjensen/book20q1.htm#Humor0220.htm 

Humor January 2020 --- http://faculty.trinity.edu/rjensen/book20q1.htm#Humor0120.htm

Humor December 2019--- http://faculty.trinity.edu/rjensen/book19q4.htm#Humor1219.ht

Humor November 2019--- http://faculty.trinity.edu/rjensen/book19q4.htm#Humor1119.htm

Humor October 2019--- http://faculty.trinity.edu/rjensen/book19q4.htm#Humor1019.htm  

Humor September 2019--- http://faculty.trinity.edu/rjensen/book19q3.htm#Humor0919.htm 

Humor August 2019--- http://faculty.trinity.edu/rjensen/book19q3.htm#Humor0819.htm 

Humor July 2019--- http://faculty.trinity.edu/rjensen/book19q3.htm#Humor0819.htm 

Humor July 2019--- http://faculty.trinity.edu/rjensen/book19q3.htm#Humor0719.htm 

Humor June 2019--- http://faculty.trinity.edu/rjensen/book19q2.htm#Humor0619.htm

Humor May 2019--- http://faculty.trinity.edu/rjensen/book19q2.htm#Humor0519.htm

Humor April 2019--- http://faculty.trinity.edu/rjensen/book19q2.htm#Humor0419.htm    

Humor March 2019--- http://faculty.trinity.edu/rjensen/book19q1.htm#Humor0319.htm  

Humor February 2019--- http://faculty.trinity.edu/rjensen/book19q1.htm#Humor0219.htm 

Humor January 2019-- http://faculty.trinity.edu/rjensen/book19q1.htm#Humor0118.htm   

 

Tidbits Archives --- http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm




And that's the way it was on March 31, 2020 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

 

 

 

 

February 2020

Bob Jensen's New Additions to Bookmarks

February 2020

Bob Jensen at Trinity University 


My Latest Web Document
Over 500 Examples of Critical Thinking and Illustrations of How to Mislead With Statistics --
-
http://faculty.trinity.edu/rjensen/MisleadWithStatistics.htm

USA Debt Clock --- http://www.usdebtclock.org/ ubl

How Your Federal Tax Dollars are Spent ---
http://taxprof.typepad.com/.a/6a00d8341c4eab53ef01b7c8ee6392970b-popup

To Whom Does the USA Federal Government Owe Money (the booked obligation of $20+ trillion) ---
http://finance.townhall.com/columnists/politicalcalculations/2016/05/25/spring-2016-to-whom-does-the-us-government-owe-money-n2168161?utm_source=thdaily&utm_medium=email&utm_campaign=nl
The US Debt Clock in Real Time --- http://www.usdebtclock.org/ 
Remember the Jane Fonda Movie called "Rollover" --- https://en.wikipedia.org/wiki/Rollover_(film)
One worry is that nations holding trillions of dollars invested in USA debt are dependent upon sales of oil and gas to sustain those investments.

To Whom Does the USA Federal Government Owe Money (the unbooked obligation of $100 trillion and unknown more in contracted entitlements) ---
http://money.cnn.com/2013/01/15/news/economy/entitlement-benefits/
The biggest worry of the entitlements obligations is enormous obligation for the future under the Medicare and Medicaid programs that are now deemed totally unsustainable ---
http://faculty.trinity.edu/rjensen/Entitlements.htm

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 Scholar --- https://scholar.google.com/

Wikipedia --- https://www.wikipedia.org/

Bob Jensen's search helpers --- http://faculty.trinity.edu/rjensen/searchh.htm

Bob Jensen's World Library --- http://faculty.trinity.edu/rjensen/Bookbob2.htm

Possibly the Number 1 Resource for CPA Exam Candidates
AICPA:  Uniform CPA Exam Blueprints ---
http://www.aicpa.org/BecomeACPA/CPAExam/ExaminationContent/DownloadableDocuments/cpa-exam-blueprints-effective-20170401.pdf?utm_source=mnl:cpald&utm_medium=email&utm_campaign=07Apr2017

CPA exam will increase focus on higher-order skills
"What Higher Order Skills Will be Tested on the Next CPA Examination," by Ken Tysiac, Journal of Accountancy, April 4, 2016 ---

http://www.journalofaccountancy.com/news/2016/apr/new-cpa-exam-201614166.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=04Apr2016

Bob Jensen's CPA Exam Helpers ---
http://faculty.trinity.edu/rjensen/Bookbob1.htm#010303CPAExam

Find a corporate home page quite easily by going to
https://en.wikipedia.org/wiki/List_of_companies_of_the_United_States

Bob Jensen's search helpers ---
http://faculty.trinity.edu/rjensen/searchh.htm




CNBC:  Here’s how to reduce the taxes on your Social Security benefits ---
https://www.cnbc.com/2020/02/25/how-to-reduce-the-tax-you-might-have-to-pay-on-social-security-checks.html 


As XBRL in financial reporting matures, focus is on accuracy ---
https://www.cfodive.com/news/xbrl-financial-reporting-accuracy/572948/

Bob Jensen's threads on XBRL ---
http://faculty.trinity.edu/rjensen/XBRLandOLAP.htm#TimelineXBRL


Climate Change Needs to Be on the Balance Sheet ---
https://www.nakedcapitalism.com/2020/02/climate-change-needs-to-be-on-the-balance-sheet.html

Jensen Comment
Being on the balance sheet can mean different things from footnote disclosures to measured estimates summed along with cash, accounts payable, and other items giving rise to "total assets" and "total liabilities" on balance sheet. The article above seems to favor putting very soft numbers into the summations. The above article offers no formulas for estimating these soft numbers. Doing so would be quite controversial in most instances, and the IASB and FASB standard setters have thus far resisted putting very soft numbers into those summations. Footnote disclosures are already covered by standards dealing with intangibles and contingencies. Standard setters might, however, address further requirements for climate change disclosures.

One of the huge problems with climate change numbers is that they depend heavily upon future politics that are very uncertain. Bernie Sanders, for example, wants all gasoline and diesel vehicles off the roads by 2030 along with all shutting down all refineries by 2030 ---
https://berniesanders.com/issues/green-new-deal/
But these are just political promises that have no reliable probabilities of ever happening, especially not by 2030 even if Bernie is elected. How do we possibly replace 300 million cars, trucks, farm equipment, construction equipment, etc. in a decade? What is to be gained by disclosing that Exxon and the other oil and gas companies have trillions of dollars in liabilities that are about as uncertain as forecasts of Armageddon.

This, of course, does not mean accounting for some components of "climate change" (think carbon tax) will not affect future balance sheets. Don't believe that the economic burdens of carbon and other climate change taxes imposed on corporations will be borne by those corporations. Business firms don't pay taxes. Business firms collect taxes from customers. For example, if a huge carbon tax is imposed on oil and gas companies customers will pay for that tax at the pumps and in the prices paid to retail firms.

My point is that a $10 trillion annual climate change tax is imposed on oil and gas corporations this does not mean that their balance sheet liabilities should increase by $10 trillion. Most of those liabilities will be recovered in higher prices paid by customers who cannot do without fuel for their vehicles, heat for their homes, and farm produce on their tables. Higher prices may reduce demand for products, but some things people cannot do without until there are other alternatives to fill those needs. It will take more than a decade to replace all the gasoline and diesel vehicles, to replace all the oil and gas furnaces in our homes, and to replace the natural gas electric plants on the grid.

It is truly sad how liberals think they've "won" when they raise the cost of capital to oil and gas companies by shutting down blocs of investors (think university endowment funds) from investing in oil and gas companies. Then they will blame oil and gas companies when they themselves must  pay $50 per gallon at the pump or pay ten times as much in electric bills.


Accounting rule Warren Buffett loathes boosts Berkshire's bottom line to $81B ---
https://www.foxbusiness.com/money/accounting-rule-warren-buffett-loathes-boosts-berkshires-bottom-line-to-81b

Jensen Comment
The accounting rule is controversial in that net earnings and portfolio values are subject to short-term transitory variations in security prices that may have little to do with long-term earnings and value. For example, Tesla share prices are subject to huge day-by-day volatility caused news events that usually do not reflect changes future cash flows of the company.

Reporting of a portfolio's value becomes highly dependent upon what day the reporting takes place.

Also there's a difference in value based upon such factors as control. For example, if Buffett's firm only owns a few shares of Company X the price of $100 per share means something different than if his firm owns 51% of the voting shares. That $100 per share represents the liquidity value of one share of stock. It does not reflect the possibly enormous value of having control of the management of the company.

The same rule could be a stock market and real estate disaster for any tax (think a wealth or income tax)  that forces investors to liquidate portfolios to pay the tax. At the moment tax accounting rules do not generally require liquidation for value appreciation alone.

It's a little like reporting the number of birds to be served for dinner while they are still in the bush and can fly away before dinner time.

Bob Jensen's threads on value accounting theory ---
http://faculty.trinity.edu/rjensen/theory02.htm#FairValueFails

Also see
http://faculty.trinity.edu/rjensen/theory02.htm#BasesAccounting


Wealth Tax --- https://en.wikipedia.org/wiki/Wealth_tax

NY Times on Two Liberal Economists Behind the Wealth Tax Debate: They crashed the Democratic primary with their idea — and angered some economists ---
https://www.nytimes.com/2020/02/21/us/politics/the-liberal-economists-behind-the-wealth-tax-debate.html?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_1044443&cid=db&source=ams&sourceId=296279

BERKELEY, Calif. — One of the most liberal policy proposals animating the Democratic presidential primaries is the handiwork of two French economists who are not formally advising any campaign and have barely met the candidates running for the White House.

Gabriel Zucman and Emmanuel Saez are the driving force behind proposals for a wealth tax, an idea embraced by Senators Bernie Sanders and Elizabeth Warren as a way to reduce economic inequality by forcing the richest Americans to pay taxes on everything they own and diverting that money to public services like universal health care and free college tuition.

Their efforts documenting a sharp increase in the concentration of wealth at the very top and their outspokenness have vaulted the tax from a fringe idea in American politics to the center of a reinvigorated debate on taxing the rich.

They have also made Mr. Zucman and Mr. Saez the most visible, and polarizing, economists in the 2020 campaign.

 

Other economists, including some who held top jobs under past Democratic presidents, have attacked Mr. Zucman and Mr. Saez over their research methods, their policy conclusions and their data. Conservative economists say their proposals would cripple economic growth.

Last year, the faculty at Harvard’s Kennedy School of Government voted to offer Mr. Zucman, 33, a tenured position. But Harvard’s president and provost nixed the offer, partly over fears that Mr. Zucman’s research could not support the arguments he was making in the political arena, according to people involved in the process. He has since been awarded tenure alongside Mr. Saez, 47, at the University of California, Berkeley.

The pair have won praise from some liberal activists. Felicia Wong, the president of the Roosevelt Institute, a progressive think tank, said Mr. Saez and Mr. Zucman had helped bring large tax increases on the rich into the mainstream, winning support even from Democratic candidates who do not support their wealth tax.

“It’s a very different debate,” Ms. Wong said, “and now we’re having it on Saez and Zucman’s terms.”

The effect was evident in the Democratic presidential debate on Wednesday in Las Vegas. Over two hours that included few concrete economic policy proposals, Ms. Warren and Mr. Sanders both promoted their wealth-tax plans. Mr. Sanders leaned on Mr. Zucman and Mr. Saez’s data to denounce “the insane situation that billionaires today, if you can believe it, have an effective tax rate lower than the middle class.”

 
Continued in article

Jensen Comment

During CBS Sixty Minutes on TV on February 23, 2020 Bernie Sanders announced that his wealth tax will fund free pre-school for every child in America including the millions that will pour across the borders.


One aspect of a wealth tax that seems to be overlooked in the liberal media is its impact on the stock, bond, and real estate markets and the public and private sector pension funds that depend upon those markets. I've not heard one question raised in the Democratic presidential debates about what a candidate intends to to to save stock, bond, and real estate markets and pension funds.

 

The biggest disaster will be Bernie Sanders who intends to give employees and labor unions control (without stock ownership) of the largest corporations in the USA. For example, Elon Musk with 22% of Tesla would be neutered when Bernie Sanders gives his employees 45% of the voting power (without stock ownership) of Tesla shares. Tesla has never earned a profit for an entire year and probably never would earn a profit for investors if employees could easily increase wages and benefits at will.
 

Bernies' Flavor of Socialism is Really More Like Communism (Workers of the World Unite)
Bernie contends that he wants corporations of the USA to be under the control of workers rather than providers of capital. And to further support this workers would also control the banks (unlike in Germany) ---
https://berniesanders.com/issues/real-wall-street-reform/
Hence Bernies' flavor of capitalism is to have workers control both the corporations and the banks.
Karl Marx must be dancing on his grave.


Neobank --- https://en.wikipedia.org/wiki/Neobank

Varo Bank --- https://www.varomoney.com/

Varo has become the first neobank to win approval for FDIC insurance ---
https://www.businessinsider.com/varo-becomes-first-neobank-to-win-fdic-approval-2020-2

. . .

Varo's approach marks a notable departure from its competitors', all of which rely on a partner bank. US regulations require neobanks to choose between pursuing their own license — which only Varo has done — or partner with an incumbent bank, which would then take a cut of their profits. Walsh has previously expressed that he feels it's unsustainable to try to grow while operating under a sponsor bank. If more neobanks follow suit, it could eliminate the need for sponsor banks, a role largely played by community banks.

A license could position Varo for future success by enabling it to engage in more lucrative segments of retail banking, like personal loans and mortgages. Varo will now have the freedom to control its own deposits and use them to fund its loans. It could add these capabilities to its existing lineup of features like overdraft protection and early wage access.

The license will also give the neobank full access to its customers' data, whereas its competitors in the US, like Chime and N26, have to rely on partner banks. Walsh has said that a charter would enable Varo to make money from deposits and continue to offer its services for free, as well as give the neobank a number of cost advantages and allow it to compete with a breadth of products. 

It's important to note that, with a license, Varo will now have to dedicate more resources to regulatory compliance. This responsibility would have previously fallen to its sponsor bank: Half of banks surveyed by the Risk Management Association said they spent between 6% and 10% of their revenue on compliance costs in 2017. Despite the potential risks of incurring compliance and other regulatory-related costs, Varo is positioning itself for long-term sustainability by pursuing a banking license independent of a partner bank. 

The FDIC granting Varo approval suggests regulators might be shifting to accommodate digital startups. This is one of the few times the FDIC has given a fintech company the ability to provide insured deposits, which banks have strongly opposed in the past, per the Journal.

