Wiley Accounting Updates

Super Sleuthing at Apple

LuAnn Bean — Wed, 01 Sep 2010 15:08:11 +0000

Court papers filed by the federal government and Apple against a former manager detail a scheme that allegedly saw confidential Apple data supplied to Asian electronics companies over more than three years in return for kickbacks of more than $1 million.

Apple says that over the course of more than three years, two individuals colluded by passing sales forecasts for unreleased iPod and iPhone models, as well as product roadmaps, sales reports and details of problems being encountered by competitors.

Questions:

1. How did Apple find out about the kickbacks?

2. Explain how data like sales forecasts, pricing information and specifications for unreleased products could contribute to this fraud.

3. Why do you think the two fraudsters intentionally kept the wired amounts at less than $10,000? At there any laws or regulations that are tied to this amount and if so, what are they?

Source:

Williams, M. (2010). Laptop e-mail tipped Apple to kickbacks plot, Computer World, August 17 (Retrievable online at http://www.computerworld.com/s/article/9180820/Laptop_e_mails_tipped_Apple_to_kickbacks_plot?taxonomyId=152&pageNumber=1)

Best Selling Candy

LuAnn Bean — Wed, 01 Sep 2010 15:01:43 +0000

Candy is big business. While international giants such as Mars Inc., Nestlé, and Kraft dominate the industry, there is still room for smaller, regional players like South Africa’s Tiger Brands and China’s Hsu Fu Chi International, with each country having a No. 1 candymaker. Even though chocolate remains the most popular candy in the world, chewing gum is growing rapidly. As this article speculates, the reason behind gum’s growth is due to tougher anti-smoking campaigns and aggressive pushes by manufacturers into new markets.

Questions:

1. What is the number one best-selling candy and how much were its annual U.S. sales in 2007? Which country eats the most chocolate per capita? How much is it and how does it compare with the U.S.?

2. Why can’t you find a 10-K for Mars Inc. on the Web?

3. Based on the article, what percentage of the total candy market is accounted for by M & M’s?

Source:

Deprez, E. (2009) What are the World’s Most Popular Candies? BusinessWeek, June 24 (Retrievable online at http://www.businessweek.com/globalbiz/content/jun2009/gb20090624_590587.htm#readerComments)

Deprez, E. (2009). The World’s Best Selling Candies (slide show), BusinessWeek, June 24 (Retrievable online at http://images.businessweek.com/ss/09/06/0624_worlds_best_selling_candy/1.htm)

Happy Birthday! Microsoft is 35 years old!

LuAnn Bean — Wed, 01 Sep 2010 14:20:52 +0000

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)

Saving for the Future

LuAnn Bean — Wed, 01 Sep 2010 13:32:23 +0000

Did you know that roughly 50 percent of employees have no retirement savings at all? In an effort to increase the number of Americans who are saving for retirement, a bill known as the Automatic IRA Act of 2010 has been introduced in the Senate by Sen. Jeff Bingaman (D-NM) and in the House by Rep. Richard Neal (D-MA). The bill establishes IRA accounts for all employees and sets up automatic payroll deductions. The rationale for the legislation is based on the success of the automatic enrollment in 401(k) plans of a few years ago. When these accounts were established by law, there was a dramatic increase in participation, by about 90 percent of eligible employees. The belief is that, by establishing automatic IRA accounts, tens of millions of workers will be eligible for these plans, and an expected $15 billion will be added to savings annually.

Questions:

1. According to the article, will there be any exemptions for the new Act, if passed?

2. According to the article, will there be any incentives for businesses to promote this? Do you see this as a weak or a robust plan? Explain.

3. Based on the article, what types of journal entries will accountants have to make with respect to the features of this legislation, if passed?

Source:

Staff (2010) Democrats seek to legislate retirement savings, AccountingWeb, August 31.

(Retrievable at http://www.accountingweb.com/topic/accounting-auditing/democrats-seek-legislate-retirement-savings)

Interesting News for IFRS Nay-sayers

LuAnn Bean — Thu, 26 Aug 2010 21:32:43 +0000

While reviewing the proposed expansion of the International Financial Reporting Standards for accounting, Tim Bush, a member of the “Urgent Issues Task Force” that scrutinises the work of the Accounting Standards Board (ASB), claims to have uncovered “fatal” and “dangerous” flaws in the system. Mr. Bush alleges the regulations, and specifically the way they have been implemented in the U.K. and Ireland, have led to “mistakes [that are so severe] that it is difficult to overstate”.

Questions:

1. What severe mistakes does Mr. Bush allege?

2. What does he propose would fix these problems?

3. Who does Mr. Bush claim are the first victims of IFRS standards and who will be the secondary victims? Based on your understanding of the issues, do you agree or disagree? Why?

Source:

Armistead, Louise. (2010). UK Bank Accounting “Fatally Flawed” Warns Influential Watchdog, Telegraph.co.uk, August 26 (Retrievable online at http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7964816/UK-bank-accounting-rules-fatally-flawed-warns-influential-watchdog.html)

Power to the Shareholders

LuAnn Bean — Thu, 26 Aug 2010 20:53:02 +0000

According to a new report from the Wall Street Journal, shareholders have won a victory in obtaining greater clout to place directors on corporate boards. This is part of the the ”shareholder rights” movement that has been chipping away the power from top executives in U.S. run corporations. However, the Journal also predicts skirmishes ahead by public companies that hope to strike down the SEC rule, which they say will be used to distract management and advance special-interest agendas.

Questions:

1. What was the SEC vote in favor of the “proxy access” rule?

2. What does the “proxy access” rule require?

3. What are the costs and benefits of this new rule?

4. How could this new rule impact you as an accountant?

Source:

Holzer, Jessica and D. Berman. (2010). Investors Gain New Clout, The Wall Street Journal, August 26. (Retrievable online at http://online.wsj.com/article/SB10001424052748703632304575451572616571774.html?mod=ITP_pageone_0)

Investing in Art: How About Some Melted Clocks?

LuAnn Bean — Thu, 26 Aug 2010 19:53:19 +0000

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)

What’s up with Hulu?

LuAnn Bean — Tue, 17 Aug 2010 18:00:49 +0000

According to the New York Times, Hulu is approaching investment banks to underwrite an IPO this fall valuing the company at $2 billion. What is Hulu? Hulu is an online video service that offers a selection of hit shows, clips, movies, and more at Hulu.com and numerous destination sites online and across four screens — PCs, TVs, mobile phones and tablets.
Questions:

1. Based on Yarrow’s article, draft a simplified income statement for Hulu in 2009. Assume a year-end of December 31.

2. What is an IPO? Why does Atkinson see problems ahead with this?

3. How does Hulu generate revenue? What accounts do you think would be associated with this business model?

Source:
Yarrow, J. (2010). Hulu Wants To IPO At A $2 Billion Valuation, Business Insider SAI, August 16. (Retrievable at http://www.businessinsider.com/hulu-ipo-2010-8)

Atkinson, Claire. (2010). Hulu Faces Hurdles to Stock Offering. New York Post, August 17. (Retrievable online at http://www.nypost.com/p/news/business/hulu_faces_hurdles_to_stock_offering_2O1mh3F3PhtbXXbyrQ7QoO)

Saving Money through Social Media

LuAnn Bean — Tue, 17 Aug 2010 17:35:55 +0000

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/#ixzz0wt6rxlKi http://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

LuAnn Bean — Mon, 09 Aug 2010 14:41:18 +0000

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)