Bob Jensen's New Bookmarks for January 1-31, 2015

Bob Jensen at Trinity University 


For earlier editions of Fraud Updates go to http://www.trinity.edu/rjensen/FraudUpdates.htm
For earlier editions of Tidbits go to http://www.trinity.edu/rjensen/TidbitsDirectory.htm
For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 
Bookmarks for the World's Library --- http://www.trinity.edu/rjensen/bookbob2.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Box in Upper Right Corner.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/

Bob Jensen's Blogs --- http://www.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://www.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm

 

Bob Jensen's Pictures and Stories
http://www.trinity.edu/rjensen/Pictures.htm

 

All my online pictures --- http://www.cs.trinity.edu/~rjensen/PictureHistory/

David Johnstone asked me to write a paper on the following:
"A Scrapbook on What's Wrong with the Past, Present and Future of Accountics Science"
Bob Jensen
February 19, 2014
SSRN Download:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2398296 




Where are the 21st Century big idea books in law and accounting?

A few accounting professors write textbooks. And there are some who write accounting history books that, under Book Editor Steve Zeff, are virtually all reviewed in The Accounting Review. But there are very few "big idea" books thus far in the 21st century to compare with big idea books written in the 20th Century. For examples of "big idea books" scan down the list of Accounting Hall of Famers at
http://fisher.osu.edu/departments/accounting-and-mis/the-accounting-hall-of-fame/membership-in-hall/
Note how many of these famed accountants wrote big idea books that were not textbooks or history books per se.

Perhaps some of the reasons for less interest in writing big idea books are the same as the alleged reasons law professors are writing fewer big idea books.

"The Little Legal Academy and the Big Idea Book," by Eugene Mazo (Wake Forest), January 17, 2015 ---
http://prawfsblawg.blogs.com/prawfsblawg/2015/01/the-little-legal-academy-and-the-big-idea-book.html

Jensen Comment
Technology makes it easier to bypass publishers and make electronic books available directly from vendors like Amazon. But there are skimpy financial rewards incentives in this type of publishing. In fairness, in the 20th Century most of the big idea accountancy authors did not write books for direct financial rewards (although there may have been substantial indirect rewards for reputation building and fame that led to consulting and endowed chairs).

I think the biggest problem is the changed way universities shifted faculty performance reviews. The focus went from long-term academic reputation building to short term academic reputation building by counting annual hits in leading accounting research journals. It's now a counting game and top researchers are expected to get hits every year in top journals, albeit hits only as one of several co-authors on each hit.

And perhaps there just aren't many big ideas worthy of books in academic accounting (other than accounting history books that are more focused on historical events than innovative big ideas).

Is the rebirth of accountics science dysfunctional to big ideas?

How Accountics Scientists Should Change:  
"Frankly, Scarlett, after I get a hit for my resume in The Accounting Review I just don't give a damn"
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm 


How to mislead with statistics
College Endowment Rankings and Returns ---
http://taxprof.typepad.com/taxprof_blog/2015/01/college-endowment-.html

Jensen Comment
Firstly, there's an enormous problem of defining "endowment" for comparisons among universities.

Secondly there's an enormous problem of valuation, especially for things like oil lands and shopping malls.

Thirdly, there's an enormous problem of differences in the number of students in universities. Dartmouth College has slightly over 6,000 students. Texas A&M has over 60,000 students.

Fourthly, universities with medical schools sort of mess up the comparisons. Medical schools uniquely attract endowment gifts and spending from those endowments. For example, an enormous gift (say 100 million dollars) may be restricted to research of a particular disease and may only indirectly benefit a few students at best. This is a whole lot different than a gift for undergraduate scholarships.


Office For Windows 10 Is Going To Have A Ton Of 'Touch' Functionality Built In — Here Are The Coolest Tricks ---
http://www.businessinsider.com/office-for-windows-10-touch-features-2015-1

Microsoft To Offer Free Windows 10 Upgrades For A Year After Release It's a giant play for developers ---
http://readwrite.com/2015/01/21/windows-10-free-upgrade-microsoft

Jensen Comment
Maybe this is a cheaper way to find bugs. Google is still aggravating Microsoft with a program to find bugs in Windows 8. To the embarrassment of Microsoft, the Google program has been wildly successful.

Once Microsoft gets you hooked on Windows 10 then the debugged upgrades will no longer be free.

What Windows 10 Will and Won't Do ---
http://readwrite.com/2015/01/21/windows-10-microsoft-what-to-expect


Amazon Launches Kindle Textbook Creator --- http://www.ecommercebytes.com/cab/cab/abn/y15/m01/i23/s02
Thank you Richard Campbell for the heads up.

Amazon launched a new service that helps educators and authors publish their own digital "textbooks" and other educational content that students can then access on Fire tablets, iPad, iPhone, Android smartphones and tablets, Mac, and PC.

"Educators and authors can use the public beta of Amazon's new Kindle Textbook Creator tool to easily turn PDFs of their textbooks and course materials into Kindle books," the company explained in its announcement. "Once the book is ready, authors can upload it to KDP in just a few simple steps to reach students worldwide."

Features include flashcards, highlighting, and note-taking.

Those who publish through the KDP (Kindle Direct Publishing) program can earn royalties of up to 70% and keep their rights and maintain control of their content. "They can also choose to enroll their books in KDP Select for additional royalty opportunities like Kindle Unlimited and the Kindle Owners' Lending Library, and access to marketing tools like Kindle Countdown Deals and Free Book Promotions," Amazon said.

More information about the KDP program is available on the Amazon website.

Jensen Comment
It's relatively easy in my field to write chapter material relative to the end-of-chapter material on questions, problems, and cases to be accompanied by a separate answer book. Also in accounting and tax there's a constant stream of rules changes such that updating textbooks becomes a pain in the butt for an individual author. For popular accounting and tax textbooks such updating has become a factory operation by the big publishing firms along with production of all the supplementary videos, test banks, teaching notes, etc.

My point is that its harder to be a textbook author in some disciplines vis-a-vis others where the content needs changing annually or more often. Textbook authors often find their textbooks own them rather than vice versa.

Kindle Textbook Creater makes it relatively easy to change course handouts into a textbook. But consideration needs to be given to all those copyrighted notes now in your password-controlled Moodle or Blackboard servers that cannot be made available by to the general public.

Also consideration needs to be given to ethics and your employer's policies regarding sales of materials to your own students.

Bob Jensen's threads on Tools and Tricks of the Trade ---
http://www.trinity.edu/rjensen/000aaa/thetools.htm


Microsoft makes data-analysis tools free (trying to lure in more business and academic users) ---
http://www.mercurynews.com/business/ci_27405690/microsoft-makes-data-analysis-tools-free
Sounds like the old Bill Gates business model of making a fortune on the high volume of eventual upgrades sales


Update on BYU Flipped Variable-Speed Video Courses in Accounting
BYU replaced live lectures in the on-campus two introductory courses in accounting with variable -speed video 15 years ago. I wrote about the pioneering efforts of adjunct professor Norman Nemrows who developed these CDs years ago ---
http://www.trinity.edu/rjensen/000aaa/thetools.htm#BYUvideo
The variable speed videos enable students to navigate more efficiently through the video files and to slow down on parts they want to study.
I think Norm supervised the courses and held office hours when students wanted some help. As I recall he did all this for $1 per term.

This was a one of the early campus classroom replacements on online lectures with video. My contention then and now was that this would not work well on many campuses. It worked well at BYU because the accounting majors are nearly all highly motivated students who learn well on their own or in small groups. In a course having a high proportion of unmotivated students there is generally more need for live instructors to kick butt.

2015 Update
"When a Flipped-Classroom Pioneer Hands Off His Video Lectures, This Is What Happens," by Jeffrey R. Young, Chronicle of Higher Education, January 7, 2015 ---
http://chronicle.com/article/When-a-Flipped-Classroom/151031/?cid=at&utm_source=at&utm_medium=en

In a way, there are two Norman Nemrows. There’s the real-life professor who spent much of his career teaching accounting students at Brigham Young University. And there’s the one I'll call Video Norm, the instructor immortalized in lectures on accounting that he began recording nearly 15 years ago.

For more than a decade, students at BYU learned from both Norms. About half of the class sessions for his introductory-accounting course were "software days," when students watched an hour or two of video lectures on their computers anywhere they wanted and then completed quizzes online. The other class periods were "enhancement lectures," in which students—as many as 800 at a time—gathered in a classroom and did group work led by the actual Mr. Nemrow.

Back when it started, in 2000, this method of reducing in-person classes and replacing them with videos and tutorials was an innovation, but today it is a buzzword: the flipped classroom.

A few years ago, the living, breathing Norman Nemrow retired from the university. And that’s when things got interesting, or at least more complicated, because students at BYU still learn from Video Norm.

In fact, every student taking introductory accounting at the university watches the video lectures, some 3,000 students each year. And the in-person sessions? They’re now led by another accounting professor, Melissa Larson, who has been thrust into the novel role of doing everything a traditional professor does except the lecturing. The tough question—and one of the biggest for the future of the flipped model—is whether other professors will be willing or able to become sidekicks to slick video productions.

Ms. Larson gets high marks on student evaluations for leading group work in the large classroom sessions and answering questions by email. But Video Norm remains the star.

That was clear when Mr. Nemrow showed up, in person, at the end of the fall semester to give a guest lecture for the introductory course. You’d think a Hollywood actor had come to campus. Students showed up early to take selfies with the professor they had spent so many hours watching on video.

"We got front-row seats," said Celeste Harris, a junior in the course. "We said, we have to see what this guy is like in real life."

How did Mr. Nemrow compare with the digital version? "He’s a little older than when he recorded the videos," Ms. Harris noted, "but it was actually one of the best lectures I’ve heard." It was inspirational, she said, because Mr. Nemrow recounted the story of this unusual accounting course, which has become a kind of legend on the campus.

From Business to Teaching

Mr. Nemrow started out as a businessman. He worked at a consulting firm in California, then helped start a real-estate-investment firm. But he was drawn to the classroom. For years he taught accounting on the side, first as an adjunct at California State University at Fullerton, then full time at Pepperdine University.

Around the time he turned 30, he sold his business and decided to retire early. He didn’t want to do nothing, but he no longer had to work for money, he says, even with a wife and five small children.

"I didn’t really have a burning desire to create another business," he says. He took some art classes. He played a lot of golf. "For a couple of years I was trying to kind of find myself," he recalls. "I decided what I really wanted to do is probably teach."

So he called up the dean of the business school at his alma mater, Brigham Young, and asked if there was a teaching spot for him. He had a master’s degree but not a Ph.D., and at first the answer was no. "When I told him I was willing to do it as a volunteer, his attitude changed," Mr. Nemrow recounts, with a laugh. "He let me teach the intro course for a year."

BYU hired Mr. Nemrow as a full-time professor. He donated his salary to the university, he says. A devout Mormon, he saw the work as a way to give back to the church. In his mind, that left his teaching in the category of volunteer work. "I wanted to have complete and total freedom, and I didn’t want to make a commitment to how long I’d be there."

After several years of teaching the introductory course, he says, he began to get tired of repeating himself and answering the same questions. He considered writing a textbook and even drafted a couple of chapters. "But I thought to myself, this isn’t as effective as when I’m explaining it in person."

So, in 1998, he approached the university’s fledgling instructional-technology group and pitched his idea to reformat his course around a series of videos and computerized homework assignments. "They were worried about getting funding, so I just put up the money myself," about $50,000, he says.

After two years of development and some lobbying to persuade the accounting faculty to let him try his flipped experiment, Video Norm was born.

Mr. Nemrow says the software increased the number of students he could teach at one time, while reducing the time it took him to do it. And he says his surveys showed that 93 percent of his students reported learning more effectively from the flipped format than from a traditional one. Both his inner businessman and his inner philanthropist thought: This is going to be big.

Hitting the Road

Mr. Nemrow believed that his system was simply better than the old way, and he thought that once other accounting professors saw it, they’d immediately adopt his videos and software rather than the textbook-and-lecture method.

He started a company, Business Learning Software Inc., to manage and update the videos and the delivery technology. True to his desire to keep his teaching like volunteer work, he says, he donates any profits to charities. Because the software and videos were developed at BYU, the university owns them and gets a portion of any revenue from their sale. And he made all of the videos for his intro course available free online.

Mr. Nemrow traveled to accounting departments and academic conferences around the country, evangelizing his teaching approach and his software. But, to his surprise, he found few takers.

Continued in article

Bob Jensen's threads on Tools and Tricks of the Trade (including flipped classrooms) ---
http://www.trinity.edu/rjensen/000aaa/thetools.htm


Careers in Logistics ---
http://academic.rcc.edu/logisticsmanagement/PDF/Careers In Logistics by CSCMP.pdf


Accountants Play Critical Role in Establishing Global Transparency ---
http://blog.aicpa.org/2015/01/accountants-play-critical-role-in-establishing-global-transparency.html#sthash.GczGKY61.dpbs


PwC US Launches CareerAdvisor, January 7, 2015
New platform of tools to provide students with resources they need for the career they want
http://www.pwc.com/us/en/press-releases/2015/pwc-us-launches-careeradvisor.jhtml

Accounting Career Network --- http://www.searchaccountingjobs.com/

 

AccountingCareersNow.com --- http://www.accountingcareersnow.com/

Bob Jensen's threads on careers are at
http://www.trinity.edu/rjensen/Bookbob1.htm#careers


AT&T to Take $7.9 Billion Pension Hit Charge Related to Longer Life Expectancy ---
http://www.wsj.com/articles/at-t-estimates-some-fourth-quarter-charges-1421449286

Bob Jensen's threads on pension accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#Pensions


Unexpected Costs of Travel ---
http://www.businessinsider.com/unexpected-costs-business-travel-2015-1

Jensen Comment
Also beware of crime such as having laptops stolen from hotel rooms and, as is common in Russia, being mugged and stripped down to your underwear. Some nations have enormous kidnapping risks. Think Mexico. Kidnapping risks may not have a high probability, but for business travelers they can be hugely dangerous and expensive. Sexual assaults are also on the rise in some nations.


"Tax Preparers Brace To Give Bad Health Law News," by April Dembosky, KQED and Jeff Cohen, WNPR, WebMD News from Kaiser Health News, January 21, 2015 ---
http://www.webmd.com/health-insurance/20150121/tax-preparers-brace-to-be-bearers-of-bad-health-law-news

Are you thinking about tax day yet? Your friendly neighborhood tax preparer is. IRS Commissioner John Koskinen declared this tax season one of the most complicated ever, and tax preparers from coast to coast are trying to get ready for the first year that the Affordable Care Act will show up on your tax form.

Sue Ellen Smith manages an H&R Block office in San Francisco, and she is expecting things to get busy soon.

“This year taxes and health care intersect in a brand new way,” Smith says.

For most people, who get insurance through work, the change will be simple: checking a box on the tax form that says, “yes, I had health insurance all year.”

But it will be much more complex for an estimated 25 million to 30 million people who didn’t have health insurance or who bought subsidized coverage through the exchanges. To get ready, Smith and her team have been training for months, running through a range of hypothetical scenarios. One features “Ray” and “Vicky,” a fictional couple from an H&R Block flyer. Together they earn $65,000 a year, and neither has health insurance.

“The biggest misconception I hear people say is, ‘Oh the penalty’s only $95, that’s easy,’” says Smith, but the Rays and Vickys of the world are in for a surprise that will hit their refund. “In this situation, it’s almost $450.”

That’s because the penalty for being uninsured in 2014 is $95 or 1 percent of income, whichever is greater. Next year, it’s 2 percent. Smith says the smartest move for people to avoid those penalties is to sign up for insurance before Feb. 15, the end of the health law’s open enrollment period.

But a lot of people may not think about this until they file their taxes in April. For them, it will be too late to sign up for health insurance and too late to do anything about next year’s penalty too, says Mark Steber, chief tax officer for Jackson Hewitt Tax Services.

Teaching Case on How New Health-Care Rules Affect Your 2014 Tax Return
From The Wall Street Journal Accounting Weekly Review on January 16, 2015

How New Health-Care Rules Affect Your 2014 Tax Return
by: Maria Armental
Jan 09, 2015
Click here to view the full article on WSJ.com
 

TOPICS: ACA, Individual Taxation

SUMMARY: For 2014, there are only two important federal income-tax changes for individual taxpayers, beyond the usual inflation-indexing of tax-rate brackets and various other parameters. Both have to do with the Affordable Care Act, and both may be complicated enough to inspire many people to engage the services of a professional tax preparer.

CLASSROOM APPLICATION: This article offers a good explanation of tax penalties under the Affordable Care Act.

QUESTIONS: 
1. (Introductory) What is the Affordable Care Act? Why are individual tax returns affected by the ACA?

2. (Advanced) What is minimum essential coverage? What are the penalties for failure to carry that coverage?

3. (Advanced) Who should be concerned about the penalty? How is the penalty calculated? How is it reported and paid?

4. (Advanced) What is the premium assistance tax credit? Who is eligible for the credit? What are the options for disbursement of this credit?

5. (Advanced) What is a refundable credit? Why are some credits refundable and others are not?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"How New Health-Care Rules Affect Your 2014 Tax Return," by Maria Armental, The Wall Street Journal, January 9, 2015 ---
http://blogs.wsj.com/totalreturn/2015/01/09/how-new-health-care-rules-affect-your-2014-tax-return/?mod=djem_jiewr_AC_domainid

Tax forms for 2014—such as W-2s and 1099s—will soon be arriving in the mail, which means it isn’t too early to start thinking about putting together your Form 1040 for last year.

For 2014, there are only two important federal income-tax changes for individual taxpayers, beyond the usual inflation-indexing of tax-rate brackets and various other parameters. Both have to do with the Affordable Care Act, also referred to as “Obamacare”—and both may be complicated enough to inspire many people to engage the services of a professional tax preparer.

Here’s what taxpayers need to know. Penalty for failure to carry “minimum essential coverage”

The health-care overhaul established a new federal income-tax penalty for the failure to carry what it deems minimum essential coverage. Last year was the introductory year for the penalty, which can potentially be owed for any month when qualifying health coverage wasn’t in force. (In Internal Revenue Service speak, the penalty is called a “shared responsibility payment.”)

You don’t have to worry about the penalty if you—and all members of your family, if applicable—had qualifying coverage for all of last year. In this case, simply check the box on line 61 of Form 1040, and you’re done.

If you didn’t have qualifying coverage for the entire year, the first task is to determine if you are exempt from the penalty. For that, see the instructions to new IRS Form 8965 Health Coverage Exemptions (and instructions for figuring your shared responsibility payment). If you were exempt for last year, file Form 8965 with your 2014 Form 1040 to prove it.

For additional information on exemptions, see IRS Publication 5187, Health Care Law: What’s New for Individuals and Families. (All IRS forms and publications discussed in this article can be found at www.irs.gov.)

If you weren’t exempt, the next step is to calculate the penalty amount that you owe using the work sheet in the instructions to Form 8965. Enter the penalty amount on line 61 of your return. For 2014, the penalty can range from $95 or less to a good deal more for higher-income folks. Also be aware that the penalty for 2015 and beyond can be much higher than the penalty for last year. Premium assistance tax credit

The other Affordable Care Act-related change for 2014 was the debut of the so-called premium assistance tax credit, or PTC. It is available to eligible individuals and families who obtain health coverage in a qualifying plan by enrolling through a state-run insurance exchange or through the federal exchange (www.healthcare.gov).

In general, you are eligible for the credit if your household income was between 100% and 400% of the federal poverty line and you didn’t have access to affordable employer-sponsored coverage last year. The allowable credit amount can vary widely depending on your specific circumstances. (For additional information on the PTC, see IRS Publication 974.)

The PTC can be advanced directly to the insurance company to lower your monthly premiums, or it can be claimed when you file your return. You may not know the exact amount of your allowable PTC for last year until you actually file your 2014 Form 1040. Calculate the PTC using the new IRS Form 8962.

If advance PTC payments were made on your behalf last year, the amount of those payments should be reported by the exchange to you on the new Form 1095-A, Health Insurance Marketplace Statement. You should receive Form 1095-A by no later than early February. Then calculate the difference between your advance PTC payments (if any) and the PTC amount you are actually entitled to claim on Form 8962. Enter any excess PTC amount on line 46 of Form 1040 and pay it when you file.

The PTC is a “refundable credit.” That means you can collect the full allowable credit amount even when it exceeds your federal income tax liability for last year. Specifically, the PTC amount is first used to reduce your federal income tax bill. After your bill has been reduced to zero, any remaining PTC can be either refunded to you in cash or used to make estimated tax payments for the 2015 tax year.

Bob Jensen's taxation helpers ---
http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

Bob Jensen's threads on the ACA legislation ---
http://www.trinity.edu/rjensen/Health.htm


Yahoo's UK auditors, PwC, have resigned ---
http://www.businessinsider.com/yahoo-uk-auditors-pwc-resign-2015-1
PwC says don't read too much into this audit resignation.

Yahoo Is Tanking (largely due to poor earnings report so its huge investment in Alibaba) ---
http://www.businessinsider.com/yahoo-is-tanking-pre-market-2015-1

Jensen Comment
It's sad when companies like Yahoo must offset their operating losses with passive investments in other, often, high risk investments. Read that as meaning it's sad when a company cannot make higher returns on its operating assets and labor force.


IRS Updated accounting method change procedures issued ---
http://www.smartbrief.com/01/16/15/updated-accounting-method-change-procedures-issued-1#.VMZSiC5kZLc


Jensen Question
I passed the CPA examination before graduation when I was a senior in college.
My question is whether first-time passage rates were higher or lower in 1960 than in the 21st Century?

2014 CPA Examination Statistics Released Annual Candidate Performance Book
 Features Exclusive Data from the National Association of State Boards of Accountancy

January 27, 2015
http://www.prweb.com/releases/2015/01/prweb12475923.htm

The National Association of State Boards of Accountancy (NASBA) announces the release of the 2014 Uniform CPA Examination Candidate Performance Book. Published annually, the book features comprehensive statistical data from all four (4) testing windows of the Uniform CPA Examination administered in 2014.

Top-ranked colleges and universities, accounting firms, researchers, professors, university accounting programs, corporate recruiters, students and aspiring certified public accountants find great value in the publication’s numerous statistical components.

Through analysis of the publication’s national average data, institutions can compare their school's overall performance against others. Professors are better equipped to measure student performance and the performance of their respective accounting programs. The publication also aids accounting firms and corporate recruiters as they develop pipelines of talent, and assists students and aspiring CPAs as they seek enrollment into top-ranked accounting programs.

According to University of Baltimore Professor Greg Gaynor, “By supplying data and analysis regarding candidate performance, NASBA helps both schools and the accounting profession by assisting in the development of successful accounting graduates and future CPAs.”

In addition to the summary data points, significant emphasis has been placed on enhancing the demographics reported throughout the publication's two-page jurisdictional dashboards. Featured tables also provide a more granular view of individual exam event and performance data.

Featured tables in the 2014 Uniform CPA Examination Candidate Performance Book include:
 

 

The 2014 Uniform CPA Examination Candidate Performance Book is available for purchase, in both softback ($150) and eBook (Coming Soon $100) versions. CLICK HERE to learn more about the publication and to place an order. Also, a complimentary copy of the 2014 Examination Summary Report is available by clicking the following link: COMPLIMENTARY REPORT.

NASBA first began gathering data on CPA Examination candidates in 1982 and has published reports on performance and selected characteristics since 1985.

Questions regarding NASBA’s 2014 Uniform CPA Examination Candidate Performance Book and other candidate performance products should be directed to cpb(at)nasba(dot)org  or 615.312.3806.

About NASBA
Celebrating more than 100 years of service, the National Association of State Boards of Accountancy (
NASBA) serves as a forum for the nation’s Boards of Accountancy, which administer the Uniform CPA Examination, license more than 700,000 certified public accountants and regulate the practice of public accountancy in the United States.

NASBA’s mission is to enhance the effectiveness and advance the common interests of the Boards of Accountancy in meeting their regulatory responsibilities. The Association promotes the exchange of information among accountancy boards, serving the needs of the 55 U.S. jurisdictions.

NASBA is headquartered in Nashville, TN, with satellite offices in New York, NY, and San Juan, PR, and an International Computer Testing and Call Center in Guam.

Jensen Question
I passed the CPA examination when I was a senior in college. My question is whether first-time passage rates were higher or lower in 1960 than in the 21st Century.


January 29, 2015 Message from Francine McKenna

Hi Bob, 

You will like this. It's based on a paper by four academics and talks about auditor independence issues and client confidentiality compromises when the same auditor is on both sides of an M&A transaction.

https://medium.com/bull-market/when-m-a-actors-share-auditors-targets-get-the-short-straw-4e7112df5f07 

Happy New Year!
Francine

Bob Jensen's threads on audit firm professionalism and independence ---
http://www.trinity.edu/rjensen/Fraud001c.htm


"What '60 Minutes' Didn't Say: Hospitals Will Charge You More Under Obamacare," by Avik Roy, Forbes, January 12, 2015 ---
http://www.forbes.com/sites/theapothecary/2015/01/12/what-60-minutes-didnt-tell-you-obamacare-will-drive-up-the-cost-of-hospital-care/

On Sunday evening, CBS’ 60 Minutes did a feature story on Steven Brill’s new book, America’s Bitter Pill, in which Brill complains that Obamacare didn’t do enough to tackle the exorbitantly high price of U.S. hospital care. “Obamacare does zero to change any of that,” says Brill. That’s not exactly right. What Brill—and CBS—don’t tell you—is that Obamacare is driving hospitals to charge you more than they already do.

