Happy Birthday! Microsoft is 35 years old!

From modest beginnings, Microsoft, started by college dropout Bill Gates, gave birth to an entire
industry, changing the way we live and work and became one of the largest software companies on the
planet. As this article points out, not everything has been notable during its history. In particular, look at
this parody video of Clippy, the cute but much maligned animated paper clip introduced with Office 97.
Microsoft turned off the Clippy feature by default in Office XP, promoting it as part of a $30 million
marketing campaign, and removed it altogether in Office 2007.

Questions:

1. What type of journal entry or entries do you think that Microsoft make for the $30 million campaign to silence Clippy?

2. The article talks about Microsoft’s surprising investment when in August 1997, rival company Apple desperately needed cash. Microsoft came to their rescue and bought $150m in stock. What do you see as the reasons for this event?

3. What journal entries do you think Apple would have made in the exchange mentioned in Question 2?
What journal entries would Microsoft have made?

Sources:

YouTube Video. (2006) Annoying Microsoft Paperclip, November 23
(Retrievable online at http://www.youtube.com/watch?v=1zr2-_ap4O8)
Sanjay. (2010) Happy 35th Birthday Microsoft, Access India, August 27.
(Retrievable online at http://www.mail-archive.com/accessindia@accessindia.org.in/msg40506.html)

Investing in Art: How About Some Melted Clocks?

There has been recent momentum in art market investments, despite the recession. The art market is scouring the world for undervalued works by major artists and museums are seeking new material for blockbuster shows.  Amid this, artistic works by Dalí and others are getting longer looks. Interestingly, few artists could reap more from a late-period revival than Dalí. The artist created at least 1,200 paintings between his art-school years in the 1920s and his death in 1989.

Questions:

1. The article mentions that over the past five years, the average price paid at auction for a late-period Dalí has risen from $108,634 to just over $1 million, based on reports by Art Research Technologies, a New York-based consulting firm that tracks auction prices.  Using this information, what percentage increase is this?

2.  As the video mentioned, many corporations invest in these artworks.  Use the information in Question 1 and assume that these average numbers  represent a sale of one Dalí painting from one corporation to another corporation.  What journal entry would the selling corporation make?

3. Use the information in Question 1 and assume that this is an exchange of one corporation selling a Dalí painting to another corporation.  What journal entry would the buying corporation make?

Sources:

Crow, Kelly. (2010). The Lust for Late, The Wall Street Journal, August 13. (Retrievable online at  http://online.wsj.com/article/SB10001424052748704017904575409732613402068.html?mod=WSJ_hp_mostpop_read#project%3DDALI-TL100805%26articleTabs%3Darticle)

WSJ Video with Kelly Crowe (2010). The Lust for Late, August 13. Retrievable online at  http://online.wsj.com/article/SB10001424052748704017904575409732613402068.html?mod=WSJ_hp_mostpop_read#project%3DDALI-TL100805%26articleTabs%3Dvideo)

Saving Money through Social Media

The recession has bred a new type of coupon: the group coupon. In recent months, several Web sites have launched nationwide giving customers discounts on restaurant meals, sporting events, spa treatments, golf outings — pretty much any expenditure that many people give up during economic downturns. The catch is that the coupon only applies if a certain number of people use it.

Questions:

1.  After watching the video and accessing http://www.groupon.com, explain the company’s business model. 

2. Do you think that the group coupon trend will continue?  Why or why not?

3.  Go to the “recent deals” in your area at http://www.groupon.com.  Pick one of the deals. If you were a company offering this deal and using the services of Groupon, what accounts would be affected by the  deals you provide?

Sources:

Eklund, Kevin. (2010) Best Social Group Buying Sites For Killer Daily Deals And Deep Discounts. Tomuse.com (Retrievable online at 

http://tomuse.com/group-buying-sites-coupon-deals-discount-savings/#ixzz0wt6rxlKihttp://tomuse.com/group-buying-sites-coupon-deals-discount-savings/)

Trejos, Nancy (2009). The Humble Coupon Joins Social-Media Web, The Washington Post, September 1 (Retrievable online at http://www.washingtonpost.com/wp-dyn/content/article/2009/08/31/AR2009083103837.html)

CNN Video. (2010). Group Coupon Business Soars, August 13. (Retrievable online at  http://www.cnn.com/video/#/video/tech/2010/08/13/am.group.coupon.business.cnn?iref=videosearch)

Chelsea Gets Married

Chelsea Clinton and investment banker boyfriend Marc Mezvinsky married on July 31 in a highly secretive affair that cost approximately $3 million. To avoid the media, the event was held on a posh private estate 90 miles north of Manhattan.

Questions:
1. What was one of the least expensive items at the wedding?
2. What percentage of the total costs (assuming that the $3 million total is correct) was paid for portable potties?
3. Using all the information presented in the video and article, itemize each cost and calculate a total. How close do you come to $3 million? What costs could be missing or do you believe the estimate is too high?