Continued in article


Quiz: Auditor independence and FASB’s revenue recognition standard ---
https://www.journalofaccountancy.com/news/2020/feb/fasb-revenue-recognition-standard-and-auditor-independence.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=14Feb2020


Report ranks NYC as having worst municipal finances in country ---
https://www.data-z.org/news/detail/report-ranks-nyc-as-having-worst-municipal-finances-in-country


The U.S. SEC is investigating a non-profit that defaulted on $170 million of municipal bonds issued to finance the acquisition of low-income apartments in Chicago and its suburbs.
https://www.bloomberg.com/news/articles/2020-02-24/sec-probes-owner-of-chicago-apartments-after-muni-bond-default?cmpid=BBD022420_BIZ&utm_medium=email&utm_source=newsletter&utm_term=200224&utm_campaign=bloombergdaily

Inspector General: TurboTax, Other Companies Tricked 14 Million Taxpayers Eligible For Free-File Program Into Paying To E-File Their Returns ---
https://taxprof.typepad.com/taxprof_blog/2020/02/inspector-general-turbotax-other-companies-tricked-14-million-taxpayers-eligible-for-free-file-progr.html

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


Ponzi Scheme --- https://en.wikipedia.org/wiki/Ponzi_scheme

Rhode Island Property Developer Sentenced to Eight Years in Prison for $10 Million Ponzi Scheme and Obstructing IRS Investigation ---
https://www.justice.gov/opa/pr/rhode-island-property-developer-sentenced-eight-years-prison-10-million-ponzi-scheme-and

Another Obama Solar Company Burns Out – DC Solar Owners Plead Guilty to Largest ($1 billion) Ponzi Scheme in Eastern California History ---
https://www.thegatewaypundit.com/2020/01/another-obama-solar-company-burns-out-dc-solar-owners-plead-guilty-to-largest-ponzi-scheme-in-eastern-california-history/

A couple pleaded guilty to scamming Warren Buffett as part of a $1 billion Ponzi scheme ---
https://markets.businessinsider.com/news/stocks/couple-admit-scamming-warren-buffett-1-billion-ponzi-scheme-2020-1-1028844728

Bob Jensen's threads on Ponzi schemes ---
http://faculty.trinity.edu/rjensen/FraudRottenPart2.htm#Ponzi


Why You Might Want Your University to Invest in Large Oil Companies? (That $145 Billion with a "B")

Shell just announced plans to build the world's largest 'green hydrogen' plant. Here's everything you need to know about the $145 billion industry, which is set to transform the energy sector ---
https://www.businessinsider.com/what-is-hydrogen-fuel-industry-explainer-2020-1?utm_source=Sailthru&utm_medium=email&utm_content=BIPrime_select&utm_campaign=BI%20Prime%202020-02-28&utm_term=BI%20Prime%20Select


The Kinney Three Paragraphs (and More) for Accounting Ph.D. Students
by William R. Kinney, Jr.
Accounting Horizons
Volume 33, Issue 4 (December 2019)

https://aaajournals.org/doi/full/10.2308/acch-52451

 

SYNOPSIS

This Commentary is intended to help beginning Ph.D. students identify, evaluate, and communicate essential components of proposed empirical accounting research using a three-step process. The first step is a structured top-down approach of writing answers to three related questions—What, Why, How—that emphasize the central role of conceptual thinking in research design, as well as practical relevance. The second step is a predictive validity assessment that anticipates concerns likely to arise in the scholarly review process, and the third is consideration of the likely outcome and potential problems to be encountered if the proposal is implemented as planned. First-hand accounts of Ph.D. student experiences using the three paragraphs and three-step approach are presented, along with an exercise that beginners can use to help themselves identify, analyze, and anticipate problems to improve chances for research success ex ante.

Keywords: communicating research, experiential and discovery learning

Received: April 2017; Accepted: March 2019; Published: May 2019


 

I. INTRODUCTION

In planning research or evaluating the research of others, a useful practice is to give early attention to the purpose of the research through preparation of a three-short-paragraph abstract, synopsis, or working model of the research. The first paragraph answers the question “What is the problem?” The second asks, “Why is it an important problem?” and the third, “How will it be solved?” Alternatively, the questions might be: “What are you (or the researcher) trying to find out?”, “Why?”, and “How will it be done?”

 —Kinney (1986, 349, fn. 18)

We believe that the objective of accounting research is to create legitimate, consequential belief revision about issues associated with accounting-related decision settings. That is, the purpose of accounting research is to change the way informed and creatively skeptical people think about an accounting issue that is important to them or to others.

 —Maines, Salamon, and Sprinkle (2006, 86)

You probably have some insights about real-world accounting—how the accounting world works, what causes what (and perhaps why), and maybe how to fix what seems broken. You know you must do accounting research, but how do you know if your ideas are good and how can you convince your professors and others to help you? One way to get started is by answering the three related questions (from Kinney above) designed to effectively identify and communicate the essentials of proposed empirical accounting research and to motivate others to listen to your ideas.

Figure 1 diagrams a three-step research process that can help you evaluate whether your idea is a “good bet” for research success—before you do the hard work of implementation. Step I results in a single-page response that provides answers for the What, Why, How questions. Step II is an ex ante predictive validity analysis of your What and How answers that will help you anticipate common concerns likely to be raised by scholarly readers and editors. Step III addresses the basis for Why that provides the link between What and How, and also anticipates critical research outcome perils that may disrupt implementation. All three steps will help you build intuition about how to structure, refine, and present your own ideas and each of the three has a “Stop Sign” to warn of conditions that may seriously imperil the success of your project.

The three-step approach is then illustrated with experiences and insights of Ph.D. students who have applied the three steps over the years. These experiences include benefits of student presentation of preliminary versions of the What, Why, How of Step I to fellow students. As a presenter, you may get insights by explaining to non-expert peers the essence of complex accounting matters, and merely trying to explain the essentials may help you see what is unique, important, or even missing in your proposal.1 As a listener, you may learn how to quickly “get a handle” on the work of others by reversing the process, and focusing on only what you need to put their ideas into the “universal” three-paragraph format and then asking them questions.

Two caveats: This is not a generic one-size-fits-all research plan that works “as is” for all empirical accounting-related research ideas (e.g., Kinney 1986; Cooper and Zeff 1992; Kinney 1992). Most of the concepts and ideas are borrowed and adapted; their combination and the student experiences are new. And, you need not follow the exact wording format in the final version of your paper (but because the three questions are commonly asked, you should include enough so readers could formulate the answers for themselves).

I begin with Steps I, II, and III of Figure 1. The approach and opt-out points (Stop Signs) are then illustrated with experiences of former Ph.D. students who, over time, helped me improve and better articulate the three-step research approach, and I'll close with some hints that will help you apply the approach today.


 

II. STEP I—THREE PARAGRAPHS FOR COMMUNICATING RESEARCH

Your ideas about “what causes what” in accounting are based on your experiences and your knowledge of theories, concepts, and organization structures from your courses in accounting and other disciplines.2 Your basic idea might be a reasoned prediction of why an accounting method choice or a change in method would affect real-world outcomes such as valuation, performance, or risk perceptions. And you may have thought about testing your ideas with archived accounting data from a particular domain and time period, or originating data via an experiment applying hypothetical accounting treatments where participants are randomly assigned to accounting methods. So—how best to put it all together?

Continued in article


Robotic Process Automation in Public Accounting

Lauren A. Cooper

D. Kip Holderness, Jr.

Trevor L. Sorensen

David A. Wood

Accounting Horizons
Volume 33, Issue 4 (December 2019)

https://aaajournals.org/doi/full/10.2308/acch-52451

SYNOPSIS

We investigate the implementation of Robotic Process Automation (RPA) software in public accounting by interviewing RPA leaders at Big 4 firms. RPA software automates the input, processing, and output of data to streamline repetitive, mundane tasks. Many of our findings are unique to accounting. For instance, participants report tax services are furthest along in RPA adoption, followed by advisory and assurance services. Furthermore, RPA has not impacted fees, but there is concern that clients may desire fee reductions due to decreased employee hours. Finally, unlike other technology implementations, RPA adoption is driven primarily by lower-level employees. Similar to other domains, our results indicate massive efficiency and effectiveness gains from RPA implementation. Also, interviewees do not expect reduced head count to result from RPA use. This study is the first to discuss the benefits, opportunities, and challenges to implementing RPA in accounting and serves as a catalyst for future research.

Keywords: robotic process automation (RPA), automation, accounting efficiency, accounting effectiveness, hiring decisions, offshoring
 

I. INTRODUCTION

The purpose of this study is to investigate the adoption and use of Robotic Process Automation (RPA), sometimes referred to as “bots,” within the accounting profession.1 RPA is the use of software programs to automate repetitive, routine business processes.2 The use of RPA in business has increased dramatically in recent years. A report from Information Services Group (ISG 2017), a technology research and advisory firm, estimates that 72 percent of companies will use RPA by 2019. Deloitte (2015) conducted a survey and found that its clients view the implementation of RPA as a priority within their firms. In particular, process automation was rated as the number one technology-related priority for shared services and global business services leaders over the next 12 months, and increasing the level of automation was rated as the second-highest strategy-related priority today as well as over the next ten years. Further, in a recent study where experienced practitioners were questioned about the areas of technology in which they expected to see significant innovations in the next five years, the two most noted areas included artificial intelligence and RPA (Austin, Carpenter, Christ, and Nielson 2018). Given the significant interest in and use of RPA, we study how RPA is affecting the accounting profession.

RPA is a relatively new technology that accounting firms use to perform internal business processes as well as tax and assurance work for clients. In addition, accounting firms are creating service lines around the implementation of this technology in clients' own operations. Because RPA is a new technology, there is still much that accounting firms do not understand about how using RPA will influence the profession moving forward. This presents an important and significant opportunity for academic researchers to help shed additional light on the costs and benefits of RPA in accounting settings. There are many argued benefits of RPA, including drastically decreasing processing time and improving accuracy, especially for repetitive, rules-based, mundane tasks (Liao 2018). These benefits do not come without potential costs. Some argue that automation will cause significant job loss, unemployment, and ultimately more drastic income disparity and resultant societal problems (McKinsey Global Institute 2017; Walker 2017; UBS 2016). Although there are many argued benefits and costs of RPA, there is very little research on the topic, as most of the current research relates to case studies and discussion papers (e.g., see, Lacity, Willcocks, and Craig 2015; Asatiani and Penttinen 2016; Aguirre and Rodriguez 2017; van der Aalst, Bichler, and Heinzl 2018). Thus, gaining an understanding of how accounting firms are currently using RPA and the initial effects of RPA are first steps to helping the profession deal with the likely significant change that will result from RPA.

We interviewed leaders of the Big 4 accounting firms to gain a deeper understanding of why and how RPA is designed and implemented within the large accounting firms and the potential implications that RPA can have on the accounting profession. Specifically, we report the findings from interviews of 14 employees of Big 4 firms. Eleven of the respondents are national or international leaders in the RPA areas of their firm (including two who oversee all of RPA at their respective accounting firm), while the remaining three interviewees spend significant time on analyzing and implementing RPA within the firm. We conducted semi-structured interviews to ascertain how the firms are currently using RPA, who within the firms is working with RPA, and how RPA may be used in the future. In addition, we examine how RPA influences human-resource decisions such as hiring, training, and offshoring decisions.

It is unclear ex ante whether the effects of implementing RPA within accounting firms are the same as the general effects of automating processes across industries or whether there are aspects of RPA use that are unique to the accounting profession. The results of our study shed light on the similarities and differences in these effects. We first highlight some findings specific to the accounting industry:

·         Participants report that all areas within the large accounting firms are adopting RPA, with tax services being the furthest along in adoption, followed by advisory services, and then assurance services.

·         RPA has not yet had a major impact on fees as the firms are still in the initial stages of using RPA and are grappling with the appropriate method for allocating costs and benefits, which can affect multiple clients and are not driven directly by employee hours. Firms are concerned that the use of RPA could cause a “race to the bottom” for fees and are studying this issue carefully.

·         Accounting firms are using different tactics related to disclosing RPA use to clients. Some accounting firms are actively advertising the use of RPA as a way to impress clients and win business, others do not discuss the use of RPA with clients but rather consider it “just another tool in the toolkit” that does not warrant discussion with the client.

·         Unlike many technology implementations where the implementation comes from a top-down approach, with RPA, accounting staff and senior-level employees are involved in the identification of RPA use cases and the deployment of bots. Given this difference, respondents believe that to be effective it is important for lower-level accountants to receive more training with computer programming, creative thinking skills (as a component of critical thinking skills), and communication skills.

We also highlight findings in the accounting domain that are similar to the findings in other domains that use automation:

·         RPA results in significant efficiency and effectiveness gains. One accounting firm shared that in 2017 they saved over one million human work hours from RPA, while another respondent discussed turning a task that took 16 hours to complete into a 17-second task. Firms also report seeing increased quality as bot accuracy approaches 99.9 percent, compared to human performance on the same task that is often closer to 90 percent.

·         Respondents report that their firms are not presently reducing head count or hiring because of RPA. Currently, the firms have enough work that they can redeploy displaced individuals into other productive tasks. While some respondents believe RPA may reduce the growth in hiring in the future, all respondents are bullish that RPA will result in similar demand for workers—but that the nature of the work will change from doing mundane, repetitive tasks to more value-adding and interesting work.

·         Interviewees believe that RPA is a stepping stone to more sophisticated automation. Specifically, they report that RPA vendors are already starting to add more artificial intelligence (i.e., machine learning and cognitive computing) to traditional rules-based bots. They believe in the future that RPAs will continue to “become smarter” and capable of doing more sophisticated tasks that require human judgments, whereas the majority of RPA work today is rules based and requires little to no judgment.

This study makes an important contribution in examining how RPA is unfolding in an entire industry, whereas most prior research is limited to individual companies. This initial research study looking at RPA within accounting should help spur future research in this area. Indeed, RPA is an important, and likely to become more important, technology employed by public accounting firms. Yet, there is little to no extant research on RPA, and as such it is unclear how the effects of implementing this technology in accounting are similar or different to the general effects of automating processes in other industries. Our interviews suggest accounting firms are very open to research that helps them understand the costs and benefits of and how to use RPA technology. This paper helps academic researchers understand the current use of RPA within accounting and identifies important issues that need additional research.


 

II. RESEARCH METHODOLOGY

We conducted semi-structured interviews with at least two RPA leaders at each of the Big 4 accounting firms to better understand RPA in public accounting.3 We selected this descriptive research approach because it allows us to obtain in-depth responses from participants. In addition, this is the first research study that is not a case study on RPA and there is currently no theory or empirical research that examines the phenomenon in accounting or other disciplines. Finally, at the time of the interviews, the group of people involved in designing and implementing this technology at the accounting firms was still relatively small, making collection of a large sample of data infeasible. By providing a rich background of the RPA phenomenon, we hope to provide a foundation for future empirical research.

Continued in article


Cryptocurrency --- https://en.wikipedia.org/wiki/Cryptocurrency

Blockchain --- https://en.wikipedia.org/wiki/Blockchain

Blockchain --- https://en.wikipedia.org/wiki/Blockchain

Cryptocurrency --- https://en.wikipedia.org/wiki/Cryptocurrency

A Crypto Ponzi Scheme Took Baseball Players for Millions ---
https://qz.com/1797589/crypto-ponzi-scheme-took-mlb-players-for-millions/

Phishing --- https://en.wikipedia.org/wiki/Phishing

How the North Korean hackers behind WannaCry got away with a stunning crypto-heist ---
https://www.technologyreview.com/s/615093/lazarus-group-dragonex-chainalysis/

MIT:  Millions of people fell for crypto-Ponzi schemes in 2019 ---
https://www.technologyreview.com/f/615120/cryptocurrency-ponzi-scams-chainalysis/

Book Review:  Taxation, Virtual Currency and Blockchain

Patrick M. Ryle
Assistant Professor of Accounting, 
Dalton State College

Journal of the American Taxation Association
Article Volume 41, Issue 2 (Fall 2019
https://aaajournals.org/doi/full/10.2308/atax-10685

ALEKSANDRA BAL, Taxation, Virtual Currency and Blockchain (Alphen aan den Rijn, The Netherlands: Wolters Kluwer, 2018, 1–312, $130.00).

 

Virtual currencies have risen from the shadows of their theoretical underpinnings to stake claim as a mainstream financial tool. While this emergence has been a positive development in many ways, it has also posed a number of important challenges to stakeholders and tax practitioners alike. Existing taxing regimes were largely unprepared to meet the many challenges posed by the meteoric rise of virtual currencies, and even today, more than ten years after the creation of Bitcoin, practitioners, taxpayers, and policy makers continue to struggle.

Thankfully, the call to make sense of this rapidly changing field has now been heard. With her new book, Taxation, Virtual Currency and Blockchain, Professor Aleksandra Bal bravely steps forward to answer the call by having conducted a thorough and comprehensive review of the field. Through her work, Professor Bal endeavors to synthesize the tangled web of cryptocurrency taxation content into a comprehensive, organized, and understandable source book. By rendering this service, she helps to bring order and clarity to this emerging and rapidly changing field.

The stated purpose of Taxation, Virtual Currency and Blockchain is to provide readers with an in-depth review of potential tax implications that may result from this emerging technology. The book goes further, however, by examining basic and fundamental policy questions such as whether virtual currencies require additional regulation, or whether tax issues posed by virtual currencies can be managed through existing regulatory regimes. Over the course of nine chapters, Bal dives headlong into many of the more widely recognized, as well some of the more nuanced, questions presented by virtual currency taxation. In a field that is rapidly rising in prominence, this book accomplishes its stated purpose. The book does indeed provide a roadmap through a dense forest of material, and paves the path forward for students and scholars alike.

