New Bookmarks
Year 2020 Quarter 2:  April 1 - June 30 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

 

Choose a date below for additions to New Bookmarks

2020

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Bob Jensen's Additions to New Bookmarks

June 2020

Bob Jensen at Trinity University 


 

My Latest Web Document
Over 600 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




For the first time in our history – this year the AAA Annual Meeting will be held virtually in August 2020.

This year the AAA Annual Meeting will be held virtually in August 2020.

This decision was not taken lightly by the Board and Council Chair -- recognizing how valued and highly anticipated the meeting is for our community - and how keen authors and presenters are to present and get feedback on their work.

With members’ health and well-being as our number one priority – and the COVID-19 pandemic disrupting our usual patterns on campus and across organizations – we look forward to working with you to find new ways to convene and support colleagues’ scholarship and education - even when it's possible to meet again face-to-face.

Plans for moving forward: While the pandemic has disrupted many of our daily patterns, it has also made us realize that the form of a meeting does not dictate its purpose, or its value. It has challenged us to find new ways to convene in order to support our scholarship and shape the future.

With that in mind, we have begun developing our new, digital platform: Spark. Our objective is to build a foundation for offering opportunities to engage globally, to share and strengthen our scholarship and teaching, and to support the accounting profession - when budgets are tight, and travel is risky. These efforts are exciting – and uncertain - so everyone’s participation and feedback are appreciated.

The Board, Section Leaders and Professional Staff will be working together to host a digital event that will incorporate opportunities to share your scholarship. Many decisions are ahead of us – and we will keep you posted. As of today, what we know is:

·        There will be opportunities for all accepted presentations to be made. Together, we will build on our Spark experiences to design dynamic, virtual session formats, and members will be encouraged to present their work in these new ways. Presenters will get more information in the upcoming weeks, so they have at least a month to prepare their presentations.

·        The AAA has strong partnerships with a wide range of organizations – sponsors, exhibitors, world-class service providers, affiliate associations, to name just a few – and we will be reaching out to each of these to explore ways that we can continue to work together to strengthen the accounting academy and profession.

·        In the meantime, we will do our best to keep you up to date on meeting status. Check back here for updates.


Coursera is offering 90% of its prestigious (think Ivy League) online classes to college students for free until September 30, 2020 — here's how to enroll ---
https://www.businessinsider.com/coursera-free-classes-college-students


One of my scholarly heroes in life is Frank Partnoy. You can track his revelations about financial derivative financial instruments frauds in my timeline at
http://faculty.trinity.edu/rjensen/FraudRottenPart2.htm
 

Frank Partnoy --- https://en.wikipedia.org/wiki/Frank_Partnoy

Derivative Financial Instrument --- https://en.wikipedia.org/wiki/Derivative_(finance)

Collateralized Debt Obligations (CDOs) --- https://en.wikipedia.org/wiki/Collateralized_debt_obligation

Collateralized Loan Obligations (CLOs) --- https://en.wikipedia.org/wiki/Collateralized_loan_obligation

2020:  Have Banks Drifted Back Into Subprime Hell?
https://www.ozy.com/presidential-daily-brief/pdb-340967/crash-course-340968/
 

Here’s another reason to panic. Berkeley Law financial markets scholar Frank Partnoy is sounding the alarm about collateralized loan obligations (CLOs). Sound familiar? Partnoy likens them to collateralized debt obligations (CDOs) that precipitated the 2008 financial crisis. CDOs bundled high-risk home mortgage debt that “too big to fail” financial institutions had stockpiled. While the current global economic threats are worse now than 12 years ago, most experts see the banking system as sound. Partnoy disagrees, saying often-concealed CLO troves could once again destabilize a system that U.S. lawmakers are unwilling to bail out yet again.

Bob Jensen's threads on CDOs in the 2008 subprime scandals are at
http://faculty.trinity.edu/rjensen/2008Bailout.htm


Where Were the Internal Controls:  The German fintech firm is reeling after its auditors said that around $2 billion cash had gone missing ---
https://www.businessinsider.com/wirecard-ceo-resigns-amid-fraud-scandal-share-crash-2020-6

Current and past editions of my blog called Fraud Updates --- http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Discover Accounting ---
https://discoveraccounting.org/resources/


Three Interesting (albeit negative) Sites on Peer Review (I highly recommend them even though one is my own)

The Guardian:  Retracted (peer reviewed) studies may have damaged public trust in science, top researchers fear ---
https://www.theguardian.com/science/2020/jun/06/retracted-studies-may-have-damaged-public-trust-in-science-top-researchers-fear

Those who think that peer review is inherently fair and accurate are wrong. Those who think that peer review necessarily suppresses their brilliant new ideas are wrong. It is much more than those two simple opposing tendencies ---
http://rodneybrooks.com/peer-review/
T
he comments are especially interesting

Bob Jensen:  574 Shields Against Validity Challenges in Plato's Cave ---
http://faculty.trinity.edu/rjensen/TheoryTAR.htm
Prestigious accounting research journals claim they encourage replication. They just don't encourage replication because replication studies in academic accounting research are blocked by the peer review process.

Jensen Comment
This is why I spend such a large part of every day reading blogs. Blog modules are not formally refereed but in a way they are subjected to widespread peer review among the entire population of readers of the blog as long as the blogger publishes their replies to to his or her blog modules.
This is why I think blogs and listservs are less suppressive of new ideas.

One of the stupid unmentioned results of peer review in our most prestigious academic accounting research journals is that they rarely publish articles without equations. Go figure!


Racial Profiles of Accountants in the USA (does not include accountants of color other than African Americans)

There are 1,762,000 accountants and auditors in the United States for the year 2008. They represent 1.2% of the total 145,362,000 employed Americans for the same year. 61.1% of American accountants and auditors are female while 10.2% are Asian. This data is based on the The 2010 Statistical Yearbook of the United States Census Bureau ---
http://infomory.com/numbers/number-of-accountants-in-the-us/
For updates see
https://www.census.gov/library/publications/time-series/statistical_abstracts.html
Note that not all "accountants" even go to college. especially those trained to do some accounting functions (think bookkeeping) on the job. To sit for the CPA examination virtually all candidates now must have five years (150 semester credits) including required courses in accounting, auditing, ethics, and business.

Overall participation of African-Americans in the accounting profession continues to be low. According to the U.S. Bureau of Labor Statistics (BLS), African-Americans represent 12.1% of the employed workforce but only 8.2% of the accountant and auditor workforce ---
https://www.journalofaccountancy.com/issues/2019/jan/challenges-continue-for-african-american-accountants.html

Out of 650,000 CPAs in the U.S., an estimated 5,000 are black, according to the National Association of Black Accountants (NABA). The number of black accountants has changed little in the past two decades while the number of their Asian and Hispanic colleagues has grown to more than 12% and 7% of the field ---
https://news.bloombergtax.com/financial-accounting/fifty-years-little-progress-for-black-accountants

The first African American CPA was John Wesley Cromwell, Jr., licensed in 1921. John went on to lead a very successful career after he became the controller of Howard University in 1930
http://gordoncpablog.wordpress.com/2009/04/10/56/

Jensen Comment
When I was Chair of the Accounting Department at Florida State University (1978-1982) there were two major university accounting programs in Tallahassee --- FSU and Florida A&M. The FSU program was heavily geared toward preparing students for the CPA examination, and we did have African American Accounting majors in the FSU program who prepared for and did become CPAs. The Florida A&M (one of the better-known historically black universities)  program at the time was not geared to preparing accounting majors to take the CPA examination. Accounting majors at Florida A&M usually had corporate apprenticeships to become corporate accountants rather than CPAs. These accounting student apprenticeships included major corporations like IBM and Exxon that gave a significant amount of money to historically black universities in general.

I mention this because I think most historically black universities (certainly not all like Howard University) at the time modeled themselves after Florida A&M. I think this reflects African American career tracks in accounting that bypassed the CPA examination entirely. African Americans aspiring to be CPAs mostly chose other universities like FSU.

Footnote:  I've not followed how Florida A&M and other historically black universities changed their accounting curricula and goals since 1982


The PhD Project --- http://www.phdproject.org/

Since 1994, The PhD Project has more than tripled the number of minority business school professors...from 294 to over 960. These individuals are inspiring and encouraging a new generation of business professionals. Click here to learn more about our fifteen years of achievements, real insights on the journey to a PhD degree and the professors who are making a big impact.

Are you ready to be the next role model? Currently, The PhD Project has 400 minority doctoral student members pursuing their dream. Like you, they were professionals or recent grads satisfying their quest for a high level of achievement and answering the call to mentor. With an expansive network of support, The PhD Project is now helping them prepare for success in academia.

Whether you become involved as a doctoral student, professor, participating university, or supporting organization...just become involved. Learn more by visiting the links on the left.

Participation in The PhD Project is available to anyone of African-American, Hispanic American and Native American descent who is interested in business doctoral studies.


Jensen Comment
The PhD Project commenced in the KPMG Foundation under the guidance of Executive Partner Bernie Milano who increasingly devoted more time, money, and sweat to raise money from other accounting firms and from corporations. It has since expanded beyond accounting doctoral programs into other business disciplines.

Above and beyond helping minority students get into selected doctoral programs, Bernie has been dogged about trying every which way to see them to the graduation day endings when a wide array colleges in literally every part of the world are eager to hire them. These students have many more hurdles to cross than most other doctoral students, and Bernie's Dream is to help them across the biggest hurdles without making it any easier for them then all other doctoral students.

Most importantly, the salting of these graduates around the world as role models is increasingly vital to inspiring undergraduate and even K12 minority students to aspire to become practicing professionals and/or doctoral students themselves. These role models are living proof that Berne's Dream can become their dream.

Thank you Bernie, KPMG, and the many other accounting firms and corporations have made Bernie's Dream come true.

How doctoral programs can help minority candidates
Video on the PhD Completion Program --- http://www.youtube.com/watch?v=zWtUTZk1w4Q

Also read about the efforts of the Bill and Melinda Gates Foundation --- Click Here

Added Jensen Rant
Often potential minority candidates for accounting doctoral programs are CPAs. They are strong accounting candidates that are attracted to accounting and turned off by the heavy mathematics, statistics, and econometrics years of study in accountancy doctoral programs that have almost no accountancy. It would help greatly if some of our leading doctoral programs would open up paths of study other than "accountics."

Alternative study and research paths could include paths of case method and field research. Those graduates may never publish in The Accounting Review (which now publishes zero case and field research studies according to the latest report of the TAR Editor), but there are research journals that will publish case and field research studies.

My rants ad nauseum on the narrow mindedness of present accountics doctoral programs are shown at ---
http://faculty.trinity.edu/rjensen/theory01.htm#DoctoralPrograms


In his first President's Message, Gary Previts mentions the Plumlee report on the dire shortage of accountancy doctoral students and provides a link to the AAA's new site providing resources for research and experimentation on "Future Accounting Faculty and Programs Projects" --- http://aaahq.org/temp/phd/index.cfm
Note especially the Accounting PhD Program Info link with a picture) and the PhD Project link (at the bottom):

Welcome to the preliminary posting of a new resource for the community participating in and supporting accounting programs, students, faculty, and by that connection practitioners of accounting. We plan to build this collection of resources for the broad community committed to a vital future for accounting education. This page is an initial step to creating a place where we can come together to gather resources and share data and ideas.
Making A Difference: Careers in Academia
Powerpoint slides created by Nancy BaGranof and Stephanie Bryant for the 2007 Beta Alpha Psi Annual Meeting. Permission granted for use and adaptation with attribution.
GradSchools.com
Accounting PhD Program Info

New Research Projects by the AAA on the Trends and Characteristics of Accounting Faculty, Students, Curriculum, and Programs

Part I: Future of Accounting Faculty Project (Report December, 2007)
Part II: Future of Accounting Programs Project

Part I will describe today's accounting academic workforce, via demographics, work patterns, productivity, and career progression of accounting faculty, as well as of faculty in selected peer disciplines using data from the national survey of postsecondary faculty (NSOPF) to establish trends, and a set of measures will be combined to benchmark the overall status of accounting against (approximately) 150 fields. This project will provide context and data to identify factors affecting the pipeline and workplace.

Part II will focus on expanding understanding of the characteristics of accounting faculty, students, and accounting programs, and implications of their evolving environment. The need for the Part I project illustrates how essential it is for the discipline and profession of accounting that we establish a more standard and comprehensive process for collecting, analyzing, and reporting data about accounting students, doctoral students, faculty, curriculum, and programs.

More Resources on the Changing Environment for Faculty:

The Reshaping of America's Academic Workforce
David W. Leslie, TIAA-CREF Institute Fellow
The College of William and Mary
TIAA Institute Research Dialogue Series, 2007

Jim Hasselback's* 2007 Analysis of Accounting Faculty Birthdates
*Copyrighted – requests for use to J. R. Hasselback

  • Among U.S. Accounting Academics -- 53.4% are 55 or older

From the Integrated Postsecondary Education System (IPEDS)

  • 34.8% of all full-time faculty in the U.S. are non-tenure-track -- nearly 2 in 5 of all full-time appointments
  • Between 1993 and 2003 the proportion of all new full-time hires into "off-track" appointments increased each year from 50% to nearly 3 in 5 (58.6%)
  • Reported in J. Schuster & M. Finkelstein (Fall, 2006). "On the Brink: Assessing the Status of the American Faculty," Thought & Action 51-62.

Supply and Demand for Accounting PhDs

American Accounting Association PhD Supply/Demand Resource Page
A collection of resources, links, and reports related to the pipeline of future Accounting faculty. Highlights include:

  • Report of the AAA/APLG Committee to Assess the Supply and Demand of Accounting PhDs
  • Link to the Doctoral Education Resource Center of AACSB International (Association to Advance Collegiate Schools of Business)
  • AICPA's Journal of Accountancy's article "Teaching for the Love of It"

Deloitte Foundation Accounting Doctoral Student Survey

Survey Results (Summer, 2007)
Data collected by survey of attendees of the 2007 AAA/Deloitte J. Michael Cook Doctoral Consortium

The PhD Project and Accounting Doctoral Students Association

The PhD Project is an information clearinghouse created to increase the diversity of business school faculty by attracting African Americans, Hispanic Americans and Native Americans to business doctoral programs and by providing a network of peer support. In just 12 short years, the PhD Project has been the catalyst for a dramatic increase in the number of minority business school faculty—from 294 to 842, with approximately 380 more candidates currently immersed in doctoral studies.

The PhD Project Accounting Doctoral Students Association is a voluntary association offering moral support and encouragement to African-American, Hispanic-American, and Native American Accounting Doctoral Students as their pursue their degrees and take their places in the teaching and research profession, and serve as mentors to new doctoral students.

PhD Project Surveys of Students, Professors, and Deans
Results of a survey among students to understand the impact of minority professors on minority and non-minority students.

Accounting Firms Supporting the AAA and Accounting Programs, Faculty, and Students

Related Organizations Sharing Interest in Accounting Faculty and Programs

 


Gender Profiles of Accountants in the USA

There are 1,762,000 accountants and auditors in the United States for the year 2008. They represent 1.2% of the total 145,362,000 employed Americans for the same year. 61.1% of American accountants and auditors are female while 10.2% are Asian. This data is based on the The 2010 Statistical Yearbook of the United States Census Bureau ---
http://infomory.com/numbers/number-of-accountants-in-the-us/
For updates see
https://www.census.gov/library/publications/time-series/statistical_abstracts.html
Note that not all "accountants" even go to college. especially those trained to do some accounting functions (think bookkeeping) on the job. To sit for the CPA examination virtually all candidates now must have five years (150 semester credits) including required courses in accounting, auditing, ethics, and business.

 

Eight Special Women of Accounting --- http://www.journalofaccountancy.com/Issues/2007/Aug/EightSpecialWomenInAccounting.htm

Among the AICPA-donated volumes at Ole Miss are two binders containing photographs of individuals appearing in the JofA or at accounting conventions from 1887 to 1979. Of the 446 individuals featured, eight are women—Christine Ross, Ellen Libby Eastman, Miriam Donnelly, Mary E. Murphy, Helen Lord, Helen H. Fortune, Mary E. Lewis and Beth M. Thompson. In a time when the profession was the all-but-exclusive domain of men, they stood out not only because of their gender but in many cases because of their accomplishments and contributions to accounting. Consider that in 1933, slightly more than 100 CPA certificates had been issued to women. By 1946, World War II had changed traditional notions of gender in the workplace, and female CPAs had more than tripled to 360—still a small contingent but, as information gleaned from the AICPA Library indicates, one capable of exerting a strong and beneficial influence on the profession.


Christine Ross

Born about 1873 in Nova Scotia, Ross took New York by storm in the late 1890s. New York state enacted licensure legislation in 1896 and gave its inaugural CPA exam in December 1896. Ross sat for the exam in June 1898, scoring second or third in her group. Six to 18 months elapsed while her certificate was delayed by state regents because of her gender. But she had completed the requirements and became the first woman CPA in the United States, receiving certificate no. 143 on Dec. 21, 1899.

Ross began practicing accounting around 1889. For several years, she worked for Manning’s Yacht Agency in New York. Her clients included women’s organizations, wealthy women and those in fashion and business.

Helen Lord
Lord received her CPA certificate from New York in 1934 and in 1935 joined the American Society of Certified Public Accountants, which merged with the American Institute of Accountants (later AICPA) the following year. In 1937, she was a partner with her father in the New York firm of Lord & Lord and a member of the AIA. She served in the late 1940s as business manager of The Woman CPA, published by the American Woman’s Society of Certified Public Accountants–American Society of Women Accountants. Lord reported the journal then had a circulation of more than 2,200.

Helen Hifner Fortune
Fortune, one of the first women CPAs in Kentucky, received certificate no. 174 in 1935 and was admitted to the AIA the following year. She became a member of an AIA committee in 1942 and by 1947 was a partner in the Lexington, Ky., firm of Hifner and Fortune.

Ellen Libby Eastman
Eastman began her career as a clerk in a Maine lumber company, eventually becoming chief accountant. She studied for the CPA exam at night and became the first woman CPA in Maine, receiving certificate no. 37 dated 1918. She was also the first woman to establish a public accounting practice in New England. Arriving in New York in 1920, Eastman focused on tax work and audited the accounts of the American Women’s Hospital in Greece. In 1925, she was a member of the ASCPA. In 1940, Eastman began working with the law firm of Hawkins, Delafield & Longfellow in New York.

She was outspoken and eloquent regarding a woman’s ability to succeed in accounting. In a 1929 article in The Certified Public Accountant, Eastman recounted her adventures:

One must be willing and able to endure long and irregular hours, unusual working arrangements and difficult travel conditions. I have worked eighteen out of the twenty-four hours of a day with time for but one meal; I have worked in the office of a bank president with its mahogany furnishings and oriental rugs and I have worked in the corner of a grain mill with a grain bin for a desk and a salt box for a chair; I have been accorded the courtesy of the private car and chauffeur of my client and have also walked two miles over the top of a mountain to a lumber camp inaccessible even with a Ford car. I have ridden from ten to fifteen miles into the country after leaving the railroad, the only conveyance being a horse and traverse runners—and this in the severity of a New England winter. I have done it with a thermometer registering fourteen degrees below zero and a twenty-five mile per hour gale blowing. I have chilled my feet and frozen my nose for the sake of success in a job which I love. I have been snowbound in railroad stations and have been stranded five miles from a garage with both rear tires of my car flat. I have ridden into and out of open culvert ditches with the workmen shouting warnings to me. And always one must keep the appointment; “how” is not the client’s concern.
 

Mary E. Murphy
A long-lived pioneer, Murphy (1905–1985) lectured, researched and taught in the United States and abroad, retiring in 1973. The Iowa native earned her bachelor of commerce degree with a major in accounting from the University of Iowa in 1927, then obtained a master’s in accountancy in 1928 from Columbia University Business School. In 1938, she received a doctorate in accountancy—only the second woman in the United States to do so—from the London School of Economics.

In 1928, Murphy began working in the New York office of Lybrand, Ross Bros. & Montgomery. Two years later, she took the CPA exam in Iowa and received certificate no. 67, to become the first woman CPA in Iowa. She joined the AIA in 1937.

Following her public accounting stint, she served for three years as the chair of the Department of Commerce at St. Mary’s College in Notre Dame, Ind. Murphy also was an assistant professor of economics at Hunter College of the City University of New York until 1951. In 1952, she received the first Fulbright professorship of accounting, with assignments in Australia and New Zealand. In 1957, she was appointed as the first director of research of the Institute of Chartered Accountants in Australia. Murphy retired in 1973 from the accounting faculty at California State University.

She published or collaborated on more than 20 books and 100 journal articles and many book reviews and scholarly papers. From 1946 to 1965 she was the most frequently published author in The Accounting Review. Murphy investigated the role of accounting in the economy, made the case for accounting education improvements and paved the way for other aspiring women accountants to prosper. More than half her publications explored international accounting, often advocating standardization. She also emphasized accounting history and biographies.

Mary E. Lewis
Lewis received California CPA certificate no. 1404 in 1939. She was admitted to the AIA that year and by 1947 had her own firm in Los Angeles.
 

Beth M. Thompson
Thompson worked as the office manager in the Kentucky Automobile Agency she and her husband, Charles R. Thompson, owned. After closing the car business, they moved to Florida, where she worked for an accounting firm. She passed the CPA exam in 1951 with the encouragement of her husband and opened her own accounting business in Miami. In 1955, Thompson was one of only 900 women CPAs and the only female president of a state association chapter—the Dade County chapter of the Florida Institute of CPAs.

Miriam Donnelly
From 1949 to 1955, Donnelly was head librarian of the AIA library. (In 1957, the AIA was renamed the AICPA.) She began her career with the library as assistant librarian and cataloger in 1927, after working for two governmental libraries and the New York Public Library.

 

History of women accountants in the 1880. US Federal Census ---
http://repository.usfca.edu/cgi/viewcontent.cgi?article=1001&context=acct

Christine Ross (The First Woman CPA) --- Click Here
http://books.google.com/books?id=W8Z2a53DJ2cC&pg=PA151&lpg=PA151&dq=%22First+Woman+CPA%22&source=bl&ots=irXssMWzFN&sig=0AneWv1qO-MB6_ixatHq-mMerRQ&hl=en&sa=X&ei=N8o8UY3XBYrK0AHngoCYBw&ved=0CDgQ6AEwAQ#v=onepage&q=%22First%20Woman%20CPA%22&f=false

Mary Jo McCann (First Woman CPA in Kansas) ---
http://www.kscpa.org/about/news/119-mary_jo_mccann_first_woman_cpa_in_kansas_passes

Bertha Aldrich (First Woman CPA in California) --- http://boards.ancestry.com/surnames.aldrich/600/mb.ashx

Accounting Reform (search for women) --- http://en.wikipedia.org/wiki/Accounting_reform

American Society of Women Accountants --- http://en.wikipedia.org/wiki/University_of_Cambridge#Women.27s_education

Accounting and Financial Women's Alliance --- http://www.afwa.org/

Accounting History Libraries at the University of Mississippi (Ole Miss) --- http://www.olemiss.edu/depts/accountancy/libraries.html
There are many items pertaining to accounting women in history, especially in the Accounting Historians Journal

Ruth Andersen, First Woman on the Board of a Big Four Accounting Firm --- http://en.wikipedia.org/wiki/Ruth_Anderson_%28accountant%29

Cynthia Cooper (Internal auditor who blew the whistle at WorldCom) --- http://en.wikipedia.org/wiki/Cynthia_Cooper_%28accountant%29

Lynn Brewer was never enough of a player to even mention in my threads on the Enron scandal
The foul mouthed Sherron Watkins was the significant whistleblowers at Enron
http://faculty.trinity.edu/rjensen/FraudEnronQuiz.htm#10

Grace Andrews (early mathematician and accountant in Barnard College) --- http://en.wikipedia.org/wiki/Grace_Andrews_%28mathematician%29

Patricia Courtney (IRS agent and professional baseball star) --- http://en.wikipedia.org/wiki/Patricia_Courtney

Patrecia Barringer (Tax accountant, auditor, and professional baseball star) ---http://en.wikipedia.org/wiki/Patricia_Barringer

Helen Nordquist (Telephone operator, accountant, and professional baseball star) --- http://en.wikipedia.org/wiki/Helen_Nordquist

Rita Lee (Accounting Student Tennis Star) --- http://en.wikipedia.org/wiki/Janet_Lee

Diane Cummins (Canadian Accountant Track Star) --- http://en.wikipedia.org/wiki/Diane_Cummins

Sue Hearnshaw (British Chartered Accountant and Long Jump Star) --- http://en.wikipedia.org/wiki/Sue_Hearnshaw

Betty Wagner Spandikow (Accountant Who Became an Advocate of Breast Feeding) --- http://en.wikipedia.org/wiki/Betty_Wagner_Spandikow

Jennifer Archer (Oil and Gas Accountant Turned Fiction Writer) --- http://en.wikipedia.org/wiki/Jennifer_Archer

 


'Death by a Thousand Cuts': Why Are Women Leaving Big Law? ---
https://www.law.com/americanlawyer/2019/11/14/death-by-a-thousand-cuts-why-are-women-leaving-big-law-405-48434/?slreturn=20200429140136


Estimated Taxes Due July 15: Tax Return Pros Warn About Special Issues For 2020 ---
https://www.forbes.com/sites/brucebrumberg/2020/06/19/estimated-taxes-due-july-15-tax-return-pros-warn-about-special-issues-for-2020/#4d0eb26c4f00


U.S. Chapter 11 bankruptcy filings surge in May ---
https://www.reuters.com/article/us-health-coronavirus-bankruptcy/u-s-chapter-11-bankruptcy-filings-surge-in-may-idUSKBN23B2K3
Jensen Comment
It will be hard for many businesses to recover from bankruptcy. Exhibit A is  a bankrupt restaurant with the cost of food soaring and revenues declining due to social distancing where perhaps only half as many diners can be legally served at any point in time. Add to this regions dependent upon tourism with almost no tourists. Sure menu prices can be increased, but price increases are not a good way to attract customers when the pandemic lockdowns are lifted while unemployment remains at double digits.

Particularly hard hit will be businesses (think food, electronics, fueling stations, and drug stores)  in urban riot zones where there's now greater fear of being looted and burned out with reduced police protection in the future. Exhibit A is St. Louis and other cities that tell police not to arrest looters since looters, like shoplifters, will no longer be punished. Minority people underserved with stores in the past will be even more underserved in the future without police protection of their stores from looters and shoplifters and even arsonists.

The Atlantic:  Defund the Police  ---
https://www.theatlantic.com/ideas/archive/2020/06/defund-police/612682/

Gun sellers must be overjoyed!

Interior Secretary: Park Police Were in 'State of Siege' ---
https://www.blabber.buzz/conservative-news/909138-interior-secretary-park-police-were-in-state-of-siege-special?utm_source=c-alrt&utm_medium=c-alrt-email&utm_term=c-alrt-GI&utm_content=697zxgAhCmuHg4vas74EBzlnoWM3eNVp0oCrhLuQnY-I.A
Let's defund the Park Police


KPMG Was GE's Independent Auditor 1909-2020:  In 2021 Deloitte Will Commence Auditing GE ---
From the CFO Journal's Newsletter on June 23, 2020

General Electric Co. said Deloitte will replace KPMG as its independent auditor starting next year, bringing an end to KPMG’s more than century-old run. The change is the culmination of a selection process GE announced in late 2018, after the ratification of KPMG as auditor drew the support of only 65% of the votes cast at that year’s annual meeting. GE, which kept KPMG as auditor in 2019 and 2020 as it sought shareholder input on the change, says the firm will remain through the completion of its services for this year and the filing of the company’s 2020 annual report. KPMG has been GE’s independent auditor since 1909.

Jensen Comment
Some years in the history of KPMG auditing of GE there were scandals.

Over the years the coziness of KPMG with GE came into question on occasion. Here's an example:
"KPMG Nixes GE Loaned Tax Staff Engagement," by Francine McKenna, re:TheAuditors, January 26, 2012 ---

http://retheauditors.com/2012/01/26/kpmg-nixes-ge-loaned-tax-staff-engagement/

KPMG will no longer loan tax professionals to GE during busy season, according to a source close to the situation. KPMG was billing an extra $8-10 million, over and above the audit each year, for the service.

Loaning, assigning, or “seconding” tax or any “bookkeeping” staff to an audit client is prohibited by the Sarbanes-Oxley Act of 2002 and by regulations that precede Sarbanes-Oxley. It looks like a regulator got to both KPMG and GE, but quietly. I doubt we’ll ever see a public sanction or fine from the PCAOB or the SEC for KPMG.

My story exposing this prohibited activity by an auditor for an audit client was published in Forbes last March.

KPMG has been GE’s auditor for more than 100 years. Former SEC Chief Accountant Lynn Turner was surprised and quite angered at my revelation. In addition, Turner commented in his newsletter on an email I received from the Carpenters Pension Fund after my column appeared at Forbes.com. The pension fund sought to hold GE and KPMG accountable for auditor independence and have a discussion at the annual meeting about auditor rotation. They were blocked by GE and the SEC:

Continued in article

GE is no longer the prized blue chip audit client it was for most of its life
In 2018 GE bonds sank to junk status as questions arose about its going concern future
Many of its famous products from lightbulbs to appliances have been sold off

https://www.pressreader.com/canada/toronto-star/20181121/281891594319444


Managing the Going Concern Risk in an Uncertain Environment ---
https://www.cpajournal.com/2020/06/15/managing-the-going-concern-risk-in-an-uncertain-environment/


Nonprofit Accounting Resources ---
https://www.cpajournal.com/2020/05/22/nonprofit-accounting-resources/


May 2020:  U.S. mortgage rates tumble to a record 3.15% for 30-year loans ---
https://www.bnnbloomberg.ca/u-s-mortgage-rates-tumble-to-a-record-3-15-for-30-year-loans-1.1442291

Mortgage Payment Calculator --- https://www.mortgagecalculator.org/
PMI means private mortgage insurance --- https://en.wikipedia.org/wiki/Lenders_mortgage_insurance
For loan comparisons only, feed in zero for property taxes, PMI, and insurance
I link to this only as a calculator (not a sales promotion)
Rates may vary for local mortgage lenders and this calculator does not include loan or refinance origination fees (that vary with lenders)


New Technologies And The Evolution Of Tax Compliance ---
https://taxprof.typepad.com/taxprof_blog/2020/05/new-technologies-and-the-evolution-of-tax-compliance.html#more


GASB proposes accounting guidance for CARES Act aid ---
https://www.journalofaccountancy.com/news/2020/jun/gasb-accounting-guidance-cares-act-coronavirus-aid.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=12Jun2020


SEC doles out record $50 million to whistleblower, pushing program total above $500 million ---
https://markets.businessinsider.com/news/stocks/sec-record-millions-whistleblower-award-program-total-payment-amount-payout-2020-6-1029282473


JC Penney is closing 154 stores for good — here's the list ---
https://www.businessinsider.com/jcpenney-closing-stores-list-addresses-2020-6


California:  Proposition 13 created a huge loophole for big property owners. Voters may close it come November, funneling $12 billion to struggling schools ---

https://www.bloomberg.com/news/articles/2020-06-10/california-s-property-tax-solution-for-a-covid-19-funding-crisis?cmpid=BBD061020_BIZ&utm_medium=email&utm_source=newsletter&utm_term=200610&utm_campaign=bloombergdaily

California has a partial solution for its looming, $54 billion Covid-19 budget disaster: It’s asking voters to gut a 42-year-old law that has let big business skate with billions of dollars it would have had to pay in property taxes. Estimated at $12 billion a year, the new revenue could help the Golden State’s struggling schools. But opponents warn that, as is usually the case, companies will simply pass the extra cost on to those who can least afford it.

