Low Pay in the News

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Thousands of fast-food workers in the went on strike in cities across the U.S. this summer. Why? They were demanding a living wage of $15 per hour and the right to unionize, but their efforts failed. Several industry groups purport that low- and minimum-wage workers are now growing faster than any other group of earners in America. This article points to companies whose profits are rising, but continue to have the distinction of paying the lowest wages in the U.S. to their employees, while paying exorbitant amounts to their CEOs.

Questions:
1. What percentage of hourly workers in 2012 made less than the federal minimum wage?
2. What percentage of these ten companies with the lowest employee wages pay their CEOs more than $10 million annually?
3. What information in this article surprised you the most?

money_ballSource: Sauter, M.B., T.C. Frohlich, and A.E.M. Hess. (2013). Ten Companies Paying Americans the Least. 247 Wall Street.com, Nov. 15 (Retrievable online at http://247wallst.com/special-report/2013/11/15/ten-companies-paying-americans-the-least/?utm_source=247WallStDailyNewsletter&utm_medium=email&utm_content=NOV152013A&utm_campaign=DailyNewsletter)

Abusing the System or a Genuine Life Line?

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The classification of animals as emotional support has been permitted by antidiscrimination laws for some time, allowing owners to take their pets to shops, restaurants, or residential buildings that have no-pet policies. However, a recently increasing trend in uncaged animals on airplanes has become a source of complaints by flight attendants, passengers with allergies, and service animal owners.

Questions:
1. According to the article, why are the emotional support animals being criticized by service dog owners and support groups?
2. According to the article, what is the cottage industry that is developing? What products have seen an expanding market with respect to emotional support animals?
3. What legal liabilities do you anticipate regarding these emotional support animal certifications? Construct an example that potentially involves a loss contingency and explain the accounting associated with the example.

Source: Witz, B. (2013). Emotional Support, With Fur, Draws Complaints on Planes. The New York Times, Nov. 15. (Retrievable online at http://www.nytimes.com/2013/11/16/business/emotional-support-with-fur-draws-complaints-on-planes.html?hp&_r=1&)

What Do Rodney Dangerfield and Some U.S. Companies Have in Common?

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CoreBrand, a consultancy firm investigating brand reputation, recently released a report on 1,000 U.S. Companies. The results are presented in this article. Interestingly the most respected brands are in the same industry and they are Coca-Cola and PepsiCo, Inc. While Coke has enjoyed this status for six years straight, Pepsi moved up from being the sixth most respected brand in 2012.

Questions:
1. According to the article, what is the most important factor for earning a high level of respect as a company?
2. How did CoreBrand’s develop their report regarding company respect?
3. What factors do companies with the least respect have in common? Discuss how a balanced scorecard approach could help these companies.

CokeSource: McIntyre, D.A. and P. Ausick. (2013).The 10 Least Respected Companies in America, 247 Wall Street.com, Aug. 23 (Retrievable at http://247wallst.com/special-report/2013/08/23/the-ten-least-respected-companies-in-america/)

Conflict of Interest?

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The commercials may sound wonderful, but unfortunately, patients are being victimized by medical credit cards. The cards, issued by specialty finance companies and commercial banks, carry huge interest rates after an initial zero interest period expires. There are also heavy penalties for late payments.

Questions:
1. What types of services can be paid for with Care Credit?
2. How high can the interest rate go and why are there numerous civil lawsuits against these lenders?
3. What was the agreement that New York’s attorney general reached with Care Credit and how do you think that Care Credit should record the refunds to customers in their accounting records via the appeals process?
4. Explain the conflict of interest situation that occurs with these cards.

Source:
Editorial Board. (2013). Alarming Abuses of Medical Credit Cards. The New York Times, Oct. 19 (Retrievable online at http://www.nytimes.com/2013/10/20/opinion/sunday/alarming-abuses-of-medical-credit-cards.html?adxnnl=1&src=recg&adxnnlx=1382700638-8mBq2p+THWPCPZvaAb8aCg)

Limiting Public Exposés: China’s Crackdown on Information about Officials and Social Elite

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There is a chilling crackdown on due diligence companies in China. In an effort to tighten access to company records at local industry and commerce bureaus, the Chinese government arrested Peter Humphreys and his wife, who run a due diligence company that works for many multinational companies in China. Access to these bureau records is often the only way that short-sellers, journalists and due diligence firms have to trace corporate ownership and expose suspicious business relationships as markers of fraud.

Questions:
1. Explain what the implications of this are for other due diligence firms in China.
2. According to the article, why won’t these new laws drive the information trade out of China?
3. According to Dan Harris, what are the purposes of China’s new laws on personal or sensitive information?

Swanson, A. (2013). China’s Chilling Crackdown on Due-Diligence Companies, The Atlantic, Oct. 23 (Retrievable online at http://www.theatlantic.com/china/archive/2013/10/chinas-chilling-crackdown-on-due-diligence-companies/280787/)

Amazon’s profit strategy?

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Almost daily, Amazon announces that it is entering another new venture. How do they do it, since they have yet to show profit that supports their share price?