Taxation, Virtual Currency and Blockchain could not have been more timely published or be more urgently needed. Virtual currencies have now become a firmly entrenched component of the economic landscape. As numerous new proposals for initial coin offerings are currently being advanced, including plans by major global players such as Facebook, it is critical for tax professionals to become informed and prepared. Virtual currencies, and associated tax issues, are now a mainstream phenomenon and practitioners, academics, and regulators must take notice.

The book is organized into nine distinct chapters with each chapter taking on a discrete topical area. The author drives the book forward with an introductory section of three chapters. These first three chapters open the discussion by providing readers with a historical overview of cryptocurrency and its origins. In Chapter 1, Professor Bal provides a blueprint that foreshadows the following chapters and an outline of the scope of the book and its content.

For readers who may need a basic review, Chapter 2 is particularly helpful, and provides important history, background, and context. This chapter examines the importance of blockchain to virtual currency development, as well as how blockchain works as a theory and in practice. The author illustrates that blockchain is built upon well-established and well-understood technologies including peer-to-peer networks, cryptographic algorithms, distributed ledgers, and a decentralized consensus. The author makes it clear to the reader that the true genius of blockchain is not in the technology it utilizes, but in the manner by which blockchain combines existing technologies to accomplish its purpose.

Continuing her review of basic concepts, Bal thoughtfully sets forth a useful background that includes the four fundamental principles upon which blockchain is built: (1) a distributed database (no single party controls the system and each party on a blockchain has access to the entire database and its complete history); (2) peer-to-peer transmission; (3) irreversibility of records; and (4) pseudo-anonymity. She attentively reminds readers that the identity of the parties is not disclosed during transactions and that blockchain is an openly distributed ledger that records transactions between two parties efficiently, in a verifiable and permanent way. This review of blockchain and cryptocurrency basics helps provide a solid foundation for exploring the rest of the book for readers who might be new to these concepts.

Moving into Chapter 3, Professor Bal describes the critical role that the development of smart-contracts played in blockchain's emergence. Dr. Bal provides contextual background on smart-contracts (a digital contract executed through computer code) dating back to 1996. She also explores the benefits and risks of virtual currency, as well as classification issues that are significant to taxation. Further, Dr. Bal also discusses initial coin offerings (ICOs) and the qualification of virtual currency as regulated securities under securities laws within the United States. Together, the first three chapters of the book provide critical background material for readers new to the field, while allowing those with more subject-matter familiarity to focus on subsequent sections of the book. Armed with this review, readers are now prepared to tackle the rest of the material.

In Chapter 4, the author examines the conceptual foundations of virtual currency income taxation. In this chapter, she explores income tax considerations generally, including income determination, capital gains, and questions raised by virtual currencies. Her review is theoretical in nature and is not jurisdiction-specific. The potential activities that may create income tax concerns are posed as universal and may include (1) exchanges of goods and services for virtual currency, (2) exchanges of legal currency for virtual currency, (3) exchanges of virtual currency for another virtual currency, (4) currency mining, (5) possession of virtual currency that appreciates in value, and (6) receipt of virtual currency (for instance as a gift or an inheritance). The author posits that many of the issues that impact virtual currency are analogous to issues that impact similar assets in other contexts.

In Chapter 5, Bal turns to jurisdictionally specific examinations of income taxation by prominently addressing the virtual currency tax orientation of the United States, including the IRS's position on major issues. Bal notably points out that in the IRS's 2014 notice Virtual Currency Guidance, the IRS addresses many questions regarding cryptocurrency taxation in the United States. The IRS generally views virtual currency as property, and, as a result, the same tax principles that apply to property transactions apply to transactions in virtual currency in the United States. Bal completes her coverage of income taxation in Chapter 6 by providing recommendations for improvements of existing tax systems in managing virtual currency challenges.

In the following three chapters, Dr. Bal pivots away from income taxation, and turns her analysis to consumption taxes. Chapter 7 provides a general overview of these taxes in the context of virtual currency. In Chapter 8, Bal then addresses specific jurisdictional examples, most notably focusing on the United States. In Chapter 9, Bal closes out her coverage of consumption taxes by making several recommendations for consumption tax policy makers and regulators.

Dr. Bal's work contains an advocacy component as well. Chiefly contained in Chapter 6 and in Chapter 9, Bal promotes reforms. In Chapter 6, Bal makes recommendations for income tax administration and compliance practices. The author also ardently advances a procedural due-process policy development argument, and proposes that policymakers must engage a sound policy adoption process, particular to each jurisdiction, in order to craft a cryptocurrency taxation regime that is optimally structured to meet the needs of each individual tax authority. In Chapter 9, Bal identifies best practices for taxing virtual currency transactions and examines methods for improving consumption tax practices.

In concluding her book, Bal provides a wide variety of useful resources for the benefit of the reader. She provides an annex that consists of a compilation of regulations from a significant sample of important jurisdictions for evaluation, reference, and comparison. Bal also provides an extensive resource of important cases, a substantial bibliography that is useful for identifying sources for further research, and a comprehensive list of publications by tax administration and regulatory bodies.

In Taxation, Virtual Currency and Blockchain, Bal provides a thoughtful and well-considered overview of the major taxation issues posed by virtual currency. In this timely work, she synthesizes a nebulous body of content into a clear and sensible design. She provides readers with the structure for mastering a complex and emerging area of taxation—and this is no small feat. For professors who are seeking a text that tackles this important and emerging field, this book would provide an excellent choice. The book is written in an understandable and accessible fashion, and each chapter adds significant value to the text. It would make an excellent introductory resource.

Taxation, Virtual Currency and Blockchain is replete with pertinent regulatory and legislative references. The book extensively incorporates significant and critical cases, rulings, and regulations. Accordingly, for instructors who wish to utilize the case metho

PwC Probably Did Celebrate When It Helped Mattel Cover Up an Accounting Error ---
https://goingconcern.com/pwc-probably-did-celebrate-when-it-helped-mattel-cover-up-an-accounting-error/

Teaching Case From The Wall Street Journal Weekly Accounting Review on November 1, 2019

Mattel Resolves Accounting Probe

By Paul Ziobro | October 29, 2019

Topics: Accounting Changes and Error Corrections , Accounting for Income Taxes

Summary: The article describes an error originating in the third quarter of 2017 in Mattel’s financial statements. The company reported a loss and related tax benefit but should have adjusted that tax benefit with a valuation allowance. Mattel then reported a loss in the quarter ended December 31, 2017, which was overstated by the same amount. There was no impact on the full year’s financial statements. The issue came to light because of a whistleblower letter; the article also describes a concern raised in regards to PricewaterhouseCoopers's independence as an auditor because the firm made recommendations about candidates for the chief financial officer (CFO) position. The press release related to this error was issued October 29, 2019 and is available as exhibit 99.2 to the Form 8-K filed on October 30, 2019. https://www.sec.gov/Archives/edgar/data/63276/000119312519277846/d788142dex992.htm

Classroom Application: The article may be used when discussing accounting for income tax valuation allowances and/or corrections of errors. The article also may be used in an auditing class to discuss the independence issues raised by the whistleblower.

Questions:

·         Why is the Mattel Inc. chief financial officer (CFO) leaving his post?

·         How did the issues facing Mattel come to light?

·         What is an income tax valuation allowance? Cite your source for this definition.

·         What accounting error occurred in Mattel’s financial statements in the third quarter of 2017?

·         When did that accounting error “wash out”? Explain your answer.

·         If the error has “washed out” of the financial statements, why must Mattel issue restated reports for the third and fourth quarter of 2017?

·         What is the concern with regards to the independence of auditor Pricewaterhouse Coopers as raised by this whistleblower?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Mattel Resolves Accounting Probe," by Paul Ziobro, The Wall Street Journal, October 29, 2019
https://www.wsj.com/articles/mattel-resolves-accounting-probe-easing-debt-squeeze-11572387644

Toy maker searches for new CFO and will restate some earnings in resolution that removes roadblock to refinance debt; stock jumps

Mattel Inc. MAT -0.42% ’s chief financial officer is leaving, and the company is restating some past earnings after completing an investigation into accounting issues raised in a whistleblower letter.

The investigation found shortcomings in the toy maker’s accounting and reporting procedures but concluded that the actions didn’t amount to fraud.

Shares of the maker of Barbie dolls and Hot Wheels cars rose more than 20% in post-market trading as the resolution, coupled with strong third-quarter earnings, removes a roadblock to the company’s plans to refinance debt due next year. The whistleblower letter, disclosed in August, abruptly nixed plans to raise debt at the last minute.

The investigation found that Mattel understated its net loss by $109 million in the third quarter of 2017 due to an error calculating its tax valuation allowance, and then understated fourth-quarter results that year by a similar amount. The error wasn’t reported to the CEO at the time or the audit committee.

The letter also questioned the independence of the lead auditor, PricewaterhouseCoopers LLP. The investigation found that the lead partner at the accounting firm violated some independence rules by recommending candidates for Mattel’s senior finance positions. Mattel said that PwC replaced its lead partner and other members of its audit team that deals with the toy maker but will continue as auditor.

Mattel has launched a search for a new CFO to succeed Joe Euteneuer, who joined the company in late 2017. He will leave the company after a six-month transition period.

A Mattel spokesperson said Mr. Euteneuer was unavailable for comment.

PwC said in a statement that both the accounting firm and Mattel had concluded PwC is “objective and impartial.” The firm “takes independence very seriously and has robust policies and procedures in place to identify and address potential threats to independence,” the statement said.

Mattel otherwise reported a sharp jump in profit, as ongoing cost cuts benefited the bottom line while overall sales rose for the second straight quarter.

In an interview, Mattel Chief Executive Ynon Kreiz said tariffs had minimal impact on the El Segundo, Calif.-based company in the latest quarter.

Continued in article

d, this book could serve as a good embarkation point or possibly as a supplementary text. Additionally, the book could deliver a valuable subject-matter overview by providing structure for further study. Combining this book with appropriate and desired supplemental materials may be a good strategy as well.

Bal's work makes an important contribution to an emerging and important area of tax law. Her work is well-researched, well-written, and well-timed. This book could be particularly useful in a course on emerging issues in taxation, or as a supplement to a technology taxation or an income taxation course. This book would be a good resource for use most likely in a graduate accounting (M.S.A.) program, a graduate tax (M.S.T.) program, or a graduate tax law (LL.M.) program. Moreover, the book would be an excellent reference source for anyone who is interested in taxation of virtual currency.


Plano, Arlington Texas among most fiscally sound cities in US; Houston, Fort Worth among worst ---
https://www.data-z.org/news/detail/plano-arlington-texas-among-most-fiscally-sound-cities-in-us-houston-fort-worth-among-worst
 


New York City considers $500 million bailout for its taxi drivers ---
https://www.data-z.org/news/detail/new-york-city-considers-500-million-bailout-for-its-taxi-drivers


Valdosta State dean, 14 others arrested in child sex sting ---
https://www.foxnews.com/us/valdosta-state-dean-14-others-arrested-in-child-sex-sting


Wells Fargo agrees to $3B settlement in fake accounts case ---
https://www.foxbusiness.com/markets/wells-fargo-settlement-fake-accounts


Dark Web --- https://en.wikipedia.org/wiki/Dark_web

A dark web tycoon pleads guilty. But how was he caught?
https://www.technologyreview.com/s/615163/a-dark-web-tycoon-pleads-guilty-but-how-was-he-caught/

PwC Probably Did Celebrate When It Helped Mattel Cover Up an Accounting Error ---
https://goingconcern.com/pwc-probably-did-celebrate-when-it-helped-mattel-cover-up-an-accounting-error/

Four Detroit-Area Physicians Found Guilty of Health Care Fraud Charges for Role in Over $150 Million Health Care Fraud Scheme ---
https://www.justice.gov/opa/pr/four-detroit-area-physicians-found-guilty-health-care-fraud-charges-role-over-150-million

Owner of DC-Area Tax Preparation Business Pleads Guilty to Fraud Filed False Returns for Herself and Clients ---
https://www.justice.gov/opa/pr/owner-dc-area-tax-preparation-business-pleads-guilty-fraud

The latest risk coronavirus poses to investors is 'substantial' fraud, SEC warns ---
https://markets.businessinsider.com/news/stocks/coronavirus-sec-warns-investors-fraud-scams-combat-wuhan-stocks-microcaps-2020-2-1028873663

How 2 filmmakers got FBI agents to reveal the details of a $24 million McDonald's Monopoly game fraud scheme run by the Mafia ---
https://www.businessinsider.com/how-hbo-mcmillions-got-fbi-to-talk-mcdonalds-monopoly-fraud-2020-1

The McDonald's Monopoly game was hugely popular in the late 1980s and through the 1990s.

You would walk into a McDonald's and, with your purchase, there would come a Monopoly game piece stuck to your soda or meal that, if you got really lucky, would reveal you won prizes like a new car, $100,000, even $1 million.

And people actually won. McDonald's even did a commercial showing some of the winners back in 1995.

But it turns out many of the people who handed in the $1 million and other big cash pieces didn't get them from buying fries at their local McDonald's. For over a decade, $24 million was stolen from the company by people who fraudulently played the Monopoly game.

It turns out the mob had obtained possession of McDonald's Monopoly big game pieces unbeknownst to the fast-food chain. It was finally revealed when an anonymous tip sent to the FBI offices in Jacksonville, Florida was looked into in the early 2000s.

HBO's six-part documentary series, "McMillions" (debuting Monday), uncovers how it all went down with shocking (and often hilarious) details from FBI agents, McDonald's executives, and some of the people who were in on the scam that was concocted by someone only known as "Uncle Jerry."

It's a too-good-to-be-true story that even its filmmakers, James Lee Hernandez and Brian Lazarte, still can't believe really happened.

 It all began with some late-night reading on Reddit

In 2012, Hernandez was randomly scrolling through Reddit before going to bed one night when he came across a "Today I Learned" he found surprising: "TIL: Nobody ever really won the McDonald's Monopoly game."

Clicking the link that accompanied the factoid didn't give him much satisfaction, as it was a brief story that didn't give many details as to what happened. And a further search around the internet also didn't bear any fruit.

"In this day and age, if you can't find out every single detail about something on the internet it's mind blowing," Hernandez told Business Insider over the phone alongside Lazarte from the Sundance Film Festival, where the first three episodes of their series got their world premiere.

For a documentary filmmaker, the lack of information out there on a topic like this just begs to be made into a movie. And it began Hernandez's obsession with the Monopoly scandal.

At the time, Hernandez was making a living working behind the camera on TV, commercials, and making branded content, so during any free time he would fall back into the rabbit hole and search for any kind of leads to how the Monopoly game was compromised. He even put in a Freedom of Information Act request to obtain court records of what was uncovered in the FBI's investigation. Hernandez said it took over three years to finally get that information. But when he did, he received a treasure trove of insight.

Continued in article

Current and past editions of Bob Jensen's blog called Fraud Updates ---
http://faculty.trinity.edu/rjensen/FraudUpdates.htm 

 


U.S. Trade Deficit Narrows for First Time in Six Years ---
https://www.wsj.com/articles/u-s-trade-deficit-narrowed-in-2019-for-first-time-in-six-years-11580909498?mod=djemCFO


Three ways to defeat ransomware: Plan, prevent, not pay ---
https://www.journalofaccountancy.com/newsletters/2020/feb/defeat-ransomware.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=10Feb2020


FASB proposes changes to not-for-profits’ reporting of gifts-in-kind ---
https://www.journalofaccountancy.com/news/2020/feb/fasb-not-for-profit-reporting-gifts-in-kind-22941.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=11Feb2020


More Companies are Opting for Hedge Accounting ---
https://www.cfo.com/risk-management/2020/02/more-companies-are-opting-for-hedge-accounting/

Jensen Comment
The incentive for hedge accounting is to reduce earnings volatility (punishment) to trying hedge earnings or value. Whereas speculators cannot qualify for hedge accounting, hedgers can qualify to the extent their hedges are effective. The ineffective part of a hedge does not qualify for hedge accounting. It's common for hedges to be partly ineffective. For example, when hedging corn prices in Fenton, Iowa with corn prices in Chicago allowance must be made for transportation costs to Chicago. Also , when hedging Fenton, Iowa corn prices with corn exchange prices in Chicago the corn exchange prices are based upon a "standard" quality of corn in Chicago whereas the corn in Fenton, Iowa may differ from that standard.