The U.S. hospital industry is crony capitalism at its finest

Steven Brill, founder of The American Lawyer and Court TV took a starring role in the health care debate when he published the Time articleBitter Pill,” describing how hospitals charge extreme prices for ordinary care to the uninsured. For example, Sean Recchi, an uninsured lymphoma patient, went to MD Anderson Cancer Center, a world-renowned facility in Houston, to seek treatment. MD Anderson proceeded to charge him $283 for a $20 chest X-ray. They charged him more than $15,000 for blood tests costing a few hundred dollars. They charged him $13,702 for a dose of Rituxan, a lymphoma drug, for which the average U.S. hospital price is around $4,000. All told, Recchi’s course of treatment cost $83,900. Whatever he couldn’t pay was called “uncompensated care.”

MD Anderson is not struggling under the weight of bills unpaid by the uninsured. In 2010, MD Anderson recorded revenue of $2.05 billion and operating profits of $531 million. Brill recounted several other patients at other hospitals with similar stories.

This is a topic we’ve covered extensively at The Apothecary, and elsewhere: the U.S. hospital industry is the single largest example of crony capitalism in the history of civilization. In 2013, I wrote a piece for National Review calledAn Arm and a Legexplaining the problem.

To summarize: the average day spent in a U.S. hospital costs five times as much as it does in other industrialized countries. That’s not because U.S. hospitals use higher technology or better care. It’s because they charge more for the same technology and the same care. Because they can get away with it.

Obamacare subsidizes hospitals’ already-high prices

Thanks to federal intervention in the health care system—Medicare, Medicaid, and the employer tax exclusion—hospitals have been able to charge whatever they want for their services, knowing that the average consumer has no idea how much he’s paying, because he’s paying mostly through taxes and other indirect means.

In 2013, U.S. government entities—i.e., taxpayers—spent a half-trillion dollars subsidizing American hospitals. By 2021, thanks in part to Obamacare, that will grow to $800 billion a year. That’s more than twice what the military spends subsidizing the aerospace industry.

And here’s the thing. While Brill rightly criticizes Obamacare for not doing anything to bring down the cost of hospital care, he’s actually an ardent supporter of the law. And this is the fundamental problem with Brill’s thesis. Obamacare doesn’t merely not do anything to bring hospital costs down. It actively works to drive hospital costs upward, by doubling down on the incentives hospitals have to charge more to patients.

In every state, it’s the hospital industry that has been the principal lobbyist in support of Obamacare. Why? Because the law increases taxpayer subsidies of the hospital industry by around $400 billion per decade. In other words, it takes the currently high prices that U.S. hospitals charge and says “keep doing what you’re doing.”

If Obamacare had never passed, hospitals would have been under much more pressure to keep these costs down, because no one would be bailing them out if hospital care became increasingly unaffordable. The opposite, of course, has happened.

Obamacare encourages hospitals to increase their market power

The next thing Obamacare does is it encourages hospitals to merge, thereby giving hospitals even more market power to charge even higher prices. A study by Jamie Robinson of the University of California found that highly concentrated hospital markets–where one or two hospitals controlled most of the patient volume—hospitals charged an average of 41 percent more for common procedures than they did in more competitive markets.

Continued in article


The Health Care Market is Not a Market

"Video:  Inside ‘Bitter Pill’: Steven Brill Discusses His TIME Cover Story," Time Magazine, February 22, 2013 ---
http://healthland.time.com/2013/02/20/bitter-pill-inside-times-cover-story-on-medical-bills/


And Yet in New Hampshire and Other States Upwards of Half the Hospitals are Refusing to Serve Patients with ACA insurance?
Why?

Answer One of the main reasons is that hospitals serving ACA patients get stuck with having to serve deadbeats who are behind in paying their insurance premiums. For 60 days doctors and lawyers must serve ACA patients that are behind over 30 days in paying insurance premiums such that insurance companies no longer have to pay their medical bills.

In the past people who defaulted on premiums became uninsured people who were treated in special facilities such as county hospitals funded by taxpayers. Now people who default on premiums get a 90-day grace period where insurance companies pay their medical costs for 30 days and the doctors and hospitals have to pay for their medical care for 60 days.

There's a 90-day grace period in the ACA where people who default on paying premiums are still covered for the first 30-days by the insurance company and the next 60 days by the doctors and hospitals providing the care is absolutely absurd. The insurance companies will simply pass on these bad debt losses (which may be enormous for surgeries and hospital confinements) into higher premiums for the people who pay their medical insurance billings.

 


Bob Jensen's message on why I don't use Skype with my grandchildren

Hi Ross,

If I had Skype my grandchildren cut back on emails and cards. Being a forever-teacher I want them to practice writing, writing, and more writing with me politely correcting mistakes.

In truth I think it's more effective getting into the heads of students and grandchildren asynchronously via email versus synchronously via phone or Skype. With email they compose, provide references, and think more about what they want to communicate.

The same applies to me when sending email messages to students and grandchildren. I spend more time composing, referencing, and thinking about what I want to communicate.

Via email grandchildren send me pictures of their years of growing up. In return I send them pictures of my earlier years of growing up rather than my later yuk years of growing old.

Thanks,
Bob

 


Jensen Comment
Jacob Soll has a somewhat unique joint appointment at USC. He purportedly is both a professor of accountancy and a professor of history. I could not find him listed in my 2013 edition of the Hasselback Accounting Faculty Directory.

How to Mislead With Statistics
"Greece's Accounting Problem," by Jacob Soll, The New York Times, January 20, 2014
http://www.nytimes.com/2015/01/21/opinion/greeces-accounting-problem.html?_r=1

Greece is back as a focal point of the world financial crisis. While coming elections are spooking the markets, the supposed cause of the crisis has not changed. Greece has a declared debt of 319 billion euros, or about $369 billion, 175 percent of its 182-billion-euro ($210 billion) gross domestic product. This sounds like a nearly impossible task for any government: to govern effectively, spur economic growth and avoid default. The shackles of the declared Greek debt have effectively paralyzed the country. Yet maybe all of this debt drama is unnecessary.

The way this story is usually told, inside and outside Greece, is as a morality play: the profligate Greeks don’t pay taxes and their banks and elites, in turn, rob Greek citizens and foreign investors alike. The Greeks, it seems, need to be held accountable and to pay back their debt at any cost.

The brutal and counterproductive response has been austerity. But given Greece’s problems, what the country really needs is transparency and accountability. Greece has a very weak tradition of accounting, with few homebred trained accountants. The government does not use International Public Sector Accounting Standards, or Ipsas, which measure liabilities and assets over time, similar standards to those used by leading governments, businesses, banks and investors at all levels. It’s of little surprise that without internationally verifiable accounting standards, no one feels the need to be accountable.

This lack of accountants not only means poor administration; it also means that the Greek government has done a lousy job of accounting for its debt number. In fact, the debt has been calculated to be larger than it actually is, or would be if one used Ipsas.

Without real accounting, we also can’t evaluate the claims of Prime Minister Antonis Samaras’s government — as well as those of numerous commentators — that Greece has made improvement in its fiscal position over the last two years. If the European Commission, the International Monetary Fund and the European Central Bank (known as the troika) are giving Greece 283 billion euros ($327 billion) of financing in return for good economic indicators — and credit ratings agencies like Moody’s shake Greek and eurozone economies with pronouncements made on these numbers — one would think they would want to verify the numbers, using Ipsas, which would be much more transparent and something people outside the troika could realistically evaluate.

But the Greeks are not the only ones content with bad accounting and fishy numbers. The troika itself does not use Ipsas in calculating Greek debt, but rather what is confusingly called the Maastricht definition of debt, which is based on face value.

Think of face value as a promise to pay something in the so-far-distant future because its value is essentially worthless today if you don’t get interest payments. This means that the troika calculates debt neither according to its financial worth, but rather according to a political agreement that ignores very low interest rates and the fact that money increases in value the longer you can hold and invest it. This is working to Greece’s advantage, but Greece can’t show it, and thus benefit from better credit ratings. Continue reading the main story Continue reading the main story Continue reading the main story

Neither economic principles nor international accounting standards would regard this as an acceptable way to report a debt position. Greece was so cash-strapped and used to European Union handouts that its leaders signed off on the bailout deal without international accounting standards.

The fact that Germany has acted as a vigilant gatekeeper over Greece’s agreement to abide by the agreed debt and austerity measures should deserve scrutiny. Look again at the 57 billion euros ($66 billion) in German loans through the lens of accounting logic. The loans have been made at under 2 percent with maturities as far out as 2054.

That means that, in reality, the interest on this loan is under market rates. Giving loans well under market rates with gaping repayment schedules amounts to a grant. According to Ipsas standards on German debts, this portion of the debt alone would require only about 13 billion euros ($15 billion), leaving Germany with a considerable 44-billion-euro ($51 billion) loss.

But given the current draconian austerity conditions, Germany might be able to avoid showing the losses on the loan, yet it will destroy Greece in the process. Germany’s demands for both austerity and overvaluing of the debt are both unjust and counterproductive for Greek and European stability.

Greek debt is not what it seems. One reason might be that the Germans have refused to price the debt fairly, or properly report its value, which means in the short run that they extract more austerity from the Greeks than they should, and that they also keep this loan off the budget balance sheets because it would come up as a loss under any legitimate accounting standard.

A little-known fact is that the Germans also do not use Ipsas and have notably opaque public finance standards. This means their potential loss on the Greek loan is out of sight of the German public, who, not great fans of the Greek bailout, would be even less enthusiastic if they understood the terms.

It should also be noted that the Greek crisis has contributed to the 15 percent drop in value of the euro over the last year, and, with this low rate, German exports have been given a huge boost.

By overstating Greek debt and effectively creating a false sense of crisis (the Greeks have been bailed out), the troika is undermining growth and investment through both the drama of overstated debt and by austerity measures that are ripping apart Greek society. If Greece continues with the yoke of this inaccurate debt number, it faces more recession and possibly political unrest, further destabilizing a hobbled Europe and the euro.

Greek leaders should demand neither more austerity nor debt default. They should simply ask that the debt be calculated using Ipsas. And while they are at it, they should implement Ipsas at home to boost confidence, investment, credit and political stability. Clear accounting would show the Greek debt to be lower, stabilize the country, and bring confidence to Greece and, correspondingly, to the euro.

Jacob Soll, a professor of history and accounting at the University of Southern California, is the author, most recently, of “The Reckoning: Financial Accountability and the Rise and Fall of Nations.”


These Photos Show The Quick Death Of A Once-Beloved Mall Chain ---
http://www.businessinsider.com/photos-of-closed-wet-seal-store-2015-1

"The Economics (and Nostalgia) of Dead Malls," by Nelson D. Schwartz, The New York Times, January 3, 2015 ---
http://www.nytimes.com/2015/01/04/business/the-economics-and-nostalgia-of-dead-malls.html?_r=0

OWINGS MILLS, Md. — Inside the gleaming mall here on the Sunday before Christmas, just one thing was missing: shoppers.

The upbeat music of “Jingle Bell Rock” bounced off the tiles, and the smell of teriyaki chicken drifted from the food court, but only a handful of stores were open at the sprawling enclosed shopping center. A few visitors walked down the long hallways and peered through locked metal gates into vacant spaces once home to retailers like H&M, Wet Seal and Kay Jewelers.

“It’s depressing,” Jill Kalata, 46, said as she tried on a few of the last sneakers for sale at the Athlete’s Foot, scheduled to close in a few weeks. “This place used to be packed. And Christmas, the lines were out the door. Now I’m surprised anything is still open.”

The Owings Mills Mall is poised to join a growing number of what real estate professionals, architects, urban planners and Internet enthusiasts term “dead malls.” Since 2010, more than two dozen enclosed shopping malls have been closed, and an additional 60 are on the brink, according to Green Street Advisors, which tracks the mall industry.

Premature obituaries for the shopping mall have been appearing since the late 1990s, but the reality today is more nuanced, reflecting broader trends remaking the American economy. With income inequality continuing to widen, high-end malls are thriving, even as stolid retail chains like Sears, Kmart and J. C. Penney falter, taking the middle- and working-class malls they anchored with them.

“It is very much a haves and have-nots situation,” said D. J. Busch, a senior analyst at Green Street. Affluent Americans “will keep going to Short Hills Mall in New Jersey or other properties aimed at the top 5 or 10 percent of consumers. But there’s been very little income growth in the belly of the economy.”

At Owings Mills, J. C. Penney and Macy’s are hanging on, but other midtier emporiums like Sears, Lord & Taylor, and the regional department store chain Boscov’s have all come and gone as anchors.

Having opened in 1986 with a renovation in 1998, Owings Mills is young for a dying mall. And while its locale may have contributed to its demise, other forces played a crucial role, too, like changing shopping habits and demographics, experts say.

“I have no doubt some malls will survive, but major segments of our society have gotten sick of them,” said Mark Hinshaw, a Seattle architect, urban planner and author.

One factor many shoppers blame for the decline of malls — online shopping — is having only a small effect, experts say. Less than 10 percent of retail sales take place online, and those sales tend to hit big-box stores harder, rather than the fashion chains and other specialty retailers in enclosed malls.

Instead, the fundamental problem for malls is a glut of stores in many parts of the country, the result of a long boom in building retail space of all kinds.

“We are extremely over-retailed,” said Christopher Zahas, a real estate economist and urban planner in Portland, Ore. “Filling a million square feet is a tall order.” Continue reading the main story

Like beached whales, dead malls draw fascination as well as dismay. There is a popular website devoted to the phenomenon — deadmalls.com — and it has also become something of a cultural meme, with one particularly spooky scene in the movie “Gone Girl” set in a dead mall.

“Everybody has memories from childhood of going to the mall,” said Jack Thomas, 26, one of three partners who run the site in their spare time. “Nobody ever thinks a mall is going to up and die.”

Well aware of the cultural dimensions, as well as the economic stakes, the industry is trying to turn around public perception of these monuments to America’s favorite pastime: shopping.

In August, the International Council of Shopping Centers, a trade group based in New York for the shopping center industry, including mall owners, hired the public relations firm Burson-Marsteller “to put the real story out there and stop the negativity around the idea that the mall isn’t going to exist in the next few years,” said Jesse Tron, communications director for the trade group.

While it is true that many thriving malls will continue to flourish in the years ahead, it is not clear what the industry can do to prevent more and more malls from falling on hard times.

About 80 percent of the country’s 1,200 malls are considered healthy, reporting vacancy rates of 10 percent or less. But that compares with 94 percent in 2006, according to CoStar Group, a leading provider of data for the real estate industry.

Nearly 15 percent are 10 to 40 percent vacant, up from 5 percent in 2006. And 3.4 percent — representing more than 30 million square feet — are more than 40 percent empty, a threshold that signals the beginning of what Mr. Busch of Green Street calls “the death spiral.”

Industry executives freely admit that the mall business has undergone a profound bifurcation since the recession.

Continued in article


Jensen Comment
Keep in mind that the poor do not pay income taxes in the USA. The top 50% of taxpayers pay 97% of the federal income tax and almost the same percentage of state income tax since so many states peg the state income tax to the federal income tax returns. Poor people do pay consumption taxes and property taxes (even when they rent housing) and low income workers as well as other workers do contribute Social Security and Medicare taxes that, in turn, entitle them to collecting those entitlements when they retire or are declared disabled.

"Obama's Empty Tax Hike Populism," by Paul Suderman, Reason Magazine, January 12, 2015 ---
http://reason.com/blog/2015/01/20/obamas-empty-tax-hike-populism

Over the weekend, the White House revealed that President Obama would propose $320 billion in additional taxes during tonight’s State of the Union address.

Rest assured they’re not going to happen—not while Republicans control Congress. This is about political signaling more than it’s about policy; it’s a tax-hike wish list put forth by a president who wants people to know that he favors higher taxes, not a genuine attempt at concocting an overhaul of the tax code that could actually pass. It’s game day, and President Obama wants to show everyone to know which side he’s rooting for, so he’s showing up early in a jersey that says Team Tax Hikes.

The White House fact sheet makes it clear that Obama is rooting for a particular kind of tax hike populism. The opening line declares that "middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations." The rest of the document reads much the same way. But Obama’s populist tax hike rhetoric doesn’t always capture the full reality of the tax hikes he’s proposing.

For example, Obama will propose ending the "stepped-up" basis "loophole" in the capital gains tax. According to the fact sheet, President Obama will propose closing "the trust fund loophole—the single largest capital gains tax loophole—to ensure the wealthiest Americans pay their fair share on inherited assets."

That’s one way of putting it. Another way of putting it is that it is essentially a brand new tax on inheritance. It’s a proposal that either doesn’t understand or doesn’t care about the primary reason the tax code employs the stepped-up basis calculation. As Ryan Ellis of American for Tax Reform explains:

Under current law, when you inherit an asset your basis in the asset is the higher of the fair market value at the time of death or the decedent's original basis. Almost always, the fair market value is higher.

Under the Obama proposal, when you inherit an asset your basis will simply be the decedent's original basis.

Imagine buying a piece of property in 1980 for $100,000. It’s worth a $400,000 now. If you sell that piece of property before you die, you’ll pay capital gains on $300,000—the difference between the two. But if you pass that on to your daughter, the value of that property will be "stepped up" to $400,000. The way it works today, if she sells the property for $440,000, she’ll pay capital gains on $40,000—the amount it appreciated while in her possession. Under Obama’s proposal, she’d be liable for capital gains on $340,000. (The Wall Street Journal has more on how this works in practice.)

As Ellis argues, it basically amounts to a "second death tax."

There are exemptions for most households, but this misses the larger point: the whole reason we have step up in basis is because we have a death tax. If you are going to hold an estate liable for tax, you can't then hold the estate liable for tax again when the inheritor sells it. This adds yet another redundant layer of tax on savings and investment. It's a huge tax hike on family farms and small businesses.  

Another provision outlined in the White House fact sheet would "roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions." Those 529 education plans are college savings plans geared toward the broad middle class—the folks his tax plan is supposedly intended to boost—the value of which was dramatically expanded by a 2001 tweak that stopped taxing those plans as ordinary income once withdrawn.

As Ellis notes in a separate post, the amount of money families put in those college funds following the 2001 reform doubled over a year, and then continued to grow rapidly. As Ellis writes, Obama’s plan would undermine the value of those plans:

The Obama plan aims to turn back the clock, once again taxing earnings growth in 529 plans as ordinary income. This is a direct and clear tax increase on middle class families sacrificing to save for college, and it’s likely to result in a mass divestment from this type of savings.

The White House proposal also calls for raising the capital gains rate from its current rate of 23.8 percent (including a 3.8 percent surtax built into Obamacare) to 28 percent. The White House describes this as a plan to "raise the top capital gains and dividend rate back to the rate under President Reagan." It’s true that in 1986 Reagan supported a law raising the capital gains rate to 28 percent. But that was in the context of a bipartisan deal to significantly overhaul (though not completely wipe out) the tax code, one that the Reagan White House worked on diligently for years.  

Similarly, Obama’s fact sheet declines to mention is that it was a Democratic president who lowered the capital gains rate back down to its current level: Bill Clinton signed the reduction into law as part of a package of tax cuts in 1997. That too was passed on a bipartisan basis as part of a broader package of federal tax reforms.

That’s obviously not what’s going on here. Obama isn’t after plausible reforms that could pass on with support of the opposition party. He’s not after anything that could pass, or even lead to a compromise that could pass—at least not while he’s in office. Which means that, despite the populist rhetoric, he’s not actually looking for ways to reduce the tax burden the middle class. He's looking to make a speech, not do the hard work of negotiating real reforms. 

Jensen Comment
Since President Obama is proposing significant populist redistribution of income it would seem that any type of tax reform over the next two years will probably have to be proposed by Republicans. Whether of not such reforms put into effect depends heavily upon whether the President will sign any kind of Republican tax reforms. He may be forced to compromise on Republican demands to keep his initiatives on ACA heath care and immigration amnesty alive.

Some outlier Republicans are proposing tax reforms that have little chance of passage by other Republicans like a proposed flat tax that eliminates popular deductions (e.g., charitable gifts, medical expenses, and home mortgage interest) of the middle class as well as higher income taxpayers. A flat tax might also eliminate exclusion of municipal bond interest. Since most legislators are lawyers I don't anticipate any tax reforms that will simplify the tax code and put lawyers and accountants out of business.

In the far background there is always a possibility of federal or state VAT (turnover) taxes. But turnover taxes are so actively despised by business firms tax payers will probably be ice skating in Hell before the USA gets a VAT tax similar to the VAT taxes of Europe.


529 College Savings Plan --- http://en.wikipedia.org/wiki/529_plan

The income put away in 529 college savings plans was taxed once. President Obama wanted to tax it twice.

"The First Family’s 529 Windfall The large contributions the Obamas have already made won’t be taxed," The Wall Street Journal, January 22, 2014 ---
http://www.wsj.com/articles/the-first-familys-529-windfall-1421971231?tesla=y&autologin=y

If there’s any silver lining in the President’s plan to end the major tax benefit of saving for college, it’s that at least he’s not talking about taxing money that’s already been saved. This aspect of the Obama plan is particularly valuable to people like, well, Barack Obama.

As we noted on Thursday, the President wants to allow the Internal Revenue Service to begin taxing distributions from so-called 529 plans, even if they are used as intended to fund legitimate educational expenses such as college tuition. The Obama plan is to treat withdrawals from these savings plans—which are funded with money that’s already been taxed—as regular income to the beneficiary. Therefore this money will be taxed again before it can be used to pay for higher education.

But the President’s plan would only apply the new taxes to withdrawals of money contributed to these accounts in the future. All past contributions to 529 plans would continue to grow and then be withdrawn tax-free to pay for school. This is no doubt a relief to families that have already managed to save significant sums. And it happens to fit nicely in the financial plan implemented by the residents of 1600 Pennsylvania Avenue, a household of two parents and two daughters.

According to a 2009 report in the Journal, in 2007 “the Obamas took advantage of a unique feature of 529 plans that allows account owners to front-load five years’ worth of contributions, $240,000 in total for the two girls.” No doubt these investments took a hit during the financial crisis. But given the stock market recovery since the spring of 2009, we imagine the Obama family has built educational resources that most middle-class families can only dream of.

We would compliment the President on his financial planning and thoughtful parenting in building up these assets tax-free. But his latest policy proposal makes us wonder why he won’t let the next generation of savers do the same.

Jensen Comment
This may sound more unfair that what it will be in reality. Students usually are "poor people" in terms of income tax returns. Poor people generally do not pay income taxes in the USA. Over 97% of of the income tax revenue is paid by the top 50% of the taxpayers, and the remaining 3% generally comes from taxpayers who earn more than students.

Of course students declared as dependents on their parent's tax returns lose their personal exemptions. This could be a complicating factor for large 529 savings accounts.

Gift Tax --- http://en.wikipedia.org/wiki/Gift_tax_in_the_United_States

An alternate plan (other than a 529 plan) that would be to avoid double taxation would be to make a non-taxable gift of less than $14,000 each year to each growing child, annual gifts that are  invested in a non-taxable fund such as a Vanguard Insured Non-Taxable Fund. The interest/dividends earned each year are non taxable along with the gifts themselves that would then not be double taxed. However, there may capital gains taxes at the federal level and some state income taxes depending up where gift recipients live.

There are of course default risks, most of which are diversified away in enormous mutual funds like the Vanguard insured tax exempt funds. These days of nearly zero interest rates on CDs means that financial risks must be taken on 529 plans as well.
 

Update
Due to voter backlash President Obama quickly axed his plan to tax IRS 529 college savings plans


Jensen Comment
Instead of proposing that taxpayers can invest in tax exempt bonds for towns, counties, and schools, President Obama is advocating extending the tax exempt bonds into the public-private sector.

"Obama Proposes New Muni Bonds for Public-Private Investments," by Brian Chappatta, Bloomberg. January 16, 2015 ---
http://www.bloomberg.com/news/2015-01-16/obama-proposes-new-muni-bonds-for-public-private-infrastructure.html

The program, called Qualified Public Infrastructure Bonds, wouldn’t expire, and there’d be no cap on issuance, the administration said in a statement Friday. The debt also wouldn’t be subject to the Alternative Minimum Tax, which limits the tax benefits and exemptions that high-earning individuals can claim.

“QPIBs will extend the benefits of municipal bonds to public private partnerships, like partnerships that involve long-term leasing and management contracts, lowering the cost of borrowing and attracting new capital,” the administration said in the statement. The bonds will serve “as a permanent lower cost financing tool to increase private participation in building our nation’s public infrastructure.”

The proposal for a new type of security in the $3.6 trillion municipal market is part of a broader White House plan calling for more investment in roads, bridges and other infrastructure in advance of the administration’s budget proposal that will be released Feb. 2.

Building Block

The market contracted in 2014 for an unprecedented fourth straight year as local officials refrained from borrowing even as tax-exempt interest rates were close to generational lows.

The last time the market expanded was in 2010, the final year of the federal Build America Bonds program. The initiative, popular with local officials and Wall Street investors, gave municipalities a subsidy on interest costs for issuing taxable debt to finance infrastructure work.

The new type of debt for public-private partnerships, or P3s, would build upon the $10 billion private-activity bond market by including funding for airports, ports, mass transit, water and sewer initiatives. There’s a $15 billion limit to issuance of private-activity bonds. The proposed bonds can’t be used to privatize public systems or finance privately owned facilities.

America’s federal, state and local governments need to spend $3.6 trillion through 2020 to put the nation’s critical systems in adequate shape, according to a 2013 report from the American Society of Civil Engineers. Without higher spending, the group projects the costs of travel delays, power and water outages will reach $1.8 trillion by 2020.

