Super Bowl Sunday!

Well it’s almost time for the Super Bowl again.  So get the snacks ready in front of the big screen TV.  But what comes with the game and half-time?  Of course, the commercials.  However, the hoopla behind Super Bowl ads has spawned a team of skeptics. Growing research shows the $3.5 million that advertisers pay for 30 seconds during Sunday’s game between the New England Patriots and New York Giants often isn’t worth the cost.

 

Questions:

1.  What companies are lined up to advertise on the Super Bowl 2012?

2.  Why does the article say that companies would be better off advertising somewhere else?

3. How would you record, in the accounting records, the $3.5 M paid to a network for airing a Super Bowl ad?  Are there any other costs other than the airing costs?  Discuss what they are and how you would record them in the accounting records.

Source:

Dicker, R. (2012). Super Bowl: Are Ads Worth the Millions? The Huffington Post, Jan. 31 (Retrievable online at http://www.huffingtonpost.com/2012/01/30/super-bowl-are-ads-worth-_n_1241677.html?ref=business)

Fatca Legislation

Legislation meant to help the United States government locate overseas assets of American tax cheats created little stir when it was quietly slipped into a jobs bill last year. But the Foreign Account Tax Compliance Act, or Fatca, as it is known, is now causing alarm among businesses outside the United States that fear they will have to spend billions of dollars a year to meet the greatly increased reporting burdens, starting in 2013. American expatriates also say the new filing demands are daunting and overblown.

Questions:
1. After reading the article, do you think that Fatca was a good Act to put in place? Why or why not?
2. What will any foreign company, in which Americans are beneficial owners, have to do according to the new legislation?
3. What is the deadline for companies who must register under the Act?
4. Why did the article call it a “sledgehammer” approach?

Source:

Jolly, D. and Knowlton, B. (2011). Law to Find Tax Evaders Denounced, The New York Times, Dec. 26 (Retrievable online at http://www.nytimes.com/2011/12/27/business/law-to-find-tax-evaders-denounced.html?_r=1&adxnnl=1&src=recg&pagewanted=1&adxnnlx=1324987211-d+MTA5CwojU1kgrQ2w/iug)

A Feel-Bad Ending: Swell the Music for Rudy

If you look up memorable quotes by Rudy Ruettiger, they exact all the inspirational feelings you can muster about “acting on your dreams.”

One of my favorites does not have such a pretty answer, now:

–If you knew you couldn’t fail, what would your goals be?

Sadly, the answer might be:

–To attempt a “pump-and-dump scheme.

Unfortunately, failure in achieving the goal, although not confirmed or denied, followed former Notre Dame football player, Daniel “Rudy” Ruettiger – the subject of the 1993 underdog movie “Rudy,” who created a sports drink company as a shell for a “classic pump-and-dump scheme.” The Securities and Exchange Commission says that the scheme bilked investors out of more than $11 million.

Questions:

1. What was the penalty imposed by the SEC settlement? Discuss whether you believe this was equitable.
2. How long did the scheme last? Look at the ACFE website (www.acfe.com). How does this compare with the length of the average pump-and-dump scheme, according to the 2010 Report to the Nation?
3. What product did the company claim to be in direct competition with? According to the article, was this the only thing that lured investors into the scheme?

Source:

Divito, N. (2011). Feel-Bad Ending for Hero of “Rudy” Movie, Courthouse News Service, Dec. 19 (Retrievable online at http://www.courthousenews.com/2011/12/19/42343.htm)

Treadway, D. (2011). Rudy Ruettiger Stock Scam: SEC Files Complaint Against Subject Of Famous Sports Movie, Huffington Post, Dec. 19 (Retrievable online at http://www.huffingtonpost.com/2011/12/19/rudy-ruettiger-stock-scam_n_1158017.html)

How do you lose $1.2 Billion?

Three of MF Global Holdings Ltd.’s top executives said they didn’t know what happened to as much as $1.2 billion in client funds that went missing in the days before the New York-based brokerage filed for bankruptcy. Jon S. Corzine, former chairman and chief executive officer of the broker testified in Congress that he didn’t intend to misuse as much as $1.2 billion in now-missing customer funds and that other employees of the failed brokerage oversaw the money. According to Corzine, a team of people in the cash finance and cash management divisions of the company had the authority to move customer funds from segregated accounts.

Questions:

1. Where does the bankruptcy of MF Global rank among all other U.S. bankruptcies?
2. What was the amount of the quarterly loss that MF Global reported on Sep. 30?
3. Briefly explain why regulators do not think that the auditors could find the problems in MF Global and what transactions were affected.
4. From what you can find out from research about MF Global, what were the weaknesses with the company that led to this crisis?