Jensen Comment
Proposition 13 exists in California and not other states largely because property values soared 50 years ago in California and are still soaring relative to other states. If property taxes soar with property values, millions of owners will one day find that they can no longer afford to keep the homes and businesses that they owned for decades. This is counterproductive in many ways, one of which Bloomberg notes for businesses. Businesses do not pay taxes or other expenses. These are passed on to customers, and this will set prices soaring even more in California.

Although the current proposal does not call for increasing property taxes on homes until they're sold, there will be a huge temptation to raise even more state and local revenues by eliminating Proposition 13 for home owners as well. Think of Stanford's Professor X who built a $45,000 in Palo Alto 40 years ago. Today a comparable house in Palo Alto sells for $45 million. Professor X would like to retire in Palo Alto and continue living in this long-time home. Proposition 13 enables Professor X to do so. Without Proposition 13 Professor X probably would have had to sell the house 25 years ago and make a career decision whether she could even afford to remain on the faculty of Stanford University. Most certainly she cannot afford to retire in Palo Alto if Proposition 13 is eliminated for homeowners. She may get a huge capital gain on her home, but the cost of replacement housing is out of sight in Palo Alto.

As it stands, the current proposal is to eliminate property tax relief for business properties such as a shopping mall in Palo Alto. The above Bloomberg article would have us believe that the mall's owners will simply pass along the rent increases to stores operating in the mall. However, these days stores in malls are operating on the edge of bankruptcy, and price increases needed to pay the added rents may well tip them over the edge. Malls in California that are already emptying out at a slow pace may well simply empty out at a much faster pace.

California businesses will simply increase the rate at which they're already moving to tax-friendly states like Nevada and Texas (especially techy Austin).

Who is really jumping for joy at the 2020 proposal to eliminate Proposition 13 relief for business properties? My guess is that the cheers are loudest in the office of Jeff Bezos at Amazon and property developers in Nevada.

California schools may benefit more from the loss of students (think of unemployment accompanying business closures) they have to serve relative to the $12 billion in added revenue.

There are no simple solutions to California's state government fiscal mismanagement.


How to Mislead With Statistics

The Five Most Expensive Countries in the World ---
https://qz.com/1867733/which-is-the-most-expensive-country-in-the-world/

The latest data, for 2017, demonstrate the huge disparities in the cost of living between countries. Japan was five times more expensive than Egypt. This means that the amount the average Japanese person could buy was about three times more than the average Egyptian. It’s still a big difference, but not as massive as it might appear at first glance.

The most expensive country in the world in 2017 was Bermuda, with prices about 105% above the global average. Bermuda was followed by Iceland, Norway, Switzerland, and the Cayman Islands. These are all very rich countries, where labor is costly, a major contributor to high prices. It is no coincidence that three of the top five are islands, which makes importing goods to these places extra expensive. The least expensive countries were poor nations like Eritrea (76% less expensive than average), Egypt (73%,) and Ukraine (67%).

. . .

Generating price statistics is not easy. The World Bank works with the statistical agencies of each country to gather prices on a set of commonly purchased goods across the world (pdf). For example, data is collected on the cost of rice, gas, TVs, and housing. The researchers’ goal is to collect prices for similar types of goods of more or less the same quality.

The measurement for the overall price level of a country is not simply comparing a similar basket of goods across all countries, but also accounts for what locals tend to buy. People in China eat a lot of pork, so the price of pork plays a bigger role than beef in determining China’s overall price level. The amount of any product that is included in a price level calculation is determined by examining surveys of household expenditures for that country.

The World Bank also releases data on the price level by major product type. The data show that not only do overall price levels vary across countries, but even within countries, the price differences with the rest of the world fluctuate widely depending on the product or service. For example, in the UK, the cost of “transport” was 39% higher than the global average, but the cost of “food and beverages” was only 7% higher. These differences are often due to government policies, like trade barriers or business subsidies, that raise or lower prices for industries. Generally though, prices tend to be relatively higher in rich countries for goods and services that involve a lot of labor, like prices at restaurants and hotels, and relatively lower for commodities like food and clothing.

The chart below shows the relative costs of different product groups for the 30 most populous countries in the world, and if you hover over a dot it will highlight the cost of that good across all countries.

Continued in article

Jensen Comment
One of the huge problems in comparing cost of living is that items being compared are not fungible, especially housing. For example, for an Egyptian median-income homeowner to live like a median-income Swiss homeowner is enormously expensive in Egypt because of the quality of housing available to median income residents. There are also great differences in non-quantifiable quality-of-life factors for home owners. A friend of mine who lived in Egypt said one of the frustrations was noise at night that arises because so many Egyptians are outdoors at all hours of the night to escape the heat. Night noise is not so much a problem in Iceland, Norway, and Switzerland.

Variations in housing costs vary within nations, and in some nations these variations are much greater than in other nations. For example, the variation in housing costs in Iceland is much lower than the variation in housing costs in the USA (think of housing costs in San Francisco versus Topeka). Or think of variation in housing costs within given cities like New York, Chicago, and San Antonio.

Transportation costs vary greatly with geography. Japan is a relatively small nation with very efficient public transportation. The USA, Russia, China, and India are relatively large geographic nations where having public transportation everywhere like Japan has public transportation everywhere is not economically feasible.

Taxes are difficult to compare between nations. Some countries like Bermuda, Iceland, and Norway can divert taxes to social services (think health care) since relatively little must be spent on national defense. For whatever reason, the USA, Russia, India, and China divert a much higher proportion of tax revenues into national defense (think nuclear arms and air force spending alone).

There's an enormous problem is comparing hugely different populations. Bermuda has a permanent population of slightly over 70,000 residents making labor costs relatively high. Egypt has 100 million residents making labor costs relatively cheap.

I could go on and on, but I suspect that by now you get the point.


Taxpayers Still on the Hook for Stadium Debts, Even Though Coronavirus Canceled Sports (taxpayers also hit with paying for unemployment and stadium unemployment)

https://reason.com/2020/06/19/the-coronavirus-put-a-stop-to-many-sports-but-cities-still-owe-stadium-debt/

 

American cities are going to lose about $360 billion in revenue over the next three years, according to a projection from the National League of Cities. The coronavirus pandemic isn't just emptying stadiums and eliminating ticket revenue. It's causing all sorts of economic spending to crater—including the common "tourist taxes" that cities often use to back debt, like those applied to hotel rooms and rental cars.

But these stadium projects were bad deals even before the pandemic-induced economic shutdown.

"The pandemic and the event cancellations it has generated have seriously disrupted the financial calculations that cities made in building stadiums at taxpayers' expense," writes David Boaz, executive vice president of the libertarian Cato Institute. "But they were never a good bargain."

The projections used to justify Worcester's investment in the stadium were iffy even under the best of circumstances. When the Worcester Business Journal surveyed 10 experts about the viability of the city's plan, nine of them expressed skepticism that the ballpark would pay for itself. The only dissenter was a Smith College economist hired by the city to make the case for the project. Study after study after study has debunked the idea that publicly funded stadiums are financially beneficial to anyone other than the team owners, who get free infrastructure for their business.

Continued in article


Excel:  Reaching the SUMIF ---
https://www.journalofaccountancy.com/issues/2020/jun/microsoft-excel-sumif-function.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=26Jun2020

Excel:  How to Include Captions in Microsoft Excel Graphs ---
https://www.howtogeek.com/673657/how-to-include-captions-in-microsoft-excel-graphs/

Excel:  You can sync Microsoft Excel spreadsheets to ensure that changes in one will automatically be reflected in another ---
https://www.howtogeek.com/673643/how-to-sync-excel-spreadsheets/

Excel:  Analyzing Future Cash Flows in Excel
https://www.fm-magazine.com/news/2020/apr/model-working-capital-adjustments-in-excel.html?utm_source=mnl:globalcpa&utm_medium=email&utm_campaign=20May2020&SubscriberID=119191126&SendID=280485




EY:  June 2020 Financial Reporting Developments
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-briefs---second-quarter-2020

EY:  Update on Earnings Per Share ---
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-developments---earnings-per-share0

EY:  PCAOB’s request for comment for its interim analysis of the Critical Audit Matter requirements ---
https://www.ey.com/en_us/assurance/accountinglink/comment-letter---pcaob-s-request-for-comment-for-its-interim-ana

In our comment letter, we express our support for the PCAOB’s efforts to make the auditor’s report more informative and relevant for investors and other users of the financial statements. We also share our views on how the critical audit matter (CAM) requirements impacted the audit process and our observations from interactions with audit committees.

EY:  Technical Line: Accounting for rent concessions related to the COVID-19 pandemic under ASC 840 ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---accounting-for-rent-concessions-related-to-the-0

Entities that provide or receive rent concessions due to the COVID-19 pandemic need to consider whether to make an election provided by the FASB staff to not evaluate whether a rent concession is a change in the provisions of the lease. Entities that make this election then need to decide whether to apply the guidance in ASC 840 on accounting for a change in lease provisions to the concession or account for the concession as if it were contemplated as part of the existing contract. Entities that don’t make the elections may find it operationally challenging to evaluate the rights and obligations of each contract and apply the guidance on accounting for a change in lease provisions to leases if a concession was not contemplated in the existing lease.

Continued in Article




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

Bayer AG said that it had reached a roughly $10.5 billion deal to settle tens of thousands of lawsuits with U.S. plaintiffs alleging the company’s Roundup herbicide causes cancer, a milestone in the German company’s legal battle that has been weighing down its share price for nearly two years.

Jensen Comment
Don't cheer out loud like ignorant activists. Big companies don't pay fines (do you know what cigarettes cost today?). Customers down the supply chain pay for business fines and taxes. In this case, most of the $10.5 billion will be paid by USA grocery customers in the prices of hundreds of products from pancake mix to bread to products depending upon corn and soybeans (think hamburger, milk, and icecream). Pharmacy prices may also go up for things like asperin.

This is why I shake my head when progressives want to push up business firm taxes passed directly along in higher prices. Unlike increases in income taxes the poor are hit harder with some business tax increases.

Sure higher taxes mean less volume. But food is not the same thing as cigarettes. The volume of bread sold will not decline like the sales of cigarettes. Customers will simply dig deeper into paychecks for bread and other food items to pay for a $10.d billion fine that's probably based more on fraud than science.

There are exceptions. Dairy farms are dying out across the USA. Making milk more expensive (due to increased and hay grain prices) will make it even tougher for dairy farms to survive.

Noi cheers for lawyers peddling bad science and emotion-driven juries.


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

Hertz Global Holdings Inc.’s plan to cut its U.S. rental fleet by more than a fourth could upset the asset-based securitization market, a key mechanism for funneling Wall Street cash to businesses, a group of lenders says.


From the CFO Journal's Morning Ledger on June 24, 2020

A distressed energy-trading company overstated its assets by more than $3 billion using “routine and pervasive” forgery, while its founder oversaw years of disastrous bets on oil derivatives, a report filed with a Singapore court said.


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

Good morning. The economic downturn is forcing finance executives to take a more detailed look at their companies’ spending. One tactic they are turning to is zero-based budgeting, a technique growing in popularity.

Companies including General Motors, Guess and Signet Jewelers are using zero-based budgeting to slash costs and navigate the effects of the coronavirus pandemic. The expense-management strategy requires finance executives to question and justify each line item in their budgets from the bottom up.

The clean-sheet approach to budgeting has become more popular with finance chiefs during the pandemic because it allows them to cut costs surgically, said Luke Pototschnik, a managing director at Boston Consulting Group who advises companies on zero-based budgeting. 

Guess slashed quarterly operating costs by about $60 million and reduced its capital expenditures to $6 million, or one-third of the company’s capital expenditures during the prior-year period. It also furloughed employees and lowered some salaries, Chief Financial Officer Katie Anderson said. While some of these cuts are expected to be temporary, others—including reductions in travel costs and store labor—are forecast to yield long-term savings, according to Ms. Anderson.

Bob Jensen's threads on zero-based budgeting ---
http://faculty.trinity.edu/rjensen/theory02.htm#Zero-Based-Budgeting


From the CFO Journal's Morning Ledger on June 15, 2020

Good morning. Finance chiefs are puzzling over how to account for the government assistance their companies received under the $2.2 trillion Cares Act.

Many public and privately-held companies took out loans under the Paycheck Protection Program to defray payroll-related costs after swaths of the economy were locked down to curb the spread of the novel coronavirus. Under current U.S. accounting rules, companies don’t need to disclose any amounts they receive in government assistance. On PPP funds and other stimulus programs specifically, standard-setters have given little guidance.

The issue has become more top-of-mind to chief financial officers and accounting chiefs as many prepare to close the books on the second quarter in a few weeks’ time. “You’ll be looking at a variety of different places for how to account for this, and for investors, that’s a recipe for some confusion,” said David Zion, head of the accounting and tax research firm Zion Research Group.

Investors will be following companies’ disclosures closely. Chicago-based North Star Investment Management will be monitoring what and how these companies divulge on the government loans they received. “If different companies treat this differently, we would view it as being a symptom of the lack of guidance, and not that anybody’s trying to confuse investors,” said Eric Kuby, chief investment officer of North Star.

Some businesses, especially smaller ones, also face questions around whether they have to pay back the PPP-loans they received. The U.S. Treasury Department and the Small Business Administration have issued 18 “interim final rules” and 48 pieces of guidance in the form of “frequently asked questions” for the program, but many questions remain unanswered.

Jensen Comment
If this were an engineering problem the academic literature of engineering would be quick to respond. Don't hold your breath for the academic literature of accountancy to respond to questions asked by the practicing profession. If it can't be solved with equations top accounting academic journals like TAR, JAR, and JAE are of little help.


From the CFO Journal's Morning Ledger on June 12, 2020

A strong planting season for U.S. corn is expected to lead to a record-high supply, as demand for the crop remains muted thanks to the fallout from the coronavirus pandemic.

Ending stocks of corn—unsold corn left over after the marketing year is done—are expected to total 3.32 billion bushels in 2020-21, the U.S. Department of Agriculture said in its monthly supply and demand estimate report. That figure is 58% higher than last year’s ending stocks, according to USDA data.

Jensen's Suggested Assignments for Accounting Students

After having students debate corn price hedging of purchased options versus futures contracts have students compare the hedge accounting differences of purchased options versus futures contracts.
Have students in particular focus on the differences in risk when speculating (not hedging) using purchased options versus futures contracts.

Then ask them where ineffectiveness arises in corn price hedging and how hedging ineffectiveness affects hedge accounting.

Next have them compare the hedge accounting differences between corn inventory fair value hedging versus cash price hedging.

Bob Jensen's free tutorials on accounting for derivative financial instruments and hedge accounting ---
http://faculty.trinity.edu/rjensen/caseans/000index.htm


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

The European Union plans to file formal antitrust charges against Amazon over the e-commerce company’s treatment of third-party sellers, according to people familiar with the matter.

The charges could be officially filed as early as next week or the week after, one of the people said. The European Commission, the bloc’s top antitrust regulator, has been honing its case, and the case team has been circulating a draft of the charge sheet for a couple of months, another person said.

The formal charges would be the commission’s latest step in a nearly two-year probe into Amazon’s alleged mistreatment of sellers that use its platform. The charges—called a statement of objections—stem from Amazon’s dual role as a marketplace operator and a seller of its own products, the people said. In them, the EU accuses Amazon of scooping up data from third-party sellers and using that information to compete against them, for instance by launching similar products

Jensen Comment
 It seems to me that the EU will go after any USA company that's operating successfully in Europe --- just because they are American.


From the CFO Journal's Morning Ledger on June 8, 2020

Good morning. After two months of carnage, companies added more jobs in May than in a single month on records dating from 1948. The jobs report boosted hopes that the economy has moved beyond the worst fallout from the coronavirus pandemic and may recover more quickly than expected.

Economists attributed the increase in U.S. jobs to both relaxed business restrictions in some states and government payments to companies that rehired workers. But they still expect a slow and choppy recovery. Government aid programs for businesses will start to run out this summer and fall. Still, a significant number of Americans appear ready to come back to the marketplace.

Among goods-producing industries, manufacturing showed strong gains. In the services category, jobs in food services and drinking places accounted for about half of the gain in total nonfarm employment. 

A study released last month found that work-related mobility dropped notably after the imposition of a stay-at-home order, and unemployment-related Google searches rose sharply after the closure of nonessential businesses. Initial claims for unemployment insurance rose sharply immediately after stay-at-home mandates. Weaker employment is correlated with stay-at-home mandates and business closures.


Quantitative Easing --- https://en.wikipedia.org/wiki/Quantitative_easing

From the CFO Journal's Morning Ledger on June 5, 2020

The European Central Bank aggressively scaled up its bond-buying program to €1.35 trillion ($1.52 trillion), a bold move that eases pressure on the region’s embattled governments and puts the ECB’s stimulus effort in line with that of the Federal Reserve.


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

A former United Auto Workers president pleaded guilty to embezzlement of union funds and racketeering, marking the highest-profile conviction yet in the government’s yearslong investigation into labor corruption within the auto industry.


From the CFO Journal's Morning Ledger on June 3, 2020

Good morning. Some grocers, food manufacturers and restaurant chains weathered the supply-chain disruption in recent months in part because they use a common hedging practice: Locking in beef prices and quantities of meat purchases months in advance.

Costco Wholesale and Jack in the Box are among the companies that have said they negotiate prices of some supplies in advance, providing finance chiefs with a forward look on costs. The practice became a key tool for these companies after the pandemic disrupted the U.S. meat supply and prices soared.

Costco is locking in some prices with suppliers, Chief Financial Officer Richard Galanti said. He declined to provide specifics on how much of Costco’s supplies come with pre-agreed prices but said the operator of members-only warehouse stores would lock in prices for weeks or months at a time. “It’s not unlike locking in currencies,” Mr. Galanti said. He said he expects overall food prices to come down as supply shortages ease.

Hormel Foods, the maker of Spam and other food products, relies on forward prices for a limited amount of pork, its finance chief, Jim Sheehan, said. “We wouldn’t go in and lock in all the cost of pork,” Mr. Sheehan said. “We would have a balance between contracted prices, open-market prices and then operating costs.”

Jensen Comment'

A learning assignment that might be given to students is to have them examine the most common hedging contracts (e.g., purchased options, forwards, or futures) and have them explain how "net settlement" means that all parties to a hedge contract do not have to buy or ship actual meat products to be part of hedging or speculation in derivatives contracts.

Then have students explain how both hedging and hedge accounting varies under the different types of hedging contracts and under different the types of price movements. In particular, explain how risk varies such as how options buyers have capped their potential losses while options sellers (writers) have greater risks under some circumstances.

Make students understand why hedge accounting is deemed so important to hedgers and how they might lose parts of it for hedging contracts that are partly ineffective. Reasons for ineffectiveness include hedging meat purchases in California with options contracts purchased in Chicago derivatives markets such as the CBOT.

Bob Jensen's free tutorials on accounting for derivative financial instruments and hedging activities ---
http://faculty.trinity.edu/rjensen/caseans/000index.htm


From the CFO Journal's Morning Ledger on June 2, 2020

Good morning. Companies are locking in current low interest rates for future bond sales, hoping to benefit from cheap refinancing costs when their debt comes due.

As finance chiefs and treasurers struggle to project an outlook for the coming quarter in the wake of the coronavirus pandemic, being able to quantify the cost of borrowing in the years ahead can guide them as they look at their companies’ debt-maturity schedule, CFO Journal reports.

Businesses including online marketplace eBay and animal-health company Zoetis Inc. disclosed in recent weeks that they entered into such rate locks on future debt—called pre-issuance hedges—with banks and other financial institutions. While the banks earn a fee for their service, companies potentially save money if rates go up in the meantime.

Jim Chapman, the finance chief of Richmond, Va.-based Dominion Energy Inc., in March locked in rates for about $1 billion in bond issuances planned for between now and 2027. Mr. Chapman, who refinances several billion in bonds a year, didn’t hedge the full amount of what he plans to sell in debt, but a significant proportion. “If rates go to zero in the next seven years, we will have lost money,” he said. “If rates go up, we can still raise funds at around 1%. We think the upside in securing the 1% is bigger than the potential cost."


From the CFO Journal's Morning Ledger on June 1, 2020

Rising tensions between the U.S. and China over Hong Kong have American businesses caught in the crossfire.

After China last week approved a plan to impose new national-security laws on Hong Kong, President Trump on Friday said the U.S. would no longer treat Hong Kong as a separate entity from China and would roll back policy exemptions for the city. They could include measures such as export controls, tariffs and visa restrictions, according to analysts, but businesses will have to wait for details and the timing of any moves.

About 85,000 U.S. citizens work in the city, with more than 1,300 U.S. companies operating here, some with regional headquarters. American companies with offices in Hong Kong range from Apple to Procter & Gamble and FedEx.

·        Tencent Rival NetEase Moves Ahead With Hong Kong Listing


From the CFO Journal's Morning Ledger on May29, 2020

The International Accounting Standards Board granted temporary relief  to companies accounting for rent concessions they received on leases due to the coronavirus pandemic.

Thursday’s amendment to an IASB 2016 standard on leases, effective immediately, exempts companies from having to consider whether temporary rent freezes or reductions qualify as lease modifications.


From the CFO Journal's Morning Ledger on May28, 2020

General Electric is getting out of the business of making lightbulbs, selling a unit that defined the company for nearly a century and was its last direct link to consumers.


From the CFO Journal's Morning Ledger on May28, 2020

Boeing intends to shed more than 13,000 employees, the plane maker said, including the first round of compulsory cuts as part of previously announced plans triggered by the coronavirus-driven collapse in global air travel.

The company said it had completed its voluntary-layoff program after offering staff buyouts last month, with several thousand more jobs set to go under compulsory cuts over the next several months. They mark the first major reductions by the company since 2017, when it laid off roughly 1,500 workers as part of a wider cost-cutting drive.

Meanwhile, American Airlines will cut its management and administrative staff by 30% as the airline prepares to shrink.

American is among the airlines that have reported a signs of a pickup in demand after government travel bans, stay-at-home orders and fears of infection brought travel to a near halt in March and April. But the modest gains won’t be enough to save thousands of industry jobs.

 





IMA Cases, Volume 13 Issue 1, 2020 ---
https://www.imanet.org/educators/ima-educational-case-journal/iecj-index/2020/iecj-issue-page?ssopc=1
These cases are not free

Volume 13 Issue 1

IMA Educational Case Journal

ISSN 1940-204X

Articles

Activity-Based Costing and the Evaluation of Customer Profitability: A Case Study

David M. Bukovinsky, Ph.D., CPA (inactive)
Department of Accountancy
Wright State University

 

THIS CASE EXAMINES THE USE OF ACTIVITY-BASED COSTING (ABC) and other accounting tools to assess the profitability of individual customers of Carolina Creations, a small furniture-manufacturing business. The company was expanding, new customers were attracted, and sales were increasing. Yet profitability was declining. The company’s founder, Richard Bachon, was concerned that the company was acquiring too many customers too fast, without regard to whether the customers were profitable. Richard ordered his directors of accounting and marketing to devise methods for evaluating the profitability of individual customers. He hoped that greater insight could lead to improved pricing methods and practices for managing customers. Students are provided basic information about the activities related to serving customers and are required to develop tools to help management better understand the costs of serving customers.
 

Keywords: Activity-based costing, customer analysis, cost allocation, common-size statements, ratio analysis.

Sea Pines Villa: Are They Ready For The Big One?

Margaret N. Boldt, Ph.D., CMA
Department of Accounting and Finance
Southeastern Louisiana University
 

SEA PINES VILLA (SPV) INTRODUCES STUDENTS (undergraduates and graduates) to cash budgeting and its importance in disaster-recovery plans. The setting is based on a real company and operating environment, and provides students with an opportunity to explore how uneven cash receipts affect the cash budget. The case describes how this coastal vacation property rental and management company earns revenues and receives cash, as well as the timing and behavior of costs and payments. Students prepare a cash budget for three months and determine whether the company has sufficient cash to survive a disaster. Students also create a disaster-recovery plan that includes preventive and action steps for the hours immediately preceding (if possible) and following a disaster.
 

Keywords: Cash, budgeting, disaster-recovery plan, business continuity.

Kilgors Wine Division: A Balanced Scorecard Simulation

Albie Brooks
Department of Accounting
University of Melbourne, Australia

Gillian Vesty
School of Accounting
RMIT University, Australia

Margaret Shackell School of Business
Ithaca College, USA


 

THE WINE DIVISION OF KILGORS IS beginning development of a new performance management framework using balanced scorecard (BSC) technologies. To date, they have developed a portfolio of measures for possible inclusion in the division scorecard. Industry experts have provided Kilgors’ management with insight regarding industry developments, and the CEO, CFO, and Wine Division manager are motivated to ensure the firm’s and division’s strategies are captured in improved performance evaluation and management control. The Wine Division operates in a dynamic environment and has recently been challenged by uncertain market conditions that have raised questions about internal operations and practices. The CEO is intent on proactive, rather than reactive, management responses.
At this stage, Lee recognizes that she needs guidance from someone with management accounting expertise in further developing and refining the BSC. She also recognizes that planning for disruptions and market threats will be an integral part of this strategic planning process.
 

Keywords: Balanced scorecard (BSC), simulation, wine industry, performance measurement.

Target Costing Decisions at BMA AG

Marc Wouters, Ph.D.
Professor of Management Accounting
Karlsruhe Institute of Technology (KIT)
University of Amsterdam
 

THIS CASE ADDRESSES TARGET COSTING at a German premium car company, BMA AG. It is based on many examples that have been anonymized and blended, making the extended description of target costing in practice a valuable part of this case. The case focuses on target costing in a context with complex supply chains, huge product-development expenses, long lead times of product-development projects, complex tradeoffs between different targets, and large product portfolios. The assignments do not require conducting detailed calculations but focus on qualitatively discussing decision-making based on target costing and developing extensions of target costing to adapt it to this context.
 

Keywords: Target costing, car industry, product development, R&D costs, parts commonality.


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 29, 2020 2020

FASB Delays New Accounting Rules for Some Private Companies, Nonprofits

By Mark Maurer | May 20, 2020

Topics: Due Process , FASB

Summary: This article follows on one from April 8, 2020, covered in this Review, which addressed the announcement that the Financial Accounting Standards Board (FASB) tentatively decided to delay implementation of ASU 2014-09, Revenue Recognition from Contracts with Customers, and ASU 2016-02, Leases, for certain entities which had not already implemented these new standards. “The Financial Accounting Standards Board extended the implementation period for new accounting rules on revenue recognition and leases for certain companies to give them more time to address the impact of the coronavirus pandemic…the proposed relief related to revenue recognition was initially limited to private franchisers only.”

Classroom Application: The article may be used in a financial reporting class to discuss the FASB’s due process for implementing accounting standards. Even a standard as straightforward as extending the implementation dates for certain entities must follow these due process procedures. Questions 1-5 may be used in Intermediate level classes and above; later questions are appropriate for advanced undergraduate or graduate level work.

Questions:

·        According to the article, when has implementation of the new revenue recognition standard been required? The new lease accounting standard?

·        The initial proposal to implement this delay was issued in April. According to this article, how was the delay of the revenue recognition standard expanded beyond the initial proposal?

·        What steps are required for companies and nonprofit entities to implement new accounting standards? Why are these steps particularly challenging during the Covid-19 outbreak?

·        What is the FASB’s due process for implementing accounting standards? Cite your source for this information (Hint: One source can be found by accessing fasb.org/home and clicking on About Us).

·        Why do you think the FASB must follow these due process procedures just to delay the implementation of these standards for certain entities during the impact of the Covid-19 pandemic?

·        Access the FASB’s Tentative Board Decisions form the May 20 meeting at which the decision announced in this article was made. https://www.fasb.org/cs/ContentServer?c=FASBContent_C&cid=1176174644728&d=&pagename=FASB%2FFASBContent_C%2FActionAlertPage What was the purpose of the meeting?

·        Access the Board Meeting Handout for the May 20 FASB meeting. It is available at https://www.fasb.org/cs/ContentServer?c=Document_C&cid=1176174643275&d=&pagename=FASB%2FDocument_C%2FDocumentPage How many comment letters were received by the FASB from constituents on the proposals to delay implementation of these standards? Were they generally in favor of this proposal or not? Were there concerns expressed? State where in the document you find this information.

Read the Article

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

 

"FASB Delays New Accounting Rules for Some Private Companies, Nonprofits," by Mark Maurer, The Wall Street Journal, May 20, 2020
https://www.wsj.com/articles/fasb-delays-new-accounting-rules-for-some-private-companies-nonprofits-11590005006

Move by U.S. accounting standard-setter is aimed at giving companies more time as they grapple with impact of coronavirus

The Financial Accounting Standards Board extended the implementation period for new accounting rules on revenue recognition and leases for certain companies to give them more time to address the impact of the coronavirus pandemic.

To carry out accounting changes, private companies often rely on technology investments or additional staffing. The pandemic has disrupted allocations of some of those resources, FASB Chairman Russell Golden said.

The FASB sets accounting rules for U.S. companies and nonprofits.

Private companies or nonprofits that haven’t yet adopted the new revenue-recognition standard could delay adopting it by one year, the FASB said Wednesday. The revenue-recognition standard streamlines how companies account for revenue from sales and services.

Implementation of the standard for those companies will be delayed to annual reporting periods beginning after Dec. 15, 2019.

Private companies and all nonprofits also will have the option to defer by one year the effective date of a standard that requires companies to place operating leases on their balance sheets.

Implementation of the leasing standard for private companies and private nonprofits will be pushed back to fiscal years beginning after Dec. 15, 2021. For public nonprofits, the effective date for the leasing rules will be pushed to fiscal years starting after Dec. 15, 2019.

The FASB said it plans to issue documents detailing the new timetables in early June, making them official.

The proposed relief related to revenue recognition wasinitially limited toprivate franchisers only. The FASB agreed Wednesday to expand the relief to other private entities.

Wednesday’s meeting marked one of the last rule votes under Mr. Golden, whose term ends June 30. Richard Jones, most recently Ernst & Young’s chief accountant, is expected to succeed him on July 1.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 29, 2020 2020

Ford’s Chicago Plant Stops Production for Second Straight Day

By Ben Foldy Mike Colias | May 20, 2020

Topics: Industrial Production , Cost Basis , Coronavirus

Summary: After re-starting production following a two-month shut down, Ford Motor Co. was forced to stop assembly lines at factories in Chicago and Michigan due to the impacts of the coronavirus pandemic. The Chicago plant was shut down twice because of two confirmed Covid-19 cases among workers at a nearby parts-assembly plant. A Ford worker at the Dearborn Michigan plant tested posted for Covid-19; the plant was shut down for disinfection and was re-opened on Wednesday, May 20, 2020.

