Huge Merger

Posted by & filed under Accounting Information Systems, Accounting Principles, All Articles, Auditing, Cost Accounting, Financial Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

To keep up with the changing technology environment, computer maker Dell will buy the storage provider EMC in a deal worth about $67 billion, the companies announced today, Oct. 12.

Questions:
1. What are some of the benefits of the new combined company?
2. How much is Dell going to pay per share of EMC? How is Dell accomplishing this merger?
3. What are the separate strengths that each company brings to the new company? Perform a SWOT analysis based on your Internet research.
4. Who will be the CEO of the new company?
5. What is the role of the companies’ accounting firms when there is a merger/acquisition? Give some examples.
Staff. (2015). Dell to Buy EMC for $67 Billion. The New York Times, Oct. 12 (Retrievable online at http://www.nytimes.com/2015/10/13/business/dealbook/dell-announces-purchase-of-emc-for-67-billion.html)

Fueling Both the Upside and Downside

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In the wake of the financial crisis, HUD established the Dirtressed Asset Stabilization Program. Unfortunately, this program has allowed many of these loans to be sold to hedge funds and private equity firms, rather than nonprofits.

Questions:
1. What have the private equity firms done that Senator Warren is rallying against?
2. How many distressed loans have been sold by HUD since 2010?
3. Explain what rental backed securities are.
4. Why do investors without ties to a neighborhood pose risks to a local housing market?

Source:
Staff (2015). Elizabeth Warren protests sales of distressed home loans to Wall Street.
Aljazeera America, Sep. 30 (Retrievable online at http://america.aljazeera.com/articles/2015/9/30/warren-protests-hud-sales-mortgages-to-wall-street.html)
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American Apparel Bankruptcy

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

American Apparel has been in the middle of a turnaround effort that includes store closings and some layoffs. The company also faces several lawsuits from ousted CEO Dov Charney. Now they face the bankruptcy court.

Questions:
1. What were the allegations against previous CEO Charney and what types of financial strains has this put on the company?
2. Who is the new CEO and why is she seen as providing a needed role in the turnaround?
3. What is the deal before the bankruptcy court to help the company relieve some of its massive debt?

Sources:
Bashin, K. (2015). Bankruptcy buys it time, but not much else. Bloomberg News, Oct. 5 (Retrievable online at http://www.bloomberg.com/news/articles/2015-10-05/american-apparel-s-bankruptcy-buys-it-time-but-not-much-else)

Garcia, Tonya (2015). 5 reasons American Apparel is now bankrupt
Marketwatch.com, Oct. 5 (Retrievable online at http://www.marketwatch.com/story/5-reasons-american-apparel-is-bankrupt-2015-10-05)

Kaleil Tuzman: The Rest of the Story

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

Kit Digital Inc.’s former chairman and chief executive officer and its former chief financial officer were arrested and charged with accounting fraud at the software company.

Questions:
1. What was the type of accounting fraud that Tuzman and Smythe are charged with committing?
2. According to the article, how much money was involved and who benefited?
3. What is the background of Kaleil Tuzman and what documentary did Mr. Tuzman star in?
4. Did Kaleil follow his own advice? Discuss.

Source:
Voris, B.V. (2015). Kit Digital Ex-Chief Tuzman Charged With Accounting Fraud. Bloomberg Business, Sep. 8 (Retrievable online at http://www.bloomberg.com/news/articles/2015-09-08/kit-digital-s-tuzman-and-smyth-arrested-in-accounting-fraud)

New Mortgage Rules for Those with Student Debt

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

New rules could make it tougher to qualify for a low down payment mortgage from the Federal Housing Administration, particularly with respect to down payment gifts and deferments associated with student loans.

Questions:
1. What is the role of debt-to-income ratios in this story, as they related to student loans?
2. What is the old rule as opposed to the new rule for student loans being factored into FHA mortgage applications?
3. According to the FHA spokesman, why are the rules changing to make it harder or not as attractive to buy a house through FHA when a person has student debt?

Source:
Harney, K. (2015) New rules make it tougher for people with college loans to buy houses. The Washington Post, Sep. 15 (Retrievable online at http://www.washingtonpost.com/realestate/new-rules-make-it-tougher-for-people-with-college-loans-to-buy-houses/2015/09/15/a31a940a-5b0c-11e5-b38e-06883aacba64_story.html).

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It’s Too Late for I’m Sorry!

