Contractors should be educating themselves on the impact of the new proposed revenue recognition standards and the recently published (June 24, 2010) exposure draft pertaining to revenue from contracts with customers. Public comments are due October 22, 2010, and it is expected the standards will be finalized in 2011.
1. What are some of the significant changes in this standard that will affect contractors?
2. How will the proposed standard define the economic unit of measure?
3. Explain what the new cost of capitalization rules will mean for contractors.
Given the last yearâ€™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.
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?Â
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:
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.Â This letter was sentÂ 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.
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 â€œits incorrect accounting for the six trades wasn’t intentional?â€
3. What does â€œend-of-quarter window dressingâ€ 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.
According to market research firm, Apple’s iPhone 4 wireless handset components cost about Â $187.51. The iPhone 4 sells for $199 and $299. The most expensive component is the LG display that costs $28.50. According to the consultant, the iPhone has typically hovered around the $170-to-$180 cost range because Apple seems to be trying to hit some kind of budget.
1.Â According to the article the firm that put this information together used a teardown analysis.Â What is this?
2. What are some of the reasons that Apple would put together this $170-to-$180 cost point budget?
3.Â What is the markup on the gyroscope chip? What percent of the total part cost is the display?
4.Â What percent profit is made on the iPhone 4 as compared to the iPhone 3GS?
In a last-minute change to the financial reforms bill, Congress allowed Wall Street to continue to sell interest-rate swaps directly, rather than isolating these derivatives in separate units. The thinking behind this move is that the interest-rate securities are benign, or at least less dangerous than credit default swaps, which the legislation requires banks to detach from their main operations.
1. What is an interest-rate swap?Â Do you think that Congress’ action regarding interest-rate swaps was a good idea?Â Why or why not?
2. What is an auction-rate security?
3.Â How was the hospital industry harmed by these financial instruments?Â What other entities took a hit from these financial instruments?
The U.S. Supreme Court ruled on June 28, 2010, that the Public Company Accounting Oversight Board (PCAOB) violates the U.S. Constitution’s separation of powers principle because board members are not appointed by the president.Â In a 5-4 decision, the Court stated that the president must have more power to remove PCAOB members. The five-member board is appointed by the U.S. Securities and Exchange Commission after consultation with the Federal Reserve System’s chairman of the board of governors and the Secretary of the Treasury.
1.Â How was the PCAOB originally established and why?
2.Â Look at the ruling.Â Which justices joined to support the ruling and which justices dissented?
3.Â According to the sources listed, how do you think the ruling will affect the Boardâ€™s operations and why does Barry Melancon, president and CEO of the American Institute of Certified Public Accountants (AICPA), see this as a victory for investors and for the accounting profession?
The SECÂ announced that it had reached a settlement with Technip for multiple violations of the Foreign Corrupt Practices Act (FCPA). The SEC allegations focus on Â Technipâ€™s role as Â a global engineering, construction and services company based in Paris, France in bribing Nigerian government officials over a 10-year period in order to win construction contracts in Nigeria worth more than $6 billion. The SEC also charged that Technip engaged in books and records and internal controls violations related to the bribery.
1. Go to the U.S. Department of Justice website (www.justice.gov) and briefly summarize the the Foreign Corrupt Practices Act?
2. Why would the SEC have any jurisdiction over a French firm doing business in Nigeria? Who is one of Technipâ€™s joint venture partners?
3. What did the company do in February 2010 to prepare its shareholders for this potential settlement?
OK. For all you accountants, hereâ€™s another acronym.Â What does FIFA stand for? Well, itâ€™s not an inventory method, but refers to the governing organization for the worldâ€™s biggest athletic event this summer ( the World Cup). Even if youâ€™re not a fan, you canâ€™t ignore World Cup fever that is sweeping the globe this summer. Tongue-in-cheek, author Daniel Braddock thinks that public accounting can learn a thing or two from these games.