Classroom Application: The article may be used in a managerial accounting course to discuss procedures to resume production while also limiting the spread of the coronavirus. Questions focus on measuring cost and profitability of one type of Ford vehicle.

Questions:

·        One of the vehicles made by Ford at the plant locations that are the first to come back into production is described in the article as the most profitable vehicle. Which vehicle is it? Why does it make sense that Ford would resume production of this vehicle first as the company tries to emerge from the effects of the coronavirus pandemic?

·        How does Ford identify the cost and profitability of a particular vehicle model? Specifically describe the managerial cost information used to make this assessment.

·        Do you think that cost and profitability of this vehicle model will change due to the impact of the coronavirus pandemic? Explain your answer including the impact, or non-impact, on specific cost components.

Read the Article

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

 

"Ford’s Chicago Plant Stops Production for Second Straight Day By Ben Foldy Mike Colias | May 20, 2020 , The Wall Street Journal,
https://www.wsj.com/articles/ford-reports-two-coronavirus-cases-at-factory-11589993052

Factory, which makes Ford Explorer SUVs, shuts down after nearby supplier suspends production

Ford Motor Co. F -2.39% stopped assembly lines at key factories in Chicago and Michigan on Wednesday, the latest sign of the risks to companies and their employees as they attempt to resume work during the Covid-19 outbreak.

Ford sent Chicago Assembly Plant workers home for a second day in a row late Wednesday morning, a company spokeswoman said. The work stoppage came after a Lear Corp. LEA -1.47% factory in nearby Hammond, Ind., that makes seats for the Ford factory idled its assembly lines, people familiar with the matter said.

Also Wednesday, Ford temporarily closed a pickup-truck plant in Dearborn, Mich., near its corporate headquarters, after a worker at the plant tested positive for Covid-19, the company spokeswoman said. Work is expected to resume Wednesday night after part of the factory is disinfected, she said.

The Dearborn plant is one of two factories that make the F-150 pickup, Ford’s biggest moneymaker. The Chicago plant makes the Ford Explorer sport-utility vehicle, one of the company’s most popular models, along with the Lincoln Aviator SUV.

On Tuesday, Ford was forced to close the Chicago factory twice for several hours after confirming two positive cases of Covid-19 at a nearby parts-assembly facility, the company spokeswoman said. The main assembly plant was back in operation by Wednesday morning after both facilities were disinfected overnight.

The spokeswoman said the company believes the workers already were infected when they returned to the job this week.

“Due to incubation time, we know these employees did not contract Covid-19 while at work,” the spokeswoman said. “Our protocols are in place to help stop the spread of the virus.”

Texts sent to employees at the Lear plant and viewed by The Wall Street Journal said that a first-shift employee tested positive for Covid-19. The facility has since been disinfected and the night shift is to report as scheduled, the texts said.

The worker told the company of the test result and has been instructed to self-quarantine, as have those who came into contact with the worker, a Lear spokesman said. The facility stopped production to be cleaned and disinfected in accordance with the company’s health and safety policies, the spokesman said.

The closures come after Detroit’s auto makers on Monday began restarting their U.S. factories, which were idled around March 20 as the coronavirus pandemic took hold. The companies have spent several weeks preparing measures to ensure a safe work environment. They include temperature checks, plastic barriers between work stations and even electronic bracelets that beep if an employee violates social-distancing rules.

Executives and analysts have warned that the industry’s restart will be slow and complex, including the risk of infections popping up at auto makers’ factories and at those of suppliers.

The car companies have resumed operations with far fewer workers making vehicles in extremely small volumes as they gradually resume operations. Executives have said production will start slowly as workers familiarize themselves with safety measures, parts trickle in from suppliers and machinery is tested after the long idle period.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 29, 2020

Companies’ Financial Planning Comes Up Short in the Coronavirus Era

By Mark Maurer Nina Trentmann | May 24, 2020

Topics: Financial Planning , Coronavirus , FP&A

Summary: The article discusses the breadth of the impact of the coronavirus outbreak on the functions in corporate Financial Planning & Analysis (FP&A). Descriptions of several U.S. companies’ expectations regarding recovery (e.g., a “swoosh” shape or otherwise), breadth of the pandemic’s impact on functions across the company and thus in FP&A modeling processes, and worst-case scenario planning are discussed.

Classroom Application: The article may be used to discuss the role of financial planning and analysis (FP&A). Questions carry students to the website for Certified Corporate FP&A Professionals https://fpacert.afponline.org/.

Questions:

·        What is the role of financial planning and analysis in corporate entities? Besides gleaning information from the article, you may access https://fpacert.afponline.org/ then click on the right-hand side of the banner, “Why the FP&A”, then “What is FP&A.”

·        What FP&A functions are impacted by the coronavirus outbreak? List all that you find in the article.

·        What assumptions used by FP&A departments are impacted by the breadth of the coronavirus outbreak?

·        What actions by corporate chief executive officers and chief financial officers have resulted from these challenges to FP&A functions during the coronavirus outbreak?

·        Consider the discussion in the article relative to its title: do you think that the financial planning and analysis conducted in corporations is “coming up short”? Explain your viewpoint.

Read the Article

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

 

"Companies’ Financial Planning Comes Up Short in the Coronavirus Era," by Mark Maurer Nina Trentmann, The Wall Street Journal, May 24, 2020
https://www.wsj.com/articles/companies-financial-planning-comes-up-short-in-the-coronavirus-era-11590325200

Uncertainty surrounding the pandemic has rendered careful corporate planning exercises useless

To prepare for uncertainty, finance chiefs turn to scenario planning. They develop models to help quantify the effects of what-if situations involving cash flow, sales revenue and other metrics. However, the unprecedented nature of the coronavirus pandemic has complicated the practice, upending annual budgets and investment time lines, and rendering forward-looking guidance futile.

CFOs in recent weeks have set aside pre-existing plans or are treating them, at best, as a starting point. Some companies have opted to draw on the fallout of the 2008 financial crisis as a de facto worst-case scenario.

But unlike past crises, many executives find every element of their business under strain.

“You’ve got these great plans and as of yesterday, they’re completely meaningless,” said Brian Kalish, who consults on financial planning and corporate treasury issues.

As the pandemic drags on, finance chiefs across sectors are devoting more time and resources to examining a range of potential scenarios. They are also stress-testing business-continuity plans and trying to revise forecasts more frequently.

“We just don’t know what we’re facing,” said Mark George, chief financial officer of Norfolk, Va.-based railroad operator Norfolk Southern Corp.

Norfolk Southern last year started relying on stress-test scenarios to test its liquidity and gauge if it was positioned to deal with another crisis such as the 2008 downturn, Mr. George said. The company’s finance team imagined scenarios using varying multiples of revenue and then simulated the impact of that revenue on cash flow. Those exercises are helping the company evaluate possible outcomes, he said.

“Part of this is driven by, frankly, the PTSD we all have going back to the 2008 financial crisis,” he said.

Many CFOs, therefore, hesitate to stick to their predictions for the coming quarters. Sixty-two percent of S&P 500 companies have withdrawn or revised earnings guidance since April 1 because of the pandemic, according to research and advisory firm Gartner Inc.

Policy makers and company executives increasingly expect a swoosh-shaped recovery, denoting a large drop in the economic performance followed by a prolonged return. But economists continue to consider a variety of possibilities, such as a short collapse followed by a bounce back to pre-pandemic levels of activity, or a slower version of gross domestic product recovery.

“The world is going to be different in three, six and 12 months,” said Christopher Kastner, CFO of Newport News, Va.-based shipbuilder Huntington Ingalls Industries Inc. “Thinking through what’s going to be next, I know that’s hard to do and we’re challenged with it.”

The unpredictability has made even worst-case scenarios revolving around natural disasters seem suddenly manageable.

“A hurricane you can see the other side of, so it’s easier to plan when you’re going to come back up the other side and how you’re going to execute,” Mr. Kastner said.

As companies tighten their budgets, models and planning tools aren’t expected to undergo significant innovation. Businesses likely will continue to use planning tools they already have because it is very difficult to develop new tools in the midst of a crisis, said Bryan Lapidus, director of the financial planning and analysis practice for the Association for Financial Professionals.

Group 1 Automotive Inc., is examining scenarios covering a 12-month period, said CFO John Rickel. Its parts and services business division was particularly resilient during the 2008 financial crisis as people held on to their vehicles longer and needed repairs and service, but is facing declines now, he said.

 

The pandemic has pushed the Houston-based dealership chain to test out worst-case scenarios that would be worse than anything tested before the current crisis, Mr. Rickel said, such as a 30% to 40% decline in revenue for its parts and services division.

Group 1 is swiftly adjusting by focusing on the potential impact on costs, cash and loan agreements. It has developed a strategic plan to reduce capital spending and suspend its dividend, he said.

“You want to be in a position where if those more dire forecasts come through,” said Mr. Rickel, “you’re not putting the business at risk.”

 

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 5, 2020 2020

Coronavirus Crisis Dents Salaries, Not Stock Awards, for Many CEOs

By Chip Cutter Theo Francis | June 3, 2020

Topics: Equity Compensation , Coronavirus

Summary: The article discusses strategies associated with changes in stock-based compensation plans for executives. “Most companies didn’t adjust 2019 compensation as the pandemic struck, even though it coincided with boards finalizing bonuses and equity awards, said Ira Kay, managing partner at consulting firm Pay Governance.” CEOs of publicly traded companies earned record compensation in 2019. Median cash salary was approximately $1.2 million while most cash compensation comes from bonuses; the median equity grant was valued at about $8.2 million. Base salaries, making up 8% to 10% of total S&P500 CEO pay, have been cut during the pandemic. Factors leading to this decision such as symbolic actions when workers are furloughed or facing reduced wages--contrasted with the need to motivate executives leading during these difficult times—are discussed in the article.

Classroom Application: The article may be used when discussing stock- or equity-based compensation plans. Questions first focus on students considering required disclosures as the basis for the information analyzed in the article. Following that are questions considering the motivation impacts of equity-based compensation plans and external shocks beyond managers' control such as the coronavirus pandemic.

Questions:

·        According to the article, what proportion of publicly-traded companies’ chief executives’ compensation comes from salaries? From equity-based compensation? In your answer, define the term equity-based compensation and describe the specific types discussed in the article.

·        From where does the Wall Street Journal obtain the information used for the analysis in this article? (Hint: tie your answer specifically to disclosure requirements described in your textbook or other accounting course materials.)

·        What is the purpose of offering compensation under equity-based plans rather than just cash salary?

·        What problems arise with that compensation system under times such as today when the coronavirus pandemic has generated an external shock beyond managers’ control?

·        Consider the case of Sonic Automotive Inc. as described in the article. On what basis did a vice president from advisory firm Glass Lewis criticize this company’s actions?

Read the Article

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

 

"Coronavirus Crisis Dents Salaries, Not Stock Awards, for Many CEOs," by Chip Cutter Theo Francis, The Wall Street Journal, June 3, 2020
https://www.wsj.com/articles/coronavirus-crisis-dents-salaries-not-stock-awards-for-many-ceos-11591197218

Companies cut cash for top executives, but few boards are making big pay changes as survival becomes a focus; 2019 was another record year

Hundreds of U.S. companies reduced salaries for their chief executives as the coronavirus pandemic swept across American business, a reversal for a group of leaders that until this year has ridden a bull market to record compensation.

Big-company CEOs had their richest paydays ever in 2019, a Wall Street Journal analysis shows. But in March and April many took large cuts to their salaries after the deadly virus crippled global commerce. For 2020, few so far changed the equity awards that make up the bulk of executive compensation and the value of which is tied to the stock market.

Unlike prior years, now “the question is not how much of an increase are we giving over the normal salary; it’s when do we even restore the old salaries,” said Robin Ferracone, CEO of compensation consulting firm Farient Advisors LLC.

One reason corporate boards have been slow to make bigger compensation changes: uncertainty over how long the economic slowdown will last, what its ultimate repercussions will be and how investors will react. After plunging, the stock market has rebounded from its March lows.

Median pay rose to $13.1 million in 2019 for the chief executives of 400 major companies reporting compensation details through May, a Wall Street Journal analysis found. Pay rose 8% or more for half the executives, while median investor returns reached 30%, a six-year high.

That was last year. This spring, as the coronavirus pandemic shut down operations, gutted revenues and sparked millions of layoffs, U.S. companies have reduced CEO pay. Many airlines, hotels and retailers have pulled their financial forecasts and said they would need to revisit executive performance targets. Nearly 600 companies in the Russell 3000 index have cut pay for top executives this year, according to data compiled by the Conference Board, Semler Brossy and Esgauge Analytics.

In the S&P 500, 102 companies have reduced base salaries for top executives as of May 22, the study found. Those taking cuts include the CEOs of companies as varied as engine maker Cummins Inc., CMI 2.97% Walt Disney Co. DIS 0.91% and McDonald’s Corp. MCD 2.03%

Of S&P 500 companies cutting pay, a third suspended CEO salaries entirely, while about half reduced salary by 50% or less, a separate analysis by the consulting firm Compensation Advisory Partners, or CAP, found. Most companies said the pay reductions would stand for several months, and many said they would last through year end.

Base salaries have typically made up 8% to 10% of total pay for S&P 500 CEOs over the past decade, the Journal analysis shows. Last year, half of S&P 500 CEOs received less than $1.2 million in salary. Most cash compensation comes from annual bonuses, and the majority of total compensation is received via equity awards whose valuations fluctuate with the market. In 2019, the median equity grant was valued at about $8.2 million, the Journal found.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 5, 2020 2020

Remote Working from a Different State? Beware of a Tax Surprise

By Laura Saunders | May 29, 2020

Topics: State Income Tax , Individual Taxation , Coronavirus

Summary: “If you’re doing your job in a state different from your usual one, beware: You may need to file returns and perhaps pay taxes there… Each state tax system is a unique mélange of rules that consider how long a worker is there, what income is earned, and where the worker’s true home, known as domicile, is. But nearly all states that have income taxes impose them on workers who are passing through. In two dozen states, that can be for just one day….[However,] So far, 13 states and the District of Columbia have agreed not to enforce their tax rules for remote workers who are present due to the coronavirus… but more than two dozen others—including New York and California…—are still set to levy taxes on these remote workers for 2020 [as of this writing].”

Classroom Application: The article may be used in an individual income tax class to discuss state income tax levies.

Questions:

·        Refer to the graphic entitled “Tax Toll on Remote Work.” Describe the range of states’ income tax treatment of remote workers located there due to the pandemic.

·        Does the Internal Revenue Service control the levies of these state income taxes on workers across the U.S.? Explain your answer.

·        Suppose you are a tax professional faced with a client frustrated that he or she may owe taxes in a second state after working from a residence there during the coronavirus pandemic. Since the state may never know whether the individual has worked from this remote location, could you sign the tax return as a paid preparer if the client insists on not filing an income tax return in that second state? Explain your answer and the factors you consider. It may help to listen to the related podcast from a preparer’s perspective, available at https://www.wsj.com/podcasts/relocated-out-of-state-during-the-pandemic-you-may-owe-state-tax/B12A95A2-843B-4FDD-ACB2-2A73B8105DA9.html

·        Explain the potential impact on income tax liability for 2020 on health care workers who went to New York to help cope with the pandemic outbreak there. What is your reaction to that potential impact?

Read the Article

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

 

"Remote Working from a Different State? Beware of a Tax Surprise," by Laura Saunders, The Wall Street Journal, May 29, 2020
https://www.wsj.com/articles/remote-working-from-a-different-state-beware-of-a-tax-surprise-11590744601

Many workers will face extra taxes by the states they have worked in during the coronavirus crisis

In March, millions of people had their workplaces scrambled by the coronavirus pandemic and hastily decamped to work remotely. Even with some offices reopening, many hope to prolong the arrangement now that summer is here.

But if you’re doing your job in a state different from your usual one, beware: You may need to file returns and perhaps pay taxes there. So check on your 2020 state taxes now to avoid a bad surprise next year.

Each state tax system is a unique mélange of rules that consider how long a worker is there, what income is earned, and where the worker’s true home, known as domicile, is. But nearly all states that have income taxes impose them on workers who are passing through. In two dozen states, that can be for just one day.

 

These rules are famous for taxing out-of-state entertainers and athletes like Michael Jordan and Alex Rodriguez. But this year they’ll complicate filings and payments for regular folks working remotely due to the pandemic, such as a tech worker based in Washington state who has temporarily moved back to his parents’ house in Oregon, or a New York banker who has set up a desk in a Florida beach home.

How will states know that someone has worked there? In various ways; employers will ask employees and tax preparers will ask clients about their work locations.

Employers and tax preparers may be able to treat a small amount of work in some states as de minimis. But that’s a judgment call, and signing a false return would put a preparer’s license at risk. DIY filers using commercial software should remember that tax returns are signed under penalty of perjury.

So far, 13 states and the District of Columbia have agreed not to enforce their tax rules for remote workers who are present due to the coronavirus, according to American Institute of CPAs spokeswoman Eileen Sherr, who tracks this evolving data. Some states don’t have an income tax, but more than two dozen others—including New York and California, which are famously aggressive—are still set to levy taxes on these remote workers for 2020.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 5, 2020

Macy’s Prices $1.3 Billion in Bonds at 8.375%

By Nina Trentmann | May 27, 2020

Topics: Bond Valuation , Debt financing

Summary: The opening statement of the article says that Macy’s “priced a total of $1.3 billion in five-year bonds…with [an] 8.375% interest rate” and follows by discussing other debt issuers’ recent interest rates. For the Macy’s issue, the article describes the real estate properties that will be used as collateral and also includes a description of Macy’s setting up a new wholly owned subsidiary to hold the collateral properties. The announcement of the offering is available at https://www.sec.gov/Archives/edgar/data/794367/000079436720000074/macys-2020securednotes.htm

Classroom Application: The article may be used in financial reporting classes covering debt issuances. It also may be used in a class covering consolidations to discuss the legal reasons for setting up a wholly-owned subsidiary in this transaction and the expected accounting consolidation of the entity.

Questions:

·        The opening statement says that Macy’s “price a total of $1.3 billion in five-year bonds…with [an] 8.375% interest rate.” What does it mean to say that the bond issue was “priced”? How does this influence the interest rate paid by Macy’s for the financing?

·        What range of interest rates on debt issuance is discussed in this article? Describe the range discussed in the article, state what issuers raised debt at these rates.

·        Why do you think that Macy’s incurred the interest rate described in the headline?

·        For what purpose has Macy’s raised this financing?

·        What is secured financing? What collateral will be used for this debt?

·        The article notes that Macy’s “will set up a new wholly owned subsidiary for the collateral….” Why do you think this structure of a separate company will be used?

·        How do you think the subsidiary, Macy’s Propco Holdings LLC, will be accounted for in the Macy’s consolidated financial statements? Explain your answer.

Read the Article

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

 

"Macy’s Prices $1.3 Billion in Bonds at 8.375%," by Nina Trentmann, The Wall Street Journal, May 27, 2020
https://www.wsj.com/articles/macys-prices-1-3-billion-in-bonds-at-8-375-11590615102

Retailer is said to have gotten $6 billion in orders

Macy’s Inc. priced a total of $1.3 billion in five-year bonds Wednesday, pulling in buyers with a 8.375% interest rate.

New York-based Macy’s announced the pricing just a day after launching an offering that had aimed to raise $1.1 billion to repay borrowings under a current credit facility. Macy’s got almost $6 billion in orders for the sale, pointing to strong investor demand for high-yielding bonds, according to a person familiar with the matter. Chief Financial Officer Paula Price, who is set to leave the company at the end of the month, declined to comment.

But the retailer also said the offering, expected to close on June 8, is subject to the closing of a new asset-based credit facility and certain other conditions. The company declined to comment on whether it has secured the facility yet.

Macy’s ability to raise funds under current market conditions was seen as a favorable development. “It should bridge them to when their sales improve,” said Chuck Grom, a senior analyst at Gordon Haskett Research Advisors LLC. “The market is looking at this as a positive, clearly.”

Macy’s stock price rose 19.6% to $7.38 a share Wednesday.

Credit Suisse Group AG , JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. acted as book runners for the debt offering, according to the person familiar with the bond sale.

The fundraising round—which comes about a week after Macy’s said it expects a roughly $1 billion operating loss for the first quarter—is a vote of confidence that the company will surmount its past troubles as well as the coronavirus lockdowns of its business, said David Swartz, an equity analyst at investment research firm Morningstar Research Services LLC. But it is paying a high interest rate compared with other recent bond offerings, he added.

For example, in March, TJX Cos Inc. raised $4 billion in several tranches maturing between 2025 and 2050 at rates from 3.5% to 4.5%, according to S&P Global. Ross Stores Inc., a discount chain, locked in $2 billion in April in several tranches returning between 4.6% and 5.45%, S&P Global said.

Other competitors have had to pay more. Nordstrom Inc. and Kohl’s Corp. have also raised debt in recent weeks at slightly higher rates than Macy’s, according to S&P Global. Macy’s was likely able to offer a lower rate because of the value of the real estate it offered as collateral, Mr. Swartz said.

The senior secured notes, set to mature in 2025, will be backed by three properties in New York City, San Francisco and Chicago, 35 stores in select malls and 10 distribution centers, the retailer said at an investor presentation Tuesday. It also said it would set up a new wholly owned subsidiary for the collateral called Macy’s Propco Holdings LLC.

Continued in article
 


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 12, 2020

Pinterest Juggles Requests for Late Payments From Advertisers

By Mark Maurer | June 8, 2020

Topics: Accounts Receivable

Summary: The article discusses trends related to Pinterest Inc. accounts receivable. Several of its “advertisers have asked to discuss payment terms related to invoices. So far, Pinterest hasn’t granted recurring extensions, but executives have discussed specific invoices with some advertisers facing extreme circumstances….” Pinterest Inc. reported a net loss of $141 million for the first calendar quarter of 2020 in comparison to $1 million net loss in the first quarter of 2019 although its average revenue per user, and its number of users, increased during that time period.

Classroom Application: The article may be used to discuss terms on open accounts receivable and customer requests for extensions of time to pay on account. The article concludes with a discussion of days’ sales outstanding ratio, so it also can be used when covering financial statement analysis.

Questions:

·        From whom does Pinterest hold accounts receivable? For what service(s)?

·        What requests has Pinterest received from its customers?

·        What are typical terms for customers requesting extension of time to pay on accounts receivable?

·        What is the formula for calculating days’ sales outstanding?

·        Pinterest Inc.'s days’ sales outstanding ratio rose between December 2019 and March 2020. Explain the meaning of that increase in this financial statement ratio.

·        How has Pinterest responded to customer requests? Specifically, what is the difference between changing accounts receivable terms or granting recurring extensions versus discussing specific invoices with specific customers facing dire circumstances?

Read the Article

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

 

"Pinterest Juggles Requests for Late Payments From Advertisers," by Mark Maurer, The Wall Street Journal, June 8, 2020
https://www.wsj.com/articles/pinterest-juggles-requests-for-late-payments-from-advertisers-11591621200

CFO of image-sharing platform says more businesses want payment extensions

The chief financial officer of Pinterest Inc. is working to keep revenue flowing without alienating cash-strapped advertisers that use its online image-sharing platform.

Pinterest relies primarily on retailers and packaged-goods companies for advertising revenue, and in recent weeks it has received an increasing number of requests for payment extensions from advertisers struggling with the fallout from coronavirus pandemic-related lockdowns, CFO Todd Morgenfeld said.

Several advertisers have asked to discuss payment terms related to invoices. So far, Pinterest hasn’t granted recurring extensions, but executives have discussed specific invoices with some advertisers facing extreme circumstances, Mr. Morgenfeld said.

San Francisco-based Pinterest last month reported a net loss of $141 million for the most recent quarter ended March 31, slightly larger than what analysts had expected. Its loss widened from a $41 million net loss for the same quarter last year.

Global average revenue per user was 77 cents for the quarter ended March 31, up 7% from a year earlier, Pinterest reported. The company also said it had 367 million global monthly active users, a 26% increase from the same period last year.

Pinterest, like other businesses seeking payments amid the pandemic, has devoted more time to deciding whether to grant advertising customers recurring extensions for payments or risk jeopardizing long-term relationships, Mr. Morgenfeld said.

“On both sides of that equation, there are opportunities and risks,” he said.

Mr. Morgenfeld said he has consulted with other finance and sales executives at the company in deciding whether to grant advertisers a break on payment deadlines. “We’ve had a lot of dialogue around things like payment extensions that I’ve tried to turn from tactical conversations into relationship-building conversations,” he said.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 12, 2020

Discovery Reviews Production Costs After Saving on Low-Budget Quarantine Shows

By Nina Trentmann | June 4, 2020

Topics: Budgeting

Summary: Discovery Inc. sent “…cameras, iPhones, tripods and other equipment to presenters and other on-air staff through the mail and had them record content for the network’s home, food and do-it-yourself programs….” The company learned a lot from these steps about cost savings on its in-house productions. As well, the chief financial officer says the company has implemented a budget template for outside production companies that he says has allowed greater visibility to achieve cost savings there as well.

Classroom Application: The article may be used when discussing budgeting.

Questions:

·        What types of programming has Discovery Channel produced from homes during the Coronavirus outbreak?

·        What cost reductions did Discovery achieve during the Coronavirus pandemic? Describe the amount as well as the nature of the cost savings.

·        Did these cost reductions increase Discovery, Inc. profitability during this pandemic time period? Explain your answer.

·        Why do you think that a budget template helped Discovery reduce its costs? In your answer, state what types of programming production must use this budget template and what you think is included in the template.

Read the Article

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

 

"Discovery Reviews Production Costs After Saving on Low-Budget Quarantine Shows By Nina Trentmann, The Wall Street Journal, June 4, 2020
https://www.wsj.com/articles/discovery-reviews-production-costs-after-saving-on-low-budget-quarantine-shows-11591311803

TV network said it saved $300,000 on average for every hour of content shot from home for HGTV, Food Network and DIY

Discovery Inc. is reassessing some production budgets after the pay-TV network operator managed to slash costs for content shot from home during the coronavirus pandemic.

The New York-based company quickly shifted to producing television shows from its cast members’ homes after widespread lockdown orders to curb the spread of the novel coronavirus took effect in March.

Discovery, which spent $3.26 billion on content last year, is saving $300,000 on average for every hour of content shot from home, said Gunnar Wiedenfels, the company’s chief financial officer.

“We have been creating some very successful content with very scrappy equipment,” he said. “It felt the more real and authentic the content became during the crisis, the better it worked with our audience.”

Discovery sent cameras, iPhones, tripods and other equipment to presenters and other on-air staff through the mail and had them record content for the network’s home, food and do-it-yourself programs, including TLC, HGTV, Food Network and DIY. Some used their own iPhones or GoPro cameras.

The company, which in 2018 closed an $11.9 billion deal to acquire Scripps Networks Interactive Inc., is reviewing the cost of future production budgets as coronavirus-related restrictions ease across the country. It also is reassessing its real-estate footprint.

 

“I absolutely know that the learnings from these covid-productions provide a different set of tools in our production management’s toolbox,” Mr. Wiedenfels said, adding that there could be smaller budgets for some productions.

Some of the cost savings could help offset projected revenue shortfalls. Advertising revenues were largely flat at around $1.4 billion during the first quarter compared with the prior-year period. But Mr. Wiedenfels said Discovery expects declines in the coming quarters.

Media companies and television networks are trying to bring down costs, said Kutgun Maral, a senior analyst at investment bank RBC Capital Markets. “Across the board, you see [media companies] looking to proactively evaluate and improve their cost strategy,” Mr. Maral said.

But Discovery could reduce its costs ahead of peers, as it doesn’t have longstanding sports-rights contracts and relies less on scripted content than other networks, he said.

Discovery has its own internal production entities but also uses a network of external content providers. The network isn’t looking to work less with production companies, but is looking for ways to bring down costs, Mr. Wiedenfels said

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 12, 2020

Ulta Beauty Undertakes Review of Its 1,254 Stores

By Kristin Broughton | June 10, 2020

Topics: Impairment , Lease Terms , Rental Real Estate

Summary: Cosmetics chain Ulta Beauty “…is undertaking a ‘clean sheet’ review of its stores, exploring whether to close, move or remodel its hundreds of brick-and-mortar locations in light of pressures facing retailers, including the coronavirus pandemic.” The company may renegotiate leases or relocate to more appealing locations. The pace of these potential changes is accelerating due to the lockdown under the Coronavirus pandemic. The company also has booked a $19.5 million impairment charge during the quarter ended May 2, 2020. “Investors expect Ulta to continue opening new stores…but at a slower pace… Still, the company remains poised to capture additional market share,” according to a senior research analyst at Piper Sandler Cos.

Classroom Application: The article focuses on store location strategies and related costs, including impairment charges, as well as overall profitablility with a company likely familiar to students. The 10-Q filing for the quarter ended May 2,2020 shows the impairment charge on the operating statement; it is available at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1403568&accession_number=0001558370-20-007085&xbrl_type=v

Questions:

·        What strategic approach to business planning is Ulta Beauty taking as a result of the Coronavirus pandemic outbreak?

·        What change is the company considering that could help reduce future costs even after the restrictions related to the novel Coronavirus have eased?

·        How do store location operations determine the existence of an impairment charge?

·        Does operating performance determine the amount of an impairment charge? Explain your answer.

Read the Article

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

 

"Ulta Beauty Undertakes Review of Its 1,254 Stores," by Kristin Broughton, The Wall Street Journal, June 10, 2020
https://www.wsj.com/articles/ulta-beauty-undertakes-review-of-its-1-254-stores-11591797600

Cosmetics chain is looking to renegotiate leases, move locations and close some underperforming store

Ulta Beauty Inc., a cosmetics chain that is a staple of shopping centers across the country, is undertaking a “clean sheet” review of its stores, exploring whether to close, move or remodel its hundreds of brick-and-mortar locations in light of pressures facing retailers, including the coronavirus pandemic.

Ulta generates most of its revenue from stores, where customers can try on makeup, buy skin-care products or book appointments for haircuts and other beauty services. The Bolingbrook, Ill., company operated 1,254 stores as of Feb. 1, an increase of 7% from a year earlier.

But local lockdown orders to curb the spread of the novel coronavirus have accelerated plans at the company to rethink its approach, said Scott Settersten, Ulta’s chief financial officer. The company could close additional stores in the months ahead—and potentially capitalize on the retail downturn to negotiate better lease terms or relocate to more appealing locations, Mr. Settersten said.

“If you did this with a white, clean piece of paper, how would you reorganize your store fleet?” Mr. Settersten said.

As states have eased local lockdown orders, Ulta has reopened more than 900 of its stores for curbside pickup, and over 650 locations have opened for in-store sales. The cosmetics chain expects to open between 30 and 40 new stores this year, about half as many as initially planned for 2020, as the company looks to conserve cash, Mr. Settersten said.