Questions:
1. After reading the article, do you think that Amazon with stay with a discounter form of commerce?
2. How do you think Amazon accounts for the $2,600 shipping lost on the cookie machine that they ship for free? What accounts do you think are affected in the transaction? (Take into account the prime member ships.)
3. Amazon is reportedly losing up to $1 billion a year on its streaming video service. What do you think the company’s business strategy is here? How do you think they plan to sustain this offering?

Source:
Streitfeld, David. (2013). Sales Are Colossal, Shares Are Soaring. All Amazon Is Missing Is a Profit, The New York Times, Oct. 21 (Retrievable online at http://www.nytimes.com/2013/10/22/technology/sales-are-colossal-shares-are-soaring-all-amazoncom-is-missing-is-a-profit.html?pagewanted=1&hpw&_r=0)

Numbers tell the story

Posted by & filed under 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, Uncategorized, Video Updates.

Unless you have been vacationing on another planet, you have probably heard about the government shutdown this week. This video by the New York Times provides some quantification of the situation.

Questions:
1. Which number in the video surprised you the most?
2. Explain why not reaching an agreement by Oct 17 on the debt ceiling would be worse than the federal shutdown.
3. Have any of the shutdown events affected you or someone you know? Explain.
4. What is the most interesting thing that you learned about the SEC and its plan regarding the government shutdown?

Source:

The New York Times video (2013). A Shutdown by the Numbers, The New York Times, September 27 (Retrievable online at http://www.nytimes.com/video/2013/09/27/us/politics/100000002467713/a-government-shutdown-by-the-numbers.html#100000002467713)

Yan, H. (2013) Government shutdown: Get up to speed in 20 questions. CNN.com, October 1 (Retrievable online at http://www.cnn.com/2013/09/30/politics/government-shutdown-up-to-speed/index.html)

Chasan, E. (2013) SEC Will Keep Lights On In A Government Shutdown. CFO Journal, September 30 (Retrievable online at http://blogs.wsj.com/cfo/2013/09/30/sec-will-keep-lights-on-in-a-government-shutdown/)

Do you have to be Good at Accounting to Embezzle $16.6 M from a Small Business?

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A fruitcake company, the Collin Street Bakery, in Texas just found out the answer to this question! The company’s controller, Sandy Jenkins, 64, of Corsicana, Texas, was arrested by special agents of the FBI on a federal criminal complaint charging 10 counts mail fraud and allegations that he wrote 888 checks totaling $16.65 million to his personal creditors.

Questions:
1. Over the 8-year period of the fraud, what amount does that average out to be per check?
2. According to Sharon Sutila, what are the common embezzlement schemes in small business?
3. How did Mr. Jenkins accomplish his fraud? How would this involve accounting skills? Discuss.
4. What controls would have prevented this?
5. What were some of the red flags of fraud presented in the articles regarding this case? full_9795

Sources:

Sutila, S. (2013). Would you Notice $16.6 Million Missing? The Informant, September 30 (Retrievable online at http://clusopi.com/embezzler-accused-stealing-millions-criminal/)

TexasBusiness.com staff (2013). Former Texas Fruit Cake Bakery Executive Accused of Stealing $16.6 Million. Texas Business, August 15 (Retrievable online at http://texasbusiness.bondwaresite.com/former-texas-fruit-cake-bakery-executive-accused-of-stealing-16-6-million-cms-9795)

Based on Projections, The Affordable Healthcare Act (ACA) will Likely Benefit Hospitals

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According to Fitch Ratings, the benefit for hospitals via enrollment in plans offered on the state health insurance exchanges starting Oct. 1 is uncertain, since participant numbers have yet to be disclosed. However, it is anticipated that as enrollment increases, hospitals’ ability to reduce bad debt will also increase and that would clearly be a credit positive.

Questions:
1. What GAAP methods are used to account for bad debt?
2. What is the direct write-off method of accounting for bad debts? Explain why it typically is not considered to be a GAAP method.
3. Explain why the Affordable Healthcare Act has been in the news so much lately.MEDICAID-1-articleLarge
Source:
Neuburger, M. (2013). ACA Exchange Enrollment Could Ease Hospital Bad Debt. Fitch Ratings.com, Oct. 2 (Retrievable online at http://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/ACA-Exchange-Enrollment?pr_id=803902)

A Dragnet for Astroturfing

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As a result of a year-long investigation, New York regulators will announced on September 23, 2013 that they would crackdown on deceptive and fake Internet reviews on products and services. Agreements have been reached with 19 companies to cease their misleading practices and pay a total of $350,000 in penalties.

Questions:

1. Where were some of the fake reviewers located (i.e., countries)?
2. Who are some of the companies that were fined?
3. What was the range of penalties?
4. Besides state Attorneys General, which Federal regulators would be interested in “astroturfing?” Explain.

Sources:

Seltzer, L. (2013). Astroturfing dragnet laid by New York State. ZDNet, Sep. 24 (Retrievable online at http://www.zdnet.com/astroturfing-dragnet-laid-by-new-york-state-7000021101/)

Streitfeld, D. (2013). Give Yourself 5 Stars? Online, It Might Cost You . The New York Times, September 22 (Retrievable online at http://www.nytimes.com/2013/09/23/technology/give-yourself-4-stars-online-it-might-cost-you.html?hp&_r=0)
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