Barclay’s Dark Pool

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting.

Despite Barclay’s private and public assurances to investors in its pool that they were continually shielded from high-speed trading, the bank is being sued for actively attracting high-speed traders to its venue, as well as bolstering high-speed trader strategies with privileged information about the pool.

Questions:
1. Summarize why the article essentially called this a private stock exchange.
2. How much equity trading in the United States and Europe is done outside the public exchanges?
3. What major banks also run dark pools?
4. What is needed to provide more transparency and order for this financial systems?
5. What, to you, was the most surprising information in this article?

Source:

Editorial Board. (2014). The Dark Pool Iceberg. The New York Times, June 28 (Retrievable online at http://www.nytimes.com/2014/06/29/opinion/sunday/lawsuit-against-barclays-shows-need-for-more-scrutiny.html?action=click&pgtype=Homepage&version=Moth&module=inside-nyt-region&region=inside-nyt-region&WT.nav=inside-nyt-region&_r=1)

Barclays

The Untouchable Alaska Bypass

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting, Video Updates.

Under a federal program exclusive to Alaska, the Postal Service is responsible for shipping more than 100 million pounds a year of apples, frozen meat, dog food, diapers and countless other consumer items to off-road villages in the sparsely populated outposts known as the bush. Over three decades acting as freight forwarder, the agency has lost $2.5 billion.

Questions:

1. Based on the article, argue the costs and benefits of continuing the Alaska Bypass.
2. What is the universal service weight allowed in the 48 states? What is it in Alaska?
3. Using the information presented in the article along with assumptions that you detail in your answer, estimate the gross profit that the grocery store in Hooper Bay, Alaska is making on each 12-pack of Coke.
4. Using the information presented in the article along with assumptions that you detail in your answer, estimate the loss that the U.S. Postal service has for each pallet of Coke shipped to Hooper Bay, Alaska.

Source:
Rein, L. (2014). U.S. Postal Service losing tens of millions annually subsidizing shipments to Alaska. The Washington Post, June 28 (Retrievable online at http://www.washingtonpost.com/politics/us-postal-service-losing-tens-of-millions-annually-subsidizing-shipments-to-alaska/2014/06/28/3d007fd6-e51a-11e3-afc6-a1dd9407abcf_story.html?hpid=z1)

How much do you have to make to get a checking account?

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

Zikomo Fields makes more than $100,000 a year in his job as a software engineer in Kansas City. However, he cannot get a bank account because of a little-known database that tracks financial transgressions, known as ChexSystems. Financial institutions who subscribe to this service view it as fraud prevention. However, New York Attorney General Eric T. Schneiderman sees this as an improper application of the information and is suing banks like Capital One and Wells Fargo for denying some consumers accounts. Until this is resolved, people like Mr. Fields will walk around with $23,000 saved on a prepaid debit card.

Questions:

1. What types of actions earn you a spot in ChexSystems database?
2. How many years does an involuntary account closure stay on your credit record?
3. Rather than carry around a prepaid debit card with $23,000 on it, what would you recommend that Mr. Fields do about his situation?
4. Mr. Fields said that he literally had no other option but to let the account at U.S. Bank overdrawn until he was employed again. If he were your friend, what would you have advised him to do?

Source:
Douglas, D. (2014). Why a guy making $100,000 a year can’t get a bank account. The Washington Post, June 19 (Retrievable online at http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/19/why-a-guy-making-100000-a-year-cant-get-a-bank-account/?tid=pm_pop)
money_ballbe

Mmmmmmmmm! But watch out for the Mac & Cheese!

Posted by & filed under Accounting Principles, Advanced Accounting, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting, Video Updates.

Some are calling this the new “Cheeseapocalypse” as Kraft Foods Group recalls 260 cases of Velveeta sold to Walmart because the batches lack enough preservatives and could “spoil prematurely and/or lead to food borne illness.”

Questions:

1. What states are affected by the recall?
2. What ingredient is causing the recall?
3. What types of costs would Kraft Foods have for their liquid gold campaign and how should they be recorded in the financial statements?
4. What types of costs would Kraft Foods have for their recall of the product and how should these be recorded in the financial statements?
5. Since the recall have either Kraft Foods or Walmart stocks gone down in the market? Could this be due to the recall? Explain.

Source:
Picchi, A. (2014). With Velveeta Recall, A New ‘Cheesapocalypse.’ CBS News Watch, June 20 (Retrievable online at http://www.cbsnews.com/news/with-velveeta-recall-a-new-cheesapocalypse-emerges/)

When is a Raise Too Small?

Posted by & filed under Accounting Principles, All Articles, Cost Accounting, Financial Accounting, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

Deeb Salem, a former Goldman Sachs trader, says that after making the company in excess of $7 billion in 2010, his $8.25 million raise was not enough compensation.

Questions:

1. What percentage drop was Salem’s 2010 raise as compared to his 2009 raise? What percentage drop was Salem’s 2011 raise as compared to his 2010 raise?
2. What did Salem discuss in his self evaluation in 2007? Why did this upset Goldman Sach’s administration?
3. When Goldman Sachs records the journal entries for Salem’s bonuses, what accounts and financial statements are affected?

Source:
Peterson, K. (2014). Trader Sues Over Skimpy $8.25 Million Bonus. CBS Newswatch, June 20 (Retrievable online at http://www.cbsnews.com/news/trader-sues-over-skimpy-8-25-million-bonus/)

Money-file-2

Separation of Power

Posted by & filed under Accounting Principles, Auditing, Financial Accounting, Intermediate Accounting, Managerial Accounting.

