My Latest Web Document
Over 700 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

Bob Jensen's gateway to millions of blogs and social/professional networks ---
http://faculty.trinity.edu/rjensen/ListservRoles.htm

QS Quacquarelli Symonds:  The 25 Best Online MBA Programs Worldwide ---
Click Here

01 (Best Online) IE Business School (Spain)
02 Imperial College Business School (UK)
03 Warwick Business School (UK)
04 Australian Graduate School of Management (AGSM) at the University of New South Wales Business School
05 Alliance Manchester Business School (UK)
06 Politecnico di Milano School of Management (Italy)
07 Indiana University (Kelley Direct Programs) (USA)
08 Marshall Business School at the University of Southern California (USA)
09 Vlerick Business School (Belgium)
10 Florida International University (USA)
11 Durham University Business School (UK)
12 Oxford Brookes Business School (UK)
13 Birmingham Business School (UK)
13 University of Otago Business School (NZ)
15 Warrington College of Business at University of Florida (USA)
16 Naveen Jindal School of Management at UT Dallas (USA)
17 CENTRUM PUCP Graduate Business School (PERU)
18 George Washington University (USA)
19 Macquarie Business School (Australia)
20 EU Business School (Spain)
21 Robert H. Smith School of Business at University of Maryland (USA)
22 Kogod School of Business at American University (USA)
23 Colorado State University's College of Business (USA)
24 Poole College of Management at North Carolina State University (USA)
25 Whitman School of Management at Syracuse (USA)

Jensen Comment
The first thing that struck me in this ranking is that the purportedly top online programs are mostly not (with a few exceptions)  among the top (elite) international MBA programs ranked by QS Quacquarelli Symonds ---
https://www.businessinsider.com/best-mba-programs-in-the-world-2020-9?op=1

Also see the US News ranking of top (elite) MBA programs ---
https://www.usnews.com/best-graduate-schools/top-business-schools/international-business-rankings

One reason may be that the top onsite programs target different applicants than the online programs. The onsite programs target full-time and younger students that are not necessarily fresh out of undergraduate studies but tend to be under 30 years of age.

The online applicants I suspect are older and possibly are studying part-time rather than full time. Sometimes online programs are viewed as cash cows for universities, and as such these online programs have lower admission standards.

Scandinavia is often held out as a top part of the world for education beginning a pre-school (think Finland). It struck me as odd that Scandinavia did not fare very well among the world's top onsite or online MBA programs. Keep in mind that all Scandinavian nations are proudly capitalist such that we would expect them to rank higher among prestigious business schools.

Aside from the UK (that is no longer part of the EU) it struck me as odd that most EU nations did not rank as high among onsite or online MBA programs as I would have expected. Part of the reason here is that traditionally business programs either do not exist or are relatively weak in outstanding and prestigious EU universities. In many cases business courses are buried among economics courses in EU universities.

Another thing to note is how poorly Asian universities are represented among top online and onsite MBA programs. In many instances Asian universities don't have separate business majors. Also Asian programs in general (think China) have poor reputations for academic standards (think cheating). In some instances (think Japan) academic rigor is excellent before college but not so great in college where a lot of partying often takes place.

Another thing to note is that there are some business study programs that are not adapted well to MBA programs. MBA programs target admissions of non-business majors from mathematics, engineering, science, and humanities. Some business study programs require undergraduate as well as graduate studies, notably accountancy where there are many more required courses for licensure (think CPA) than can possibly be covered in a two-year MBA program. CPA firms rarely recruit auditors and tax accountants among students who were not undergraduate accounting majors.

Bar Exams May Soon Be Easier To Pass, As States Eye Changes ---
https://news.bloomberglaw.com/business-and-practice/bar-exams-may-soon-be-easier-to-pass-as-states-eye-changes
The USA needs more starving and homeless lawyers.

Sometimes FASB standards work as the FASB intended them to work:  The Case for SFAS 161 on Accounting for Derivative Financial Instruments and Hedging Activities

SFAS 161 is an amendment to SFAS 133 on Accounting for Derivative Instrument and Hedging Activities
https://en.wikipedia.org/wiki/FASB_133

The Effect of Mandatory Disclosure on Market Inefficiencies: Evidence from FASB Statement No. 161 ---
https://meridian.allenpress.com/accounting-review/article-abstract/96/2/153/439634/The-Effect-of-Mandatory-Disclosure-on-Market?redirectedFrom=fulltext
John L. Campbell ; Urooj Khan ; Spencer Pierce
The Accounting Review (2021) 96 (2): 153–176.

Prior research finds that unrealized gains/losses on cash flow hedges are negatively associated with future earnings, and that investors and analysts fail to anticipate this association. These studies speculate that this mispricing is due to either poor derivatives disclosures or the accounting model for cash flow hedges. We examine whether enhanced mandatory derivatives disclosures set forth in FAS 161 improve users' understanding of firms' hedging activities and offer three main findings. First, we find that this mispricing does not persist after FAS 161. Second, we find that the correction of mispricing is greatest when disclosure might help investors most. Finally, we find that analyst forecast accuracy improves after FAS 161. Overall, our results suggest that the enhanced mandatory derivative disclosures required by FAS 161 improved users' understanding of the effects of derivative and hedging activities on future firm performance and firm value—and consequently mitigated investor mispricing.

AICPA:  Do colleges prepare future CPAs? Three key insights ---
https://blog.aicpa.org/2021/03/do-colleges-prepare-future-cpas-three-key-insights.html#sthash.3VM0SxUN.bgNY3b65.dpbs

Jensen Question
We solved the recent education problem by making the CPA exam easier with much higher passage rates. The cheapest solution is is make it even easier and easier and easier --- like the way we expect less and less of our high school graduates.

April 6, 2021 reply from Jagdish

Bob,

We had an ideal opportunity to totally overhaul the entire accounting curriculum when the 150 hour requirements kicked in. But we all blew it. At Albany I suggested that the undergraduate curriculum be kept substantially the same since it was rigorous and very good, but have the lower division students be allowed to take just the two intro financial/cost accounting courses, and take all other courses except auditing during the junior/senior years. And the fifth year be for specialized industry accounting courses, auditing, corporate governance, advanced systems courses offered in specialised tracks such as oil & gas, insurance, entertainment, advanced systems, real estate & construction,.... When that did not register, I suggested the university give only BA degrees at undergraduate level (at Albany the difference between BA and BS is that the former requires 3 years of liberal arts while the latter requires only two). That idea did not gain much traction either. So it became a run of the mill 4+1 degree.

While almost all of the learned professions have specializations, in accounting we have just one general track. That is not really sustainable with the encroachment of technology into just about everything that anybody does.

Regards,

Jagdish S. Gangolly

Emeritus Associate Professor
Department of Informatics
Director (Retired), PhD Program in Information Science

Retired Founding Co-Director, New York State Center for Information Forensics & Assurance
State University of New York at Albany
1400 Washington Ave Albany, NY 1222

April 6, 2021 reply from Tom Selling

Hi, Jagdish:

I wholeheartedly agree with your analysis, except that my explanation for why we don’t have in-depth specializations in accounting may be different:  the nature of the CPA exam drives the bus.

The AICPA explicitly states that it tests what the profession wants entering worker bees to know to competently carry out their duties during the first two years on the job.  (Other educational formats, e.g., CPE programs, are supposed to take care of the rest --- HAHAHA.) It doesn’t matter if the worker bee is assigned to audit a bank or a cereal maker or a municipal government, or prepare tax returns, or audit ICFR, or work with GAAP or IFRS.  Everyone takes the same exam.  In addition, the Big Four firms don’t act as if they really care much about what a student actually learned in college.  They want students with two attributes:  (1) they demonstrated that by getting high grades in a “good” school, they are reasonably smart and are ambitious enough to working long hours; and (2) they know enough (after taking a review course) to pass the CPA exam on the first try. 

Therefore, given the high stakes involved, if a course doesn’t perceptibly help a student pass the exam, they are (understandably) not interested.  They might even rebel if an “irrelevant” course were required.  There is little value of specialization courses to them, so it is difficult for those kinds of courses to be offered by cash-strapped academic institution.

If you want to apportion blame for the current state of affairs, at least some of it should go to the AICPA and the profession at large for establishing the current system of incentives.   Although I have little expertise in the area, I understand that bar exams are different.  The top employers are less concentrated than the Big Four; and they very much want students to acquire a specialization in school.  Therefore, specialized courses are emphasized by law schools.  From most lawyers, I hear that the bar exam content actually has little to do with the content of their law school curriculum—and even the practice of law.  But, that’s a different kettle of fish.

Best,

Tom

Do We Matter? Attention the General Public, Policymakers, and Academics Give to Accounting Research
F. Greg Burton ; Scott L. Summers ; T. Jeffrey Wilks ; David A. Wood
Issues in Accounting Education (2021) 36 (1): 1–22
https://meridian.allenpress.com/iae/article/36/1/1/442757/Do-We-Matter-Attention-the-General-Public

Many question the value of accounting scholarship to society. We compare the attention the general public, policymakers, and academics give to academic accounting research relative to other business disciplines and other more general disciplines (economics, psychology, and other sciences). The results indicate that accounting research receives significantly less attention from the general public than all other disciplines and also performs relatively poorly in receiving policymakers' attention compared to both economics and finance. Within accounting subtopics, tax research receives more attention from the general public and policymakers than other topic areas. We also find that articles in other disciplines' elite journals cite relatively few of accounting's elite-level publications, but non-elite journal articles cite accounting research in similar numbers to other disciplines. Finally, we rank scholars, institutions, and journals by the attention they receive. We discuss how these findings could impact accounting education.

. . .

One difficulty in analyzing impact is that there are few existing measures of impact, especially within the accounting discipline. The traditional measure of impact—citations—is well established and accepted in academia. However, there is dissatisfaction with citations as a measure of impact. Alternative measures have been explored (e.g., Brooks 2003; Brown and Laksmana 2004). A promising area of development is the use of alternative metrics (such as those developed by Altmetric) for measuring impact that capture more than citations. Altmetric is part of Digital Science & Research Ltd. (a London-based technology company) and specializes in capturing article-level metrics that focus Alton measuring attention, dissemination, and influence.³ That is, Altmetric gathers mentions of articles in policy documents, traditional media outlets (e.g., magazines), social media (e.g., tweets on Twitter), and other online sources. These mentions are then aggregated and weighted to produce a score that can be used to compare individual articles.

 

The argued benefits of Altmetric scores are that they are quicker to accumulate than citations (because of publication lags), they capture a more diverse set of noted public measures than citations, and they can apply to more than journal articles and books (i.e., data, software, etc., can be tracked by Altmetric [Altmetric 2018]). Prior research confirms that the correlation between Altmetric scores and citation-based metrics is relatively weak, which is interpreted to mean that these two measures capture different kinds of impact (Priem, Taraborelli, Groth, and Neylon 2010; Haustein, Thelwall, Larivière, and Sugimoto 2013; Thelwall, Haustein, Larivière, and Sugimoto 2013; Zahedi, Costas, and Wouters 2014; Haustein, Peters, Sugimoto, Thelwall, and Larivière 2014; Sud and Thelwall 2014).

In addition to measuring different types of impact, another strength of Altmetric scores is that the scores can be decomposed into separate measures of attention from different stakeholders. That is, Altmetric gathers separate data of how the general public and policymakers reference scientific literature. A major purpose of accounting research is to impact policymakers rather than the public. Thus, Altmetric allows for a multifaceted view of the attention accounting research is receiving.

 

Given the uniqueness of Altmetric scores, we analyze both Altmetric's overall scores and citation counts for a large body of accounting research. In relation to Altmetric scores, we examine the extent to which the general public and policymakers reference accounting research. For citations, we consider not only the raw number of citations per article, but also how much accounting research is cited by those outside of the accounting discipline. To provide meaning and context, we also compare Altmetric attention scores and citations between topical areas of accounting research—namely AIS, audit, financial, managerial, tax, and other types of research. We then compare the accounting discipline as a whole to other business school disciplines of finance, management, and marketing. We also provide data about how two “parent” disciplines of accounting research—economics and psychology—and the top-rated general-interest science journals perform. We do not make specific hypotheses; rather, we conduct and report a descriptive analysis for these comparisons to provide useful benchmarks.

Continued in article

What Are Altmetrics ---
https://www.altmetric.com/about-altmetrics/what-are-altmetrics/

Altmetrics have a number of advantages over citation-based metrics:

They are quicker to accumulate than citation-based metrics: By virtue of being sourced from the Web and not from journals and books, it’s possible to monitor and collate mentions of work online as soon as it’s published.

They can capture more diverse impacts than citation-based metrics: As described above, altmetrics can complement citations in that they help you to understand the many ‘flavours’ of impact research can have.

They apply to more than journal articles and books: Researchers are sharing their data, software, presentations, and other scholarly outputs online more than ever before. That means we can track their use on the Web as easily as we can for articles and books.

 

There are a number of limitations to the use of altmetrics:

·        Altmetrics don’t tell the whole story: As described above, altmetrics are a complement to, not a replacement for, things like informed peer review and citation-based metrics. Think of altmetrics as just one tool of many you’ve got in your toolbox for understanding the full impact of research.

 

·        Like any metric, there’s a potential for gaming of altmetrics: Anyone with enough time on their hands can artificially inflate the altmetrics for their research. That’s why altmetrics providers like Altmetric, PLOS and SSRN have measures in place to identify and correct for gaming. Don’t forget to look at the underlying qualitative data to see who has been talking about the research, and what they’ve been saying.

 

·        Altmetrics are relatively new, more research into their use is needed: Though we’re learning a lot about how often research is shared online, we don’t yet know a lot about why–more research is needed. Until we know more, use and interpret altmetrics carefully.

Continued in article

Jensen Comment
Unlike engineering, law, and medicine, one failing of academic accounting research is that there is very little impact on the professional practice of academic accounting research ---
http://faculty.trinity.edu/rjensen/theory01.htm#AcademicsVersusProfession

Creating Relevance of Accounting Research (ROAR) Scores to Evaluate the Relevance of Accounting Research to Practice

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3501871
49 Pages Posted: 17 Dec 2019

F. Greg Burton

Brigham Young University - School of Accountancy

Scott L. Summers

Brigham Young University - School of Accountancy

T. Jeffrey Wilks

Brigham Young University

David A. Wood

Brigham Young University - School of Accountancy

Date Written: December 10, 2019

Keywords: Research Relevance, Accounting Rankings, Practice-Oriented Research, Journal Rankings

JEL Classification: M40, M41, M49, M00

Abstract

The relevance of accounting academic research to practice has been frequently discussed in the accounting academy; yet, very little data has been put forth in these discussions. We create relevance of accounting research (ROAR) scores by having practitioners read and evaluate the abstract of every article published in 12 leading accounting journals for the past three years. The ROAR scores allow for a more evidence-based evaluation and discussion of how academic accounting research is relevant to practitioners. Through these scores, we identify the articles, authors, journals, and accounting topic areas and methodologies that are producing practice-relevant scholarship. By continuing to produce these scores in perpetuity, we expect this data to help academics and practitioners better identify and utilize practice-relevant scholarship.

V. CONCLUSIONS

This research provides empirical data about the contribution accounting academics are making to practice. Specifically, we had nearly 1,000 professionals read the abstract of academic accounting articles and rate how relevant the articles are to practice. We then present the data to rank journals, universities, and individual scholars. Overall, we interpret the results to suggest that some of the research that is currently produced and published in 12 accounting journals is relevant to practice, but at the same time, there is room to improve. Our hope is that by producing these rankings, it will encourage journals, institutions, and authors to produce and publish more relevant research, thus helping to fulfill the Pathways charge “to build a learned profession.”