Investors expect Ulta to continue opening new stores in the months and years ahead, but at a slower pace, according to Erinn Murphy, a senior research analyst who covers the company at Piper Sandler Cos . Still, the company remains poised to capture additional market share, particularly given its popularity with teens, she said.

“Ulta really does speak to the beauty category for all people and at all price points,” Ms. Murphy said. The company sells products from luxury brands, such as Estée Lauder Cos., and mass-market brands, such as e.l.f. Beauty Inc.

Still, deciding whether to keep a store open is not a clear-cut calculation. Ulta in the first quarter took a $19.5 million impairment charge due to weak performance at about 20 stores, some of which are located in high-rent areas.

Those stores aren’t necessarily being targeted for closure, Mr. Settersten said, citing their potential for long-term growth or ability to increase Ulta’s appeal to certain customers, Mr. Settersten said.

Net sales during the quarter ended May 2 plunged 33%, to $1.2 billion, affected by lockdown orders. The company reported a quarterly loss of $78.5 million compared with a $192.2 million profit a year earlier.

One factor that could work in Ulta’s favor: store closures at other major chains. The company is working with landlords to evaluate its options for renegotiating its rent, securing incentives to remodel stores or relocating stores to shopping centers with more attractive tenants, according to Mr. Settersten.

Meanwhile, Ulta is also putting more emphasis on digital sales. As the company reopens its stores, it is prohibiting customers from testing products in person, and instead is directing them to use an online feature where they can virtually try on makeup.

“You’re looking at this digital shift which has always been there, it’s accelerated now because of the Covid crisis,” Mr. Settersten said. “How does that change your thinking about the total number of stores you need to service your customers or optimize your sales opportunity?”

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 19, 2020

Companies Unclear on How to Account for Coronavirus Aid

By Mark Maurer | June 14, 2020

Topics: Disclosure , Payroll , Coronavirus

Summary: The article emphasizes that U.S. GAAP contains no specific disclosure requirements for government grants. Nonetheless, “Russell Golden, chairman of the Financial Accounting Standards Board… urged businesses to provide as much information as possible on any government aid they have received.” The American Institute of Certified Public Accountants (AICPA) also has issued guidance for companies deciding whether to account for funds received as loans or grants received. The CFA Institute has discussed the importance of disclosing whether Paycheck Protection Plan (PPP) funds have been included as revenue or reduction of payroll expenses.

Classroom Application: The article may be used in a financial reporting class to discuss accounting and disclosure questions in reporting for the quarter ended June 30, 2020. Questions 1 and 2 related to specifics of accounting requirements appropriate for any financial reporting course. Questions 3 and 4 relate to accounting policies and standard-setting appropriate for higher-level students.

Questions:

·        In what areas of accounting do questions arise regarding how to account for government assistance received by businesses during the Covid-19 pandemic?

·        Explain your understanding of each area you list in answer to question 1.

·        What is the status of standard-setting by the Financial Accounting Standards Board (FASB) over accounting for government aid? Do you think that status will change in the near term? Explain your answer.

·        What accounting guidance has been issued by the American Institute of Certified Public Accountants (AICPA)? Explain your understanding of the authoritative status of that guidance.

Read the Article

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

 

"Companies Unclear on How to Account for Coronavirus Aid," by Mark Maurer, The Wall Street Journal, June 14, 2020
https://www.wsj.com/articles/companies-unclear-on-how-to-account-for-coronavirus-aid-11592139600

Finance chiefs are puzzling over how to account for the government assistance their companies received under the $2.2 trillion Cares Act.

Many public and privately-held companies took out loans under the Paycheck Protection Program to help defray payroll-related costs after swaths of the economy were locked down to curb the spread of the novel coronavirus. Congress provided $660 billion for the program, which as of Friday, had approved 4.56 million loans worth $512 billion, the Small Business Administration said.

Under current U.S. accounting rules, companies don’t need to disclose any amounts they receive in government assistance. On PPP funds and other stimulus programs specifically, standard-setters have given little guidance.

Still, Russell Golden, chairman of the Financial Accounting Standards Board, which sets accounting rules for U.S. companies and nonprofits, urged businesses to provide as much information as possible on any government aid they have received. Investors want to see on financial statements how much assistance companies have gotten and when it might stop, he said in a talk Tuesday at the CFO Network Summit hosted by The Wall Street Journal’s CFO Network.

Lawmakers have pushed for the SBA and the Treasury Department to provide more transparency on the companies that receive PPP loans. Investors and lenders could benefit from more such information.

The issue has become more top-of-mind to chief financial officers and accounting chiefs as many prepare to close the books on the second quarter in a few weeks’ time.

“You’ll be looking at a variety of different places for how to account for this, and for investors, that’s a recipe for some confusion,” said David Zion, head of the accounting and tax research firm Zion Research Group.

A work in progress

The PPP and similar support programs were introduced in a blur in March. Adding to the confusion, many companies only now are receiving the funds because of delays in allocating the loans and changes to the program.

Finance chiefs also are facing questions about the PPP program itself. Official guidance on the program’s requirements has been lacking and keeps changing, said Brian Posner, CFO of Basking Ridge, N.J.-based medical-technology company ElectroCore Inc., on a May 14 earnings call. On June 5, President Trump signed a law amending aspects of the program, including reducing the amount that borrowers use for funding payroll costs to 60% from 75%.

The rule changes have tripped up companies trying to determine whether they still qualify. For those that do qualify, accounting issues are the latest hurdle.

FASB advises companies to disclose the principal amounts in the footnotes of their financial statements, said Shayne Kuhaneck, the organization’s acting technical director, at a May 20 board meeting.

In those footnotes, companies are expected to clearly disclose whether they classified the government assistance as revenue or a reduction of expenses, said Sandy Peters, senior head of financial reporting policy at the CFA Institute, a nonprofit association of financial analysts.

The American Institute of Certified Public Accountants, which sets standards for audits of private companies in the U.S., issued recommendations to help finance executives determine whether to use loan or grant accounting to recognize the funds.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on June 19, 2020

Hit by Coronavirus—and a 30% Holdback by the Payment Processor

By AnnaMaria Andriotis Peter Rudegeair | June 15, 2020

Topics: Cash Flow , Payments industry

Summary: The article discusses issues being faced by small businesses using payment processors under the Covid-19 pandemic. Processors “are making some businesses wait additional days or weeks to access funds deposited in their accounts, citing the need to protect themselves against possible losses….” The article discusses processors’ analysis factors in deciding which businesses would face these delays and limitations in accessing funds. Also clearly discussed in the article are the steps in the cash flow process beginning with when a customer makes a purchase with a credit card.

Classroom Application: The article may be used when discussing cash and receivables in a financial reporting class or revenue/cash receipt cycles in an accounting systems class. The article focuses on small business impact.

Questions:

·        What is the function of a payment processor? Particularly comment on the usefulness of these services for small businesses.

·        What are ‘chargebacks’? Who is responsible for paying chargebacks?

·        Why are businesses that charge customers upfront for future services at greater risk of “chargebacks”?

·        How are payment processors analyzing the exposure they face due to increased chargebacks during the Covid-19 pandemic?

·        What steps are payment processors taking as a result of their analyses related to chargebacks?

·        How are these steps impacting businesses, particularly small ones, that use payment processor services?

Read the Article

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

 

"Hit by Coronavirus—and a 30% Holdback by the Payment Processor," by AnnaMaria Andriotis and Peter Rudegeair, The Wall Street Journal, June 15, 2020
https://www.wsj.com/articles/hit-by-coronavirusand-a-30-holdback-by-the-payment-processor-11592040601

Payment processors tell customers they will take care of the nagging details. But lately they are emerging as yet another headache for businesses hit hard by the new coronavirus.

Processors like PayPal PYPL -2.20% Holdings Inc., Stripe Inc., Square Inc. and Worldpay are making some businesses wait additional days or weeks to access funds deposited in their accounts, citing the need to protect themselves against possible losses when people who have bought airline tickets, vacation packages and some other goods and services seek refunds.

 

That is intensifying the cash crunch at many firms already devastated by lockdowns and changes in consumer behavior.

Square emailed Bluebonnet Photography, a portrait studio in Tacoma, Wash., on May 6, saying it would start holding 30% of each of Bluebonnet’s transactions for 120 days “to protect you and Square from unexpected loss events.”

“I’ve really been left in a lurch,” said Tamara Hudson, Bluebonnet’s owner. Many customers were already canceling photo shoots because of the coronavirus.

Square said in the email that the decision was based on factors including an industry being more prone to payment disputes and the length of time the company has been using Square.

Ms. Hudson said Bluebonnet had never had a disputed transaction in three years with Square. In addition to processing about $100,000 in payments through Square each year, she said, Bluebonnet offered installment financing for photo shoots through Square’s lending arm and used Square’s software to help customers book studio sessions and run marketing campaigns. Now, Ms. Hudson said, she plans to drop the company.

 

A Square spokesman said that less than 1% of customers were told that some of their future sales would be placed into a reserve account, typically businesses that collect payments in advance of delivering goods, sell high-risk goods or services or receive high rates of disputes.

From mid-March until the end of April, credit-card holders contested two to three times as many purchases as they did before the pandemic, according to Aite Group, a research and consulting firm. That excludes purchases flagged as fraudulent.

Continued in article

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Teaching Case From The Wall Street Journal Weekly Accounting Review on June 19, 2020

Expanded Tax Break for Charitable Gifts Gains Support in Congress

By Richard Rubin | June 15, 2020

Topics: Individual Income Taxation , Charitable Contributions , Itemized Deductions

Summary: With fundraising events cancelled and the value of stocks declining, nonprofit entities are struggling just when “their services are most in need” during the Covid-19 outbreak. A related graphic shows a steadily declining percentage of U.S. households contributing to charitable causes from 66% in 2008 to 53% in 2016. Senators are now proposing to allow taxpayers to “deduct charitable donations, even if they don’t itemize their deductions.”

Classroom Application: The article may be used in an individual income tax class to help student connect the tax law to social incentives it establishes.

Questions:

·        What are itemized deductions on an individual’s tax return?

·        How did the 2017 tax law change impact (reduce) the number of individuals eligible to take advantage of tax deductions for charitable donations?

·        Consider the information presented in the chart entitled “Disappearing Donors.” Do you think the tax deductibility change has impacted the trend in charitable donations? Explain your answer.

·        Consider the point in the article that charitable donations a coming from an increasingly wealth, smaller group of individuals. How does this social concern relate to tax law?

Read the Article

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

 

 

"Expanded Tax Break for Charitable Gifts Gains Support in Congress," By Richard Rubin |, The Wall Street Journal, June 15, 2020
https://www.wsj.com/articles/expanded-tax-break-for-charitable-gifts-gains-support-in-congress-11592218800

Bipartisan group of senators is pitching idea for next economic-relief legislation to help nonprofits and middle-class donors, as giving drops

WASHINGTON—A bipartisan effort to expand tax breaks for charitable donations is gaining momentum in Congress, as nonprofit groups struggle during the pandemic.

Senators, including James Lankford (R., Okla.) and Jeanne Shaheen (D., N.H.), want to let taxpayers deduct charitable donations, even if they don’t itemize their deductions. Their plan would greatly increase a small tax break created in March that allowed such extra charitable deductions. Their plan would limit that to one-third of the standard deduction. In 2020, that is $4,133 for individuals and $8,267 for married couples.

The senators, backed by organizations with national clout such as Habitat for Humanity International and the YMCA, are offering their idea as a way to help nonprofits and their middle-class donors. They are pitching it for the next economic-relief legislation, set for Senate consideration next month.

“Their services are most in need right now, as the challenges from the pandemic and the economic fallout are so great,” Ms. Shaheen said in an interview. “How can we help them in ways that are going to make a difference?”

Charities are struggling during the pandemic after fundraising events were canceled and the stock market gyrated. Habitat laid off 10% of its staff and cut executive pay. Some religious congregations report donation declines of more than 30% and have lost income from renting space for events, according to the Union of Orthodox Jewish Congregations of America.

“It’s like nothing we’ve ever seen,” said Neal Denton of the YMCA, where the national office is reducing its staff from 300 to 170.

The Senate proposal also counters longer-term trends that worry nonprofit leaders, who have seen their donor bases shrinking into a smaller, wealthier group. In 2000, 66% of Americans donated to charities; by 2016, that proportion had dropped to 53%, according to the Indiana University Lilly Family School of Philanthropy’s Philanthropy Panel Study.

“That’s a disturbing trend from a democratic perspective and a philosophical perspective,” said Jonathan Reckford, Habitat’s CEO.

The 2017 tax law dealt another blow to charitable giving. By nearly doubling the standard deduction, the law reduced the number of people who have enough deductions to make itemizing worthwhile. The number of itemizers fell to about one-tenth of households from about one-quarter. The top 1% of households now get 58% of the tax break, according to the Urban-Brookings Tax Policy Center.

But some tax experts warn that the senators’ expanded tax deduction may be inefficient, directing benefits to people who would give anyway.

Continued in article

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Teaching Case From The Wall Street Journal Weekly Accounting Review on June 19, 2020

 

", The Wall Street Journal,
 

 

Continued in article





Humor for June 2020

Carol Burnett reveals the most 'devastating' sketch she filmed on her namesake TV show ---
https://www.foxnews.com/entertainment/carol-burnett-most-devastating-sketch-namesake-show

Couples should wear face masks during sex to prevent coronavirus spread, according to a Harvard study ---
https://www.insider.com/wear-face-masks-during-sex-prevent-coronavirus-spread-harvard-study-2020-6
Am I the only one who considers the conclusion of this serious study funny?
Can a family of six no longer dine together at one table unless the table is six feet wide and 24 feet long?

Rediscovering One of the Wittiest Books Ever Written ---
https://www.newyorker.com/books/second-read/rediscovering-one-of-the-wittiest-books-ever-written


A bear who couldn't apparently bear the temperatures any longer was recorded lapping up a margarita and hanging in an unheated hot tub at a California home over the weekend ---
https://www.foxnews.com/us/bear-recorded-relaxing-in-hot-tub-drinking-margarita

Car ownership can be seen as a privilege in developing countries, and judging by the applause that this new driver got as he slowly pulled away from the crowd, maybe it's a privilege that needs more rigor in granting driving licenses ---
https://www.motor1.com/news/429824/new-vw-polo-driver-crash/

Q..How do you keep your car from being stolen?
A...Buy a standard shift model

Q...How do you send a message in code?
A...Write in cursive --- doctors coded prescriptions using this code for years


Forwarded by Auntie Bev

Due to Covid-19 we're asking protesters to work at home and destroy their own property

White bread will now be referred to as "privileged white"

Dark bread will be referred to as "unprofiled dark" (I made this one up)

Can we still order black coffee?
What will we call brownie dessert?
What will we call dark eggs?

Cracker Barrel is screwed
Dixie Chicks singers are now just Chicks (even if they're really old hens by now)


A DUI Joke Forwarded by Tina

A woman ran a red traffic light and crashed into a man's car. Both of their cars are demolished, but amazingly neither of them was hurt.

After they crawled out of their cars, the woman said; "Wow, just look at our cars! There's nothing left, but fortunately we are unhurt. This must be a sign from God that we should meet and be friends and live together in peace for the rest of our days.”

The man replied, "I agree with you completely. This must be a sign from God!

The woman continued, "And look at this, here's another miracle. My car is completely demolished, but my bottle of 75 year old scotch didn't break. Surely God meant for us to drink this vintage delicacy and celebrate our good fortune." Then she handed the bottle to the man.

The man nods his head in agreement, opened it, drank half the bottle and then handed it back to the woman. The woman took the bottle, immediately put the cap back on, and handed it back to the man.

The man asks, "Aren't you having any?" She replies, "Nah. I think I'll just wait for the police."

Some years ago Adam ate the apple. Men will never learn!


Forwarded by Paula

The Black Death during 1347-1351 was the most fatal pandemic recorded in human history, resulting in the deaths of up to 75–200 million.

The ending was celebrated with drunkeness and orgies.

Are there any plans to celebrate the ending of this Covid-19 pandemic?

Also forwarded by Paula

Now that I've lived through a plague I understand why those paintings from the middle ages feature naked fat people

Some call it multitasking. At my age I call it doing something else while I'm trying to remember what I was doing in the first place.

The worst time to have a heart attack is during while playing a game of Charades.

Senior Acronyms
BFF Best Friend Fell
BYOWC Bring Your Own Wheel Chair
BYOT Bring Your Own Teeth
LYDO --- Laughing Your Dentures Out
FWIW Forgot Where I Was
OMMR On My Massage Recliner
LMTL Lower Mask; Talk Louder
DL Defund Lawyers

Thinking Like the Old Cat
"The old lady fell and can't get up."
"Who's going to feed me now?"

Our minister tends to fall asleep before his weekly sermon
This Sunday we came prepared
While he was asleep
Our congregation laid out a trail of underwear leading to the door
And we all went went home before his boring sermon


Forwarded by Tina

I’m on two diets. I wasn’t getting enough food on one.

 Apparently RSVP’ing to a wedding invitation “Maybe next time,” isn’t the correct response.

 Don’t irritate old people. The older we get the less “Life in prison” is a deterrent.

Have you ever listened to someone for a minute and thought “Their cornbread ain’t done in the middle.”

Aliens probably fly by earth and lock their doors.

“You will hit every cone on the highway before I let you merge in front of me because you saw that sign 2 miles ago like I did.

I really don’t mind getting older, but my body is taking it badly.

It turns out that being an adult is mostly just googling how to do stuff.

I miss the 90’s when bread was still good for you and no one knew what kale was.

Do you ever get up in the morning, look in the mirror and think “That can’t be accurate.”

I want to be 14 again and ruin my life differently. I have new ideas.

As I watch this generation try to rewrite our history, one thing I’m sure of....it will be misspelled and have no punctuation.

I thought getting old would take longer.

Confuse your doctor by putting on rubber gloves at the same time he does.

My wife asked me to take her to one of those restaurants where they make food right in front of you. I took her to Subway. That’s when the fight started.

Picked up a hitchhiker. He asked if I wasn’t afraid he might be a serial killer? I told him the odds of two serial killers being in the same car were extremely unlikely.

I went line dancing last night. OK, it was a roadside sobriety test... same.


Forwarded by Auntie Bev
What It's Like to Be Old

I really don't mind getting older, but my body is taking it badly.

You're still going to do dumb stuff, only much slower.

You define success differently. Now success is getting your leg through your underwear without tipping over.

The leading cause of injury is thinking you're still young.

Having benefits is knowing someone who can drive you at night.

It's hard to put an elbow on the bar when you reach from behind your walker.

That lifetime warranty on your old Kirby vacuum is worthless when it's just to heavy to push across the carpet.

The minister asks you to repeat your wedding vows, and you say A-E-I-O-U


Forwarded by Tina

Sign on a Pond:  Parking for Frogs Only;  All Others Will Be Toad

Growing Your Own Tomatoes is the Best Three Months You Can Spend Saving $2.17

Jellyfish Survived for 350 Million Years Without a Brain

Newborn's Confession:  "I just did nine months on the inside"

Me:  "Alexa, what's the weather this weekend?"
Alexa:  "Does it matter;  You ain't going anywhere."

Beware of that DUI checkpoint between the living room and the kitche

 

 




Humor June 2020 --- http://faculty.trinity.edu/rjensen/book20q2.htm#Humor0620.htm

Humor May 2020 --- http://faculty.trinity.edu/rjensen/book20q2.htm#Humor0520.htm

Humor April 2020 --- http://faculty.trinity.edu/rjensen/book20q1.htm#Humor0420.htm 

 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 June 30, 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

 

 

 

May 2020

Tidbits Political Quotations
To Accompany May 2020 Additions to Bookmarks at
http://faculty.trinity.edu/rjensen/TidbitsDirectory.htm

May 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




Preparing accounting students for a changing profession ---
https://blog.aicpa.org/2020/05/preparing-accounting-students-for-a-changing-profession.html#sthash.7R5KQXBF.dpbs?utm_source=mnl:cpald&utm_medium=email&utm_campaign=18May2020

Jensen Comment
The consulting divisions of large CPA firms are hiring students with diverse skill sets and non-accounting backgrounds (think computer science, statistics, and finance). But the cores of an accounting firm still depend upon accounting, auditing, and tax skills of students with the required accounting backgrounds to sit for the CPA exam. A firm cannot be a CPA firm without CPAs.

Bob Jensen's threads on careers ---
http://faculty.trinity.edu/rjensen/Bookbob1.htm#careers


Deducting home office expenses:  With many now working at home, taxpayers need to understand the rules ---
https://www.journalofaccountancy.com/issues/2020/may/deduct-home-office-expenses-coronavirus-remote-work.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=20May2020

 


First Look at the CARES Act’s Provisions for Tax Relief ---
https://www.cpajournal.com/2020/04/29/first-look-at-the-cares-acts-provisions-for-tax-relief/


Meet the Shadowy Accountants Who Do Trump’s Taxes and Help Him Seem Richer Than He Is ---
https://www.propublica.org/article/meet-the-shadowy-accountants-who-do-trumps-taxes-and-help-him-seem-richer-than-he-is?utm_source=pardot&utm_medium=email&utm_campaign=majorinvestigations&utm_content=feature

Thank you Denny Beresford for the heads up
Jensen Comment
I imagine that, as Trump himself claims, he's being audited very closely by the IRS since before he became President. I can't imagine that the IRS over the years has been letting Trump get away with enormous tax evasion. This would reflect very badly on competence of the IRS itself at a time when the IRS is desperate to maintain an image off both competence and non-partisanship. I don't think the IRS will jail Donald Trump like it did Al Capone. Having said this, there are lots of legal ways rich people can minimize their annual tax bill --- although much of what they get away with is tax deferral rather than tax evasion. There are of course huge embarrassments such as the way the State of New York let Donald Trump abuse his charity trust while he lived in NYC.

The bottom line is that the left-leaning IRS probably is working overtime with their best professionals to keep the Federal taxes of Trump, Bloomberg, Soros, etc. in line with tax law filled with loopholes created by both sides of the aisle in Congress. What billionaire has made the IRS a favorite charity?


Cuomo Finds Way to Discourage Future Out-of-State Crisis Volunteers
New York was hit particularly hard. Now, those that spent more than 14 days in the Empire State will be required to pay state income tax, even if they’re being paid by entities in other states for their work in New York.
https://legalinsurrection.com/2020/05/cuomo-health-care-workers-who-volunteered-to-help-with-covid-19-must-pay-state-income-tax/
Jensen Questions
In 2001 did George Pataki tax out-of-state firefighters and other emergency helpers after the 9/11 attack on the World Trade Center?
Does a  professor in New York on paid sabbatical leave by a Texas university have to pay New York income taxes even though no organization in New York paid compensation or expense support?

May 7, 2020 reply from Beryl Simonson

This is the old no good deed goes unpunished routine. If you work in NY regardless of from where you are paid or you live, you pay tax in NY (and don’t forget about NY City tax). NY could certainly exempt emergency responders in this pandemic from NY taxation. And not to pick on NY, most states are the same. Along the same lines, although a different part of the rules, It is one of the reasons as an RSM partner that I paid tax in about 40 states, few of which I ever entered.

Beryl

Beryl D. Simonson CPA

Jensen Comment
Thanks Beryl,
If you take a sabbatical leave or do volunteer work in New Hampshire we won't tax your income.

This begs the question of taxation for your distance education services. Suppose you teach online at Trinity University in Texas during this pandemic, and some of your online students are temporarily home in the State of New York during the lockdown? Should you eventually file a 2020 New York income tax return even if your employer is Trinity University?

You don't have to answer this Beryl if it begins to look like getting advice that you normally charge for to cover your taxes.


Pandemic-specific guidance for auditors and preparers ---
https://www.journalofaccountancy.com/podcast/coronavirus-guidance-for-auditors-and-financial-statement-preparers.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Apr2020

AICPA posts 20 FAQs on tax filing relief ---
https://www.journalofaccountancy.com/news/2020/apr/tax-filing-relief-faqs-coronavirus-pandemic.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Apr2020

Coronavirus (COVID-19) tax resources ---
https://www.aicpa.org/interestareas/tax/covid19.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Apr2020


SBA issues PPP guidance on laid-off employees who refuse to be rehired ---
https://www.journalofaccountancy.com/news/2020/may/sba-ppp-guidance-on-laid-off-employees-refuse-to-be-rehired.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=05May2020


Hertz, which started with a fleet of a dozen Ford Model T’s a century ago and became one of the world’s largest car rental companies, filed for bankruptcy protection on Friday after falling victim to its mountain of debt ---
|https://www.nytimes.com/2020/05/22/business/hertz-bankruptcy-coronavirus-car-rental.html


What if Connecticut files for bankruptcy? ---
https://www.data-z.org/news/detail/what-if-connecticut-files-for-bankruptcy


Lord & Taylor to liquidate its stores as soon as they reopen ---
https://www.reuters.com/article/us-lord-taylor-liquidation-exclusive/exclusive-lord-taylor-to-liquidate-its-stores-as-soon-as-they-reopen-sources-idUSKBN22H2SJ


The $44,000 Chevy Bolt versus the $44,000 Nissan Leaf: A battle of mass-market electric hatchbacks ---
https://www.businessinsider.com/chevy-bolt-and-nissan-leaf-compared-photos-features-best-choice-2020-5

Demand for the Chevy Bolt ---
https://en.wikipedia.org/wiki/Chevrolet_Bolt#United_States

Demand for the Nissan Leaf ---
https://en.wikipedia.org/wiki/Nissan_Leaf#Model_and_production_history

In 2019, the auto industry in the United States sold approximately 17 million light vehicle units ---
https://www.statista.com/statistics/199983/us-vehicle-sales-since-1951/


How to Mislead With Statistics

Simple Solution to California’s Anticipated $54 Billion Budget Deficit ---
https://www.counterpunch.org/2020/05/15/simple-solution-to-californias-anticipated-54-billion-budget-deficit/

. . .

A 50% tax on the wealth of just Larry Ellison, Mark Zuckerberg and Elon Musk would solve the deficit with tens of billions remaining. A quick google search puts their wealth at:[1]

Zuckerberg $68.2 billion

Ellison $67.4 billion

Musk $36.8 billion

An emergency wealth tax of 50% on these three individuals alone would come to $86.2 billion.[2] That would leave over $30 billion more than the estimate of California’s government deficit. That extra money could be used to house the homeless, guarantee everyone food and access to medical care, finally provide a proper level of funding for the state’s public colleges and schools, lift many, if not all, of the state’s residents out of poverty, and have funds to help out in case the state experiences another round of destructive fires and/or a major earthquake.

 

This type of tax should have no impact on the lifestyles of the super-wealthy. Recently, they appeared to be able to get by on “far less.” Zuckerberg’s wealth was put at $46 billion at the end of 2015 and “just” $4 billion in 2010, less than 6% of what it is today. In 2015, Musk’s wealth was estimated at $13.2 billion, not even half of what it is now. After the tax, the net worth of the super-wealthy would still be excessive.

Continued in article

Jensen Common

An extreme wealth tax such as that suggested above is not so simple as the article naively makes it sound. California needs cash and none of the billionaires mentioned above are sitting on tens of billions in cash or gold or any other investments that are easily cashed in at market values. They're sitting mostly on common stock in the companies they control (Facebook, Oracle, Tesla, Boring, and SpaceX, etc.). Stock prices are set by supply and demand at relatively small amounts of daily trading. Forcing these huge shareholders to quickly dump 50% of their enormous holdings would send share values plunging to a point where these billionaires and their companies no longer have the wealth envisioned in the above article.

Secondly, the author of the above article assumes that these billionaires will passively accept a 50% tax on all their wealth. If such legislation in Sacramento approaches reality those billionaires will be long gone from California and may even move their companies out of state. The naive author of the above article does not investigate why Sweden and France experimented with and then abandoned much more modest wealth taxes on their most wealthy taxpayers as the wealth taxes were discovered to be counterproductive on the economies. 

Thirdly, California would be sending a message that there is no longer a California dream of becoming a billionaire with new ventures in the no-longer Golden State. Instead the message would be to start new ventures iin more business-friendly states that still offer an American Dream.

Sir Jim Ratcliffe, Britain's wealthiest man and a key Brexit backer, has decided to leave the UK and live in Monaco ---
https://www.independent.co.uk/news/uk/home-news/jim-ratcliffe-brexit-uk-richest-man-monaco-move-tax-haven-eu-leave-a8484211.html

Sir Jim Ratcliffe, Britain’s wealthiest man and a key Brexit backer, has decided to leave the UK and live in Monaco.

Despite his previous claims that the UK would be “perfectly successful” outside of the European Union (EU), the billionaire has chosen to leave the country of his birth and move to the principality, whose residents do not pay income tax, on the Mediterranean coast.

Sir Jim, founder and CEO of the chemicals giant Ineos, was named as the richest man in Britain in this year’s Sunday Times rich list, with an estimated fortune of £21bn.

Continued in article

The Achilles heel of the dual income tax : the Norwegian case ---
https://ssb.brage.unit.no/ssb-xmlui/handle/11250/180583

The dual income tax provides the self-employed individual with large incentives to participate in tax minimizing income shifting. The present paper analyses the income shifting incentives under the Norwegian split model in the presence of technology risk, and it concludes that the widely held corporation serves as a tax shelter for high-income self-employed individuals. In addition, real capital investments with a low risk profile are means to shift income from the labor income tax base to the capital income tax base for the high-income self-employed.

OECD:  Recommended Tax Reform in Norway --- Phase Out the Wealth Tax
https://www.oecd-ilibrary.org/content/paper/5k9bls0vpd5d-en?crawler=true

Tax Reform in Norway

A Focus on Capital Taxation

Norway’s dual income tax system achieves high levels of revenue collection and income redistribution, without overly undermining economic performance and while paying attention to environmental externalities. It treats capital and labour income in different ways: capital income is taxed at a single low rate, while labour income is taxed at progressive rates. However, effective tax rates on savings vary widely across asset classes. The favourable treatment of owner-occupied housing relative to financial savings should be reduced, preferably by taxing imputed rents at the standard 28% statutory rate. The wealth tax implies very high effective tax rates on savings, indicating that it either gives rise to tax avoidance or significantly inhibits growth. The government should investigate the issue and, if the growth-equity trade-off is too unfavourable to growth, phase out or lower the wealth tax. To restrain tax avoidance by the wealthy, the base of the gift and inheritance tax should be broadened. Overall, the reform package recommended in this paper would improve the allocation of capital and increase work and investment incentives. It could be designed to be broadly neutral in regard to income redistribution and public revenue.

American Economic Review 2019:  Tax Evasion and Inequality (Scandinavia) ---
https://www.aeaweb.org/articles?id=10.1257/aer.20172043

Drawing on a unique dataset of leaked customer lists from offshore financial institutions matched to administrative wealth records in Scandinavia, we show that offshore tax evasion is highly concentrated among the rich. The skewed distribution of offshore wealth implies high rates of tax evasion at the top: we find that the 0.01 percent richest households evade about 25 percent of their taxes. By contrast, tax evasion detected in stratified random tax audits is less than 5 percent throughout the distribution. Top wealth shares increase substantially when accounting for unreported assets, highlighting the importance of factoring in tax evasion to properly measure inequality.

