A New Trend?

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Video Updates.

According to the Associated Press (AP), Chinese companies are withdrawing from the US stock market amid accusations of improper accounting by some companies, as well as complaints that low share prices do not reflect the true value of Chinese companies. On top of this, the AP note that a state bank has provided $1 billion in loan to help companies with listings abroad move them to China’s domestic market exchanges.

Questions:

1. Research and summarize the conflict about improper accounting by some companies and the deadlock that has emerged between Beijing and Washington over whether U.S. regulators can oversee their China-based auditors.

2. Economic commentator Charles Hugh Smith said,”Credibility is like a sand castle; every false promise, every half-truth, every simulacra “solution,” every secret deal, every surrender to vested interests, every politically expedient but ultimately disastrous “fix” removes a handful of sand from beneath the sand castle.” Research this quote. What is he referring to? Comment on whether you believe the situation is as dire as Mr. Smith indicates.

3.What role are private equity firms taking in the withdrawal of Chinese companies from U.S. stock exchanges?

Sources:

Hoft, J. (2012). Chinese Companies Pull Out of US Stock Market Amid Complaints Over Price, Gateway Pundit, August 14 (Retrievable online at http://www.thegatewaypundit.com/2012/08/chinese-companies-pull-out-of-us-stock-market-amid-complaints-over-price/)

McDonald, J. (2012). Chinese Companies Pull Out of U.S. Stock Markets, USA Today, Aug. 14 (Retrievable online at http://www.usatoday.com/money/world/story/2012-08-14/China-US-stock-markets/57048488/1)

One News Page video. (2012). Europe Debt Crisis, China Economy, Market Strategy, August 14 (Retrievable online at http://www.clipsyndicate.com/video/playlist/8178/3701045?wpid=8989)

What went up has come down

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

Facebook’s stock price has been cut in half since the fanfare of the IPO hit the market three months ago. With this drop, both employee morale and employee stock issues have plummeted. This article provides some insight into what the future holds for those holding Facebook stock.

Questions:
1. What is an employee lock-up release? What does trading stocks sideways mean?
2. According to Blodget, Facebook stock is not expected to bottom out until one of three things happens. What are these?
3. If you are an employee holding Facebook stock, which company’s long-term stock action does Blodget suggest you study?

Source:
Blodget, H. (2012). DEAR FACEBOOK EMPLOYEES: Here’s the Truth About Your Stock Price. Business Insider, August 17 (Retrievable online at http://www.businessinsider.com/dear-facebook-employees-heres-the-truth-about-your-stock-price-2012-8)

Spreading money on your skin

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

What are the most often prescribed drugs written for by dermatologists? They include generic creams and ointments that are used to treat skin rashes, scabies, and athlete’s foot. So aren’t generics suppose to be inexpensive. Unfortunately, not any more’; significant price increases in these generics are stumping doctors and patients. In a world of prescription drug plans, doctors that prescribe without deference to drug costs, expensive FDA approval, and private equity involvement, the generic drug companies are ignoring costs and going right to the bottom line – reporting incredible net incomes for these specialized companies.

Questions:

1. The article mentioned a jump in betamethasone dipropionate cream. What percentage increase has it seen since 2008?

2. The article also mentioned permethrin cream. What percentage increase has it seen since 2008?

3. Explain the illogical world of drug pricing in a summary paragraph. Include in the summary whether you think this defies basic economics.

4. Do you think that higher generic prices are here to stay? Please give at least three specific reasons to support your conclusions.

5. Do you think that some type of price regulation is needed? If so, what would you suggest?

Source:

Thomas, K. (2012). Soaring Ointment Prices Are A Dermatologic Mystery. The New York Times, August 9 (Retrievable online at http://www.nytimes.com/2012/08/10/business/prescription-skin-creams-jump-in-price.html?hpw)

Robo-Signing Redux

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

Debt collection practices focusing on erroneous documents, incomplete records and generic testimony from witnesses in lawsuits by credit card companies is mirroring problems similar to those in the mortgage foreclosure process. According to Noach Dear, a civil court judge in Brooklyn, about 90% of the cases he sees are flawed and cannot prove who the person is that owes the debt. This has resulted in a multi-billion dollar settlement with big banks for their defective collection practices.

Questions:

1. What types of defective practices did the article highlight? How much was the settlement?

2. Which company is the Office of the Comptroller of the Currency investigating and why?

3. According to the article, borrowers are behind on $18.7 billion of credit card debt, which is roughly 3 percent of the total. Based on this information, what is the total credit card debt?

Source:
Silver-Greenberg, S. (2012). Problems Riddle Moves to Collect Credit Card Debt. The New York Times, August 12 (Retrievable online at http://dealbook.nytimes.com/2012/08/12/problems-riddle-moves-to-collect-credit-card-debt/?hp)

Angie’s list

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

By now you have probably heard of Angie’s List. Angie Hicks started the company in 1995 after a friend moved and had trouble finding reliable contractors. Originally started in Columbus, Ohio, the company has expanded to other national markets. There is a subscription fee to belong to this list that includes personal recommendations.

Questions:

1. How do Angie’s List members “reap benefits for their bucks”? Discuss why you believe her business model has been successful.

2. How does Angie’s List take precautions to prevent manipulation of reviews? Would this be important to you or would you prefer a free service?

3. Based on the video, what did Ms. Hicks suggest that companies should do with a bad review?

Sources:
Yamshon, L. (2011). Angie’s List: Is the Service Site Worth Its Membership Fee?, PCWorld, Sep. 5 (Retrievable online at http://www.pcworld.com/article/237331/angies_list_is_the_service_site_worth_its_membership_fee.htm)
CNN Video (2012).Angie’s list thrives despite economy, July 31. (Retrievable online at http://www.cnn.com/video)

How much do you think the largest U.S. Corporations pay in taxes?

