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.

Each financial action a consumer takes may affect their credit score, causing it to constantly change.  The economic downturn has put Americans’ credit scores in the limelight, especially as more homeowners struggle to stave off foreclosure by refinancing or modifying their mortgage loans. Although a large majority of Americans are working to improve their scores, it’s important to understand how credit scoring works – and the factors that cause consumer scores to constantly undergo changes.  As this video shows, the numbers that lenders are looking at are also changing.

Questions:

1. According to the video, what use to be a good credit score?  Do you know your credit score?  How do you stack up, based on the video?
2.  What is the “new” good credit score? Why did it change?  Do you think it is warranted?  Why or why not?
3.  Based on the example they gave in the video, what would a person pay in total dollars for a $150,000 house on a 30 year mortgage if they had a 720 credit score?  How much total interest would they pay over the lifetime of the mortgage?

Source:

CreditCom Staff. (2010). Why are Consumer Credit Scores Constantly Changing? Credit.Com, October 25. (Retrievable online at http://www.credit.com/news/credit-debt/2010-10-25/why-are-consumer-credit-scores-constantly-changing-.html)

CNN Video. (2010). New Magic Number, CNN, October 23. (Retrievable online at www.cnn.com)

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.

Starting this week, for-profit companies marketing debt-relief services over the telephone are prohibited from charging a fee before they settle or reduce a customer’s debt to the Internal Revenue Service, credit card company, or other unsecured debt. The new rule by the Federal Trade Commission covers telemarketers of for-profit debt-relief services, including credit counseling, debt settlement, and debt negotiation services. Nonprofit firms are not affected by the rule.

Questions:
1.  What is this ruling meant to prevent?  Explain this in terms of GAAP recognition of revenue.
2. Under the new ruling, providers’ fees for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled.  Assume that John Smith has 3 debts enrolled ($150,000, $450,000, and $300,000) and the company agrees to settle the debts for a charge of $1,200 for settling the debt.  When they settle the $450,000 debt according to the new ruling, how much of this fee can they collect?
3. Under the ruling, if a consumer enrolls multiple debts into one debt relief program and the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged must be the same for each of the consumer’s debts, according to the FTC. Can you think of a possible situation where manipulation of this part of the ruling may be used by debt-relief services to gain greater fees?  If so, how do you think this can be investigated?

Source:
Staff. (2010). FTC rule prohibits debt-relief companies from collecting up-front fees. AccountingWEB, October 27. (Retrievable online at http://www.accountingweb.com/topic/tax/ftc-rule-prohibits-debt-relief-companies-collecting-front-fees)

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.

In 2011, the Uniform CPA Examination will be offered outside the 55 U.S. jurisdictions for the first time in its history. The American Institute of Certified Public Accountants (AICPA), National Association of State Boards of Accountancy (NASBA), and Prometric – the three organizations that jointly offer the CPA exam in the United States – reached an agreement to administer the exam in international locations. The CPA exam will be offered next year in Japan, Bahrain, Kuwait, Lebanon, and the United Arab Emirates.

Questions:
1. Will the exam be offered in several different languages?  Do you agree or disagree with this and why?
2. What are the “three E’s” of the licensure for the CPA designation in the U.S.?
3. What is the testing time for all 4 sections of the exam?
4. How many times has the computer-based CPA exam been offered?

Source:
Staff. (2010). CPA Exam to Be Administered Outside U.S. for the First Time. AccountingWEB, October 22. (Retrievable online at http://www.accountingweb.com/topic/education-careers/cpa-exam-be-administered-outside-us-first-time)

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Jane Buchan is a rarity on Wall Street. Not only has she built a hugely successful hedge fund investment firm but the firm is also the only one that is, on paper, owned and run by women. Unfortunately, it now appears that the firm Pacific Alternative Asset Management Company (PAAMCO) was bankrolled by some of the biggest (male) names in the business, in order to disguise aspects of the business from customers, partners and federal regulators.

Questions:
1. What is this scandal all about in terms of ill-gotten gains? (Include some red flags of fraud and/or motives to commit this type of fraud.)
2. The case centers on whether Mr. Sussman had the right to convert a $2 million loan he made to Paamco’s founding partners in 2000 into an equity stake in Paamco’s parent company. What journal entry would Mr. Sussman make for this transaction, if credible?
3. What was Mr. Sussman’s previous history with the SEC and why is this important?

Source: Creswell, Julie. (2010). A Hedge Fund Controlled By Women, So It Claimed. The New York Times, October 18 (Retrievable online at http://www.nytimes.com/2010/10/19/business/19hedge.html)

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.

According to Joshua Bamfield, author of the 2010 Global Retail Theft Barometer report from the U.K.-based Center for Retail Research, U.S. retailers lost about $40 billion in stolen goods in 2010.  This is about 1.5% of the nation’s sales. Even though this sounds really bad, the losses are down by 6.8% from the prior year. Still, losses passed onto consumers added about $423 to the average American family’s shopping bill this year.

Questions:

1.  What are the most stolen goods?  Explain why you think these are targeted.

2.  Why do you think that employee thefts are greater than shoplifting thefts in the U.S.?

3.  According to the video, while employers have increased their prevention efforts by 12%, why doesn’t that result in a 12% reduction in losses?

4. What roles do accountants play in the prevention of retail theft? Explain.

Source:

Video. (2010) U.S. Families Lose $400 to Theft, October 19.