Bob Jensen's free tutorials on hedge accounting and accounting for derivative financial instruments in general can be downloaded from from
http://faculty.trinity.edu/rjensen/caseans/000index.htm
Warning:  Intermediate financial accounting textbooks are almost worthless when it comes to accounting for derivatives contracts and hedging. This specialty is only covered superficially in the CPA examination.

I consider some of the best learning material for this specialty to be the original examples in FAS 133 and FAS 138. Sadly, most of those examples were not included in the Codification database. You have to download the original FAS 133 and 138 standards and possibly my Excel learning modules focusing on those examples.

The DIG examples are also important at
http://faculty.trinity.edu/rjensen/acct5341/speakers/133glosf.htm
Look for the green modules.


Excel:  Five Excel Functions You May Not Know ---
https://www.fm-magazine.com/news/2020/feb/helpful-excel-functions-aggregate-eomonth-formulatext-n-textjoin.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=25Feb2020

Excel: The easy way to join text in Excel ---
https://www.journalofaccountancy.com/issues/2020/feb/join-text-in-excel-textjoin-function.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=17Feb2020


EU finance ministers have added four places to a blacklist of tax havens: Palau, Panama, Seychelles and the Cayman Islands.---
https://www.politico.eu/article/cayman-islands-panama-land-on-eu-tax-haven-blacklist/?utm_source=smartbrief&utm_medium=referral&utm_campaign=sbtrial


State and Local Tax (SALT) Deduction --- https://smartasset.com/taxes/trumps-plan-to-eliminate-the-state-and-local-tax-deduction-explained

How Not to Mislead With Statistics

We Don’t Know If The SALT Cap Is Driving Away Residents Of High-Tax States ---
https://www.taxpolicycenter.org/taxvox/we-dont-know-if-salt-cap-driving-away-residents-high-tax-states

Jensen Comment
This is a classic problem of correlation versus causation and the article avoids some of the pitfalls of misleading statistics.
It's also a problem with anecdotal evidence in surveys. People who move to another state and are also angry with the SALT cap may report that SALT is the reason for moving when in fact it is only one of many reasons for moving. The decision to move out of state is usually a complicated multivariate decision.

The title of the above article is honest about being unable to report that the SALT Cap is the leading reason that a majority of people are leaving the high tax (blue) states. There are instances where it is a leading reason, but most likely there are also many more reasons that are more important to the final decision to move. It's long been known, before the SALT Cap that retirees who move out of state choose lower tax states like Florida, Texas, Washington, and New Hampshire.  But there's also a weather factor and a living cost factor. Erika and I chose to retire in Hampshire rather than Maine because of both lower NH taxes and lower real estate prices when comparing NH mountains with Maine shoreline. But other factors made us want move from Texas, especially the heat and humidity and nearness to some of our widely-dispersed children in California, Wisconsin, and Maine.

The Governor of New York is placing a lot of blame on the SALT Cap as a reason so many people are leaving New York. However, he probably wants to draw attention away to the chronic New York problem of high state income taxes, inheritance taxes, increasing crime, weather, and cost of living. Deep down he probably hates that the SALT cap increased taxpayer resistance to increasing taxes in New York ---  ---
https://www.investors.com/politics/editorials/cuomos-budget-rich-high-taxes/
Of course a lot of people are also moving into New York because its a popular sanctuary state for illegal immigrants.


Pritzker’s (Illinois) accounting gimmicks can’t fix pension crisis, but real reform can ---
https://www.illinoispolicy.org/pritzkers-accounting-gimmicks-cant-fix-pension-crisis-but-real-reform-can/

. . .

The truth is all of these accounting games cannot come close to solving the pension crisis or freeing up resources for government services and tax relief. As credit rating agency S&P Global Ratings put it, Illinois needs a “practical reduction in liabilities,” which means a reduction in the value of expected future pension benefits.

The only way left to accomplish that is with a constitutional amendment allowing for reductions in the growth of future, not-yet-earned pension benefits. A deeper dive into Pritzker’s original five-point plan shows the proposals range from ineffective to counterproductive.

Continued in article


Bankruptcy in the USA --- https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States

Can you get rid of your student loans by filing for bankruptcy?
https://theconversation.com/can-you-get-rid-of-your-student-loans-by-filing-for-bankruptcy-130995




EY:  Register for the EY Q1 2020 financial reporting update webcast
https://www.ey.com/en_gl/webcasts/2020/03/what-you-need-to-know-for-q1-2020-financial-reporting


EY:  GASB issues omnibus statement to address practice issues ---
https://www.gasb.org/cs/Satellite?c=Document_C&cid=1176174144351&pagename=GASB%2FDocument_C%2FDocumentPage

The GASB issued final guidance to address accounting and financial reporting issues identified during the implementation and application of certain GASB pronouncements. The issues covered in Statement No. 92, Omnibus 2020, relate to leases, intra‑entity transfers of assets, postemployment benefits, government acquisitions, risk financing and insurance-related activities of public entity risk pools, fair value measurements and derivative instruments.

Some of the requirements are effective upon issuance, while others are effective for fiscal years beginning after 15 June 2020. Earlier application is encouraged and is permitted by topic.


EY:  SEC issues guidance on disclosures about key performance indicators and other metrics in MD&A, and SEC proposes eliminating certain Regulation S-K requirements and enhancing MD&A disclosures --- |
https://www.ey.com/Publication/vwLUAssetsPI/TothePoint_08279-201US_KPI_4February2020/$FILE/TothePoint_08279-201US_KPI_4February2020.pdf


EY:  FASB staff issues Revenue Recognition Implementation Q&As

 The FASB staff compiled publicly available Transition Resource Group (TRG) memos and other educational resources previously issued on the implementation of Accounting Standards Codification 606, Revenue from Contracts with Customers, into a new document called Revenue Recognition Implementation Q&As. The staff’s objective in compiling this document, which is organized by subject matter (e.g., step of the revenue model), is to make the available educational resources easier to navigate and not to issue any new implementation guidance.

Go to
https://www.fasb.org/cs/ContentServer?c=Document_C&cid=1176174093597&d=&pagename=FASB%2FDocument_C%2FDocumentPage


A Management Focused Tool for Developing Pro-Forma Financial Statements

International Journal of Management and Marketing Research, v. 12(1), p. 61-86, 2019

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3523830
26 Pages Posted: 18 Feb 2020

Terrance Jalbert

University of Hawaii - Department of Business Administration

Date Written: 2019

Abstract

Developing pro-forma financial statements and associated financial analysis is an important undertaking for new and existing business alike. This paper reports user experiences with a spreadsheet-based method for developing pro-forma financial statements as developed in Jalbert (2017). The paper also presents improvements and enhancements to the template. The forecasting approach reported on here requires users to simply enter their firm-specific figures. As such it is particularly useful for individuals without extensive training in finance. The tool does not require programming or the use of plug figures and does not result in circular references which are all common to other tools. The template provides a powerful tool for entrepreneurs and for teaching management, accounting and finance courses. The tool is suitable for both novice and advanced users.

Keywords: Financial Statements; Pro-Forma Financial Statements, Forecasting, Entrepreneurship, Small Business Finance, Accounting for Small Businesses

JEL Classification: A2, G31, M13, M41


Discretionary Disclosure in Interim Financial Reports of Listed Companies in Vietnam

Vietnam’s Socio-Economic Development, 24(99), 3-16, 2019

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3523597
17 Pages Posted: 18 Feb 2020

Nguyen Huu Cuong

Danang University of Economics - The University of Danang

Quynh Duong

Da Nang Markets Development and Management Company

Date Written: November 30, 2019

Abstract

Discretionary disclosure refers to differences in the depth of disclosed items that managers can exercise in disclosing information because there are no specific requirements of the disclosure extent. This paper investigates discretionary disclosure levels in interim financial reports by Vietnamese listed companies and identifies the influencing factors. Discretionary disclosure is measured by employing the researcher-based index and the determinant factors are examined by estimating a regression model. The results indicate that discretionary disclosure levels in interim financial reports in Vietnam are relatively low, and positively associated with board independence, and solvency, but negatively associated with state ownership. Accordingly, the study provides some suggestions to improve discretionary disclosure in interim financial reports in Vietnam and enhance the transparency of financial information on the stock exchanges.

Keywords: Discretionary Disclosure; Interim Financial Reports, Determinant Factor, Interim Reporting, Vietnamese Accounting Standard 27

JEL Classification: M41


Rule- vs. Principle-Based Accounting Standard and Earnings Characteristics : An Analysis Using ASC 606

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3534039
51 Pages Posted: 13 Feb 2020

Kyungran Lee

The University of Hong Kong - School of Business

ShinWoo Lee

Columbia University - Columbia Business School

Date Written: February 6, 2020

Abstract

We examine the effect of the adoption of the new revenue recognition standard (ASC 606) on earnings characteristics and how it, in turn, affects the stock and the debt market. The new rule standardizes, simplifies, and harmonizes previous revenue recognition practices among companies, which is a transition from a rule-based accounting standard to a principle-based accounting standard. We find that the new rule decreases earnings predictability and it is associated with the increased discretion in preparing earnings numbers. In addition, the use of earnings-based covenants decreases in debt contracting. However, we do not find evidence that the new standard is associated with an increase in earnings management behavior. In terms of the stock market response, the earnings response coefficient (ERC) does not change after the new rule overall. However, it has increased for firms with high institutional holdings after the adoption and decreased for firms with low institutional holdings. Our analysis supports the idea that this is due to different investors interpreting the new disclosure associated with ASC 606 differently.

Keywords: ASC 606, principle-based accounting standard, rule-based accounting standard, earnings characteristics, debt covenant, institutional investors

JEL Classification: G18, M41, M48


Accounting for Convertible Bonds: Current Practices and Proposed Changes

Accounting & Taxation, v. 11 (1) p. 21-34

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3480699
14 Pages Posted: 11 Feb 2020

Deanna Burgess

Florida Gulf Coast University

Adrian Valencia

Florida Gulf Coast University - Department of Accounting, Finance & Business Law

Ara Volkan

Florida Gulf Coast University

Date Written: 2019

Abstract

Convertible bonds are financial instruments used by corporations to raise funds. Investors buy them for both their return and potential equity feature. To make the bonds more attractive to investors and to lower the bond interest rate, the corporations give investors the opportunity to receive equity shares at a time of their choosing during the life of the bonds. According to the generally accepted accounting standards issued by the Financial Accounting Standards Board, convertible bonds in the U.S. are accounted for as bonds, ignoring the equity option imbedded in these instruments. In the rest of the world, convertible bonds are accounted for according to the international financial reporting standards of the International Accounting Standards Board. Under international financial reporting standards, convertible bonds are bifurcated into liability and equity components. Should the U.S. standards change? Will such a change result in financial statements that are more transparent and representationally faithful? This paper aims to answer these questions and propose recognition, measurement, and reporting procedures that will implement the answers

Keywords: Convertible Bonds, GAAP, IFRS, IASB, FASB

JEL Classification: M41, M48


IAS 21 - The Effects of Changes in Foreign Exchange Rates: A Review of Concepts and Related Issues

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3519984
20 Pages Posted: 10 Feb 2020

Omer Cayirli

Manisa Celal Bayar University

Date Written: January 10, 2020

Abstract

As interaction of companies across borders increases, accounting for foreign exchange transactions as well as translation of financial statements has become an important topic. An entity is exposed to foreign exchange gains or losses through investments or balances in a foreign currency or ownership in a foreign operation. In order to assess these risks and the related impact, foreign currency transactions and balances should be accounted accurately. IAS 21 aims to set the framework for inclusion of foreign currency transactions and foreign operations in the financial statements of an entity and translation of financial statements into a presentation currency. Foreign exchange transactions and translations inevitably affect an entity’s net income and/or other comprehensive income. Despite IAS 21 setting the framework for accounting for these effects, management still may use some judgement in practice. When analyzing financial statements, users of information should be aware of the underlying methods used for accounting for exchange rate differences since results of analysis of financial statements is largely dependent on these methods.

Keywords: IAS 21, Foreign Exchange Rates, Foreign Exchange Transactions, Foreign Exchange Translations, Other Comprehensive Income

JEL Classification: M41


Deep Learning by a Tensor Network Algorithm Provides Hyperfast Training of Business Finance

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3518838
38 Pages Posted: 6 Feb 2020 Last revised: 17 Feb 2020

Alfredo Lacayo Evertsz

Florida International University - College of Business

Lizelia Bravo Boza

Qbit Solutions Research Team

Date Written: January 12, 2020

Abstract

We show how tensor network theory and deep learning theory can be combined to provide a ground-state network (Orús, 2014) of financial information for hyperfast training of business finance. The resulting minimal-complexity structure encodes an infinite number of probable outcomes into a finite graphical alphabet of 12 potential dynamic relations, called double-entries; the pixels of financial information. Using the proposed many-layered (Serb & Prodromakis, 2019), financial wave function (Schrödinger, 1935), as a computational resource (Biamonte, 2016), allows hyperfast processing of financial information, one pixel at a time; see fig. 1. This reveals a highly entangled architecture (Levine, et al., 2019), where complexity scales linearly, not exponentially (Huggins, et al., 2018). The new algorithm trains people on the fundamentals of business finance in about 10 hours; a process that would take at least one year with the conventional scheme. Results are based on solid empirical evidence.

Keywords: Financial Literacy, Tensor Networks, Deep Learning, Complexity, Emergence, Information Reuse, Accounting


Real Effects of Financial Reporting on Innovation: Evidence from Tax Law and Accounting Standards

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3519300
58 Pages Posted: 6 Feb 2020

Braden Williams

University of Texas at Austin - Department of Accounting

Brian Williams

Indiana University - Kelley School of Business - Department of Accounting

Date Written: November 21, 2019

Abstract

This study examines whether financial accounting standards moderate the effectiveness of tax policy. Specifically, we examine whether myopic managers’ focus on short-term financial reporting reduces the effectiveness of certain tax subsidies that incentivize innovation. We employ a novel setting, the issuance of Financial Interpretation No. 48 (FIN 48), which changed the financial reporting for some important, yet uncertain, tax incentives to innovate. For firms most affected by the standard change, we find evidence of reduced investment in innovation, reduced sensitivity of investment to tax incentives, and reduced future innovative output. Consistent with earnings myopia, we find evidence suggesting the effect is mitigated for firms with high institutional ownership and high equity compensation. These results indicate financial reporting myopia has real effects on innovation and can reduce tax policy effectiveness. The results further suggest that tax policymakers should consider both financial reporting and cash flow incentives in designing effective tax policy.

Keywords: Innovation, Accounting Recognition, FIN 48

JEL Classification: H25, M41


Does TV Advertising Increase Online Sales: The Role of Inter-Temporal Substitution

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3530105
32 Pages Posted: 6 Feb 2020

Anja Lambrecht

London Business School

Catherine E. Tucker

Massachusetts Institute of Technology (MIT) - Management Science (MS)

Xu Zhang

London Business School

Date Written: February 1, 2020

Abstract

Firms use offline advertising to drive online browsing and sales. However, while a recent literature has demonstrated a surge in online activity in the minutes following TV advertising, there is limited evidence on the extent to which offline advertising indeed leads to a sustained significant uptake in online sales. We investigate the effect of TV advertising on browsing and sales accounting both for the instant effect as well as for an aggregate effect across a time window covering multiple weeks. Using evidence from a field test conducted by an online travel company, we confirm similar findings as in previous literature that TV advertising has a positive instant effect on both online browsing and online sales. However, this instant effect does not translate into an increase in either browsing or sales over a period of multiple weeks, implying that the firm does not see an increase in revenue as a result of the TV advertising campaign. We document consumers' inter-temporal substitution as the mechanism behind this aggregate null effect. The findings indicate that rather than focusing on instantaneous spikes marketing managers should consider a longer time window when evaluating the effectiveness of TV campaigns on online purchases.