We now take the liberty to provide some normative comments about our research findings in relation to the goal of producing a learned profession. One of the key findings in this study is that the traditional top 3 and top 6 journals are not producing the most or the greatest average amount of practice relevant research, especially for the distinct accounting topic areas. Prior research shows that the collection of a small group of 3/6 journals is not representative of the breadth of accounting scholarship (Merchant 2010; Summers and Wood 2017; Barrick, et al. 2019). Given the empirical research on this topic, we question why institutions and individual scholars continue to have a myopic focus on a small set of journals. The idea that these 3/6 journals publish “the best” research is not empirically substantiated. While many scholars argue that the focus is necessary for promotion and tenure decisions, this seems like a poor excuse (see Kaplan 2019). Benchmarking production in a larger set of journals would not be hard, and indeed has been done (Glover, Prawitt, and Wood 2006; Glover, Prawitt, Summers, and Wood 2019). Furthermore, as trained scholars, we could read and opine on article quality without outsourcing that decision to simple counts of publications in “accepted” journals. We call on the 18 We recognize that only looking at 12 journals also limits the scope unnecessarily. The primary reason for the limitation in this paper is the challenge of collecting data for a greater number of journals. Thus, we view 12 journals as a start, but not the ideal. academy to be much more open to considering research in all venues and to push evaluation committees to do the same.

A second important finding is that contribution should be a much larger construct than is previously considered in the academy. In our experience, reviewers, editors, and authors narrowly define the contribution an article makes and are too often unwilling to consider a broad view of contribution. The current practice of contribution too often requires authors to “look like everyone else” and rarely, if ever, allows for a contribution that is focused exclusively on a practice audience. We encourage the AACSB, AAA, and other stakeholders to make a more concerted effort to increase the focus on practice-relevant research. This may entail journals rewriting mission statements, editors taking a more pro-active approach, and training of reviewers to allow articles to be published that focus exclusively on “practical contributions.” This paper has important limitations. First, we only examine 12 journals. Ideally, we would like to examine a much more expansive set of journals but access to professionals makes this challenging at this time. Second, measuring relevance is difficult. We do not believe this paper “solves” all of the issues and we agree that we have not perfectly measured relevance. However, we believe this represents a reasonable first attempt in this regard and moves the literature forward. Third, the ROAR scores are only as good as the professionals’ opinions. Again, we limited the scores to 5 professionals hoping to get robust opinions, but realize that some articles (and thus authors and universities) are not likely rated “correctly.” Furthermore, articles may make a contribution to practice in time and those contributions may not be readily apparent by professionals at the time of publication. Future research can improve upon what we have done in this regard.

We are hopeful that shining a light on the journals, institutions, and authors that are excelling at producing research relevant to practice will encourage increased emphasis in this area.

Jensen Question
Is accounting research stuck in a rut of repetitiveness and irrelevancy?

"Accounting Craftspeople versus Accounting Seers: Exploring the Relevance and Innovation Gaps in Academic Accounting Research," by William E. McCarthy, Accounting Horizons, December 2012, Vol. 26, No. 4, pp. 833-843 --- 
http://aaajournals.org/doi/full/10.2308/acch-10313 

Is accounting research stuck in a rut of repetitiveness and irrelevancy? 
I (Professor McCarthy) would answer yes, and I would even predict that both its gap in relevancy and its gap in innovation are going to continue to get worse if the people and the attitudes that govern inquiry in the American academy remain the same. From my perspective in accounting information systems, mainstream accounting research topics have changed very little in 30 years, except for the fact that their scope now seems much more narrow and crowded. More and more people seem to be studying the same topics in financial reporting and managerial control in the same ways, over and over and over. My suggestions to get out of this rut are simple. First, the profession should allow itself to think a little bit normatively, so we can actually target practice improvement as a real goal. And second, we need to allow new scholars a wider berth in research topics and methods, so we can actually give the kind of creativity and innovation that occurs naturally with young people a chance to blossom.

 

Since the 2008 financial crisis, colleges and universities have faced increased pressure to identify essential disciplines, and cut the rest. In 2009, Washington State University announced it would eliminate the department of theatre and dance, the department of community and rural sociology, and the German major – the same year that the University of Louisiana at Lafayette ended its philosophy major. In 2012, Emory University in Atlanta did away with the visual arts department and its journalism programme. The cutbacks aren’t restricted to the humanities: in 2011, the state of Texas announced it would eliminate nearly half of its public undergraduate physics programmes. Even when there’s no downsizing, faculty salaries have been frozen and departmental budgets have shrunk.

But despite the funding crunch, it’s a bull market for academic economists. According to a 2015 sociological study in the Journal of Economic Perspectives, the median salary of economics teachers in 2012 increased to $103,000 – nearly $30,000 more than sociologists. For the top 10 per cent of economists, that figure jumps to $160,000, higher than the next most lucrative academic discipline – engineering. These figures, stress the study’s authors, do not include other sources of income such as consulting fees for banks and hedge funds, which, as many learned from the documentary Inside Job (2010), are often substantial. (Ben Bernanke, a former academic economist and ex-chairman of the Federal Reserve, earns $200,000-$400,000 for a single appearance.)

Unlike engineers and chemists, economists cannot point to concrete objects – cell phones, plastic – to justify the high valuation of their discipline. Nor, in the case of financial economics and macroeconomics, can they point to the predictive power of their theories. Hedge funds employ cutting-edge economists who command princely fees, but routinely underperform index funds. Eight years ago, Warren Buffet made a 10-year, $1 million bet that a portfolio of hedge funds would lose to the S&P 500, and it looks like he’s going to collect. In 1998, a fund that boasted two Nobel Laureates as advisors collapsed, nearly causing a global financial crisis.

The failure of the field to predict the 2008 crisis has also been well-documented. In 2003, for example, only five years before the Great Recession, the Nobel Laureate Robert E Lucas Jr told the American Economic Association that ‘macroeconomics […] has succeeded: its central problem of depression prevention has been solved’. Short-term predictions fair little better – in April 2014, for instance, a survey of 67 economists yielded 100 per cent consensus: interest rates would rise over the next six months. Instead, they fell. A lot.

Nonetheless, surveys indicate that economists see their discipline as ‘the most scientific of the social sciences’. What is the basis of this collective faith, shared by universities, presidents and billionaires? Shouldn’t successful and powerful people be the first to spot the exaggerated worth of a discipline, and the least likely to pay for it?

In the hypothetical worlds of rational markets, where much of economic theory is set, perhaps. But real-world history tells a different story, of mathematical models masquerading as science and a public eager to buy them, mistaking elegant equations for empirical accuracy.

Real Science versus Pseudo Science --- 
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm#Pseudo-Science

Jensen Comment
Academic accounting (accountics) scientists took economic astrology a step further when their leading journals stopped encouraging and publishing commentaries and replications of published articles --- 
How Accountics Scientists Should Change:  
"Frankly, Scarlett, after I get a hit for my resume in The Accounting Review I just don't give a damn"
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm

Times are changing in social science research (including economics) where misleading p-values are no longer the Holy Grail. Change among accountics scientist will lag behind change in social science research but some day leading academic accounting research journals may publish articles without equations and/or articles of interest to some accounting practitioner somewhere in the world --- 
 See below

 

Time to say goodbye to “statistically significant” and embrace uncertainty, say statisticians ---
https://retractionwatch.com/2019/03/21/time-to-say-goodbye-to-statistically-significant-and-embrace-uncertainty-say-statisticians/

Three years ago, the American Statistical Association (ASA) expressed hope that the world would move to a “post-p-value era.” The statement in which they made that recommendation has been cited more than 1,700 times, and apparently, the organization has decided that era’s time has come. (At least one journal had already banned p values by 2016.) In an editorial in a special issue of The American Statistician out today, “Statistical Inference in the 21st Century: A World Beyond P<0.05,” the executive director of the ASA, Ron Wasserstein, along with two co-authors, recommends that when it comes to the term “statistically significant,” “don’t say it and don’t use it.” (More than 800 researchers signed onto a piece published in Nature yesterday calling for the same thing.) We asked Wasserstein’s co-author, Nicole Lazar of the University of Georgia, to answer a few questions about the move.

So the ASA wants to say goodbye to “statistically significant.” Why, and why now?

In the past few years there has been a growing recognition in the scientific and statistical communities that the standard ways of performing inference are not serving us well.  This manifests itself in, for instance, the perceived crisis in science (of reproducibility, of credibility); increased publicity surrounding bad practices such as p-hacking (manipulating the data until statistical significance can be achieved); and perverse incentives especially in the academy that encourage “sexy” headline-grabbing results that may not have much substance in the long run.  None of this is necessarily new, and indeed there are conversations in the statistics (and other) literature going back decades calling to abandon the  language of statistical significance.  The tone now is different, perhaps because of the more pervasive sense that what we’ve always done isn’t working, and so the time seemed opportune to renew the call.

Much of the editorial is an impassioned plea to embrace uncertainty. Can you explain?

The world is inherently an uncertain place.   Our models of how it works — whether formal or informal, explicit or implicit — are often only crude approximations of reality. Likewise, our data about the world are subject to both random and systematic errors, even when collected with great care. So, our estimates are often highly uncertain; indeed, the p-value itself is uncertain. The bright-line thinking that is emblematic of declaring some results “statistically significant” (p<0.05) and others “not statistically significant” (p>0.05) obscures that uncertainty, and leads us to believe that our findings are on more solid ground than they actually are. We think that the time has come to fully acknowledge these facts and to adjust our statistical thinking accordingly.

Continued in article

To p-Value or Not to p-Value? An Answer From Signal Detection Theory ---
https://open.lnu.se/index.php/metapsychology/article/view/871

“In statistics, Type I errors (false alarms) and Type II errors (misses) are sometimes considered separately, with Type I errors being a function of the alpha level and Type II errors being a function of power. An advantage of signal detection theory is that it combines Type I and Type II errors into a single analysis of discriminability…”

“…p values were effective, though not perfect, at discriminating between real and null effects.”

“Bayes factor incurs no advantage over p values at detecting a real effect versus a null effect … This is because Bayes factors are redundant with p values for a given sample size.”

“When power is high, researchers using p values to determine statistical significance should use a lower criterion.”

“… a change to be more conservative will decrease false alarm rates at the expense of increasing miss rates. False alarm rates should not be considered in isolation without also considering miss rates. Rather, researchers should consider the relative importance for each in deciding the criterion to adopt.”

“…given that true null results can be theoretically interesting and practically important, a conservative criterion can produce critically misleading interpretations by labeling real effects as if they were null effects.”

“Moving forward, the recommendation is to acknowledge the relationship between false alarms and misses, rather than implement standards based solely on false alarm rates.”

Continued in article

 

 

Academic accounting researchers sheilded themselves from validity challenges by refusing to publish commentaries and refusing to accept replication studies for publication ---
http://faculty.trinity.edu/rjensen/TheoryTAR.htm

On the Past and Present of Reproducibility and Replicability in Economics ---
https://replicationnetwork.com/2021/01/25/on-the-past-and-present-of-reproducibility-and-replicability-in-economics/

Here are the states where retirement savers have the biggest nest eggs ---
https://www.cnbc.com/2021/04/12/here-are-the-states-where-retirement-savers-have-the-biggest-nest-eggs.html

Practical highlights of recent tax research ---
https://www.thetaxadviser.com/issues/2021/apr/highlights-recent-tax-research.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=26Apr2021

Scott Sumner on capital gains taxation ---
https://marginalrevolution.com/marginalrevolution/2021/04/scott-sumner-on-capital-gains-taxation.html

A Review Of Corporate Social Responsibility And Reputational Costs In The Tax Avoidance Literature ---
https://taxprof.typepad.com/taxprof_blog/2021/04/a-review-of-corporate-social-responsibility-and-reputational-costs-in-the-tax-avoidance-literature.html

Risky Business Cycles ---
https://marginalrevolution.com/marginalrevolution/2021/04/risky-business-cycles.html

That is from a new NBER working paper by Susanto Basu, GiacomoCandian, Ryan Chahrout, and Rosen Valchev, and you will find related ideas in my 1998 book Risk and Business Cycles and also the earlier work of Fischer Black.

During the pandemic, there has been severe hostility to firms buying back their own shares, a practice only made legal in the UK in 1981 ---
https://www.economicsobservatory.com/should-companies-be-allowed-to-buy-back-their-own-shares

2015:  "140 current female KPMG US employees join lawsuit against firm," by Kevin Reed, Accountancy Age, January 9, 2015 ---
http://www.accountancyage.com/aa/news/2389474/140-current-female-kpmg-us-employees-join-lawsuit-against-firm

MORE THAN 140 current KPMG US fee-earning female staff have opted in to a lawsuit against the firm.

Lawyers contacted 9,000 current and former fee-earning female staff from KPMG in the US, in October 2014, to join the class action. A former KPMG manager, Donna Kassman, spent 17 years in the firm's New York office before resigning, claiming that she and other women had suffered gender discrimination.

Nearly 900 women have currently opted into the case. Of the 845 that have been processed by class action representative Kate Kimpel, of law firm Sanford Heisler, 142 are from existing staff. The opt-in period runs until 31 January.

Kimpel claimed that the number of current employees that had already opted in was high. In similar instances, they tend to wait until the end of the time period before opting-in, to gauge response from their peers, she added.

"It's easier for previous employees to opt in, they're less worried about retaliation. I'm sure the number of current employees [opted in] will rise dramatically," she told Accountancy Age.

KPMG has previously vigorously denied the allegations in the claim against the firm. "We will not comment on pending litigation, except to say that KPMG thoroughly and repeatedly reviewed the allegations in this case and found them totally unsupported by the facts," said a statement from a KPMG spokesman.

Continued in article

Bob Jensen's threads on KPMG litigation ---
http://www.trinity.edu/rjensen/Fraud001.htm

Bob Jensen's threads on the history of women in accounting ---
http://www.trinity.edu/rjensen/bookbob2.htm#Women

Consulting confessions: 6 current and former staffers at Deloitte, PwC, and other top firms detail pandemic burnout ---
https://www.businessinsider.com/burnout-consulting-firms-deloitte-pwc-big-four-2021-4?op=1

FASB provides goodwill triggering relief for private companies, not-for-profits ---
https://www.journalofaccountancy.com/news/2021/mar/fasb-goodwill-triggering-relief-private-companies-not-for-profits.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=31Mar2021

Can You Owe $800k Tax on a Profit of $45k? The rules for tax losses might lead to different outcomes in the U.S. and Canada ---
https://www.morningstar.ca/ca/news/210709/can-you-owe-$800k-tax-on-a-profit-of-$45k.aspx
Thank you Thomas Amlie for the heads up

Tesla is often cited as a disrupter of the auto industry. But Fisker's "asset-light" model is closer to the theory of disruptive innovation ---
https://network-bussiness.com/2021/04/02/the-true-disrupter-in-the-auto-industry-isnt-tesla-its-fisker/

The Spring 2021 edition of ThinkTwenty20 is out ---
https://thinktwenty20.com/
This issue is devoted to blockchain

Harvard Business Review:  Overselling Sustainability Reporting ---
https://hbr.org/2021/05/overselling-sustainability-reporting?utm_medium=email&utm_source=newsletter_monthly&utm_campaign=finance_not_activesubs&deliveryName=DM129742

Jensen Comment
In 1977 I called it phantasmagoric social responsibility accounting that is so imprecise that it's more misleading than helpful ---
Monograph by Bob Jensen
PHANTASMAGORIC ACCOUNTING: Research and Analysis of Economic, Social and Environmental Impact of Corporate Business (Sarasota, FL: The American Accounting Association, 1977).