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
 


Editors of Ethnologia Europaea announce the retractions of seven more papers by Mart Bax, the Dutch anthropologist whose misconduct includes not only making up data but making up papers — at least 61 of them ---
https://ee.openlibhums.org/article/id/1801/

A year after the University of Maryland asked two Elsevier journals to retract papers, they haven’t ---
https://retractionwatch.com/2020/04/22/a-year-after-a-university-asked-two-elsevier-journals-to-retract-papers-they-havent/


Walter E. Williams:  Fixing College Corruption ---
https://townhall.com/columnists/walterewilliams/2020/04/15/fixing-college-corruption-n2566832?utm_source=thdaily&utm_medium=email&utm_campaign=nl&newsletterad=04/15/2020&bcid=b16c6f948f297f77432f990d4411617f&recip=17935167

America's colleges are rife with corruption. The financial squeeze resulting from COVID-19 offers opportunities for a bit of remediation. Let's first examine what might be the root of academic corruption, suggested by the title of a recent study, "Academic Grievance Studies and the Corruption of Scholarship." The study was done by Areo, an opinion and analysis digital magazine. By the way, Areo is short for Areopagitica, a speech delivered by John Milton in defense of free speech.

Authors Helen Pluckrose, James A. Lindsay and Peter Boghossian say that something has gone drastically wrong in academia, especially within certain fields within the humanities. They call these fields "grievance studies," where scholarship is not so much based upon finding truth but upon attending to social grievances. Grievance scholars bully students, administrators and other departments into adhering to their worldview. The worldview they promote is neither scientific nor rigorous. Grievance studies consist of disciplines such as sociology, anthropology, gender studies, queer, sexuality and critical race studies.

In 2017 and 2018, authors Pluckrose, Lindsay and Boghossian started submitting bogus academic papers to academic journals in cultural, queer, race, gender, fat and sexuality studies to determine if they would pass peer review and be accepted for publication. Acceptance of dubious research that journal editors found sympathetic to their intersectional or postmodern leftist vision of the world proves the problem of low academic standards.

Several of the fake research papers were accepted for publication. The Fat Studies journal published a hoax paper that argued the term bodybuilding was exclusionary and should be replaced with "fat bodybuilding, as a fat-inclusive politicized performance." One reviewer said, "I thoroughly enjoyed reading this article and believe it has an important contribution to make to the field and this journal." "Our Struggle Is My Struggle: Solidarity Feminism as an Intersectional Reply to Neoliberal and Choice Feminism," was accepted for publication by Affilia, a feminist journal for social workers. The paper consisted in part of a rewritten passage from Mein Kampf. Two other hoax papers were published, including "Rape Culture and Queer Performativity at Urban Dog Parks." This paper's subject was dog-on-dog rape. But the dog rape paper eventually forced Boghossian, Pluckrose and Lindsay to prematurely out themselves. A Wall Street Journal writer had figured out what they were doing.

Some papers accepted for publication in academic journals advocated training men like dogs and punishing white male college students for historical slavery by asking them to sit in silence in the floor in chains during class and to be expected to learn from the discomfort. Other papers celebrated morbid obesity as a healthy life choice and advocated treating privately conducted masturbation as a form of sexual violence against women. Typically, academic journal editors send submitted papers out to referees for review. In recommending acceptance for publication, many reviewers gave these papers glowing praise.

Continued in article

Bob Jensen's threads on professors who let students cheat ---
http://faculty.trinity.edu/rjensen/Plagiarism.htm#RebeccaHoward

Bob Jensen's threads on professors who cheat ---
http://faculty.trinity.edu/rjensen/Plagiarism.htm#ProfessorsWhoFabricate

Bob Jensen's threads on grade inflation ---
http://faculty.trinity.edu/rjensen/assess.htm#RateMyProfessor

Current and past editions of my blog called Fraud Updates --- 
http://faculty.trinity.edu/rjensen/FraudUpdates.htm


Latest Accounting Trends: Transforming the Retail Industry ---
https://readwrite.com/2020/05/15/latest-accounting-trends-transforming-the-retail-industry/


PPP forgiveness guidance issued as Congress mulls changes ---
https://www.journalofaccountancy.com/news/2020/may/ppp-loan-forgiveness-guidance-issued-as-congress-mulls-changes.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=25May2020


Deduction for worthless partnership interest ---
https://www.thetaxadviser.com/issues/2020/may/deduction-worthless-partnership-interest.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=25May2020


How many jobs do robots really replace?
https://techxplore.com/news/2020-05-jobs-robots.html


The U.S. Postal Service 'Unsustainable,' Says GAO. And That Was Before COVID-19 Hit ---
https://reason.com/2020/05/07/the-u-s-postal-service-unsustainable-says-gao-and-that-was-before-covid-19-hit/


State and local taxes during the pandemic ---
https://www.journalofaccountancy.com/podcast/state-local-taxes-during-coronavirus-pandemic.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=12May2020


SBA provides safe harbor for PPP loans under $2 million ---
https://www.journalofaccountancy.com/news/2020/may/sba-safe-harbor-for-ppp-loans-under-2-million.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=14May2020


Virus unleashes wave of fraud in US amid fear and scarcity ---
https://apnews.com/f7ab8d9f968905498cb3b31c9c753b1e


How to Mislead With Statistics

The Cost of Living Adjustment (COLA) for Social Security is Not Based Upon What Senior Citizens Buy

Social Security beneficiaries might not receive much of a cost-of-living adjustment next year — and some say recipients might not get anything at all.

COLA is linked to the consumer-price index, which has suffered lately because of low oil prices. Based on the CPI data between January and April of this year, COLA for next year would be zero, according to Mary Johnson, a Social Security policy analyst for The Senior Citizens League. There are still five months until the administration announces the COLA for 2021, which occurs in October. The adjustment in 2020 was considered minimal, at 1.6% this year, down from 2.8% in 2019. COLAs have averaged 1.4% over the last decade, down from the average 3% it was between 2000 and 2009.

. . .

The problem: Social Security’s cost-of-living adjustment is linked to the consumer-price index for urban workers. There’s another subset of CPI, known as CPI-E, which tracks elderly spending. The difference is primarily in health care and housing. Those expenses, including Medicare premiums and homeowners’ insurance, grow rapidly year over year, but benefit adjustments don’t reflect that growth.

The coronavirus crisis could deepen the divide, especially as medical expenses drop in some areas — such as elective surgeries — but increase in others, including care for COVID-19 patients. “Older people are disproportionately affected by the COVID-19 crisis, often due to underlying medical conditions,” Johnson said. The Centers for Disease Control and Prevention, as well as other leading figures, have urged older Americans to stay home and away from others as they are typically at a higher risk of complications from contracting the virus.

 

Annual average out-of-pocket expenses for prescription drugs were $1,102 in January 2000 and $3,875.76 in January 2020, according to the study — a 252% increase. Medicare Part B premiums jumped 218% during the same time frame, and home heating oil grew 172% during that period. Even the price of oranges grew more than double, from $0.61 in 2000 to $1.34 in 2020, a 120% increase. A retiree in 2000 with an average benefit of $816 a month would have $1,246.20 in 2020, but would need $380 more a month just to maintain that same level of buying power she had in 2000.

Continued in article

Jensen Comment
The 800-lb gorilla in all of this is what will happen to nursing home pricing and other long-term care nursing prices not covered by Medicare? Nursing home expenses are going through the roof as nursing homes adapt to the risks of the pandemic and increased attention given to nursing homes by regulators. It's pretty safe to predict that already very high nursing home prices in the USA are going to take another leap upward. There will be increases in Medicare fraud as heirs try to siphon off estate assets years early in order to get loved ones onto Medicaid that covers nursing home care for "poor people." Increased costs of Medicaid coverage is the most serious expense rise for our beleaguered state budgets.

Nursing home pricing trends 2004-2019 ---
https://www.genworth.com/aging-and-you/finances/cost-of-care/cost-of-care-trends-and-insights.html

 


The Sears Headquarters Deal Cost Taxpayers $500 Million. 30 Years Later, There’s Little to Show for It ---
https://www.propublica.org/article/sears-story-day-2-study

Jensen Comment
There are winners and losers in big tax deals like this. Silicon Valley might not have amounted to much without tax relief. Some tax deals are hard to assess as of yet, particularly tax deals for solar and wind power energy conversions.

Peoria's tax deal with Caterpillar probably saved retaining the headquarters and plant locally and thus far looks like an economic winner for Peoria. Hoffman Estates bet big on Sears which is beginning to look like a big loser --- because, unlike Caterpillar, Sears became a big loser. Hoffman Estates bet on a losing horse. Peoria bet on a winner.

Some local deals are affected by factors outside the control of local politics. For example, towns in Texas and the State of Washington benefit by not having state personal income taxes. Towns in Illinois, California, New Jersey, and Connecticut are being hammered by increases in personal income taxes that are state-wide. In some states, fiscal problems (think unfunded pensions) create huge fears among businesses when making location decisions. Tax deals for companies in those states may be good for the companies but bad for employees. Vermont is Exhibit A that discourages professionals from moving into the lowly-populated state that taxes everything imaginable.


CDOs --- https://en.wikipedia.org/wiki/Collateralized_debt_obligation

CLOs --- https://en.wikipedia.org/wiki/Collateralized_loan_obligation

Ticking Time Bombs:  CLOs in 2020 versus CDOs in 2007 ----
https://www.ozy.com/news-and-politics/will-these-debt-instruments-spark-another-financial-crisis/326496/?utm_term=OZY&utm_source=Sailthru&utm_medium=email&utm_campaign=DailyDose%20%282020-05-18%2013:59:55%29&utm_content=Final

Bob Jensen's threads on the 2007 sleaze ---
http://faculty.trinity.edu/rjensen/2008Bailout.htm#Sleaze


Quantitative Easing --- https://en.wikipedia.org/wiki/Quantitative_easing

 

Helicopter Money --- https://en.wikipedia.org/wiki/Helicopter_money

 

Scott Pelly from CBS News --- https://en.wikipedia.org/wiki/Scott_Pelley

 

Jerrome Powell, Chairman of the Federal Reserve Bank --- https://en.wikipedia.org/wiki/Jerome_Powell

 

CBS Sixty Minutes
Fed Chair Jerome Powell on the coronavirus-ravaged economy ---

https://www.cbsnews.com/news/coronavirus-economy-jerome-powell-federal-reserve-chairman-60-minutes/

Pelly:  Fair to say you simply flooded the system with money?

 

Powell:  Yes. We did. That's another way to think about it. We did.

 

Pelly: Where does it come from?

 

Powell:  We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency, and we distribute that through the Federal Reserve banks.

Jensen Comment
This printing of money is not the normal way money is created. Currency is usually printed only to satisfy liquidity (currency) demand for money that's already in the money supply such as when you write a $100 check for cash. The money in your checking account is already in the money supply. Money is created when you borrow from the bank to add to your checking account.
https://en.wikipedia.org/wiki/Money#Creation_of_money

Bank money, or broad money (M1/M2) is the money created by private banks through the recording of loans as deposits of borrowing clients, with partial support indicated by the cash ratio.

Currently, bank money is created as electronic money. In most countries, the majority of money is mostly created as M1/M2 by commercial banks making loans. Contrary to some popular misconceptions, banks do not act simply as intermediaries, lending out deposits that savers place with them, and do not depend on central bank money (M0) to create new loans and deposits

But there are reserve requirements that banks must maintain to limit the amount of money created by banks


Excel:  Modeling working capital adjustments in Excel ---
https://www.fm-magazine.com/news/2020/apr/model-working-capital-adjustments-in-excel.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=01May2020

 




Public Peers, Accounting Comparability, and Value Relevance of Private Firms’ Financial Reporting

 

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3576389
47 Pages
 Posted: 8 May 2020

Thomas Bourveau

Columbia Business School - Accounting, Business Law & Taxation

Jason V. Chen

University of Illinois at Chicago

Ferdinand Elfers

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Jochen Pierk

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: April 15, 2020

Abstract

We examine whether higher accounting comparability between public and private firms facilitates the valuation of private firms and, in particular, impacts the value relevance of private firms’ financial reporting in M&A transactions. To help develop our hypotheses, we conduct a series of interviews with M&A valuation experts to obtain insights on the private firm valuation process. Using a large sample of private target firm M&As in the European Union, we predict and find that the financial reporting of private firms that follow the same accounting standards as public firms has higher value relevance. This relation is more pronounced for private firms in industries with more public companies. Furthermore, our analysis around the mandatory adoption of IFRS by public companies suggests that private firms that do not adopt the new public standard show a decrease in the value relevance of their reporting. These findings are consistent with higher accounting comparability facilitating a spillover of valuation information from public to private markets.

 

 

Keywords: value relevance, private firms, spillovers, comparability

JEL Classification: M40, M41, G30, G34


Credit Spreads, Leverage and Volatility: a Cointegration Approach

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3575545
34 Pages Posted: 8 May 2020

Federico Maglione

Cass Business School

Date Written: April 14, 2020

Abstract

This work documents the existence of a cointegration relationship between credit spreads, leverage and equity volatility for a large set of US companies. It is shown that accounting for the long-run equilibrium dynamic between these variables is essential to correctly explain credit spread changes. Using a novel structural model in which equity is modelled as a compound option on the firm's assets, a new methodology for estimating the unobservable market value of the firm's assets and volatility is developed. The proposed model allows to significantly reduce the pricing errors in predicting credit spreads when compared with several structural models. In terms of correlation analysis, it is shown that not accounting for the long-run equilibrium equation embedded in an Error Correction Mechanism (ECM) results into a misspesification problem when regressing a set of explanatory variables onto the spread changes. Once credit spreads, leverage and volatility are correctly modelled, thus allowing for a long-run equilibrium, the fit of the regressions sensibly increases if compared to the results of previous research. It is further shown that most of the cross-sectional variation of the spreads appears to be more driven by firm-specific characteristics rather than systematic factors.

Keywords: credit spreads, financial leverage, asset volatility, cointegration, compound options

JEL Classification: C58, C61, G13, G32, G33


The Evolution of Charter School Quality

Economica, Vol. 87, Issue 345, pp. 158-189, 2020

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3595580
32 Pages
 Posted: 8 May 2020

Patrick Baude

University of Illinois at Chicago

Eric A. Hanushek

Stanford University - Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Steven Rivkin

University of Illinois at Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: January 2020

Abstract

Studies of the charter sector typically compare charters and traditional public schools at a point in time. These comparisons are potentially misleading, because many charter‐related reforms require time to generate results. We study quality dynamics among charter schools in the State of Texas from 2001 to 2011. School quality in the charter sector was initially highly variable and on average lower than in traditional public schools. However, exits, improvement of existing charter schools, and higher quality of new entrants increased charter effectiveness relative to traditional public schools despite an acceleration in the rate of sector expansion in the latter half of the decade. We present evidence that reduced student mobility and an increased share of charters adhering to No‐Excuses‐style curricula contribute to these improvements. Although selection into charter schools becomes more favourable over time in terms of prior achievement and behaviour, such compositional improvements appear to contribute little to the charter sector gains. Moreover, accounting for composition in terms of prior achievement and behaviour has only a small effect on estimates of the higher average quality of No Excuses schools.


Big G (Government)

CEPR Discussion Paper No. DP14625

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3594256
91 Pages
 Posted: 8 May 2020

Lydia Cox

Harvard University, Department of Economics

Gernot J. Müller

University of Tuebingen - Department of Economics

Ernesto Pastén

Central Bank of Chile

Raphael Schoenle

Brandeis University

Michael Weber

University of Chicago - Finance

Multiple version iconThere are 4 versions of this paper

Date Written: April 2020

Abstract

``Big G'' typically refers to aggregate government spending on a homogeneous good. In this paper, we open up this construct by analyzing the entire universe of procurement contracts of the US government and establish five facts. First, government spending is granular, that is, it is concentrated in relatively few firms and sectors. Second, relative to private expenditures its composition is biased. Third, procurement contracts are short-lived. Fourth, idiosyncratic variation dominates the fluctuation of spending. Last, government spending is concentrated in sectors with relatively sticky prices. Accounting for these facts within a stylized New Keynesian model offers new insights into the fiscal transmission mechanism: fiscal shocks hardly impact inflation, little crowding out of private expenditure exists, and the multiplier tends to be larger compared to a one-sector benchmark aligning the model with the empirical evidence.

Keywords: federal procurement, fiscal policy transmission, government spending, granularity, monetary policy, sectoral heterogeneity

JEL Classification: E32, E62


Intermediated Asymmetric Information, Compensation, and Career Prospects

CEPR Discussion Paper No. DP14586
SSRN|
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3594208

105 Pages Posted: 8 May 2020

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Dmitry Orlov

University of Wisconsin School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 2020

Abstract

Adverse selection harms workers, but benefits firms able to identify talent. An informed intermediary expropriates its agents' ability by threatening to fire and expose them to undervaluation of their skill. An agent's track record gradually reduces the intermediary's information advantage. We show that in response, the intermediary starts churning well-performing agents she knows to be less skilled. Despite leading to an accelerated reduction in information advantage, such selectivity boosts profits as retained agents accept below-reservation wages to build a reputation faster. Agents prefer starting their careers working for an intermediary, as benefits from building reputation faster more than offsets expropriation costs. We derive implications of this mechanism for pay-for- performance sensitivity, bonuses, and turnover. Our analysis applies to professions where talent is essential, and performance is publicly observable, such as asset management, legal partnerships, and accounting firms.

Keywords: career concerns, Compensation, Dynamic adverse selection, Dynamic signaling, real options


Spike in 2019Q1 Leverage Ratios: The Impact of Operating Leases

FEDS Working Paper No. 2019-12-13-2
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3595653

Posted: 7 May 2020

Berardino Palazzo

Federal Reserve Board

Jie Yang

Board of Governors of the Federal Reserve System

Date Written: December 13, 2019

Abstract

In this note, we show that the key driver of the 2019:Q1 increase in the leverage ratio appears to be a change in accounting rules – which requires the inclusion of operating leases as financial liabilities on U.S. corporations' balance sheets – and also provide a methodology for adjusting the leverage ratio to allow for cleaner historical comparisons.


Immigration, Internal Migration and Crime in South Africa: A Multi‐Level Model Analysis

Development Policy Review, Vol. 37, Issue 5, pp. 672-691, 2019

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3594735

20 Pages Posted: 7 May 2020

Umakrishnan Kollamparambil

University of the Witwatersrand

Date Written: September 2019

Abstract

A review of South African literature on crime confirms the lack of a study that considers the impact of migration on the crime rate in the country. The high levels of crime in South Africa aside, additional motivation behind the study has been the increasing rhetoric in media and by politicians insinuating the prominent role of foreign immigrants in the high crime levels of the country. While this is the first attempt to study this relationship in the South African context, it also stands apart from existing studies undertaken in the developed countries by accounting for both internal migrants as well as foreign immigrants. Further, the study claims the use of multi‐level regression estimations as an improvement from the existing studies on the issue by accounting for variance clustering across different spatial levels. In all the estimated models, internal migrant ratio came out as being positively and significantly related to crime rates across five different crime categories, with the sole exception of sexual crime rate. There was no evidence of foreign immigrant ratio impacting on crime rate in any of the crimes analysed except crime relating to property. Further, income inequality and sex ratio figure as determining factors across most types of crime in South Africa.

Keywords: crime, foreign immigration, income inequality, internal migration, multi‐level model, South Africa


What Kind of Leader Does an Accounting Firm Need to Thrive?

Journal of Accounting, Ethics and Public Policy 19(4): 419-440 (2018).
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3583877

22 Pages Posted: 6 May 2020

Hershey H. Friedman

City University of New York - Department of Business Management

Miriam Gerstein

affiliation not provided to SSRN

Sarah Hertz

State University of New York (SUNY), Empire State College

Date Written: December 10, 2018

Abstract

The leadership style that worked in the industrial economy will not work in the knowledge economy where integrity and creativity are crucial if an organization is to survive and thrive. This paper demonstrates why organizations, including accounting firms, need leaders that possess the characteristics of integrity, compassion/benevolence, and humility.

Keywords: virtuous organization, ethical leadership, compassion, care ethics, benevolent leadership, humility, and narcissistic leadership

JEL Classification: L20, L21, L22, L29


Intermediation Frictions in Equity Markets

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3586582
65 Pages
 Posted: 6 May 2020

Bryan Seegmiller

MIT Sloan School of Management

Date Written: December 1, 2019

Abstract

Stocks with similar characteristics but different levels of ownership by financial institutions have returns and risk premia that comove very differently with shocks to the risk bearing capacity of financial intermediaries. After accounting for observable stock characteristics, excess returns on more intermediated stocks have higher betas on contemporaneous shocks to intermediary willingness to take risk and are more predictable by state variables that proxy for intermediary health. The empirical evidence suggests that asset pricing models featuring financial intermediaries as marginal investors and frictions that induce changes in intermediary risk bearing capacity are useful in explaining price movements even in asset classes with comparatively low barriers to household participation.

Keywords: financial intermediaries, intermediary-based asset pricing, institutional investors

JEL Classification: G12, G23


Are the CDC’s Corona Virus Statistics Fraudulent? An Accounting and Legal Analysis

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3590800
6 Pages
 Posted: 6 May 2020

Robert W. McGee

Fayetteville State University - Department of Accounting

Date Written: May 1, 2020

Abstract

This paper presents an overview of the Corona virus situation and examines the literature that seems to suggest that some, or perhaps much of the reporting of Corona virus deaths is actually the result of deliberate misclassification. The accounting and legal literature is also examined to determine whether the misclassifications amount to fraud.

Keywords: COVID-19, Coronavirus, fraud, corruption

JEL Classification: D61, D73, E31, I11, I18, I19, F68, G18, G28, K10, L38

CONCLUDING COMMENTS It is clear that there is misreporting of at least some deaths because the CDC guidelines require it. It is also clear that much harm is being caused by it because millions of individuals have become unemployed as a result of the belief that the Coronavirus is a pandemic that requires closing businesses and government offices as a matter of public health.

Dr. Birx Reportedly Believes Coronavirus Death Toll Inflated By Up To 25% ---
https://dailycaller.com/2020/05/11/doctor-deborah-birx-coronavirus-covid-19-death-toll-inflated-numbers-cases-cdc-white-house-meeting-report/


The Real Effects of Financial Reporting on Pay and Incentives

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3568502
40 Pages
 Posted: 6 May 2020

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: April 10, 2020

Abstract

This paper discusses two real effects of financial reporting on pay and incentives:

(1) Better earnings leads to better incentives, and

(2) If pay is mis-measured, pay can be mis-used.

The first real effect follows from the fact that incentives are often based on earnings, and the effectiveness of earnings-based incentives is positively related to the quality of earnings. Greater use of earnings in incentives provides better incentives at a lower cost. The second real effect has to do with how well the accounting system measures the expense of various pay components. Complex calculations are required to value complex pay components such as options, post-employment benefits, and performance-vested equity, and these calculations have historically not been done correctly. The incorrect accounting leads to these pay components being mis-used. I conclude by discussing how accounting and disclosure of pay and incentives can be improved.

Keywords: Pay, Incentives, Real Effects, Earnings Quality, Accounting Quality


What Do Analysts’ Provision Forecasts Tell Us About Expected Credit Loss Recognition?

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3572406
52 Pages
 Posted: 5 May 2020

Anne Beatty

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Scott Liao

University of Toronto - Rotman School of Management

Date Written: June 28, 2019

Abstract

We examine the incremental predictive ability and information content of analysts’ provision forecasts to explore the potential effects of the FASB’s new current expected credit loss (CECL) accounting method. Controlling for the recognized loan loss provision, consensus analyst provision forecasts are incrementally associated with future non-performing loans (NPLs) and equity markets returns. This incremental association is increasing in banks’ unconstrained ability to estimate future losses as evidenced by their loan fair value disclosures and the extent of the constraints imposed by the incurred loss model measured by the fraction of heterogeneous loans individually reviewed for impairment. For a sample of analysts that also forecast NPLs, the association between the individual analyst’s provision forecast and future NPLs is increasing in the analyst’s comparative NPL forecasting accuracy. Finally, we find that the association between the analyst’s provision forecast and future NPLs is increasing in EPS forecast errors but decreasing in target price forecast errors. Together these results suggest that the reported provisions under the current incurred loss model do not fully incorporate banks’ information about future losses and that the extent to which this occurs depends both on banks’ ability to forecast expected losses and the constraints imposed by the incurred loss model. These results suggest that analysts forecast future losses beyond those reflected in the recognized provision and that the incremental information in these forecasts and potential CECL provision timeliness effect is greater when the constraints imposed by the incurred loss model are greater.

Keywords: CECL, Expected Loss Model, Bank Accounting

JEL Classification: M41, G21


The Effect of PCAOB Disclosure Regulations on the Structure of the Small Public Company Audit Market

Posted: 5 May 2020
SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3572291

Michael Ettredge

University of Kansas - Accounting and Information Systems Area

Juan Mao

University of Texas at San Antonio - Department of Accounting

Mary S. Stone

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: April 9, 2020

Abstract

Three recent PCAOB releases increase PCAOB registrant’s disclosure requirements. Form 2 (2009) requires audit firms to file an annual report to facilitate analysis and inspection by the PCAOB; Form 3 (2009) requires timely reporting of disciplinary, administrative and other proceedings related to a registrant’s audit practice; and Form AP (2017) requires disclosure of the identity of the engagement partner and of other firms playing a significant role in an audit. The Forms include previously undisclosed information, aggregations of disclosures provided elsewhere, and information potentially detrimental to firm reputation, thereby imposing direct and indirect costs on PCAOB registrants. We examine the effects of these disclosure requirements on the pool of firms available to audit SEC Smaller Financial Reporting companies, a market segment important to the U.S. capital markets, and a pool that often is audited by small and medium-sized accounting firms. We document that initiations of both Form 2/3 and of Form AP reporting are accompanied by significant shrinkage in the pool of smaller PCAOB registered audit firms. Using hand-gathered data we further investigate the following issues. What effect do the new required disclosures appear to have had on concentration in the small audit firm market? What do the characteristics and subsequent histories of the de-registering audit firms suggest about their motives for de-registration and their strategies? How has audit quality changed? ​

Keywords: PCAOB Deregistration; Form 2; Form AP; Audit Firm


Financial Education Affects Financial Knowledge and Downstream Behaviors

Wharton Pension Research Council Working Paper No. 2020-07

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3588131

37 Pages Posted: 5 May 2020

Tim Kaiser

German Institute for Economic Research (DIW Berlin) - Department of International Economics; University of Koblenz-Landau, Department of Economics; University of Koblenz-Landau

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Multiple version iconThere are 3 versions of this paper

Date Written: April 2020

Abstract

We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions.

Keywords: financial education, financial literacy, financial behavior, RCT, meta-analysis

JEL Classification: D14, G53, I21


Does Auditor Assurance of Client Prosocial Activities Affect Auditor-Client Negotiations?

44 Pages Posted: 5 May 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571812

Jeremy Douthit

University of Arizona - School of Accountancy

Steven J. Kachelmeier

University of Texas at Austin - Department of Accounting

Ben W. Van Landuyt

University of Arizona - School of Accountancy

Date Written: April 2020

Abstract

We draw on theory from moral licensing and image motivation to test the prediction that, when auditors provide assurance over a pro-social activity that is roughly analogous to reported corporate social responsibility (CSR), reporters become more aggressive in subsequent reporter-auditor negotiations. In Part 1 of a two-part interactive experiment, participants in the reporter role answer trivia questions. Our first manipulation is whether correct answers result in a donation to charity (i.e., a pro-social benefit) or a personal gain to the reporter. Our second manipulation is whether participants in the auditor role observe and verify reporters’ Part 1 efforts. In Part 2, reporter/auditor pairs negotiate an estimate for an uncertain amount, with higher reported estimates increasing the likelihood that the reporter receives a bonus and the auditor incurs a penalty. We find that reporters propose more aggressive estimates and achieve more favorable negotiated outcomes in Part 2 only when the Part 1 condition combines a pro-social activity with auditor assurance.

Keywords: Audit Negotiations; Auditor Independence; Moral Licensing; Corporate Social Responsibility; Charitable Giving; Audit Quality; Accounting Estimates; Experimental Economics


The Effects of Fair Value on the Matching of Revenues and Expenses: The Case of Asset Revaluations

International Journal of Accounting, Forthcoming

34 Pages Posted: 1 May 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3570210

Fabio Moraes da Costa

FUCAPE Business School

Carol Liu

Arizona State University (ASU), W.P. Carey School of Business, School of Accountancy, Students

Regina Rosa

University of New Orleans - College of Business Administration

Samuel L. Tiras

Indiana University - Kelley School of Business

Date Written: January 27, 2020

Abstract

Researchers and practitioners have expressed concern that matching has declined over time, as evidenced by a decreasing association between revenues and expenses. They attribute this decline to the shift in financial reporting from a revenue-expense view that emphasizes matching, to an asset-liability view that emphasizes the measurement of economic resources that incorporates more fair values. When revenues rise with inflation, but the expenses remain tied to historical costs, the two streams tend to diverge. We hypothesize that upwardly revaluing the long-lived fixed operating assets resets the expense stream, thus firms that revalue would exhibit stronger associations between revenues and expenses than firms that do not upwardly revalue. Based on a sample of UK firms, we find evidence of stronger associations that support our expectations, particularly in those higher inflationary industries.

Keywords: asset revaluations, matching, fair value accounting, IFRS


Firm Life Cycle and the Disclosure of Estimates and Judgments in Goodwill Impairment Tests: Evidence from Australia

Journal of Contemporary Accounting and Economics, April 2020

Posted: 1 May 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3589893

Humayun Kabir

Auckland University of Technology

Li Su

Auckland University of Technology

Asheq Rahman

Auckland University of Technology - Faculty of Business & Law

Date Written: April 29, 2020

Abstract

The goodwill impairment disclosure literature examines the association between firm-and country-level factors and the disclosure of estimates and judgments used in the goodwill impairment test under International Accounting Standard 36. Although the accounting literature provides competing predictions between firm life cycle and these disclosures, prior studies did not explore the role of firm life cycle in these disclosures. This paper fills in this gap in the literature, and documents that, in Australia, these disclosures vary by life cycle stages and that firm size moderates this association. We, however, find that the differences are more pronounced for some disclosure items than for others.