Keywords: Television Advertising, Online Shopping, Field Test, Channel, Inter-temporal Substitution

JEL Classification: L82, L86, M37


Problem Based Learning in Accounting: Where Are We Now?

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3517613
15 Pages Posted: 4 Feb 2020

Rafiuddin Ahmed

James Cook University, Townsville

Desti Kannaiah

James Cook University

Date Written: November 19, 2018

Abstract

Problem Based Learning (PBL) is a pedagogical approach to teaching content knowledge through structured or unstructured problems. The medical education literature is replete with its uses and effectiveness in teaching and learning medical curriculum for nearly five decades. PBL has started to emerge in accounting education context over the last two decades but its progress is rather slow compared to the medical or other disciplines. This paper examines the available evidence on PBL over the last two decades in accounting education context and synthesizes the progress of this approach in teaching and learning of accounting curriculum. The paper then evaluates the achieved outcomes that emerged from the synthesis and compares these achievements against the calls from different stakeholders to reform accounting curriculum to the changing demands in accounting education and practices.

Keywords: accounting education, medical education, problem-based learning, problems, pedagogical approach


 

Accounting Information Systems in the Blockchain Era

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3517142
35 Pages Posted: 3 Feb 2020

Olga Fullana

Universidad Internacional de la Rioja (UNIR)

Javier Ruiz

Universidad Complutense de Madrid (UCM)

Date Written: January 10, 2020

Abstract

In this paper we analyse the advantages that the application of blockchain technology brings to accounting information systems (AIS), but also highlight the potential issues with its use. We examine the use of blockchain against the background of the historical evolution of accounting information systems and explain the operational fit of this technology in AIS. We then analyse the pros and cons of the highly probable use of blockchain technology in accounting information systems. For this purpose, we review the relevant contributions on this subject in the accounting academic literature to date and classify them into four categories on the basis of their focus: Governance, transparency and trust; Continuous audit; Smart contracts; and Roles of accountants and auditors. We also analyze the early reactions of the accounting industry and regulators to this new technological environment.

Keywords: Triple-entry accounting, Blockchain, Accounting information system

JEL Classification: M40, M41, M42


The Blockchain Technology and Modern Ledgers Through Blockchain Accounting

Adalya Journal, Volume 8, Issue 12, December 2019

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3514501
13 Pages Posted: 29 Jan 2020

C. Vijai

St.Peter’s Institute of Higher Education and Research

S. M. Suriyalakshmi

affiliation not provided to SSRN

D. Joyce

affiliation not provided to SSRN

Date Written: December 30, 2019

Abstract

Blockchain is one of the emerging technology in global. Blockchain is fundamentally an accounting and finance technology. In this paper, we discuss Blockchain technology in accounting and Distributed ledger technology (DLT), Triple-Entry Accounting and the Benefits of Blockchain-based accounting, a negative impact on Blockchain-based accounting. The focus on this paper is to explain an overview of the current Blockchain market size, leading countries in Blockchain technology, major companies using Blockchain Technology, Blockchain formation, types of Blockchain, and core components of Blockchain.

Keywords: Blockchain technology, Blockchain Accounting, Distributed ledger technology (DLT), Blockchain technology in India, crypto currencies, Triple-Entry Accounting,

JEL Classification: M15, M41, O14, O33, O55


Sins of the Father: The Effect of a Parent Firm's Accounting Misconduct on Current and Former Subsidiaries

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3516833
58 Pages Posted: 30 Jan 2020

Steven Utke

University of Connecticut - Department of Accounting

Jingyu Xu

University of Connecticut - Department of Accounting

Date Written: January 7, 2020

Abstract

We exploit a unique setting to examine how managerial and economic connections affect the current and former subsidiaries (“subsidiaries”) of a parent firm undergoing a restatement and bankruptcy. The demise of Enron and the varying nature of ties between Enron and its four publicly traded subsidiaries allow us to examine if capital market reactions for each of the subsidiaries surrounding Enron’s failure vary with the nature of their connections to Enron. We observe no significant differences in contemporaneous market reaction regardless of the nature and strength of connections between Enron and the subsidiaries, providing two main insights. First, over the year following the Enron events, those subsidiaries with ownership or accounting ties but with weak economic ties performed in-line with the industry, consistent with the lack of a differential market reaction across these sets of firms. This result contrasts with recent studies finding evidence of manager fixed effects affecting accounting choices. Second, we find that Enron’s most economically connected subsidiary (predictably) went bankrupt shortly after Enron, suggesting a market under-reaction at the time of the Enron events. Additional analysis provides some limited evidence that low institutional ownership or slow analyst forecast updating partly explains this under-reaction. Our study adds to the literature on restatements, management reputation effects, peer information transfer, and the market’s ability to react to specific fundamental information.

Keywords: Restatement, Bankruptcy, Information Transfer, Management Reputation

JEL Classification: G14, M41


Four Decades of Audit Committee Research: A Bibliometric Analysis (1977–2018)

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3496040
43 Pages Posted: 29 Jan 2020

Joel Behrend

University of Duisburg-Essen, Mercator School of Management

Marc Eulerich

University of Duisburg-Essen, Mercator School of Management

Date Written: November 30, 2019

Abstract

In the post-SOX era, research on audit committees (AC) has evolved into a distinct scientific domain devoted to the analysis of corporate oversight and its effect on financial reporting and internal control quality. Numerous studies have contributed to the identification of potential determinants of AC effectiveness and possible performance effects associated with the AC oversight process. Nevertheless, the scarcity of studies that offer a holistic view on AC research impedes a profound understanding of the antecedent elements and emerging themes in this field within recent decades. Applying a combination of citation, co-citation, and social network analysis to 92 articles published in six leading accounting journals, we comprehensively map the intellectual structure of AC research. Thus, we contribute to the literature by offering insights on major publication trends, chronological developments, and underlying relationships between different strands of the AC literature as part of the accounting discipline. Our findings reveal a high level of homogeneity in AC-related studies published in the leading accounting journals, especially when it comes to sample selection and methodological approaches.

Keywords: Audit Committee; Bibliometrics; Audit Committee Effectiveness, Sarbanes Oxley Act, SOX

JEL Classification: G34, G38, M40, N01


Manipulation of Pension Discount Rates: Biases in Estimation and International Evidence

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3514448
37 Pages Posted: 27 Jan 2020

Jiaman Xu

University of Edinburgh - Accounting and Finance Group

Seth Armitage

University of Edinburgh - Accounting and Finance

Ronan Gallagher

University of Edinburgh - Edinburgh Business School

Date Written: December 24, 2019

Abstract

This study examines manipulation of discount rates in the valuation of defined-benefit (DB) pension obligations. We show analytically and by simulation that estimation methods used by existing studies suffer from systematic bias which increases the probability of type I error (erroneous inference of manipulation). We develop new measures of discretion which substantially reduce the estimation bias. Using an international sample of DB sponsors reporting under IFRS, we find that upward use of discretion is positively related to funding deficits, confirming that manipulation takes place. We also find that the efficacy of country-level regulation affects how closely discount rates track the relevant benchmark bond rate.

Keywords: Defined Benefit, Pension, Discount Rate, Manipulation, Accounting Standards

JEL Classification: M41, J32



 

From the CFO Journal's Morning Ledger on February 25, 2020

General Electric last year (2019) shed roughly 78,000 employees, or more than a quarter of its workforce, leaving the American industrial giant with the same number of employees as it had back in 1951.

The company ended 2019 with about 205,000 global workers, down from about 283,000 a year ago, according to GE’s annual report filed on Monday. In the U.S., its workforce dropped to 70,000.

The 2019 reduction is almost entirely explained by GE’s decision to part with two units: the oil-and-gas division and the transportation business. The oil business had more than 65,000 employees, while the transportation unit had more than 9,000.

GE Capital --- https://en.wikipedia.org/wiki/GE_Capital#Recent_news

On March 13, 2014, GE Capital announced that it would spin its North American consumer finance division off under the new name Synchrony Financial through an initial public offering (IPO).[66] On July 31, 2014, Synchrony Financial raised $2.9 billion in its IPO when GE sold 125 million shares (15%) of the company.

On April 10, 2015, it was announced that GE would sell most of GE Capital's commercial and consumer businesses within two years, focusing instead on its leasing businesses connected with GE's manufacturing businesses. The company reached an agreement to sell the majority of its property business to Wells Fargo and Blackstone, valued at $26.5 billion. GE Chairman and CEO, Jeff Immelt, announced the plan in a letter to shareholders. It is "a big change for GE," but he said it is "right for the company." Under the plan, Immelt said that GE expects more than 90% of its earnings will be generated by its industrial businesses by 2018, up from 58% in 2014.GE Capital, meanwhile, will make up 10% of the company's revenues by 2018, down from 46% in 2001.[70] Shareholders applauded the announcement, pushing shares in G.E. up nearly 11 percent, to $28.51, levels unseen since the financial crisis. However, the downsizing is no small matter for a company whose empire encompasses 175 countries and employs about 305,000 people.

In June 2015, the Canada Pension Plan Investment Board announced it would acquire GE Capital's private equity lending portfolio for $12 billion.[

 

 

 


From the CFO Journal's Morning Ledger on February 24, 2020

Good morning. Finance chiefs at manufacturers increasingly reliant on China for their supply chain are seeing shortages ripple around the globe due to the coronavirus outbreak.

Two decades of economic integration has made regional economies tethered to China, as companies turn to the country’s factories for many intermediate and finished goods. With fears of contagion keeping Chinese workers home, production is getting pinched. In the U.S., General Motors unions have warned that a lack of China-made parts could slow assembly lines at sport-utility vehicle plants in Michigan and Texas; the company said it is working to mitigate the risk. Elsewhere, the story is the same—even in places that might seem remote.

A month after the epidemic forced factories into limbo past their usual Lunar New Year break—a handful are reopening—officials and economists are warning that an extended Chinese shutdown could cripple global manufacturing and cost the world up to $1 trillion in lost output.

Global stocks started the week sharply lower as cases of coronavirus spread outside China. Over the weekend, the Group of 20 major economies warned that the fast-spreading coronavirus posed a serious risk to global growth and agreed to take action should the epidemic’s impact intensify. French Finance Minister Bruno Le Maire said the virus illustrated the need for countries to become less dependent on other nations for supply chains. “We can no longer depend at 90% or sometimes 100% of goods that are produced in foreign countries,” he said. “That’s the long-term consequence.”

Small U.S. businesses that sell everything from bicycles to custom software are struggling with the effects of the coronavirus outbreak on their supply chain. “We are against the wall,” said Sanjay Sadana, president of American Scientific LLC, which makes and imports scientific equipment for students. Mr. Sadana said the Columbus, Ohio, company might lay off a few of its 10 employees if its supply chain issues don’t get resolved soon.

·         Why Many Businesses Will Be on the Hook for Coronavirus Losses

·         Coronavirus Hits U.S. Business Activity

 

From the CFO Journal's Morning Ledger on February 21, 2020

           The accounting and audit regulator for the U.K. and Ireland said it would review how companies and auditors are assessing and reporting on the impact of climate change on their business.


From the CFO Journal's Morning Ledger on February 21, 202

Penn Mutual Executive on Challenges of New Accounting Rule

Finance chiefs at U.S. insurance companies are preparing to implement a new accounting standard affecting how they value their long-term insurance contracts. The Financial Accounting Standards Board rule requires insurers to review at least annually—and, if necessary, update—the assumptions they use to measure the value of their insurance obligations. Private U.S. insurers have until the fiscal year after Dec. 15, 2023, to implement the rule. Insurers that typically file with the Securities and Exchange Commission have until the fiscal year after Dec. 15, 2021.

Dave Raszeja, chief risk officer of Horsham, Pa.-based insurer Penn Mutual Life Insurance Co., spoke with CFO Journal’s Mark Maurer about the potential impact of the rule. Mr. Raszeja will become the company’s finance chief on March 1.


From the CFO Journal's Morning Ledger on February 21, 2020

Good morning. Emerging-market companies sold a record amount of foreign-currency debt this year, taking advantage of low rates and investors’ appetite for better returns despite warnings about the growing risks of a global borrowing binge.

The growing debt pile leaves the companies vulnerable to any stark appreciation in the foreign currencies, which would drive up the cost of interest payments. Businesses that rely on domestic operations, such as real-estate firms, are particularly susceptible.

Investors, meanwhile, are taking on the uncertainties involved in putting funds into faraway businesses, with different standards of transparency and accounting practices. Any sudden shock to the global economy could see foreign funds rush out of emerging markets and into haven assets, leaving investors holding an illiquid pool of securities.

Businesses are refinancing their existing debt to lock in low rates ahead of any market volatility in the months leading up to the U.S. presidential elections, or in case unforeseen events like the coronavirus epidemic roil markets. The cost of borrowing has dropped for emerging market companies, whose bonds are generally priced in reference to returns generated by the safest assets: U.S. government bonds.


From the CFO Journal's Morning Ledger on February 19, 2020

The eur ticked lower against the dollar to trade at near its lowest level in almost three years after a measure of economic expectations in Germany dropped.

The data presents a picture at odds with the stock market, where the Stoxx Europe 600 is up 4.8% this month and the S&P 500 is up 4.5% over the same period, said Lauri Hälikkä, a foreign-exchange and fixed-income strategist at Sweden’s
SEB Bank
.


From the CFO Journal's Morning Ledger on February 18, 2020

Good morning. Apple became the first major U.S. company to say it won’t meet its revenue projections for the current quarter due to the coronavirus outbreak, which it said had limited iPhone production for world-wide sales and curtailed demand for its products in China.

The tech giant had projected last month record revenue for the current quarter of between $63 billion and $67 billion, which it said was a wider than normal range due to the virus. The technology giant didn’t provide on Monday an updated sales estimate, saying that the situation in China is evolving. It said it would provide more information when it holds its earnings call in April.

Apple’s announcement is the most prominent example yet of the broad ripple effects of the coronavirus on global business and markets as the outbreak continues to spread, hitting smartphone sales and commodity prices and delaying production across industries.

The difficulties are extending into supply chains around the world as assembly lines from Asia to Europe depend upon parts moving swiftly from China into their plants.

Volkswagen said Monday it would postpone production restarts at some Chinese plants for another week. Fiat Chrysler Automobiles said last week it temporarily halted production in Serbia because it couldn't get parts from China, which continues to deal with manufacturing delays as it seeks to contain the spread of the virus.

·         Gilead’s Coronavirus Drug Trial Slowed by Lack of Eligible Recruits

·         China’s Central Bank Cuts Rate on Key Lending Facility

·         Outbreak Brings Its Own Kind of Pain to Small Businesses

·         Cabin Fever: Working From Home Tests Employees’ Endurance


From the CFO Journal's Morning Ledger on February 14, 2020

McClatchy, the second-largest U.S. newspaper group by circulation, filed for bankruptcy protection, a move that comes as the nation’s newspaper industry is struggling to cope with a sharp decline in print advertising and the challenges of building a robust digital business.

Jensen Comment
This is especially bad news from the standpoint of financially supporting news reporters, especially those covering the local communities. Newspapers are especially important in restraining corruption in city and county governments that will likely run amuck without local newspaper watchdogs (think of Miami without the Miami Herald, Kansas City without the Kansas City Star, California state government without the Sacramento Bee, etc.

The social networks and Internet news services that people now read for news are largely re-reporting news dug up by local newspapers. The Associated Press does not send reporters to cover school board meetings and city hall meetings in Littleton, NH.


From the CFO Journal's Morning Ledger on February 12, 2020

U.S. companies are paying more for insurance, a reversal after years of flat or declining rates for property and liability policies.

Insurers have raised prices aggressively in the past year on companies of all sizes across the country. And they have warned price hikes are likely to continue. The turnabout underscores a challenging landscape for U.S. insurers following several years of large catastrophe losses and continued low interest rates, which have weighed on their investment returns.