I've not seen noteworthy advances in making this type of accounting more precise since 1977. It's a little like singing praises to Tesla's lithium battery cars because they eliminate carbon exhaust of gasoline cars. Seldom is it mentioned that mining and manufacturing lithium and cobalt is perhaps more of an environmental hazard to the world than driving highly efficient modern gasoline cars ---
https://www.instituteforenergyresearch.org/renewable/the-environmental-impact-of-lithium-batteries/
Add to this the shortage of these key earth components for measuring the sustainability of Tesla's enormous battery factories and EV production plants and any reporting of the sustainability becomes a phantasmagoric exercise in futility. I wonder how much reliability decision makers can place upon imprecise sustainability accounting of Tesla, Inc.

I truly believe sustainability accounting has been oversold.

EY: Updates

Technical Line: Navigating the requirements for merging with a special purpose acquisition company

EU proposes sustainability reporting standards 
The European Commission proposed a Corporate Sustainability Reporting Directive (CSRD) that would standardize how companies report information about their impact on the environment. The proposal, which is part of a sustainable finance package, would require nearly 50,000 entities (including US companies listed in the European Union and large subsidiaries of US companies) to make the disclosures, up from 11,000 companies that are currently required to report on these issues

Technical Line: Entities should reevaluate the design of their internal controls over completeness and accuracy of the SEFA State and local governments and not-for-profit entities that receive federal funding need to make sure their internal controls address the heightened risk that they may not identify all federal awards they are required to report on the Schedule of Expenditures of Federal Awards (SEFA), given all of the new federal programs relating to the COVID-19 pandemic. Preparing a complete and accurate SEFA is important because the entities use it to determine whether they are required to obtain a compliance audit of their federal expenditures, and it is the basis for the audit if one is required.  Updated FRD on discontinued operations Our Financial reporting developments (FRD) publication on discontinued operations has been updated to enhance and clarify our interpretive guidance. Refer to Appendix E of the publication for a summary of the updates.  Updated FRD on bankruptcies, liquidations and quasi-reorganizations Our FRD publication on bankruptcies, liquidations and quasi-reorganizations has been updated to enhance and clarify our interpretive guidance. See Appendix A for a summary of important changes. What boards need to know about shareholder activism webcas The EY Center for Boards Matters (CBM) webcast What boards need to know about shareholder activism, on 22 April 2021 at 3 p.m. Eastern time, will feature panelists who will discuss what attracts an activist investor, common activist objectives and

IASB'sThird agenda consultation
The IASB has published a consultation document to seek views on what the Board’s priorities should be over the next five years. The objective is to gather views on the strategic direction and balance of the Board’s activities, the criteria for assessing the priority of financial reporting issues that could be added to the work plan, and new financial reporting issues that could be given priority in the Board’s work plan. Comments are due by 27 September 2021.

 

EY:  SEC in Focus for April 2021 ---
https://www.ey.com/en_us/assurance/accountinglink/sec-in-focus---april-20210

Deloitte: Fair Value Measurements and Disclosures ---
https://deloitte.wsj.com/cfo/2021/04/28/on-the-radar-fair-value-measurements-and-disclosures/?mod=djemCFO

Most entities have amounts that are recognized at fair value in their financial statements, and ASC 820 defines fair value, sets out a framework for measurement, and establishes fair value disclosure requirements. Consider using a seven-step Fair Value Measurement Application Framework to prepare a fair value measurement that complies with the measurement principles and disclosure requirements in ASC 820.

Continued in article

Jensen Comment
One huge problem is valuing non-fungible assets that do not have reliable market values. For example, a parcel of land's value  can vary greatly in value with respect to which particular freeway exit is close and where the land is located in terms of side of the road. McDonalds sold it's store cheap east of Exit 42 in Littleton, NH and built a store just like it west of Exit 42 just to be closer to the most popular Walmart in the State of New Hampshire.

About ten miles from our cottage the values of a strip mall's properties took a nosedive because a New Hampshire State Liquor Store moved over a mile away into another strip mall. Some assets are more valuable to some owners than other owners such as when Tesla buys a factory building versus when pillow manufacturer buys the factory. Antique values vary greatly with finding and inspiring the best buyers. Antique dealers with established reputations try to buy cheap in yard sales and then resell items at enormous markups because they know fat cat buyers who don't take the time and trouble to go to yard sales.

Deloitte:  Accounting Brief: Distinguishing Liabilities From Equity ---
https://deloitte.wsj.com/cfo/2021/04/06/accounting-brief-distinguishing-liabilities-from-equity/?mod=djemCFO

. . .

ASC 480 is the starting point for determining whether an instrument must be classified as a liability. SEC registrants and non-SEC registrants that elect to apply the SEC’s guidance on redeemable equity securities must also consider the classification within equity. The relevant accounting guidance has existed for a number of years without substantial recent changes. In addition, we are not aware of any plans of the FASB or SEC to significantly change the guidance in the near future.

Continued in article

Excel:  Can Excel Survive? (in other words is it sustainable?) ---
https://www.cfo.com/spreadsheets/2021/04/can-excel-survive/
The bottom line is that nobody really knows, which is so often the case with sustainability questions.

Excel:  An Excel Way to Calculate a Key Depreciation Component ---
https://www.fm-magazine.com/news/2021/apr/use-excel-to-calculate-depreciation-economic-life-of-noncurrent-asset.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=23Apr2021

Excel:  New Excel Function Redefines Formula Building ---
Click Here
Build custom functions without code

Excel:  Fighting Fire with Fire: Using Excel Macros to Combat Academic Dishonesty in Excel Projects
Don Lux ; Margaret E. Knight
Issues in Accounting Education (2021) 36 (1): 23–34.-Excel-Macros-to
https://meridian.allenpress.com/iae/article/36/1/23/441735/Fighting-Fire-with-Fire-Using

Harvard undergraduate general (blue book) exam in economics, 1957 ---
http://www.irwincollier.com/harvard-undergraduate-general-examination-in-economics-1957/

Jensen Comment
It's now more interesting to have students discuss what answers may have changed between 1957 and the 21st Century. For example monetary policy (think of how the Fed's tight money policy may have dampened the boom of 1955) versus how the Fed's zero (or negative) interest rate policy is insufficient on its own to spur growth on its own in 2021. Think of how robots/technology in society are now changing labor needs and policies. Think of how unions have become weaker in goods and stronger in services such and education and government services.

Recall that in 1955 Marxism experiments in socialism were looking much more promising in such places as the Soviet Union, China, and Cuba (just slightly after 1955). Since then the socialist regimes have reverted back to more and more capitalism, although socialism is not dead and gone and is experiencing newer movements in the USA (especially in academia).

Before he died, Fidel Castro labeled the Cuban Experiment an economic failure. Many in the USA are now trying to instigate Cuban policies with guaranteed annual income, universal free medical care, free college, enormous government spending/taxation, etc. Socialism is by no means dead, although socialists are still trying to find one successful experiment in the 20th Century. Keep in mind that the Scandinavian nations are proudly capitalist with greatly reduced taxation ---
https://www.econlib.org/library/Enc/MarginalTaxRates.html
Note that the highest marginal tax rates in virtually all nations (including Scandinavia) in 1955 were greatly reduced in the 1970s. Now the USA is trying to revive higher and higher marginal tax rates.

My point is that a lot has happened to change economic theory and practice since the Harvard Undergraduate Economics Exam of 1957.

Satyam Computer Scam – Pre and Post Diagnosis

International Journal of Marketing & Financial Management, Volume 4, Issue 9, Dec-2016, pp 53-68

SSRN
16 Pages Posted: 24 Apr 2021
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3826780

Rajshree Sharma

affiliation not provided to SSRN

Shivani Gupta

affiliation not provided to SSRN

Dr. Bhupendra Kumar

Debre Tabor University

Date Written: December 16, 2016

Abstract

Scandals are often the “tip of the iceberg”. They represent the "visible‟ catastrophic failures. An attempt is made in this paper to examine in-depth and analyze India‘s Enron, Satyam Computer‘s “creative-accounting” scandal. Their scandal/fraud has put a big question mark on the entire corporate governance system in India. In public companies, this type of 'creative‘ accounting leading to fraud and investigations are, therefore, launched by the various governmental oversight agencies. The accounting fraud committed by the founders of Satyam in 2009 is a testament to the fact that ―the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory. Scandals have proved that ―there is an urgent need for good conduct based on strong corporate governance, ethics and accounting & auditing standards. Unlike Enron, which sank due to 'agency‘ problem, Satyam was brought to its knee due to 'tunneling‘ effect. The Satyam scandal highlights the importance of securities laws and CG in emerging markets. Indeed, Satyam fraud ―spurred the government of India to tighten the CG norms to prevent recurrence of similar frauds in future. Thus, major financial reporting frauds need to be studied for 'lessons-learned‘ and 'strategies-to-follow‘ to reduce the incidents of such frauds in the future. The increasing rate of white-collar crimes ―demands stiff penalties, exemplary punishments, and effective enforcement of law with the right spirit.

Keywords: Corporate accounting scandal, Satyam Computer India, Corporate governance, Accounting and auditing standards

Suggested Citation:

Sharma, Rajshree and Gupta, Shivani and Kumar, Bhupendra, Satyam Computer Scam – Pre and Post Diagnosis (December 16, 2016). International Journal of Marketing & Financial Management, Volume 4, Issue 9, Dec-2016, pp 53-68 , Available at SSRN: https://ssrn.com/abstract=3826780

Financial Accounting in the Era of Blockchain - A Paradigm Shift from Double Entry to Triple Entry System

SSRN
11 Pages Posted: 24 Apr 2021
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3827591

Date Written: April 16, 2021

Keywords: Financial accounting, blockchain, information quality, distributed ledger technology, triple entry system

JEL Classification: M41, M42, L86, C55

Suggested Citation:

Enhancing Cultural Intelligence and Digital Literacy in Accounting Education: Insights from a University’s Global Student Consulting Programme

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3826076
18 Pages Posted: 23 Apr 2021

Date Written: April 1, 2021

Keywords: Cultural Intelligence, Digital Literacy, Project Based Learning, Partnership Management

Suggested Citation:

The Effect of the Balance Sheet Approach on the Usefulness of Accounting Information in Assessing Bank Default Risk

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3828678
57 Pages Posted: 19 Apr 2021

Peter R. Demerjian

University of Illinois at Chicago

Kodai Ito

affiliation not provided to SSRN

Akinobu Shuto

University of Tokyo - Graduate School of Economics

Date Written: March 31, 2021

Abstract

This study investigates the effect of the balance sheet approach, where financial reporting focuses on asset and liability valuation, on the usefulness of the capital adequacy ratio in the evaluation of bank default risk by credit rating agencies. We examine Japanese banks, which play the central role in the Japanese economy, and whose capital adequacy ratios are affected by the fair value measurement under the balance sheet approach. We adopt Demerjian’s (2011) approach to develop a bank-level measure of balance sheet focus. Although we find a significant positive correlation between the slack of the regulatory capital adequacy ratio and issuer rating, we find that this positive correlation is significantly weakened as a bank’s dependence on the balance sheet approach increases. The results suggest that the regulatory capital adequacy ratio based on a bank’s accounting information provides useful information for the evaluation of default risk but that rating agencies discount capital information that relies heavily on the balance sheet approach when estimating a bank’s default risk.

Keywords: balance sheet approach, regulatory capital adequacy ratio, bank regulation, rating

JEL Classification: M41

Suggested Citation:

Demerjian, Peter R. and Ito, Kodai and Shuto, Akinobu, The Effect of the Balance Sheet Approach on the Usefulness of Accounting Information in Assessing Bank Default Risk (March 31, 2021). Available at SSRN: https://ssrn.com/abstract=3828678 or http://dx.doi.org/10.2139/ssrn.3828678

Short Memories? The Impact of SEC Enforcement on Insider Leakage

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3827855
33 Pages Posted: 19 Apr 2021

Date Written: October 1, 2019

Keywords: Time-series models, financial econometrics, illegal behavior and the enforcement of law, nonparametric methods

JEL Classification: C32, C58, K42, C14, G14, K22

Suggested Citation:

The Effects and Value of Financial Information Under a Power Utility CAPM

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3827485
44 Pages Posted: 19 Apr 2021

Date Written: April 15, 2021

Keywords: CRRA CAPM, power utility, cost of capital, decision relevance, accounting information theory

JEL Classification: G11, G12, G31

Suggested Citation:

Work Smarter, Not Harder: Towards Efficient Naval Financial Management

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3825938
6 Pages Posted: 19 Apr 2021

Date Written: April 14, 2021

Keywords: government accounting, public financial management, fiscal responsibility, auditability, Department of Defense, Department of the Navy

JEL Classification: M12, M20, M29, M40, M41, M42, M48, M49

Suggested Citation:

The Data Analytics Journey: Interactions among Auditors, Managers, Regulation, and Technology

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3826172
Posted: 19 Apr 2021

There are 2 versions of this paper

Date Written: March 31, 2021

Keywords: accounting, audit fees, audit quality, data analytics, financial reporting quality, regulation

Suggested Citation:

When Justice Is Served: Using Data Analytics To Examine How Fraud-Based Legal Actions Affect Earnings Management

SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3818575
24 Pages Posted: 15 Apr 2021

Date Written: 2021

Keywords: Earnings Management, Fraud Litigation, Discretionary Accruals, Accounting Data Analytics, Legal Analytics

Suggested Citation:

From the CFO Journal's Morning Ledger on April 29, 2021

Good morning. Companies are spending more money on dividends and share repurchases after pausing or shrinking them last spring in an effort to preserve cash during the coronavirus pandemic.

Executives are boosting these shareholder rewards as they are growing more optimistic about the economic recovery and the outlook for their business. The U.S. economy is expected to grow by 6.4% this year, with Covid-19 vaccinations and stimulus funds prompting a surge in consumer spending.

 

Many companies are generating significantly more revenue than a year ago, leading some of them to reduce the cash piles they amassed during the onset of the crisis. Industrial conglomerate Johnson Controls International PLC and retailer Kohl’s Corp., among others, in recent weeks increased their dividends and planned more share repurchases.

Finance chiefs face a balancing act when they allocate corporate cash toward buybacks or dividends as opposed to capital investments or acquisitions. They want to reward shareholders, while also not overstraining their companies’ finances. Buying back shares when stock markets are high can be costly and having to cut the dividend can scare off investors.

 

From the CFO Journal's Morning Ledger on April 21, 2021

Good morning. If President Biden is to implement his ambitious economic agenda, he will have to rely on a beleaguered arm of the government: the Internal Revenue Service.

The U.S. tax agency, shrunken after a decade of budget cuts, is sending $1,400 payments to most Americans, the third such logistical challenge in a year. Last month’s $1.9 trillion relief law requires the IRS to create a system outside of annual tax filings for issuing child tax-credit payments. And, further complicating an already messy filing season in which the April 15 deadline was pushed back to May 17, the agency must implement a retroactive change to taxation of unemployment benefits received in 2020.