Alternative Appeal

“The interest in P3s has clearly been growing, and we’ve seen states in particular launch a lot of these projects,” said Robin Prunty, who oversees state credit ratings at Standard & Poor’s in New York, said in an interview. “The availability of an attractive alternative with cost-effective financing, certainly from a strict muni perspective that’s a positive.”

Obama has made previous calls for increased infrastructure investment since the end of Build America Bonds, which were part of his 2009 stimulus plan. He asked Congress in 2013 to create a national infrastructure bank and recommended a program called America Fast Forward Bonds. He sought the same initiatives last year after they failed to advance in Congress.

Continued in article

 


How to Mislead With Statistics
The ITEP would have you believe that the poor in every state of the USA would be better off if wealth was redistributed and the poor get even more of a free ride in terms of state taxation

Institute for Taxation and Economic Policy --- http://www.itep.org/
Also see http://en.wikipedia.org/wiki/Institute_on_Taxation_and_Economic_Policy

"Who Pays?" ITEP, January 2015 ---
http://www.itep.org/whopays/

Jensen Comment
The first thing that makes me suspicious is that ITEP bills itself as being bipartisan. There's nothing bipartisan about the Board of Directors of ITEP --- http://www.itep.org/about/board_directors.php

Personally, I have much more respect for the professionalism and independence of the Tax Foundation ---
http://taxfoundation.org/
Also see http://en.wikipedia.org/wiki/Tax_Foundation

The Tax Foundation's Review of the ITEP report on "Who Pays?"
http://taxfoundation.org/article/comments-who-pays-distributional-analysis-tax-systems-all-50-states

The Institute on Taxation and Economic Policy (ITEP) released a report last month titled Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.[1] The study attempts to examine the overall level of regressivity of the tax systems of the fifty states and Washington, D.C. and presents state and local effective tax rates (total state and local taxes paid as a percentage of income) for each state’s five income quintiles. The report finds that nearly all states have regressive state and local tax systems.

The report also surveys the features of each state and local tax system, characterizing each feature as either regressive or progressive. Some of the tax system characteristics that ITEP regards as regressive are narrow income tax brackets, lack of a state income tax, and high reliance on sales and excise taxes. Progressive characteristics include little reliance on consumption taxes and graduated income tax rate structures.

Here we present three issues with ITEP’s conclusions and policy recommendations, in addition to their methods of presentation.

Issue #1: ITEP advocates tax policies that dampen economic growth in favor of short-term income redistribution.

A tax system should choose long-term economic growth over short-term redistribution.[2] Tax Foundation Chief Economist Dr. William McBride recently published a comprehensive review of the literature on the empirical relationship between taxes and economic growth over the last three decades, finding overwhelming evidence of a negative relationship between the two.[3] What’s more interesting is that among the work that examined specific tax types, researchers found that the most harmful to growth were corporate and individual income taxes, followed by taxes on consumption. The least harmful were taxes on property.

ITEP suggests that states move away from taxes on consumption (sales and excise taxes) and aim for “highly progressive income taxes.” That is, the report suggests moving more towards the taxes that are most harmful to economic growth. One study in Dr. McBride’s survey, an OECD panel data analysis, found progressive income tax systems specifically are negatively related to economic growth.[4] This may occur due to the way these systems disincentivize certain behaviors. According to Dr. McBride,

The more we try to make an income tax progressive, the more we undermine the factors that contribute most to economic growth: investment, risk-taking, entrepreneurship, and productivity. This is because high-income earners tend to do much of the saving, investing, risk-taking, and high-productivity labor.[5]

ITEP suggests that states move toward a tax revenue source that would harm future economic growth in favor equalizing incomes in the short term.

Issue #2: ITEP recommends that state and local governments rely on unstable sources of revenue.

ITEP suggests states move more toward progressive income tax systems. Income tax revenues, however, are much more volatile from year to year than sales taxes or property taxes. Using state and local government finance data from the U.S. Census Bureau,[6] we analyzed the U.S. totals of various combined state and local tax revenue sources to identify the most volatile sources of tax revenue from year to year. Figure 1 shows the annual percentage change in various types of state and local tax revenues.

Figure 1 Not Quoted Here

The Census data indicates that the most volatile source of combined state and local government tax revenues in the U.S. is corporate income tax, followed by individual income tax and sales and gross receipts taxes. Property tax revenues are the least volatile from year to year. These findings are confirmed by a 2010 Tax Foundation analysis of state tax revenue volatility by tax type, which found that corporate income and personal income tax revenues were the most volatile.[7] Further, the general shape of annual changes in revenues from taxes on corporate income, individual income, and sales and gross receipts closely follows the shape of the overall economy. Changes in income taxes, however, are much more pronounced as the overall economy changes.

In their analysis, ITEP punishes states that depend heavily on consumption taxes as a main source of revenue while advocating moving toward income taxation. Depending largely on a volatile source of revenue can cause budget issues in the event of an economic downturn. This is especially important in light of the inadequacy of state rainy day funds in providing additional funding during the most recent recession.[8]

Depending on high-income earners for tax revenue is even more problematic. Using 2009 IRS data, we found that millionaire income, in addition to the tax revenues they generate for the federal government, is quite volatile:

Comparing the 2009 data to the pre-recession data for 2007 shows that not only did the number of millionaires fall by 40 percent, but the overall income of millionaires fell by 50 percent. The result for the U.S. Treasury was that 54 percent of the total drop in tax revenues during this period was due to the falling tax collections from millionaires.[9]

Though this example uses federal tax collections, the principle still applies to state and local governments. The more a government relies on volatile sources of revenue, the more unstable overall funding will be when the economy dips.

Issue #3: ITEP includes one regressive feature of the federal income tax in its calculations, but excludes the rest of the highly progressive federal income tax.

Perhaps the most problematic part of ITEP’s report is its selective inclusion of federal policy. When ITEP presents effective state and local tax rates they also include what is known as the federal offset. The federal income tax code allows taxpayers who itemize their deductions to claim tax payments to state and local governments as a deduction. ITEP argues that since this benefit disproportionately helps high-income taxpayers lower their total tax bill, it should be accounted for in an analysis of regressivity. Including the federal offset in an analysis of state and local tax structures is misleading because it is a feature of the federal tax code, not state and local tax systems.[10]

When the federal offset is not included in the calculations of state and local effective rates, ITEP’s regressivity conclusions are much less severe. ITEP also breaks the top quintile into three smaller income groups, making the difference between the richest and the poorest appear much more pronounced. In the following analysis, we present the top quintile as a whole, rather than breaking it up into smaller income groups. Figure 2 shows the U.S. average of state and local effective tax rates, with and without the federal offset.

Fiture 2 Note Quoted Here

Continued in the article

Jensen Conclusion
It all boils down to how biased the unending debate about whether the poor will be better off if all wealth and income is equally distributed versus whether the poor in the USA are actually doing better by having incentives to strive for differential wealth and income.

Some analysts argue that we will have just as many dedicated brain surgeons if they make no more than dishwashers in a restaurant. I happen to not agree, but it's probably something that cannot be answered with data since we have very little to compare it with. Castro complained that when Cuban workers all received the same allowances they did not want to work very hard. Certainly, many of the most skilled professionals escaped and are still trying to escape Cuba. But comparing Cuba with the USA is not really fair in terms of so many factors affecting prosperity.

In the final analysis it's still Karl Marx versus Friedrich Hayek

Karl Marx --- http://en.wikipedia.org/wiki/Karl_Marx

Friedrich Hayek --- http://en.wikipedia.org/wiki/Friedrich_Hayek

The world is still waiting for any of the 200+ nations to demonstrate that Karl Marx had a better idea.

In Cuba where the goal was to eliminate inequality, Fidel Castro found that his ration books, free housing, free public transportation, and minimal wages destroyed incentives to work.

"Report: Castro says Cuban model doesn't work," by Paul Haven. Associated Press, Yahoo News, September 8, 2010 ---
http://news.yahoo.com/s/ap/20100908/ap_on_re_la_am_ca/cb_cuba_fidel_castro_5

Fidel Castro told a visiting American journalist that Cuba's communist economic model doesn't work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.

The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel's brother Raul, the country's president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba's 1959 revolution is sure to raise eyebrows.

Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba's economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn't even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.

He said Castro made the comment casually over lunch following a long talk about the Middle East, and did not elaborate. The Cuban government had no immediate comment on Goldberg's account.

Since stepping down from power in 2006, the ex-president has focused almost entirely on international affairs and said very little about Cuba and its politics, perhaps to limit the perception he is stepping on his brother's toes.

Goldberg, who traveled to Cuba at Castro's invitation last week to discuss a recent Atlantic article he wrote about Iran's nuclear program, also reported on Tuesday that Castro questioned his own actions during the 1962 Cuban Missile Crisis, including his recommendation to Soviet leaders that they use nuclear weapons against the United States.

Even after the fall of the Soviet Union, Cuba has clung to its communist system.

The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen's food needs are sold to them through ration books at heavily subsidized prices.

President Raul Castro and others have instituted a series of limited economic reforms, and have warned Cubans that they need to start working harder and expecting less from the government. But the president has also made it clear he has no desire to depart from Cuba's socialist system or embrace capitalism.

Fidel Castro stepped down temporarily in July 2006 due to a serious illness that nearly killed him.

He resigned permanently two years later, but remains head of the Communist Party. After staying almost entirely out of the spotlight for four years, he re-emerged in July and now speaks frequently about international affairs. He has been warning for weeks of the threat of a nuclear war over Iran.

Castro's interview with Goldberg is the only one he has given to an American journalist since he left office.


XBRL --- http://en.wikipedia.org/wiki/XBRL

"Houses Passes XBRL Exemption as Survey Reveals Costs," by Tammy Whitehouse, Compliance Week, January 15. 2015 ---
http://www.complianceweek.com/blogs/accounting-auditing-update/houses-passes-xbrl-exemption-as-survey-reveals-costs#.VMKP1C5kZLe

Bob Jensen's threads on XBRL ---
http://www.trinity.edu/rjensen/XBRLandOLAP.htm


How to mislead with statistics
The Cost of Living in Nations Around the World
---
http://www.businessinsider.com/the-cost-of-living-worldwide-2015-1

Highest Cost of Living Nations

  1. Switzerland

  2. Norway

  3. Venezuela

  4. Iceland

  5. Denmark

  6. Australia

  7. New Zealand

  8. Singapore

  9. Kuwait

  10. United Kingdom

  11. Ireland

  12. Luxenbourg

  13. Finland

  14. France

  15. Belgium

 

The lowest cost of living nations are also ranked in this study, but I would not want to live in any of those nations.

Jensen Comment
You have to go to Movehub site for details on how the cost of living index is calculated ---
http://www.movehub.com/blog/living-costs-world-map

Any CPI index is controversial. It's not clear that it's very comparable between all these nations.

The low cost of living nations are poverty nations where most of the people barely stay alive in spite of a low cost of living.

Some of the high cost of living nations are rich oil producing nations like Norway, Venezuela, and Kuwait. Some have very high taxes with benefits redistributions like Denmark and New Zealand. Note that "free health care" is not really free. Even the lower income people are taxed somewhat for the their national health plans. Most nations do not have as many poor people on totally free medical and medicine health plans that the USA provides with Medicaid.

My impression is that some things we take for granted in the USA are luxuries in the highest cost of living nations. For example, it's not uncommon for middle class families in the USA to have homes with over 2,000 square feet. Such large homes are luxuries in all the 15 nations ranked above. Energy is relatively cheap in the USA in terms of electricity, heating oil, and gasoline compared to most of the high cost of living nations ranked above.

Health plans are difficult to compare between nations. For example, most on national health plans will provide organ, knee, and hip replacements but the waiting times may stretch into years. But those national health plans may also provide nursing care for the elderly that's not covered by Medicare in the USA.

Some of the high cost of living nations provide free or nearly free college education. But free college is not universal and may be limited to 25% or fewer of the college-age prospects. I don't think any nation provides free college education to everybody such as is now being proposed by President Obama.

My general impression is that most tourists would tend to agree that the the top 15 nations ranked above are indeed very expensive tourism destinations. But  some of the low cost of living nations are also expensive tourism destinations when there are high safety and kidnapping risks such as in Pakistan.


Video from PWC:  The quarter close: Cloud computing --- Click Here
http://www.pwc.com/us/en/cfodirect/multimedia/videos/cloud-computing.jhtml?j=682626&e=rjensen@trinity.edu&l=958865_HTML&u=24203448&mid=7002454&jb=0


I will never use TurboTax again ever

 

TurboTax --- http://en.wikipedia.org/wiki/TurboTax

TaxACT --- http://en.wikipedia.org/wiki/TaxACT

 

In the past I used TaxACT until 2010 when Wal-Mart only had TurboTax available. So I switched to TurboTax in 2010 and used it until next year when I will go back to TaxACT. Note that TaxACT will read all of your prior TurboTax returns and vice versa.

Here's why I will never ever use TurboTax again.

  1. On January 10. 2015 I went to Wal-Mart as usual to buy by TurboTax Deluxe disk for $49. I prefer to own the disk to make it easier in future years if I have a tax audit and a computer crash. I have backup hard copy returns, the installation disk, and backup copies of my returns on several hard drives.

     
  2. I January 24 when I installed TurboTax and the software works fine as long as I do not try to install updates. The updates corrupt the program both my main computers. So I decided that this year I will simply not install updates.

     
  3. On January 24 things were going smoothly using TurboTax Deluxe until I tried to install a small amount of bond sales for 2013. A message popped up from the CEO of TurboTax informing me that his company did a bad thing this year to TurboTax Deduct. If I wanted to file my tax return I would have to pay an added $30 to his company. Then when I file my tax return using TurboTax he will send me a $25. I guess he's still trying to screw me out of $5 plus all the time I lost sending an added $30 in extortion money to TurboTax. He shoud be refunding me the $35 for the added time and aggrevation.
     
  4. After I put out the refund information on a couple of listservs I got a few horror stories about frustrations of others with TurboTax in the past. The most egregious frustration is that sometimes, purportedly, TurboTax will tell you that your electronic return has been accepted by the IRS when in fact it was not received by the IRS. Horrors!

     
  5. Thus I'm shifting to TaxACT for good. So long TurboTax. This is not the first year in which you screwed your customers.

 

The bait and switch (failed) strategies of Turbo Tax in 2013 and 2014 Explained
http://www.businessweek.com/articles/2015-01-23/the-cheapest-tax-prep-software-for-2015-hint-it-s-not-turbotax-?campaign_id=DN012315

"TurboTax Apologizes for Bait-and-Switch, Provides $25 Refunds to Customers," by Paul Caron, TaxProf Blog, January 23, 2015 ---  http://taxprof.typepad.com/taxprof_blog/2015/01/turbotax-apologizes-for-bait-and-switch.html

"TurboTax Customers Angry Over Change In Tax Return Software," CBS News via Paul Caron, TaxProf Blog, January 14, 2015 ---
http://taxprof.typepad.com/taxprof_blog/2015/01/turbotax-customers-angry-.html

Changes to the popular tax program, TurboTax, has some customers mad.

“People are just livid. They feel deceived,” says consumer advocate Edgar Dworsky. “They feel they’ve used this product for so many years, they’ve trusted it, and now they’re being sandbagged.” Dworsky is a TurboTax customer unhappy after Intuit, the maker of TurboTax, changed the deluxe version of the popular tax preparation software product.

The changes require customers to upgrade to more expensive versions if reporting investment, self-employment, or rental income — costing an extra $30 to $40 — and surprising many long-time Turbo customers. “Imagine their surprise when they get halfway through doing their taxes and there is a roadblock in the program that says you have to upgrade,” added Dworsky.

“It can be viewed as a bait and switch, yes,” Prof. Bryan Menk told KDKA money editor Jon Delano on Tuesday, “because people were not accustomed to this limitation in a prior year.” Menk teaches taxation at Duquesne University and uses TurboTax himself.

Jensen Comment
Sounds to me like it's time for another boycott.

By the way the only difference on Amazon between Amazon Premiere and Deluxe is $15.00. So why is Turbo Tax charging 30 for an upgrade to thoroughly disgusted Deluxe customers?

Worst public relations strategy that I can remember in a very long time.

The Amazon reviews of TurboTax pretty much tell it like it should be in my opinion ---
http://www.amazon.com/TurboTax-Deluxe-State-Software-Refund/dp/B00NG7JVSQ/ref=sr_1_1?s=software&ie=UTF8&qid=1422214283&sr=1-1&keywords=turbotax

Turbo Tax Deluxe Customer Reviews
   105 Five Star Ratings
     25 Four Star Ratings
     18 Three Star Ratings
     22 Two star Ratings
1,705 One Star Ratings (as low as it goes)

Note that H&R Block software can read your prior-year TurboTax return and vice versa if you want to change software.

Jensen Comment
2008
TurboTax Boycott
Tax Software Boycott of TurboTax Begins:  I'll Bet You Can't Find the Hidden Fees Disclosed on the TurboTax Website
Note that this was back in the time when most taxpayers mailed in hard copy printouts of their tax returns. It was common to by one copy of TurboTax and then file returns for other members of the family such as when a married couple filed separate returns.

Users are not complaining about the functionality of TurboTax. The problem, as they see it, is with pricing changes. For the first time, TurboTax producer Intuit started charging users an additional $9.95 for each additional return whether they print or e-file. Also, readers complain that the 2008 software costs more at checkout, jumping from $44.95 to $59.95. (However, when AccountingWEB went on Amazon, the software could be had at the discounted price of $54.99.) . . . One reviewer seemed to be issuing a battle cry by writing, "Time to start the boycott." Another reviewer had criticism of a more personal nature: "You should fire the person who came up with pay to print!" Of the 182 product reviews as of the evening of December 9, 2008, 171 of them were one-star reviews and only five were five-stars, the highest rating. Of the five five-star ratings, one user named Fernando Ortega said TurboTax is still the best, pointing out that he doesn't have to enter all of his personal information and previous returns manually.
"TurboTax turmoil: Online reviews pan the top selling software," AccountingWeb, December 2008 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=106620

Reply from Denny Beresford on January 25, 2015

Bob,

I've used TurboTax for many years although it has been frustrating at times. After reading that the Deluxe version I've used in the past wouldn't accommodate investment sales I bought the Premier version this time. I should add that I first tried to do this online but found that the system wouldn't capture my 2013 amounts claiming that those files were "corrupted" or some such thing. So I bought the CD at Walmart and the 2013 amounts loaded fine.

As I started working on some preliminary stuff yesterday, I realized that Premier did not provide for the use of Schedule C for my small amount of consulting income and that I would have to upgrade to the still higher version. Apparently I hadn't read the news accounts correctly or the instructions on the TurboTax packaging.

I then called customer service to ask if I was entitled to a complimentary upgrade as I had been reading in the press. For the first 5-10 minutes the young lady essentially insulted me by repeatedly asking whether I had read the specifications on the website or CD packaging and if so why hadn't I figured out that Schedule C wasn't included in the version I was buying. I finally got mad and said are you going to help me or not at which point she started to try to figure out how to upgrade me over the phone. After about 45 minutes of wasted effort I said thanks for your non help and hung up. In the meantime TurboTax sent me an email indicated that they had processed my order for a free upgrade!

Frankly, I had decided to just pay the extra fee and not screw around with customer nonservice again, but later in the day I decided to give it one more try. This time I got a different young lady who "appreciated my many years of being a customer" and was as friendly and as helpful as she could be. In less than 10 minutes she decided that rather than trying to fix my problem through an upgrade, she would simply send me a new, free CD of the higher version by expedited delivery. While I obviously haven't received it yet, that sounded like a great solution.

So assuming I do receive the new CD and it works as promised, I do intend to remain a TurboTax customer. But they've certainly made this a challenging year.

Denny

 

Bob Jensen's taxation helpers ---
http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation


Many Turbo Tax Users Who Were Promised a $25 Refund Might Be Screwed Out of That Refund by TurboTax

Jensen Comment
I don't know if anybody else caught this clever ploy by TurboTax to deny a promised $25 refund.

TurboTax had not intended to offer anybody a refund, but millions of TurboTax customers were so unhappy about this year's bait and switch fraud by TurboTax that TurboTax reluctantly promised certain users a refund.

The refund was promised to TurboTax Deluxe ($49 or close) buyers who found that in order to complete their 2013 tax returns they have to send TurboTax an added $30. After all the complaints TurboTax reluctantly agreed to refund $25 of that refund.

But there's a catch that maybe nobody else realizes until they read the outline below.

  1. TurboTax conducted a bait and switch fraud by deleting Schedules C, D, E, and F  from the TurboTax Deluxe software this year. When you try to enter data that requires 1040 Schedules C, D, E, and F  a message pops up that you will must send an added $30 to Turbo Tax with a promise that TurboTax will refund $25 of that payment after you file your tax return.

     
  2. But there's a catch that I never caught before going to the TorboTax Website where in a very obscure place TurboTax states the following

         Eligibility for $25 cash back for returning Deluxe customers: Customers who have completed their 2013 taxes in TurboTax Deluxe (CD or download), and have completed their 2014 taxes in either TurboTax Premier or TurboTax Home & Business (CD or download), and apply here before 11:59PM PST April 20, 2015, are eligible for $25 back. 2014 TurboTax Advantage users are ineligible for this offer. Terms and conditions are subject to change without notice.

     
  3. Did you notice the catch? You must have used TurboTax Deluxe in 2013 to file your 2012 tax return and again in 2014 (after paying the added $30) to file your 2013 tax return.

     
  4. Presumably taxpayers who did not use TurboTax Deluxe to file their 2012 tax returns are not eligible for the $25 refund even when they paid the TurboTax $30 surcharge required to file their 2013 tax returns using TurboTax Premiere. In other words only people who used TurboTax Deluxe for their 2012 tax returns and paid an added $30 for their 2013 tax returns are eligible for the payment.

     
  5. Also note that to be eligible you must apply for the refund before  11:59PM PST April 20, 2015.

 

The bait and switch (failed) strategies of Turbo Tax in 2013 and 2014 Explained
http://www.businessweek.com/articles/2015-01-23/the-cheapest-tax-prep-software-for-2015-hint-it-s-not-turbotax-?campaign_id=DN012315

"TurboTax Apologizes for Bait-and-Switch, Provides $25 Refunds to Customers," by Paul Caron, TaxProf Blog, January 23, 2015 ---  http://taxprof.typepad.com/taxprof_blog/2015/01/turbotax-apologizes-for-bait-and-switch.html

"TurboTax Customers Angry Over Change In Tax Return Software," CBS News via Paul Caron, TaxProf Blog, January 14, 2015 ---
http://taxprof.typepad.com/taxprof_blog/2015/01/turbotax-customers-angry-.html

 

Jensen Comment
If this doesn't tell you to never use TurboTax again, here are some other reasons to never use TurboTax again.
Note that H&R Block software can read your prior-year TurboTax return and vice versa if you want to change software.

The Amazon reviews of TurboTax pretty much tell it like it should be in my opinion ---
http://www.amazon.com/TurboTax-Deluxe-State-Software-Refund/dp/B00NG7JVSQ/ref=sr_1_1?s=software&ie=UTF8&qid=1422214283&sr=1-1&keywords=turbotax

Turbo Tax Deluxe Customer Reviews
   105 Five Star Ratings
     25 Four Star Ratings
     18 Three Star Ratings
     22 Two star Ratings
1,705 One Star Ratings (as low as it goes)

 

Reply from Elliot Kamlet on January 25, 2015

Intuit just doesn't care.  See some of the following:
 

Top 1,106 Complaints and Reviews about Intuit - TurboTax

www.consumeraffairs.com › Financial Services › Tax Services

 

Top 351 Complaints and Reviews about Intuit - Quickbooks

www.consumeraffairs.com › Business Services

 
That's one website.  There are many thousands of complaints about this company's products. 
 
They charge a premium price because they are so professional, they claim.
There is no reason for them to improve their products.  They really don't care what you think.

 
Elliot Kamlet

 


Joint Tax Committee Releases List of Expiring Federal Tax Provisions, 2014-2024 ---
https://www.jct.gov/publications.html?func=startdown&id=4683


"TWO WORDS FOR BETTER TEACHING," by Joe Hoyle, Teaching Blog, January 7. 2015 ---
http://joehoyle-teaching.blogspot.com/2015/01/two-words-for-better-teaching.html


Quantitative Easing (QE) despite arguments to the contrary can boil down to simply printing money to pay government bills, a strategy that destroys interest payments on savings accounts and pension funds. Exhibit A is the way QE in the USA drove interest rates on CDs from over 5% to virtually zero.
http://en.wikipedia.org/wiki/Quantitative_easing

From the CFO Journal's Morning Ledger on January 23, 2015

Stimulus through bond purchases helped tip America back toward growth, but will it work in Europe? Investors certainly seemed to think so, as both stock and bond markets rallied on the news that the European Central Bank plans to flood the eurozone with more than $1.16 trillion in newly created money, the WSJ reports. Corporate leaders also responded with guarded optimism. “It’s one piece of getting Europe back to growth, and we should see an impact,” said Novartis AG CEO Joe Jimenez.

But the launching of quantitative easing won’t necessarily solve Europe’s problems, and soaring markets are just one piece of the puzzle. Denmark’s central bank cut its main interest rate 90 minutes after the ECB announced its plan, underscoring how swiftly the stimulus plan is likely to ripple through the region. While the euro sinks in response to the stimulus, that puts other currency areas in the region at risk, as it will likely weaken their exports. Denmark had feared that investors would rush into its currency, widening the spread against the euro further.