Keywords: Goodwill impairment; firm life cycle; accounting estimates and judgments; note disclosures; disclosure regulation; Australia

JEL Classification: G34; M41

***************************************************


Mortgage Amortization and Wealth Accumulation

Stanford University Graduate School of Business Research Paper No. 3569252

49 Pages Posted: 30 Apr 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3569252

Asaf Bernstein

University of Colorado at Boulder

Peter Koudijs

Stanford GSB; National Bureau of Economic Research (NBER)

Date Written: April 1, 2020

Abstract

The effect of mortgage amortization (debt repayment) on wealth accumulation is critical in understanding savings-debt repayment fungibility, macroprudential policies, and the importance of homeownership for household wealth building. Nevertheless, it is not well understood and difficult to cleanly identify. We provide the first empirical evidence on these effects using individual administrative data to examine plausibly exogenous variation in the timing of home purchases surrounding a January 2013 mortgage reform in the Netherlands which restricted the use of interest only mortgages for first time home buyers. For those who bought just after the regulation, we find little-to-no change in the accumulation of non-mortgage savings, even four years later, despite a significant increase in debt repayment. This surprisingly implies a near 1-for-1 rise in net worth - a response consistent with little savings-debt fungibility – financed via increased labor supply and reduced expenditures. Results hold using life-events, such as the birth of a child, as an instrument for the timing of home purchase, and appear unaffected by potential selection or confounded treatment concerns. Effects are unchanged focusing on buyers with substantial liquid savings and across the spectrum of ages, suggesting general applicability beyond just non-savers and the young. Our results are broadly consistent with savings decisions being almost entirely driven by short-term consumption smoothing and models of wealth accumulation driven by default settings, commitment devices, and mental accounting. Overall, our findings suggest that homeownership, when coupled with amortizing mortgages, are key drivers of wealth accumulation, and that the amortization-wealth elasticity is a crucial consideration for policy makers.

Keywords: wealth, home equity, housing, mortgage, amortization, debt, repayment, savings

JEL Classification: D1, D14, D91, E21, E61, E65, G00, G02, G21, G28, H31, R38


Firms´ Accounting Misrepresentations - Reasons, Tools and Outcomes

71 Pages Posted: 29 Apr 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3575982

Ingolf Kloppenburg

University of Turku

Date Written: March 14, 2020

Abstract

The paper investigates and determines the profile of misrepresenting firms by suitable accounting ratios. It moreover measures the impact of the misrepresentation on the accounting characteristics. Unlike prior literature, it splits the dataset by the reason of the managers for conducting the misrepresentation. The reason is therefore hand-collected from SEC-investigation reports and verified by further sources. This allows to identify the characteristics and quantify the impact of the misrepresentation depending on the reason for the misrepresentation. The research is conducted with statistical tests for significance and a firth logistic regression (Firth 1993). The results show that there are indeed differences in the characteristics of misrepresenting firms depending on the reason for the misrepresentation. In total three different main categories of these reasons for misrepresentations could be identified. In one category are small well-performing firms. Here data shows that the main reason for the misrepresentation is the enrichment of the managers (greed) e.g. through bonusses. In another category are small almost bankrupt firms. Here data shows that the managers typically misrepresent to avoid bankruptcy. In the third category are bigger and established firms. Here data shows a misrepresentation to handle capital market pressure e.g. through analyst forecasts. Moreover, the results suggest that depending on the reason (and consequently the category) the misrepresentation was done through different accounting components (earnings, total assets, sales, current assets, current liabilities, inventory). The results are in general in line with the positive accounting theory as defined by Watts and Zimmerman (1986) since the results underline the importance of accounting in various contracting situations e.g. in negotiating managements’ remuneration system.

Keywords: earnings quality, financial statement fraud, financial misrepresentation, reason for a misrepresentation, accounting characteristics, AAER


Financial Position and Performance in IFRS 17

 

44 Pages Posted: 28 Apr 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3567745

Mathias Lindholm

Stockholm University

Filip Lindskog

Stockholm University

Lina Palmborg

Stockholm University

Date Written: April 3, 2020

Abstract

The general principles for determining the financial performance of a company is that revenue is earned as goods are delivered or services provided, and that expenses in the period are made up of the costs associated with this earned revenue. To follow these principles in the insurance industry is a complex task.

The premium payments are typically made upfront, and can provide coverage for several years, or be paid many years before the coverage period starts. The associated costs are often not fully know until many years later. Hence, complexity arises both in determining how a premium paid should be earned over time, and in valuing the costs associated with this earned premium. IFRS 17 attempts to align the insurance industry with these general accounting principles.

We bring this new accounting standard into the realm of actuarial science, through a mathematical interpretation of the regulatory texts, and by defining the algorithm for profit or loss in accordance with the new standard. Furthermore, we suggest a computationally efficient risk-based method of valuing a portfolio of insurance contracts and an allocation of this value to sub-portfolios. Finally, we demonstrate the practicability of these methods and the algorithm for profit or loss in a large-scale numerical example.

 

 

Keywords: IFRS 17, Financial Performance, Valuation, Allocation


Taxation of Electronic Gaming

77 Wash & Lee L. Rev. 661 (2020)

90 Pages Posted: 28 Apr 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3585945

Bryan Camp

Texas Tech University School of Law

Date Written: April 26, 2020

Abstract

At a doctrinal level, the subject of this Article is timely. During this time of the coronavirus pandemic, casinos have been closed and large populations have been subject to stay-home orders from local and state authorities. One can reasonably expect a large increase in electronic gaming and thus an increased need for proper consideration of its taxation. This Article considers the proper way to tax electronic gaming of all kinds. It argues that a cash-out rule is the proper rule.

At a deeper level, the subject of this Article is timeless. Tax law is wickedly complex. This Article explores that complexity through the example of electronic gaming. It grapples with the source of that complexity: an inherent and unresolvable tension between economic theories of income and the practical needs of administering a system of taxation to a large population in a democracy. That tension has led some scholars to argue for a standards-based approach to taxation. This Article considers and rejects that argument. It argues that legal rules are necessary to mediate between theory and practice. Hence, this Article demonstrates the continued relevance and importance of doctrinal analysis in legal scholarship.

Keywords: constructive receipt, gambling, gaming, casinos, poker, electronic gaming, internet poker, internet gaming, economic substance, accouting periods, consumption, wealth, income, definition of income, history, economic thought, accounting theory, stocks, flows,

JEL Classification: B10, B13, B19, K19, K34, K40, K49


Nothing but Noise? Price Discovery between Cryptocurrency Exchanges

47 Pages Posted: 24 Apr 2020

SSRN

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3565209

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics

Franziska Peter

Zeppelin University

Date Written: February 21, 2020

Abstract

We examine the price discovery contributions of cryptocurrency exchanges in the presence of market microstructure noise. Cryptocurrency markets exhibit a decisively higher level of microstructure noise compared to the New York Stock Exchange or NASDAQ. Therefore, traditional measures of price discovery are potentially biased. To overcome this concern, we draw on the information leadership share (ILS) proposed by Putninš [2013, J.Emp.Fin]. Based on the ILS, we find that Bitfinex is the leader in the price discovery process. Our results highlight the importance of accounting for different levels of noise when evaluating price discovery contributions

Keywords: price discovery, cryptocurrency, Bitcoin, information share, microstructure noise

JEL Classification: C32, G14, G15


 

 


 

 


 


 


 

 


 


 


 


 

 


 


 


 


 

 


 

 

 


 


 


 

 


Excel:  Modelling working capital adjustments in Excel ---
https://www.fm-magazine.com/news/2020/apr/model-working-capital-adjustments-in-excel.html?utm_source=mnl:globalcpa&utm_medium=email&utm_campaign=20May2020&SubscriberID=119191126&SendID=280485


 

 




EY:  How to account for proceeds from Paycheck Protection Program loans ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---how-to-account-for-proceeds-from-paycheck-prote

EY:  Financial Reporting Developments - Issuer’s accounting for debt and equity financings ---
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-developments----issuer-s-accounting-for-debt

EY:  Updated FRD on equity method investments and joint ventures ---
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-developments---equity-method-investments-and

EY:  Updated FRD on applying the credit impairment standard to short-term receivables and contract assets ---
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-developments---credit-impairment-for-short-t

EY:  How to apply the SEC’s new requirements for registered debt issued or guaranteed by subsidiaries ---
https://www.ey.com/en_us/assurance/accountinglink/-technical-line---how-to-apply-the-sec-s-new-requirements-for-re

EY:  SEC proposes rule to modernize fund valuation practices
https://www.ey.com/en_us/assurance/accountinglink/to-the-point---sec-proposes-rule-to-modernize-fund-valuation-pra

EY: FASB staff clarifies accounting for cash flow hedge accounting disrupted by the COVID-19 pandemic ---
https://www.ey.com/en_us/assurance/accountinglink/to-the-point---fasb-staff-clarifies-accounting-for-cash-flow-hed

SEC staff issues COVID-19-related FAQs regarding Form S-3

The SEC staff in the Division of Corporation Finance issued COVID-19-related FAQs to address questions about the SEC order extending the filing deadline for registrants that cannot file their periodic reports on time due to the COVID-19 pandemic. The FAQs clarify that registrants that validly rely on the order

·        Can continue to conduct takedowns using an already-effective Form S-3 shelf registration statement; however, registrants and their legal advisers will need to consider whether a post-effective amendment is needed due to a “fundamental change,” whether the prospectus disclosures are accurate and complete, and, if the prospectus contains annual disclosures older than 16 months, when updated information is required because it can be furnished without unreasonable effort or expense

·        Must reassess their Form S-3 eligibility upon timely filing Form 10-K, including by any extended due date

·        Can file a new Form S-3 registration statement, if eligible, before the extended due date of a periodic report; however, the SEC staff will be unlikely to accelerate the effective date of a Form S-3 until all required information is filed (i.e., the order does not extend the financial statement timeliness requirements for purposes of new Securities Act filings)


 




 

 


From the CFO Journal's Morning Ledger on May20, 2020

Good morning. More companies are pivoting their businesses as consumer habits shift amid coronavirus lockdowns, and finance chiefs are finding ways to fund the transformation, CFO Journal reports.

Bricks-and-mortar retailers—many of which have been closed for weeks—are being forced to bolster their online presence. Other businesses have had to come up with new products and services. “Everyone is revisiting their business model and not all retailers are going to make it,” said Brian McGee, the chief financial officer of camera maker GoPro.

GoPro is pushing ahead with selling more of its products through e-commerce channels, accelerating a shift that was set to happen over the next couple of years, Mr. McGee said.

From Amazon to Walmart, consumer-facing companies are rethinking how they engage with consumers stuck at home and those returning to a changed work and shopping environment. “[The pandemic] has accelerated changes that many companies were going through,” said Andrew Uerkwitz, a senior equity analyst at investment bank Oppenheimer. “There is a broad consensus that the pandemic is speeding up the transition to online retail.

Jensen Comment
Some colleges are making similar pivots as they move more courses online to tap deeper into the online market.


From the CFO Journal's Morning Ledger on May19, 2020

J.C. Penney plans to permanently close more than 240 department stores, or nearly 30% of its locations, as the retailer tries to streamline its business under chapter 11 bankruptcy protection.


From the CFO Journal's Morning Ledger on May15, 2020

President Trump said he was considering whether to require Chinese companies to follow U.S. accounting rules to be listed on U.S. stock exchanges, though he expressed concern that such a move could prompt companies to take their listings elsewhere.

The fight over regulation of Chinese companies dates back more than a decade, to when many Chinese companies went public on U.S. stock exchanges by merging with an American shell company. Such “reverse mergers” gave the Chinese companies access to a U.S. investor base with little upfront scrutiny from the Securities and Exchange Commission.


Ford: The Only Big-Three Automaker That Did Not Need a 2008 Bailout is In Deeper Trouble in 2020

From the CFO Journal's Morning Ledger on May15, 2020

Ford executives tried to reassure investors Thursday the auto maker was on track with a plan to lift its beaten-down stock price, as a halting restructuring effort that began nearly two years ago has been complicated by the Covid-19 pandemic.


From the CFO Journal's Morning Ledger on May13, 2020

Good morning. Will the economic recovery be V-shaped? No, say corporate leaders.

As companies have reported first-quarter earnings, corporate executives have indicated that they are less optimistic about the recovery than many investors. Several executives have said on earnings calls that they are expecting various other shapes of recovery—U-shaped, L-shaped, and W-shaped among them—that indicate that the rebound will be slower.

The commentary by corporate executives underscores the differences in how companies and economists are viewing the country’s economic recovery. While some analysts have remained hopeful that the U.S. has already reached its trough, many companies are saying they can’t forecast the pandemic’s impact. At the same time, several companies have had to re-evaluate as many stay-at-home orders remain in place and economic data has worsened.

Federal Reserve Chairman Jerome Powell urged the White House and Congress on Wednesday to spend more money to ensure their initial response to the economic downturn isn’t squandered. He warned that, with revenues depressed for longer, waves of business bankruptcies could follow, risking a much slower pace of improvement in the job market. U.S. unemployment is expected to hit 17% in June as the economy contracts, economists predicted.

 


From the CFO Journal's Morning Ledger on May13, 2020

New tax breaks expected to total about $650 billion are starting to flow to U.S. businesses, giving them quick cash and longer-term help to ride out the coronavirus-induced economic downturn.

Companies reporting tax deferrals or benefits exceeding $100 million each include Chipotle Mexican Grill, Disney, American Airlines, and oil refiners Valero Energy and Marathon Petroleum.

So far, more than 50 publicly traded companies have disclosed tax savings and deferrals totaling at least $2.8 billion, according to securities filings. Money is also going to private companies that don’t report earnings.

“Depending on the company, the provisions can be really meaningful in getting them to the other side of this,” said Manal Corwin, principal-in-charge of KPMG LLP’s Washington tax practice.

The tax breaks, enacted in March, are a crucial piece of the government’s attempt to prop up businesses during the coronavirus pandemic, alongside Federal Reserve lending and the Small Business Administration’s loan-forgiveness program.


From the CFO Journal's Morning Ledger on May12, 2020

Good morning. As the Mayo Clinic was rolling out its response to the coronavirus pandemic, its finance team was trying to figure out how best to classify a reserve of masks and gloves: expense or inventory?

That question, among others, has prompted the nonprofit hospital system to overhaul the way it accounts for everything from inventory to labor costs and other expenses, CFO Journal reports. The fluctuations in Mayo’s revenue and expenses in recent months exposed shortcomings in the way crucial equipment was recorded and recognized on financial statements, said Chief Financial Officer Dennis Dahlen.

As hospitals across the country try to offset falling revenues as their spending on supplies soars, finance chiefs are making sweeping changes to reduce costs and streamline financial operations.

The pandemic has allowed health-care systems to take a step back and review their accounting systems and how they measure performance and costs, said Bill Tayler, an accounting professor at Brigham Young University in Provo, Utah. “When they make those changes, those changes are here to stay,” he said.

The Mayo Clinic ran into the question of how to account for protective gear after it purchased a stockpile in late February to early March. Previously, the hospital system had recognized gear as inventory if it was stored in a warehouse; if the gear were kept at a clinical facility or on a hospital floor, it would be recognized as an expense. Faced with the pandemic, the clinic had no choice but to keep the gear close to its medical staff.

 


From the CFO Journal's Morning Ledger on May11, 2020

U.S. insurers are turning away business from some Americans who want a life-insurance policy. The driving force behind the action: a collapse in interest rates tied to the spread of the new coronavirus and an expectation from insurers that rates won’t rebound anytime soon.


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

The largest cable and satellite TV companies lost more than two million customers in the first three months of the year, as restaurants, bars and hotels hit by the coronavirus pandemic joined consumers canceling or pausing service.


Going Concern --- https://en.wikipedia.org/wiki/Going_concern

From the CFO Journal's Morning Ledger on May 7, 2020

Good morning. Companies should expect auditors to look more closely at their ability to remain going concerns, even if their recent annual reports gave a healthier impression, CFO Journal reports.

The number of going-concern filings, which can flag survival problems at a company, is currently at a 10-year low, according to the research firm Audit Analytics. Those warnings on a company’s likelihood to remain in business for the next 12 months are typically made when it files its annual report. But this year at many companies that financial assessment may have occurred before the coronavirus laid waste to the economy.

This year’s going-concern figures are incomplete, and the full extent of the pandemic’s impact will not be clear until sometime next year, said Don Whalen, general counsel and director of research at Audit Analytics.

Quarterly reports and other filings can foreshadow going-concern designations in the annual report, experts say. Companies are expected to provide more detailed information in the liquidity and capital resources section of quarterly reports and in footnotes. Disclosures on the breaching of debt covenants, for instance, or special plans for meeting financial obligations could weigh on auditors’ opinions at the end of the fiscal year.

Auditors will be more skeptical of companies’ modeling of future cash flows, said Michael Shaub, an accounting professor at Texas A&M University’s Mays Business School. “This is going to wipe out a lot of those companies sitting around on the precipice,” Mr. Shaub said.

Jensen Comment
It will be interesting to await new accountics science articles on use of Bayesian decision making in making going concern decisions.

Enter "Going concern" AND "Bayesian" at ---
https://scholar.google.com/


From the CFO Journal's Morning Ledger on May 6, 2020

Beyond Meat said sales more than doubled in the latest quarter, boosted by increased demand from its partners and retailers stocking up on the alternative meats as food supply chains faced disruptions because of the coronavirus pandemic.


From the CFO Journal's Morning Ledger on May 6, 2020

Norwegian Cruise Line Holdings said it won’t be able to remain in business without a significant influx of money as the pandemic has halted global travel and battered the company.


Amazon's Revenues Soar as Profits Fall

From the CFO Journal's Morning Ledger on May 1, 2020

Amazon reported soaring quarterly sales as homebound customers flooded it with online shopping orders, capping a string of earnings reports from big tech companies that show how the coronavirus pandemic has fueled demand for their products and services.

The Seattle-based tech giant said Thursday that revenue rose 26% from a year earlier to $75.5 billion in the three months through March—by far the highest on record for what is usually Amazon’s slowest period of the year. The boom in sales came at a cost, though, as profit fell 29% from a year earlier to $2.5 billion.


From the CFO Journal's Morning Ledger on April 30, 2020

Struggling companies desperate for cash during the coronavirus crisis are raising money in a way that hasn’t been this widely used since the 2008 recession: selling bonds that can convert into stocks. Nearly 60% of all money raised in equity capital markets in April through Tuesday—totaling more than $12.5 billion—has been through convertible-bond sales, according to Dealogic. That is the highest percentage since early 2008, and bankers say they expect to see many more convertible deals in the coming weeks.

 


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

Major U.S. manufacturers said some closed plants may never reopen and new product introductions could be delayed, after the coronavirus pandemic slashed demand for everything from motorcycles to industrial paint.

Executives are offering a dark outlook for a sector of the economy that was already faltering before the coronavirus crisis sapped demand and hobbled plants and supply chains. Big chunks of the U.S. industrial base remain closed as part of the effort to contain the virus. Other factories are closed due to declining demand or parts shortages.


 

 

 

 

 

 

 




Teaching Case From The Wall Street Journal Weekly Accounting Review on May 1, 2020 2020

Coronavirus Poses Hurdle for Goodwill Impairment Tests

By Mark Maurer | April 22, 2020

Topics: Goodwill Impairments , Coronavirus

Summary: “Oil-field-services company Baker Hughes recently disclosed that it expects to book a roughly $15 billion goodwill impairment charge for the first quarter….” The article focuses on the process of goodwill recording and amortization: it defines goodwill as the amount “created when a company acquires another business for more than the value of its hard assets”; it comments that U.S. accounting standards require companies to consider testing annually; and it notes that “companies usually conduct impairment tests in the third quarter.”

Classroom Application: The article is useful to discuss details of the process for goodwill impairment testing. Beginning the discussion with Baker-Hughes’ disclosure ahead of its earnings release—and presumably as soon as it determined the amount of the impairment loss—is useful for students to understand the importance of disclosure as well as the process for impairment testing. FACULTY SHOULD REMOVE PRIOR TO DISTRIBUTING TO STUDENTS. Answers to questions regarding references to professional literature for goodwill impairments are: (1) Goodwill is defined in the ASC glossary specifically that associated with ASC 350-20-20; and (2) ASC sections 350-20-35-3A and 350-20-35-3E discuss the qualitative assessment factors that may first be considered to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

Questions:

·        Why do you think that the senior head of financial reporting policy at the CFA Institute recommends that “every company that has goodwill should be talking about their views this quarter, if they’ve had a decrease in business”? Is this required discussion in the first quarter according to accounting standards? Explain your answer.

·        Do you agree with the description that “U.S. accounting standards require companies to test for goodwill impairment at least once a year”? Explain your answer with citations to professional literature.

·        Do you agree with the definition of goodwill that is given in the article? State the definition given and explain your answer with citations to professional literature.

·        Why is the accounting requirement for goodwill impairment testing so significantly impacted by the Coronavirus pandemic? Summarize the points in the article describing the effect on this area of accounting.

Read the Article

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

 

"Coronavirus Poses Hurdle for Goodwill Impairment Tests," by Mark Maurer, The Wall Street Journal, April 22, 2020
https://www.wsj.com/articles/coronavirus-poses-hurdle-for-goodwill-impairment-tests-11587598009

Finance executives are devoting more time and resources to determining whether they need to perform an impairment test and, if necessary, record a charge for goodwill

The unknown depth and duration of the coronavirus pandemic has disrupted finance chiefs’ ability to generate sound forecasts, complicating efforts to conduct the required impairment tests for goodwill, securities lawyers and valuation experts say.

The scenario is forcing companies to devote more time and resources to determining when to perform their impairment tests and, if necessary, record a charge for goodwill.

Goodwill is created when a company acquires another business for more than the value of its hard assets. U.S. accounting standards require companies to test for goodwill impairment at least once a year to determine whether future cash flows associated with an acquisition are still expected.

Companies usually conduct impairment tests in the third quarter. But if a so-called triggering event—something that will likely cause the carrying amount of a segment of the business to exceed its fair market value—occurs, companies must conduct the test sooner.

Companies generally don’t make disclosures about goodwill in quarterly reports, but investors will expect many of them to share their thinking behind recent impairments and existing goodwill on earnings calls and in financial disclosures, said Sandy Peters, senior head of financial reporting policy at the CFA Institute, a nonprofit association of financial analysts.

“Every company that has goodwill should be talking about their views this quarter, if they’ve had a decrease in business,” she said.

Oil-field-services company Baker Hughes Co. on Wednesday said it would cut jobs and reduce capital spending by 20%, days after disclosing that it expects to book a roughly $15 billion goodwill impairment charge for the first quarter due to the decline in oil prices and the pandemic.

“You’re going to have a domino effect in certain industries where a big company in an industry announces that they’re going to take an impairment and it triggers additional companies to sort of work through that as well,” said Steve Hills, head of the technical accounting consulting practice at valuation advisory and investment banking firm Stout Risius Ross LLC.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 1, 2020 2020

Public Colleges Lose State Funding, Effective Immediately

By Melissa Korn | April 23, 2020

Topics: Governmental Accounting , Not-for-profit

Summary: New Jersey has cut its appropriations to its state colleges and universities due to the Coronavirus outbreak. The drastic nature of a significant budget cut of $12.3 million to Montclair State University which must be implemented in the last two months of the year is described and supported by quotations from the university president. Other states discussed in the article include Nevada—whose funding covers “about 70% of the $1 billion total budget” for all of its public universities—and Missouri—which withheld one month’s (1/12) of its funding to each of its public universities. “…[T]he [Nevada] system’s chancellor, [Thom Reilly] said this experience has highlighted the need for his schools to become less reliant on state funding and diversify their revenue streams.”

Classroom Application: The article may be used to discuss state and local governmental accounting for the state of New Jersey itself and for the state universities located there. Questions focus on understanding the revenues to, and costs incurred by, state governments as well as colleges and universities.

Questions:

·        Describe the chain of events leading to this New Jersey cut to the budget appropriation for its colleges and universities. That is, how has the Coronavirus impacted the state budget leading to this cut?

·        What are the sources of revenue to state colleges and universities such as Montclair State University? List all that you can think of based on your own educational experiences.

·        What is the nature of operating expenses incurred by colleges and universities?

·        What additional costs do you think colleges and universities are experiencing due to this Coronavirus outbreak?

Read the Article

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

 

"Public Colleges Lose State Funding, Effective Immediately," by Melissa Korn, The Wall Street Journal, April 23, 2020
https://www.wsj.com/articles/public-universities-see-state-funding-disappear-effective-immediately-11587653753

Coronavirus prompts states to cut budgets of their universities; Montclair State University loses about 25% of its annual appropriation

Some public colleges and universities are starting to see their budgets cut with surprising speed, as states reckon with the economic fallout of the pandemic.

The cuts are deep and swift—and taking effect immediately, not next fiscal year. They will hit student programs as well as capital projects and staff salaries, university administrators said.

Montclair State University, in New Jersey, said it has been told not to expect $12.3 million of state funding it had been counting on for the rest of the current fiscal year, after Gov. Phil Murphy slashed funding in light of the coronavirus’s toll on the local economy. That’s about 25% of the university’s annual state appropriations for the fiscal year that ends in June.

The state’s office of management and budget has detailed nearly $138 million that was earmarked for community-college and public-university operations and now has been put back into reserves. The New Jersey Treasury Department didn’t respond to a request for comment.

“This is not a small number for us. And coming when it did, exactly when we have so many unanticipated and very substantial expenditures, is really difficult,” said Montclair State President Susan Cole.

Montclair State, with more than 21,000 students, has an operating budget of $437 million.

To make up for the unexpected loss of funds, the university instituted a hiring freeze, eliminated temporary and contingent positions including non-tenure-track instructors, deferred capital projects and is planning to offer fewer, larger classes come fall, she said.

Most states never recovered their pre-recession funding levels for higher education, on a per-student basis. Now, they are even further from that mark.

Another state that is moving quickly is Nevada. The Nevada System of Higher Education’s board of regents recently proposed an across-the-board cut of 4% to university budgets in fiscal 2020, and offered options of 6%, 10% and 14% cuts for next fiscal year, at the governor’s request. They are still awaiting word on which levels of cuts will be implemented.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 1, 2020 2020

Consumer Lenders Enter Fog of Uncertainty

By Telis Demos | April 21, 2020

Topics: Banking , Bad Debts

Summary: The article discusses loans receivable charge-off rates at consumer lenders under the current economic shock created by the Covid-19 coronavirus outbreak. The article and discussion questions focus on the company-specific and general economic factors considered in determining allowances (reserves) and charged-offs. Quotations from consumer lending companies’ executives in analysts calls about first-quarter earnings form the basis for the article; specifics from Ally Financial and Synchrony Financial conference calls are discussed. Quotations from JPMorgan Chase economists and a WSJ survey of economists about expectations for recovery from the Covid-19 outbreak are also provided. The article also includes a graph comparing the stock market performance of banks with a consumer-lending focus to that of the S&P 500 Banks.

Classroom Application: The article is an excellent one to tie economic circumstances and company specifics in loan portfolios to bad debt charge-offs. To lead the discussion, faculty may consider answering the first two questions by defining charge-offs and charge-off rates, then asking students to discuss the ensuing questions on points made in the article. A good reference is the discussion by the Federal Reserve Board of Governors available at https://www.federalreserve.gov/releases/chargeoff/

Questions:

·        What is a “charge-off’ of accounts or loans receivable?

·        What do you think is a “charge-off rate”?

·        How do consumer financial companies’ charge-off rates compare to the most recent severe economic slowdown prior to the Coronavirus outbreak, that of the financial crisis and its aftermath of 2008-2010?

·        What factors influence this comparison of financial companies’ loan receivable charge-offs in challenging economic circumstances?

·        Consider the graph showing that “big consumer-lender stocks have been hit harder than banks overall” during the three months ending April 21, 2020. What is shown in the graph? What is the explanation for what is shown?

Read the Article

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

 

"Consumer Lenders Enter Fog of Uncertainty," by Telis Demos, The Wall Street Journal, April 21, 2020
https://www.wsj.com/articles/consumer-lenders-enter-fog-of-uncertainty-11587491972

Credit-card and auto lenders don’t yet believe borrowers will perform as badly as they did in 2009

Consumer lenders are preparing for something pretty bad to happen to borrowers—but perhaps not bad enough.

Ally Financial ALLY -5.15% said this week that its loan-loss reserves reflect an assumption that its net charge-off rate on retail auto loans may be about 1.8% to 2.1% this year. After the financial crisis, its net loss rate on roughly comparable portfolios briefly peaked at about 3%, the bank said. Overall, the bank is now reserved for a scenario about 70% as bad as its own “severely-adverse” scenario stress test, in which it expects losses would hit about 2.5% to 3%.

Meanwhile, credit-card lender Synchrony Financial SYF -3.89% also said it wasn’t yet setting reserve levels for a scenario as dire as in 2009. Synchrony’s net charge-off rate that year was about 11%, the lender said.

Executives on calls with analysts said that, in general, they have much better-quality loan books heading into the coronavirus crisis. But investors should also keep in mind that economic forecasts have gotten more dire in the brief time since the end of March, when banks had to make a quarter-end judgment call on their reserve levels.

Ally said that its model at that time was for more of a “V”-shape path, rather than a “U” or “L,” for the economy,  with the unemployment rate approaching 10% and beginning to moderate later in the year. JPMorgan Chase’s economists are now expecting unemployment to peak at 20%. A Wall Street Journal survey of economists in early April found nearly half of them predicting a “U”-shape recovery.

 

As an offset, companies have noted that there has been bigger and faster government stimulus, and more lender forbearance, than after the financial crisis. So far, though, it’s hard to draw any big conclusions. Ally said that about 25% of its accounts requested forbearance, meaning they don’t have to make payments for a time; 70% of those accounts have never had any payment delinquency with Ally. Does that mean most people in forbearance are solid borrowers just taking advantage of the break—or that even solid borrowers are finding themselves in trouble?

So much ultimately depends not just on the peak severity of the coronavirus crisis, but also how long its effects linger. Investors are still dealing with a moving target when it comes to consumer credit.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 15, 2020 2020

Going-Concern Opinions May Be Poised for a Comeback

By Mark Maurer | May 6, 2020

Topics: Audit Report

Summary: “Dave & Buster's Entertainment Inc. filed a going-concern opinion this year.” According to Audit Analytics, twenty “companies had received going-concern audit opinions as of May 3 this year, based on the end of the company’s fiscal year, down from 41 in 2019.” One notable case is Dave & Buster’s (Ticker symbol PLAY and traded on NASDAQ). Their MD&A in the 10-K filing notes that total revenues increased 7.1% to $1,354,691 in fiscal 2019 compared to $1,265,301 in fiscal 2018, though that growth came from new store openings. Comparable store sales decreased 2.6%; operating income and margins decreased. Earnings per share remained relatively flat largely because of share repurchases. Dave & Buster’s 10-K filing is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1525769/000119312520098060/d832311d10k.htm#tx832311_3

Classroom Application: This article may be used to discuss a form of audit report. The audit report as well includes other explanatory paragraphs including critical audit matters. The report can be located by accessing the Table of Contents (click on the link in the upper left corner), Click on Item 15, Exhibits and Financial Statement Schedules, then scroll to page 43, Report of Independent Registered Public Accounting Firm. The MD&A also discusses the going concern assumption.

Questions:

·        What is the reason behind issuing a “going concern audit report”? Who issues the report?

·        As stated in the article, going concern opinions are typically issued when a company files its annual report. Why would that be the case, rather than in association with a quarterly report? Is this a requirement for issuing a going concern report? Explain your answer.

