Sweet Dreams and Watch Out for those False Medical Claims!

Posted by & filed under Accounting Information Systems, Accounting Principles, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Fraud Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

If you have been up late watching TV, you might have seen the Infomercial for a Minnesota company that sells My Pillow, a patented open-cell, poly-foam design created by inventor Michael J. Lindell. This staple of late-night TV infomercials has sold about 18 million pillows since 2005. However, a recent lawsuit successfully argued My Pillow overstated its claims.

Questions:
1. What are some of the disputed medical claims related to My Pillow?
2. Where was Mr. Lindell sued?
3. What percentage of annual profits did Mr. Lindell settle the suit for?
4. What is the National Sleep Foundation? Would you consider it to be a related party? Discuss whether the foundation should have not-for-profit status.
5. How should the company record the payment for the settlement in its accounting records? Be sure to include the donation and refund, as well as the settlement amount in your journal entries?

Source:
Guarino, B. (2016). Infomercial sleeper ‘My Pillow’ gets $1 million wake-up call over false medical claims. The Washington Post, Nov. 3 (Retrievable online at https://www.washingtonpost.com/news/morning-mix/wp/2016/11/03/infomercial-sensation-my-pillow-gets-1-million-wake-up-call-over-false-medical-claims/?hpid=hp_hp-morning-mix_mm-pillow%3Ahomepage%2Fstory)


Lions Hunting Zebras! Oh MY!

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According to the New York Times, Wells Fargo would like to close the chapter on the sham account scandal, saying it has changed its policies, replaced its chief executive and refunded $2.6 million to customers. However, lawmakers and regulators say they will not let it go that quickly.

Questions:
1. Who were the customers that Wells Fargo targeted to meet steep sales goals?
2. What action did the Board of Supervisors in San Francisco take against Wells Fargo?
3. What patterns did this scam take at various branch banks?
4. Do you think that Wells Fargo should be further sanctioned by regulators? Discuss.
5. Do Wells Fargo’s actions rise to the level of fraud? Discuss.

Source:
Cowley, S. (2016). ‘Lions Hunting Zebras’: Ex-Wells Fargo Bankers Describe Abuses. The New York Times, Oct. 20 (Retrievable online at http://www.nytimes.com/2016/10/21/business/dealbook/lions-hunting-zebras-ex-wells-fargo-bankers-describe-abuses.html)

wells-fargo

Not all retirement plans are equal!

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Intermediate Accounting, Managerial Accounting, Uncategorized.

According to the New York Times, millions of Americans — public school teachers, clergy members, employees of religious institutions or nonprofits, and some charities — are not offered 401(k)’s; instead they typically must rely on what are known as 403(b) plans, many of which are more lightly regulated.

Questions:
1. Briefly summarize why public school teachers, clergy members, employees of religious institutions or nonprofits are losing so much of their nest eggs for retirement.
2. How much of the $879 billion in total 403(b) assets are not subject to federal retirement plan regulations?
3. What was the highest management percentage mentioned in the article? How does this compare with an average 401K fee? Discuss,
4. What was the most interesting issue raised in the article?

Source:
Bernard, T. (2016). Think Your Retirement Plan Is Bad? Talk to a Teacher The New York Times, Oct. 21 (Retrievable online at http://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html)
this-legend-has-retired

You mean, pay matters?

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Remember when sales at Walmart stores open at least a year fell for five straight quarters and the company’s revenue fell for the first time in Walmart’s 45-year run as a public company in 2015? According to the New York Times, this is how they changed the dissatisfaction that customers felt.

Questions:
1. What was Walmart’s idea that set them on a better path?
2. What were the investments that Walmart made?
3. Explain what relentless focuses on cost were relaxed or reversed.
4. What have these changes done to attract different types of workers?
5. Discuss whether you think these changes are short-term or long-term approaches to the Walmart problems. Give examples.

Source:
Irwin, N. (2016). How Did Walmart Get Cleaner Stores and Higher Sales? It Paid Its People More. The New York Times, Oct. 14 (Retrievable online at http://www.nytimes.com/2016/10/16/upshot/how-did-walmart-get-cleaner-stores-and-higher-sales-it-paid-its-people-more.html)

A Growing Force in Real Estate

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According to the Washington Post, for the fourth year in a row, buyers from China ranked first among foreign nationals purchasing property in the United States, according to a survey by the National Association of Realtors (NAR). U.S. home sales to Chinese nationals totaled $27.3 billion — exceeding the total dollar sales figure of the next four countries in the rankings combined, the survey showed.

