The Comeback Kid?

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, Uncategorized, Video Updates.

Pandora, an online radio service, had a public offering of stock on June 15, 2011. Many are saying that its success in the public offering is part of a new tech bubble in the stock market. As of April had 90 million registered members, which is up from 80 million in February. Its members racked up 3.8 billion hours of listening to Pandora’s song stream at the end of the 2011 fiscal year. But as its audience grows, so does its biggest cost: the royalties it pays for the music it streams. Pandora’s filing said its current rates for royalty payments are good until 2015, after which it will need to renegotiate.

Questions:

1. Pandora was founded in 2000, but it wasn’t known as “Pandora” at the time. What was its original name?

2. Who are Pandora’s competitors? What are the problems with Pandora’s business strategy?

3. The video mentioned Zip Car (http://www.zipcar.com/) as a new IPO.  What is an IPO?  Look up Zip Car.  What is the focus of this business? 

4.  Compare the Pandora product and the Zip Car product.  Which do you think will be more successful and why?

5.  Pandora was expecting to raise about $100 million with their stock offering and instead raised $250 million.  What percentage is this over their expectations?

Sources:

Pandora CEO Kennedy (http://video.cnbc.com/gallery/?video=3000027758), June 15, 2011

Siegler, M. (2011). Pandora Puts The “P” In IPO — Our Talk With Them On The Big Day , Tech Crunch, June 15 (Retrievable online at http://techcrunch.com/2011/06/15/pandora-stock-ipo/)

KPMG in the News

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, Uncategorized.

Although KPMG LLP, one of the “Big Four” accounting firms, a former female Senior Manager, Donna Kassman, filed a $350 million class action discrimination lawsuit against the company on June 2, since the numbers tell a different story entirely. Women comprise about half of KPMG’s employees, but are conspicuously absent from the top leadership positions. The Company’s 20-member global executive team and 24-member global board each have only one female representative. Similarly, women are only 18% of all KPMG Partners compared to nearly 50% of all employees.

Questions:

1. Where is KPMG headquartered? What were the company’s global revenues for 2010?

2. What is Ms. Kassman seeking in the suit? How long had she been with the firm?

3. Do you think that Ms. Kassman or KPMG will prevail in this suit?  Explain your assumptions.

Source:

Staff (2011). Accounting Giant KPMG LLP Faces $350 Million Gender Discrimination Class Action, PRNewswire, June 2 (Retrievable online at http://www.prnewswire.com/news-releases/accounting-giant-kpmg-llp-faces-350-million-gender-discrimination-class-action-123021028.html)

Do great products translate into great profits?

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, Uncategorized, Video Updates.

So far the summer of 2011 has seen its share of giant wildfires. Recently GelTech Solutions, Inc. was profiled in CNN – Your Money’s segment on small businesses for its product – FireIce. The company is committed to continuing the work of developing sustainable solutions that solve common problems and maintain the integrity of the earth – today and for generations to come. The FireIce product appears to be incredible stuff if you are in the path of these destructive fires. While it appears to be remarkable, why isn’t the company doing so well? See if you can come up with some answers, based on their financial statements.

Questions:
1. Go to the company’s website at http://geltechsolutions.com/geltech/default.aspx. Then look at GelTech Solutions, Inc. 10K for 9/28/10 (found at http://ir.stockpr.com/geltechsolutions/filings?qm_page=8102). What amount has the company spent on Research and Development over the last two years? What was most of this spent on? Explain how you would account for R & D in terms of journal entries.
2. What is the company’s experience and expenditures for marketing?
3. Where is the company headquartered?
4. How old of a process did they say the FireIce concept was on the video?
5. What are the contingencies that the company is facing?
6. Are there any clues to why the company is not profitable? What are they?
7. Would you consider buying this stock? Why or why not? Explain.

Sources:
CNN.com. (2011). Blowtorch your hand without a wince, June 6 (Retrievable online at http://money.cnn.com/video/smallbusiness/2011/06/06/n_fireice.cnnmoney/)

Fraud in Medicare Part D

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, Uncategorized, Video Updates.

Crooks are taking advantage of lax oversight in Medicare’s Part D prescription-drug program to obtain highly addictive drugs including oxycodone, Ritalin, and methadone, according to results of a federal investigation. Pharmacies and other Medicare contractors are supposed to enter in a form a number that identifies prescribers. But in many cases, that information is being left blank or assigned a dummy number, the report found. The missing information doesn’t always indicate fraud and could include clerical errors, but without prescriber identifiers, it’s hard for investigators to determine.