·        Access the Dave & Buster’s 10-K filing with the U.S. Securities and Exchange Commission at https://www.sec.gov/ix?doc=/Archives/edgar/data/1525769/000119312520098060/d832311d10k.htm#tx832311_3 Access the Table of Contents (click on the link in the upper left corner), Click on Item 15, Exhibits and Financial Statement Schedules, then scroll to page 43, Report of Independent Registered Public Accounting Firm. Describe the audit report: how is the “going concern opinion” presented? What other explanatory paragraph(s) is(are) included?

·        Refer again to the Dave & Buster’s 10-K filing, the associated auditors report, and the company’s financial statements in the filing. What was is the date on the audit report? What was the company’s financial performance during the period of the financial statements?

·        Refer again to the factors discussed in your answer to the question above. Given these factors, why does the company receive a going concern audit opinion?

Read the Article

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

 

"Going-Concern Opinions May Be Poised for a Comeback," by Mark Maurer, The Wall Street Journal, May 6, 2020
https://www.wsj.com/articles/going-concern-opinions-may-be-poised-for-a-comeback-11588799231

Auditors may be issuing more of the notices, which serve as red flags on a company’s viability.

Companies should expect auditors to look more closely at their ability to remain going concerns, even if their recent annual reports gave a healthier impression.

The number of going-concern filings, which can flag survival problems at a company, is currently at a 10-year low, according to the research firm Audit Analytics. Just 20 companies had received going-concern audit opinions as of May 3 this year, based on the end of the company’s fiscal year, down from 41 in 2019 thus far.

Those warnings on a company’s likelihood to remain in business for the next 12 months are typically made when it files its annual report. But this year at many companies that financial assessment may have occurred before the coronavirus laid waste to the economy.

Among this year’s going-concern opinions was that of Dave & Buster’s Entertainment Inc., which was filed in April and included the company’s liquidity problems and low revenues due to coronavirus. In March, the company temporarily closed all 137 of its locations as consumers sheltered at home.

This year’s going-concern figures are incomplete, and the full extent of the pandemic’s impact will not be clear until sometime next year, said Don Whalen, general counsel and director of research at Audit Analytics.

“By trying to count the going-concerns, we’re just not getting a real indication of the picture yet,” Mr. Whalen said. “We’re in the middle of it.”

Auditors will be more skeptical of companies’ modeling of future cash flows, said Michael Shaub, an accounting professor at Texas A&M University’s Mays Business School.

“This is going to wipe out a lot of those companies sitting around on the precipice,” Mr. Shaub said.

Since 2017, all companies have been required under U.S. accounting rules to evaluate going-concern assumptions. Public companies can disclose going-concern issues in any filing at any time, upon discovery.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 15, 2020 2020

Coronavirus Pushes Mayo Clinic to Revisit Its Accounting Practices

By Mark Maurer | May 11, 2020

Topics: Medical Supplies , Expense , Inventory Accounting

Summary: “As the Mayo Clinic was rolling out its response to the coronavirus pandemic, its finance team was trying to figure out how best to classify a reserve of masks and gloves: expense or inventory?” The Mayo Clinic’s CFO Dennis Dahlen points out that improvements needed in accounting systems may become more evident during times of extreme change. “The pandemic has allowed health-care systems to take a step back and review their accounting systems and how they measure performance and costs…When they make those changes, those changes are here to stay,” said Bill Tayer, accounting professor at Brigham Young University.

Classroom Application: The article may be used in a financial or managerial accounting course discussing policies of expense versus inventory of supplies. An additional managerial accounting topic discussed in the article is the cost allocation of employee benefits based on employee hours that appears to be an activity-based costing issue.

Questions:

·        Refer to the first sentence in the article about the Mayo Clinic deciding how best to classify masks and gloves, as expense or inventory. Why is this decision-making required? Don’t accounting standards state what must be expensed and what may be shown as an asset?

·        How was the Mayo Clinic’s accounting policy for incoming masks and other protective gear decided?

·        On what basis did the Mayo Clinic change this accounting policy? Do you think the change will have a material impact on the Mayo Clinic's financial reports for 2020? Explain your answer.

·        Describe activity-based costing: summarize its purpose and provide a brief description of the mechanics of using this system.

·        Consider the Mayo Clinic also “looking to revamp the way it accounts for employee benefits.” How is the description provided in the article similar to your description of activity-based costing?

·        What problem has arisen during the Covid-19 outbreak that significantly impacts the accounting system for employee benefits?

Read the Article

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

 

"Coronavirus Pushes Mayo Clinic to Revisit Its Accounting Practices By Mark Maurer | May 11, 2020 , The Wall Street Journal,
https://www.wsj.com/articles/inventory-or-expense-coronavirus-pushes-mayo-clinic-to-revisit-its-accounting-practices-11589241631

Stockpiles of protective equipment and other necessities have raised new questions

As the Mayo Clinic was rolling out its response to the coronavirus pandemic, its finance team was trying to figure out how best to classify a reserve of masks and gloves: expense or inventory?

That question, among others, has prompted the nonprofit hospital system to overhaul the way it accounts for everything from inventory to labor costs and other expenses.

The fluctuations in Mayo’s revenue and expenses in recent months exposed shortcomings in the way crucial equipment was recorded and recognized on financial statements, said Chief Financial Officer Dennis Dahlen.

“You don’t always see the timing of recognition of revenue and expense when it’s relatively stable,” he said. “It’s a great opportunity to diagnose the causes of the issues and retool for greater precision going forward.”

The Mayo Clinic, based in Rochester, Minn., was projecting a $3 billion drop in revenue for the year, in part due to the deferral of elective care at its facilities nationwide, according to a financial disclosure made in April. Revenue totalled $13.8 billion in 2019. But Mr. Dahlen said the outlook for 2020 has materially improved, in part because social distancing has lowered the number of projected Covid-19 cases, and because more states are allowing a resumption of elective procedures.

As hospitals across the country try to offset falling revenues as their spending on supplies soars, finance chiefs are making sweeping changes to reduce costs and streamline financial operations.

The pandemic has allowed health-care systems to take a step back and review their accounting systems and how they measure performance and costs, said Bill Tayler, an accounting professor at Brigham Young University in Provo, Utah. “When they make those changes, those changes are here to stay,” he said.

The Mayo Clinic ran into the question of how to account for protective gear after it purchased a stockpile in late February to early March. Previously, the hospital system had recognized gear as inventory if it was stored in a warehouse; if the gear were kept at a clinical facility or on a hospital floor, it would be recognized as an expense. Faced with the pandemic, the clinic had no choice but to keep the gear close to its medical staff.

“These weren’t expenses,” Mr. Dahlen said, adding that such equipment should be considered inventory even if it weren’t in a warehouse. “They shouldn’t have been expensed.” The finance team began reclassifying the gear as inventory instead of expenses, he said.

The Mayo Clinic also is looking to revamp the way it accounts for employee benefits after it furloughed thousands of workers in April. It reduced the hours of 23,000 employees, some of whom were fully furloughed for a limited period, while others were partly furloughed for the rest of the year, Mr. Dahlen said. The nonprofit uses a pooled-allocation approach, in which it gathers all costs associated with health care, retirement and disability into one cost pool and allocates those costs per employee based on a specific tool for tracking cost reductions.

In this model, when workers are furloughed, it is difficult to track where the benefit reduction or benefit load for an employee is going to go, Mr. Dahlen said.

To reduce accounting imprecisions, Mayo is looking into reinstituting an approach that would tie costs directly to each employee.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 15, 2020 2020

Less Traffic Isn’t Doing America’s Roads Any Favor

By Jinjoo Lee | May 6, 2020

Topics: Governmental Accounting

Summary: More than one observer—including President Trump himself—has noted that America’s coronavirus lockdowns are an ideal time to fix the roads. However, the drop in fuel tax revenues and roadway usage tolls during the Covid-19 pandemic means those funding sources are not available for infrastructure repair. “State departments of transportation are projecting at least a 30% decline in transportation revenues on average for the next 18 months.” Federal government help to alleviate the problem is uncertain and, if passed, may not make up fully for the shortfall. A related issue is that companies such as Martin Marietta, Vulcan Materials, and engineering firms have withdrawn management guidance about performance during the rest of 2020 due to uncertainty.

Classroom Application: The article may be used in a governmental accounting course to cover the funding intricacies of usage-based taxation and federal versus state and local government programs.

Questions:

·        What is fuel tax revenue? What entities receive fuel tax revenues?

·        How are fuel taxes as well as highway tolls used by governmental entities?

·        How are fuel tax revenues determined? What has happened to those amounts during the Covid-19 outbreak?

·        Why is the situation with transportation revenues particularly problematic during this Covid-19 outbreak?

·        What options do governmental entities have to resolve this issue surrounding transportation revenues and infrastructure?

Read the Article

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

 

"Less Traffic Isn’t Doing America’s Roads Any Favor," by Jinjoo Lee, The Wall Street Journal, May 6, 2020
https://www.wsj.com/articles/less-traffic-isnt-doing-americas-roads-any-favors-11588762800

The expected shortfall in fuel-tax revenue doesn’t bode well for companies that supply and build roads

More than one observer—including President Trump himself—has noted that America’s coronavirus lockdowns are an ideal time to fix the roads. It would be killing two birds with one stone: avoiding traffic jams and providing jobs during a surge in unemployment. Sadly, the exact opposite might happen in many states, punishing private-sector companies.

Infrastructure is typically a reliable source of business for companies like Martin Marietta and Vulcan Materials, which provide construction materials like cement, asphalt and gravel, as well as engineering firms like AECOM and Jacobs Engineering. That could be less of a certainty for some time as losses in fuel-tax revenue hit state and federal budgets.

After recording its most profitable year in 2019, Martin Marietta on Tuesday withdrew full-year guidance, paused share repurchases and reduced its estimate for annual capital expenditures by up to 32%, bracing for potential impact. Infrastructure is the largest user of Martin Marietta’s aggregates—materials like sand and gravel—on a dollar-for-dollar basis, and the company had been counting on healthy state budgets to deliver more business this year. Its chief executive remained optimistic about the possibility of government intervention and said infrastructure is still its most resilient segment.

While it is known that government revenue is taking a big hit from the economic downturn, the impact on infrastructure spending is more immediate and direct: Miles driven and gallons pumped are what drive funding through fixed taxes. The week ending April 3 saw the lowest motor gasoline consumption—measured as product supplied—since the U.S. Energy Information Administration started tracking that number in 1991.

State departments of transportation are projecting at least a 30% decline in transportation revenues on average for the next 18 months, according to the American Association of State Highway and Transportation Officials, or AASHTO. That funding shortfall could last a while.

Take North Carolina, one of the top 10 states for Martin Marietta’s business. During the course of the 2008 recession, North Carolina’s Department of Transportation revenue fell 6.5%, and it took the state almost five years to take that number back to prerecession levels. This quarter alone, its revenue is projected to drop by up to 36%, translating to a full-year reduction of up to 10%. Over the next 12 months, the state is putting off roughly 250 projects estimated at $2.1 billion and only continuing work on 50 major ones.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 22, 2020 2020

Companies Start Reaping Billions in Tax Breaks to Help Ride Out Slump

 By Richard Rubin Theo Francis | May 13, 2020

 

Topics: Net Operating Losses , Deferred Taxes

Summary: The article discusses analysis of income tax disclosures to observe the choices made by public companies taking advantage of the tax breaks enacted in March 2020 in the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). “So far, more than 50 publicly traded companies have disclosed tax savings and deferrals totaling at least $2.8 billion, according to securities filings." The 10-Q filing for Chipotle Mexican Grill Inc., is available at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1058090&accession_number=0001058090-20-000020&xbrl_type=v# Note 7, Income Taxes, states that the company has elected to defer the employer-paid portion of social security taxes and to accelerate depreciation for tax purposes. “These accelerated tax depreciation expenses of $32,256…represent temporary book-to-tax timing differences...recorded as components within… deferred income tax liabilities….”

Classroom Application: The article may be used when teaching the topic of deferred tax assets and net operating loss (NOL) carryback and carryforward. NOL carrybacks had been limited to only certain industries but under the CARES Act are now broadly allowed to provide cash relief from the economic impacts of the Covid-19 pandemic. Valero Energy Corp. discloses that a $110 million portion of its $616 million reported income tax benefit relates to an expected carryback to 2015 income tax year in which the company paid federal income taxes at 35%. The filing is available at https://www.sec.gov/cgi-bin/viewer?action=view&cik=1035002&accession_number=0001035002-20-000016&xbrl_type=v#

Questions:

·        What are deferred tax assets and liabilities?

·        Why are disclosures about deferred taxes useful to identify the ways in which publicly-traded companies are taking advantage of economic relief provided through the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)?

·        Chipotle Mexican Grill, Inc., takes advantage of accelerated depreciation under the CARES Act. How does accelerating depreciation impact the Chipotle tax return? Does it also impact the depreciation expense reported on Chipotle’s income statement? Explain your answer.

·        Chipotle Mexican Grill reports that it will take additional accelerated depreciation expenses of $32,256,000 during the first quarter of 2020. At a federal income tax rate of 21%, how will the deferred tax impact of these accelerated depreciation charges be recorded?

·        What are net operating loss (NOL) carrybacks and carryforwards? Define each and explain how changing income tax rates impact the income tax benefits and refunds received by corporations.

·        How does the NOL carryback introduced in the CARES Act allow companies a greater benefit than would a carryforward of net operating losses experienced during the Covid-19 pandemic?

Read the Article

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

 

"Companies Start Reaping Billions in Tax Breaks to Help Ride Out Slump," by Richard Rubin and Theo Francis, The Wall Street Journal, May 13, 2020
https://www.wsj.com/articles/companies-start-reaping-billions-in-tax-breaks-to-ride-out-economic-slump-11589362202

Oil refiners, restaurant operators count on cushion from tax deferrals and breaks in March coronavirus relief package

WASHINGTON—New tax breaks expected to total about $650 billion are starting to flow to U.S. businesses, giving them quick cash and longer-term help to ride out the coronavirus-induced economic downturn.

Companies reporting tax deferrals or benefits exceeding $100 million each include fast-casual chain Chipotle Mexican Grill Inc., CMG 2.82% Walt Disney Co., American Airlines Group Inc. AAL -1.92% and oil refiners Valero Energy Corp. VLO -0.08% and Marathon Petroleum Corp. MPC -0.34%

So far, more than 50 publicly traded companies have disclosed tax savings and deferrals totaling at least $2.8 billion, according to securities filings. Money is also going to private companies that don’t report earnings.

“Depending on the company, the provisions can be really meaningful in getting them to the other side of this,” said Manal Corwin, principal-in-charge of KPMG LLP’s Washington tax practice.

The tax breaks, enacted in March, are a crucial piece of the government’s attempt to prop up businesses during the coronavirus pandemic, alongside Federal Reserve lending and the Small Business Administration’s loan-forgiveness program.

“They’re tinkering with the levers they have to get cash into the pockets of businesses, with the exception of just outright handing cash to them,” said David Hasen, who teaches tax law at the University of Florida.

Some other programs spurred controversy over eligibility and over what conditions should be attached to federal money. Companies including AutoNation Inc. and Shake Shack Inc. returned federal money following lawmakers’ concerns about public companies getting money aimed for small businesses.

Generally applicable tax provisions are different. They aren’t limited by an application process, a dollar cap or specific agency approvals. Instead, they are available broadly to companies meeting the criteria in the law, and they are designed to generate cash quickly.

Oil-industry companies get money from the tax system while policy makers debate whether they should get lending support. Airlines can get tax refunds on top of grants from a separate Treasury Department program.

In all, businesses are likely to get about $650 billion in tax cuts, accelerated deductions and deferred payments in 2020 and 2021, according to the Joint Committee on Taxation. The net cost will shrink over time as deferred payments are made and companies use deductions now instead of in the future.

Many companies told investors that they are still analyzing the provisions; they may disclose more details later this year. Some may only realize tax-break benefits as they book 2020 losses that make them eligible.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 22, 2020 2020

Banks Are Only as Sound as Their Models

By Rochelle Toplensky | May 14, 2020

Topics: Loan Loss Allowance , Accounting For Investments , Fair Value Accounting

Summary: The article discusses the challenges facing banks using financial models for valuation during this Covid-19 pandemic. In recent first-quarter results, lenders used widely differing approaches and assumptions about the coming months to make estimates. The only consensus seems to be that “…it is still too early to know how this crisis will play out. That is understandable….but it also increases the risk that those complicated models get it wrong, with real-world consequences for investors.”

Classroom Application: The article may be used to discuss fair value reporting of Level III investments and loan loss estimates—particularly the use of historical results in making those estimates in light of the economic impact of the Covid-19 pandemic.

Questions:

·        What two types of assets reported on bank balance sheets are discussed in this article?

·        What are Level 3 assets?

·        Why must banks rely on financial models to make estimates that are critical to accounting for these entities? Explain your understanding of the use of models for both types of assets.

·        Why is the economic impact of Covid-19 impacting the estimation process so significantly as to warrant the discussion in this article?

·        Why does the author argue that audits by banking regulators and external auditors are “little comfort” under current circumstances?

Read the Article

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

 

"Banks Are Only as Sound as Their Models," by Rochelle Toplensky, The Wall Street Journal, May 14, 2020
https://www.wsj.com/articles/banks-are-only-as-sound-as-their-models-11589449375

The unprecedented nature of today’s economic shutdowns make it hard for lenders to update the complex models at the core of their business

Unprecedented is an overused word of late, but it does precisely capture a key challenge for banks: How to update the models at the heart of their businesses, given widespread economic uncertainty and a dearth of relevant historical data. In recent first-quarter results, lenders used widely differing approaches and assumptions about the coming months to estimate loan losses. The only consensus:

 

It is still too early to know how this crisis will play out. That is understandable, given how little clarity there is about the path to recovery, with expectations shifting almost daily. But it also increases the risk that those complicated models get it wrong, with real-world consequences for investors.

Loan-loss estimates in particular are sizable and uncertain. The six largest U.S. lenders set aside over $25 billion for loan losses in recent results, which seems little more than a first guess and will likely rise. Major British banks estimated their losses at £7.5 billion ($9.2 billion) in the first quarter, but the full year hit could be as much as £18.5 billion, according to S&P Global Market Intelligence.

Banks also routinely revalue their financial instruments, and those that aren’t widely traded—so called Level 3 assets—are priced using internal estimates. The big U.S. and European banks have reduced their Level 3 holdings by 27% in the past five years, according to brokerage Berenberg, but some, particularly in Europe, still have a lot of these opaque assets on their books relative to their capital buffers.

Models—used not just to estimate loan losses but also to value little-traded assets and design, price and assess the risk of products—are crucial to a bank’s financial position and health. U.S. and European banks have relatively strong balance sheets and buffers for now, but they are still giant leverage machines, carefully calibrating their risks and capital levels to boost returns. Depending on how they are calculated, estimated loan losses or asset revaluations could easily eat into those buffers.

Continued in article


Teaching Case From The Wall Street Journal Weekly Accounting Review on May 22, 2020 2020

 Don’t Be Spooked by Walmart’s Rising Costs

Topics: Financial Statement Analysis , Profitability , Sales Mix

Summary: The article discusses the author’s assessment of WalMart’s performance during the Covid-19 outbreak as evidenced by comparison of each major income statement item reported in the first quarter of 2020 to the comparable period in 2019. Forecasts of continuing impact of Covid-19 related sales practices and costs also are discussed.

Classroom Application: The article can be used in an introductory level financial reporting class to discuss the importance of analyzing components of the income statement: sales revenues, gross profit, operating income, and net income. The managerial accounting topic of sales mix also is discussed.

Questions:

·        Define the terms revenues, gross profit (or gross margin), operating income, and net income.

·        How are these components of the income statement used to analyze the operating performance achieved by WalMart during the first quarter of 2020 as it coped with the impacts of Covid-19?

·        What is the conclusion reached by the author after considering this analysis of WalMart’s income statement items?

·        What is sales-mix? How is it important to profitability?

·        How did Covid-19 pandemic affect WalMart’s sales mix?

Read the Article

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

 

"Don’t Be Spooked by Walmart’s Rising Costs," by Jinjoo Lee, The Wall Street Journal, May 19, 2020
https://www.wsj.com/articles/dont-be-spooked-by-walmarts-rising-costs-11589907321

Walmart’s e-commerce sales grew by 74% year-over-year in the fiscal first quarter, which ended April 30.

Walmart WMT -0.53% tries to live by its twin mottoes of Everyday Low Prices and Everyday Low Costs. The latter has been a challenge, but investors should take it in stride.

The retailer reported Tuesday that total revenue jumped to $134.6 billion for the fiscal first quarter, which ended April 30—an 8.6% increase compared with a year earlier. Both its top and bottom lines exceeded analysts’ expectations. Of particular note was Walmart’s e-commerce sales, which grew by 74% year-over-year—a substantial acceleration from the previous quarter’s pace of 35%. Walmart shares gave back early gains and fell by 2% on Tuesday.

Investors might be wary of Walmart’s cost of sales, which grew 9.7%, also topping estimates and putting a damper on operating income growth. Walmart said Covid-19 related costs—increased wages, benefits and heightened sanitation measures—added up to nearly $900 million during the quarter. The shift to e-commerce already had been a drag on profitability even before the pandemic. The company also said gross margins were negatively affected by a shift to sales in lower-margin categories such as groceries and consumables.

One obvious solution to the margin problem is to simply sell more, as Walmart U.S. Chief Executive Officer John Furner pointed out on the retailer’s last earnings call. Revenue was on a steady growth trajectory well before the pandemic; the sudden e-commerce boost is already having an effect on operating income, which grew by 5.6% in the first quarter compared with a year earlier after the previous quarter saw a 12.3% year-over-year drop. Evercore ISI estimates that Walmart’s operating margin will rise in the next two to four years as grocery pickup turns profitable.

 

Since mid-March there has been a fourfold increase in new customers for pickup and delivery, and Walmart has seen indications that those customers are returning. A customer who shops in both the physical store and through the Walmart app or website spends twice as much as a customer who shops in stores only, the company said during its last earnings call.

Continued in article




Humor for May 2020

This Hilarious Walmart Deli Employee Drives His Bosses Crazy In the Most Creative Way Possible ---
https://twentytwowords.com/this-hilarious-walmart-deli-employee-drives-his-bosses-crazy-in-the-most-creative-way-possible/?utm_source=deck&utm_medium=cpc&utm_term=influencer&utm_campaign=dm64


Brothers allowed black widow to sting them believing they'd turn into Spider-Man ---
https://www.foxnews.com/world/bolivian-brothers-believing-they-would-become-spiderman-get-stung-by-dangerous-spider-report


Forwarded by Glen Gray

Jay Leno, of the Tonight Show, would visit college graduations and ask students questions. The answers were funny or sad depending on point of view regarding education. For example, who were we fighting in WWII and who was our ally? Answer: fighting Russia; ally was Germany. In what war did John McCain fight in? Answer: Civil war. How many moons circle the earth? 2.

I was thinking about those kinds of answers when I was watching the Late, Late Show last night. James Cordon, the host, had 16 people in a Zoom meeting. He asked each of them a different question. If they had less than 3 wrong answers, they would each win $100. They did end up with three wrong answers. One question was who was the actress in Pretty Woman? The person couldn’t remember the actress’ last name. That’s ok, maybe the guy didn’t watch movies. I didn’t know Lady Ga Ga’s real name. But the other two questions they missed were sad.

 The 16 people were in their 20s. The other two questions they missed were: What is the name of the Queen of England? The person didn’t have a clue. The second question was: Name one of the two houses of congress? The person said: Republicans.

Forwarded by Auntie Bev

Nostalgic 1950’s Memories ---
https://biggeekdad.com/2015/05/1950s-memories/

 


From Auntie Bev and Paula (with a few added by Bob)

You're not hungry, you're bored --- Shut the refrigerator door

I finished three books yesterday --- that's a lot of coloring
I'm working my way up to painting by the numbers

Darn, my house got TP'd and my property taxes jumped upward

How much longer will TP last if you put it in the freezer?

This is the longest something made in China ever lasted

Imagine surviving unprotected sex and then dying from a handshake

Home invasions are on the decline, because everybody is home with guns and enough bleach and toilet paper to clean up the scene

If you resort to cannibalism during the lockdown, remember vegans are grass fed

After a week of lockdown I saw a mom outside scraping off a bumper sticker reading "My kid's an honor student"

Police are worried that an activist will start a riot by throwing out a roll of toilet paper or package of condoms in a Walmart parking lot

President Trump does not need a face mask, but there's a great need for duck tape

The world will end when people wipe themselves out with all that toilet paper

Why is it that the Tofu never needs restocking in the supermarket?

My body's absorbed so much soap and disinfectant that I can pee and clean the toilet at the same time

Dogs that will sit and stay are better trained than teenagers

Does Hooters offer home delivery during this pandemic?

Laughter's contagious but it still needs a stimulus


Forwarded by Tina

I need to practice social-distancing from the refrigerator.

Still haven't decided where to go for Easter ----- The Living Room or The Bedroom

PSA: every few days try your jeans on just to make sure they fit. Pajamas will have you believe all is well in the kingdom.

Homeschooling is going well. 2 students suspended for fighting and 1 teacher fired for drinking on the job.

I don't think anyone expected that when we changed the clocks we'd go from Standard Time to the Twilight Zone

This morning I saw a neighbor talking to her cat. It was obvious she thought her cat understood her. I came into my house, told my dog..... we laughed a lot.

So, after this quarantine.....will the producers of My 600 Pound Life just find me or do I find them?

Quarantine Day 5: Went to this restaurant called THE KITCHEN. You have to gather all the ingredients and make your own meal. I have no clue how this place is still in business.

My body has absorbed so much soap and disinfectant lately that when I pee it cleans the toilet.

Day 5 of Homeschooling: One of these little monsters called in a bomb threat.

I'm so excited --- it's time to take out the garbage. What should I wear?

I hope the weather is good tomorrow for my trip to Puerto Backyarda. I'm getting tired of Los Livingroom.

Classified Ad: Single man with toilet paper seeks woman with hand sanitizer for good clean fun.

Day 6 of Homeschooling: My child just said "I hope I don't have the same teacher next year".... I'm offended.

Better 6 feet apart than 6 feet under

 


Forwarded by Paula Ward

GREAT TRUTHS THAT LITTLE CHILDREN HAVE LEARNED:
1) No matter how hard you try, you can't baptize cats..
2) When your Mom is mad at your Dad, don't let her brush your hair.
3) If your sister hits you, don't hit her back. They always Catch the second person.
4) Never ask your 3-year old brother to hold a tomato.
5) You can't trust dogs to watch your food..
6) Don't sneeze when someone is cutting your hair..
7) Never hold a Dust-Buster and a cat at the same time.
8) You can't hide a piece of broccoli in a glass of milk.
9) Don't wear polka-dot underwear under white shorts.
10) The best place to be when you're sad is Grandma's lap

GREAT TRUTHS THAT ADULTS HAVE LEARNED:
1) Raising teenagers is like nailing Jello to a tree.
2) Wrinkles don't hurt.
3) Families are like fudge...mostly sweet, with a few nuts.
4) Today's mighty oak is just yesterday's nut that held its ground.
5) Laughing is good exercise. It's like jogging on the inside.
6) Middle age is when you choose your cereal for the fiber, not the toy.

THE FOUR STAGES OF LIFE:
1) You believe in Santa Claus.
2) You don't believe in Santa Claus.
3) You are Santa Claus.
4) You look like Santa Claus.

GREAT TRUTHS ABOUT GROWING OLD
1) Growing old is mandatory; growing up is optional.
2) Forget the health food.. I need all the preservatives I can get.
3) When you fall down, you wonder what else you can do while you're down there.
4) You're getting old when you get the same sensation from a rocking chair that you once got from a roller coaster.
5) It's frustrating when you know all the answers but nobody bothers to ask you the questions.
6) Time may be a great healer, but it's a lousy beautician.
7) Wisdom comes with age, but sometimes age comes alone.

SUCCESS:
At age 4 success is   . . . Not piddling in your pants.
At age 12 success is . . . Having friends.
At age 17 success is . . . Having a driver's license.
At age 35 success is . . . Having money.
At age 50 success is . . . Having much more money.
At age 70 success is . ..  Having a driver’s license.
At age 75 success is . ... Having friends.
At age 80 success is . . . N
ot piddling in your pants.

A 100-Year-Old Says His Secret to a Long Life Is Putting Two Cherries in his Manhattan ---
https://www.ksbw.com/article/man-celebrates-100th-birthday-1586688527/32118142


Florida man put COVID-19 warning sign on his door to avoid arrest, police say (---
https://www.foxnews.com/health/florida-man-covid-19-warning-sign-on-door-avoid-arrest-police-say
He probably also has measles, smallpox, polio, and tuberculosis


Act of Magic Link Forwarded by Paula ---
https://1funny.com/amazing-heartwarming-magic/


Thank you Tina ---
https://1funny.com/jonathan-winters-accidentally-glued-his-cat-to-the-floor/


Forwarded by Paula

One Theory:  Why were space shuttles and railroads built for horses asses?

The U.S. Standard railroad gauge (distance between the rails) is 4 feet, 8.5 inches. That's an exceedingly odd number.

Why was that gauge used?
Because that's the way they built them in England, and English expatriates designed the U.S. Railroads.

Why did the English build them like that?
Because the first rail lines were built by the same people who built the pre-railroad tramways, and that's the gauge they used.

Why did 'they' use that gauge then?
Because the people who built the tram ways used the same jigs and tools that they had used for building wagons, which used that wheel spacing.

You can read about horses asses and space shuttles at
https://aviationhumor.net/the-us-standard-railroad-gauge-is-4-feet-8-5-inches/


Forwarded by Ned Wilson

It is a slow day in the small Saskatchewan town of Pumphandle, and streets are deserted.   Times are tough, everybody is in debt, and everybody is living on credit.
 
A tourist visiting the area drives through town, stops at the motel and lays a $100 bill on the desk, saying he wants to inspect the rooms upstairs to pick one for the night. As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
 
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
 
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
 
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
 
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
 
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.  At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.
No one produced anything. No one earned anything.  However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And that, ladies and gentlemen, is how a "Stimulus Package" works. ��

Forwarded by Auntie Bev

Imagine in 2010 -- 10 years ago -- you were approached by a time traveler and he said, "Look, I don't have much time to explain. All I can tell you is that the year 2020 is going to be wild as heck! You know Donald Trump, the star of 'The Apprentice'? Well he's the President of the United States and at the beginning of 2020 he gets into a Twitter beef with Iran that almost starts World War III. Australia catches fire and a woman tries to save it by selling pictures of her boobs. Kobe Bryant dies in a helicopter crash. Half the world is devastated and the other half just makes really wretched memes. Tom Brady leaves the Patriots to play for the Buccaneers and, just when the world starts recovering from the loss of Kobe, some dude in China eats a freakin' bat and starts a global pandemic that specifically kills old people and asthmatics. Everyone loses their minds. Forty percent of the population thinks it's the end of the world, another 40% thinks it's all fake, and 20% blames the whole thing on cell phone towers. The one thing everyone seems to agree on is that the only way to survive is by hoarding toilet paper. Grocery stores are ransacked and Charmin Ultra Soft essentially replaces the dollar as the United States official currency. Eventually, as hysteria grows, world governments are forced to shut the entire planet down and lock everyone in their houses and ... then there is the hit show 'Tiger King' starring a homosexual gun-toting Oklahoma man with two husbands, a meth addiction, and 223 pet tigers ..."