Meanwhile, a few savvy investors had anticipated last week’s surprise from the Swiss central bank, when it chose to scrap its three-year-old policy of limiting its value against the euro. Swiss investment firm Quaesta Capital AG bought options “a considerable time” ago betting that the euro would drop below 1.20 francs, said Chief Executive Thomas Suter.

 

Harvard's LARRY SUMMERS: 'There Is Every Reason To Expect QE Will Be Less Impactful In Europe' ---
http://www.businessinsider.com/larry-summer-on-european-qe-2015-1

On Thursday, the European Central Bank is expected to announce a new quantitative easing program. 

 

And according to a report from The Financial Times, Harvard professor Larry Summers is not convinced that the ECB's program will live up to the hype. 

Speaking at the World Economic Forum in Davos, Summers said, "There is every reason to expect QE will be less impactful in Europe." QE programs in Japan and the US have had at least some success in reaching their goals, which in Japan was devaluing the yen and in the US was boosting economic growth. 

Summers said, however, that the risks of doing too little in Europe outweigh the risks of doing too much. Summers has been the leading voice behind the economic idea of "secular stagnation," or that certain of the world's economies will be unable to create enough demand to sustain their current or expected growth trends. 

According to the FT, Summers outlined three reasons why Europe's QE program might not be as impactful as those undertaken in the US:

The latest indications are that the program will see the ECB buy €50 billion per month in bonds in an effort to stave off deflation and kickstart the sputtering European economy.

Markets have expected that the ECB would launch a QE program for some time, and over the last few months the euro has weakened and European stocks have rallied in anticipation of this program. 


Read more: http://www.businessinsider.com/larry-summer-on-european-qe-2015-1#ixzz3PYlz8iDl

From the CFO Journal's Morning Ledger on January 23, 2015

The economic reality in the U.S. is that wealthier households are getting ahead more quickly, while middle- and lower-income Americans continue to struggle. That is forcing companies to adjust their marketing strategies and product lines to appeal to people with money to spend, knowing that those in the middle and below continue to hold their purse strings tightly, the WSJ reports.

For home builder Quadrant Homes, that has meant pivoting from a “More House, Less Money” marketing slogan to “Built Your Way,” aiming toward buyers with money to spend on gourmet kitchens and other custom finishes. It’s easy to see why. Since 2009, average household spending among the top 5% of U.S. income earners climbed 12% through 2012, while spending fell by 1% for everyone else.

The trend goes beyond homes. Luxury retailers are registering solid growth, as are luxury hotel chains, whereas midscale hotel chains are seeing revenues decline. And in grocery stores, sales of economy brands have risen, while top-tier chain Whole Foods Market Inc. reported record sales per gross square foot last year.

Jensen Comment
The situation is more dire in other countries where poor people do not get subsidized housing, welfare, food stamps, and Medicaid free medicine and medical treatment. America's poor live better than the upper middle class in some nations.

Midscale hotel chains may do better now that fuel prices have plummeted.

What hurts hotels in general is need for travel is greatly reduced by new communications technology such as the ability to have virtual meetings where people see and talk to each other without physical presence. Robotics is also changing the need to travel, including such things as robotic surgeries where the skilled surgeon may be thousands of miles from where the surgery is actually taking place.


Some Things Never Seem to Change

From the CFO Journal's Morning Ledger on January 29, 2015

Amazon: long on promise, short on profit
http://www.wsj.com/articles/amazon-long-on-promise-short-on-profit-ahead-of-the-tape-1422474969
Shareholders in the online retailer won’t necessarily sell off their shares if Thursday’s results miss expectations, Ahead of the Tape’s Spencer Jakab reports. Analysts forecast an 80-cent loss for 2014, but revenue growth is closely watched, so a blowout holiday season could send the stock higher Friday morning.


Subprime Lending --- http://en.wikipedia.org/wiki/Subprime_lending

Jensen Comment
Only now it's called "nonprime" lending, which makes it all OK.  Yeah Right!

"Subprime Bonds Are Back With Different Name Seven Years After U.S. Crisis," by Jody Shenn, Bloomberg Businessweek, January 28, 2015 ---
http://www.bloomberg.com/news/articles/2015-01-28/get-ready-for-the-return-of-risky-mortgage-bonds-credit-markets?cmpid=BBD012815&alcmpid=


PwC:  2014 year-end financial reporting --- Click Here
http://www.pwc.com/us/en/cfodirect/issues/year-end-financial-reporting-resources/index.jhtml?j=686551&e=rjensen@trinity.edu&l=962414_HTML&u=24281992&mid=7002454&jb=0


Question
Does the following post imply that having fewer accountants is a good thing?

From the CFO Journal's Morning Ledger on January 26, 2015

About one in three of 150 top management jobs at U.K. retail giant Tesco PLC are expected to be slashed, but at the same time, the company is planning to beef up its finance function, the Financial Times reports. Looking to move past the trials of 2014, which included a profit warning pegged to accounting errors, and a lack of clarity as to who was running finance between one finance director’s departure in the spring and the next one’s arrival later in the year, Tesco is now laying the groundwork for a small team that will operate as a corporate finance department.

Tesco’s plans for finance could herald a further shake up of its diverse portfolio, and may signal further asset sales, according to the FT. The company is currently looking for a new head of corporate development, who will join a team that will concentrate on investment opportunities, M&A activity, asset disposals and portfolio reviews. The team will report to current finance director Alan Stewart and Chief Executive Dave Lewis, as well as group strategy director Benny Higgins.

Bankers and analysts expect further activity from Tesco to strengthen its balance sheet, after credit rating agencies cut the firm to below investment grade last week.

 


Question
What will make a healthy tennis star refuse to play in selected major tournaments and why?

"How Tennis Stars Handle the Tax Man’s Topspin:  Players like Nadal and the Williams sisters show excellent footwork when protecting their income.," by Allysia Finley, The Wall Street Journal, September 27, 2015 ---
http://www.wsj.com/articles/allysia-finley-how-tennis-stars-handle-the-tax-mans-topspin-1422401926?tesla=y

In an interview at the Australian Open last week, Swiss tennis virtuoso Roger Federer was lobbed a question about Switzerland’s recent decision to unpeg its currency from the euro and let the franc float. “Does it mean I’ve got to win now?” the tournament’s 33-year-old second seed joshed.

The Swiss central bank’s recent gambit jolted global markets and currency traders, but as Mr. Federer suggested, a rising franc will also take a bite out of his winnings. In the past two weeks, the Swiss franc has appreciated by about 15% relative to the Australian dollar. Mr. Federer was bumped Friday in the third round and will take home 60,000 Australian dollars ($47,599) in prize money, which will now be worth about 8,000 francs ($8,868) less. Had he won the championship, the Swiss currency spike would have cost him 400,000 francs ($443,298).

Mr. Federer and his fourth-seeded compatriot Stan Wawrinka, who won his fourth-round match Monday, would be taking even larger blows had not tournament officials increased the prize money earlier this month to compensate for the falling Australian dollar. French Open organizers may have to do the same to account for a weakening euro.

As sport regulators understand, tennis players respond to economic incentives and often act as strategically off the court as on. For the past three years Spain’s Rafael Nadal (eliminated in the Australian Open on Monday) has bowed out of England’s annual Queen’s Club tournament, traditionally a Wimbledon warm-up, because the U.K. charges foreign athletes a prorated tax on their world-wide income (including endorsements). The more tournaments he plays in Britain, the more he owes Her Majesty’s Government.

“The truth is, in the U.K. you have a big regime for tax, it’s not about the money for playing. They take from the sponsors, from Babolat, from Nike and from my watches,” Mr. Nadal explained in 2011 to the Times of London. He endorses a line of luxury timepieces by Richard Mille. “This is very difficult. I am playing in the U.K. and losing money.”

The top five French players on the men’s circuit— Jo-Wilfried Tsonga, Gael Monfils, Gilles Simon, Julien Benneteau and Richard Gasquet, as well as Germany’s Philipp Kohlschreiber, all claim residence in Switzerland, ostensibly to avoid paying their home countries’ punitive 45% top personal income-tax rates (not including surcharges or social-security contributions).

Many Swiss cantons assess taxes on the living expenses of foreign high-rollers (typically fives times the market rate for renting out their residence) rather than on their income. As a result, Switzerland has become a tax haven for thousands of wealthy Europeans. Maybe New Jersey Gov. Chris Christie should consider applying the Swiss tax model in the Garden State. Jersey City might become the Geneva for New York’s professional athletes.

Yet the most popular haven for tennis players is the principality of Monaco, which doesn’t tax foreigners’ world-wide income. (French athletes choose Switzerland because la République Française taxes its citizens who live in Monaco.) Swedish tennis legends Bjorn Borg and Mats Wilander escaped to Monte Carlo during their primes in the 1970s and ’80s to dodge their home country’s 90% top marginal rate, which has since fallen to 57%. In 2002 Germany charged six-time Grand Slam title-winner Boris Becker with tax evasion for falsely claiming Monaco as his primary residence.

Today, Monaco is the putative home of many of the world’s top-ranked men and women players. They include Serbia’s Novak Djokovic (1), the Czech Republic’s Petra Kvitova (4), Tomas Berdych (7) and Lucie Safarova (16); Canada’s Milos Raonic (8); Denmark’s Caroline Wozniacki (8); Bulgaria’s Grigor Dimitrov (11); and Ukraine’s Alexandr Dolgopolov (23). Players who hail from former communist countries are especially keen, it seems, on keeping their hard-earned money.

The U.S. has its own Monaco: no-income-tax Florida. It’s no coincidence that America’s top-ranked players Serena (1) and Venus Williams (18) and John Isner (21), as well as Russia’s Maria Sharapova (2) and Japan’s Kei Nishikori (5) live in the Sunshine State. So do twins Mike and Bob Bryan, who have won 16 Grand Slam doubles titles. Like the Williamses, they come from California, where the 13.3% state income-tax rate is the nation’s highest.

Jensen Question
What happened to the proposed legislation, possibly in Maryland, to tax out-of-state income for out-of-state residents?
http://marylandreporter.com/2014/10/02/supreme-court-to-hear-case-on-right-of-maryland-to-tax-out-of-state-income/

Bob Jensen's tax helpers ---
www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation


The new Revenue Recognition Standard in accounting is costing billions to implement

From the CFO Journal's Morning Ledger on January 27, 2015

Sweeping changes in the rules that determine when companies can recognize revenue are afoot, but questions remain as to how they should be implemented—250 questions, according to the SEC—and some companies are pleading for a delay in their implementation beyond the current start date of Jan. 1, 2017, CFO Journal’s Maxwell Murphy reports.

The rule changes involve so-called deferred revenue—money already collected from customers that gets brought to the top line over time. Companies in the S&P 500 have about $360 billion of such revenue on their books. A group of U.S. software companies, including Adobe Systems Inc., Symantec Corp. and VMware Inc. asked rulemakers on Wednesday for guidance and a two-year delay. AT&T and Verizon Communications Inc. also said the current deadline doesn’t give them enough time.

Auto makers, including Ford Motor Co. and General Motors Co. estimate they might have to spend as much as $300 million each on accounting technology, and claim the new financial figures the rules will yield will provide little benefit for investors

Bob Jensen's threads on revenue recognition controversies and frauds ---
http://www.trinity.edu/rjensen/ecommerce/eitf01.htm 


From the CFO Journal's Morning Ledger on January 23, 2015

Ethics and Compliance Programs: Questions Boards May Want to Ask ---
http://deloitte.wsj.com/cfo/2015/01/23/ethics-and-compliance-programs-questions-boards-may-want-to-ask/

Building a culture of ethics and an effective compliance program within an organization today is a business imperative. Effective ethics and compliance within an organization require senior management involvement, organization-wide commitment, an effective communications strategy and an ongoing monitoring system. A series of questions can assist board members in assessing whether elements of an ethical culture and an effective compliance program are in place at their company.

Continue Reading Today's Article »

Read more Deloitte Insights »

 


Advances in Visualization
From the CFO Journal's Morning Ledger on January 16, 2015

We know how you feel
http://www.newyorker.com/magazine/2015/01/19/know-feel
The New Yorker’s Raffi Khatchadourian reports on how technology conceived to help autistic individuals recognize the emotional meanings behind facial expressions came to be embraced by the advertising industry and beyond. User engagement has become an increasingly valuable commodity “and just as the increasing scarcity of oil has led to more exotic methods of recovery the scarcity of attention, combined with a growing economy built around its exchange, has prompted R&D in the mining of consumer cognition.”  Today many industries, from film studios to cable companies to even nightclubs, are paying attention to advances in hardware and software platforms that detect and record even the most minute facial expressions for signs of engagement. Representative Mike Capuano, of Massachusetts tried and failed to propose an act to compel companies to indicate when sensing begins. “People were saying, ‘Come on. What are you, crazy, Capuano? What, do you have tinfoil wrapped around your head?’ And I was like, ‘Well, no. But if I did, it’s still real.’ ”

Bob Jensen's threads on visualization ---
http://www.trinity.edu/rjensen/352wpvisual/000datavisualization.htm 


Modern Language Association --- http://en.wikipedia.org/wiki/Modern_Language_Association

"The Silly—and Sobering—History of MLA Job Ads," by Sydni Dunn, Chronicle of Higher Education, January 14, 2015 ---
https://chroniclevitae.com/news/869-the-silly-and-sobering-history-of-mla-job-ads?cid=at&utm_source=at&utm_medium=en 


From the CFO Journal's Morning Ledger on January 15, 2015

Accounting Roundup: Year in Review-2014
http://deloitte.wsj.com/cfo/2015/01/16/accounting-roundup-year-in-review-2014/

One of the biggest accounting developments in 2014 was the FASB's and IASB's issuance of their joint standard on revenue recognition. Deloitte's "Accounting Roundup: Year in Review" summarizes final guidance released during 2014 that could affect reporting and disclosures for the coming reporting season. It also provides an overview of the status of active FASB projects, which could significantly affect reporting and disclosure in 2015 and beyond, as well as a table of significant adoption dates and deadlines.

Continue Reading Today's Article ---
http://deloitte.wsj.com/cfo/2015/01/16/accounting-roundup-year-in-review-2014/

Read more Deloitte Insights ---
http://deloitte.wsj.com/cfo/

EY:  2014 Standard Setter Update --- Click Here
http://www.ey.com/Publication/vwLUAssetsAL/StandardSetterUpdate_BB2918_15January2015/$FILE/StandardSetterUpdate_BB2918_15January2015.pdf

PwC:  Accounting for Income Taxes: 2014 Year-end Hot Topics --- Click Here 
http://www.pwc.com/us/en/cfodirect/publications/tax-accounting-insights/accounting-income-taxes-2014-year-end-hot-topics.jhtml?display=/us/en/cfodirect/issues/income-tax&j=677061&e=rjensen@trinity.edu&l=954879_HTML&u=24095415&mid=7002454&jb=0

Bob Jensen's threads on accounting theory ---
http://www.trinity.edu/rjensen/Theory01.htm


What will business tax reforms look like?
From the CFO Journal's Morning Ledger on January 22, 2015

President Obama’s State of the Union address was long on ideas for boosting the middle class through adjustments to personal-income-tax rules. But the White House hasn’t omitted business taxes from the agenda. The WSJ’s John D. McKinnon reports that Treasury Secretary Jacob Lew is optimistic that a business tax overhaul could happen with the current Congress, and the two top tax writers in Congress agree.

Both House Ways and Means Committee Chairman Paul Ryan (R., Wis.) and Senate Finance Committee Chairman Orrin Hatch (R., Utah) have signaled their willingness to address business taxes alone, even though they would prefer to address the entire tax system at once, including individual rates. Such a move would allow the White House and Congress to sidestep their differences over Mr. Obama’s various proposals for individual taxation that could have a larger impact on wealthy Americans.

Mr. Lew said in a speech Wednesday, “The fact is, there is a growing bipartisan consensus in Washington on how to achieve business-tax reform, and we have a unique opportunity now to get this done.” He added, “I am confident that as long as we keep our focus on doing what is right for our economy and our nation, we will get this done.”

Jensen Comment
Problems at the state and local levels are inconsistencies in the way businesses are taxed. Virtually all states (ranging from Illinois to Vermont) give governors and town leaders powers to selectively waive taxes and even grant subsidies for business firms, especially firms that have learned out to play the game of threatening to leave or threatening develop in locations that give them the best deals.

Other problems are the added deals where tax revenues are diverted to the private sector. Exhibit A is comprised of the tens of billions of scarce tax dollars being diverted to football stadiums, hockey arenas, basketball arenas, and baseball stadiums. If you want to see the examples of waste witness the Silverdome stadium near Detroit that will probably cost tens of millions of taxpayer dollars for demolition after earlier tens of millions of taxpayer dollars for construction ---
http://en.wikipedia.org/wiki/Silverdome

One thing that is as certain as death and taxes is that team owners will want a new facility even before they move into their new facility. Tens of millions of taxpayer dollars were spent on the money-losing Alamo Dome that was built for the San Antonio Spurs. Before the Spurs even moved in they wanted another (read that exclusive) new basketball domed arena which taxpayers also built for them so the Spurs no longer had to use the "new" Alamo Dome.

By the way the Spurs originally wanted not to have to compete with baseball teams for use of the Alamo Dome. So the Spurs insisted that the roof of the facility be built too low for baseball. Now that they've departed the Alamo Dome, San Antonio cannot use the huge Alamo Dome to attract a major league baseball team. For a major league baseball team, taxpayers of San Antonio would have to build yet a third domed sports facility. And so the beat goes on and on and on.


From the CFO Journal's Morning Ledger on January 22, 2015

S&P lowered standards on ratings, SEC says
http://www.wsj.com/articles/s-p-sec-two-states-agree-to-roughly-80-million-settlement-1421851682
Standard & Poor’s Ratings Services agreed to pay nearly $80 million to resolve an investigation by the Securities and Exchange Commission and two states into its mortgage-backed securities. As recently as mid-2012, S&P published “a false and misleading article” showing how bonds rated triple-A under a revised methodology could withstand Great Depression-era levels of economic stress, according to the SEC. But the data used to compile the report was “decades removed” from the Great Depression.

Credit Ratings: Borne of Greed, Sleaze, Bribery, and Lies ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze


From the CFO Journal's Morning Ledger on January 22, 2015

N.Y. attorney general: Barclays isn’t cooperating with probe
http://www.wsj.com/articles/n-y-attorney-general-barclays-isnt-cooperating-with-dark-pool-investigation-1421874791
New York state’s top prosecutor says Barclays PLC hasn’t cooperated with an investigation into high-speed trading in its dark pool and named employees who allegedly were involved in wrongdoing. The complaint alleges two top executives were directly involved in, and oversaw, much of what it calls fraudulent activity in the dark pool.

Bob Jensen's Fraud Updates ---
http://www.trinity.edu/rjensen/FraudUpdates.htm


Another Victim of Amazon:  It's so much easier to sit at your desk and order electronic components

From the CFO Journal's Morning Ledger on January 15, 2015

RadioShack prepares bankruptcy filing ---
http://www.wsj.com/articles/radioshack-prepares-bankruptcy-filing-1421279360
RadioShack Corp.
is preparing to file for bankruptcy protection as soon as next month, following a sputtering turnaround effort that left the electronics chain short on cash. A filing could come in the first week of February, and the company has reached out to potential lenders who could help fund its operations during the process, said people familiar with the matter.

Jensen Comment
Of course this does not mean your favorite Radio Shack store will immediately disappear --- if you still have such a favorite store
Inventories will probably shrink, and your new clerks may not know much about electronics.
My closest Radio Shack (10 miles) went out of business years ago.


Auditing Standards Board --- http://en.wikipedia.org/wiki/Auditing_Standards_Board

"ASB issues auditing interpretations to SAS No. 126 on going concern," by Ken Tysiac, Journal of Accountancy, January 26, 2015 ---
http://www.journalofaccountancy.com/news/2015/jan/going-concern-auditing-interpretations-201511675.html


PwC:  FASB proposes two ASUs on income taxes as part of simplification initiative ---
http://www.pwc.com/us/en/cfodirect/publications/in-brief/accounting-for-income-taxes-fasb-simplification-project-us2015-05.jhtml?display=/us/en/cfodirect/publications/in-brief&j=685209&e=rjensen@trinity.edu&l=961893_HTML&u=24257970&mid=7002454&jb=0

What happened?

On January 22, the FASB issued an exposure draft of two proposed ASUs related to the accounting for income taxes: Intra-Entity Asset Transfers and Balance Sheet Classification of Deferred Taxes. The proposed ASUs are part of the Board’s simplification initiative aimed at reducing complexity in accounting standards.

Intra-entity asset transfers

Existing GAAP for intra-entity asset transfers is an exception to the principle of comprehensive recognition of current and deferred income taxes. Currently, the buyer and the seller in a consolidated reporting group are generally required to defer the income tax consequences of intra-entity asset transfers when the profits from such transfers are eliminated in consolidation. For example, upon an intra-entity transfer of inventory, the seller is required to defer the tax expense on the profit from the transfer and the buyer is prohibited from recognizing the deferred tax benefit on the inventory’s increased tax basis. Both the seller’s tax expense and the buyer’s tax benefit are recognized when the inventory is sold to an outside party. In the case of a transfer of long-lived assets, recognition of the seller’s tax expense and the buyer’s tax benefit occurs in one or more subsequent periods.

Under the proposed ASU, the exception would be eliminated, and as a result, the seller’s tax expense on the profit from the transfers of assets and the buyer’s deferred tax benefit on the increased tax basis would be recognized when the transfers occur. As proposed, this would result in the recognition of the tax consequences of intra-entity transfers even though the pre-tax profit is eliminated in consolidation. The Board believes the proposed simplification will reduce diversity in practice and result in more transparent decision-useful information, which in many cases will more closely align with tax cash flows.

Balance sheet classification of deferred taxes

Current GAAP requires the deferred taxes for each tax-paying jurisdiction of an entity to be presented as a net current asset or liability and net non-current asset or liability. This requires a jurisdiction-by-jurisdiction analysis of deferred taxes and the underlying classification of the assets and liabilities to which they relate. To simplify presentation, the proposed ASU would require that all deferred tax assets and liabilities be classified as non-current on the balance sheet. The proposed guidance would not affect the existing requirement to offset the deferred tax liabilities and assets of each tax-paying jurisdiction. As a result, each jurisdiction will now only have one net non-current deferred tax asset or liability.

Why is this important?

The proposed ASUs will affect virtually all tax-paying entities that apply U.S. GAAP. In particular, the change to the accounting for intra-entity asset transfers could have a significant impact on reporting entities’ income tax provision for the period in which transfers occur and, in turn, the effective tax rate in future periods. 

The proposed guidance in both standards would achieve convergence with IFRS on the topics addressed.

What's next?

The comment period for the exposure draft ends on May 29, 2015. Stakeholders are encouraged to provide comments on the proposals. After considering comments received, the Board expects to finalize the standards later this year.

As proposed, the standards would be effective for annual and interim periods beginning after December 15, 2016 for public business entities, with no option to early adopt. For all others, the standards would be effective for annual periods beginning after December 15, 2017, and interim periods in annual periods beginning after December 15, 2018. Early adoption would be permitted for non-public companies, but not before the effective date for public business entities. Early adoption, if chosen, would need to be applied to both standards.

Entities will be required to apply the modified retrospective transition approach, with a cumulative catch-up adjustment to opening retained earnings in the period of adoption for the Intra-Entity Asset Transfers standard. Prospective transition would be required for the Balance Sheet Classification of Deferred Taxes

Download the Full Report ---
http://www.pwc.com/en_US/us/cfodirect/assets/pdf/in-brief/us-2015-05-fasb-proposes-two-asus-on-income-taxes.pdf


"Howard University’s Study on Attracting Minorities to Accounting," Financial Accounting Foundation, Undated ---
http://www.accountingfoundation.org/diversity

The Howard University School of Business Center for Accounting Education recently published a study "Attracting Underrepresented Minorities to the Accounting Profession: Insights into Diversifying the Talent Pipeline" (April 2014)  that sheds light on the lack of diversity in the accounting profession.

More specifically, the study focuses on the challenges in attracting students to the career:

Despite decades of intensive efforts, the accounting profession has not reached its diversity goals. One reason is the misperceptions about accounting as a career. Studies suggest that young people, including underrepresented minorities, hold the profession in relatively low regard, do not understand what accountants do, and do not appreciate the career opportunities the profession offers.

 
It turns out that this lack of esteem is widely shared by parents and educators, the two groups with the most influence on young people’s academic and career choices.

Improving the quality of accounting curriculum and expanding internship and scholarship opportunities are essential elements in creating a new, meaningful perception of the accounting profession.


While the accounting profession is expected to grow by 16 percent between 2010 and 2020, applications by African Americans and Hispanics to accounting programs at colleges and universities actually are declining, the Howard study notes.

Additionally, African Americans and Hispanics – who together comprise about 30 percent of the U.S. population – represent just four percent of all partners in the accounting profession,
according to data published by the American Associations of CPAs. Caucasians still hold approximately 75 percent of the professional positions in accounting, and 90 percent of the partnerships.

All of this is occurring while the number of minority-owned businesses is projected to skyrocket.

Table not reproduced here

Partnering to Form a Pipeline for Diversity


As a result of the study, the Howard Center for Accounting Education has partnered with the American Institute of CPAs to establish the “Pipeline Working Group” to create a unified, nationwide initiative that reaches out to underrepresented minority students at high schools, community colleges and universities, as well as to their teachers, guidance counselors, and parents—to educate them about the profession.