Questions:

1.     What types of overrides of internal controls are allowing the situation mentioned in the article to happen? What types of overrides of internal controls are allowing the situation mentioned in the video to happen?

 2. The article mentioned that “the CMS paid $20.6 million for 228,000 prescriptions for so-called Schedule II drugs with invalid prescriber IDs in 2007.”  What does this work out as the average price per prescription?

 3. How do you think that pharmacies would record in their accounting records the prescriptions that they fill on Medicare D?

 4. What types of costs do the problems mentioned in the video result in for taxpayers? What types of costs do the problems mentioned in the article result in for taxpayers?

5. What recommendations would you make to eliminate either of these two fraudulent issues related to Medicare Part D? Explain.

Sources:

Kennedy, K. (2011) Lax scrutiny of Medicare Part D tied to drug fraud, The Philadelphia Inquirer-Digital, Feb. 12 (Retrievable online at http://www.philly.com/philly/business/116045359.html)

Kavilanz, Parija (2011). Drug Shortages at All-Time High, CNN.com, June 10 ((Retrievable online at http://money.cnn.com/2011/06/10/news/economy/drug_shortages_fda/index.htm)

The Aftermath in Japan

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, Uncategorized, Video Updates.

The Tokyo Electric Power Co. on Friday reported a net loss of 1.2 trillion yen ($15.4 billion) for the fiscal year that ended March 31. Tokyo Electric also announced it will decommission reactors Nos. 1-4 at Fukushima Daiichi and has also canceled plans to build two other reactors at the site. In addition to the company’s earnings, Tokyo Electric president Masataka Shimizu announced his resignation Friday, which must be approved by the board of directors at a June meeting.

A restructuring plan was announced to boost company finances and help create more than a trillion yen in savings. The Fukushima Daiichi plant has faced a series of setbacks since a magnitude 9.0 earthquake and tsunami struck on March 11. The disasters triggered a glitch in the plant’s cooling system, and caused radiation to leak.

Questions:

1. Based on the video and the article, how much compensation is being made to some of the families directly affected by the tragedy?
2. Under IFRS, how would these payments be accounted for?
3. What is the anticipated total compensation projected?
4. What measures is the company taking to make up losses?

Source:
Lah, K. and Wakatsuki, Y. (2011). Tokyo Electric reports $15 billion net loss after earthquake, tsunami, CNN.com (Retrievable online at http://www.cnn.com/2011/BUSINESS/05/20/japan.tokyo.electric.earnings/index.html)
CNN.com Video (2011)., TEPCO Reports Massive Losses, May 20. (Retrievable online at www.cnn.com/videos)

Can You Copyright a Tattoo?

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Hollywood is accustomed to lawsuits over salaries, movie credits, even half-baked concepts that become movies. Now a studio may be going to court over the original concept of a tattoo. In “The Hangover Part II,” the character played by Ed Helms wakes up with a permanent tattoo bracketing his left eye, which bears an eerie resemblance to Mike Tyson’s Maori-inspired design tattoo, who is also in the film.

The tattoo artist who designed Mike Tyson’s tattoo claims that it is a copyrighted work and has gone to Federal District Court to stop Warner Brothers from using the tattoo in its movie and posters and demands monetary damages for reckless copyright infringement by the movie company. Legal experts contend that the case could offer the first rulings on tricky questions about how far the rights of the copyright holder extend in creations that are, after all, on someone else’s body.

Questions:

1. Do you think the tattoo artist will prevail in claim under the Copyright Act? Why or why not?
2. What is the “fair use” defense?
3. Per accounting rules, explain how you would account for the copyright on a tattoo, if the artist is successful in his claim?

Source:

Cohen, N. (2011) On Tyson’s Face, It’s Art. On Film, a Legal Issue, The New York Times, May 20 (Retrievable online at http://www.nytimes.com/2011/05/21/business/media/21tattoo.html?_r=1&hp)

The confused world of outsourcing

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, Uncategorized.

India’s outsourcing giants — faced with rising wages at home — have looked for growth opportunities in the United States. But with Washington crimping visas for visiting Indian workers, some companies such as Aegis are slowly hiring workers in North America, where their largest corporate customers are based. In this evolution, outsourcing has come home. At its U.S. sites, Aegis says, 90 percent or more of its workers are American.

Questions:

1.  Using the amounts given in the article (pay runs $12 to $14 an hour with bonus checks of up to $730 a month), use an average per hour amount of $13 per hour plus a bonus of $730 to calculate what a call center’s gross pay would be for an individual who works a 40-hour week.