More challenges await. The Biden administration and congressional Democrats are considering tax increases on companies and top earners that would require significant implementation and enforcement. They also hope to collect hundreds of billions of dollars by expanding the IRS and beefing up audits.

Getting all that done likely will require a transformation of the U.S. tax agency. Although the IRS still inspires fear and anger in many, it lost a net 15% of its employees between 2010 and 2020, including thousands who pursued tax avoidance and answered taxpayers’ queries. It opens about half as many criminal investigations as in 2010. In fiscal 2019, the percentage of individuals audited reached its lowest level in at least 40 years.

From the CFO Journal's Morning Ledger on April 20, 2021

Good morning. U.S. companies might have to pay more in taxes to fund President Biden’s $2.3 trillion infrastructure plan. How much they owe and to whom likely will remain a mystery.

Public companies in America disclose their total tax payments and their tax rate. But they have resisted plans that would require them to break down how much they pay to the federal government, states or foreign countries. Businesses say the additional disclosure would be costly and potentially misleading.

The Financial Accounting Standards Board, which sets accounting standards for U.S. companies and nonprofits, for years has been discussing plans to require companies to disclose more about their tax bills. FASB in 2019 proposed asking public companies to break out the amount of federal, state and foreign taxes they paid. The proposal also suggested that companies should disclose those figures on a quarterly basis.

More than four years after the first proposal, FASB still is looking at the issue. The board last discussed the matter in February 2020, shortly before shifting its focus to Covid-19 pandemic-related issues. FASB plans to address the issue again at a coming board meeting, but the date hasn’t been set, according to a spokeswoman.

• Smaller Corporate Tax Increase Floated at White House Meeting

From the CFO Journal's Morning Ledger on April 14, 2021

U.S. consumer prices rose sharply in March as the economic recovery gained momentum, marking the start of an expected months long pickup in inflation pressures.

Some of the price increases reflected temporary factors, but others showed how demand for many goods and services is reviving a year after the coronavirus pandemic shut down large swaths of the economy, analysts said.

Jensen Comment
You ain't seen nuthin' yet!

From the CFO Journal's Morning Ledger on April 14, 2021

Brian Armstrong is poised to become one of the richest people in the world after Coinbase Global Inc. goes public Wednesday.

Special Purpose Acquisition Company (SPAC) --- https://en.wikipedia.org/wiki/Special-purpose_acquisition_company

From the CFO Journal's Morning Ledger on April 14, 2021

Good morning. Finance executives at businesses merging with special-purpose acquisition companies face hurdles preparing for valuation work and setting up internal controls within a short space of time, as U.S. regulators ramp up their scrutiny of such deals.

SPACs, which are in essence large pools of cash, offer private companies a faster route to the public markets compared with other forms of listings such as an initial public offering. Through April 11, 23 companies combined with SPACs in the U.S., up from 19 during the prior-year period, according to data provider Refinitiv. Last year, 54 of these transactions closed, totaling $76.7 billion in value, Refinitiv said.

More than 380 U.S.-based SPACs are currently scouting for a merger partner, Refinitiv said. They usually have to do so within two years of their launch, resulting in tight deadlines for both parties.

The Securities and Exchange Commission in recent weeks has urged companies and SPACs to fully grasp and follow accounting and reporting rules. The U.S. securities regulator reviews the disclosures that SPAC sponsors provide when they raise funds as well as the merger documents they file when they combine with a company.

• Grab to Go Public in Record-Breaking SPAC Merger

From the CFO Journal's Morning Ledger on April 13, 2021

Good morning. Federal spending soared in March as the government sent a third round of stimulus payments to Americans, pushing up the budget deficit to a record $1.7 trillion in the first half of the fiscal year.

The budget gap is now more than double what it was for the same period a year ago, the Treasury Department said Monday. The Covid-19 pandemic and related shutdowns sent the economy into a tailspin starting in March 2020.

The deficit was $660 billion last month, 454% higher than it was in the same month a year ago. Revenue rose 13% to $268 billion, while spending increased 161% to $927 billion.

The government’s spending surge has provided some cushion to the economy from the pandemic’s devastation, but it has also sent deficits soaring to levels not seen since the end of World War II as a proportion of the economy. Weaker tax revenue has contributed to the shortfall.

From the CFO Journal's Morning Ledger on April 8, 2021

Good morning. Auditors and finance chiefs of some of Germany’s biggest businesses are worried that a new regulatory proposal intended to improve audit quality in the wake of the Wirecard AG scandal will lead to higher costs and less competition.

German lawmakers currently are debating draft legislation for the so-called Act to Strengthen Financial Market Integrity. The law is expected to pass over the next few months, ahead of the country’s national elections in the fall.

The current proposal stipulates that audit firms pay higher fines for wrongdoing and auditors themselves take unlimited personal liability if found grossly negligent. Companies face mandatory change of auditors in certain cases and are required to rotate audit firms every decade. The draft legislation also suggests stricter supervision of the banking regulator BaFin.

CFOs, especially those at companies with dozens of foreign subsidiaries, point to the practical challenges of switching auditors over a perceived conflict of interest. A sudden order to change audit firms while the audit process is ongoing could be very distracting and endanger companies’ ability to present audited financial statements and pay dividends. “I don’t think this is feasible,” said Ralf Thomas, CFO of industrial company Siemens AG.

From the CFO Journal's Morning Ledger on April 6, 2021

Good morning. Finance chiefs are considering their options to offset potential cost increases stemming from a higher corporate tax rate and other tax proposals by the Biden administration.

Companies such as railroad operator Union Pacific Corp., insurer FM Global and technology firm Uniphore Technologies Inc. are analyzing steps they could take in response to the suggested changes. Union Pacific expects that the company might have less money to invest if taxes were to rise, Chief Financial Officer Jennifer Hamann said. The railroad company is still evaluating how to offset these additional costs, Ms. Hamann said.

 

FM Global, a Johnston, R.I.-based mutual insurance company, is considering deferring a tax incentive known as bonus depreciation, finance chief Kevin Ingram said. By deferring bonus depreciation and other incentives, FM Global can take deductions in future years when tax rates could be higher, he said. “Our tax planning has taken on an increased pace and increased sense of urgency now,” Mr. Ingram said, referring to Mr. Biden’s newly unveiled plan.

The proposal, which marks Mr. Biden’s first detailed tax proposal since taking office in January, could be changed or scaled back as it moves through Congress. Treasury Secretary Janet Yellen argued for a global minimum corporate tax rate Monday, seeking international cooperation that is crucial to funding the infrastructure proposal.

• Senate Democrats Pitch Their International Corporate Tax Plan

From the CFO Journal's Morning Ledger on April 5, 2021

Good morning. Corporations had ample warning—an entire presidential campaign—that tax increases were coming. But that doesn’t take the sting out of President Biden’s proposal to raise the corporate-tax rate to 28% from 21%.

A tax increase, which would take effect as early as January 2022, would cut into corporate profits as the economy recovers, and the Biden plan could reduce the earnings of companies in the S&P 500 by at least 10%, said accounting analyst Dave Zion of the Zion Research Group.

A higher tax rate would cost some companies more than others—essentially, the same firms that benefited most from 2017’s corporate-rate cut. That includes utilities, regional banks, many retailers and other companies that sell goods and services primarily in the U.S. Large U.S. multinational companies paid an 8.8% tax rate on their world-wide income in 2018, down from 15.8% in 2017, according to data released recently by the congressional Joint Committee on Taxation.

The Biden plan also raises taxes on U.S. companies’ foreign income. It would create a new 15% minimum tax on companies’ income as reported on financial statements—partly a response to companies that report profits to investors but use legal credits and deductions to reduce their tax bills.

Jensen Comment
Remember that business firms do not usually pay taxes, fines, and operating expenses. These costs are passed on to customers in the form of higher prices for goods and services. This, in turn, adds gasoline to the fires of inflation roaring from Biden's hopes of spending trillions of dollars for infrastructure, green initiatives, Medicare for All, bailout fiscally mismanaged states, free college, expanded food stamps, housing subsidies, guaranteed annual income, reparations, and a spike in the cost of over a million (possibly a second million for the uncounted) migrants expected this year, many of them unaccompanied minors needing food, housing, medical care, and schooling. The irony is that business taxes that are supposed to help pay for these trillions in social services are themselves inflationary because business tax increases result in higher prices that government pays for in new social programs.

Scandinavia Understands the Value of Low Corporate Taxes
https://reason.com/2021/04/01/joe-biden-corporate-tax-rate-increase-policy-spending-denmark-norway-sweden/

Teaching Case From The Wall Street Journal Weekly Accounting Review on March 19, 2021

Companies Still Working on Libor Changeover By Anna Hirtenstein Julia-Ambra Verlaine Mark Maurer | March 12, 2021

Topics: Interest Rates, Bond Summary: The London interbank offered rate (LIBOR) is integral to many business financing transactions as a benchmark to determine the interest rate paid by borrowers. The rate will no longer be published for many currencies by December and “remaining dollar rates will end after June 30, 2023.” The rate met its demise due to scandals involving rate setting. “Jason Winkler, Motorola’s finance chief, said the communications-equipment provider plans to use the replacement preferred by the Federal Reserve—the Secured Overnight Financing Rate, or SOFR.” The company hasn’t yet made any changes because no finance contracts currently need to be negotiated. Classroom Application: The article may be used when covering bonds and other long term debt in a financial reporting class. Questions: What is the London-Interbank offered rate (LIBOR)? In what way(s) is the LIBOR used in finance? What will happen to LIBOR by December 31, 2021? What challenges do CFOs face in the process of changing away from using LIBOR?

READ THE ARTICLE

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

 

"Companies Still Working on Libor Changeover," by Anna Hirtenstein, Julia-Ambra Verlaine, and Mark Maurer, The Wall Street Journal, March 12, 2021 ---
https://www.wsj.com/articles/companies-still-working-on-libor-changeover-11615545001

Regulators press firms to drop borrowing benchmark, while many weigh its replacement or discuss timing, financial implications

Regulators are pressuring Wall Street to do away with the London interbank offered rate by year-end. Companies are still making the switch.

Chief financial officers at major U.S. companies such as Motorola Solutions Inc. and Ralph Lauren Corp. said they are working on issues including choosing between alternatives to the troubled borrowing benchmark, used for decades to help set rates on corporate debt, and discussing the timing and financial implications.

Jason Winkler, Motorola’s finance chief, said the communications-equipment provider plans to use the replacement preferred by the Federal Reserve—the Secured Overnight Financing Rate, or SOFR. But without any immediate financial arrangements in need of adjustment, the company was still gauging when to transition to the new rate.

“We’re working through it like many other companies and evaluating our choices,” Mr. Winkler said.

Libor is a key reference rate for corporate borrowing, underpinning trillions of dollars in financial contracts ranging from loans to interest-rate swaps. But financial firms and regulators world-wide are scheduled to abandon the rate at the end of this year after it fell into disrepute a decade ago following a manipulation scandal.

The Fed warned banks Tuesday that they could face regulatory consequences if robust plans aren’t in place to move away from the benchmark before Dec. 31. That is when it expires for some shorter-dated dollar rates.

The U.K. regulator in charge of overseeing Libor, the Financial Conduct Authority, said March 5 that Libor would cease for sterling, the euro, Swiss franc and yen at the end of the year, building on its mandate that market participants transition to other benchmark rates. The remaining dollar rates will end after June 30, 2023.

The use of Libor is still strong in the futures and options markets, data from CME Group showed. Daily trading volume reached the highest level for Eurodollar futures, which use Libor as a benchmark, since 2014 on Feb. 25 at 10.7 million contracts and averaged three million daily for the month. By comparison, average daily volume for SOFR futures in February was 122,872 contracts.

“Examiners should consider issuing supervisory findings and other supervisory actions if a firm is not ready to stop issuing Libor-based contracts by Dec. 31, 2021,” said Michael Gibson, a director in the division of supervision and regulation at the Fed.

CFOs said they have been examining contracts linked to Libor and are discussing replacement options with lenders who bankroll them to fund operations or other expenses. Many corporations’ credit lines and loans have interest rates based off Libor. If they don’t change over, or otherwise prepare, legal fallbacks in their contracts could raise their debt payments.

Banks have put resources and cash into programs to transition to SOFR, which is based on the cost of transactions in the market where financial companies borrow cash overnight using U.S. government debt as collateral. That was developed by a committee of major banks, insurers and asset managers that has joined the Fed in rallying users of Libor to adopt SOFR.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on March 19, 2021

IRS Delays Tax-Filing Deadline Until Mid-May By Richard Rubin | March 17, 2021

Topics: Individual Income Tax Summary: “The Internal Revenue Service delayed the main April 15 tax-filing and payment deadlines for individuals until May 17…. The move comes after lawmakers and accountants urged the government to allow more time to complete 2020 tax returns and adjust to tax-law changes implemented during the pandemic.” As reported in a related article (available at https://www.wsj.com/articles/heres-how-you-can-still-save-on-2020-taxes-with-ira-contributions-11614909575), IRS Commissioner Charles Rettig had wanted to keep the typical April 15 deadline. Classroom Application: The article may be used in an individual income tax class. Questions: As described in the article, what was the most recent change in tax law affecting amounts reported on 2020 individual income tax returns? What steps must tax preparers undertake to cope with the challenges of both the coronavirus pandemic itself and the tax law changes that have been implemented for 2020 tax returns? List all that you find in the article. You may include some that you think of yourself as well. Some argue that the one month extension of the deadline for federal individual income tax filings is not sufficient. Why?

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

 

"IRS Delays Tax-Filing Deadline Until Mid-May," by Richard Rubin, The Wall Street Journal, March 17, 2021 ---
https://www.wsj.com/articles/irs-said-to-delay-tax-filing-deadline-until-mid-may-11616005038

Extension will give taxpayers more time to grapple with late law changes, pandemic

WASHINGTON—The Internal Revenue Service delayed the main April 15 tax-filing and payment deadlines for individuals until May 17, giving taxpayers and preparers a bit of breathing room in an unusually complicated tax season.

The move comes after lawmakers and accountants urged the government to allow more time to complete 2020 tax returns and adjust to tax-law changes implemented during the pandemic.

The tax-filing season started later than usual and has been challenging for taxpayers dealing with the effects of last year’s economic disruptions and late changes to the tax law. Typical in-person assistance, which can be particularly valuable for low-income filers, has been more complicated this year as well.

The automatic extension applies to individual returns and payments for 2020 that are due on April 15; they will be extended to May 17 without penalties and interest. It doesn’t apply to 2021 estimated-tax payments due on April 15, the IRS said late Wednesday. Many questions remain unanswered, including whether states will follow suit and extend their income-tax deadlines.

The IRS, seeking a return to something resembling its normal schedule after 2020, had been reluctant to change the deadline. It delayed the start of the filing season to Feb. 12 from the typical late January date so it had time to implement tax-law changes that Congress wrote in December. Calls for another delay came this month as Congress changed 2020 tax law again.

Notably, the coronavirus relief package that President Biden signed into law last week retroactively changed the tax rules for unemployment benefits received in 2020, making the first $10,200 exempt from taxation for tax filers making less than $150,000.

 

“We are gratified that the IRS has recognized the need and heeded our calls for additional time, and while we are pleased with this 30-day extension, we will continue to monitor developments during this hectic filing season,” Reps. Richard Neal (D., Mass.) and Bill Pascrell (D., N.J.) said in a statement.

Bloomberg News first reported the delay. The IRS will release further details in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” IRS Commissioner Charles Rettig said in a statement.