From the CFO Journal's Morning Ledger on February 12, 2020

Credit-Loss Standard Could Benefit Lenders, Study Says

A new accounting standard on credit losses could prompt federal banking regulators to set set looser capital requirements for financial institutions—a potential benefit for lenders that have largely criticized the rule, new academic research suggests.

The rule known as Current Expected Credit Losses, which began to go into effect for large public banks in December, requires lenders to record expected future losses as soon as loans are issued. It is expected to make lenders more prudent because they have to form expectations of losses and write down risky loans that are nonperforming, thus allowing banking regulators to ease requirements for lenders holding capital, according to the study. CECL and capital requirements could serve as substitutes to control excessive risk-taking, the research suggests.

As a result, looser capital requirements would spur lenders to provide more loans, thus strengthening their bottom line and aiding the economy, said Haresh Sapra, an accounting professor at the University of Chicago and one of the study’s authors.


From the CFO Journal's Morning Ledger on February 12, 2020

Good morning. U.S. corporations accelerated deductions and deferred income to maximize the benefits of the 2017 tax-rate cut, contributing to a large temporary drop in federal corporate-tax revenue in 2018, according to newly released data.

Companies made the moves as Congress was cutting the corporate tax rate to 21% from 35%. Such moves were anticipated and discussed at the time, but the data from the nonpartisan Joint Committee on Taxation show the magnitude of the transactions and help explain revenue fluctuations whose causes were then unclear.

Corporate tax receipts in calendar year 2018 declined 32% before rising 25% in 2019, according to the joint committee. Those numbers don’t directly align with tax years because of when and how companies pay. Nevertheless, as the rate cut was happening, the incentives were clear for companies. They wanted to take as many deductions as possible in 2017 and push as much income into 2018 as possible.

The reverse could be true if Democrats win the White House in November and follow through on their campaign promises to raise tax rates. Companies would then have an incentive to accelerate income and defer deductions. One way to prevent these maneuvers would be to phase in tax cuts gradually, said Rebecca Kysar, a Fordham University law professor who testified at a House Ways and Means Committee hearing on Tuesday. In 2017, Republicans debated and then rejected that option.

This shifting across calendar years isn’t the only factor that has confounded revenue estimates since the tax law was enacted. Some companies also took advantage of gaps in the law to bring home foreign profits at low tax rates.


From the CFO Journal's Morning Ledger on February 10, 2020

Good morning. Finance chiefs at the smallest companies in the U.S. are having difficulty finding workers, at a time when more Americans are jumping into the labor market.

The number of people working at small companies didn’t budge last year, even as larger businesses continued to expand their payrolls for a record 10th straight year. The sluggishness in small-business hiring is particularly striking because it is the first time small companies haven’t added to their payrolls since 2010, when businesses of all sizes were recovering from the financial crisis. More than 5.3 million businesses have fewer than 20 employees, based on the latest data available from the Small Business Administration.

Small businesses are the first to feel the pinch from a tight labor market, but the challenges they face in adding workers highlight a threat to companies of all sizes and to the broader economy. Finding workers in today’s tight job market is particularly challenging for small-business owners who must juggle writing job postings and weeding through résumés with the normal demands of running a company. At some companies, tariffs and other business challenges have put pressure on head count.

U.S. hiring strengthened in January, helping juice up the economy at the start of the year. The employment report should comfort Federal Reserve officials about the state of the U.S. economy before the recent threats to global growth surfaced from the outbreak of the coronavirus in China last month.

Nearly three of four Americans who became newly employed in recent months came from outside the labor force—meaning they weren’t actively looking for work prior to the month they accepted a job. That is the highest ratio in three decades of records and helps explain how employers have consistently added jobs without stoking stronger wage growth.

·         Tech Firms Send Employees Into New York Classrooms

·         Parcel, Warehouse Companies Added 20,000 U.S. Jobs Last Month

·         A Hot, but Not Overheated, Jobs Report


From the CFO Journal's Morning Ledger on February 6, 2020

The U.S. Justice Department has reached out to more than a dozen companies in its antitrust probe of Google, including publishers, advertising technology firms and advertising agencies, as the company’s online ad tools become a major focus of the investigation, according to people familiar with the matter.

In recent months, the department has been posing increasingly detailed questions—to Google’s rivals and executives inside the company itself—about how Google’s third-party advertising business interacts with publishers and advertisers, the people say. That digital business was built largely on the company’s 2008 acquisition of the ad-technology firm DoubleClick.


From the CFO Journal's Morning Ledger on February 6, 2020

U.K. Regulator Plans to Boost Audit, Reporting Reviews

The U.K.’s regulator for auditors and accountants plans boost its audit and reporting reviews and extend its monitoring of audit firms—a move that comes amid concerns about the quality of audits in Britain.

The Financial Reporting Council said it intends to extend its monitoring to smaller audit firms beyond the Big Four—Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers.

It also plans to speed up enforcement actions by hiring additional lawyers and forensic accountants and to increase its budget by 13.2% to £47.2 million ($61.36 million) for its 2020-21 fiscal year.


From the CFO Journal's Morning Ledger on February 6, 2020

 Ernst & Young Caught in Criminal Bid Rigging for an Audit

Good morning. A rare criminal investigation into corporate auditing is focused on allegations that bid-rigging helped Ernst & Young win a competition run by Sealed Air Corp., according to people close to the probe. 

The scrutiny highlights the close ties that often exist between corporate executives and the major audit firms. Almost two decades since legal curbs were imposed on management’s oversight of audit firms in the wake of the Enron accounting scandal, executives’ influence on auditors remains a subject of concern and of enforcement activity.

William Stiehl and Carol Lowe were senior executives at Sealed Air when the bubble-wrap maker in 2015 appointed Ernst & Young. A decade earlier, the two were senior executives at Carlisle Cos. when that company also appointed Ernst & Young, public records show.

Securities and Exchange Commission officials and North Carolina prosecutors are investigating allegations that Mr. Stiehl rigged the competition to win Sealed Air’s multimillion-dollar audit contract in favor of Ernst and Young by tipping the Big Four firm details of rival KPMG‘s bid, the people said. Sealed Air last year fired both Mr. Stiehl and Ernst & Young.

Under a tightening of independence rules adopted after the Enron scandal, public companies are required to put the hiring and pay of their audit firm in the hands of an independent audit board committee. Critics say management still plays too big a role at many companies in hiring auditors.


From the CFO Journal's Morning Ledger on February 5, 2020

Good morning. Once the backbone of America’s shopping malls, department-store chains like Macy’s, J.C. Penney and Sears have been losing customers to the convenience of Amazon.com Inc. and the discounts found at off-price chains like T.J. Maxx.

That’s forcing finance executives to make deep cuts. Macy’s said Tuesday it plans to close 125 department stores over the next three years, while also cutting 2,000 corporate jobs and abandoning a dual headquarters in Cincinnati. Macy’s expects to save $1.5 billion annually by the end of 2022, with $600 million in savings in the current fiscal year.

Macy’s move could prompt finance chiefs at other retailers to delve further into a location-by-location analysis of profitability of bricks-and-mortar locations, Odeon Capital Group LLC analyst Alex Arnold tells CFO Journal. “Everyone’s going to go into triage mode,” he said.

CFOs at other bricks-and-mortar retail companies likely will review sales per square foot in their stores relative to leasing costs, among other factors, Mr. Arnold said. Macy’s competitors could reap the benefit of new customers from a store closing or suffer from a “dead-mall situation,” in which traffic dries up after a giant like Macy’s leaves, he said.

Retail CFOs are expected to exercise caution when it comes to investments and expansion and closely watch the economy in the year ahead, analysts have told CFO Journal.

Macy’s plans to close 125 of its stores over the next three years.

 


From the CFO Journal's Morning Ledger on February 4, 2020

Good morning. Travel restrictions related to the coronavirus outbreak could limit the work of external auditors, possibly leading to incomplete reports, late corporate filings or last-minute scrambles for deadline extensions, securities lawyers and former regulators tell CFO Journal.

Governments around the world have imposed entry restrictions on visitors from China, while major airlines canceled flights to China. The Big Four accounting firms, which conduct audits for many of the biggest U.S. public companies, have also imposed travel restrictions on employees.

The restrictions raise a question for U.S. companies preparing regulatory filings that depend on independent audits of operations: What happens when auditors can’t travel?

U.S. audit standards require some components such as inventory to be physically counted. Travel restrictions could make those kinds of tasks more daunting—especially in restricted zones, such as warehouses in or near the Chinese city of Wuhan, the epicenter of the fast-spreading coronavirus epidemic, which has infected more than 20,000 people and killed more than 400.

In certain cases, if enough companies are affected by an event or circumstances, the U.S. Securities and Exchange Commission might issue a deadline extension. The SEC provided relief for companies amid Hurricane Michael in 2018, for instance, by extending filing deadlines for certain reports and exempting some companies from certain provisions of federal securities laws.


From the CFO Journal's Morning Ledger on February 3, 2020

SEC Proposes Amending Corporate Disclosure Rules

The U.S. Securities and Exchange Commission is proposing changes to rules governing how companies disclose financial information —the latest move by the regulator to give executives more flexibility in what they share with investors, CFO Journal's Mark Maurer reports.

The proposal, which has been released for public comment over the next 60 days, reflects the regulator’s general shift from strict guidance toward principles-based disclosures that aim to simplify information for companies and investors. Under the new proposal, released Thursday, companies would no longer be required to provide the previous five years of selected annual financial data or the previous two years of selected quarterly financial data to the SEC.

 




Teaching Case:  Lego Products and Pricing ---
http://www.realityprose.com/what-happened-with-lego/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

Jensen Comment
The above article is not yet a case, but it is a great foundation for a case if combined with cost accounting modules. For example it could be combined with the  Extraterrestrial Transport, Inc. Case written by Burns and Mills.

In 1996 Texas Tech's Cathleen Burns and Sherry Mills won the American Accounting Association Innovation in Accounting Education Award for their use of Legos when teaching cost accounting ---
https://www.questia.com/library/journal/1G1-19052254/bringing-the-factory-to-the-classroom

In the 21st century, managers will continue to face global competition, sophisticated information technology and continuous process improvement initiatives. As cross-functional teams do their work, management accounting information will play an integral role in supporting the teams' decision-making processes. How can accounting educators prepare students for such a future? At New Mexico State University, we have our students use the latest techniques to understand emerging business issues and to actively learn. To accomplish these goals, we use LEGO[R] building materials to help teach management accounting concepts.

The context is Extraterrestrial Transport, Inc. ([ET.sup.2]), a hypothetical business that manufactures and sells 21st century lunar transportation vehicles. This setting sparks students' imaginations about business in the future while they learn--in simulations--to integrate management accounting concepts with marketing, engineering, purchasing and production issues. To help do this, we create production line simulations with untrained workers, unbalanced workloads, end-of-shift inspections and unreliable suppliers. Students identify prevention and appraisal activities that could help avoid the high cost of failing to do a job right the first time. This lets the students see the value of measuring the cost of poor quality.

HOW IT ALL WORKS

[ET.sup.2] helps students realize that management accounting serves managers in a variety of situations within a single business context. Moving through this context, students learn cost terms and concepts, job order costing, activity-based costing, just-in-time

 Continued in article


Teaching Case from Issues in Accounting Education, Volume 34, Issue 4 (November 2019)

WrecksAll Drug Company
https://aaajournals.org/doi/full/10.2308/iace-52546

Kyleen Prewett

University of Arkansas at Little Rock

Tammie J. Schaefer

University of Missouri–Kansas City

Donald (Don) Wengler

University of Central Missouri

 

ABSTRACT

WrecksAll Drug Company is a fraud investigation case in which students use financial and nonfinancial data to develop and test hypotheses related to irregularities in deposits. The case teaches the proper sequence of activities in conducting a fraud investigation and how to identify sources of evidence useful in evaluating fraud hypotheses. Students get hands-on experience in analyzing a large dataset using Excel and drawing and supporting conclusions about the case using the data and other evidence obtained in the case.

I. CASE

WrecksAll Drug Company (WrecksAll) operates three retail stores across Suburbia, Illinois, and competes with stores of two national chains and several retail drug stores located on-site at area hospitals. In addition to pharmaceuticals, the three stores sell the usual over-the-counter products and health-related supplies. The stores also sell limited household items to support one-stop shopping for the convenience of customers. WrecksAll Drug Company has developed a successful niche in the marketplace by locating its stores near otherwise underserved residential neighborhoods and by providing personalized service, which generates loyalty from a core base of its customers. Much of its core-customer base tends to be elderly and below median income for Suburbia.


 

II. PHASE I

You graduated from college three years ago and have recently passed the CPA exam and obtained your CPA credential. You have been working for a local CPA firm for two years and recently transferred from the auditing and assurance department to the forensic accounting department. One day while putting the finishing touches on an audit workpaper, you receive a call from Sterling Preston, a senior manager in your new group. Sterling tells you that the next morning the two of you will drive to Suburbia, Illinois for a meeting with a potential client. You confirm that you are to be in the office at 7 a.m. to ride with Sterling to the meeting.

While driving the next morning Sterling explains what he expects to happen in the meeting:

WrecksAll Drugs is a privately owned, unaudited company. This morning's meeting is with one of the attorneys for WrecksAll Drugs and the company's owner, Ben Broughton. Ben found some irregularities in the deposits. The WrecksAll attorney is going to explain what is going on and determine whether we can help. Just listen and take some notes, and of course, ask clarifying questions as needed.

You and Sterling arrive and are ushered into a conference room at the law firm. Present are Ben, his lawyer, you, and Sterling. The lawyer explains the general nature and structure of the business.

Ben, the owner, interjects: “One service we provide to qualifying customers is filling prescriptions on credit for customers enrolled in Medicare, Medicaid, or private medical insurance plans. We file claims for customers for drug purchases, and the insurance reimbursement checks are received directly by us from health insurance programs in payment of customer credit accounts. Of course, we also accept payment by cash, check, or major credit card for all customers. We run a pretty tight ship and we hire capable people who tend to stay with us a long time. But something is wrong!”

The attorney continues: “When Conrad, the Director of Accounting, left for vacation, Ben stepped in to open and sort through the mail. In the process, he opened and reviewed the bank statement. Everything looked fine at first, but upon closer inspection of the copies of deposit slips, the amount of cash deposited seemed low. Ben then reviewed register reports and deposit slips filed in the office and found what he thinks is suspicious activity. Every shift, a deposit slip is completed by each cashier and deposit amounts (cash, checks, and credit card batches) are removed from the cashier's register. Amounts are keyed into the point of sale register by the cashier as a register withdrawal for deposit. As a matter of procedure, bank deposit slip totals can be compared to the register reports for each shift and each cashier. Deposit slip totals nearly always agree with the register report totals. However, often throughout each week, certain deposits contain less cash than indicated on the register report. By an equal amount, these same deposits contain more value in checks than indicated on the register report. Ben wonders why this is and why Conrad hasn't said anything about it in his and Ben's monthly meetings.”

Sterling asks a few questions, and then a follow-up meeting is scheduled. Ben and the WrecksAll Drugs attorney leave the room. You and Sterling discuss the meeting and begin to develop an action plan.

You are surprised that WrecksAll is having these issues. It is an old, well-respected business. You are from the area and have been in the stores many times. In fact, you can remember going with your grandmother when she had prescriptions to fill. You loved going with her because the pharmacists always gave you a piece of candy or bubblegum when you were there. So few independently owned pharmacies exist anymore. Most have been squeezed out by the chains, but WrecksAll's commitment to its customers and the friendly, home-town attitude of its employees have helped it survive. If something is going on, you hope you can find it. You don't want to see the store lose money or reputation due to a rogue employee!

Phase I Questions

1.

Form initial hypotheses about what could be happening to explain why deposits balance with the register reports in total, but cash deposited is less than the amount reflected on the register report and checks deposited are greater than the amount reflected on the register report. Try to develop three or four hypotheses.

2.

For each of the hypotheses stated in #1 above, label which ones are fraud hypotheses and which ones, if true, would be non-fraud explanations. Which hypothesis do you consider to be the most likely or leading hypothesis?

3.

List specific information and documents, including reports, you would like to receive in order to begin testing your leading hypothesis.

4.