 
The notion of working collaboratively to help increase the pipeline of diverse talent into the industry as a whole is a new idea – and one that deserves support—FAF President & CEO Terri Polley
 
The Working Group’s members include representatives from Deloitte, EY, KPMG, PwC, BDO, the National Association of Black Accountants, the Association of Latino Professionals in Finance and Accounting, the New Jersey Society of CPAs and other organizations.

The Howard study outlines a five-pronged approach to diversifying the talent pipeline, through the development and implementation of:
  1. A national marketing and awareness initiative highlighting the benefits and intellectual rewards of accounting as a profession, aimed at students who are making career choices.
  2. School-based programs intended to promote accounting as a high-value career choice, including business career academies, summer development programs, and other community programs.
  3. Initiatives aimed at helping minority students earn their CPA and other professional certifications.
  4. Internships and career exploration opportunities to provide high school and college students the means to become familiar with the accounting profession.
  5. Programs that both increase the number of accounting scholarships available to minority students and that more widely publicize scholarships that already are available.

A Call to Action


According to FAF President & CEO Terri Polley, the pipeline initiative represents a call to all in the profession to join a critically important conversation about the future.

The FAF has begun to hold conversations with the Center for Accounting Education and the AICPA regarding the role that the FAF, FASB and GASB – and other stakeholders – can play in the development of the diversity pipeline initiatives.

Ensuring the success of the pipeline initiative is in the best interests of all in the accounting profession. Therefore, it is expected that the collaboration and support of firms, state societies, and institutions will determine the success and longevity of the pipeline initiative. Organizations interested in the cause can educate their stakeholders on the key issues facing the profession and invite leaders to share their ideas on how to promote the five initiatives.

Jensen Comment
An extremely important, in my viewpoint, initiative is the KPMG initiative of getting role model faculty into colleges and universities that inspire minority students who take an early course in accounting or business.

KPMG Foundation Grants (other accounting firms contribute to this Foundation) ---
http://www.kpmgfoundation.org/foundinit 
The Minority Ph.D, Program Initiative ---
http://www.phdproject.org/

The PhD Project was founded upon the premise that advancements in workplace diversity could be propelled forward by increasing the diversity of business school faculty. Today, our expansive network of supporters, sponsors and universities helps African-Americans, Hispanic-Americans and Native Americans attain their business PhD and become the business professors who will mentor the next generation of leaders.

"KPMG Foundation Celebrates 15th Year of Minority Accounting Doctoral Program," SmartPros, August 1, 2009 --- http://accounting.smartpros.com/x67298.xml 

The KPMG Foundation is marking the 15th anniversary of its Minority Accounting Doctoral Scholarship program by announcing today it has awarded a total of $390,000 in scholarships to 39 minority doctoral scholars for the 2009 - 2010 academic year.

Of the awards, eight are to new recipients scheduled to begin their accounting doctoral program this fall, three are to new recipients who have already begun programs, and 28 are renewals of scholarships previously awarded.

Each of the scholarships is valued at $10,000 and renewable annually for a total of five years. The Foundation established the scholarship program in 1994 as part of its ongoing efforts to increase the number of minority students and professors in business schools – and has since awarded $8.7 million to minorities pursuing doctorate degrees.

“We’re proud of the achievements of our program over the last 15 years, and we have seen a healthy increase in the number of minority faculty members at our nation’s business schools, although more work needs to be done,” said Bernard J. Milano, President of the KPMG Foundation and The PhD Project. “That’s why we continue to award new scholarships each year and we remain committed to our mission.”

Together with The PhD Project, a related program whose mission is to increase the diversity of business school faculty, the Minority Accounting Doctoral Scholarship program has helped to more than triple the number of minority business professors in the United States since The PhD Project first began in 1994. Today, there are 985 minority business school professors teaching in the United States. Nearly 400 minority students are currently enrolled in business doctoral programs.

The Minority Accounting Doctoral Scholarship recipients come from a wide variety of cultures and backgrounds. This year’s new recipients are:

Continued in article

Jensen Comment
Under the guidance of KPMG Executive Partner Bernie Milano this program became more than a money awards program. KPMG works with some recipients in customized counseling and assistance when problems arise for certain individuals still studying for their doctorates. Various types of problems arise, including some crises within families.

 

Minority Hiring Success Varies Greatly by Discipline:  Law, Business, and Sciences Have the Worst Records
The major cause lies in the supply chain of PhD graduates

One of the reasons for the shortage of minority undergraduate students in accounting has been the lack of role models teaching accounting courses in college.

"Whatever Happened to All Those Plans to Hire More Minority Professors?" by Ben Gose, Chronicle of Higher Education, September 26, 2008
http://chronicle.com/weekly/v55/i05/05b00101.htm?utm_source=at&utm_medium=en

Duke U.: Success rates vary by discipline

The black faculty Strategic Initiative began in 1993, on the heels of the failed effort to add at least one black professor to every department.

As of the fall of 2007, Duke had 62 tenured or tenure-track black professors, accounting for 4.5 percent of the faculty. But while the raw number is double that of 20 years ago, it masks tremendous variation within the university. Black professors remain rare in the law school, which has one black professor, the business school, with two, and the natural sciences, with three.

Karla FC Holloway, an English professor who served as dean of humanities and social sciences from 1999 to 2005, says each unit of the university should be held accountable for its record on diversity. "There has been growth in arts and social sciences, and medicine, but in some ways that growth has arguably allowed other schools or divisions not to work as aggressively with this effort," she says.

Mr. Lange, the provost, concedes that some parts of the university have fallen short. He says he is working closely on the issue with the law school's dean, David F. Levi, and other officials. "They have made offers and have not been successful at times," Mr. Lange says. "They're putting in a lot of effort to do better."

Duke makes sure that when black job applicants visit the campus, they meet other black faculty members — and not just potential colleagues in the department to which they're applying. The university also is taking small steps to widen the pipeline. Duke has financed two postdoctoral positions for minority candidates each year, with the hope that it will eventually hire some of them for tenure-track faculty positions.

In 2003, Duke started yet another faculty initiative related to diversity — but this time the scope was expanded to include women and all underrepresented minority groups. "We needed to recognize that diversity had come to include a substantially broader set of concerns," Mr. Lange says.

Ms. Holloway worries that the broader focus may give deans and department chairs an out: "People can say, 'I've hired enough women, and that makes up for the lack of minorities.'"

Harvard U.: Uneven progress on racial diversity

Harvard created an office of faculty development and diversity, to be headed by a senior vice provost, in 2005, shortly after announcing that it would spend $50-million to help diversify the faculty.

In the more than three years since that commitment, the university has made modest progress in diversifying its faculty, and some professors believe that the new office deserves some of the credit. Kay Kaufman Shelemay, a professor of music and of African and African-American studies, says the office has done a good job compiling statistics related to diversity and working with deans and department chairs to ensure that they cast a wider net in their searches. "There is no doubt that the office established by former President Summers both invigorated and centralized our institutional efforts," Ms. Shelemay says.

Women now make up 16 percent of tenured and tenure-track faculty members in the natural sciences, up from 12 percent in 2004-5. In the humanities, 32 percent of the professors are women, up from 30 percent, and in the social sciences, 31 percent are women, up from 28 percent.

The changes for the professional schools over that period varied — law, engineering, and government all saw significant gains for women, while the proportion of female faculty members actually dropped in the schools of divinity, dentistry, and education.

The university's progress on racial diversity, meanwhile, has been uneven. More than 6 percent of the tenured and tenure-track faculty members in the social sciences are black, but black professors make up 1 percent or less of faculty members in the natural sciences and the humanities. Hispanic professors make up no more than 2 percent of faculty members in each of those three areas.

In 2006, Harvard committed $7.5-million to improve child care on the campus — a primary concern of female faculty members. The university also just completed its third year of a summer program aimed in part at improving the pipeline for female and minority professors. The program allows undergraduates to spend 10 weeks in the research laboratories of science and engineering faculty members. More than half of the 400 participants have been women, and more than 60 percent have been minority students.

Judith D. Singer, a professor of education who became senior vice provost for faculty development and diversity in June, says she was willing to take on the job because the climate "feels different" under Drew Gilpin Faust, Harvard's first female president. But Ms. Singer acknowledges that progress has been uneven among departments and divisions.

"Addressing issues of diversity remains a challenge throughout higher education," she says. "We at Harvard, like our peer institutions, must do better."

U. of Wisconsin at Madison: Progress in fits and starts

The university undertook its Madison Plan in 1988, vowing to double the number of black, Hispanic, and American Indian professors by adding 70 new faculty members within three years.

Progress has come in fits and starts. A Wisconsin official told The Chronicle in 1995 that the university hadn't made the progress it had hoped for. The number of tenured or tenure-track black professors, for example, increased only 61 percent, to 37, in that seven-year span. The total then surged to 60 by 2001, only to stall. Over the six years ending in 2007, the number of black professors dropped to 51.

Mr. Farrell, the provost, argues that part of the challenge is increased competition. While institutions like Wisconsin were among the first to spell out ambitious plans to diversify the faculty, now almost every institution has one. "We compete with everybody else for the pool that exists," he says.

Damon A. Williams, who became vice provost for diversity and climate in August, says Wisconsin and other universities must seek out minority job candidates more aggressively. For example, he wants to see Madison recruit aggressively at the annual Institute on Teaching and Mentoring, sponsored by the Southern Regional Educational Board and attended by hundreds of minority Ph.D. candidates.

"We have to be visible and present at that meeting and be willing to sell ourselves to them," he says.

Wisconsin's record with Hispanic and American Indian faculty members has been stronger. The university had 77 Hispanic professors in 2007, up from 53 in 1998, and 13 American Indian professors, up from four in 1998.

The growth of American Indian studies — in a state that is home to several Indian tribes — has helped attract new American Indian professors to the campus, Mr. Farrell says. "Professors who visit say, 'OK, here's a place where people from our background can thrive, fit in, and have success.'"

Still, Wisconsin and other universities must persuade more minority undergraduates to pursue academic careers, the provost says. The engineering school has developed a fellowship program, aimed primarily at minority graduate students, that encourages them to pursue research immediately. That program is being copied by the College of Letters and Science.

"When students spend their first year or two just on class work," Mr. Farrell says, "they find graduate school is not nearly as interesting as they thought it would be."

Virginia Tech: A bigger faculty role in hiring

The university made an extraordinary effort to diversify its campus starting in the late 1990s, and it paid off: During the three years ending in 2002, the number of black tenured and tenure-track professors in the College of Arts and Sciences rose by more than 50 percent, to 17; the number of Hispanic professors more than doubled, to seven; and the proportion of female professors rose from 20.6 percent to 23.6 percent.

Myra Gordon, an associate dean who left Virginia Tech in 2002, was the architect of the plan. At the time, faculty members complained that she had essentially taken over their role of hiring new professors.

Mark G. McNamee, the provost since 2001, says that while the university remains strongly committed to diversifying the faculty, some of the tactics that were criticized have been reined in or eliminated. Now he and the deans offer input at beginning of the process but for the most part let faculty members have the final say in hiring.

"It was a much more centrally controlled process at the time," Mr. McNamee says. "The deans are still engaged and have responsibilities, but they're not perceived as unduly influencing what the outcome is going to be."

It is difficult to evaluate progress in the College of Arts and Sciences since then, because it was divided into smaller colleges several years ago. Over the four years ending in 2007, the university had a net increase of five black and five Hispanic professors. Black faculty members make up about 3 percent of the tenured and tenure-track professoriate, Hispanic faculty members less than 2 percent, and women 24.3 percent.

In 2006 students protested the university's decision not to grant tenure to a black professor known for his activism on affirmative action and other causes. Mr. McNamee promised to establish a committee to study the role of race at the university. "When someone doesn't get tenure, that doesn't help us, but that's just the way it is sometimes," he says now.

In August the committee released a plan that calls for a cluster of six new hires in Africana studies and race and social policy.

Virginia Tech also frequently invites professors from historically black universities to deliver lectures on the campus, in part to elevate awareness of the university among those lecturers.

"Once people know Virginia Tech," says Mr. McNamee, "they really like it a lot better than they think they're going to like it."

Continued in article

"Whatever Happened to All Those Plans to Hire More Minority Professors?" by Ben Gose, Chronicle of Higher Education, September 26, 2008
 http://chronicle.com/weekly/v55/i05/05b00101.htm?utm_source=at&utm_medium=en

 

Bob Jensen's threads on careers ---
http://www.trinity.edu/rjensen/Bookbob1.htm


"Blogging changes the nature of academic research, not just how it is communicated," by Patrick Dunleavy, London School of Economics, January 2015 ---
http://blogs.lse.ac.uk/impactofsocialsciences/2014/12/28/shorter-better-faster-free/

Academic blogging gets your work and research out to a potentially massive audience at very, very low cost and relative amount of effort. Patrick Dunleavy argues blogging and tweeting from multi-author blogs especially is a great way to build knowledge of your work, to grow readership of useful articles and research reports, to build up citations, and to foster debate across academia, government, civil society and the public in general.

One of the recurring themes (from many different contributors) on the LSE Impact of Social Science blog is that a new paradigm of research communications has grown up — one that de-emphasizes the traditional journals route, and re-prioritizes faster, real-time academic communication. Blogs play a critical intermediate role. They link to research reports and articles on the one hand, and they are linked to from Twitter, Facebook, Pinterest, Tumblr and Google+ news-streams and communities. So in research terms blogging is quite simply, one of the most important things that an academic should be doing right now.

But in addition, STEM scientists, social scientists and humanities scholars all have an obligation to society to contribute their observations to the wider world. At the moment that’s often being done

So the public pay for all or much of our research (especially in Europe and Australasia). And then we shunt back to them a few press releases and a lot of out-of-date, arcanely phrased academic junk.

Types of blogs

A lot of people think that all blogs are solo blogs, but this is a completely out of date view. A ‘blog’ is defined by Wikipedia as:

‘a truncation of the expression web log… [It] is a discussion or informational site published on the World Wide Web and consisting of discrete entries (“posts”) typically displayed in reverse chronological order (the most recent post appears first). Until 2009 blogs were usually the work of a single individual, occasionally of a small group, and often covered a single subject. More recently “multi-author blogs” (MABs) have developed, with posts written by large numbers of authors and professionally edited. MABs from newspapers, other media outlets, universities, think tanks, advocacy groups and similar institutions account for an increasing quantity of blog traffic. The rise of Twitter and other “microblogging” systems helps integrate MABs and single-author blogs into societal newstreams’. [Accessed 29 August 2014]. (Let me pause here to reassure some academic readers who may be bristling at being asked to read Wikipedia text – I know this passage is sound since I co-wrote much of it).

Actually the evolution of academic blogs specifically has now progressed even further, so that we can distinguish group or collaborative blogs as an important intermediate type between solo blogs and multi-author blogs. The two tables below summarize how these three types of blogs now work, drawing attention to their very different advantages and disadvantages.

Continued in article

Bob Jensen's threads on blogs, listservs, and social media ---
http://www.trinity.edu/rjensen/ListservRoles.htm

. . .

I am including some Websites here, because the archives of some blogs are very much like Websites (that can be searched by Web crawlers). For example, I consider the MAAW Website the most important consideration for most accounting course syllabi, but Jim's blog is so infrequent I would not list it as among the most important blogs for syllabi.

MAAW Websote (Tremendous Archive) --- http://www.maaw.info/
MAAW Blog --- http://maaw.blogspot.com/

Here are a few of MAAW's pages useful for AIS teaching and research:
Journal of Information Systems:
http://maaw.info/JournalOfInformationSystems.htm

International Journal of Information Systems:
http://maaw.info/InternationalJournalofAccInfoSys.htm

AIS/MIS Bibliography: http://maaw.info/AISMISArticles.htm
Index of Accounting Systems for Business A-I:
http://maaw.info/AccountingForArticlesByTopic.htm

and J-Z: http://maaw.info/AccountingForArticlesByTopic2.htm

All MAAW's Journal Bibliographies: http://maaw.info/SelectedJournals.htm

 

Other Infrequent Blogs
There are many accounting blogs that are terribly infrequent such that I would not include them for current news. However, you may want to consider using them for their archives. Some examples (mere samplings off the top of my head) include:

 

 

More Frequent Blogs
Each of the Big Four firms have blogs and/or newsletters
I subscribe to all of their newsletters

Updates on CPA Firm Litigation ---
http://www.trinity.edu/rjensen/Fraud001.htm


Updates on Auditor Professionalism and Independence ---
http://www.trinity.edu/rjensen/Fraud001c.htm


Deloitte's International Accounting Blog --- http://www.iasplus.com/index.htm


Accounting Education News (International)  --- http://www.accountingeducation.com/
This blog covers international updates in financial, managerial, and AIS


FEI Daily --- http://daily.financialexecutives.org/


Paul Caron Tax Prof --- http://taxprof.typepad.com/


XBRL (Eric Cohen) --- http://www.computercpa.com/


Tom Selling generally has commentaries on accounting standards 9my replies are on the AECM)
The Accounting Onion---
http://accountingonion.com/
 
 

Dennis Elam Blog (often about fraud and forensics) ---
http://www.professorelam.typepad.com/


Accounting Association Blogs --- http://www.accounting-degree.org/50-best-accounting-blogs-of-2014/


 

 

David Albrecht's List of Accounting Professors Who Blog (some no longer blog) ---
https://profalbrecht.wordpress.com/2008/12/26/accounting-professors-who-blog/

 

Bob Jensen's Threads --- http://www.trinity.edu/rjensen/Threads.htm


For earlier editions of Fraud Updates go to http://www.trinity.edu/rjensen/FraudUpdates.htm


For earlier editions of Tidbits go to http://www.trinity.edu/rjensen/TidbitsDirectory.htm


For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 


Bookmarks for the World's Library --- http://www.trinity.edu/rjensen/bookbob2.htm 

 


The Quill Pen Isn't What it Used to Be by a Long Shot:  Software That Turns Data into a Narrative Story
"Robot Journalist Finds New Work on Wall Street:  Software that turns data into written text could help us make sense of a coming tsunami of data," by Tom Simonite, MIT's Technology Review, January 9, 2015 ---
http://www.technologyreview.com/news/533976/robot-journalist-finds-new-work-on-wall-street/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20150114

Software that was first put to work writing news reports has now found another career option: drafting reports for financial giants and U.S. intelligence agencies.

The writing software, called Quill, was developed by Narrative Science, a Chicago company set up in 2010 to commercialize technology developed at Northwestern University that turns numerical data into a written story. It wasn’t long before Quill was being used to report on baseball games for TV and online sports outlets, and company earnings statements for clients such as Forbes.

Quill’s early career success generated headlines of its own, and the software was seen by some as evidence that intelligent software might displace human workers. Narrative Science CEO Stuart Frankel says that the publicity, even if some of it was negative, was a blessing. “A lot of people felt threatened by what we were doing, and we got a lot of coverage,” he says. “It led to a lot of inquiries from all different industries and to the evolution to a different business.”

Narrative Science is now renting out Quill’s writing skills to financial customers such as T. Rowe Price, Credit Suisse, and USAA to write up more in-depth, lengthy reports on the performance of mutual funds that are then distributed to investors or regulators.

“It goes from the job of a small army of people over weeks to just a few seconds,” says Frankel. “We do 10- to 15-page documents for some financial clients.”

An investment from In-Q-Tel, the CIA’s investment division, led the company to work from multiple U.S. intelligence agencies. Asked about that work, Frankel says only that “The communication challenges of the U.S. intelligence community are very similar to those of our other customers.” Altogether, Quill now churns out millions of words per day.

The software’s output can be impressive for software, but it can’t write without some numerical data for inspiration. It performs statistical analysis on that data, looking for significant events or trends, and it draws on knowledge about key concepts such as bankruptcy, profit, and revenue, and how such concepts are related.

The following paragraph, from an investment report, shows that Quill can write passable text for such a document, but it can still feel as if it were written by a computer.

“The energy sector was the main contributor to relative performance, led by stock selection in energy equipment and services companies. In terms of individual contributors, a position in energy equipment and services company Oceaneering International was the largest contributor to returns. Stock selection also contributed to relative results in the health care sector. Positioning in health care equipment and supplies industry helped most.”

Quill is programmed with rules of writing that it uses to structure sentences, paragraphs, and pages, says Kristian Hammond, a computer science professor at Northwestern University and chief scientist at Narrative Science. “We know how to introduce an idea, how not to repeat ourselves, how to get shorter,” he says.

Companies can also tune Quill’s style and use of language based on what they need it to write. It can accentuate the positive in marketing copy, or go for exhaustive detail in a regulatory filing, for example.

Continued in article

Jensen Comment
One problem of with financial data versus scientific data is that financial data possibly has much higher variation in quality and standardization. For example, the FASB cannot even define concepts of "earnings" and derivations from earnings measures like P/E ratios. This makes comparisons of one company's "net earnings" over multiple years dubious. Even more dubious are comparisons of "net earnings," eps, and P/E ratios of different companies doubtful no matter how good the Quill software is for generating narratives out of financial data.

Net earnings and EBITDA cannot be defined since the FASB and IASB elected to give the balance sheet priority over the income statement in financial reporting ---
"The Asset-Liability Approach: Primacy does not mean Priority," by Robert Bloomfield, FASRI Financial Accounting Standards Research Initiative, October 6, 2009 ---
http://www.fasri.net/index.php/2009/10/the-asset-liability-approach-primacy-does-not-mean-priority/

Similar problems arise with variations in quality and standardization of components of balance sheets. For example, measures of cash might be relatively accurate in terms of error variations, whereas variations in goodwill and other intangibles is subject to high error variations.

"Mechanical Turk and the Limits of Big Data:  The Internet is transforming how researchers perform experiments across the social sciences," by Walter Frick, MIT's Technology Review, November 1, 2012 --- Click Here
http://www.technologyreview.com/view/506731/mechanical-turk-and-the-limits-of-big-data/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20121102

It’s telling that the most interesting presenter during MIT Technology Review’s EmTech session on big data last week was not really about big data at all. It was about Amazon’s Mechanical Turk, and the experiments it makes possible.

Like many
other researchers, sociologist and Microsoft researcher Duncan Watts performs experiments using Mechanical Turk, an online marketplace that allows users to pay others to complete tasks. Used largely to fill in gaps in applications where human intelligence is required, social scientists are increasingly turning to the platform to test their hypotheses.

The point Watts made at EmTech was that, from his perspective, the data revolution has less to do with the amount of data available and more to do with the newly lowered cost of running online experiments.

Compare that to Facebook data scientists Eytan Bakshy and Andrew Fiore, who presented right before Watts. Facebook, of course, generates a massive amount of data, and the two spoke of the experiments they perform to inform the design of its products.

But what might have looked like two competing visions for the future of data and hypothesis testing are really two sides of the big data coin. That’s because data on its own isn’t enough. Even the kind of experiment Bakshy and Fiore discussed—essentially an elaborate A/B test—has its limits.

This is a point political forecaster and author Nate Silver discusses in his recent book
The Signal and the Noise. After discussing economic forecasters who simply gather as much data as possible and then make inferences without respect for theory, he writes:

This kind of statement is becoming more common in the age of Big Data. Who needs theory when you have so much information? But this is categorically the wrong attitude to take toward forecasting, especially in a field like economics, where the data is so noisy. Statistical inferences are much stronger when backed up by theory or at least some deeper thinking about their root causes.

 

Bakshy and Fiore no doubt understand this, as they cited plenty of theory in their presentation. But Silver’s point is an important one. Data on its own won’t spit out answers; theory needs to progress as well. That’s where Watts’s work comes in. 

Continued in article

Bob Jensen's threads on the limits of big data ---
http://www.trinity.edu/rjensen/Theory01.htm#LimitsOfBigData

Bob Jensen's threads on accounting theory or lack thereof ---
http://www.trinity.edu/rjensen/Theory01.htm


Example of an outdated concept that should be eliminated from your syllabus immediately
"No more extraordinary items: FASB simplifies GAAP," by Ken Tysiac, Journal of Accountancy, January 13, 2015 ---
http://www.journalofaccountancy.com/news/2015/jan/gaap-extraordinary-items-201511630.html


"IFRS: Common good?," by Liz Loxton, Economia, January 2015 ---
http://economia.icaew.com/finance/january-2015/ifrs-common-good

. . .

ICAEW’s review looked across numerous topics, including transparency, comparability, cost of capital and capital flows across border – to see if authors could discern improvements since 2005.

“For each, the findings are mixed,” says Singleton-Green. “Overall, we think the balance of the research evidence is that there is a positive response. Some researchers disagree. No one is saying that all companies and all countries benefit. The overall answer seems to be that there are more winners than losers.”

So far so good: allowing for those variations from study to study, country to country and even within sectors, the results found a broadly positive response to the notion that IFRS has gone some way to achieving its stated goals and thereby helped to increase investor confidence. Nigel Sleigh-Johnson, head of the faculty, says: “There are inevitably caveats, but overall IFRS has gone a long way to achieving its objectives.”

One acknowledged area of difficulty is the fact that IFRS implementation did not occur in a vacuum. It is hard to isolate its impact to the point where one can know whether it is IFRS or the evolution of corporate governance that is the most significant factor.

“It’s a very difficult thing to reflect on because there is no control group,” says Peter Hogarth, partner and head of PwC’s UK accounting services division.

The academic research is ultimately limited in what it can communicate, given the mixed messages within it, says Veronica Poole, global IFRS technical leader at Deloitte. “Yes, there is now a better understanding of risks and exposures. Some EU countries had no GAAP per se – they accounted for tax reasons.