Last week’s late change in the tax law compounded difficulties facing tax preparers, taxpayers and the IRS, which is still working through a backlog of 2019 tax returns. The government has received 18% fewer tax returns through early March this year compared with 2020.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on March 19, 2021

Minority-Owned Investment Banks Are Underwriting More Corporate Bond Offerings By Kristin Broughton | March 15, 2021

Topics: Bonds, ESG Reporting Summary: The year 2020 produced records for total bond offerings. Another record reached was an all-time high for the percent of investment-grade debt issuances involving investment banks that are owned or controlled by minority individuals, women, or veterans. The percentage rose to 29% from 22% 10 years ago. The article focuses on factors considered by chief financial officers (CFOs) in deciding on which investment firms to use in conducting a bond issuance. It also discusses the investor base and other business benefits that minority-, women-, and veteran-owned investment banks can provide. Classroom Application: The article may be used when discussing bond offerings in a financial reporting class or environmental, social, and governance reporting in a managerial or financial accounting class. Questions: Describe the process for a corporation to issue bonds to the public. Why have corporations used investment banks owned by minority individuals, women, or veterans more frequently in recent years than in the past? What factor or factors do chief financial officers (CFOs) consider in deciding which investment banks to hire in conducting a bond offering to the public?

READ THE ARTICLE

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

 

"Minority-Owned Investment Banks Are Underwriting More Corporate Bond Offerings,' by Kristin Broughton, The Wall Street Journal, March 15, 2021 ---
https://www.wsj.com/articles/minority-owned-investment-banks-are-underwriting-more-corporate-bond-offerings-11615800601

Participation in debt offerings by firms with diverse ownership was at an all-time high last year, according to Refinitiv

Finance chiefs are hiring minority-owned investment banks as underwriters on their corporate bond offerings more frequently, aiming to attract new investors and demonstrate their commitment to diversity.

The 10 largest investment banks by deal volume that are owned by minorities, women or veterans took part in 29% of debt sales by U.S. investment-grade companies last year, according to data provider Refinitiv, raising $814.2 billion during a record year for bond offerings overall.

That participation level for firms with diverse ownership was an all-time high and up from 22% of debt sales with proceeds of $211.5 billion a decade ago, according to Refinitiv.

So far in 2021, the top 10 firms with diverse owners have taken part in bond offerings that raised $136.2 billion, accounting for 43% of proceeds in the U.S. investment-grade market, according to Refinitiv. In the same period in 2020, such firms took part in debt sales that raised $95.1 billion, accounting for 33% of the market, Refinitiv said.

The bond sales come as finance departments play a more prominent role in their companies’ diversity efforts following protests over racial injustice and the killing of George Floyd in 2020. Some businesses, such as Netflix Inc. and PayPal Holdings Inc. pledged to move a portion of their corporate deposits to Black-owned banks.

Allstate Corp. , a Northbrook, Ill.-based insurance company, in November hired investment banks owned by minorities, women or veterans as underwriters on a $1.2 billion bond sale to finance a portion of its acquisition of rival National General Holdings Corp., with Loop Capital Markets LLC, Siebert Williams Shank & Co. LLC, Samuel A. Ramirez & Co. and Academy Securities Inc. named lead underwriters. Some of the firms picked as leads previously worked on Allstate’s debt and equity deals, but had never been offered a leading role, said Mario Rizzo, the company’s chief financial officer. “What changed was, I think, really the direct result of events of last summer,” he said, referring to the protests over racial injustice.

Allstate previously hadn’t hired minority-owned firms to lead its bond offerings because it viewed them as higher risk since they didn’t have the same level of experience on large deals as the big banks, according to Mr. Rizzo. It also simply hadn’t spent time during previous deals questioning the matter, he said.

But the protests, along with a companywide diversity push, prompted Allstate to use its latest bond offering to showcase such firms’ capabilities, Mr. Rizzo said. It also reviewed previous deals at other companies where minority-owned firms generally played a leading role. “They were always kind of chaperoned by another larger institution, and we said we wanted to do something different,” he said.

Finance chiefs and corporate treasurers usually consider several factors in deciding which firms to hire as underwriters on bond sales. Among them: whether the company has an existing relationship with an investment bank, or wants to give a bank an opportunity to earn underwriting fees after providing less prominent services, such as lending or handling share repurchases. Big banks like JPMorgan Chase & Co. and Bank of America Corp. dominate the debt capital markets.

The firms that led the Allstate transaction said they have seen an uptick in interest from potential new corporate clients in the months since the deal closed. The transaction helped confront companies’ perceptions that smaller firms lack the capabilities to execute large transactions on their own, they said. Some view their competitive edge as complementing the services of big banks.

“Where our value comes in is finding smaller, midtier investors that we can reach out to and build relationships with,” said Jonathan Levin, head of corporate finance at Siebert Williams Shank. He said his firm works with institutional investors of all sizes, including many small and minority-owned investment managers with under $10 billion in assets under management.

Continued in article

Teaching Case from Issues in Accounting Education

Bitcoin and Blockchain: Audit Implications of the Killer Bs
Ryan T. Dunn ; J. Gregory Jenkins ; Mark D. Sheldon
Issues in Accounting Education (2021) 36 (1): 43–56.
https://doi.org/10.2308/ISSUES-19-049

This case examines auditing implications of Bitcoin and blockchain, and is intended for either undergraduate or graduate auditing and assurance courses. Students are asked to engage in aspects of planning and risk assessment for the audit of an online retailer. The case provides an interesting setting in which to achieve the learning objectives of: (1) identifying risks of material misstatement, (2) linking risks of material misstatement to relevant financial statement assertions, (3) explaining changes in audit procedures for responding to risks, (4) understanding a financial statement auditor's use of service auditor reports, and (5) understanding management specialists and the role they play in an audit. The modular case can be used for in-class discussion or as an out-of-class assignment and requires minimal advance preparation by the instructor. The case may be assigned in part or in its entirety. Student responses indicate the case is interesting and offers a positive learning experience.

Teaching Case from Issues in Accounting Education

Taxes: Taking a Bite out of Bitcoin
Kerry K. Inger ; Mollie Mathis
Issues in Accounting Education (2021) 36 (1): 57–64.
https://doi.org/10.2308/ISSUES-19-061

This tax research case introduces students to virtual currency taxation issues, which are increasingly important in the global economy. The setting provides an overarching story with three inter-related taxpayers and a variety of transactions—miner, short-term investor, and long-term investor—thus, allowing instructors to assign individuals or groups to one or more scenarios. There is limited primary authority on virtual currency, leading students to relate the virtual currency transactions to existing primary authority. The case learning objectives are: (1) critical thinking, (2) technical knowledge, (3) tax research proficiency, and (4) written communication skills. Students identify relevant tax-related issues, conduct tax research, and prepare a research memorandum that summarizes their findings.

Teaching Case from Issues in Accounting Education

A Case Study of Effective Tax Rates Using Data Analytics
Christine Cheng ; Pradeep Sapkota ; Amy J. N. Yurko
Issues in Accounting Education (2021) 36 (1): 65–89.
https://doi.org/10.2308/ISSUES-19-060

Tomorrow's accounting professionals need to understand both accounting and data analytics. To meet these needs, we developed a case that combines an important area of tax accounting, Effective Tax Rates (ETRs), with multiple data analysis skills. The case can be completed in Excel, or with Tableau and/or Alteryx, using Compustat or public data. The case's learning objectives for students are to: (1) expand knowledge of data analytics and ETRs; (2) use critical-thinking skills to identify economic, industry, and firm-level factors that might affect ETRs; (3) develop skills specific to data analytics and data visualization in accounting; and (4) develop effective oral and written communication skills. We evaluate the case's efficacy using data from pre- and post-learning assessment surveys and open-ended responses, which indicate that the comprehensive case meets these learning objectives.

Teaching Case From The Wall Street Journal Weekly Accounting Review on March 26, 2021

U.K. Mulls Capping Number of Audits Big Four Firms Can Do By Nina Trentmann | March 18, 2021

Topics: Auditing Services, International Summary: “The U.K. government is seeking feedback on a range of proposals to overhaul the country’s audit sector following a series of corporate scandals as well as similar regulatory efforts in Germany.” Proposals will be open for comment for 16 weeks and include elements to increase competition for audits of the largest U.K. companies by smaller audit firms. Classroom Application: The article may be used in an auditing class or an international accounting or auditing class. Questions: Why is the U.K. government considering “overhauling the country’s audit sector”? What audit practice changes are being considered by the U.K. government? How do you think these proposed changes will impact the strength of U.K. audit firm practices? Suppose you were going to work for one of the public accounting firms in the U.K., either the Big Four or smaller. State your choice and then discuss whether you think the developments in this article could impact your career.

READ THE ARTICLE

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

 

"U.K. Mulls Capping Number of Audits Big Four Firms Can Do," by Nina Trentmann, The Wall Street Journal, March 18, 2021 ---
https://www.wsj.com/articles/u-k-mulls-capping-number-of-audits-big-four-firms-can-do-11616059801

Government is inviting comment from business and the public on revamping audit regulation in Britain

The U.K. government is seeking feedback on a range of proposals to overhaul the country’s audit sector following a series of corporate scandals as well as similar regulatory efforts in Germany.

The government said on Thursday it plans to reduce a general overreliance on Big Four firms Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers by forcing companies to employ a smaller audit firm to conduct part of their annual audit.

The Big Four also could face a cap on the number of companies in the FTSE 350 Index they can audit if competition doesn’t pick up, the release by the Department for Business, Energy and Industrial Strategy said.

Other structural changes, for example, an operational split between the audit and nonaudit business of professional-services firms—first suggested by a U.K. regulator in 2019—will fall into the remit of a new oversight body called the Audit, Reporting and Governance Authority. The ARGA, which would have responsibility for large listed as well as privately owned businesses, would have stronger powers to enforce audit standards, including the ability to order companies to redo their financial accounts.

Thursday’s proposals come after several reviews and studies about the functioning of the U.K. audit sector, triggered by a series of corporate failures.

“It is clear from large-scale collapses like Thomas Cook, Carillion and BHS [British Home Stores] that Britain’s audit regime needs to be modernized with a package of sensible, proportionate reforms,” Business Secretary Kwasi Kwarteng said, according to the release.

In Germany, lawmakers are currently discussing whether to give companies’ supervisory boards enhanced rights, strengthen auditor independence and overhaul BaFin, the country’s market watchdog, after last year’s Wirecard AG scandal.

Under the proposals, German companies would be forced to rotate auditors every 10 years. Professional-services firms would have to separate their auditing and consulting businesses, mirroring the U.K. proposal. Auditors would bear extended liability and face harsher penalties in cases of misconduct, according to the German draft legislation.

The U.K. government, which hasn’t introduced a legislative proposal yet, also is readying new reporting requirements for auditors and company directors around detecting and preventing fraud. Companies would have to add clauses to executive contracts that would require bonuses be returned in the event of failures up to two years after any award was made. Large companies would be required to hold off on paying dividends and bonuses when at risk of insolvency, the paper said.

Directors would publish resilience statements describing how their company is navigating short- and long-term risks, including the fallout of climate change, the government said. Going forward, auditors would be able to measure companies’ nonfinancial performance in areas such as climate-protection targets, the release said.

Deloitte, E&Y, KPMG and PwC said they welcomed the government consultation, which will last 16 weeks. The comment period allows businesses and the public to provide their views on issues such as whether shareholders should vote on companies’ audit policies or whether to introduce a new set of enforceable audit principles.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on March 26, 2021

Covid-19 Relief Law Gives Companies More Time to Fund Pensions By Mark Maurer | March 23, 2021

Topics: Pension Funds, Coronavirus Summary: The new Covid-19 relief package just signed into law will help companies with defined-benefit pension plans. The plan extends the time from seven years to 15 years over which current plan deficits must be funded. The law assists “struggling multiemployer pensions, which are jointly run by unions and companies. The law creates a more predictable and favorable basis for measuring the liabilities that ultimately determine the funding obligation….” The stock market boom has left many companies’ pension plans in a healthier position. “The funding level of single-employer plans sponsored by S&P 500 companies rose roughly 4.7 percentage points to 91.5% at the end of 2020, compared with the previous year….The funded status has since climbed to 95.3% as of Feb. 28.” Some companies are winding down pensions so won’t use the new flexibility available under the relief plan. Contributing less now simply extends the gap between assets available and funding required to terminate them. Classroom Application: The article may be used when discussing pension plans accounting an advanced financial reporting class. The article focuses on federal pension funding requirements and one question ensures that students understand the difference between funding and financial reporting requirements. Questions: What laws establish funding requirements for U.S. pension plans? Cite your source for this answer whether from your textbook or elsewhere. Do the pension funding requirements establish the financial reporting requirements for these plans by plan sponsors? Explain your answer and cite authoritative accounting literature. In which industries will companies be most likely to adjust their pension funding requirements under this new law? Why do some companies’ chief financial officers think they may not take advantage of this change in funding requirements?

READ THE ARTICLE

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

 

"Covid-19 Relief Law Gives Companies More Time to Fund Pensions," by Mark Maurer, The Wall Street Journal,  March 23, 2021 ---
https://www.wsj.com/articles/covid-19-relief-law-gives-companies-more-time-to-fund-pensions-11616491801

Single-employer plan sponsors will have 15 years—up from seven now—to cover pension deficits, and flexibility in how money earmarked for 2019 and 2020 pension contributions can be used

Finance chiefs will get more time to cover their companies’ pension deficits and more flexibility with the cash they have put into retirement plans as part of the new Covid-19 aid package.

Market disruptions caused by the pandemic and near-zero interest rates have made it harder for companies to manage their pension obligations, especially plans sponsored by a single employer. Low interest rates contribute to higher liabilities, increasing the amount of funding that companies need to set aside for pension obligations.

Single-employer plans often promise to pay out fixed sums to retirees, sometimes over several decades, similar to other defined-benefit plans. More than 20,000 U.S. companies offer these single-employer plans, according to consulting firm Mercer LLC.

Many of these plans, which are largely underfunded, have fared well with the rise in the stock market over the past few months. The funding level of single-employer plans sponsored by S&P 500 companies rose roughly 4.7 percentage points to 91.5% at the end of 2020, compared with the previous year, professional-services firm Aon PLC said. The funded status has since climbed to 95.3% as of Feb. 28. The estimated aggregate deficit of single-employer pensions sponsored by S&P 500 companies was $102.1 billion as of Feb. 28, tumbling 72.8% from the prior year, Aon said.

 

But as interest rates are expected to remain low for a while, companies need long-term support to continue making contributions to their plans and to cover any potential future market volatility or cash crunch, advisers say.

The $1.9 trillion aid package that President Biden signed into law earlier this month helps sponsors of single-employer plans hold on to cash and delay paying off any deficit in their plan over a 15-year period vs. the current seven-year period. It also set aside about $86 billion for struggling multiemployer pensions, which are jointly run by unions and companies.

The law creates a more predictable and favorable basis for measuring the liabilities that ultimately determine the funding obligation, said Jonathan Price, a senior vice president at the Segal Group Inc., an employee-benefits consulting firm.