Conrad, the Director of Accounting, has been on vacation, but is thought to be back in town, although not yet back at work. Would you like to request that Conrad come in for an interview with you today? Why, or why not?


 

III. PHASE II

Availability of WrecksAll staff and your time is limited. Review the WrecksAll organization chart in Exhibit 1 and the additional documentation obtained in this case. The organization chart indicates the title for each position, which indicates the nature of job responsibilities for the position. Each position is also connected by a line to a position above it, indicating the supervisor for the position. The boxes in the last two rows of the organization chart represent numerous positions of identical responsibility, such as cashier. After answering Question 5 below, you will receive additional information to help answer Questions 6 and 7.

 Continued in article

 


Teaching Case From The Wall Street Journal Weekly Accounting Review on January 28, 2019

Goodwill Sparks Deep Division, at Least on Balance Sheets

By Jean Eaglesham | January 21, 2020

Topics: Goodwill , Goodwill Impairments

Summary: “The recent wave of deal making [in record-breaking stock market pricing] has created a pile of goodwill. S&P 500 companies had $3.5 trillion worth of goodwill on their books at the end of September, according to data provider Calcbench.” For the S&P 500 companies, that balance represents 9% of total assets, 42% of total stockholders’ equity, and an increase of 67% from 2013. The article provides perspectives on both the impairment and amortization models of accounting for goodwill from the Financial Accounting Standards Board (FASB), analysts, academics, corporate representatives, and others.

Classroom Application: The article may be used in a financial reporting class covering intangible assets or covering business combination accounting. By providing comparisons of different accounting methods for goodwill, the article also is a good one for showing that accounting requirements are not fixed and are set by choices subject to social influences.

Questions:

·         How significant are goodwill balances on U.S. companies’ consolidated balance sheets?

·         Why are these goodwill balances so significant?

·         Describe the current accounting requirements for goodwill balances. Consider both publicly-traded firms and privately-held entities.

·         How does the graph entitled “Accounting under current rules” depict these accounting requirements? Specifically identify in your description the implied caption for the y-axis, or height of the graph, which is missing.

·         What is(are) the problem(s) with the current method(s) of accounting for goodwill?

·         What is(are) the problem(s) with the change in accounting requirements being considered by the Financial Accounting Standards Board (FASB)?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Goodwill Sparks Deep Division, at Least on Balance Sheets," by Jean Eaglesham, The Wall Street Journal, January 21, 2020
https://www.wsj.com/articles/goodwill-sparks-deep-division-at-least-on-balance-sheets-11579613906

The FASB weighs changes to financial concept; companies, investors, academics not shy about weighing in

A brewing battle over how to treat more than $5.5 trillion in assets on company books is pitting investors against businesses, investment advisers against academics and even banks against their own trade association.

At issue is an accounting term known as goodwill, which is the premium a company pays when it buys another for more than the value of its net assets. An unprecedented five-year boom in mergers and acquisitions has added urgency over how to account for the financial concept.

When Amazon.com Inc. bought Whole Foods Market Inc. for $13.7 billion in 2017, the e-commerce giant paid $9 billion more than the value of the supermarket’s stores and other net assets. That amount was added to Amazon’s books as goodwill.

As things stand now, Amazon is supposed to evaluate, or test, that $9 billion every year to see if its value still holds. If not, they have to write down a portion of it, a move that cuts profit.

The Financial Accounting Standards Board, the accounting-rules maker, is weighing whether to continue to assess goodwill by tests—or return to a similar approach to the guidelines of nearly 20 years ago, when companies wrote down a set portion of goodwill each year for up to 40 years.
 

The FASB has asked for comments on the possible change, and companies haven’t been shy about weighing in.

Many companies argue the test approach is costly and subjective. As it is, companies can be slow to write down goodwill, even when stock markets are signaling that they no longer believe in the value of the asset, according to research by academics and analysts.

The annual review requires “an inordinate amount of time to validate and document,” Indianapolis-based drugmaker Eli Lilly & Co. said in a comment letter to the FASB.

SHARE YOUR THOUGHTS

How would you change the rules governing goodwill, if at all? Join the conversation below.

However, critics say the old approach, the so-called amortization of goodwill year by year, allows companies to mask problems and costs investors valuable information.

In addition, going back to the old rules could also be costly. The CFA Institute, which represents chartered financial analysts, said amortization might cause “the write-off of a substantial portion of the assets and equity of U.S. public companies and … reduce profits to nearly zero for a significant number of companies in the S&P 500” in a comment letter to FASB this month.

The recent wave of deal making has created a pile of goodwill. There were $7.4 trillion in U.S. deals the five years through 2019, the highest five-year tally for at least two decades, according to Dealogic.

S&P 500 companies had $3.5 trillion worth of goodwill on their books at the end of September, according to data provider Calcbench. This was up 67% from 2013 and represented 9% of total S&P 500 assets and 42% of total equity, the Calcbench data show.

Continued in article


Teaching Case from IAE:  Is a Reported Goodwill Impairment Loss Really a Goodwill Impairment Loss? A Financial Reporting Case on Evaluating the Efficacy of Authoritative Guidance
by Casey J. McNellis and Walter R. Teets
Issues in Accounting Education
Volume 34, Issue 3 (August 2019)
https://aaajournals.org/doi/full/10.2308/iace-52460

While undergraduate financial reporting courses focus primarily on the application of generally accepted accounting principles and the mechanics of accounting treatments, graduate-level courses should motivate students to explore standard-setting's theoretical perspective and to develop a more rigorous understanding of accounting issues not necessarily discussed in textbooks, but included, implicitly or explicitly, in the authoritative guidance. Anecdotal evidence suggests that accounting students face difficulties transitioning from the undergraduate setting to the higher expectations common in graduate accounting programs and the workplace. This hypothetical case provides an interesting scenario on goodwill impairment to facilitate the development of students' understanding of accounting theory and its connection to professional research skills. While students are accustomed to computing goodwill impairment losses from knowledge acquired in undergraduate financial accounting courses, this topic contains interesting theoretical and practical issues and serves as a salient example of the analysis of interesting accounting issues possible at the graduate level.

. . .

f the case is used in practice or theory courses after the latest effective date for ASU 2017-04, minor modifications of the case and requirements could be made. Instead of dealing with the first formal quantitative goodwill impairment testing process, the case could focus on comparing the process used for impairment testing in the then-current year with impairment testing in the “last year where a formal quantitative test was performed,” and assuming that last test was done using the two-step test required prior to adoption of ASU 2017-04. Students would be required to use the Archive tabs of the Codification to support conclusions about impairment tests made in previous years, thereby keeping the issues relating to the two-step versus one-step test relevant, and giving students an opportunity to learn about the Archive feature.

Evidence of Efficacy

The case was tested in a graduate-level theory and practice course at a private university. When the case was first assigned to the class, the instructor asked students to complete seven complex multiple-choice questions, partially adapted from McNellis et al. (2015), to assess their understanding of the goodwill impairment process and four scale questions to assess their level of practical and conceptual understanding of the topic. After students completed the requirements, they were provided with the same questions and items.

Regarding the multiple-choice assessment, the post-case average (Mean = 0.456, Standard Deviation = 0.184) is significantly higher (p < 0.001) than the pre-case average (Mean = 0.177; Standard Deviation = 0.095). This result indicates that students' understanding of goodwill was enhanced by completion of the case. It should be noted that the post-case average was still below 50 percent, a result that warrants further discussion. From one standpoint, the scores may be reflective of a scaling issue, as the questions were very detailed and complex in nature, in some cases beyond the scope of typical intermediate-level instruction. For example, a few of the questions compelled students to understand specific details related to the grouping of subsidiaries into reporting units for the purposes of goodwill impairment testing. This level of complexity may have contributed to the relatively low pre-case score.

A commonly missed question during both the pre-case and post-case administration was one that required students to select a number of activities to be performed prior to a quantitative test of goodwill impairment. The correct response contained three of the six possible choices in the problem. While most students identified one or two of the correct activities, very few students selected the correct combination of activities and, thus, the majority of students were marked down for an incorrect response. Furthermore, the post-case questions were completed approximately one week after the second class discussion, and the time lag may have been a factor in student recall of the most detailed and complex points related to goodwill in the post-case assessment.

Accordingly, the nature of the questions and the relative timing of the assessment requiring detailed recall likely lowered both the pre-case and post-case scores. Finally, and perhaps most importantly, the questions were not part of a larger classroom assessment for course points. As such, the context in which the students answered the questions may have resulted in a lack of urgency in scrutinizing the various choices in the questions. Nevertheless, the significant difference suggests improvement on the part of the students and complements the survey results, which are presented in Table 1.

Bob Jensen's threads on accounting for goodwill and impairment ---
http://faculty.trinity.edu/rjensen/theory02.htm#Impairment


PwC Probably Did Celebrate When It Helped Mattel Cover Up an Accounting Error ---
https://goingconcern.com/pwc-probably-did-celebrate-when-it-helped-mattel-cover-up-an-accounting-error/

Teaching Case From The Wall Street Journal Weekly Accounting Review on November 1, 2019

Mattel Resolves Accounting Probe

By Paul Ziobro | October 29, 2019

Topics: Accounting Changes and Error Corrections , Accounting for Income Taxes

Summary: The article describes an error originating in the third quarter of 2017 in Mattel’s financial statements. The company reported a loss and related tax benefit but should have adjusted that tax benefit with a valuation allowance. Mattel then reported a loss in the quarter ended December 31, 2017, which was overstated by the same amount. There was no impact on the full year’s financial statements. The issue came to light because of a whistleblower letter; the article also describes a concern raised in regards to PricewaterhouseCoopers's independence as an auditor because the firm made recommendations about candidates for the chief financial officer (CFO) position. The press release related to this error was issued October 29, 2019 and is available as exhibit 99.2 to the Form 8-K filed on October 30, 2019. https://www.sec.gov/Archives/edgar/data/63276/000119312519277846/d788142dex992.htm

Classroom Application: The article may be used when discussing accounting for income tax valuation allowances and/or corrections of errors. The article also may be used in an auditing class to discuss the independence issues raised by the whistleblower.

Questions:

·         Why is the Mattel Inc. chief financial officer (CFO) leaving his post?

·         How did the issues facing Mattel come to light?

·         What is an income tax valuation allowance? Cite your source for this definition.

·         What accounting error occurred in Mattel’s financial statements in the third quarter of 2017?

·         When did that accounting error “wash out”? Explain your answer.

·         If the error has “washed out” of the financial statements, why must Mattel issue restated reports for the third and fourth quarter of 2017?

·         What is the concern with regards to the independence of auditor Pricewaterhouse Coopers as raised by this whistleblower?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Mattel Resolves Accounting Probe," by Paul Ziobro, The Wall Street Journal, October 29, 2019
https://www.wsj.com/articles/mattel-resolves-accounting-probe-easing-debt-squeeze-11572387644

Toy maker searches for new CFO and will restate some earnings in resolution that removes roadblock to refinance debt; stock jumps

Mattel Inc. MAT -0.42% ’s chief financial officer is leaving, and the company is restating some past earnings after completing an investigation into accounting issues raised in a whistleblower letter.

The investigation found shortcomings in the toy maker’s accounting and reporting procedures but concluded that the actions didn’t amount to fraud.

Shares of the maker of Barbie dolls and Hot Wheels cars rose more than 20% in post-market trading as the resolution, coupled with strong third-quarter earnings, removes a roadblock to the company’s plans to refinance debt due next year. The whistleblower letter, disclosed in August, abruptly nixed plans to raise debt at the last minute.

The investigation found that Mattel understated its net loss by $109 million in the third quarter of 2017 due to an error calculating its tax valuation allowance, and then understated fourth-quarter results that year by a similar amount. The error wasn’t reported to the CEO at the time or the audit committee.

The letter also questioned the independence of the lead auditor, PricewaterhouseCoopers LLP. The investigation found that the lead partner at the accounting firm violated some independence rules by recommending candidates for Mattel’s senior finance positions. Mattel said that PwC replaced its lead partner and other members of its audit team that deals with the toy maker but will continue as auditor.

Mattel has launched a search for a new CFO to succeed Joe Euteneuer, who joined the company in late 2017. He will leave the company after a six-month transition period.

A Mattel spokesperson said Mr. Euteneuer was unavailable for comment.

PwC said in a statement that both the accounting firm and Mattel had concluded PwC is “objective and impartial.” The firm “takes independence very seriously and has robust policies and procedures in place to identify and address potential threats to independence,” the statement said.

Mattel otherwise reported a sharp jump in profit, as ongoing cost cuts benefited the bottom line while overall sales rose for the second straight quarter.

In an interview, Mattel Chief Executive Ynon Kreiz said tariffs had minimal impact on the El Segundo, Calif.-based company in the latest quarter.

Continued in article

 


Teaching Case From The Wall Street Journal Weekly Accounting Review on January 28, 2019

Lease-Accounting Rules May Have Hurt Companies’ Valuations, Study Says

By Mark Maurer | January 27, 2020

Topics: Lease Accounting , Operating Leases

Summary: “A recent change in how companies are expected to account for and report operating leases on company balance sheets may have delivered a jolt to their share prices, raising questions about how future rules could affect companies’ valuations.” New academic research by professors at Florida International University finds that entities with the greatest reliance on operating leases experienced shocks to their valuations upon initial recognition of operating leases on balance sheet in the first calendar quarter of 2019. The chief executive of AMC Entertainment Holdings Inc. says he saw a decline in his company’s stock price he attributes to the lease accounting standard and changing characterization of the information by data providers due to the implementation of the standard.

Classroom Application: The article may be used to discuss operating leases and the impact of the change to the new lease accounting standard.

Questions:

·         What authoritative requirements made “a recent change in how companies are expected to account for and report operating leases on company balance sheets”? Be specific in who issued this requirement and where it can be found.

·         What are operating leases? How are they shown on corporate balance sheets? Describe measuring an amount to be included on the balance sheet and the accounts that are affected.

·         Consider your answer to the question above. How is it possible that accounting prior to the new lease accounting standard might not show operating leases on the balance sheet?

·         Prior to implementing new lease accounting requirements for the first calendar quarter of 2019, how was information about operating leases presented in financial reports?

·         What was the impact of this accounting change on companies’ stock prices? Why do you think this impact occurred?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Lease-Accounting Rules May Have Hurt Companies’ Valuations, Study Says," by Mark Maurer, The Wall Street Journal, January 27, 2020
https://www.wsj.com/articles/lease-accounting-rules-may-have-hurt-companies-valuations-study-says-11580169715

New academic research suggests certain future standards could affect stock prices

A recent change in how companies are expected to account for and report operating leases on company balance sheets may have delivered a jolt to their share prices, raising questions about how future rules could affect companies’ valuations.

The initial recognition of operating leases on balance sheets could have led companies’ equity valuations to shrink, new academic research suggests. U.S.-listed public companies with significant operating leases lost stock value, on average, during the quarter in which they first recognized those leases, according to a study conducted by researchers at Florida International University.

Before the rule, which started going into effect in December 2018, public companies used to disclose operating leases in the footnotes of their financial statements. The Financial Accounting Standards Board required companies to treat operating leases as liabilities on their balance sheets in a move to heighten transparency for lenders and investors.

For the most part, public companies experienced little more than a one-time shock to their stock returns. But future accounting standards could have similar unfavorable consequences on businesses, said Jonathan Milian, an accounting professor at Florida International University and co-author of the study.

“If standard-setters decide to shift more information from the footnotes to the balance sheet, it could have a negative impact on stock returns,” Mr. Milian said in an interview. Such shifts ultimately make it easier for investors to use financial statements, but they could hurt companies in the near term, he said.

The effect on stock returns was especially noticeable for the retail industry, in which companies traditionally have significant operating leases. Urban Outfitters Inc., Foot Locker Inc., Abercrombie & Fitch Co. and Dick’s Sporting Goods Inc. were among the retailers that were the most reliant on operating leases in their operations and reported abnormal stock returns around their earnings announcement for the first quarter of 2019, the study said.