Source:

Brush, S. (2011) Top MF Global Execs Say They Don’t Know How Funds Went Missing, Dec. 13 (Retrievable online at http://www.bloomberg.com/news/2011-12-13/top-mf-global-execs-say-they-don-t-know-how-funds-went-missing.html)
CNN VIDEO. (2011). No Christmas for Former MF Global Client, CNN, Dec. 8 (retrievable online at www.cnn.com/videos)

Tickets, Anyone?

Ticketmaster’s various fees and surcharges, which sometimes add 40 percent or more to the cost of a ticket, have long infuriated its customers. But next year, thanks to a recent class-action settlement, many of those fans will be able to get some money back.

Questions:

1. According to the article, what are the two types of credits that will be offered to people who bought tickets on the Ticketmaster Web site from Oct. 21, 1999, to Oct. 19, 2011?
2. Are there any limitations to the credits?
3. Explain how Ticketmaster will likely make the journal entries for these claim amounts.
4. What is the minimum payment that Ticketmaster faces per year over the four-year life of the settlement? What happens if individuals do not claim their credits?

Source:

Sisario, B. (2011). Ticketmaster Offers Credits to Settle Lawsuit. The New York Times, Dec. 2 (Retrievable online at http://mediadecoder.blogs.nytimes.com/2011/12/02/ticketmaster-to-offer-redress-for-fees/?scp=2&sq=ticketmaster&st=cse)

PPM: What does it stand for when funding is involved?

The abbreviation PPM stands for many things, including parts per million. But what does PPM stand for if you are an entrepeneur that is interested gaining funding for your business? When a company is looking to raise funds without an initial public offering, a private placement memorandum (PPM) is one of the best ways to raise capital. A company must have the consent of the Securities Exchange Commission (SEC) before this can be done, and will need an information memorandum along with the PPM. Because of the complexity of SEC rules and documentation, it is highly advised to seek a knowledgeable attorney to help throughout this process.

Questions:

1.  What are the sections in a PPM?

2.  What should be the length of a PPM?

3. When Mike on the video talks about the internal route of raising funds, from an accounting standpoint, what is comparable to the Use of Funds table that he presents? Do you agree or disagree that all new companies can follow the model that Mike presents using Dell as an example?

4. If you presell like the Dell example in the video, how would you make the journal entries for the products that you sell? Give an example problem.

Sources:

Spotora, A. (2011). Los Angeles Business Attorney Emphasizes the Importance of Private Placement Memorandums, Spotora Blog (Retrievable online at http://www.spotoralaw.com/2011/11/los-angeles-business-attorney-emphasizes-the-importance-of-private-placement-memorandums/)

Michalowisc, M. (2011) Video: On A Roll- Raising Funds For Your Business (Retrievable online at http://www.toiletpaperentrepreneur.com/videos?tubepress_page=15)

Geonzon, M. (2011) Private Funding Technique And Practical Information On Small Enterprises. Articles Corp., Nov. 24 (Retrievable online at http://articlescorp.com/business/venture-capital/private-funding-technique-and-practical-information-on-small-enterprises)

On A Roll- Raising Funds For Your Business from Obsidian on Vimeo.

Accounting Error or Change in Estimate?

On November 21, 2011, independent research firm, Gradient Analytics issued a report that questioned whether j2 Global appropriately treated the measurement of annual contacts with eFax customers as a change in estimate. Based on its examination of the j2 Global’s financial disclosures, applicable accounting rules, and limited feedback from the company, Gradient reported that “…the description of the underlying circumstances sounds more like a correction of an error in prior-period financial results.” If those adjustments are appropriately considered an accounting error rather than a change in estimate, a restatement of j2 Global’s 2010 financial reports may be warranted if such errors are considered material under accounting rules.

Questions:

1. In your own words, briefly explain the difference between the treatment of an accounting error and a change in estimate and why it is important for this company.
2. Who is Sam E. Antar, the author of this blog, and why should an accountant recognize him?
3. Look at other articles in Mr. Antar’s blog and briefly summarize one that interests you.

Sources:

Antar, Sam (2011). Should j2 Global Communications Restate its 2010 Financial Reports?, November 22. (Retrievable online at http://whitecollarfraud.blogspot.com/2011/11/should-j2-global-communications-restate.html)

Michalowisc, M. (2011) Video: Biggest Accounting Mistake #2. (Retrievable online at http://www.toiletpaperentrepreneur.com/videos?tubepress_page=3)

Biggest Accounting Mistake #2 from Obsidian on Vimeo.