Companies can use as a minimum, a corporate bond yield of roughly 5%, to determine the value of their pension liabilities. Before the law, there was no such minimum. The floor rate, which is higher than the current market rate, is expected to reduce short-term contributions that companies need to make for their plan.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on March 26, 2021

Why Finance Executives Rely on Supply-Chain Finance: A Guide to the Financing Tool By Mark Maurer and Kristin Broughton | March 22, 2021

Topics: Disclosure, Supply Chains, Accounts Payable Summary: In supply-chain finance, a bank pays its customer’s vendor, but the customer (debtor) pays the bank at a later due date. The early payment is made at a discounted amount, such as happens when companies offer discounts to encourage early payments. Banks keep the discount difference when they are repaid the full amount owed by the debtor. The system allows debtors to extend repayment terms without requesting an extension of terms directly from the vendor. As described in the article “large manufacturers, such as airplane manufacturer Boeing Co., and other global companies, including soft drinks producer Keurig Dr Pepper Inc., are avid users of supply-chain financing to extend payment terms. But there tends to be a barrier to entry for some businesses, especially those with weaker credit ratings.” Classroom Application: The article may be used in a managerial accounting class or in a financial reporting class discussing disclosure requirements. There has been limited disclosure by companies about their use of this tool, but the recent Greensill Capital insolvency filing, linked in the article and in questions, has led to concerns about the lack of disclosure. Questions: What types of entities provide supply chain financing? Summarize your understanding of how supply chain financing operates. What is Greensill Capital? What problem developed at Greensill Capital? You may refer to the related article linked in the second paragraph or available directly at https://www.wsj.com/articles/greensill-capital-tumbles-into-insolvency-spreading-financial-pain-11615216346 How does the Greensill Capital problem lead to questions about disclosure by companies using this tool? What advantages do chief financial officers (CFOs) cite as reasons for using supply chain finance? Refer to the question above. Which of these are operational advantages and which are financial reporting advantages?

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

 

"Why Finance Executives Rely on Supply-Chain Finance: A Guide to the Financing Tool," by Mark Maurer and Kristin Broughton, The Wall Street Journal, March 22, 2021 ---
https://www.wsj.com/articles/why-finance-executives-rely-on-supply-chain-finance-a-guide-to-the-financing-tool-11614820691

Companies are setting up programs to improve working capital and cut costs while disclosing few details

The struggles of Greensill Capital have shone a light on the increasing use of supply-chain financing, a tool that gives companies the ability to extend their payment terms to vendor

Regulators and standard-setters are closely watching if and how companies disclose their use of the financing tool, which has come into focus amid the recent problems seen at Greensill, a major provider of supply-chain finance. The firm filed for insolvency earlier this month and is facing regulatory scrutiny.

How Does Supply-Chain Finance Work?

As part of a supply-chain finance agreement, banks provide funding to pay a company’s supplier of goods and services. The supplier is then paid earlier—but less—than it would be paid without the agreement.

For small suppliers, the financing can provide money for their operations without having big companies extend their payment terms, potentially by months.

The company pays the money it owes the supplier to the bank, often later than it would have paid its supplier. The bank keeps the amount it doesn’t pay to the supplier in exchange for its services.

Supply-chain finance has been around for decades. Companies started using it more frequently after the 2008 financial crisis, when many businesses wanted to preserve cash on-hand by extending payment terms with vendors.

Since then, the market for this short-term borrowing tool has expanded, with banks and other providers offering digital tools to help companies manage related processes, such as procurement, according to professional services firms KPMG LLP, PricewaterhouseCoopers LLP and the Hackett Group Inc.

Which Companies Can Use Supply-Chain Finance?

Large manufacturers, such as airplane manufacturer Boeing Co., and other global companies, including soft drinks producer Keurig Dr Pepper Inc., are avid users of supply-chain financing to extend payment terms.

But there tends to be a barrier to entry for some businesses, especially those with weaker credit ratings. These ratings help determine the discount rate applied to the payment the supplier receives. The better the credit rating of a company, the cheaper it is for the supplier to participate in the program.

“Smaller companies have to just deal with the fact that their discount rates are fairly high,” said Rudi Leuschner, associate professor of supply chain management at Rutgers University.

It is unclear how many companies have supply-chain finance programs. Twenty-seven companies in the S&P 500 disclosed in their 2020 annual reports they are using the tool, up from 13 the previous year, according to data provider MyLogIQ. Between 2015 and 2019, an average of about eight companies in the S&P 500 said they used supply-chain finance.

Who Are the Providers?

Large financial institutions, including JPMorgan Chase & Co. and Citigroup Inc., are the most frequent providers of supply-chain financing. Banks provide capital and run the programs for companies.

Financial technology and logistics firms in recent years also have started to provide such funding, sometimes through a partnership with a bank, along with other invoicing and procurement services, advisers at KPMG, PwC and Hackett said.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 2, 2021

Democrats Weigh Increases in Corporate, Personal Income-Tax Rates By Andrew Duehren and Richard Rubin | March 24, 2021

Topics: Individual Income Tax, Corporate Income Tax Summary: The Biden Administration has achieved passage of the Covid-relief bill and now is proposing two additional legislative proposals. “One would be aimed at infrastructure projects such as roads, bridges and water systems, while a second would focus on education and antipoverty measures. The plan also breaks the tax increases into two pieces, proposing to raise taxes on businesses as part of the infrastructure bill and reserving tax increases on high-income households for the second package….” Classroom Application: The article may be used in either an individual or a corporate/entity income tax class. Questions: Why is the Biden administration proposing increased taxes on businesses and individuals? Why do you think that proposed tax increases are divided between those affecting businesses and those affecting individuals? What concerns do members of Congress express about the tax proposals? Will the Biden Administration proposal likely be voted on by Congress as the proposed legislation now stands? Explain your understanding the process likely to occur in Congress. What concerns do members of Congress express about the tax proposals?

READ THE ARTICLE

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

 

"Democrats Weigh Increases in Corporate, Personal Income-Tax Rates, by Andrew Duehren and Richard Rubin, The Wall Street Journal, March 24, 2021 ---
https://www.wsj.com/articles/democrats-weigh-increases-in-corporate-personal-income-tax-rates-11616589155

President Biden seeks to raise revenue for sweeping infrastructure and education plans

WASHINGTON—Democrats are considering a variety of possible tax increases, including boosting the corporate tax rate and the top marginal income-tax rate on individuals, to raise revenue as President Biden completes his infrastructure, climate and education proposal.

After the recently signed $1.9 trillion coronavirus-relief package, White House officials have crafted a preliminary plan for the next legislative push, a roughly $3 trillion proposal split into two parts. One would be aimed at infrastructure projects such as roads, bridges and water systems, while a second would focus on education and antipoverty measures.

The plan also breaks the tax increases into two pieces, proposing to raise taxes on businesses as part of the infrastructure bill and reserving tax increases on high-income households for the second package, according to people familiar with the discussions.

The White House said Wednesday that Mr. Biden and his economic team are finishing the plan over the next several days, ahead of a speech Mr. Biden will make next Wednesday in Pittsburgh to discuss the plan.

Once the White House completes its proposals, lawmakers will have their own ideas about spending, taxes and the sequencing and packaging of the legislative agenda. Democrats in Congress have started discussions about tax increases, which they back as a way to pay for programs and combat inequality.

House Speaker Nancy Pelosi (D., Calif.) said raising the corporate tax rate and increasing taxes on capital gains were possible options during a meeting last week, according to a senior Democratic aide. Senate Majority Leader Chuck Schumer (D., N.Y.) said he had a lengthy discussion with White House officials last weekend about various options.

The next legislative push faces a number of headwinds on Capitol Hill, and it is likely to be much more challenging to complete than the pandemic-relief law. Many Republicans oppose significant new spending and broad tax increases, while some Democrats are skeptical of linking complicated tax-policy changes with what they see as urgent needs such as infrastructure.

“Trying to tie something as big as real tax reform to this would just bog down the process and not get the funding out to the economy as quickly as necessary,” said Rep. Mark Pocan (D., Wis.), a leader among House progressives.

Republicans are already mobilizing against the potential tax increases, arguing that they would hurt the economy as it recovers from the coronavirus pandemic. GOP lawmakers have said they could back a narrow infrastructure package that doesn’t make significant increases to the deficit.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 2, 2021

Tesla Versus the Taxman By Spencer Jakab | March 26, 2021

Topics: Tax Credits, Individual Income Tax, Sales Taxes Summary: “By encouraging customers to buy with bitcoin and exhausting its tax credits, Tesla could see its customers facing a far heftier tax bill….Now it has sold so many cars that customers no longer qualify for the federal subsidy. That matters more now that it is competing in the increasingly crowded mass-market category. Buyers will face an even bigger hit if they choose to pay with bitcoin since the IRS will treat this as a sale of the recently appreciated asset….The upshot is that, compared with, say, a rebate-eligible Hyundai Ioniq EV with an almost identical sticker price paid for in legal tender, the Tesla Model 3 buyer using appreciated bitcoin would pay 53% more after taxes.” Classroom Application: The article may be used in a financial reporting course discussing sales taxes or in an individual income tax class, particularly the issue of using an appreciated asset to make a purchase. Questions: What is a tax credit? What happened to the U.S. federal tax credit for purchasers of Tesla electric vehicles? You may follow the link in this article to another for help with this answer (or go directly to https://www.wsj.com/articles/tesla-turns-to-china-with-u-s-tax-credit-ending-11577810430). Refer to the same related article at https://www.wsj.com/articles/tesla-turns-to-china-with-u-s-tax-credit-ending-11577810430. Why does a purchase of a Hyndai Ioniq EV qualify a buyer for a federal tax credit? Tesla Inc. accepts Bitcoin in payment for its vehicles. Why would using that form of payment cost a Tesla buyer even more in taxes than would be paid by a car buyer using U.S. dollars? Will these tax differences likely be visible to a buyer at the time of purchasing a vehicle? Explain your answer.

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

 

"Tesla Versus the Taxman," by Spencer Jakab, The Wall Street Journal, March 26, 2021 ---
https://www.wsj.com/articles/tesla-versus-the-taxman-11616767630

By encouraging customers to buy with bitcoin and exhausting its tax credits, Tesla could see its customers facing a far heftier tax bill

As much as it tries to be the company of the future, Tesla TSLA -3.95% shares a present-day problem with the rest of us—it has to deal with the Internal Revenue Service.

Tax rules were a boon when it was almost the only electric-vehicle game in town. Its well-to-do customers got a $7,500 federal rebate and many states added to that. Now it has sold so many cars that customers no longer qualify for the federal subsidy. That matters more now that it is competing in the increasingly crowded mass-market category.

Buyers will face an even bigger hit if they choose to pay with bitcoin since the IRS will treat this as a sale of the recently appreciated asset. Say a buyer from California pays for its entry-level Model 3 sedan with $33,690 in bitcoin purchased three months ago. At the marginal tax rate of the average Model 3 buyer according to automotive research firm Hedges & Co., she would owe $4,056 at the federal level and $1,572 to California for short-term capital gains. Starting this year, cryptocurrency ownership has to be reported on federal returns under penalty of perjury.

The upshot is that, compared with, say, a rebate-eligible Hyundai Ioniq EV with an almost identical sticker price paid for in legal tender, the Tesla Model 3 buyer using appreciated bitcoin would pay 53% more after taxes.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 2, 2021

JPMorgan, Salesforce Join Growing List of Firms Dumping Office Space By Konrad Putzier | March 30, 2021

Topics: Real Estate, Accounting Careers, Coronavirus Summary: CBRE Group Inc. reports that office space available for sublease at the end of 2020 was up 40% from the end of 2019 and is at a record level not seen since 2003. “While sublet space increases during every recession as struggling businesses look to cut costs, firms typically add office space when the economy picks up again. But this time many of the companies ditching real estate are doing well financially….” The impact of the sublease market on overall rental rates is discussed in the article. Classroom Application: While the article focuses on real estate trends, questions ask students to consider the career implications of the shift towards more working from home versus working in an office environment, particularly in large public accounting firms. Questions: What recent factors have changed the demand for large companies’ leased office space? Why does the length of large companies’ lease terms impact their ability to influence rental market rates? Do you think this change in demand for office space is particular to an industry? Explain your answer. Are you planning to go to work for a large public accounting firm in a major U.S. city? Whether you are or not planning to do so, do you think the real estate developments reported in this article describe anything to do with your career? Explain your answer. Do you think there could be a strategic change in operating businesses in the future after reducing office space because of staff working from home? Explain your answer.

READ THE ARTICLE

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

 

"JPMorgan, Salesforce Join Growing List of Firms Dumping Office Space," by Konrad Putzier, The Wall Street Journal, March 30, 2021 ---
https://www.wsj.com/articles/jpmorgan-salesforce-join-growing-list-of-firms-dumping-office-space-11617096603

Rise of remote work means demand for office space could be permanently lower for some companies

JPMorgan Chase & Co., Salesforce. com Inc. and PricewaterhouseCoopers are among the major firms looking to unload big blocks of office space, the latest sign that remote work is hurting demand for this pillar of commercial real estate.

Large companies typically sign office leases for a decade or longer, giving them few options for reducing their footprint beyond trying to sublease floors to other tenants. At the end of 2020, 137 million square feet of office space was available for sublease across the U.S., according to CBRE Group Inc. That is up 40% from a year earlier and the highest figure since 2003.

While sublet space increases during every recession as struggling businesses look to cut costs, firms typically add office space when the economy picks up again. But this time many of the companies ditching real estate are doing well financially; they say they need less space because they plan for more employees to work at least part time from home even after the pandemic is over.

That raises the prospect that demand for office space could be permanently lower at some companies, much like the rise of e-commerce has been driving down demand rents for street-level retail.

This flurry of subleasing activity is already causing fresh headaches for landlords. Office rents for more expensive space, including concessions, fell around 17% over the past year in New York and San Francisco and 13% nationwide, according to real-estate firm JLL.

 

Sublease space usually comes with an additional 25% discount, said David Falk, president of the New York tri-state region at real-estate services firm Newmark. And since firms can sublease on short notice, rising sublease availability can serve as an early indicator of the true state of the office market.

The speed at which sublet availability has been rising is “astonishing,” said Phil Ryan, director of U.S. office research at JLL.

Some companies are merely testing what they can get by subletting and may ultimately decide to keep their space, brokers say. But by adding to office supply when there are few takers, they are helping push down rents across cities and at times could compete for business with their own landlords.

JPMorgan started marketing 700,000 square feet of office space in lower Manhattan earlier this year. That is the largest block of space available for sublease in Manhattan, according to real-estate services firm Savills Inc.

PricewaterhouseCoopers and Yelp Inc. have also listed space in New York for sublease, brokers say.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 9, 2021

Companies Merging With SPACs Face Challenges Around Valuations, Controls By Mark Maurer | April 13, 2021

Topics: Disclosure Requirements, Valuation, Internal Control Summary: The article describes many accounting and internal control steps necessary for companies to undertake as they prepare to become public entities. Doing so through acquisition by a special purpose acquisition company (SPAC) means the timing becomes tight, typically within 2 years. “Through April 11, [2021,] 23 companies combined with SPACs in the U.S., up from 19 during the prior-year period…last year, 54 of these transactions closed, totaling $76.7 billion in value…. More than 380 U.S.-based SPACs are currently scouting for a merger partner….” Classroom Application: Discussion in the article is centered around disclosure and internal control changes, as well as business combination valuations, that must be implemented by chief financial officers of start up companies planning to go public. It may be used in a financial reporting or accounting information systems course. Questions: What is a SPAC? According to the article, why do companies undertaking mergers with SPACs face financial reporting challenges? What evidence in the article shows that startup entities going public by merging with SPACs face greater financial reporting challenges than do those which go through a traditional public offering? In your answer, explain your understanding of a “traditional process” for going public. What are the major areas of financial accounting and reporting that typically pose challenges for companies going public, particularly those doing so by merging with a special purpose acquisition company (SPAC)? What are internal controls? Why do companies undertaking initial public offerings, particularly by merging with an SPAC, face challenges in implementing sufficient internal controls? How do “public companies and their accountants…attest that they have adequate internal controls over financial reporting”?