Adam Aron, chief executive of AMC Entertainment Holdings Inc., sees a correlation between the decline in his company’s stock price and the adoption of the lease-accounting standard. But he doesn’t blame the standard itself. Instead, he says, this is because certain financial data providers are erroneously categorizing the Leawood, Kan.-based movie theater chain’s operating leases as debt.

Data providers’ categorization of AMC’s leverage has made the company seem less attractive to asset managers and algorithmic traders that rely on these data providers, Mr. Aron said on an earnings call last year.

Mr. Aron said the situation contributed to a 54.6% drop in the company’s stock price, to about $6.36, in the past year. “This is one reason there’s been a massive increase in the shorting of AMC’s shares,” Mr. Aron said in an interview. The company has also faced a decline in box-office sales like other movie-theater chains, analysts say.

Continued in article

Did the Recognition of Operating Leases Cause a Decline in Equity Valuations?

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3509373
43 Pages
 Posted: 15 Jan 2020

Jonathan A. Milian

Florida International University (FIU)

E. Jin Lee

Florida International University (FIU) - School of Accounting

Date Written: December 24, 2019

Abstract

We examine whether investors react to a significant change in financial statements absent a significant change in underlying economics. Beginning in 2019, ASC 842 requires the recognition of operating leases, which were previously only disclosed in the footnotes. This plausibly exogenous change in accounting standard has no effect on firms’ economics but results in firms with significant operating leases recognizing a considerable increase in debt. We find that firms with significant operating leases, on average, earn negative returns around the first recognition of their operating leases. For example, firms above the 99th, 95th, and 90th percentiles of operating lease intensity experience abnormal returns of -10.5%, -4.7%, and -3.3%, respectively during the two weeks around their first quarter 2019 earnings announcements. Our results suggest that the higher information processing costs inherent in disclosed versus recognized information can lead to mispricing, even in the case of a common and well-known accounting distortion.

Keywords: Disclosure, Recognition, Market Efficiency, Information Processing Costs, Leases, ASC 842, Financial Statement Analysis

JEL Classification: G10, G12, G14, M40, M41, M48

 


Teaching Case From The Wall Street Journal Weekly Accounting Review on January 28, 2019

How International Auditing Rules Are Shaping Standards in the U.S.

By Mark Maurer | January 20, 2020

Topics: International Auditing

Summary: “The International Auditing and Assurance Standards Board (IAASB)…has been trying to become more closely aligned with U.S.-focused standard setters” particularly in considering its current standards setting project on audit firms’ quality control and risk management. The new IAASB chairman, Tom Seidenstein, was interviewed for this article. He notes that “a lot of the people who participate in the feedback don’t want two fundamentally different quality management standards throughout the world[ b]ecause we’re in a world where audits are increasingly being done by forensic global networks….”

Classroom Application: The article may be used in an auditing course to discuss international standards setting and its implication for U.S. auditing standards setting by the Public Company Accounting Oversight Board (PCAOB).

Questions:

·         What is the International Auditing and Assurance Standards Board (IAASB)? Where is it located and what is its purpose? (Hint: you may find information beyond that in the article at https://www.iaasb.org/about-iaasb)

·         According to the new chair of the IAASB, how different are the auditing standards set by the PCAOB and the IAASB?

·         For what new standard is the IAASB currently considering public comment letters and feedback?

·         According to the article, how does the new standard currently being considered by IAASB relate to the PCAOB’s requirements?

·         What other topics are currently on the agenda of the IAASB?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"How International Auditing Rules Are Shaping Standards in the U.S," by Mark Maurer, The Wall Street Journal, January 20, 2020
https://www.wsj.com/articles/how-international-auditing-rules-are-shaping-standards-in-the-u-s-11579532400

The head of the standard setter for company audits in 130 countries and jurisdictions says his organization is looking into modernizing rules on identifying fraud

The International Auditing and Assurance Standards Board, which sets international auditing standards used in more than 130 countries and jurisdictions, has been trying to become more closely aligned with U.S.-focused standard setters.

The New York-based independent standards body is reviewing public feedback on proposed rules that would make risk a focus of audit firms’ approach to quality control. That proposal is now serving as the basis for revisions that the Public Company Accounting Oversight Board is considering making to its longstanding rules on quality control. The IAASB plans to issue the standards by June.

The IAASB works with organizations such as the PCAOB, which regulates the audits of U.S. public companies, and the American Institute of Certified Public Accountants, which sets the standards for audits of private companies in the U.S., in an effort to make its standards generally aligned with the others.

IAASB Chairman Tom Seidenstein, who began his three-year term last July, spoke with CFO Journal about emerging audit issues and coordinating with other standard setters. Here are edited excerpts of the interview:

WSJ: The IAASB has no regulatory mandate for audit firms to follow your standards. How do you get them to care?

MR. SEIDENSTEIN: It’s like the ultimate market test of the relevance of your standards if people want to adopt. And so it’s a privilege that we have. We have to convince people that it’s continually worth doing. I’m committed to the cause that global standards make sense set by an independent body, but that’s not always the international consensus, so we really have to earn our keep. There’s a number of issues in a number of jurisdictions today that are raised about the value of the audit. Our strategy really has to be focused on it.

WSJ: In what ways will the IAASB’s and PCAOB’s quality-control standards differ?

MR. SEIDENSTEIN: I hope not much. Our clear intent is to avoid unnecessary divergences. The PCAOB participates in our task force that’s responsible for our quality management suite of standards. A lot of the people who participate in the feedback don’t want two fundamentally different quality management standards throughout the world. Because we’re in a world where audits are increasingly being done by forensic global networks. The more divergences you have, the more potential for confusion.

WSJ: In what way will the quality-control rules emphasize risk?

 

MR. SEIDENSTEIN: In risk management at financial institutions, you’re continuously assessing where risks arise and what you need to remediate. Similarly, it should be highly integrated into the execution of audit-firm strategy rather than viewed as a back-end compliance function.

WSJ: What other emerging issues are you looking at?

MR. SEIDENSTEIN: We’re beginning to assess if the standards are modern enough to meet public expectations on going concern and fraud, and how to deal with an increase in calls for assurance on nonfinancial information. Also, I’ve heard over the years that people complain about the glacial pace of standards setting. We need to have a standard-setting process respond quickly to it to make sure that people trust externally reported financial information.

WSJ: In December, the IAASB revised a standard for identifying and assessing the risks of material misstatements, in an effort to clarify the auditor’s risk-assessment process. Has the PCAOB discussed aligning with you on those changes?

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 4, 2019

How Coronavirus Could Disrupt the Auditing of Companies

By Mark Maurer | February 3, 2020

Topics: Auditing

Summary: The article discusses the ways in which travel restrictions could impact the conduct of audits. It further specifically addresses audit steps related to inventory counts. Also discussed are steps taken by the large auditing firms as of the date of its writing to address travel to and from China and the potential steps that may be taken if audit work cannot be completed by deadlines such as those for Securities and Exchange Commission (SEC) filings by U.S. publicly traded companies.

Classroom Application: The article may be used in an auditing class to discuss the implications of a current event, the coronavirus outbreak.

Questions:

·         Name one audit step that requires auditors to travel.

·         Why might auditors have to travel specifically to China?

·         What alternative procedures might be implemented by auditors to avoid travelling to areas that pose health risks due to the coronavirus?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"How Coronavirus Could Disrupt the Auditing of Companies," by Mark Maurer, The Wall Street Journal, February 3, 2020
https://www.wsj.com/articles/how-coronavirus-could-disrupt-the-auditing-of-companies-11580772000

Auditors could have trouble completing inventory count or other key aspects of the balance sheet, legal and audit experts say

Not only is it an advantage, it is also sometimes required. U.S. audit standards require some components—generally inventory, among them—to be physically counted. Travel restrictions could make those kinds of tasks more daunting—especially such jobs in restricted zones, such as warehouses in or near the Chinese city of Wuhan, the epicenter of the fast-spreading coronavirus epidemic, which has killed at least 360 people and infected more than 17,000.

The independent counting of inventory represents a crucial component of companies’ balance sheets. If auditors can’t access material inventory for physical audits and complete their work, they likely wouldn’t submit a report.

To submit complete financial statements, executives could have to negotiate deadline extensions with regulators or, in some cases, devise ways to provide sufficient disclosures in lieu of on-site inspections by auditors. They could also need to request deadline extensions for certain filings.

Public accounting firms continue to monitor and will coordinate as necessary with regulators, said Catherine Ide, senior managing director of professional practice and member services at the Center for Audit Quality, a nonprofit that represents public-company auditors.

 

Some companies may not be affected, particularly if they are being audited by a large accounting firm that relies on an international network of affiliates to perform audits in far-flung corners of the world. The Big Four firms, for instance, often operate this way.

Smaller firms with limited international connections still can do some audit work remotely. Elements of public-company audits can largely be performed through the review of documents electronically and interviews of company personnel.

“Auditors might have some reservations about eliminating the face-to-face aspects of the audit,” said Daniel Goelzer, a retired partner at law firm Baker McKenzie and former interim chairman of the PCAOB.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 4, 2019

COSO Warns of the Downside of Siloing Risk Managers

By Kristin Broughton | February 4, 2020

Topics: Risk Management , COSO

Summary: The article discusses the use of risk management assessment in C-suite decision-making, rather than in a silo focusing only on areas of significant corporate risk. COSO has issued recent guidance based on the 2017 framework that is linked in the article.

Classroom Application: The article may be used in a managerial accounting or auditing class discussing COSO requirements and/or enterprise risk management practices. Questions are linked directly to the COSO website as well as the WSJ article.

Questions:

·         What entities make up COSO? (Hint: you may find this information at www.coso.org In your answer, state the full name for the acronym COSO.

·         What is the COSO framework? In your answer, cite your source for this information.

·         This article is based on a survey. Who conducted the survey and what are its findings?

·         The article is also based on recent guidance from COSO, available through the link in the article and directly at https://www.coso.org/Documents/COSO-ERM-Creating-and-Protecting-Value.pdf. Read the introduction and consider the discussion in the article, then summarize the main points of this guidance as you understand them.

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"COSO Warns of the Downside of Siloing Risk Managers," by Kristin Broughton, The Wall Street Journal, February 4, 2020
https://www.wsj.com/articles/coso-warns-of-the-downside-of-siloing-risk-managers-11580856142

New guidance from the advisory group emphasizes the role of risk management in maximizing growth

An influential organization that advises companies on risk management is urging corporate boards and senior executives to incorporate risk analyses into high-level decision-making.

The Committee of Sponsoring Organizations of the Treadway Commission on Tuesday issued guidance to help executives better manage enterprisewide risks. The guidance emphasizes the benefit of including risk managers in strategic decisions, such as whether to expand overseas or buy back stock.

 

“Historically, rightly or wrongly, people have tended to view risk management as managing the bad things that could happen,” said Paul Sobel, chairman of COSO. But risk management can have a financial upside for companies that incorporate it into strategic planning, he said.

COSO develops frameworks to help companies improve internal controls and manage key risks. The organization is best known among risk executives for a voluntary framework that it developed after the accounting scandals in the early 2000s and updated in 2017.

The guidance issued Tuesday—which is based on the 2017 framework but provides a bigger focus on the role of risk management in strategic decisions—provides practical advice on how to establish an enterprise risk program, including how to describe the benefits to senior executives.

The guidance also provides advice for companies that want to improve their existing programs. For instance, risk managers should begin their work by focusing on a company’s key strategies, rather than on a company’s biggest risks, COSO said.

Companies that perform well financially often rely on risk managers to provide information to senior executives about key decisions, said Mark Frigo, a professor emeritus at DePaul University’s Driehaus College of Business and a co-author of the guidance.

Thirty-eight percent of companies have a centralized process in place to identify and regularly report on risk, according to a survey of senior-level finance executives published Tuesday by the Association for Financial Professionals.

“The survey data points to the need to improve the ability to systematically identify new, emerging risks and analysis of known risks,” said Alex Wittenberg, executive director of Marsh & McLennan Advantage. Consulting firm Marsh & McLennan partnered with AFP on the survey.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 4, 2019

Why You Don’t Need to Be an Accountant to Be a CFO

By Mark Maurer | January 29, 2020

Topics: Accounting Careers

Summary: Chief Financial Officers (CFOs) today “…often oversee more than just the books…As a result, companies increasingly want skilled general managers who possess strategic savvy and a firm grasp of operations in the CFO seat… ‘Technical accounting is becoming a smaller percentage of the job,’ said Andrej Suskavcevic, chief executive of professional organization Financial Executives International.”

Classroom Application: The article may be used in a managerial accounting or any accounting class to discuss career paths to the top levels of corporate entities.

Questions:

·         Review the graph entitled Counting Down. Does this information capture all CFOs who have significant accounting knowledge? Explain your answer.

·         What skills beyond a strong accounting background are required of chief financial officers (CFOs)? Why are these skills necessary?

·         Does a reduced focus on technical accounting abilities by the chief financial officers (CFOs) of large U.S. corporations concern you in any way? Explain your answer.

·         Does reading this article impact your view of the skills you must obtain while in college if you aspire to achieve a high-ranking corporate finance position? Explain.

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Island (Uri)

 

"Why You Don’t Need to Be an Accountant to Be a CFO," by Mark Maurer, The Wall Street Journal,  January 29, 2020
https://www.wsj.com/articles/companies-appointing-fewer-finance-chiefs-with-accounting-skills-11580293801

Strategic, operations-minded finance chiefs are finding favor, with specialists increasingly taking care of the books

Directors of Hannon Armstrong Sustainable Infrastructure Capital Inc. congregated in the boardroom in late 2018. On the agenda: the ideal résumé of their next finance chief.

They wanted to fill the impending vacancy with someone who had expertise in raising debt and equity—a priority for the Annapolis, Md.-based investment firm.

The board also decided they could do without one particular qualification. Having appointed a chief accounting officer in 2017, they didn’t care if the new chief financial officer had an accounting background.

“It was almost counterintuitive, almost backwards,” said Steve Osgood, a board director at Hannon Armstrong and chairman of its audit committee. “But that freed us up to get a capital-markets-focused CFO.”

CFOs have traditionally emerged from the accounting ranks, with reputations as masters of cost management, corporate finance strategy, accounting standards and reporting requirements. But the role has morphed to the point that accounting expertise is often no longer required.

At the 1,000 largest U.S. public companies, the portion of CFOs who are certified public accountants fell to about 36% last year, according to data from organizational consulting firm Korn Ferry. That is the lowest figure in the six years Korn Ferry has been collecting the data, down from 46% in 2014.

Finance chiefs today often oversee more than just the books. They are increasingly in charge of human resources, information technology and elements of enterprise risk management. As a result, companies increasingly want skilled general managers who possess strategic savvy and a firm grasp of operations in the CFO seat.

“Technical accounting is becoming a smaller percentage of the job,” said Andrej Suskavcevic, chief executive of professional organization Financial Executives International.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on February 14, 2019

Trump Proposes $4.8 Trillion Budget, With Cuts to Safety Nets

By Andrew Restuccia Kate Davidson | February 10, 2020

Topics: Governmental Accounting

Summary: The White House has issued is proposed budget for the fiscal year ending September 30, 2021, with a total of $4.8 trillion in spending, a forecasted budget deficit of $966 billion, and a reduction of projected future spending over where it would be under current policies. The budget calls for funding of a border wall with Mexico as well as increased funding for the National Aeronautics and Space Administration (NASA) and Immigrations and Customs Enforcemnet (ICE) detention space. Budget cuts are proposed for the Department of Housing and Urban Development, Commerce Department, Centers for Disease Control and Prevention, and the National Institutes of Health. All of these proposals reflect President Trump’s expected campaign priorities.

Classroom Application: The article may be used in a governmental accounting class or any class discussing budgeting to tie to current events.

Questions:

·         Why does the recently issued budget for the U.S. federal government reflect matters on which President Trump likely will base his campaign?

·         Who has the authority to establish the budget for the U.S. federal government?

·         Why is the budget proposed by President Trump and his administration viewed by some as “just a list of suggestions”?

·         Given the possible transition in an election year to a new administration, what is Congress likely to do in order to authorize funds to run the U.S. government through the November election?

Read the Article

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rho