Jensen Comment
It will get worse ---like when you trade your Rolex watch for a pound of bacon

Folks from Michigan are flying to New Hampshire for tomato plant seedlings

Folks from Pennsylvania are cleaning out the New Hampshire liquor stores

Over 7,000 homeless in San Francisco are now staying in hotels that charge over $1,200 per night for each room. They're also getting free WiFi, free movies, free medical care, and room service meals three times a day (seriously).

Forwarded by Auntie Bev

The world has turned upside down. Old folks are sneaking out of the house, and their kids are yelling at them to stay indoors!

You think it’s bad now? In 20 years our country will be run by people home schooled by day drinkers…

This virus has done what no woman had been able to do…cancel all sports, shut down all bars, and keep men at home!!!

Do not call the police on suspicious people in your neighborhood! Those are your neighbors without makeup and hair extensions!

Since we can’t eat out, now’s the perfect time to eat better, get fit, and stay healthy. We’re quarantined! Who are we trying to impress? We have snacks, we have sweatpants – I say we use them!

Day 7 at home and the dog is looking at me like, “See? This is why I chew the furniture!”

Does anyone know if we can take showers yet or should we just keep washing our hands???

I never thought the comment “I wouldn’t touch him/her with a 6 foot pole” would become a national policy, but here we are!

Me: Alexa what’s the weather this weekend? Alexa: It doesn’t matter – you’re not going anywhere.

Can everyone please just follow the government instructions so we can knock out this coronavirus and be done?! I feel like a kindergartner who keeps losing more recess time because one or two kids can’t follow directions.

I swear my fridge just said “what the hell do you want now?”

When this is over…what meeting do I attend first…Weight Watchers or AA?

Quarantine has turned us into dogs. We roam the house all day looking for food. We are told “no” if we get too close to strangers. And we get really excited about CAR RIDES.

I was so bored I called Jake from State Farm just to talk to someone. He asked me what I was wearing...

2019: Stay away from negative people. 2020: Stay away from positive people.


Pandemic Discoveries forwarded by Tina

The kids are begging to go to a restaurant because they're tired of eating groceries.

The grandparents missing their grandchildren will probably get them for months once the lockdown is lifted.

Cops outside an apartment with their guns drawn:  "Come out with your hands washed!"

The Powerball Lottery is now up to 100 rolls of Charmin

Dolly Parton:  "Honey when this is over you'll be begging for Joline to take your man."

While removing masks at home after shopping, one wife discovered she came home with the wrong hubby.


Forwarded by Auntie Bev

The INS will announce next month that senior citizens will be deported instead of illegal immigrants
Older people require a disproportionate share of Social Security support, Medicare, and Medicaid. Also they're easier to catch and will not remember how to get back to the USA
Sounds like a good plan

Did you know that on the Canary Islands there's not one canary
The same with the Virgin Islands --- not one canary

Did you know that in Heaven there's a viewer the shows beneath the clouds
It's dedicated for viewing your ex-spouse in Hell

At Age 20 when you drop something you pick it up
At Age 80 when you drop something you decide you don't need it anymore

When you're dead you don't know it; The pain is felt by others still living
The same thing happens when you're stupid

If your eyes hurt while drinking coffee
Think about taking the spoon out of the cup

Conversation starters for old people
"Did I tell you this already?"
"What was I going to say?"

Golf:  The adult version of an Easter egg hunt

Recommended:  Replace answering "Hello" with the following:

We're too broke to buy anything
We know who we're voting for
We've already found Jesus
We don't have a computer or a credit card
Unless we know you, please don't call back

The purpose of your little toe is to keep furniture in its place

Thought of a dog in the park
She loves me enough to pick up my poop in a flimsy glove
I'm not standing six feet away because of the coronavirus

If you buy smart water for $3 a bottle
It's not working

Anything can kill you
So choose something fun


Pandemic Discoveries forwarded by Tina

The kids are begging to go to a restaurant because they're tired of eating groceries.

The grandparents missing their grandchildren will probably get them for months once the lockdown is lifted.

Cops outside an apartment with their guns drawn:  "Come out with your hands washed!"

The Powerball Lottery is now up to 100 rolls of Charmin

Dolly Parton:  "Honey when this is over you'll be begging for Joline to take your man."

While removing masks at home after shopping, one wife discovered she came home with the wrong hubby.


Guess what Bob Jensen saw while coming home from the grocery store
Two little kids were behind a card table set up beside the street
The sign read:

Unused Toilet Paper
$.10 per sheet
12 sheets for a a$1 bill
We don't know how to make change


Forwarded by Auntie Bev

A female CNN journalist heard about a very old Jewish man who had been going to the Western Wall to pray, twice a day, every day, for a long, long time.

So she went to check it out.

She went to the Western Wall and there he was, walking slowly up to the holy site.

She watched him pray and after about 45 minutes, when he turned to leave, using a cane and moving very slowly, she approached him for an interview.

"Pardon me, sir, I'm Rebecca Smith from CNN. What's your name?

"Morris Feinberg," he replied.

"Sir, how long have you been coming to the Western Wall and praying?"

"For about 60 years."

"60 years! That's amazing! What do you pray for?"

"I pray for peace between the Christians, Jews and the Muslims."

"I pray for all the wars and all the hatred to stop."

"I pray for all our children to grow up safely as responsible adults and to love their fellow man."

"I pray that politicians tell us the truth and put the interests of the people ahead of their own interests."

"How do you feel after doing this for 60 years?"

"Like I'm talking to a f**king wall."

 




Humor May 2020 --- http://faculty.trinity.edu/rjensen/book20q2.htm#Humor0520.htm

Humor April 2020 --- http://faculty.trinity.edu/rjensen/book20q1.htm#Humor0420.htm 

 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 May 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

 

 

 

April 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




Pandemic-specific guidance for auditors and preparers ---
https://www.journalofaccountancy.com/podcast/coronavirus-guidance-for-auditors-and-financial-statement-preparers.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Apr2020

AICPA posts 20 FAQs on tax filing relief ---
https://www.journalofaccountancy.com/news/2020/apr/tax-filing-relief-faqs-coronavirus-pandemic.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Apr2020

Coronavirus (COVID-19) tax resources ---
https://www.aicpa.org/interestareas/tax/covid19.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Apr2020


Law schools build reputations on specialty programs more than accountancy schools. This, in part, is what three years of post-graduate studies can do in terms of specialization ---
https://taxprof.typepad.com/taxprof_blog/2020/04/2021-us-news-specialty-rankings.html

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.


Primer On How To Navigate The Recovery Rebate This Time ---
https://taxprof.typepad.com/taxprof_blog/2020/04/primer-on-how-to-navigate-the-recovery-rebate-this-time.html


Is it still the happiest place on earth? Disney, likely bracing for a lengthy shutdown, will cease paying 100,000 of its park employees this week, leaving them to rely on state aid instead ---
https://www.ozy.com/presidential-daily-brief/pdb-310900/?utm_term=OZY&utm_source=Sailthru&utm_medium=email&utm_campaign=PDB%20%282020-04-20%2011:19:17%29#article311001

Jensen Comment
Where do we get enough food in food banks for 100,000 people.
Where do we get enough money for state aid?

USA States on Deepest Trouble for Paying Bills (your state was probably one of them before the 2020 pandemic hit) ---
https://www.data-z.org/state_data_and_comparisons/
As expenses soar in this pandemic state revenues (think sales and income taxes and property taxes) collapse

A solution is at hand. Helicopters are lining up for newly printed bundles of dollars. States will get trillions of new greenbacks.


History of Trade Deficits With China ---
https://townhall.com/columnists/terryjeffrey/2020/04/29/us-has-run-up-55-trillion-in-trade-deficits-with-china-n2567824?utm_source=thdaily&utm_medium=email&utm_campaign=nl&newsletterad=04/29/2020&bcid=b16c6f948f297f77432f990d4411617f&recip=17935167


Buyers needed for $3 trillion of US government debt ---
https://www.truthinaccounting.org/news/detail/buyers-needed-for-3-trillion-of-us-government-debt
Jensen Comment
One buyer dominates all others --- The Federal Reserve (think of it as a debtor investing in his own debt)
But the Federal Reserve is "printing money" in a limited way (QE is not like printing helicopter money)  to buy much of the debt under the fancy name of Quantitative Easing ---
https://en.wikipedia.org/wiki/Quantitative_easing

Jensen Comment
There's no disaster in quantitative easing in times of recession as long as the QA is in relatively small amounts and the money is not being used to finance the Federal deficit ---
https://www.thebalance.com/what-is-quantitative-easing-definition-and-explanation-3305881
It helps maintain investment market liquidity and prevent runs on markets where investors want to withdraw cash (think Jimmy Stewart in It's a Wonderful Life)
However, as we get into the realm of trillions of dollars these are not small amounts by any means.

There are losers even with more limited QE ---
https://www.bbc.com/news/business-15198789
Outside investors in our National Debt get hit and become less likely to roll over their investments in our National Debt, thereby making the National Debt a bigger problem

Are there any losers from QE? QE pushes up the market price of government bonds and reduces the yield, or interest rate, paid out to investors. In other words, investors have to pay more to get the same income.

If market interest rates are lower that depresses the value of a currency because it becomes less attractive to foreign investors.

The US's programme of QE also kept the value of the dollar lower than it might otherwise have been, a factor not welcomed in some emerging economies. Since the end of QE in the US and with the prospect of interest rate rises there, the dollar has regained strength.

March 16, 2020
Federal Reserve cuts rates to zero and launches massive $700 billion quantitative easing program ---
https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-to-zero-and-launches-massive-700-billion-quantitative-easing-program.html

The bottom line is that to a point QE is not as inflationary as helicopter money, but only to a point under three trillion dollars and counting ---
https://www.economicshelp.org/blog/2900/inflation/inflation-and-quantitative-easing/

See the comments at
https://www.quora.com/Does-quantitative-easing-lead-to-inflation?share=1


Even In This Bizarro World, KPMG U.K. Still Gets Fined For Bad Auditing ---
https://goingconcern.com/even-in-bizarro-world-kpmg-u-k-still-gets-fined-bad-auditing/

Bob Jensen's threads on the two faces of KPMG ---
http://faculty.trinity.edu/rjensen/fraud001.htm


CPA Exam moves to 'continuous testing' model ---
https://www.journalofaccountancy.com/news/2020/mar/cpa-exam-continuous-testing-model.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=01Apr2020


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

Coronavirus is forcing fans of Bitcoin to realize it’s not a “safe haven” after all ---
https://www.technologyreview.com/s/615385/coronavirus-is-forcing-fans-of-bitcoin-to-realize-its-not-a-safe-haven-after-all/


Going concern tips for auditors during the pandemic ---
https://www.journalofaccountancy.com/news/2020/apr/going-concern-tips-for-auditors-during-coronavirus-pandemic.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=06Apr2020


Fintech ---https://en.wikipedia.org/wiki/Financial_technology

Small Business Aid Through Fintech ---
https://marginalrevolution.com/marginalrevolution/2020/04/small-business-aid-through-fintech.html


Excel:  Ideas for data analysis in Excel ---
https://www.fm-magazine.com/news/2020/mar/excel-data-analysis-ideas-23189.html?utm_source=mnl:globalcpa&utm_medium=email&utm_campaign=15Apr2020&SubscriberID=119191126&SendID=271384


WEALTH TAXES AND CAPITAL MARKETS ---
https://poseidon01.ssrn.com/delivery.php?ID=222100088117002113065010097029102099028056019049035053126027087101126080102125004067102059037001108061038108094013116028004092006000058075009004125120002110065070046039004095008116098103127092090082001125078006028007029084075006125066098067112126073&EXT=pdf

Abstract

Wealth taxes have been adopted or considered as an adjunct to existing tax systems such as income taxes, property taxes, and consumption taxes.  Discussions about a wealth tax are usually a mixture of political, social, and economic issues, with many of the published papers designed to serve an author’s agenda. The purpose of this note is to leave many of these issues behind and to focus on the effects of a wealth tax on capital markets.

Highlights

• Wealth taxes, like any cash flow, are capitalized and incorporated into the valuation of taxed assets.  Wealth taxes may apply to many asset classes, and we will focus on wealth tax effects on stock and bond valuation.

• Because the tax is imposed annually, the valuation impact can be a large multiple of the nominal size of the annual wealth tax rate.

• Taxed assets will have lower valuations and higher required rates of return.  Because of this, in a market economy the impacts of the tax will not be limited to the persons paying the wealth tax but are shared across all capital market participants.  Individuals will experience reductions in the values of their taxable accounts, their RAs and 401(k)s, and the funding of their pension plans.  Corporations will have lower valuations and higher costs of capital.  The government sector will realize lower property tax and capital gains tax revenues and increased interest costs on their outstanding debt obligations.  Assets owned by domestic investors will have lower valuations than untaxed international investors, causing a shift away from domestic ownership of taxed asset classes.

Jensen Comment
A huge problem of a wealth tax is that wealth is usually not liquid such that to pay the tax the taxpayer may have to sell investments (land, stocks, bonds, physical assets, etc.) to pay the tax. For example, a ranch owner may have to sell part of a ranch because of the tax. Water rights and other factors can make it difficult to sell just part of the ranch. And year after year more land will have to be sold.

An owner of 50% of a corporation may have to sell 10%, thereby giving up control of the corporation.

Think of having to sell assets in April-July 2020 to pay a wealth tax when markets are very depressed.


CalPERS (California Employees Retirement Fund) --- https://en.wikipedia.org/wiki/CalPERS

CalPERS Dumps Risk Hedge Right Before Coronacrash, Sacrificing $1 Billion ---
https://www.nakedcapitalism.com/2020/04/calpers-dumps-risk-hedge-right-before-coronacrash-sacrificing-1-billion-and-confirming-doubts-about-chief-investment-officer-ben-mengs-expertise.html

Jensen Comment
Progressives who lambaste economic stimulus for Wall Street and major players in the stock market stupidly ignore that USA workers (think school teachers, municipal workers, college employees, factory workers, etc.) are enormously dependent upon stock market and pension fund recovery. Since 2006 and the crashing of interest rates pension fund management became more challenging. Workers with choices between stocks and bonds shifted more heavily into financially risky stocks after 2006. Without economic stimulus of the stock markets both present and future retirees of all types may face pension fund disaster. 

There are complicated ways to hedge financial risk to a certain extent, and the accounting rules for hedge accounting are enormously complicated ---
http://faculty.trinity.edu/rjensen/caseans/000index.htm

 In fact accounting rules for thousands of types of hedging strategies are  so complicated that they're only superficially covered in university accountancy programs and on the CPA exam. Large accounting firms painfully develop their own derivative financial instrument and hedge accounting experts.


Behind the numbers: Refunds for dorms and dining are a tricky calculation ---
https://www.chronicle.com/article/the-coronavirus-has-emptied/248472?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_1141663&cid=db&source=ams&sourceId=296279

The spread of the coronavirus sent students home and left college dorms and dining halls empty. Many students have asked for a refund of their room-and-board fees. Some colleges have refused, some have issued refunds, and others remain undecided. All types of institutions are concerned about the price tag of mass refunds, and what it could mean to them.

Jensen Comment
The most negligible parties in this situation are the lawyers who wrote the dorm contracts and did not factor in the contractual refund calculation. Although there may be contractual clauses for individual cases such as when a student is expelled from a dorm, I guess the lawyers never thought about pandemics or other situations where the college shuts down all dorms before the end of academic years. The university probably has insurance to cover situations where fire or other casualty damage closes a dorm. Insurance proceeds can then be used for resident refunds or the expense of alternative housing, I doubt that any college had pandemic insurance covering dorm contracts.

Refund allocation on the basis of the proportion of a term not served by a dorm is arbitrary relative to costs. For example, liability insurance and casualty insurance on a dorm is generally fixed for an entire year at a time. Many other dorm costs are fixed costs must be paid even if the dorm is closed before he end of a term.. Some costs that are variable for a over years are not variable over partial years such as the labor contracts for dorm workers that guaranty salary for for a year at a time. It's common for universities to outsource food services and those contracts may have huge penalties for early cancellations.

In hindsight the lawyers and accountants should've written in fine print covering pandemics. They are probably re-writing future dorm contracts, but it's too late for the Spring 2020 term.

 


The Coronavirus Crisis Is Starting to Hit Muni Bonds. Why That Matters ---
https://www.barrons.com/articles/the-coronavirus-crisis-is-starting-to-hit-muni-bonds-why-that-matters-51587767452
Much depends upon which muni bonds are largely held in your fund --- times are tougher for the higher yield bonds that are riskier
Also see
https://www.wsj.com/articles/coronavirus-shutdown-weighs-on-higher-risk-muni-issuers-11587979801?mod=djemCFO


A Wealth Tax is the Way to Fund the Pandemic ---
https://www.nytimes.com/2020/04/21/opinion/coronavirus-wealth-tax.html
 

A Wealth Tax is Not the Way to Fund a Pandemic ---
https://www.bloomberg.com/opinion/articles/2020-04-21/coronavirus-a-wealth-tax-isn-t-the-right-way-to-pay-for-pandemic?sref=y8VYjYe4

Jensen Comment
Note that a wealth tax is more symbolic than a viable way to raise the trillions of dollars.

Firstly, if the you want to eliminate billionaires you can send them all to tax havens like Monaco before you get the legislation passed.

Secondly, taxes are collected in cash whereas billionaire wealth is invested in things other than cash (think stocks, bonds, patents, and real estate), Forcing billionaires to spend trillions in assets to raise cash to pay taxes could collapse the stock markets, bond markets, real estate markets, and pension funds at a time when the USA is struggling to keep those markets from collapsing entirely.

Thirdly, billionaires are not stupid. Thev've seen fit to protect themselves in constitutional law and obedient bipartisan legislators making passage of a serious wealth tax almost impossible. One of the most popular way to protect billionaires (think George Soros and Bill Gates) is to transfer billions into tax-exempt trusts that are much more difficult to tax both legally and socially, Think of the beneficiaries (like disease-infected Africans) that will be devastated by taking away the support those billionaire foundations provide.

Nations like Sweden, France, and others that passed wealth taxes found wealth taxes to be a disaster and later rescinded most the wealth taxes and even high marginal income taxes ---
https://en.wikipedia.org/wiki/Wealth_tax#Criticisms

Adding an enormous wealth tax on top of all the other economic disasters of the 2020 pandemic will become another nail in the coffin of the USA economy relative to the world economy that now knows better than to impose serious wealth taxes.

 




EY:  Accounting for the income tax effects of the CARES Act and the COVID-19 pandemic ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---accounting-for-the-income-tax-effects-of-thecar

EY:  How to appropriately use non-GAAP measures to discuss the effects of COVID-19 ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---how-to-appropriately-use-non-gaap-measures-to-d

EY:  Accounting for rent concessions related to the COVID-19 pandemic under ASC 842 ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---accounting-for-rent-concessions-related-to-the-

EY:  Accounting for the income tax effects of the CARES Act and the COVID-19 pandemic ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---accounting-for-the-income-tax-effects-of-thecar

EY:  Our FRD publication on goodwill and intangible assets has been updated to reflect standard-setting activity and to enhance and clarify our interpretive guidance ---
https://www.ey.com/en_us/assurance/accountinglink/financial-reporting-developments---intangibles---goodwill-and-ot

EY:  Relief provided by the CARES Act will affect accounting and financial reporting ---
https://www.ey.com/en_us/assurance/accountinglink/to-the-point---relief-provided-by-the-cares-act-will-affect-acco

EY: SEC Updates
https://www.ey.com/en_us/assurance/accountinglink/sec-in-focus---april-2020 

EY:  Accounting and reporting considerations for the effects of the coronavirus outbreak (Revised 31 March 2020) ---
https://www.ey.com/en_us/assurance/accountinglink/technical-line---accounting-and-reporting-considerations-for-the




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

Major U.S. manufacturers said some closed plants may never reopen and new product introductions could be delayed, after the coronavirus pandemic slashed demand for everything from motorcycles to industrial paint.

Executives are offering a dark outlook for a sector of the economy that was already faltering before the coronavirus crisis sapped demand and hobbled plants and supply chains. Big chunks of the U.S. industrial base remain closed as part of the effort to contain the virus. Other factories are closed due to declining demand or parts shortages.


From the CFO Journal's Morning Ledger on April 28, 2020

The Supreme Court ruled the federal government is obligated to pay billions of dollars to health insurers that sold consumer policies on exchanges created by the Affordable Care Act, the Obama-era health-care overhaul law.


From the CFO Journal's Morning Ledger on April 28, 2020

Good morning. In industries that were already in a precarious position before the coronavirus pandemic, the crisis has tipped many companies over the edge. Companies in areas that were previously stable may soon face similar pressures.

Companies of all stripes are scrambling to avoid a painful reorganization of their capital structures and operations, default or bankruptcy. Many have tapped lines of credit and slashed costs. Some, such as Carnival, Expedia Group and Airbnb, have issued new equity or debt to public investors or private-equity firms.

Hard-hit companies have taken on additional debt on top of using their credit lines—and some may have effectively boxed themselves in by doing so. Carnival this month sold $4 billion worth of senior secured notes backed by assets like its cruise ships. Tying up those assets will make it difficult for the company to go back to the debt market if it needs to raise more cash, said a person familiar with the company’s capital structure.

For private-equity-backed companies, which are typically bought using a heavy helping of debt and a relatively small amount of equity, having little to no revenue can be even more painful. And the universe of companies facing distress stretches well beyond the world of private equity, said Steve Zelin, head of restructuring at investment bank PJT Partners. “It doesn’t matter if you were five times levered or two times levered prior to the current crisis if you are now not generating any revenue.”


It's finally been proven that IRS workers are more "essential" than elective surgery (think cataracts, knees, feet, and hips) workers

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

The Internal Revenue Service is bringing thousands of employees back to agency offices on today to deal with a growing backlog of work amid the coronavirus pandemic.


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

Good morning. Finance executives have been trying for years to bring down inventories to reduce working capital and free up cash. Now, with large parts of the world in lockdown and supply chains under pressure, businesses are stocking up on raw materials, boosting inventories of finished goods and simplifying manufacturing procedures.

Companies also are advancing payments to small suppliers to make sure that their supply chains remain intact despite uncertainty about how long it will take to reopen economies. Lockheed Martin, for example, said it has advanced more than $155 million to what it called small and vulnerable suppliers.

Companies are likely to continue facing issues across their supply chains, even if the bulk of their systems are operating, said Paul Donovan, chief economist of UBS Group’s global wealth management unit.

“What I think Covid-19 has done is add another cost to having a long and complicated supply chain,” he said. Over time, Mr. Donovan believes companies will look to localize more production, allowing for easy access to inventories.

One of the many challenges companies will be facing are hurdles in shipping markets roiled by deep capacity cuts and weeks of disruptions in global trade, said Frank Appel, chief executive of Deutsche Post AG, the parent of logistics company DHL.


From the CFO Journal's Morning Ledger on April 24, 2020

Good morning. Publicly traded companies are facing criticism from some lawmakers for tapping into a federal program intended to aid small businesses. The Treasury Department asked publicly traded companies to repay loans they received from the $350 billion rescue program, which ran out of funds two weeks after it started accepting applications. 

Ruth’s Hospitality Group Inc., which was among roughly 150 public companies that received nearly $600 million in forgivable loans this month, said it would return $20 million. In updated guidance, the Treasury Department said it was “unlikely that a public company with substantial market value and access to capital markets” would be able to demonstrate that it needed a government-backed loan to support its continuing business

The Federal Reserve said it plans to disclose monthly the borrowers, loan amounts and interest rates on funding from several new lending programs the central bank is in the process of establishing.

Banks are also receiving heightened attention over their role in handling applications for the loans. Sen. Marco Rubio (R., Fla.) is asking banks to address whether they favored certain borrowers in processing applications for government-backed small business loans, in violation of the program’s mandate for treating applications on a first-come, first-served basis.

Meanwhile, House lawmakers on Thursday voted to approve the next infusion of aid for small businesses and hospitals grappling with the outbreak’s toll.


From the CFO Journal's Morning Ledger on April 23, 2020

Shake Shack, which said it would return its loan, was the biggest recipient by market capitalization, while Ruth’s Hospitality Group Inc. got $20 million—by applying for the maximum amount through two subsidiaries.The intent of this money was not for big, public companies that have access to capital,” Treasury Secretary Steven Mnuchin said Tuesday.


From the CFO Journal's Morning Ledger on April 23, 2020

Good morning. The unknown depth and duration of the coronavirus pandemic has disrupted finance chiefs’ ability to generate sound forecasts, complicating efforts to conduct required impairment tests for goodwill, securities lawyers and valuation experts tell CFO Journal. The scenario is forcing companies to devote more time and resources to determining when to perform impairment tests and, if necessary, record a charge for goodwill.

Investors will expect executives to share their thinking behind recent impairments and existing goodwill on earnings calls and in financial disclosures, said Sandy Peters, senior head of financial reporting policy at the CFA Institute, a nonprofit association of financial analysts. “Every company that has goodwill should be talking about their views this quarter if they’ve had a decrease in business,” she said.

For most companies, macroeconomic conditions such as limitations on access to capital and fluctuations in foreign-exchange rates will increase the likelihood of a triggering event. Other more company- or industry-specific indicators, such as a sustained decrease in share prices, labor costs having a negative impact on cash flows or overall financial performance, will also boost the chances of a triggering event, said Andrew Probert, a managing director at financial consulting firm Duff & Phelps LLC.

Oil-field-services company Baker Hughes on Wednesday said it would cut jobs and reduce capital spending by 20%, days after disclosing that it expects to book a roughly $15 billion goodwill impairment charge for the first quarter due to the decline in oil prices and the pandemic.

 


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

Volkswagen will restart car plants across Europe, offering a pandemic-era blueprint for other global manufacturers that will alter workers’ daily lives and, at least temporarily, relegate productivity to the back seat.

. . .

Consumer-products giant Procter & Gamble Co. reported its biggest U.S. sales increase in decades as Americans stocked up on household mainstays like toilet paper, laundry detergent and cough medicine as the coronavirus pandemic spread across the country.

P&G is the first big maker of household staples to report financial results for 2020’s first quarter, when the pandemic ravaged China and spread in earnest through the U.S

Publishers Clearinghouse new promotion is one role of toilet paper per week for life.


From the CFO Journal's Morning Ledger on April 16, 2020

Good morning. Retail finance chiefs are struggling to protect against a steep decline in sales and to bridge a gap between industrial and consumer-focused distribution channels.

The coronavirus pandemic closed malls, restaurants, factories and mines in March, causing Americans to cut retail spending by a record amount and the country’s industrial output to plunge at the steepest rate in more than 70 years. The month’s retail sales, a measure of purchases at stores, gasoline stations, restaurants, bars and online, saw the biggest month-over-month decline since the records began in 1992, the Commerce Department said.
Across industries, U.S. economic activity
contracted sharply and abruptly in the past few weeks, resulting in lost jobs and lower wages, the Federal Reserve said.

Coronavirus-driven market upheaval is also making it harder for retailers to manage their supply chains. Wholesalers that sell to both retail and food-service customers can try to leverage existing relationships with grocers to offload some bulk products. But stores configured to sell consumer-size goods may not have space to store and display hefty sacks of rice and giant jars of mayonnaise.

Some retailers had been struggling long before officials ordered stores to close. J.C. Penney said it skipped a $12 million interest payment owed to bondholders, one of the first major retailers to buckle under the strains of the pandemic. The company has a $3.7 billion debt load and has struggled with falling sales and a revolving door of leaders and strategies. Other chains, including Neiman Marcus Group and J.Crew Group, also have been in negotiations with creditors this month, according to people familiar with the matter.


From the CFO Journal's Morning Ledger on April 15, 2020

Good morning. Banking giants JPMorgan Chase and Wells Fargo have set aside billions of dollars as they brace for a flood of defaults amid the economic havoc caused by the coronavirus pandemic, a move that is likely going to be followed by other financial institutions.

Many Americans were already deep in debt before the pandemic, tapping credit cards, auto loans and student loans at record levels to cover a shortfall left by wages that remained flat for many years. More than a million consumers contacted Wells Fargo to defer their payments, largely on mortgages and auto loans. The deferrals totaled roughly $3 billion in principal, Chief Financial Officer John Shrewsberry said.

Neither bank has yet seen a wave of loans go bad, but they are preparing for it as millions remain out of work and the world economy is forecast to contract by 3% in 2020, according to the International Monetary Fund.

JPMorgan’s CFO, Jennifer Piepszak, warned that the bank’s provision may not be enough. She said it was based in part on the assumption that U.S. gross domestic product would fall 25% and that unemployment would rise to above 10% in the second quarter. Since then, Ms. Piepszak said, JPMorgan economists have amended their forecast to a 40% decline in GDP and a 20% unemployment rate.

The bank said in its most extremely adverse scenario for how the pandemic plays out, credit costs could hit $45 billion in total this year, just shy of the $47 billion increase following the 2008 financial crisis. A sharper recovery could mean things stop well short of that point. But an extended major downturn would mean the provisions taken by banks so far are only the beginning.


From the CFO Journal's Morning Ledger on April 14, 2020

Good morning. Good morning. Finance chiefs and other executives around the world who rapidly overhauled operations when the coronavirus struck are now focused on restarting the economy and their own businesses.

Many multinational operations are looking to their China units for a playbook. Starbucks executives in the U.S. held talks with bosses in the company’s China division beginning in late January to understand the virus’ spread there. In February, the coffee chain imported procedures it had been using in China to the U.S., including stepped-up cleaning, paying workers to quarantine and pushing to-go offerings, before closing dine-in service at most of its 8,870 company-owned stores last month.

In many ways, companies are at the mercy of local and national governments to ensure that the reopening doesn’t reinvigorate the virus. Companies themselves have a role to play, and many are laying plans to do their part. Dozens of companies have notified the U.S. Food and Drug Administration that they are developing tests that indicate whether someone has had—and is likely immune to—the coronavirus, though some early efforts have hit roadblocks in other countries.

Manufacturers have redrawn factory floor plans and implemented processes, such as staggering shift workers or asking employees to take turns eating lunch in their cars to avoid cafeteria crowding, practices that may become standard as more plants come back online. Tyson, the biggest U.S. meat company by sales, is installing walk-through temperature scanners at its plants across the country and sending home workers showing potential Covid-19 symptoms, said Hector Gonzalez, Tyson’s head of U.S. human resources.

Jensen Comment
Sweden and Brazil never shut down.
China, Denmark, and Slovakia are opening up.
In the USA the 50 states varied regarding degree of shut downs (such as whether greenhouses shut down).
Texas will probably begin to open up next week.
Some states in the far west and east are cooperating with one another to start opening up at an unknown start date.


From the CFO Journal's Morning Ledger on April 8, 2020

General Motors is making 30,000 ventilators for the