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

 

"Companies Merging With SPACs Face Challenges Around Valuations, Controls," by Mark Maurer, The Wall Street Journal, April 13, 2021 ---
https://www.wsj.com/articles/companies-merging-with-spacs-face-challenges-around-valuations-controls-11618350611

CFOs have to navigate accounting and reporting issues around SPAC deals as regulators loom

Finance executives at businesses merging with special-purpose acquisition companies face hurdles preparing for valuation work and setting up internal controls within a short space of time, as U.S. regulators ramp up their scrutiny of such deals.

SPACs, which are in essence large pools of cash, offer private companies a faster route to the public markets compared with other forms of listings such as an initial public offering. Through April 11, 23 companies combined with SPACs in the U.S., up from 19 during the prior-year period, according to data provider Refinitiv. Last year, 54 of these transactions closed, totaling $76.7 billion in value, Refinitiv said.

More than 380 U.S.-based SPACs are currently scouting for a merger partner, Refinitiv said. They usually have to do so within two years of their launch, resulting in tight deadlines for both parties.

Finance chiefs at target companies face a host of accounting challenges. Here are the most important ones.

Disclosures

Companies looking to go public have to update their financial statements to comply with a more complex set of reporting rules compared with those for private entities. Reporting errors or lack of preparation can result in serious consequences, such as having to file financial restatements or facing regulatory enforcement.

Companies are more likely to restate their financial filings in the first two years after a SPAC merger than in later years, according to research firm Audit Analytics. Over the past decade, 11.7% of SPAC transactions resulted in restatements in the first year, followed by 15.7% in the second year, the data show. Restatements fell to an average of 5.3% in years three to five.

By contrast, since 2010, companies involved in mergers and acquisitions had to restate their financial statements in roughly 6.3% of cases during each of the first five years after a deal closed, Audit Analytics said. The difference is largely because companies merging with SPACs face accounting challenges, including internal controls and accounting for financial instruments, that are less common in other deals, said Derryck Coleman, director of research analytics at Audit Analytics.

180 Life Sciences Corp. , a Menlo Park, Calif.-based biotechnology company, in November merged with KBL Merger Corp. IV, a SPAC. About three months after the transaction closed, the combined company restated two sets of financial statements to report previously unrecorded liabilities and add disclosures related to certain liabilities of the SPAC. Total liabilities rose to $6.28 million as of Sept. 30, up from the $4 million reported earlier, according to a filing.

The issues with the SPAC’s financial statements became apparent more than a month after the merger closed, 180 Life Sciences CFO Ozan Pamir said. KBL didn’t immediately respond to a request for comment. “We know that this can happen,” Mr. Pamir said, referring to potential restatements. He declined to comment further.

SPACs usually don’t have assets because they don’t have operations or an underlying business. However, they often have some liabilities as part of their working capital—for example, when they borrow funds to pay for expenses related to the acquisition.

SPACs are required to disclose significant liabilities in their financial statements or footnotes when they go public, said Stephen Moehrle, an accounting professor at the University of Missouri at St. Louis, adding that restatements can hurt the combined company’s reputation.

The Securities and Exchange Commission in recent weeks has urged companies and SPACs to fully grasp and follow accounting and reporting rules. The U.S. securities regulator reviews the disclosures that SPAC sponsors provide when they raise funds as well as the merger documents they file when they combine with a company.

The SEC will likely take a closer look at companies that went public via a SPAC to investigate potential wrongdoing, said Caitlyn Campbell, a partner at law firm McDermott Will & Emery LLP and former SEC enforcement attorney. With the increase in volume of companies merging with SPACs, there is a higher risk that some of them won’t fulfill their obligations under securities laws, she said. The SEC declined to comment.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 9, 2021

Dollar Hits Rough Patch After Strong Start to 2021 By Paul J. Davies | April 9, 2021

Topics: Foreign Currency Exchange Rates Summary: The dollar has been increasing in value against those of the U.S.’s major trading partners except that it has fallen during the first part of April 2021. General economic factors and investor trading factors influencing the current value of the U.S. dollar are discussed in this article. In addition to interest rates and expected economic growth across the globe, financial institutions' currency managers’ holdings are discussed. These holdings are determined based on estimates of expected economic activity around the globe and consequentially also impact currency values. Classroom Application: The article is very useful for introducing foreign currencies in an advanced financial reporting class. Questions: What trends in the value of the U.S. dollar are discussed in this article? What factors in general influence the change in value of the U.S. dollar or any floating currency? Cite your source for this answer whether it be from your textbook or elsewhere. What specific factors discussed in this article are examples of how those general factors are currently impacting the value of the U.S. dollar in since the beginning of 2021? List the specific examples and explain their impact on the value of the dollar. What has happened to the value of the U.S. dollar historically in the month of April? According to the article, why does this trend exist?

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

 

"Dollar Hits Rough Patch After Strong Start to 2021," by Paul J. Davies, The Wall Street Journal, April 9, 2021 ---
https://www.wsj.com/articles/dollar-hits-rough-patch-after-strong-start-to-2021-11617975452

Investors don’t expect the currency’s weakness to last as the U.S. economy outpaces others

The dollar has slipped this month as the Federal Reserve stuck to its message that it won’t raise interest rates soon despite forecasts that the U.S. economy will recover faster than its peers.

The greenback is down about 1.2% against the currencies of its biggest trading partners so far in April. Before a slight rise Friday, the dollar had seen its worst seven-day losing streak since December.

The fall in the greenback interrupts a rally so far this year: The ICE Dollar Index climbed about 4% from early January to the end of March.

The dollar’s weakness is unlikely to last because the U.S. economy is expected to outpace others, according to Oliver Brennan, head of research at TS Lombard in London.

Right now, the U.S. is expected to grow about 2 percentage points more than the eurozone in the year ahead, Mr. Brennan said. The gap hasn’t been that large since early 2017, when the dollar was much stronger against the euro: Back then, $1 bought about €0.94, whereas now it buys €0.84.

The dollar has tended to fall against other currencies in April over the past 10 years, Mr. Brennan said, as a result of disappointing economic data such as gross domestic product.

“There tends to be bad economic surprises in April because of a recent history of winter weakness,” Mr. Brennan said. “Investors tend to end up not optimistic enough at the start of the year and then too optimistic by April.”

But the dollar has fallen this month despite some strong economic data. That might be due to the fact that Covid-19 and the sudden shutdown of the economy last year has made this year’s economic indicators more difficult to set in context.

Other investors and analysts expect the dollar to weaken further as other countries get a grip on Covid-19, roll out their vaccination programs and start to reopen their economies.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 9, 2021

After Wirecard, Germany’s Proposed Audit Overhaul Worries Finance Executives By Nina Trentmann | April 8, 2021

Topics: Auditing, Regulation Summary: The article describes the situation facing auditors in Germany in the aftermath of the Wirecard AG failure. Germany has proposed legislation that is aimed at improving audit quality and competition in the profession. But financial executives, auditors, and other financial reporting experts are concerned that the legislation may have unintended consequences which do more harm than good. Parallels to the market circumstances in the U.S. for audit services are discussed (e.g., dominance by the Big 4 with smaller firms desiring to compete; status as a regulated profession; and legal action following a crisis similar to the developments following the Enron collapse in the U.S.). Classroom Application: The article may be used in an auditing or international accounting class. Questions: What is the Wirecard AG scandal? You may use the links in the article to assist with your answer. Who is quoted in the article as reacting to the proposed German legislation to increase regulation over the audit profession? What are the concerns expressed by leaders in Germany’s finance and accounting industry about the newly proposed regulation? As a reaction to an accounting scandal and audit failure, is the proposed legislation similar to a situation in the U.S. in the past? Explain your answer. Do you think it is important to understand these auditing profession developments in Germany if you are planning to enter the profession in the U.S.? Explain your answer.

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

 

"After Wirecard, Germany’s Proposed Audit Overhaul Worries Finance Executives," by Nina Trentmann, The Wall Street Journal,  April 8, 2021 ---
https://www.wsj.com/articles/after-wirecard-germanys-proposed-audit-overhaul-worries-finance-executives-11617868813

Proposed legislation calls for higher fines for audit firms and more oversight of regulator BaFin

Auditors and finance chiefs of some of Germany’s biggest businesses are worried that a new regulatory proposal intended to improve audit quality in the wake of the Wirecard AG scandal will lead to higher costs and less competition.

German lawmakers currently are debating draft legislation for the so-called Act to Strengthen Financial Market Integrity. The law is expected to pass over the next few months, ahead of the country’s national elections in the fall.

The current proposal stipulates that audit firms pay higher fines for wrongdoing and auditors themselves take unlimited personal liability if found grossly negligent. Companies face a mandatory change of auditors in certain cases and are required to rotate audit firms every decade. The draft legislation also suggests stricter supervision of the banking regulator BaFin.

 

The proposed law, which was drafted in a matter of weeks, comes after the disclosure last June that Wirecard, a once highflying electronic-payments company, had a $2 billion accounting hole. This triggered various investigations into the company, its auditor Ernst & Young, and how regulators missed it. Companies and auditors said they welcome the intent of the proposed law but worry that rules are being made even before investigations into what went wrong at Wirecard are complete.

“In its current version, the draft law contains provisions whose effects are more than problematic,” said Luka Mucic, chief financial officer of German software giant SAP SE.

Mr. Mucic is among 31 CFOs of German companies who sent a letter in February to the government voicing their concerns about some of the clauses of the planned legislation, including the requirement that a company auditor be removed in cases of perceived conflicts of interest. Such instances can occur, for example, when an audit firm reviews a company’s financial statements and another arm of the firm provides nonaudit services such as tax consulting to a company executive, potentially in another country.

“It would make sense to wait for the findings and results before hastily drafting a new law,” said Andrea Bruckner, a member of the executive board at BDO, a professional services firm.

Germany’s auditing landscape looks similar to that of the U.S. and the U.K., with the Big Four companies—Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers—dominating the market. There are several smaller international and local players that are eager to gain market share, but they worry that the proposed rules could hinder them.

CFOs, especially those at companies with dozens of foreign subsidiaries, point to the practical challenges of switching auditors over a perceived conflict of interest. A sudden order to change audit firms while the audit process is ongoing could be very distracting and endanger companies’ ability to present audited financial statements and pay dividends. “I don’t think this is feasible,” said Ralf Thomas, CFO of industrial company Siemens AG.

Mr. Thomas and other executives also fear that the proposed law could result in higher audit charges. If audit firms take on increased liability, as suggested by the proposed law, it could potentially drive up their insurance costs, which could then be passed on to corporate clients.

The changes could result in increased market concentration, with the numbers of small- and medium-size audit firms shrinking, said Volker Krug, the chief executive of Deloitte in Germany. Deloitte is a sponsor of CFO Journal. EY, PwC and KPMG declined to comment for this article.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 16, 2021

Strained IRS is Key to Biden’s Agenda By Richard Rubin | April 20, 2021

Topics: Internal Revenue Service Summary: The article describes an Internal Revenue Service (IRS) overhaul proposed by Commissioner Charles Rettig in a six-year turnaround plan presented to Congress. The beginning of the article delineates the employee losses and other agency challenges due to inconsistent funding. Needs for specialized staff capabilities and more modern technologies are explained. The article further details the challenges faced in enforcement actions such as those behind recent tax court victories against Coca-Cola Co.; Whirlpool Corp.; and promoters of land-rights tax-easement syndicates Regarding the latter issue, the article shows that promoters of these deals “flood the system with transactions, setting aside money in each deal to fight the government and knowing the IRS can’t challenge them all.” The article also links to an article estimating uncollected taxes among Americans with the highest incomes. Classroom Application: The article may be used in any tax class to discuss the functioning of the IRS. It also may be used in a governmental accounting course for the same purpose. The link to the article detailing the challenges faced in enforcement actions against Coca-Cola Co.is https://www.wsj.com/articles/coca-cola-improperly-shifted-profits-abroad-tax-court-rules-11605738514; it was covered in this review in November 2020. The link to the article about enforcement actions against promoters of land-rights tax-easement syndicates is http://www.wsj.com/article/SB11707335554515884908804582523441786614110.html; it was covered in this review in January 2017. Questions: Summarize the points included in the article about a proposal to revamp the Internal Revenue Service by its current commissioner Charles Rettig. You must glean those points from throughout the article. In support of the Internal Revenue Service (IRS) request for Congressional funding of its plan, IRS leaders say they have shown that this is a “can-do” agency. What has the IRS accomplished to support this assessment of its operations? The article references an academic study that estimates underpayment of taxes by highest income individuals in the U.S. Why is it challenging for the IRS to collect these tax payments? Might you as an accounting graduate be interested in working for the Internal Revenue Service? Why or why not?

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

 

"Strained IRS is Key to Biden’s Agenda," by Richard Rubin, The Wall Street Journal,  April 20, 2021 ---
https://www.wsj.com/articles/biden-agenda-relies-on-shrunken-strained-irs-11618928830  

WASHINGTON—If President Biden is to implement his ambitious economic agenda, he will have to rely on a beleaguered arm of the government: the Internal Revenue Service.

The U.S. tax agency, shrunken after a decade of budget cuts, is sending $1,400 payments to most Americans, the third such logistical challenge in a year. Last month’s $1.9 trillion relief law requires the IRS to create a system outside of annual tax filings for issuing child tax credit payments. And, further complicating an already messy filing season in which the April 15 deadline was pushed back to May 17, the agency must implement a retroactive change to taxation of unemployment benefits received in 2020.

More challenges await. The Biden administration and congressional Democrats are considering tax increases on companies and top earners that would require significant implementation and enforcement. They also hope to collect hundreds of billions of dollars by expanding the IRS and beefing up audits.

Getting all that done likely will require a transformation of the U.S. tax agency. Although the IRS still inspires fear and anger in many, it lost a net 15% of its employees between 2010 and 2020, including thousands who pursued tax avoidance and answered taxpayers’ queries. It opens about half as many criminal investigations as in 2010. In fiscal 2019, the percentage of individuals audited reached its lowest level in at least 40 years.

The result: At least $381 billion in taxes owed goes uncollected annually, according to agency estimates for tax years 2011 through 2013. Inflation and budget cuts since then mean the current number is likely much larger, and IRS Commissioner Charles Rettig said last week that it could be as high as $1 trillion annually, which is more than the annual defense budget.

Getting more than half that missing money would require much more intrusive enforcement. But picking up the easiest quarter could yield as much revenue as Mr. Biden’s proposed corporate tax-rate increase. To the agency’s backers, this is a no-brainer, the rare government program that more than pays for itself.

IRS officials have prepared a six-year turnaround plan to modernize aging technology and improve customer service. Mr. Rettig, a veteran California tax lawyer who was appointed by then-President Donald Trump and whose term lasts until November 2022, has been seeking billions to implement it.