So a single set of standards is a big improvement. And on the cost of capital, many studies suggest that it has indeed lowered barriers. Within the FD 100 Group, for instance, if you talk to the companies themselves, they say they have better access to capital markets.” - See more at: http://economia.icaew.com/finance/january-2015/ifrs-common-good#sthash.jPGpqu4U.dpuf

Comparability has not always been readily achieved. From a starting point of 17 different national GAAPs across Europe, and with larger companies starting to adopt US GAAP, IFRS had much ground to cover. Mark Vaessen, global head of IFRS at KPMG, says the change has been necessarily gradual: “I would say they are broadly applied consistently.”

At first lots of national traditions continued, he says. “Now it’s more mature. New standards are coming through that don’t have a national history so we are losing national bias. Everyone is trying to speak the same language. IFRS is becoming a language on its own.”

Importantly, the investor community agrees on the comparability point. Hilary Eastman, director of investment engagement at PwC, says the evolution means that companies and even countries that investors might have excluded as investment possibilities are now part of the investment landscape: “What we hear is that comparability is much enhanced. Even if individual companies within different countries might apply standards differently, there is at least a common framework. Investors don’t have to make so many adjustments and the work to do so is less. With regard to the common framework, you can see who’s applying it more rigorously and that helps in investment decisions. They [investors] make decisions globally so they like to see the consistent accounting around the world.”

Paul Lee, head of investment affairs at the National Association of Pension Funds, says that the ability to compare across national markets is a genuine step forward.

“Inevitably from an investor perspective you want to look at the universe of possible investments, look at individual companies and their performance and look at how the market is pricing them. The ability to compare across national markets is a genuine step forward. We have a European market instead of a collection of different national markets.”

From its earliest days, IFRS formalised accounting procedures, and brought more disclosure and more rigour to financial reporting. Segment reporting, which had a standard under UK GAAP, was far from the norm across the EU.

In 2005, IFRS also inherited a pension standard that the ASB had long been trying to introduce. Perhaps the biggest change has been the controversial and long-debated financial instruments standard – still effectively some way off, since the implementation date for IFRS 9 is January 2018.

“A lot of companies never accounted for financial instruments. The introduction of the standard shone a light on some of the exposures that existed,” says Peter Hogarth.

The wider parameters don’t add up to simplification of corporate reporting, however. Complexity is a charge often levelled at IFRS – and it doesn’t always stand up well to the accusation. “There are companies where it’s harder to see what is going on,” says Lee. Again, it’s difficult to unpick which areas are down to IFRS and which are down to the added complexity of business life.

“The world of business has changed dramatically, particularly on the risk management front – a major increase in the use of derivatives to manage currency risk for example. The whole complexity of Treasury and interest rate risk – that’s taken off across a whole range of companies. Life is more complicated and that inevitably means reporting will be too,” he says.

IFRS defenders will say that the world is better off for having companies that disclose more and that firms would be in still worse shape and the investor community would have a much less clear idea about listed companies and their exposure to risk without it. Along the way, listed companies have accrued benefits in terms of transparency and access to capital. “On the cost of capital, many studies suggest that it has indeed lowered barriers. Within the FD 100 Group, for instance, if you talk to the companies themselves, they say they have better access to capital markets,” says Veronica Poole.

There is still a debate raging around financial stability and the performance of IFRS at the time of the financial crisis. And the Barnier-commissioned Maystadt Report recommendations to increase the influence of EFRAG have drawn concern that IFRS will become politicised.

“There are certainly some who want to have political control of international standards. There is a threat – and that’s not too strong a word – that such an approach will start to move us towards an EU version of IFRS.

“If what we are looking for is comparability, different markets having different flavours of international standards is potentially a disaster and takes us back towards the situation where we had numerous different GAAPs. Most of all it will erode confidence and that will increase the cost of capital,” says Paul Lee.

What is more, Philippe Maystadt’s recommendation that the goal of international standards contributing to financial stability and not hindering economic growth be made more explicit has raised eyebrows. “Our view is that it’s not needed,” says Mark Vaessen. “It is already included within the public good criteria and it is inherent in the aims of international standards.”

There are dangers for IFRS in this argument, Vaessen says. Prudential regulators may understandably want to take a conservative line and smooth out performance in financial institutions. But that approach has led to hidden reserves in the past. Vaessen adds: “From a stewardship point of view that’s bad, because you are not holding management to account.” - See more at: http://economia.icaew.com/finance/january-2015/ifrs-common-good#sthash.jPGpqu4U.dpuf

Jensen Comment
The benefits of adopting IFRS in a given nation depends a lot on the quality of that nation's accounting standards before IFRS. For example, for nations having virtually no accounting standards or no enforced standards the benefits are greater, especially when audit firms are credible in the global markets. However, benefits do not always pass the cost-benefit test, especially in the eyes of some companies that did not see significant improvements in how capital is raised (e.g., some companies in Germany and Japan where bankers tend to be part and parcel to management of a company). IFRS has not always been a magic bullet for opening equity capital markets, but these standards cannot be entirely blamed for those failures.

Bob Jensen's threads on controversies in deriving accounting standards ---
http://www.trinity.edu/rjensen/Theory01.htm#MethodsForSetting


Here's Where The Options Market Thinks The S&P 500 Could Go in 2015 ---
http://www.businessinsider.com/sp-500-option-implied-volatility-2015-1

Jensen Comment
You can get a forecast from an individual expert or a consensus forecast from a group of experts who probably do not have most of their own financial futures tied up in equity investments. Or you can get a forecast from investors in stock options who actually put enormous amounts of money down in leveraged speculations on where the stock prices will go in terms of short-term options (e.g., 30 days) or long-term options for all or a greater part of 2015. The options can be long (calls) or shorts (puts). Actually each derivatives market transaction takes an investor betting long and another investor betting short.

The problem with all these forecasts is that we cannot foresee some events that can make all these forecasts way off the mark. There could be a major earthquake such as an enormous earthquake in California. Militants could (heavens forbid) blow up refineries in Saudi Arabia, and  that would cause a huge spike in oil prices. There could be a giant volcano that would greatly change all the climate forecasts for years to come.

Imagine what might happen if the Chicago Cubs win the World Series!


"Free Speech for Harvard and the SEC," by Noah Feldman, Bloomberg Businessweek, January 9, 2015 ---
http://www.bloombergview.com/articles/2015-01-09/free-speech-for-harvard-and-the-sec

A sitting member of the Securities and Exchange Commission co-writes an article accusing Harvard University of violating securities laws -- because, the article claims, a professor’s biased research has been used to argue for eliminating staggered corporate board terms. The facts are so juicy that the article has drawn plenty of attention, and corporate law heavyweights from the bar to the academy as well as other former SEC members have all weighed in.

But a crucial question has been lost: Exactly whose free speech is at stake here? The answer may surprise you, especially if you live in the shadow of SEC threats. In fact, it’s not only the university and the professor who have free-speech interests. It’s also the commissioner himself, who shouldn’t lose his right to express his view just because he occupies public office.

So let’s start with that commissioner, Daniel Gallagher, who was joined in writing by Joseph Grundfest, a former SEC commissioner who is now a professor at Stanford Law School. And for the moment, let’s leave aside the content of their argument, namely that the Shareholder Rights Project, led by my Harvard Law School colleague Lucian A. Bebchuk, has cited incomplete data in the course of pressuring corporate boards to abandon the staggered structure beloved of incumbent boards and hated by shareholder activists.

Critics say that Gallagher overstepped his bounds by charging in the article that the Shareholder Rights Project violated securities laws by misrepresentation and that the university may be liable for it. But even if Gallagher is wrong on the merits and law -- we’ll get to that -- he still should have the free-speech right to say whatever he wants, provided he specifies that he isn’t speaking on behalf of the SEC.

Preserving free speech for government officials is important for them and for the public at large. In recent decades the U.S. Supreme Court has made it hard for government employees to speak publicly about matters arising in the course of their employment. This development has been bad for public employees, and bad for the public’s right to know. Luckily for Gallagher, he isn’t an employee and so couldn’t be fired for speaking out of school. But what’s good for the employee is equally good for the principal: more freedom to speak means more public understanding of the thought processes and practices of government officials. Arguably the need for transparency is greater still at the SEC, where commissioners are unelected and can’t be fired. In short, Gallagher may be a fool or a scoundrel, but he should be free to express his views and be criticized for their content, not because he has them.

The obvious counterargument is that when an SEC commissioner suggests a person or institution may have violated the law, he may in effect be threatening prosecution -- and chilling the free speech of the targeted party. This isn’t quite right. The enforcement division of the SEC brings lawsuits, not the commissioners. Gallagher may be revealing to the world that he is encouraging the enforcement division to investigate Harvard, and that may be a terrible idea. But we’re better off knowing it rather than having it happen in secret. And we’re better off hearing Gallagher’s reasons, so they can be addressed substantively and rebutted.

That brings us to the most troubling aspect of Gallagher’s claims: the notion that Harvard might be legally responsible for the actions of the Shareholder Rights Project through the doctrine of respondeat superior. This claim drastically misunderstands the relationship between scholars and the university that employs them -- and in ways that deeply threaten free academic speech.

Harvard is a nonprofit corporation that has some employees who can act on its behalf and create liability for it, like the Harvard Management Co. that invests the university’s endowment. If employees of Harvard Management broke securities laws, the university could rightly be found liable.

But professors and their projects are fundamentally different. In a research university, a crucial element of the design is that faculty research isn’t directed or supervised by anyone in the administration, not even the deans. Faculty aren’t doing Harvard’s business like employees of a company. They’re employed to do their own research -- independently. The job of the faculty isn’t to do the deans’ bidding. Administrative supervision or substantive oversight would break the ideal of independent research -- precisely because administrators, unlike faculty, are constrained by institutional and political incentives from which faculty are meant to be free.

In other words, faculty research independence is an important element of academic freedom. The doctrine of respondeat superior applies and makes sense only when there is a principal-agent relationship between a boss and an employee. Applying the doctrine to faculty research would seriously undermine academic freedom by introducing a structure of agency where none is supposed to exist.

Continued in article

January 10, 2015 reply from Tom Selling

Admittedly as a non-lawyer, I immediately see two troubling aspects of Feldman’s analysis. First, he states:

The obvious counterargument is that when an SEC commissioner suggests a person or institution may have violated the law, he may in effect be threatening prosecution -- and chilling the free speech of the targeted party. This isn’t quite right. The enforcement division of the SEC brings lawsuits, not the commissioners.

To the best of my knowledge, the Division of Enforcement is directly responsible to the Chair. If Enforcement is bringing an action, it is with the permission of the Chair. Granted, Gallagher is not the chair, but a majority vote of the commissioners is required to give Enforcement subpoena authority (and to compel testimony?). Also, the commissioners vote on whether to accept a settlement; and after an issue is decided by an administrative law judge, the commissioners may vote to reduce the sanctions — perhaps even to eliminate them. Hence, Feldman may be technically correct, but if so, it seems that he is splitting hairs to make a very large point.

Second, the actual legal issue (again, as I see it) is not a Harvard professor’s right to free speech; rather it is whether the disclosures in a document filed with the SEC (a proxy statement?) was misleading by omitting material information — ironically, by not “speaking" enough.

Note that I am not taking any position on the issues, because I am still conflicted. Although I do not want to infringe on the legal right to free speech, I think that what Gallagher did was underhanded. He probably didn’t even write much of the paper — just leant his name to it so that it would get exposure. Which, of course, raises additional ethical questions for the co-authors who added his name without, perhaps, any significant contribution that normally merits co-authorship.

Best,
Tom


Autoregressive Model --- http://en.wikipedia.org/wiki/Autoregressive_model

Autoregressive Distributed Lag (ARDL) --- http://en.wikipedia.org/wiki/Partial_autocorrelation_function

"ARDL Modelling in EViews 9," by David Giles, Econometrics Beat, January 9, 2015 ---
http://davegiles.blogspot.com/2015/01/ardl-modelling-in-eviews-9.html

My previous posts relating to ARDL models (here and here) have drawn a lot of hits. So, it's great to see that EViews 9 (now in Beta release - see the details here) incorporates an ARDL modelling option, together with the associated "bounds testing".

This is a great feature, and I just know that it's going to be a "winner" for EViews.

It certainly deserves a post, so here goes!

First, it's important to note that although there was previously an EViews "add-in" for ARDL models
(see here and here), this was quite limited in its capabilities. What's now available is a full-blown ARDL estimation option, together with bounds testing and an analysis of the long-run relationship between the variables being modelled.

Here, I'll take you through another example of ARDL modelling - this one involves the relationship between the retail price of gasoline, and the price of crude oil. More specifically,
the crude oil price is for Canadian Par at Edmonton; and the gasoline price is that for the Canadian city of Vancouver
. Although crude oil prices are recorded daily, the gasoline prices are available only weekly. So, the price data that we'll use are weekly (end-of-week), for the 4 January 2000 to 16 July 2013, inclusive.

The oil prices are measured in Candian dollars per cubic meter. The gasoline prices are in Canadian cents per litre, and they exclude taxes. Here's a plot of the raw data:

Common Accountics Science and Econometric Science Statistical Mistakes ---
http://www.cs.trinity.edu/~rjensen/temp/AccounticsScienceStatisticalMistakes.htm

 


"140 current female KPMG US employees join lawsuit against firm," by Kevin Reed, Accountancy Age, January 9, 2015 ---
http://www.accountancyage.com/aa/news/2389474/140-current-female-kpmg-us-employees-join-lawsuit-against-firm

MORE THAN 140 current KPMG US fee-earning female staff have opted in to a lawsuit against the firm.

Lawyers contacted 9,000 current and former fee-earning female staff from KPMG in the US, in October 2014, to join the class action. A former KPMG manager, Donna Kassman, spent 17 years in the firm's New York office before resigning, claiming that she and other women had suffered gender discrimination.

Nearly 900 women have currently opted into the case. Of the 845 that have been processed by class action representative Kate Kimpel, of law firm Sanford Heisler, 142 are from existing staff. The opt-in period runs until 31 January.

Kimpel claimed that the number of current employees that had already opted in was high. In similar instances, they tend to wait until the end of the time period before opting-in, to gauge response from their peers, she added.

"It's easier for previous employees to opt in, they're less worried about retaliation. I'm sure the number of current employees [opted in] will rise dramatically," she told Accountancy Age.

KPMG has previously vigorously denied the allegations in the claim against the firm. "We will not comment on pending litigation, except to say that KPMG thoroughly and repeatedly reviewed the allegations in this case and found them totally unsupported by the facts," said a statement from a KPMG spokesman.

Continued in article

Bob Jensen's threads on KPMG litigation ---
http://www.trinity.edu/rjensen/Fraud001.htm

Bob Jensen's threads on the history of women in accounting ---
http://www.trinity.edu/rjensen/bookbob2.htm#Women


"Preparing for Pay Rules, Privacy, and a New Congress," by Joe Mont, Compliance Week, January 6, 2015 ---
http://www.complianceweek.com/news/news-bulletin/preparing-for-pay-rules-privacy-and-a-new-congress#.VLGDzHtkZLe


Corning changes yen hedging strategy
Do your students understand the difference between hedging strategies and accounting journal entries for hedging of the yen in the yen in the illustration below?

Do your students understand the FAS 133 accounting differences between hedging with written options, purchased options, long forward contracts, short forward contracts, long futures contracts, short futures contracts, and swaps (that are generally portfolios of forward contracts)?

For example, what derivative financial contracts have bounded risk in speculation versus hedging strategies?

From the CFO Journal's Morning Ledger on January 28, 2015

Corning changes yen hedging strategy ---
http://blogs.wsj.com/cfo/2015/01/27/corning-changes-yen-hedging-strategy/?mod=djemCFO_h
Glassmaker Corning Inc. is conceding that the yen will remain weak for the next few years, CFO Journal’s Vipal Monga reports. As a result, the company has changed its hedging strategy to protect only against more weakening, said James Flaws, finance chief. The glass that Corning makes for LCD displays used in flat-screen televisions is priced in yen, so a decline in the currency hurts the company’s bottom line when it translates those sales into U.S. dollars.

Jensen Helpers
On of my popular Excel workbook downloads showing different speculating and hedging strategies with alternative derivative contracts ---
www.cs.trinity.edu/~rjensen/Calgary/CD/Graphing.xls   
You might ask students to make FAS 133 jounal entries for each of the illustrations in the above workbook.
My PowerPoint slides on accounting for derivative financial instruments and hedging activities ---
http://www.cs.trinity.edu/~rjensen/Calgary/CD/JensenPowerPoint/


"Your Taxpayer Tuition Bill:  First encourage more student debt, then promote nonpayment," The Wall Street Journal, December 30, 2014 ---
http://www.wsj.com/articles/your-taxpayer-tuition-bill-1419985952?tesla=y&mod=djemMER_h&mg=reno64-wsj

. . .

So-called income-based repayment programs reduce a borrower’s monthly payments and then forgive the remaining principal after a period of years. Graduates who choose the nonprofit and government jobs favored by the President can have their loans forgiven entirely after 10 years.

Mr. Delisle has dug into the government’s numbers and finds that the take-up rate of these nonpayment programs is far larger than most Americans appreciate. Two years ago the Administration’s estimate of the average amount to be forgiven in income-based repayment plans was already $41,000 per borrower. The total amount of forbearance loans is $125 billion, and rising. And even with all of these ways to avoid on-time repayment, borrowers are still defaulting at a rate of nearly 20%. The clear danger is that hundreds of billions of dollars will never be repaid, which means that future taxpayers will have to pick up the tab.

That may have been the plan all along, since Democrats have wanted to make college another federal entitlement. And conveniently for President Obama, the bill will come due after he has left office.

Bob Jensen's threads on the entitlements disaster ---
http://www.trinity.edu/rjensen/Entitlements.htm


Coursera --- http://en.wikipedia.org/wiki/Coursera

Coursera Free Courses --- https://www.coursera.org/

Jensen Comment on Coursera
Enter the search term for accounting and note the free accounting courses from the University of Illinois, University of California at Irvine, Penn (Wharton), and the University of West Virginia

200+ Free Courses and Certificates from Top Professors in Leading Universities
200 MOOCs (Massive Open Online Courses) Getting Started in January ---
http://www.openculture.com/2015/01/200-moocs-massive-open-online-courses-getting-started-in-january.html
Complete Listing --- http://www.openculture.com/free_certificate_courses

Note the free financial accounting courses from Penn (Wharton) and various free forensic accounting courses from elsewhere (not all begin in January)

"18 Free Online Business Courses That Will Boost Your Career," by John A. Byrne, Business Insider, December 18, 2014 ---
http://www.businessinsider.com/best-free-online-business-courses-in-january-2014-12

. . .

To learn more about these courses — and register for them — click on the links below.

Gamification / Wharton / January 26

Globalization of Business Enterprise / IESE / January 19

Entrepreneurship 101 and Entrepreneurship 102 / MIT / January 9

ContractsX: From Trust to Promise to Contract / Harvard / January 8

Technology Entrepreneurship / Stanford / January 6

Asset Pricing – Part One / University of Chicago / January 18

Innovation and Commercialization / MIT / January 13

Grow To Greatness: Smart Growth For Private Businesses – Part II / University of Virginia / January 12

Financial Analysis of Entrepreneurial Ideas / Babson College / January or February

Time to Reorganize! Understand Organizations, Act, and Build a Meaningful World / HEC Paris / January 13

Game Theory II: Advanced Applications / Stanford / January 11

U.Lab: Transforming Business, Society, and Self / MIT / January 7

Make An Impact: Sustainability for Professionals / University of Bath / January 12

Managing People: Engaging Your Workforce / University of Reading / January 12

Decision Making in a Complex and Uncertain World / University of Groningen / January 19

Project Management for Business Professionals / January 26

Subsistence Marketplaces / University of Illinois / January 26

DQ 101: Introduction to Decision Quality / Strategic Decisions Group / January 15

More from John A. Byrne:

This article originally appeared at LinkedIn. Copyright 2014. Follow LinkedIn on Twitter.

Read more: https://www.linkedin.com/pulse/best-mooc-courses-business-john-a.-byrne#ixzz3MLx1WEeQ

Bob Jensen's threads on MOOCs, free tutorials, free videos, and other free learning materials from prestigious universities ---
http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI


"Click for Me if I'm Not There" sounds like it could be a title of a country song
"Dartmouth Accuses 64 Students of Cheating in Popular Course," by Andy Thomason, Chronicle of Higher Education, January 8, 2015 ---
http://chronicle.com/blogs/ticker/dartmouth-accuses-64-students-of-cheating-in-popular-course/91857?cid=wc&utm_source=wc&utm_medium=en

Dartmouth College has accused 64 students of cheating in a “Sports, Ethics, and Religion” course taught last fall, the Valley News reports. Randall Balmer, chairman of the religion department, discovered in October that absent students in his class were passing their clickers to classmates who were present to answer in-class questions on their behalf.

Mr. Balmer told the newspaper that most of the students involved had been suspended for a semester. In the fall he counted 43 students who handed off their clickers in the roughly 275-person class, but that number does not include the students who facilitated the cheating.

Think Students in Your Class Might Be Cheating? Here’s What to Do

The popular class was initially designed to help the college’s athletes, many of whom struggled with freshman-year coursework.

Diana Lawrence, a spokeswoman for the college, said it would not offer more-detailed comment on the proceedings until the appeals process ends this month.

Continued in article

Jensen Comment
It would be interesting to know the grading distribution in this course. My hypothesis is that students are more apt to skip class and cheat in a course where they are assured of an A grade with very little effort. This is what happened when over 120 students cheated in a political science course assignment at Harvard University. All students in that course were assured of getting A grades such that there's less incentive to work hard in the course. In Harvard's case over half the cheaters were expelled from the University. It appears that Dartmouth College will be a little less harsh.

Bob Jensen's threads on cheating ---
http://www.trinity.edu/rjensen/Plagiarism.htm


Pathways Commission Updates
"Pathways implementation taking next steps," by Ken Tysiac, Journal of Accountancy,  January 15, 2015 ---
http://www.journalofaccountancy.com/news/2015/jan/accounting-education-pathways-201511647.html

A transition is taking place as implementation of the recommendations of the Pathways Commission on Accounting Higher Education continues, the AICPA and American Accounting Association (AAA) announced Thursday.

The Pathways Commission was formed in 2010 to study possible future higher-education paths for those seeking entry into the accounting profession.

Recommendations were published in a report in 2012, and at that time the AICPA and AAA agreed to continue their support for the commission for another three years as the commission worked to implement the recommendations.

As the end of that three-year period approaches, the AICPA and AAA are transitioning ongoing projects into their respective organizations during the coming year. The transition will be complete by Aug. 1.

Developments in implementing the commission’s recommendations have included:

“Accountants play a crucial role in the economy,” AICPA President and CEO Barry Melancon, CPA, CGMA, said in a news release. “Therefore, ensuring that our pipeline of talent is supported by an education system that meets the evolving demands of an increasingly complex profession is of the utmost importance.”

The commission has pushed forward with its recommendations with more than 75 volunteers working on more than 17 task forces.

“As an educator committed to accounting as a learned profession, I am enthusiastic about continuing work toward Pathways-inspired goals to advance the future of accounting through connecting education and research to practice in the service of the public interest,” AAA Executive Director Tracey Sutherland said in a news release.

More information on the Pathways Commission is available online. The website will continue to host archival information and post updates to make them available to the accounting community.

 

It's easier to move a cemetery than to affect a change in curriculum.
Woodrow Wilson

I watched the Pathways Commission videos from the 2014 annual meetings and was impressed ---
http://commons.aaahq.org/hives/8d320fc4aa/summary
These videos may only be available to members of the American Accounting Association.

Jensen Comment
I worried that the Pathways Commission initiatives would turn to flubber and die in future years. If anything the momentum is growing stronger with top leaders in accounting education, research, and practice carrying forward with practical strategies that have a real chance for doing what is almost impossible in higher education --- bring about change in something other than technology.

What was sown is what is being reaped
After five decades of narrow-minded econometric and psychometric training and education in North American accounting doctoral programs we have generations of accounting faculty who are not ready to handle change. Many of our mathematicians, statisticians, and economists that we graduated were really not very good at accounting and not at all interested in clinical accounting research. They became super at applying the General Linear Model (GLM) to purchased databases like CRSP, Compustat, and Audit Analytics. Some could run simplistic behavioral experiments pretending MBA students were executives. But in comparison to schools of medicine, engineering, and law, schools of accounting did not produce Ph.D. graduates interested in solving the clinical problems of our profession.
Clinical Research --- http://en.wikipedia.org/wiki/Clinical_research

This point was driven home in 2011 by Harvard's Bob Kaplan ---
Accounting Scholarship that Advances Professional Knowledge and Practice
Robert S. Kaplan
The Accounting Review, March 2011, Volume 86, Issue 2, 


 

Recent accounting scholarship has used statistical analysis on asset prices, financial reports and disclosures, laboratory experiments, and surveys of practice. The research has studied the interface among accounting information, capital markets, standard setters, and financial analysts and how managers make accounting choices. But as accounting scholars have focused on understanding how markets and users process accounting data, they have distanced themselves from the accounting process itself. Accounting scholarship has failed to address important measurement and valuation issues that have arisen in the past 40 years of practice. This gap is illustrated with missed opportunities in risk measurement and management and the estimation of the fair value of complex financial securities. This commentary encourages accounting scholars to devote more resources to obtaining a fundamental understanding of contemporary and future practice and how analytic tools and contemporary advances in accounting and related disciplines can be deployed to improve the professional practice of accounting. �2010 AAA

Added Jensen Comment
Simplistic solutions like appointing clinical researchers as editors of TAR, JAR, CAR, and the JAE will not bring about change because no clinical research manuscripts will be forthcoming from generations of faculty not trained or educated in clinical research. Another problem that we know from schools of medicine, engineering, and law is that solid clinical research is very, very expensive. Higher education research in accountancy is just not funded for expensive clinical research.