Posted by & filed under Accounting Information Systems, Accounting Principles, All Articles, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Financial Statement Analysis, Fraud Accounting, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized, Video Updates.

Volkswagen shares plunged more than 20 percent on Monday, their biggest one-day fall, after the German carmaker admitted it had rigged emissions tests in the United States, and U.S. authorities said they would widen their probe to other manufacturers.

Questions:
1. Briefly explain the emissions data scandal.
2. What was the recent challenge to Volkswagen Chief Executive Martin Winterkorn and what changes in the organization are likely for the future?
3. What types of legal challenges will the company face and by what government agencies?

Source:
Cremer, A. and V. Volcovici. (2015). Volkswagen shares plunge on emissions scandal, U.S. widens probe. Reuters.com, Sep. 21 (Retrievable online at http://www.reuters.com/article/2015/09/21/us-usa-volkswagen-idUSKCN0RL0II20150921)

“A Very Dangerous Process”

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

Specialists in infectious disease are protesting a gigantic overnight increase in the price of Daraprim,a 62-year-old drug that is the standard of care for treating malaria and toxoplasmosis.

Questions:
1. What are the causes of price increases for drugs like Daraprim?
2. What is the past controversy associated with Martin Shkreli, the founder and chief executive of Turing Pharmaceuticals?
3. With the patent for Daraprim expired, what are the roadblocks to generic production of this drug?
4. Graph the sales statistics of Daraprim since 2010, including the names of the corporate owners over this period and the number of prescriptions as reported in the article.

Source:
Pollack, A. (2015). Drug Goes From $13.50 a Tablet to $750, Overnight. The New York Times, Sep. 20 (Retrievable online at http://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news)
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Tax Accounting Fraud – A Chinese Way of Life

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

This article describes how businesses in China have to give out invoices called fapiao in order to ensure that taxes are being paid. However, as you will learn from Mr. Ding’s experience, the fapiao or the very mechanism intended to keep businesses honest, is the key to cheating on taxes.

Questions:
1. What was the challenge that the accountant at Mr. Ding’s workplace posed; what was his plan; and why was it so hard to accomplish?
2. What was the status of fake invoices in China in 2010?
3. Why was Mr. Ding both a villain and a hero in this story?
4. What did the 2011 audit of the Beijing-Shanghai high-speed railway construction project find?

Source:
Ding, G. (2015). How to Cheat on Taxes in China. The New York Times, Sep. 11 (Retrievable online at http://www.nytimes.com/2015/09/11/opinion/how-to-cheat-on-taxes-in-china.html)

New Student Loan Default Study

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New data suggests that many popular perceptions of student debt are incorrect. The huge run-up in loans and the subsequent spike in defaults have not been driven by $100,000 debts incurred by students at expensive private colleges. Instead, they are driven by $8,000 loans at for-profit colleges and, to a lesser extent, community colleges. Borrowing for both of these has become far more common in recent years.

Questions:
1.What is responsible for the 75% increase in defaults between 2004 and 2011?
2. What is the logic behind the types of students that default?
3. How has the landscape of student borrowers changed over the last 20 years and what factors drove the rapid change in the last few years?

Source:

Dynarski, S. (2015). New Data Gives Clearer Picture of Student Debt. The New York Times, Sep. 10 (Retrievable online at http://www.nytimes.com/2015/09/11/upshot/new-data-gives-clearer-picture-of-student-debt.html)

New Student loan default study

Salary and Class Inequality at the World Bank?

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As outsourcing has become more common, even the World Bank is seeing its share of employee discontent about contract employees. Roughly half of those that work for the World Bank are consultants, brought on for fixed contracts that often end up being renewed over and over again. Across the bank’s offices worldwide, there are currently 19,608 contract workers who make up 8,225 full-time equivalent positions, compared to 15,551 employees, according to the Bank’s staff association.

Questions:
1. What are the costs and benefits of outsourcing for the World Bank?
2. What are some of the most aggregious issues that are creating the class issues between World Bank staffers and short-term contractors?
3. Discuss these types of contingent worker models throughout the economy, using some specific details about the World Bank model.
4. Per various regulations, when should a consultant be recognized as an employee? Does this apply only to private and public companies or does it include government entities?

Source:
DePilis, L. (2015). The World Bank is struggling with its own class divide. The Washington Post, Aug. 13 (Retrievable online at http://www.washingtonpost.com/news/wonkblog/wp/2015/08/13/the-world-bank-is-struggling-with-its-own-class-divide/?tid=article_nextstory)

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