Source:
YouTube.com (2010). Chelsea Clinton Wedding Could Cost $5 Million, July 29. (Retrievable online at http://www.youtube.com/watch?v=R0J8w0Nsl8Y)
Staff. (2010) Clinton Wedding Cost to Top $3 million. KTLA News, July 27 (Retrievable online at http://www.ktla.com/news/landing/ktla-clinton-wedding-costs,0,106194.story)

Accounting Firms and Social Media

If accounting has the Big 4, then social media has the Big 3: LinkedIn, Facebook and Twitter. Still, many accounting firms and businesses consider LinkedIn as their sole source of social media because the site helps form relationships that often result in more business and turn into referral sources. But what are the benefits and drawbacks to using the other two main social media sources.  As this article and video show, taking time to investigate and manage social media outlets may help a firm’s marketing and ultimately its bottom line. 

 

Questions:

1.What were the 5 tips in the video for using social media to boost your firm’s income or presence?

2.Based on the video and article, what would you say are the biggest benefit(s) for accounting firms that use social media to promote their practices?

3.Are there any drawbacks for accounting firms who use social media?  How would you design a policy that would help in preventing these issues?

 Sources:

Cytron, Scott. (2009). Just a Tweet Away: Social Media in Accounting Firms. The CPA Technology Advisor, November.  (Retrievable online at http://www.cpatechnologyadvisor.com/publication/article.jsp?pubId=1&id=2609&pageNum=4)

CNN. (2010). How to Make Money with Social Media, CNN videos, July 24. (Retrievable online at http://www.cnn.com/video/)

Mortgage Fairs

Given the last year’s trend, is there an end in sight to new record-low interest rates? For example, on July 22, Freddie Mac’s Primary Mortgage Market Survey, which provides a snapshot of national average mortgage rates, reported a national average rate of 4.56% with 0.7 points on a 30-year fixed-rate mortgage. At the same time last year, the rate was 5.2% with 0.7 points. Given these changes and the housing crisis, many are turning to mortgage fair events for additional information.

Questions:

1. Assume that the women in this video has a fifteen-year $175,000 mortgage with a 7.5% interest rate and a monthly payment of $1,622.28. What is the interest portion of her first payment and how much is her principal reduced by with her first payment? If she refinanced this loan for 30 years at the same interest rate, what elements of her mortgage would change? 
2. The woman at the end of the video said that her mortgage was upside down. What does that mean? Why does she need an appraisal?
3. What do you see as the benefits for having mortgage fair events like these?
4. What is a point that is charged on mortgages and how do these affect the homebuyer?
Source:

Fontinelle, A. (2010). All-Time Low Mortgage Rates: Time To Refinance? San Francisco Chronicle, July 26. (Retrievable online at http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/07/26/investopedia45861.DTL)

CNN.com. Free Mortgage Fair Help Draws Crowd (Retrievable online at: http://www.cnn.com/video/#/video/us/2010/07/26/endo.mortgage.help.fair.cnn?hpt=C2)

Bank of America: It Depends On How You Define Materiality

Bank of America incorrectly classified as much as $10.7 billion in short-term lending and repurchase deals for mortgage securities as sales. This claim surfaced in a May 13 letter to the SEC where the banking corporation alleges that the transactions were immaterial and that it would be beefing up its internal accounting controls.  This letter was sent in response to an SEC request of finance chiefs at about two dozen firms in March, asking whether they employed accounting strategies like Repo 105 used at Lehman Brothers Holdings Inc.

Questions:

1. In the letter, the bank said its incorrect accounting for the six trades wasn’t intentional. “We do not deliberately structure transactions that are economically disadvantageous simply for the purpose of recording a sale or reducing recorded liabilities.” What must their incorrect journal entries have been?

2. Why did the bank include the phrase that “its incorrect accounting for the six trades wasn’t intentional?”

3. What does “end-of-quarter window dressing” mean in terms of this event? What is Repo 105?

4. Do you agree or disagree that this amount is not material enough to disclose? Explain your answer.

Source:

Rebel Traders (2010). Bank Of America (NYSE: BAC) Admits To Hiding Debt, iStock Analysts, July 12 (Retrievable online at http://www.istockanalyst.com/article/viewarticle/articleid/4299094)

Video: Lehman Brothers ‘Accounting Gimmick’: Repo 105 Lehman Hid Assets (Retrievable online at http://www.youtube.com/watch?v=Zb3DLWeHCks)

Staff reporter. (2010). Bank of America Wrongly Classified Transactions, China Daily, July 12 (Retrievable online at http://english.sina.com/business/2010/0711/328707.html)

Scrushy Back in the News

The U.S. Supreme Court on Tuesday ordered a new review of the convictions in the government corruption case against former Alabama Gov. Don Siegelman and ex-HealthSouth CEO Richard Scrushy.