Netflix shareholders will vote on at the company’s annual meeting on Monday is a proposal by two public pension funds to separate the roles of chairman and chief executive. Both are held by Reed Hastings, Netflix’s co-founder.

Questions:
1. Who are the backers of this corporate governance issue and why do you think they are pursuing this?
2. What other firms have been pressured to do this in recent years? Is this a good thing? Discuss in terms of costs and benefits.
3. What are some of the recent battles that Netflix has encountered? Discuss whether any of these could be related to this corporate governance issue.

Source:
De La Merced, M.K. (2014). Netflix Investors to Vote on C.E.O.-Chairman Split. The New York Times, June 8 (Retrievable online at http://dealbook.nytimes.com/2014/06/08/netflix-investors-to-vote-on-c-e-o-chairman-split/?rref=homepage&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Home%20Page&pgtype=article)
netflix

To compete or not compete – Upside or Downside?

Posted by & filed under Accounting Principles, All Articles, Managerial Accounting, Uncategorized.

Noncompete clauses are now appearing in far-ranging fields beyond the worlds of technology, sales and corporations with tightly held secrets, where the curbs have traditionally been used.

Questions:
1. What industries have recently seen more noncompete clauses?
2. What clause were you most surprised at?
3. What are the costs and benefits of noncompete clauses?

Source:
Greenhouse, S. (2014). Noncompete Clauses Increasingly Pop Up in Array of Jobs. The New York Times, June 8 (Retrievable online at http://www.nytimes.com/2014/06/09/business/noncompete-clauses-increasingly-pop-up-in-array-of-jobs.html?hp)

criminal-justice-logo-md

Something doesn’t add up

Posted by & filed under Accounting Principles, Financial Accounting, IFRS, Intermediate Accounting, Managerial Accounting, Video Updates.

As more companies become aware of the tax opportunity that Bermuda, the Cayman Islands and the British Virgin Islands offer, more are taking advantage of it. According to the I.R.S. in 2004, companies with foreign income said 8 percent of that income came from those remarkable islands. But in 2010, the figure was 11 percent. No further figures have been released from later years.
Questions:

1.What is the loophole in FASB accounting standards that companies use to avoid disclosure about taxation? Is that expected to change soon?
2. On average, United States companies had profits of $873,611 per person living in Bermuda, the Cayman Islands, and the British Virgin Islands? Is this legal in the U.S.?
3. What is the current hot trend in corporate tax avoidance known as?
4. Why do you suppose that Northrop Grumman quit disclosing foreign profits on their books that they do not expect to pay taxes on?

Source:
Norris, F. (2014). The Islands Treasured by Offshore Tax Avoiders. The New York Times, June 5 (Retrievable online at http://mobile.nytimes.com/2014/06/06/business/the-islands-treasured-by-offshore-tax-avoiders.html?_r=2&referrer=)

Is a Tattoo a Forever Thing?

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According to a 2012 Harris survey, one in five U.S. adults has a tattoo, Interestingly, removing tattoos has also become a growing trade, as one in seven of these tattooed individuals express misgivings with their body art choices. In fact, some spend thousands of dollars for several searing laser sessions.

Questions:
1. How many removals does the American Society for Dermatological Surgery estimate that their members made during 2012?
2. Which company introduced the first aesthetic laser device approved in the U.S. using pico-second technology in March 2013? What does the company’s stock sell for?
3. How much do these machines cost? Based on $2,000 for 10 laser treatments per patient, how many patients would a dermatologist need to breakeven on the machine alone?
4. Access the Cutera Company’s investor information at http://phx.corporate-ir.net/phoenix.zhtml?c=130892&p=irol-IRHome. This company has two lasers systems awaiting U.S. approval for tattoo removal. What does the company’s stock sell for?
5. What are the risks that the article warns of?

Source:

Gale, J. (2014). No Pain, No Gain, as Tattoo Regret Fueling Laser Removals. Bloomberg News, June 1 (Retrievable online at http://www.bloomberg.com/news/2014-06-01/no-pain-no-gain-as-tattoo-regret-fueling-laser-removals.html)

Maybe not such a good business plan.

Posted by & filed under Accounting Principles, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

In Crumbs Bake Shop’s most recent Form 10-Q filed with the SEC, the company disclosed that its auditors, Rothstein Kass, “expressed substantial doubt about our ability to continue as a going concern.”

Questions:
1. Since the IPO of Crumbs, how much has the stock dropped?
2. Explain the statement that Crumbs published in its 10-Q in one simple sentence: “We need additional capital to fund future cash flow requirements, and we may not be able to obtain such funds on acceptable terms. Raising additional funds by issuing securities or through lending or licensing arrangements may cause dilution to [Crumbs’] existing security holders, restrict our operations or require us to relinquish proprietary rights. Management believes that our cash flow requirements will likely consume our existing capital resources and cash from anticipated sales unless we are able to raise additional funds prior to June 30, 2014.”
3. Summarize the red flags at Crumbs that are evidence of a going concern problem.

Source:
Udland, M. (2014). Crumbs Baked Shop’s Accounts Are Not So Sweet. Business Insider, June 1 (Retrievable online at http://www.slate.com/blogs/business_insider/2014/06/01/crumbs_baked_shop_a_cupcake_and_baked_goods_maker_might_not_stay_in_business.html)

cupcake