Losing Millions

Bankrupt professional athletes are a sad fixture on the sports scene, and they may or may not mess up more often than the average person who earns a lot of money really fast.  However, their troubles seem outsize because of their fame and the pathetic schemes they fall for. The stakes are particularly high for football players, since their average professional career lasts just four seasons or so and may leave lingering injuries, health costs, or physical limitations.  This article and the interactive multimedia pictorial explain some of the specifics.

Questions:

1.  What are the three lessons that the author thinks almost anyone can put to work, whether you are a new college graduate getting a four-figure paycheck for the first time or you have suddenly inherited, earned or won a pile of money?  Do you agree or have any additions?  Discuss.

2. What are the requirements for financial advisors that appear on the N.F.L. players’ pre-screen advisor list?

3. What does the author think that the fiduciary standard should be in order to be listed on the players’ union prescreened advisor list? Discuss whether you think this is the best approach.

4.  What do you see as the CPA’s role in financial planning?

 

Sources:

Lieber, R. (2011). Financial Lessons From Sports Stars’ Mistakes. The New York Times, Sep. 9 (Retrievable online at http://www.nytimes.com/2011/09/10/your-money/financial-lessons-from-sports-stars-mistakes-your-money.html?pagewanted=1&_r=1)

Staff (2011). When Athletes Go Broke, The New York Times, Sep. 9 (Retrievable online at http://www.nytimes.com/interactive/2011/09/10/your-money/20110910-money.html?ref=your-money)

Brother, can you spare $5

Beginning Tuesday, Starbucks coffee drinkers can get their morning caffeine fix and help create jobs in small businesses across the country. According to CEO Howard Schultz of Starbucks, the company will accept donations for a program that helps raise money and spurs job creation by small businesses, at its almost 6,800 locations across the nation, in addition to its website at www.CreateJobsforUSA.org.

Questions:

1. What is the Opportunity Finance Network? Do you think this a good approach to the downturn in our economy? Discuss.
2. Based on these articles, each job created equal to a salary of $21,000 or are other factors being considered in the multiplier effect mentioned?
3. Do you believe that this campaign is about marketing rather than what the CEO purports? Discuss the pros and cons.
4. Comment on Mr. Schultz’s comment about the importance of a trade off between social contract and traditional profit being needed. Does this indicate that there might be a new profit paradigm emerging in today’s economy? Discuss.
5. Mr. Schultz indicated that Starbucks would probably be spending millions of dollars on the campaign. How would you as their accountant classify these costs?

Sources:
Clifford, C. (2011) Starbucks steps up to the jobs challenge, Oct. 4 (Retrievable online at http://money.cnn.com/2011/10/03/smallbusiness/starbucks_jobs/index.htm?iid=EL)
Clifford, C. (2011) Get your Starbucks, create a job, Nov. 2 (Retrievable online at http://money.cnn.com/2011/11/01/smallbusiness/starbucks_jobs/)

Rhode Island Nearly Broke?

The current general treasurer of Rhode Island, Gina Raimondo, warns that the state will soon be broke due to its debt problems. After decades of drift, denial and inaction, Rhode Island’s $14.8 billion pension system is in crisis. Ten cents of every state tax dollar now goes to retired public workers and that figure will climb perilously toward 20 cents. Until this year, Rhode Island calculated its pension numbers by assuming that its various funds would post an average annual return on their investments of 8.25 percent; the real number for the last decade is about 2.4 percent. This article explains some of the challenges facing the state and Ms. Raimondo.

Questions:
1. How many reform plans has Rhode Island tried to institute since 2005 to fix the pension system? Do you agree with Ms. Raimondo’s approach? Why or why not?
2. Who did Ms. Raimondo learn was investigating the state and city finances of Rhode Island, as soon as she was sworn in? Why were they investigating?
3. What do the percentages in the article refer to in terms of the calculations made to calculate pension expenses? How do these changes affect the amount of pension expense?
4. In recent months, Ms. Raimondo has crisscrossed the state trying to sell a different plan that would allow the pensions to survive and avoid additional plans within the next couple of years. What type of pension structure is she trying to save? Explain this structure and whether or not it is the most common type for most companies.
5. The article mentioned that when the board voted to lower the projected long-term investment return assumption to 7.5 percent, the state’s pension shortfall instantly rose to $9 billion from $7 billion. Make the journal entry to show this effect.

Source:
Walsh, M.W. (2011) The Little State With a Big Mess. The New York Times, Oct. 22 (Retrievable online at http://www.nytimes.com/2011/10/23/business/for-rhode-island-the-pension-crisis-is-now.html?src=me&ref=business)

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