Questions:

1. What is the “honest services” fraud law?

2. What is a “quid pro quo” agreement?

3. A judge issued a $2.9 billion civil judgment against Scrushy. According to the opinion, what did Mr. Scrushy do and why?

 

Sources:

Johnson, B. (2010). Court Orders New Review of Siegelman, Scrushy Case, Associated Press, June 29 (Retrievable online at http://www.google.com/hostednews/ap/article/ALeqM5gEFj4h2WLTpKm2g7jltY0N0opHMgD9GL1FQO1

Memorandum Opinion in the 2002 Derivative Litigation for Jefferson County Alabama Circuit Court Case of Wade Tucker, et.al. versus Richard M. Scrushy, et. Al., June 18, 2009. (Retrievable online at http://www.hwnn.com/images/stories/files/Scrushy%20Memorandum%20Opinion.pdf)

Barry Minkow in the News

Barry Minkow was the famed entrepreneur who started ZZZZ Best in the 1980’s, only to have it collapse in 1987 under the weight of a discovered Ponzi scheme.  Minkow was convicted of fraud, among other charges, and sentenced to 25 years in prison, but only served 7 years. Minkow now is head of the Fraud Discovery Institute, a company which searches for fraudulent corporate activities and highlights the allegations through its website. Minkow and his firm, the Fraud Discovery Institute, are currently the subject of a probe by the U.S. Securities and Exchange Commission. The subpoenas ask, among other things, for all communications regarding six companies FDI has criticized: InterOil Corp. (IOC), Lennar Corp. (LEN, LENB), Pre-Paid Legal Services Inc. (PPD), Medifast Inc. (MED), Herbalife Ltd. (HLF) and Usana Health Sciences Inc. (USNA). In addition, the subpoenas want information about Minkow’s involvement with Whitney Tilson, who runs a $135-million New York hedge fund. It also appears that the SEC is focused on the fact that Minkow acknowledges that he takes short positions in some of the companies he criticizes. The SEC states the “investigation is a non-public, fact-finding inquiry,” intended “to determine whether there have been any violations of the federal securities laws,” according to copies of three of the subpoenas and related materials reviewed by Dow Jones Newswires. Minkow, however, believes the probe is politically motivated.

Questions:

1.  What is a short position?

2. What can you find out about Pre-Paid-Legal Services, Inc?  Are there any “red flags” noted in the video or your research that would raise your level of skepticism about a suspected fraud?

3. Research the other companies that the SEC named in the FDI subpoenas.  Based on your research, is there anything to raise your level of skepticism about these firms and financial fraud?

 

Source:

Murphy, M. (2010) SEC Probe Into Barry Minkow’s Fraud Discovery Institute Continues. Wall Street Journal, June 11 (Retrievable online at http://online.wsj.com/article/BT-CO-20100611-709043.html or

http://webcache.googleusercontent.com/search?q=cache:qRCsAwh54OYJ:online.wsj.com/article/BT-CO-20100611-709043.html+SEC+Probe+Into+Barry+Minkow%E2%80%99s+Fraud+Discovery+Institute+Continues&cd=1&hl=en&ct=clnk&gl=us)

Video. (2008). Former US Attorney unveils the fraud of Pre-paid Legal, Fraud Discovery Institute (Retrievable online at http://www.youtube.com/watch?v=-g6exqWj0rs)

Small Discrepancies Grow Into a Giant Fraud

Satyam Computer Services, a leading Indian outsourcing company that served more than a third of the Fortune 500 companies, was at the heart of a huge 2009 fraud perpetrated through the significant inflation of earnings and falsification of accounts and assets for a number of years.  Chairman, Ramalinga Raju, resigned  in January 2009 after revealing that 94 percent or about $1.04 billion in assets were nonexistent and revenue was actually 20 percent lower than that reported.

Questions:

1. Who were Satyam’s auditors? What are some of the audit procedures that should have helped in the detection of this fraud?
 
2. What prior incident led to scrutiny of the company in October 2008?  What does this indicate to you about the corporate culture of the company?

3. Is Satyam still in business?  Provide a brief summary of its demise. What happened to the Satyam’s Chairman?

Sources:

Khanzode, R. (2010). Satyam Not out of Woods, Likely to Seek Time for Audited Results. The Financial Express, June 7. (Retrievable online at http://www.financialexpress.com/news/satyam-not-out-of-woods-likely-to-seek-time-for-audited-results/630308/)

Video (January 8, 2009). Satyam Auditor PwC Under Lens. (Retrievable online at http://www.youtube.com/watch?v=c_TvuhOtln0&feature=related)

 Timmons, H. (2009). Satyam Chief Admits Huge Fraud, New York Times, January 7 (Retrievable online at http://www.nytimes.com/2009/01/08/business/worldbusiness/08satyam.html)

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