Questions:
1. Explain what this influx of investment from China is doing to some real estate markets.
2. When did Chinese nationals start buying U.S. property in large numbers?
3. On average, what types of properties are Chinese looking for?
4. What did you find to be the most interesting issue in this article?

Source:
McMullen, T. (2016). Wealthy Chinese buyers are a growing force in U.S. real estate markets. The Washington Post, Oct. 14 (Retrievable online at https://www.washingtonpost.com/realestate/wealthy-chinese-buyers-are-a-growing-force-in-us-real-estate-markets/2016/10/13/15ab3cba-7441-11e6-8149-b8d05321db62_story.html?hpid=hp_hp-more-top-stories_chinarealestate-830am%3Ahomepage%2Fstory)

portland

Changes Coming!

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According to the Associated Press, Federal regulators recently announced new rules governing the prepaid debit card industry. It’s a big change more than two years in the making that’s expected to bring some basic account protections to its customers, who are often financially disadvantaged.

Questions:
1. How much money was loaded on prepaid cards in 2012 and how does that compare with the amount in 2009?
2. According to the Pew Charitable Trusts, who are the primary users of prepaid cards?
3. What are the changes to prepaid cards?
4. What controversial feature was left as a concession to the prepaid card industry?
5. Explain this controversial feature in terms of the accounting journal entries that might take place.

Source:
Staff. (2016). Changes coming to prepaid card market. The Associated Press, Oct. 16 (Retrievable online at http://bigstory.ap.org/article/43266ab343d84e7b8e56e55125788c51/changes-coming-prepaid-card-market)460x

Cell Phone Worries

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According to the Washington Post, Samsung is suspending production of its Galaxy Note 7 replacement phones after more reports of fires in South Korea and the United States.

Questions:
1. According to the article, what major U.S. carriers are suspending sales or exchanges of the troubled device?
2. How many fires have been reported so far in replacement phones?
3. What types of damages have occurred with the Samsung phones prior to the voluntary recall on Sep. 2?
4. From a financial standpoint, what are the ramifications of these battery problems?
5. If you assume that the cost of replacing each phone is $100, how should Samsung account for the recalls, once they are able to safely provide replacement phones?

Source:
Barbash, F. and A. Fifield (2016). Samsung Galaxy Note 7 crisis deepens. Is it ‘done for’? The Washington Post, Oct. 10 (Retrievable online at https://www.washingtonpost.com/news/morning-mix/wp/2016/10/10/samsung-galaxy-note-7-production-suspended-after-replacement-phone-fires-reports-say/)

Is this Fair?

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Since 2014, a Michigan law has limited Tesla Motors’ capacity to sell in the state, after the Republican-led legislature implemented a statute that banned the company’s only method of selling its cars to consumers.

Questions:
1. What are the four states that Tesla has been shut out of?
2. Where did Tesla win its most high-profile battle?
3. Who are the primary challengers against the Tesla business model and why?
4. What is the thinking behind a constitutional challenge? What is your opinion of this approach?
5. From an accounting standpoint, how does the Tesla model differ from a GM model of sales?

Source:
Felton, R. (2016) Tesla fights back as Michigan goes to new lengths to shut company out. The Guardian, Oct. 9 (Retrievable online at https://www.theguardian.com/us-news/2016/oct/09/tesla-michigan-ban-detroit-lawsuit)

Mylan Settles with the Government

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

According to the New York Times, Mylan, the maker of the allergy treatment EpiPen, said Friday that it had reached a $465 million settlement with the Justice Department and other government agencies over questions on whether the company had overcharged Medicaid for the treatment by improperly classifying it as a generic drug.

Questions:
1. What is the difference from an accounting standpoint on whether a drug is classified as a brand-name or a generic?
2. What is the federal government rule issued this year for companies with new drug applications?
3. Besides the settlement, what other steps is the Medicaid program taking to see that other companies are not overcharging for their drug products?
4. If you assume that Medicaid was paying approximately $300 for the pens, approximately how many pens did the program buy from Mylan between 2011 and 2015?
5. How much of the revenue to Mylan comes from the government?
6. In addition to the settlement, what adjustments will Mylan’s financial reportings see?
7. How should Mylan account for the settlement based on financial accounting practices? Based on income tax practices?

Source:
Thomas, K. (2016). Mylan to Settle EpiPen Overpricing Case for $465 Million. (Retrievable online at http://www.nytimes.com/2016/10/08/business/epipen-mylan-justice-department-settlement.html)