2.  How would you make the journal entry for the bonus?

3.  According to the article, about 5,000 people work at nine U.S. call centers and Aegis aims to triple its U.S. head count to more than 15,000.  Based on this information:
          a. How many people on average work at each call center in the U.S.?
          b. What percentage increase in workers is anticipated?
          c.  From a managerial accounting perspective, what issues would you be concerned with regarding
               this growth?

Source:

Glader, P. (2011). As Indian Companies Grow in the U.S., Outsourcing Comes Home, The Washington Post, May 20 (Retrievable online at http://www.washingtonpost.com/business/as-indian-companies-grow-in-the-us-outsourcing-comes-home/2011/05/17/AFZbrp7G_story.html?hpid=z2)

What’s a Bitcoin?

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Bitcoin is a peer-to-peer currency, meaning it is not issued by a central authority, like the dollar or yen. The money supply grows as the network grows and will max out at about 21 million bitcoins. But right now, you can purchase them online on the Mt. Gox currency exchange or an over-the counter market. They do not exist in physical form—only electronically, owned and traded by members of a special, anonymous peer-to-peer network. No third-party intermediary, such as a payment processor or a bank, needs to keep tabs on or process the electronic transactions.

Questions:

1.  According to the article, what are the advantages of the bitcoin?

2.  According to the article, what are the disadvantages of the bitcoin?

3. Explain how issues related to the bitcoin might overlap with accounting concepts.  

Source:

Lowrey, A. (2011). My Money is Cooler Than Yours. Slate.com, May 18 (Retrievable online at http://www.slate.com/id/2294980/)

Gamify Your Life!

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, Uncategorized, Video Updates.

Are there things that you hate to do?  Sure, plenty!  Well now Green Goose, Inc. is trying to entice you to connect sensor activity to things to wide-spread activities, like how long you brush your teeth or how much you vacuum your house or apartment or how much energy you burn while riding your bike, or even how much water you use in the shower.  Originally, developed by a company of the same name to illustrate how an eco-friendly lifestyle could save you money, the “egg” has been re-purposed to turn the activities of everyday life into a sort of video game and tracking experience scores and unlocking rewards as part of the process.

Questions:

1. Consider the following:

a. Perform a cost benefit analysis on Green Goose and brushing your teeth.

b. Perform a cost benefit analysis on Green Goose and riding your bike.

c. Perform a cost benefit analysis on Green Goose and the water you use in the shower.

2.  What were some of the most difficult assumptions you had to make for these analyses?

3. Discuss whether you believe this will be a successful entrepeneurial company.

 Source:

Liszewski, A. (2011). Green Goose System Turns Your Whole Life Into A Video Game, March 4 (Retrievable online at http://www.ohgizmo.com/2011/03/04/greengoose-system-turns-your-whole-life-into-a-video-game/)

Hollister, S. (2011). Green Goose Sensors Monitor Your Life, You Earn Experience Points (update), Feb. 23 (Retrievable online at http://www.engadget.com/2011/02/23/green-goose-sensors-monitor-your-life-you-earn-experience-point/)

Have A New Idea? Maybe It’s Not That Weird for a Business Opportunity?

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Hart Main, age 13,  developed a new product called ManCans, candles with scents made specifically for men who don’t really want to smell like freshly laundered towels or a dewy forest. Basically, a typical ManCans scent is smells more like a fresh new baseball glove. It all started when his sister, age 12, started selling candles to raise money for school. Main wasn’t crazy about the girly scents and joked that there ought to be candles for guys — guys who didn’t want their bedrooms to smell like lavender soap. His mom encouraged her son to try to make some candles with a masculine aroma. ManCans now offers eight scents so far: New York Style Pizza, Grandpa’s Pipe, Sawdust, Campfire, New Mitt, Fresh Cut Grass, Coffee and, of course, Bacon.

Questions:

1.  How much did Hart sell the original candles for? 

2.  By what percentage did he raise the price?

3.  Based on the total current orders, how much is Hart’s sales revenue?

4.  According to the article, pricing has been tricky to figure out. What information do you need to find out his breakeven point?

5.  ManCan’s has a charitable arm.  Explain what it is and how you think it should be accounted for.

Source:

Williams, G. (2011). ManCans’ Hart Main: A 13-Year Old Entrepeneur Invents Candles for Men, AOL Small Business, May 10 (Retrievable online at http://smallbusiness.aol.com/2011/05/10/mancans-hart-main-a-13-year-old-entrepreneur-invents-candles-f/)