And turning thousands of economists produced by accounting doctoral programs over the last 50 years into genuine scholars in the professions of auditing, tax, financial accounting, information systems, and managerial accounting. I mean scholars that that are sought after by accounting firms because of the professional expertise of those scholars. Instead schools of accounting are taking on adjunct teachers of accounting from the profession to cover topics like the ERP model, insurance accounting, and advanced taxes because the tenured accounting faculty does not have the expertise for such topics.

The bad news is that changes promoted by the Pathways Commission will very slowly implemented. But given the current momentum of leaders of the academy and the the profession eventual change is becoming increasingly possible.

Do watch the 2014 Pathways Commission videos to seem what I mean about "momentum."
http://commons.aaahq.org/hives/8d320fc4aa/summary

"Accounting for Innovation," by Elise Young, Inside Higher Ed, July 31, 2012 ---
http://www.insidehighered.com/news/2012/07/31/updating-accounting-curriculums-expanding-and-diversifying-field

Accounting programs should promote curricular flexibility to capture a new generation of students who are more technologically savvy, less patient with traditional teaching methods, and more wary of the career opportunities in accounting, according to a report released today by the Pathways Commission, which studies the future of higher education for accounting.

In 2008, the U.S. Treasury Department's  Advisory Committee on the Auditing Profession recommended that the American Accounting Association and the American Institute of Certified Public Accountants form a commission to study the future structure and content of accounting education, and the Pathways Commission was formed to fulfill this recommendation and establish a national higher education strategy for accounting.

In the report, the commission acknowledges that some sporadic changes have been adopted, but it seeks to put in place a structure for much more regular and ambitious changes.

The report includes seven recommendations:

According to the report, its two sponsoring organizations -- the American Accounting Association and the American Institute of Certified Public Accountants -- will support the effort to carry out the report's recommendations, and they are finalizing a strategy for conducting this effort.

Continued in article

Bob Jensen's threads on how accountics scientists should change:

How Accountics Scientists Should Change: 
"Frankly, Scarlett, after I get a hit for my resume in The Accounting Review I just don't give a damn"
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm
One more mission in what's left of my life will be to try to change this
http://www.cs.trinity.edu/~rjensen/temp/AccounticsDamn.htm

What is currently wrong with accountancy doctoral programs in North America ---
http://www.trinity.edu/rjensen/Theory01.htm#DoctoralPrograms


From the CFO Journal's Morning Ledger on January 13, 2015

Life Sciences: Outlook and Opportunities for the Industry in 2015 ---
http://deloitte.wsj.com/cfo/2015/01/13/2015-life-sciences-industry-outlook/

Homi Kapadia, U.S. Life Sciences leader and vice chairman of Deloitte LLP, anticipates what is coming in 2015 for the industry, including market consolidation, new models of innovation, growth in specialty therapeutic areas, R&D efficiency and the data revolution. He also discusses what businesses should be mindful of as they plan for growth and how big data will likely become an integral part of life sciences organizations encompassing the entire value chain.

Continue Reading Today's Article »

Read more Deloitte Insights »

 


From the CFO Journal's Morning Ledger on January 11, 2015

Investment Advisers: Six Areas of Focus for SEC Cybersecurity Exams ---
http://deloitte.wsj.com/cfo/2015/01/12/investment-advisers-six-areas-of-focus-for-sec-cybersecurity-exams/

The growing number and complexity of cybersecurity risks facing investment advisers (IAs) have triggered an increased interest in cyber risk management by the SEC, including a planned sweep of more than 50 registered IAs and broker-dealers. Learn more about the documentation SEC examiners likely will request and six areas of focus that organizations may want to address as they prepare for an examination.

Continue Reading Today's Article »

Read more Deloitte Insights »


From the CFO Journal's Morning Ledger on January 11, 2015

Electric-car pioneer Musk charges head-on at Detroit ---
Tesla Motors Inc
. is on a collision course with the auto industry’s giants like never before, but the CEO has no plans to stop cursing or obsessing about the tiniest design details. In a speech Tuesday, Chief Executive Elon Musk is expected to criticize larger auto makers for not responding to Tesla even more aggressively. Tesla is worth $26 billion in stock-market value, nearly half the size of General Motors Co. or Ford Motor Co. Meanwhile, GM is readying a one-two punch in the electric-car market, hoping to gain against Tesla with a next-generation Chevrolet Volt, as well as a $30,000 all-electric vehicle called the Chevrolet Bolt, slated for 2017.


From the CFO Journal's Morning Ledger on January 5, 2015

Federal CFO: Using Tie-Point Analytics to Address Financial Reporting Challenges
http://deloitte.wsj.com/cfo/2015/01/09/federal-cfo-using-tie-point-analytics-to-address-financial-reporting-challenges/

Standardized codes used by the federal government create a link between budgetary and proprietary accounting called tie-points. Using tie-point analytics can helps agencies support and perform root cause analyses for Federal agencies' posting logic issues. Once found, such issues can be permanently fixed using a combination of the knowledge gained from finding an agency's tie-point discrepancies and any tie-point methodology used by the agency's financial reporting team members.

 


From the CFO Journal's Morning Ledger on January 5, 2015

The U.S. economy is among the strongest in the world as the new year begins, but that presents special challenges for some sectors. In part one of a two-part feature on the business outlook for 2015, the WSJ notes that America’s strength has made its products particularly expensive abroad, and that could continue to crimp foreign demand throughout the year.

And technological disruption remains a persistent risk. Big IT sellers Microsoft Corp., Cisco Systems Inc. and Hewlett-Packard Co. were caught flat-footed as new business-technology trends took hold, such as software sold by subscription and advanced data-analysis tools. Now they are faced with trying to claw their way back to relevance.

Another forecast may be cause for particular nervousness in the C-suite. The powerful forces of bolder shareholder activists and impatient boards may mean “more CEOs will get ousted in 2015,” suggests Jeffrey Cohn, a CEO succession expert. That would continue a trend from last year, when at least 14 top bosses of big U.S. businesses were shown the door—six in December alone.

 


"FRC delivers formal complaint against Deloitte," by Oliver Griffin, Economia, January 12, 2015 ---
http://economia.icaew.com/news/january-2015/frc-delivers-formal-complaint-against-deloitte 

The Financial Reporting Council (FRC) has launched a formal disciplinary complaint against Big Four firm Deloitte, as well as partner John Clennett, and Hugh Bevan, the former financial director (FD) of Aero Inventory

The complaint was issued in connection with the 2009 collapse of Aero Inventory plc and its subsidiary Aero Inventory UK.

The FRC alleges that Deloitte’s conduct, as well as the conduct of the firm’s audit engagement partner (Clennett) and Aero Inventory FD (Bevan), “fell significantly short” of expected standards.

The FRC complaint said the three parties – all of whom are ICAEW members – had “failed to act in accordance with the fundamental principles” of the ICAEW’s guide to professional ethics, and code of ethics, as part of working with “professional competence and due care”.

An independent tribunal will now be appointed to hear the complaint, though a date has yet to be set.

Aero Inventory, a listed wholesaler of aircraft parts, was placed in administration in November 2009, after suspending shares when issues concerning the valuation of stock became apparent.

While Deloitte had audited the company’s accounts for a number of years, the firm refused to sign off accounts in 2009, due to a disagreement over stock valuations with Aero Inventory’s management.

In late 2014, Deloitte launched an appeal against a record FRC fine of £14m, issued in connection with the firm’s role as adviser to MG Rover Group, which collapsed in 2005. A decision has yet to be reached on that appeal.

A spokesperson for Deloitte said, "We note today’s announcement from the FRC and will continue to cooperate fully with this process. We take this matter very seriously but will not comment further prior to the tribunal hearing.” -
See more at: http://economia.icaew.com/news/january-2015/frc-delivers-formal-complaint-against-deloitte#sthash.VKWsHEIf.dpuf

Bob Jensen's threads on professionalism of audit firms ---
http://www.trinity.edu/rjensen/Fraud001c.htm

Bob Jensen's threads on the litigation woes of Deloitte ---
http://www.trinity.edu/rjensen/Fraud001.htm


IRS Made $14.5 Billion in Erroneous of Earned Income Tax Credit Payments in 2013, a 24% Error Rate ---
http://taxprof.typepad.com/taxprof_blog/2015/01/tigta-irs-made-145-billion-in-erroneous-of-eitc-payments-.html

Jensen Comment
I mean what's $14.5 billion to the Federal Government?
I'll tell you what it is. It's the approximate price tag of two years of  free tuition for all students under President Obama's proposed free college plan.


Hedging and Risk Management When Teats are Being Squeezed

From the CFO Journal's Morning Ledger on January 9, 2015

Dairy factories get a lesson in risk management
http://www.wsj.com/articles/dairy-factory-gears-up-for-production-1420765811
Milk exports were booming when American dairy processors began retooling to send more products to China and other countries with rapidly expanding middle classes. But now collapsing prices are giving plant owners a crash course in competing globally as they work to improve their use of hedging and other risk-management tools.


From the CFO Journal's Morning Ledger on January 9, 2015

Google loses most search share since 2008
http://www.bloomberg.com/news/2015-01-07/google-loses-most-u-s-search-share-since-2009-while-yahoo-gains.html
Google Inc.
’s search share fell to 75.2% in December from 79.3% a year previous, according to analytics firm StatCounter. It was Google’s smallest share since at least 2008 and likely the result of Yahoo Inc. replacing Google as the default search engine on Firefox browsers in November, Bloomberg reports.


"Proof That College Football Refs Are Riddled With Bias," by Bryan Gruley, Bloomberg Businessweek, January 9, 2015 ---
http://www.businessweek.com/articles/2015-01-09/proof-that-college-football-refs-are-riddled-with-bias?campaign_id=DN010915

Jensen Comment
Perhaps the word "proof" is too strong due to the many degrees of freedom in this research. The outcomes are, however, highly suggestive. One problem is that a bit like Dan Stone's message regarding climate change and the fact that 2014 was the fourth coldest year on record for Illinois.

January 9, 2015 reply from Dan Stone

from the Illinois state climatologist, "In summary, while it was a cold year
for Illinois, the effect was largely confined to the Midwest and was not
global and it does not reflect the long-term temperature trend in Illinois."

source:

https://climateillinois.wordpress.com/2015/01/05/2014-4th-coldest-year-on-record-for-illinois/#more-4919

Climate change is confusing because:

1. it requires understanding data, outliers, and statistics
2. of the fossil fuel industry which, very much like the tobacco industry of
50 years ago, funds promotion campaigns to deny the scientific evidence,
3. a major political party, which is funded by the fossil fuel industry,
promotes science denial.

Dan Stone

January 9, 2015 reply from Bob Jensen

Perhaps given the many referees studied (some impeccably honest and some biased), perhaps the bias in football refereeing is confusing because "it requires understanding data, outliers, and statistics."

Statistical analysis just does not work very well for non-stationary systems. But repeated outcomes may suggest patterns of non-randomness that are difficult to completely ignore in spite of the limitations in theory.

Bob Jensen

 


Are "Going Concern" Letters Mere Nails in the Coffin or Are They Part of the Poison Before Death?

From the CFO Journal's Morning Ledger on January 5, 2015

Study: “Going concern” letters on decline, but that may not be good ---
http://blogs.wsj.com/cfo/2015/01/02/study-going-concern-letters-on-decline-but-that-may-not-be-good/?mod=djemCFO_h
Fewer firms in the 2013 fiscal year saw red flags raised over their ability to continue as a going concern, but that’s partly because many businesses shut down, CFO Journal’s John Kester reports. In a new Going Concern Report from Audit Analytics, the number of companies that received such warnings fell by 6% from 2012, but 207 of the firms that received them that year filed terminations and no longer exist.


GAAP versus Non-GAAP Accounting for IPOs
From the CFO Journal's Morning Ledger on January 8, 2015

Forty companies went public last year reporting losses under traditional accounting rules but showing profits under their own tailor-made measures, the WSJ’s Michael Rapoport reports. That is 18% of all U.S. IPOs for the year. Some IPO market observers have raised fears that companies’ increased use of nonstandard earnings measures could confuse or mislead investors.

Companies that use the non-GAAP measures insist that they give investors a better picture of the company. But that worries some experts, and hasn’t stopped the SEC from demanding that some of the companies revise their filings, saying that they give too much prominence to the specialty calculations over more standard measures.

Nonstandard metrics give investors “the best measure” of continuing performance, said Jason Morgan, chief financial officer of Zoe’s Kitchen Inc., one of the firms that had to revise its filings at the request of the SEC. Do you feel that you need to look beyond GAAP to tell the full story of your company’s performance? Send us a note to let us know or tell us in the comments

"Tailored Accounting at IPOs Raises Flags Critics Say:  Companies’ Increased Use of Customized Earnings Measures Could Confuse Investors," by Michael Rapoport, The Wall Street Journal," January 7, 2015 ---
http://www.wsj.com/articles/tailored-accounting-at-ipos-raises-flags-1420677431

Zoe's Kitchen Inc. is serving up profits—but only after leaving some of its expenses off the menu.

Zoe’s, a chain of 125-plus Mediterranean-theme restaurants that went public in April, reported an adjusted profit of $13.2 million for the first nine months of 2014 under its own accounting treatments that strip out a variety of expenses.

Including those expenses, as is required under standard accounting rules, Zoe’s reported a loss of $8.4 million.

It is far from an isolated example. Forty companies went public in 2014 reporting losses under traditional accounting rules but showing profits under their own tailor-made measures. That is 18% of all U.S. initial public offerings for the year, according to consulting firm Audit Analytics, the highest level since at least 2009. Of 2014’s 10 biggest IPOs, nine used nonstandard earnings measures alongside the official accounting treatment to some degree.

Many companies prefer highlighting their own customized measures, saying they give investors a better picture of the company. That worries some experts, and the Securities and Exchange Commission has written letters to Zoe’s and other companies telling them the bespoke figures they use are given too much prominence in regulatory filings and asking for revisions.

Nonstandard metrics give investors “the best measure” of continuing performance, said Jason Morgan, chief financial officer of Zoe’s, who added that the SEC’s concerns were addressed in the company’s case by revising its prospectus.

But as the IPO market heated up last year, observers have raised fears that companies’ increased use of these nonstandard measures could confuse or mislead investors at a time when they are forming their first impression of a company.

“I think it’s a sign of frothiness” in the IPO market, said Brandon Rees, deputy director of the AFL-CIO’s Office of Investment. “Why investors tolerate it, I don’t know.”

Some say the costs that companies strip out of their nonstandard measures are increasingly things that should be counted in earnings calculations, such as executive bonuses, fees for stock offerings and acquisition expenses.

“I was just astounded at the wide variety of elements that people thought were appropriate to exclude,” said Curtis Verschoor, a DePaul University emeritus professor of accountancy. Investors should be aware that a company’s nonstandard numbers “are more likely to be slanted rather than balanced,” he said.

Companies must still prominently disclose their earnings under generally accepted accounting principles, the standard set of U.S. accounting rules, even if they also spotlight their earnings under “non-GAAP” measures.

“It’s knee-jerk to say that’s a place where companies put bad stuff,” said Mike Guthrie, chief financial officer of TrueCar Inc., an auto-buying-and-selling platform that went public in May.

For the first nine months of 2014, TrueCar had a $38.6 million loss under standard rules but a $6.6 million profit under “adjusted Ebitda”—earnings before interest, taxes, depreciation and amortization, modified further to exclude other costs, such as an $803,000 expense to acquire rights to the company’s stock symbol.

Mr. Guthrie said it would be more misleading for the companies not to present adjusted measures; the stock-symbol cost, for instance, was a one-time expense that won’t affect TrueCar’s future results. TrueCar closed Wednesday at $20.94 a share, up 133% from its IPO price of $9.

According to Audit Analytics data, 59% of the companies that filed for an IPO since 2012 have used nonstandard metrics, compared with 48% in 2010 and 2011.

Many go beyond the items that companies most frequently strip out of their preferred measures, such as employee stock compensation and foreign-exchange gains and losses. A PricewaterhouseCoopers LLP survey found 80% of IPO companies that made adjustments to their Ebitda from 2010 to 2013 had at least one adjustment beyond the more-common strip-outs, though PwC said it couldn’t comment on individual companies.

The growth in such reporting by IPO companies comes in part because more technology and service-based companies are coming public. Those companies are more likely to use accounting estimates and subjective measures when compared with traditional bricks-and-mortar companies, said Jay Ritter, a University of Florida finance professor who tracks IPOs.

The SEC has expressed concern in the past about companies’ non-GAAP metrics, notably with regard to daily-deals company Groupon Inc. Before Groupon’s 2011 IPO, the SEC raised questions about its use of “adjusted consolidated segment operating income,” a metric that excluded Groupon’s marketing costs to land new subscribers. Groupon scaled back its use of the metric in response to the SEC concerns. Groupon couldn’t be reached for comment.

In the past two years, the commission has sent comment letters to more than 30 companies, both pre-IPO companies and those already public, criticizing them for giving nonstandard earnings measures “undue prominence” in their securities filings.

Zoe’s received such a letter in January 2014.

Zoe’s had mentioned its adjusted Ebitda first in the “management’s discussion and analysis” section of its prospectus, four pages before providing an earnings table that followed standard accounting rules. The SEC also questioned Zoe’s exclusion of some cash expenses from its adjusted Ebitda, such as the costs of opening new restaurants and management and consulting fees.


Are PCAOB Inspection Reports Revealing Audit Firm Deficiencies Misleading?

January 23, 2015 message from a practitioner friend

Hi Bob, I hope all is well with you.

As part of your classroom application you might ask the following

How are engagements selected by the PCAOB for inspection

Do the engagements selected represent a random sample of the Firm’s audit practice

Are entire engagements reviewed or only selected areas

How are deficiencies determined (i.e. against objective requirements for audit testing and performance or is the evaluation subjective)

I think if this is a teaching application, the students should understand the subjectivity in how engagements are selected and evaluated.

Practitioner XXXXX

January 23, 2015 reply from Bob Jensen

May I quote you in a message to the AECM?

Alternately may I quote you as being "Anonymous?"

In fairness, I think the PCAOB does not pretend to use random sampling or inspections of the complete audits.

Also in fairness, auditing is rather unique in that we are and probably should be critical of deficiencies of any type that are not disclosed in the audit reports. Auditing in this regard is a bit like a surgeon's report on 1,000 surgeries. Even though that surgeon may have done a great job on 990 of those surgeries, a misleading report on 10 of the surgeries is inexcusable if the deficiencies are not disclosed in the report.

If I were on a medical board investigating a surgeon I would want the board to selectively chose what surgeries to investigate for deficiencies. The real test of a surgeon is how whether he or she occasionally cuts corners rather than how often corners are cut.

Of course in the case of surgeries there may sometimes be acceptable reasons for cutting corners such as when the patient is doomed no matter what. Then we might ask why the surgery is even being performed.?

For example, a former colleague of mine only had a few months to live with bone cancer. Surgeons in the Eastern Maine Medical Center in Bangor installed two new artificial hips. He was never going to walk again with or without those new hips. They probably cut a few corners in his case. I don't blame them for cutting corners. I blame them for doing the surgeries in the first place.

Thanks,
Bob

January 23, 2015 reply from Bob Jensen

Bob

I probably should stay anonymous until retirement and then I can “come out”. I would not debate your comments at all.

The point of my additional questions is that for those that don’t understand the process, the headline numbers are that the Firms that are inspected don’t know how to audit because of the high “failure” rate, language that my former partner, Jay Hanson, wants to change by the way. I thought it important if we are teaching students for them to understand that the audits the PCAOB inspects are the high risk audits (which they clearly say in their report but the public does not seem to understand) and that many (I won’t say most because no one has the statistics) of the deficiencies are subjective because the PCAOB does not want to write rule based standards which the auditors have asked them to write.

The information shows PCAOB inspections don’t cause restatements or withdrawn opinions rather deal with if you had sufficient evidence when the report was released. If the auditing was so bad, you would see more restatements and more withdrawn opinions. Lastly, consider that an exit conference is like dealing with the prosecutor who tells you if you don’t accept the plea bargain for distracted driving, he will indict you and make you stand trial for first degree murder (maybe a bit of an exaggeration).

Your analogy regarding surgeons, although a good one, is not exactly on point since their reviews tend to have a dead patient or the like as a starting point.

Practitioner XXXXX

January 23, 2015 reply from Bob Jensen

I don't think its fair to judge inspection reports in terms of restatements. Restatements more often than not do not reflect audit deficiencies. Restatements are ever so often caused by deceptions of top management and outright frauds that financial statement auditors are not intended to detect in the first place (except maybe by accident). Throughout the history of CPA auditing standard setters have repeated that financial statements are not fraud detection audits except to the extent that standard auditing procedures should detect material departures from GAAP in financial statements and some other related issues such as going concern issues and examination of internal controls via new responsibilities imposed by SOX.

Time and time again CPA audit firms are not held responsible for not detecting frauds from the bottom to the top of organizations. Fraud audits for such purposes would be much more extensive and costly beyond what the SEC and public sector agencies are willing to pay for in financial statement audits.

There are some gray zone settlements that really frighten CPA audit firms, but these are few and far between. A gray zone settlement now commonly used in audit courses is the Grant Thornton audit of Koss Corp. ---
http://en.wikipedia.org/wiki/Koss_Corporation

"Koss suit against former auditor (Grant Thornton) to proceed," by Doris Hajewski, Journal Sentinel, June 22, 2011 ---
http://www.jsonline.com/business/124389194.html

"Defending Koss And Their Auditors: Just Loopy Distorted Feedback," by Francine McKenna, re: TheAuditors, January 16, 2010 ---
http://retheauditors.com/2010/01/16/defending-koss-and-their-auditors-just-loopy-distorted-feedback/

 

Bob Jensen's threads on audit professionalism ---
http://www.trinity.edu/rjensen/Fraud001c.htm

 


High Fees for Poor Quality Audits
"PCAOB takes Deloitte and KPMG to task," Economia, January 23, 2015 ---
http://economia.icaew.com/news/january-2015/pcaob-takes-deloitte-and-kpmg-to-task
Bob Jensen's threads on the woes of Deloitte and KPMG ---
http://www.trinity.edu/rjensen/Fraud001.htm

Teaching Case from The Wall Street Journal Weekly Accounting Review on October 31, 2014

KPMG Audits Had 46% Deficiency Rate in PCAOB Inspection

by: Michael Rapoport
Oct 24, 2014
Click here to view the full article on WSJ.com
 

TOPICS: Accounting Firms, Auditing, Deficiencies, PCAOB

SUMMARY: The 23 deficient audits the Public Company Accounting Oversight Board found in its 2013 inspection of the firm, were out of 50 audits or partial audits conducted by KPMG that the PCAOB evaluated - a deficiency rate of 46%. In the previous year's inspection, the PCAOB found deficiencies in 17 of 50 KPMG audits inspected, or 34%. The report spotlights the PCAOB's continuing concerns about audit quality. Overall, 39% of audits inspected in the latest evaluations of the Big Four firms - KPMG, PricewaterhouseCoopers LLP, Deloitte & Touche LLP and Ernst & Young LLP - were found to have deficiencies, compared with 37% the previous year.

CLASSROOM APPLICATION: This is useful for an auditing class to present recent results of PCAOB inspections.

QUESTIONS: 
1. (Introductory) What is the PCAOB? What is its function?

2. (Advanced) What are the "Big Four" accounting firms? What are the results of the annual inspections of the Big Four accounting firms? Did one firm perform better than others?

3. (Advanced) What is the purpose of these inspections? What do the inspectors do? What is a deficiency? What do the firms do with the inspection results?

4. (Advanced) What happens once these results are determined? Are the financial statements changed as a result of these inspections? Are the firms sanctioned?

5. (Advanced) The article notes that the PCAOB has made public what was previously secret criticism of the firms. Why were those previous results secret? Should this information be secret? Why or why not?

6. (Advanced) Should these results impact the reputations of the Big Four firms? Why or why not? How should the firms handle these public revelations?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

RELATED ARTICLES: 
Inspection Finds Defects in 19 PricewaterhouseCoopers Audits
by Michael Rapoport
Jun 30, 2014
Online Exclusive

Regulator Finds Deficiencies in 15 Deloitte & Touche Audits
by Michael Rapoport
Jun 02, 2014
Online Exclusive

Ernst & Young 2013 Audit Deficiency Rate 49%, Regulators Say
by Michael Rapoport
Aug 28, 2014
Online Exclusive

"KPMG Audits Had 46% Deficiency Rate in PCAOB Inspection," Michael Rapoport, The Wall Street Journal, October 24, 2014 ---
http://online.wsj.com/articles/kpmg-audits-had-46-deficiency-rate-in-pcaob-inspection-1414093002?mod=djem_jiewr_AC_domainid

Audit regulators found deficiencies in 23 of the KPMG LLP audits they evaluated in their latest annual inspection of the Big Four accounting firm’s work.

The 23 deficient audits the Public Company Accounting Oversight Board found in its 2013 inspection of the firm, released Thursday, were out of 50 audits or partial audits conducted by KPMG that the PCAOB evaluated—a deficiency rate of 46%. In the previous year’s inspection, the PCAOB found deficiencies in 17 of 50 KPMG audits inspected, or 34%.