Kavilanz,  Parija, (2010). Thieves Will Cost You $423 At The Mall This Year. CNNMoney.com, October 19. (Retrievable online at http://money.cnn.com/2010/10/18/news/economy/store_theft_drain_on_your_wallet/index.htm)

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Former Denver Broncos quarterback John Elway and his business partner gave $15 million to a hedge-fund manager now accused of running a Ponzi scheme.  In court papers filed by Elway and Mitch Pierce the two claim that their investment was supposed to be kept in a separate account from Mueller’s Over Under Fund. Therefore, the Denver Broncos legend is seeking a declaratory judgment for the return of their money, ahead of other investors. Mueller Capital Management has just $9.5 million left to cover liabilities of $140 million.

Questions:

1.  What is a hedge fund?

2.  What accounting guidance for hedge accounting is available under International Financial Reporting Standards (IFRS)?

3.   What accounting guidance for hedge accounting is available from the Financial Accounting Standards Board (FASB)?

4.  As one accountant said of this story: “It’s hard to feel sorry for rich people who play in games without rules (hedge funds).” Do you agree or disagree? Explain.

 

Source:

Staff. (2010) Hall of Famer Elway Seeks Mueller Money Now. FINAlternatives, October 19 (Retrievable online at http://www.finalternatives.com/node/14212).

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.

Federal regulators on Thursday, October 7,  brought securities fraud charges against more than a dozen penny-stock promoters — including Larry Wilcox, who played California Highway Patrol officer Jonathan “Jon” Baker on the hit TV show “CHiPs” in the late 1970s and early ’80s. The Securities and Exchange Commission said it caught the promoters in “various illicit kickback schemes to manipulate the volume and price of microcap stocks and illegally generate stock sales.”

Questions:

1.  What is another name for the type of scam that Larry is accused of perpetrating?

2. Briefly summarize the kickback scheme and tell why it is illegal.

3. What type of charges does Larry potentially face?

 

Source: SEC Staff. (2010) SEC Charges Penny Stock Promoters in Series of Kickback Schemes, SEC Press Release, October 7 (Retrievable online at http://sec.gov/news/press/2010/2010-187.htm)

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Bank of America, the nation’s largest bank by assets, is placing a moratorium on all foreclosure proceedings and sales across the United States, according CNBC and a report on The Wall Street Journal’s Web site. The postponement takes effect Saturday, October 9. JPMorgan and Ally’s GMAC Mortgage unit have delayed foreclosures in 23 states where courts have jurisdiction over home seizures.

 
Questions:
1. What is a “hydra?” Why does Dr. Henning say that the foreclosure mess is going to “become a hydra?” What ethical breaches are part of this story?
2. What is a defective title? Who will be sued for this and why?  What are the potential avenues of liability in this crisis?
3. The article mentions civil suits. Do you think there will be criminal court actions also? Is this fraud?
4. How do you think this story came to the media’s attention?

 

Source:

Fisk, M. C., and K. M. Howley. (2010) Why the Foreclosure Mess Could Last for Years. Businessweek, October 8 (Retrievable online at http://msnbc.msn.com/id/39562824/ns/business-real_estate)

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

MGM Bankruptcy news is still coming in, but at the moment we know that Metro-Goldwyn-Mayer Inc. said it has begun seeking its creditors’ approval on a prepackaged bankruptcy plan in which they will exchange more than $4 billion in debt for equity in a new company that has rights to the James Bond franchise and the upcoming two-part movie series “The Hobbit.” Creditors would hold 95.3 percent of the company after it exits from Chapter 11. Only approved holders of secured debt as of Oct. 4 will be allowed to vote.

Questions:

1. Why do you think that MGM chose bankruptcy over a sale?

2. What is secured debt?

3. According to the video, what were the strategic reasons that MGM has deteriorated over the years? What are some of the risks it has faced?

 

Source:

Staff. (2010). MGM Bankruptcy Details: $4 Billion in MGM Studio Bankruptcy Deal, ThirdAge.com, October 8 (Retrievable online at http://www.thirdage.com/news/mgm-bankruptcy-details-4-billion-mgm-studio-bankruptcy-deal_10-8-2010).

CNN Video (2010). What Caused MGM’s decline?, Oct. 8 ( Retrievable online at  http://www.cnn.com/video/)

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Why can’t everyone accept credit cards? Now there is no good reason because the Square Up system eliminates card reading equipment by providing cell phone users with an app that snaps into a headphone jack. The plug is free and you are spared the contracts, the minimums and the monthly fees. For each transaction, Square charges you 2.75 percent of the total, plus 15 cents. Alternatively, you can accept credit card payments without the card itself — over the phone, for example. You just need the card number, expiration date and security code, although these transactions cost you more (3.5 percent).

Questions:

1. Assume that you sold a surfboard on Craigs List to someone who paid you $100 and gave you a credit card. If you swipe the card, how much would you pay to Square for the use of their system?
2. Assume the same facts as in Question 1, except that you do not have the card to swipe, but enter the number, expiration date and security code. How much would you pay for Square to process the transaction?
3. Assume that you sold the surfboard from your small business. What journal entry would you make in Questions 1 & 2?
4. Why do you think that Square has restrictions on deposits over $1,000 for first time users?

Source:
Pogue, D. (2010). A Simple Swipe on a Phone, and You’re Paid, The New York Times, September 30 (Retrieved online at http://www.cnbc.com/id/39438067/)