Posted by & filed under Accounting Principles, All Articles, Cost Accounting, IFRS, International Accounting, Managerial Accounting.

In a year of presidential politics, many of America’s biggest corporations complain that they pay too much in taxes. But, how much is that? A recent analysis shows that many are actually getting off pretty easy. It turns out that the 10 most profitable U.S. companies only paid an average federal tax rate of 9 percent last year. This group of companies includes Exxon Mobil, Apple, Microsoft, JPMorgan Chase and General Electric.

Questions:
1. According to Travis Waldron, which company complained that it paid too much in taxes, yet paid zero for 2008 through 2011? Explain briefly how this could happen.
2. How does the U.S. effective tax rate compare to those in other developed countries around the world?
3. The article by Eichler presents a slide show for each company and lists Tax Provision and Actual Taxes Paid. Explain the difference.
4. Which company surprised you most about the amount of taxes that they paid to foreign countries? Explain.

Sources:

Waldron, T. (2012). Corporation That Paid Nothing In Taxes For Four Years Tells Congress It Pays Too Much In Taxes. The Huffington Post, July 20 (Retrievable online at http://thinkprogress.org/economy/2012/07/20/558931/corporation-that-paid-nothing-in-taxes-for-four-years-tells-congress-it-pays-too-much-in-taxes/?mobile=nc)

Eichler, A. (2012). Ten Most Profitable U.S. Corporations Paid Average of Just 9 Percent Last Year: Report. The Huffington Post, August 6 (Retrievable online at http://www.huffingtonpost.com/2012/08/06/most-profitable-corporations-tax-rate_n_1746817.html?ref=topbar)

Blogging without a license

Posted by & filed under Accounting Principles, All Articles, Financial Accounting, Fraud Accounting.

Here’s an interesting case to watch. Steve Cooksey eats what he professes to be “a cave man diet.” On his blog, he says that it has lot of meat and greens, but no bread or pasta. He claims that the diet has helped him conquer diabetes. In North Carolina, where he lives, “assessing the nutritional needs of individuals and groups” without a license is a crime. His claim is that the First Amendment allows him to blog about his experience. A court case ensued.

Questions:
1. From a legal, ethical, or business standpoint, do you think Mr. Cooksey needs a license?
2. Who is representing Mr. Cooksey? What types of litigation do they usually tackle?
3. Why does Mr. Cooksey hope he loses in the 1st round and the case goes to the Supreme court?

Source: Liptak, A. (2012). Blogger Giving Advice Resists State’s: Get A License. The New York Times, August 6 (Retrievable online at http://www.nytimes.com/2012/08/07/us/nutrition-blogger-fights-north-carolina-licensing-rebuke.html?ref=technology)

Whistleblower Identifies Unnecessary Heart Procedures

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

In the summer of 2010, a troubling letter reached the chief ethics officer of the hospital giant HCA, written by a former nurse at one of the company’s hospitals in Florida. In less than two months, an internal investigation by HCA concluded the nurse was right. Unnecessary cardiac procedures were being performed to boost HCA’s bottom line.

Questions:

1. What types of procedures were being performed?
2. What type of organization is HCA?
3. Why was this such a money making practice? Has it been determined to be Medicare fraud?
4. Who was the CEO in 2000 when In 2000, the company reached one of a series of settlement involving a huge Medicare fraud case with the Justice Department?

Source:

Abelson, R. and J. Creswell. (2012). Hospital Chain Inquiry Cited Unnecessary Cardiac Work. The New York Times, August 6 (Retrievable online at http://www.nytimes.com/2012/08/07/business/hospital-chain-internal-reports-found-dubious-cardiac-work.html?pagewanted=1&_r=1&ref=business)

LIBOR Scandal Widens

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

Bank of America, the second largest U.S. bank, has received subpoenas from the U.S.Justice Department, the Commodity Futures Trading Commission, and U.K. Financial Services Authority requesting information about the company’s possible role in the rigging of a key international lending benchmark, LIBOR. Regulators have queried at least a dozen banks worldwide about their roles in setting LIBOR, the most widely used benchmark for interest rates, affecting more than $360 trillion in financial products.

Questions:

1. According to the article, who are the other banks that are facing mounting legal claims, regarding LIBOR? When are U.S. regulators expected to file charges against traders involved in the scandal?
2. Explain why Bank of America’s deferred tax assets will diminish as a result of the LIBOR scandal? Summarize and discuss.
3. What other settlement was Bank of America recently involved in regarding price-fixing? Summarize and discuss.

Source:

Son, H. (2012). BofA Says Libor Probe Draws U.S. Subpoenas on Submissions. BloombergBusinessWeek, August 3 (Retrievable online at http://www.businessweek.com/news/2012-08-02/bofa-says-libor-probe-draws-u-dot-s-dot-subpoenas-on-submissions)

Computers are great when they work……

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

The Knight Capital Group announced that losses they sustained on Wednesday, August 1, were the result of a computer glitch and now threaten the stability of the Jersey City firm. At the heart of this, the firm lost $440 million when it sold stocks that it accidentally bought Wednesday morning.

Questions:

1. On Thursday, what was the share price of Knight Capital?
2. If the amount in #1 was down 63% from Wednesday’s close, what was the share price at Wednesday’s close?
3. If the amount you calculated in #2 was down 32% from Tuesday’s close, what was the share price on Tuesday, before the computer glitch?
4. Based on the article, how much has Knight Capital lost this year in total?

Source:

Popper, N. (2012). Knight Capital Says Trading Glitch Cost It $440 Million. The New York Times, August 2 (Retrievable online at http://dealbook.nytimes.com/2012/08/02/knight-capital-says-trading-mishap-cost-it-440-million/?hp)