Democratic control of the White House and Congress ensures political support for funding that plan, the new law’s provisions and tougher enforcement—for now. The relief law gives the IRS about $2 billion for implementation and modernization. Agency officials say that money will accelerate long-overdue computer revamps, but emphasize that they need support to continue, which is never a certainty. The Biden administration’s first budget calls for another $1.2 billion boost over baseline funding, plus $417 million as part of a multiyear increase in enforcement.

“A healthy IRS is very important to a healthy country,” said Jeffrey Tribiano, the deputy commissioner who oversees information technology and back-office operations. “We need consistent, timely and multiyear funding, and we need increases.”

In recent years, Republicans haven’t been pushing to further shrink the IRS, but they haven’t voiced support for Democrats’ drive to dramatically expand enforcement. GOP lawmakers backed the recent increases in IRS funding and last year’s one-time boosts to implement the pandemic response.

A turnaround takes more than money. It is a management challenge as complex as the IRS itself. The agency is a collections company, police force, law firm, financial institution, call center and high-security information-technology shop rolled into one. It operates with political constraints no private company faces, such as budgets that fluctuate with election results and pushback from influential businesses large and small when it ramps up enforcement.

“If I hadn’t lived in Washington for 50 years, I would say, ‘Wow, this is the moment, definitely,’ ” said Charles Rossotti, a former IRS commissioner who has urged sustained attacks on tax avoidance. “I’m a little more cautious.”

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 16, 2021

Tax Bills May Go Up for Big Companies. It Will Be Hard to Tell How Much. By Mark Maurer | April 20, 2021

Topics: Disclosure, Corporate Taxes, Accounting For Income Taxes Summary: The opening to the article reads: “U.S. companies might have to pay more in taxes to fund President Biden’s $2.3 trillion infrastructure plan. How much they owe and to whom will likely remain a mystery. Public companies in America disclose their total tax payments and their tax rate. But they have resisted plans that would require them to break down how much they pay to the federal government, states or foreign countries.” The article clearly discusses disclosure requirements related to taxes using the headings “What Do Companies Disclose About Taxes?...What Are Standard-Setters and Regulators Doing?... Why Don’t Companies Want to Disclose More About Their Taxes?...[and] How Does Tax Accounting Complicate Disclosure?” It also references the proposed 28% statutory corporate tax rate and compares the U.S. rate to other economically advanced countries’ statutory tax rates. Classroom Application: The article is may be used either in an entity taxation or financial reporting course. It is an excellent one to introduce disclosure requirements in accounting for income taxes. Questions: According to the article, how are U.S. corporations’ taxes described in financial statements? Access the FASB Accounting Standards Codification. Identify the section requiring these disclosures. What changes are proposed by the Biden Administration related to taxation of U.S. corporations? Why do you think investors may want to know more details from financial statement disclosures as these corporate tax changes occur? What information is being provided by corporations to tax authorities but currently is not available to investors in those corporations?

READ THE ARTICLE

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

 

"Tax Bills May Go Up for Big Companies. It Will Be Hard to Tell How Much," by Mark Maurer, The Wall Street Journal, April 20, 2021 ---
https://www.wsj.com/articles/tax-bills-may-go-up-for-big-companies-it-will-be-hard-to-tell-how-much-11618911003

Public companies aren’t required to disclose the amount of taxes they pay in each of the states or countries where they operate

U.S. companies might have to pay more in taxes to fund President Biden’s $2.3 trillion infrastructure plan. How much they owe and to whom will likely remain a mystery.

Public companies in America disclose their total tax payments and their tax rate. But they have resisted plans that would require them to break down how much they pay to the federal government, states or foreign countries. Businesses say the additional disclosure would be costly and potentially misleading.

“This is an area that most companies would prefer to keep lurking in the shadows, especially those that are not paying their fair share of taxes, so the less details the better,” said David Zion, head of Zion Research Group, an accounting and tax research firm that serves investors.

Corporate taxes are in the spotlight right now because President Biden’s infrastructure proposal calls for boosting the corporate tax rate to 28% from the current 21%.

The plan also sets a 15% minimum tax on companies with income of more than $2 billion. The tax would target firms that report large profits but low tax payments. About 180 U.S. companies meet the income threshold and an undisclosed 45 would have to pay the tax, according to Treasury estimates.

Here is what we do know about companies’ taxes and why we don’t know more.

What Do Companies Disclose About Taxes?

Public companies under U.S. Generally Accepted Accounting Principles have to disclose cash taxes they pay during a particular period. Many businesses choose to give an annual figure instead of a quarterly one because the rules don’t specify the period. The figure is usually disclosed at the bottom of the companies’ statement of cash flows or in the footnotes.

Companies also have to provide their pretax net income for U.S. and foreign operations as well as their tax expense or benefit in the income statement. Businesses don’t have to break out their foreign operations by country. They also tally up their current and noncurrent deferred tax assets or liabilities on the balance sheet.

Companies under U.S. GAAP must give an effective tax rate, reconciling their domestic statutory rate with their actual tax expense. The effective tax rate, which they usually provide in the footnotes, is essentially the ratio between their tax expense and their pretax income, or the profit they disclosed to investors. Companies don’t need to spell out which business activities and jurisdictions the total tax expense is attributable to, said April Little, a partner at professional-services firm Grant Thornton LLP.

America’s disclosure requirements on corporate taxes are similar to those in other countries because U.S. GAAP rules on this matter are closely aligned with International Financial Reporting Standards, or IFRS, which are used in about 165 jurisdictions around the world.

Still, companies’ international operations often muddy the picture. “Once you start adding in incremental foreign jurisdictions, you may have a preferential or favorable tax structure in a particular jurisdiction that substantially reduces the amount of tax that you might pay there,” Ms. Little said.

The Treasury Department in 2016 began forcing U.S. multinational companies with annual global revenues above $850 million to provide certain tax and other financial information on a country-by-country basis. Tax authorities in more than 90 countries have a similar requirement, which was first proposed by the Organization for Economic Cooperation and Development. Companies only have to disclose this information to the Internal Revenue Service or its local equivalent, but not in publicly accessible filings.

Continued in article

Teaching Case From The Wall Street Journal Weekly Accounting Review on April 16, 2021

FASB Gives Certain Companies an Accounting Break on Lease-Contract Losses By Mark Maurer | April 14, 2021

Topics: Lease Accounting Summary: NOTE: Instructors may want to exclude this summary before distributing to students. At its meeting on April 14, 2021, the Financial Accounting Standards Board decided that a lessor should classify a lease with variable lease payments that do not depend on an index or a rate as an operating lease at lease commencement if: 1. the lease would have been classified as a sales-type lease or direct financing lease in accordance with the classification criteria paragraphs 842-10-25-2 and 25-3, respectively; and, 2. the lessor would have recognized a selling loss at lease commencement. This article reports on this FASB development. It describes circumstances under which lessors require variable lease payments that are not tied to an index, e.g. electric companies that charge customers based on their electricity usage and office-equipment and medical-device companies that charge lessees based on usage of printers or magnetic resonance imaging machines. Classroom Application: The article may be used when discussing lessor accounting and variable lease payments for either lessors or lessees in an advanced financial reporting or graduate level class. This Board Decision is available on the FASB website under the Project Update for Leases (Topic 842): Lessors—Leases with Variable Lease Payments. The direct link is https://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdateExpandPage&cid=1176175028424 The new requirements will be implemented on before fiscal years beginning after December 15, 2021 (i.e., in 2022) with earlier application permitted with adoption of ASC Section 842. Questions: Define the terms lessor and lessee. Cite your source from the FASB Accounting Standards Codification for these definitions. What are variable lease payments? In your answer, include a discussion of those tied to an index and those that are not, using both the article and other sources. Cite outside sources that you use. Under what circumstances might a lessor record a loss from a sales-type lease contract? Provide an example entry for lessor accounting at the outset of this type of lease. What relief has the FASB provided to these lessors who face a selling loss in the accounting at the outset of a lease? Access the description of the FASB decision about the leases discussed in this article at https://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdateExpandPage&cid=1176175028424 Describe the accounting at the outset of the lease under the new FASB requirement.

READ THE ARTICLE

Reviewed By: Judy Beckman, Ph.D., CPA, University Of Rhode Islan

 

"FASB Gives Certain Companies an Accounting Break on Lease-Contract Losses," by Mark Maurer, The Wall Street Journal, April 14, 2021 ---
https://www.wsj.com/articles/fasb-gives-certain-companies-an-accounting-break-on-lease-contract-losses-11618435218

Businesses leasing out assets were required to record a loss at the start of certain contracts even if they expected the arrangement to be profitable

The Financial Accounting Standards Board approved a new rule for companies leasing out assets in an effort to eliminate a sometimes sizable accounting loss at the start of certain contracts.

The new standard, approved Wednesday by the U.S. accounting standard-setter, serves as an update to a rule that went into effect for public companies in early 2019 and requires businesses to put operating leases on their balance sheets instead of in footnote disclosures.

Under current accounting rules, lessors have to recognize a loss at the beginning of certain types of leases even if they expect the arrangement to be profitable overall. The requirement was an unintended consequence of past rule alterations, FASB board members said. The rule applies to so-called sales-type and direct-financing lease arrangements involving payments that can change depending on circumstances such as customers’ usage of equipment or property.

For example, electric companies charge customers based on their electricity usage. Office-equipment and medical-device companies often rely on contracts with future payments that fluctuate in size, for example for using printers or magnetic resonance imaging machines, respectively.

The recorded loss does not reflect an actual loss related to the contract the lessor signed, an issue companies may have to explain to analysts or investors, the FASB said. In cases in which the lessor’s contract includes highly variable future payments, the size of the accounting loss could be substantial.

“This accounting doesn’t reflect the reality of the transaction,” board member Gary Buesser said. He added that companies don’t enter agreements “expecting a loss.”

Under the new standard, lessors are no longer required to recognize the accounting loss in those contracts. The benefits of a more accurate presentation of the lease arrangement justify additional costs to implement the changes, the FASB staff said.

Alphabet Inc., which owns Google, among other companies, supported the proposal. Alphabet’s net property and equipment, which includes assets in sales-type leases and other finance leases, totaled $84.75 billion in 2020, up 15% from the previous year, the company reported in February.

Removing the loss requirement would more closely align the FASB with international accounting standards without creating additional operational challenges for companies, Gabor Turschl, the company’s director of technical accounting, wrote in a Dec. 8 letter to the FASB. Alphabet didn’t immediately respond to a request for comment on Wednesday.

The rule change is set to take effect for both public and private companies in fiscal years that begin after Dec. 15, 2021. Companies are permitted to adopt it early, but only if they have already implemented the broader lease-accounting changes. Some private companies have yet to adopt those changes.

The FASB in February decided to pare down its initial October proposal on leases. That proposal for example would have allowed companies leasing assets to recalculate lease liabilities depending on changes in the consumer price index or another economic indicator that affects future lease payments. The FASB said it removed that aspect of the proposal because the change would have gone into effect too late to be useful for companies.

Continued in article

Humor for April 2021

Forwarded by Auntie Bev

ENGLISH IS HARD

01. The bandage was wound around the wound.

02. The farm was used to produce produce.

03. The dump was so full it had to refuse refuse.

04. We polish Polish furniture.

05. He could lead if he would get the lead out.

06. The man decided to desert his dessert in the desert.

07. Since there is no time like the present, he thought it was time to present the present.

08. A bass was painted on the bass drum.

09. When shot at, the dove dove into the bushes.

10. I did not object to the object.

11. The insurance for the invalid was invalid.

12. There was a row among the oarsmen about how to row.

13. They were too close to the door to close it.

 

Forwarded by Auntie Bev

01. My grandchildren will never know the joy of finding a quarter left behind in a pay phone (although the quarter these days does not buy a hamburger or an ice cream shake like in my youth)

02. The older you get the more you appreciate cancelled trips and parties, early nights, thunderstorms, and liquor that's on sale

03. I just went to another room and remembered why I was there --- of course the sink and commode provided some clues

04. When I finish taking a bite I must show the dog who suspects a slight of hand trick.

05. Some people won't admit their faults; I would always own up to my faults if I had any.

06. I don't have any tatoos for the same reason a driver who owns a Ferrari won't stick on bumper stickers.

07. I might wake up and run outside for exercise; I also might wake up and discover I won the lottery; The odds are about the same.

08. Hugh Heffner became a multimillionaire by staying home in his jammies --- that never worked for me.

09. You can fix ignorance but not stupidity;  Quarantines also don't work for stupidity, but they might help ignorance if you make an effort to study.

10. When the cop said I smelled of alcohol, I replied that he was not properly using social distancing.

11. When I was a kid I wanted to be older; This crap is not what I expected.

12. I thought growing old would take longer.

13. Pubs:  The official sun block of Ireland.

14. My wife says I have two faults; I don't listen and something else.

15. I'm so busy I don't know whether I found a rope or lost a horse.

16. Particles making up the universe:  Protons, Neurons, Electrons; Morons

17. The best thing about the old days was that I wasn't good and I wasn't old.

18. Twinkle twinkle little star, point me to the nearest bar.

Video:  Dog hilariously enters high school relay event, wins with ease after wild final sprint ---
https://sports.yahoo.com/dog-enters-high-school-track-field-relay-utah-wins-final-sprint-hilarious-200759024.html

Forwarded by Auntie Bev

If you had to choose between being skinny and drinking a bottle of wine every day would you choose red or white?

My doctor gave me three days to give up drinking --- I chose June 4, July 28, November 3

The teacher gave a demonstration by placing a worm in each of the following:  A glass of water, a glass of beer, a glass of wine, and a glass of whisky
The next day all the worms were dead except of the one in a glass of water
The teacher then asked what lesson was to be learned
Little Mike O'hara radised his hand and asserted"  "People who drink beer, wine, and whiskey don't have worms."

Forwarded by Auntie Bev

Those who jump off a bridge in Paris are in Seine.

A man's home is his castle, in a manor of speaking.

Dijon vu - the same mustard as before.

Practice safe eating - always use condiments.

Shotgun wedding - A case of wife or death.

A man needs a mistress just to break the monogamy.

A hangover is the wrath of grapes.

Dancing cheek-to-cheek is really a form of floor play.

Does the name Pavlov ring a bell?

Condoms should be used on every conceivable occasion.

Reading while sunbathing makes you well red.

When two egotists meet, it's an I for an I.

A bicycle can't stand on its own because it is two tired.

In democracy your vote counts. In feudalism your count votes.

She was engaged to a boyfriend with a wooden leg but broke it off.

A chicken crossing the road is poultry in motion.

If you don't pay your exorcist, You get repossessed

With her marriage, She got a new name and a dress.

The man who fell into an upholstery machine is fully recovered.

You feel stuck with your debt if you can't budge it.

Local Area Network in Australia - the LAN down under.

Every calendar's days are numbered.

A lot of money is tainted - Taint yours and taint mine.

A boiled egg in the morning is hard to beat.

He had a photographic memory that was never developed.

Once you've seen one shopping centre, You've seen a mall.

Bakers trade bread recipes on a knead-to-know basis.

Santa's helpers are subordinate clauses.

Acupuncture is a jab well done.

Forwarded by Auntie Bev

Question: What is the perfect example of Globalization ?

Answer : Princess Diana's death.

Question: How come?

Answer :

An English Princess with an Egyptian boyfriend

crashes in a French tunnel, riding in a

German car

with a Dutch engine,

driven by a Belgian

who was drunk

on Scottish whisky, (check the bottle before you Challenge the spelling),

followed closely by

Italian Paparazzi,

on Japanese motorcycles,

treated by an American doctor, using Brazilian medicines.