In a statement responding to the PCAOB inspection, KPMG said, “We are always mindful of our responsibility to the capital markets, and we are committed to continually improving our firm and to working constructively with the PCAOB to improve audit quality.”

The 23 deficiencies were significant enough that it appeared KPMG hadn’t obtained sufficient evidence to support its audit opinions that a company’s financial statements were accurate or that it had effective internal controls, the PCAOB said. A deficiency in the audit doesn’t mean a company’s financial statements were wrong, however, or that the problems found haven’t since been addressed.

Still, the report spotlights the PCAOB’s continuing concerns about audit quality. Overall, 39% of audits inspected in the latest evaluations of the Big Four firms—KPMG, PricewaterhouseCoopers LLP, Deloitte & Touche LLP and Ernst & Young LLP—were found to have deficiencies, compared with 37% the previous year.

In addition, all of the Big Four have now seen the PCAOB make public some of its previously secret criticisms of the firms. Separately from the latest report, the PCAOB on Thursday unsealed previously confidential criticisms of KPMG’s quality controls it had made in 2011 and 2012, mirroring previous moves the board had made with regard to PwC, E&Y and Deloitte. The unsealing amounts to a public rebuke to KPMG for not acting quickly enough to fix quality-control problems, in the regulator’s view.

In the unsealed passages, the board said some of the firm’s personnel had failed to sufficiently evaluate “contrary evidence” that seemed to contradict its audit conclusions.

In the latest inspection report, among the areas in which the PCAOB found audit deficiencies at KPMG were failure to sufficiently test companies’ loan-loss reserves, testing of companies’ valuations of hard-to-value securities, and audits of certain kinds of derivatives transactions.

The PCAOB didn’t identify the clients involved in the deficient audits, in accordance with its usual practice.

PCAOB inspectors evaluate a sample of audits every year at each of the major accounting firms—focused on those the board believes are at highest risk for problems. Because of that focus, the PCAOB says the inspection results may not reflect how frequently a firm’s overall audit work is deficient. The inspections are intended only to evaluate the firms’ performance and highlight areas for potential improvement, so the firms aren’t subject to any penalties.

Only part of the inspection reports typically becomes public. A separate portion, with the PCAOB’s criticisms of the firm’s quality controls, is kept confidential to give the firm an opportunity to address any concerns. If the firm does so, that portion of the report stays sealed permanently.

If the firm doesn’t do enough to satisfy the PCAOB within a year, however, the board makes the concerns public. Again, though, the unsealing doesn’t carry any formal penalties for the firms.

 

Bob Jensen's threads on the "Two Faces" of KPMG ---
http://www.trinity.edu/rjensen/Fraud001.htm

Jensen Comment
I keep recalling the 1990s when KPMG Executive Partner and AICPA President Bob Elliott more than any other accountant made a public pitch that the big accounting firms could expand their services beyond auditing (remember Elder Care and SysTrust) because the auditing profession more than any other profession had a reputation for competence, quality, and integrity. The Big Four firms, especially KPMG, have nearly destroyed that reputation.
http://www.trinity.edu/rjensen/Fraud001.htm

Maybe audit quality really hasn't declined so much. Instead it may be that no regulatory agencies really investigated audit firm quality controls before the PCAOB was created. In the good old days audit quality was mostly regulated by separate professional boards in the 50 states. For example, the New York Society of CPAs only suspended the licenses for auditors convicted of drunk driving. The same state agency that regulated audit firms in Florida also regulated funeral parlors and para psychologists.

 

Usually With the Blessings of Their Audit Firms:  The PCAOB concludes that all large audit firms frequently conduct deficient audits)
"Big Companies Can’t Stop Cooking Their Books," The Economist, December 13, 2014 ---
http://www.businessinsider.com/why-big-companies-cant-stop-cooking-their-books-2014-12

No endorsement carries more weight than an investment by Warren Buffett. He became the world's second-richest man by buying safe, reliable businesses and holding them for ever. So when his company increased its stake in Tesco to 5% in 2012, it sent a strong message that the giant British grocer would rebound from its disastrous attempt to compete in America.

But it turned out that even the Oracle of Omaha can fall victim to dodgy accounting. On September 22nd Tesco announced that its profit guidance for the first half of 2014 was £250m ($408m) too high, because it had overstated the rebate income it would receive from suppliers. Britain's Serious Fraud Office has begun a criminal investigation into the errors. The company's fortunes have worsened since then: on December 9th it cut its profit forecast by 30%, partly because its new boss said it would stop "artificially" improving results by reducing service near the end of a quarter. Mr Buffett, whose firm has lost $750m on Tesco, now calls the trade a "huge mistake".

No sooner did the news break than the spotlight fell on PricewaterhouseCoopers (PwC), one of the "Big Four" global accounting networks (the others are Deloitte, Ernst & Young (EY) and KPMG). Tesco had paid the firm £10.4m to sign off on its 2013 financial statements. PwC mentioned the suspect rebates as an area of heightened scrutiny, but still gave a clean audit.

PwC's failure to detect the problem is hardly an isolated case. If accounting scandals no longer dominate headlines as they did when Enron and WorldCom imploded in 2001-02, that is not because they have vanished but because they have become routine. On December 4th a Spanish court reported that Bankia had mis-stated its finances when it went public in 2011, ten months before it was nationalised. In 2012 Hewlett-Packard wrote off 80% of its $10.3 billion purchase of Autonomy, a software company, after accusing the firm of counting forecast subscriptions as current sales (Autonomy pleads innocence). The previous year Olympus, a Japanese optical-device maker, revealed it had hidden billions of dollars in losses. In each case, Big Four auditors had given their blessing.

And although accountants have largely avoided blame for the financial crisis of 2008, at the very least they failed to raise the alarm. America's Federal Deposit Insurance Corporation is suing PwC for $1 billion for not detecting fraud at Colonial Bank, which failed in 2009. (PwC denies wrongdoing and says the bank deceived the firm.) This June two KPMG auditors received suspensions for failing to scrutinise loan-loss reserves at TierOne, another failed bank. Just eight months before Lehman Brothers' demise, EY's audit kept mum about the repurchase transactions that disguised the bank's leverage.

The situation is graver still in emerging markets. In 2009 Satyam, an Indian technology company, admitted it had faked over $1 billion of cash on its books. North American exchanges have de-listed more than 100 Chinese firms in recent years because of accounting problems. In 2010 Jon Carnes, a short seller, sent a cameraman to a biodiesel factory that China Integrated Energy (a KPMG client) said was producing at full blast, and found it had been dormant for months. The next year Muddy Waters, a research firm, discovered that much of the timber Sino-Forest (audited by EY) claimed to own did not exist. Both companies lost over 95% of their value.

Of course, no police force can hope to prevent every crime. But such frequent scandals call into question whether this is the best the Big Four can do--and if so, whether their efforts are worth the $50 billion a year they collect in audit fees. In popular imagination, auditors are there to sniff out fraud. But because the profession was historically allowed to self-regulate despite enjoying a government-guaranteed franchise, it has set the bar so low--formally, auditors merely opine on whether financial statements meet accounting standards--that it is all but impossible for them to fail at their jobs, as they define them. In recent years this yawning "expectations gap" has led to a pattern in which investors disregard auditors and make little effort to learn about their work, value securities as if audited financial statements were the gospel truth, and then erupt in righteous fury when the inevitable downward revisions cost them their shirts.

The stakes are high. If investors stop trusting financial statements, they will charge a higher cost of capital to honest and deceitful companies alike, reducing funds available for investment and slowing growth. Only substantial reform of the auditors' perverse business model can end this cycle of disappointment. Born with the railways

Auditors perform a central role in modern capitalism. Ever since the invention of the joint-stock corporation, shareholders have been plagued by the mismatch between the interests of a firm's owners and those of its managers. Because a company's executives know far more about its operations than its investors do, they have every incentive to line their pockets and hide its true condition. In turn, the markets will withhold capital from firms whose managers they distrust. Auditors arose to resolve this "information asymmetry".

Early joint-stock firms like the Dutch East India Company designated a handful of investors to make sure the books added up, though these primitive auditors generally lacked the time or expertise to provide an effective check on management. By the mid-1800s, British lenders to capital-hungry American railway companies deployed chartered accountants--the first modern auditors--to investigate every aspect of the railroads' businesses. These Anglophone roots have proved durable: 150 years later, the Big Four global networks are still essentially controlled by their branches in the United States and Britain. Their current bosses are all American.

As the number of investors in companies grew, so did the inefficiency of each of them sending separate sleuths to keep management in line. Moreover, companies hoping to cut financing costs realised they could extract better terms by getting an auditor to vouch for them. Those accountants in turn had an incentive to evaluate their clients fairly, in order to command the trust of the markets. By the 1920s, 80% of companies on the New York Stock Exchange voluntarily hired an auditor.

Unfortunately, Jazz Age investors did not distinguish between audited companies and their less scrupulous peers. Among the miscreants was Swedish Match, a European firm whose skill at securing state-sanctioned monopolies was surpassed only by the aggression of its accounting. After its boss, Ivar Kreuger, died in 1932 the company collapsed, costing American investors the equivalent of $4.33 billion in current dollars. Soon after this the Democratic Congress, cleaning up the markets after the Great Depression, instituted a rule that all publicly held firms had to issue audited financial statements. Britain had already brought in a similar policy.

Read more: http://www.businessinsider.com/why-big-companies-cant-stop-cooking-their-books-2014-12#ixzz3LsJuCymz

Bob Jensen's Recipes for Book Cooking ---
http://www.trinity.edu/rjensen/Theory02.htm#Manipulation

Bob Jensen's threads on creative earnings management ---
http://www.trinity.edu/rjensen/Theory02.htm#Manipulation

Bob Jensen's threads on pro forma reporting ---
http://www.trinity.edu/rjensen/Theory02.htm#ProForma

 


Investors Losing Confidence in Financial Analysts and Advisers
From the CFO Journal's Morning Ledger on January 5, 2015

Vanguard sets record funds inflow
http://www.wsj.com/articles/vanguard-sets-record-funds-inflow-1420430643
Investors gave stock pickers a resounding vote of no confidence in 2014, pouring $216 billion into Vanguard Group, the biggest provider of index-tracking products. Active investments have been hurt by years of subpar performance and high fees. Data through November show investors pulled $12.7 billion in 2014 from actively managed U.S. stock funds while plowing $244 billion into similar passively managed funds.

"Working In Wealth Management Taught Me Most Financial Advisers Aren't Worth The Cost," by Peter Dolan, FutureAdvisor, Business Insider, December 15, 2014 ---
http://www.businessinsider.com/most-financial-advisers-arent-worth-the-cost-2014-12

Jensen Comment
I agree. I think investors should first try out the free services from trustworthy funds like Vanguard or Fidelity. Or they might get into some long-term investments but not retain the financial adviser year-after-year.

Bob Jensen's personal finance helpers ---
http://www.trinity.edu/rjensen/Bookbob1.htm#InvestmentHelpers


From the CPA Newsletter on January 5, 2015

SEC launches pilot project for XBRL data downloads
http://r.smartbrief.com/resp/gqzmBYbWhBCMsijHCidKtxCicNwUEM?format=standard
The Securities and Exchange Commission started a pilot program to consolidate financial statements submitted using the eXtensible Business Reporting Language into databases for easy access by the public. The data will be organized for bulk downloads. Compliance Week/The Filing Cabinet blog (12/31)

Bob Jensen's threads on XBRL ---
http://www.trinity.edu/rjensen/XBRLandOLAP.htm


Teaching Ideas
How would your intermediate accounting or accounting theory students propose accounting for the recent massive hedges placed by oil companies on future oil prices?

Hint
Under FAS 133 much depends upon the types of hedges placed and whether they are hedging values of inventories on hand or forecasted transactions.Make sure your students understand the difference between hedging fair value versus hedging cash flows and why both types of risks are impossible to hedge simultaneously.

I would suggest that you have students journalize various types of possible hedgings of the oil companies rather than just the types actually being used by some of the companies.

Bob Jensen's road show CD files used for presentations to companies and traders regarding hedge accounting ---
http://www.cs.trinity.edu/~rjensen/Calgary/CD/
Especially note the PowerPoint files.

"Oil Companies Made Massive Bets That Oil Prices Are Not Going To Go Up." by Lucas Iberico Lozada, Reuters, January 5, 2015 ---
http://www.businessinsider.com/r-revamped-us-oil-hedges-may-test-opecs-patience-2015-1 

NEW YORK (Reuters) - As a war of nerves between U.S. shale producers and Gulf powerhouses intensifies, OPEC's biggest members are counting down the months until their upstart rivals lose the one thing shielding them from crashing oil prices — hedges.

They may need much more patience than they reckon, however, because those hedges are a moving target. Rather than wait for their price insurance to run out, many companies are racing to revamp their policies, cashing in well-placed hedges to increase the number of future barrels hedged, according to industry consultants, bankers and analysts familiar with the deals.

OPEC officials hope that once U.S. oil companies get fully exposed to the impact of an over 50 percent slide in crude prices since last June, they will have to drill fewer new wells, causing U.S. production growth to stall and putting a floor under oil prices now testing $50 a barrel.

"There are companies which are hedged until the beginning of the year or until the end of the year, so we need to wait at least until the first quarter to see what is going to happen," United Arab Emirates Energy Minister Suhail Bin Mohammed al-Mazroui told Reuters and one other news agency last month.

Yet that hope is based largely on quarterly company reports from several months ago, when drillers last made their hedging portfolios public. In the meantime, with the price rout showing no sign of reversing, at least some firms have put on new hedges that will help prevent their revenues from falling further — and allow them to drill far longer this year than earlier expected.

"OPEC should not expect to see any impact on U.S. shale growth in the first half of the year and the impact in the second half is being attenuated significantly by producer hedging," says Ed Morse, global head of commodities research at Citigroup, one of the biggest U.S. banks involved hedging.

Continued in article

Bob Jensen's free tutorials on accounting for derivatives and hedging transactions ---
http://www.trinity.edu/rjensen/caseans/000index.htm


There are "natural hedge" reasons to shift production overseas --- reasons other than cheaper labor and less restrictive regulations
From the CFO Journal's Morning Ledger on January 21, 2015

The dollar’s surge against many currencies is wreaking havoc on balance sheets and giving foreign competitors a window of opportunity to steal market share by undercutting American firms on prices. The WSJ’s Theo Francis reports that the stronger dollar, often presented as an optical problem, has the potential to inflict real damage, and that the effects will become clearer as earnings reports roll in over the next several weeks.

Multinationals have spent decades shifting production to major markets, providing a natural hedge against currency fluctuations. Those efforts are imperfect, however, and the dollar’s rise comes as many firms are coping with sluggish sales globally.

U.S. manufacturers are particularly exposed. The strong dollar is adding urgency to efforts by U.S. manufacturers, makers of everything from circuit boards to heavy equipment, to automate their operations, redesign products or shift some work abroad. Is your business nimble enough to cope with the dollar’s rapid rise? Let us know in the comments.


From the CFO Journal's Morning Ledger on January 6, 2015

2015 Outlook on Power and Utilities
http://deloitte.wsj.com/cfo/2015/01/06/2015-outlook-on-power-and-utilities/

2015 is the year for power and utility companies to chart their course to growth and returns, according to John McCue, a vice chairman and the U.S. Energy & Resources leader at Deloitte LLP. Mr. McCue discusses current trends in renewable energy, the maturing retail energy marketplace and energy efficiency sector, and next steps in the industry's transformation, including state-level regulatory shifts that could enable new paths to profitability.

Continue Reading Today's Article
http://deloitte.wsj.com/cfo/2015/01/06/2015-outlook-on-power-and-utilities/

Read more Deloitte Insights
http://deloitte.wsj.com/cfo/


From the CFO Journal's Morning Ledger on January 6, 2015

2015 Outlook on Power and Utilities
http://deloitte.wsj.com/cfo/2015/01/06/2015-outlook-on-power-and-utilities/

2015 is the year for power and utility companies to chart their course to growth and returns, according to John McCue, a vice chairman and the U.S. Energy & Resources leader at Deloitte LLP. Mr. McCue discusses current trends in renewable energy, the maturing retail energy marketplace and energy efficiency sector, and next steps in the industry's transformation, including state-level regulatory shifts that could enable new paths to profitability.

Continue Reading Today's Article
http://deloitte.wsj.com/cfo/2015/01/06/2015-outlook-on-power-and-utilities/

Read more Deloitte Insights
http://deloitte.wsj.com/cfo/


From the CFO Journal's Morning Ledger on January 7, 2015

New COSO Internal Control Framework Takes Effect
http://deloitte.wsj.com/cfo/2015/01/07/new-coso-internal-control-framework-takes-effect/

As of December 15, 2014, the new 2013 COSO framework superseded the 1992 version for companies applying and referencing COSO's internal control framework for purposes of complying with Section 404 of the Sarbanes-Oxley Act of 2002. For banks and capital markets firms, which operate under a complex regulatory environment, the transition to the new framework involves careful considerations.

Continue Reading Today's Article »

Read more Deloitte Insights »

Committee of Sponsoring Organizations of the Treadway Commission (COSO) ---
http://en.wikipedia.org/wiki/Committee_of_Sponsoring_Organizations_of_the_Treadway_Commission

"COSO’s ERM framework to undergo update," by Ken Tysiac, Journal of Accountancy, October 21, 2014 ---
http://www.journalofaccountancy.com/News/201411173.htm

A well-known framework for risk management is scheduled for another update.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) announced Tuesday that it is undertaking a project to update its Enterprise Risk Management—Integrated Framework, which debuted in 2004.

Organizations use the framework to help them manage uncertainty, consider how much risk to accept, and improve understanding of their opportunities to increase and preserve value.

The update is being undertaken to improve the framework’s content and relevance in the context of an increasingly complex business environment. The update is intended to:

  • Reflect the evolution of risk management thinking and practices, as well as stakeholder expectations.
  • Develop tools to help management report risk information, and review and assess the application of enterprise risk management.


PwC has been engaged to update the framework under the direction of COSO’s board. PwC will seek input and feedback on the project, and will conduct a survey seeking opinions on the current framework and suggestions for improvements.

More information is available at coso.org.

COSO is a committee of five sponsoring organizations, including the AICPA, that come together periodically to provide thought leadership on enterprise risk management, internal control, and fraud deterrence.

In 2013, COSO completed an update of its internal control framework to reflect changes in technology and the business environment that have taken place since that framework’s origination in 1992.

What's New with COSO?

From the CFO Journal's Morning Ledger on September 24, 2014

Implementing COSO's Internal Control-Integrated Framework ---
http://deloitte.wsj.com/cfo/2014/09/26/implementing-cosos-internal-control-integrated-framework/

To unlock the value that can be achieved by adopting COSO's 2013 Internal Control-Integrated Framework, management should take a step back and evaluate how it is addressing the risks to its organization in light of its size, complexity, global reach and risk profile. Learn about leading internal control practices that may help address common challenges related to implementing the 2013 Framework, as well as perspectives on applying the framework for operational and regulatory compliance purposes.

Continue Reading Today's Article --- http://deloitte.wsj.com/cfo/2014/09/26/implementing-cosos-internal-control-integrated-framework/

Read More --- Deloitte Insights »http://deloitte.wsj.com/cfo/

Bob Jensen's threads on managerial accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#ManagementAccounting


From the CFO Journal's Morning Ledger on January 7, 2015

Companies paid record sums to settle bribery probes in 2014
http://blogs.wsj.com/cfo/2015/01/06/companies-paid-record-sums-to-settle-bribery-probes-in-2014/?mod=djemCFO_h
Companies paid more than ever before to settle Foreign Corrupt Practices Act investigations last year, the latest sign that bribery enforcement remains hot after all these years. Firms shelled out an average $157 million to settle FCPA investigations in 2014, nearly doubling the prior year’s average $80 million.

Bob Jensen's Fraud Updates ---
http://www.trinity.edu/rjensen/FraudUpdates.htm


"The Economics (and Nostalgia) of Dead Malls," by Nelson D. Schwartz, The New York Times, January 3, 2015 ---
http://www.nytimes.com/2015/01/04/business/the-economics-and-nostalgia-of-dead-malls.html?_r=0

OWINGS MILLS, Md. — Inside the gleaming mall here on the Sunday before Christmas, just one thing was missing: shoppers.

The upbeat music of “Jingle Bell Rock” bounced off the tiles, and the smell of teriyaki chicken drifted from the food court, but only a handful of stores were open at the sprawling enclosed shopping center. A few visitors walked down the long hallways and peered through locked metal gates into vacant spaces once home to retailers like H&M, Wet Seal and Kay Jewelers.

“It’s depressing,” Jill Kalata, 46, said as she tried on a few of the last sneakers for sale at the Athlete’s Foot, scheduled to close in a few weeks. “This place used to be packed. And Christmas, the lines were out the door. Now I’m surprised anything is still open.”

The Owings Mills Mall is poised to join a growing number of what real estate professionals, architects, urban planners and Internet enthusiasts term “dead malls.” Since 2010, more than two dozen enclosed shopping malls have been closed, and an additional 60 are on the brink, according to Green Street Advisors, which tracks the mall industry.

Premature obituaries for the shopping mall have been appearing since the late 1990s, but the reality today is more nuanced, reflecting broader trends remaking the American economy. With income inequality continuing to widen, high-end malls are thriving, even as stolid retail chains like Sears, Kmart and J. C. Penney falter, taking the middle- and working-class malls they anchored with them.

“It is very much a haves and have-nots situation,” said D. J. Busch, a senior analyst at Green Street. Affluent Americans “will keep going to Short Hills Mall in New Jersey or other properties aimed at the top 5 or 10 percent of consumers. But there’s been very little income growth in the belly of the economy.”

At Owings Mills, J. C. Penney and Macy’s are hanging on, but other midtier emporiums like Sears, Lord & Taylor, and the regional department store chain Boscov’s have all come and gone as anchors.

Having opened in 1986 with a renovation in 1998, Owings Mills is young for a dying mall. And while its locale may have contributed to its demise, other forces played a crucial role, too, like changing shopping habits and demographics, experts say.

“I have no doubt some malls will survive, but major segments of our society have gotten sick of them,” said Mark Hinshaw, a Seattle architect, urban planner and author.

One factor many shoppers blame for the decline of malls — online shopping — is having only a small effect, experts say. Less than 10 percent of retail sales take place online, and those sales tend to hit big-box stores harder, rather than the fashion chains and other specialty retailers in enclosed malls.

Instead, the fundamental problem for malls is a glut of stores in many parts of the country, the result of a long boom in building retail space of all kinds.

“We are extremely over-retailed,” said Christopher Zahas, a real estate economist and urban planner in Portland, Ore. “Filling a million square feet is a tall order.” Continue reading the main story

Like beached whales, dead malls draw fascination as well as dismay. There is a popular website devoted to the phenomenon — deadmalls.com — and it has also become something of a cultural meme, with one particularly spooky scene in the movie “Gone Girl” set in a dead mall.

“Everybody has memories from childhood of going to the mall,” said Jack Thomas, 26, one of three partners who run the site in their spare time. “Nobody ever thinks a mall is going to up and die.”

Well aware of the cultural dimensions, as well as the economic stakes, the industry is trying to turn around public perception of these monuments to America’s favorite pastime: shopping.

In August, the International Council of Shopping Centers, a trade group based in New York for the shopping center industry, including mall owners, hired the public relations firm Burson-Marsteller “to put the real story out there and stop the negativity around the idea that the mall isn’t going to exist in the next few years,” said Jesse Tron, communications director for the trade group.

While it is true that many thriving malls will continue to flourish in the years ahead, it is not clear what the industry can do to prevent more and more malls from falling on hard times.

About 80 percent of the country’s 1,200 malls are considered healthy, reporting vacancy rates of 10 percent or less. But that compares with 94 percent in 2006, according to CoStar Group, a leading provider of data for the real estate industry.

Nearly 15 percent are 10 to 40 percent vacant, up from 5 percent in 2006. And 3.4 percent — representing more than 30 million square feet — are more than 40 percent empty, a threshold that signals the beginning of what Mr. Busch of Green Street calls “the death spiral.”

Industry executives freely admit that the mall business has undergone a profound bifurcation since the recession.

Continued in article


"CSC reaches $190 million settlement with SEC over accounting probe," by Amrita Jayakumar, The Washington Post, December 30, 2014 ---
http://www.washingtonpost.com/business/capitalbusiness/csc-reaches-190-million-settlement-with-sec-over-accounting-probe/2014/12/30/00cdf9ca-9065-11e4-a900-9960214d4cd7_story.html

Bob Jensen's Fraud Updates ---
http://www.trinity.edu/rjensen/FraudUpdates.htm


"Morgan Stanley Fires Employee Over Client-Data Leak," by Justin Baer, The Wall Street Journal, January 5, 2015 ---
http://www.wsj.com/articles/morgan-stanley-terminates-employee-for-stealing-client-data-1420474557?tesla=y&mod=djemCFO_h

Morgan Stanley fired one of its financial advisers after it accused him of stealing account data on about 350,000 clients and posting some of that information for sale online, in potentially the largest data theft at a wealth-management firm.

The bank last week terminated Galen Marsh, who worked at a Midtown Manhattan branch of Morgan Stanley, a person familiar with the matter said.

Continued in article

Jensen Comment
Most data breaches are still inside jobs in one way or another. I suspect that when they finally get to the bottom of Sony's data reach it will be traced to an insider. An woman who was fired is now suspected.


First Blockbuster and Radio Shack, Now Kroeger and HEB

"How E-Commerce Is Finally Disrupting The $600 Billion-A-Year Grocery Industry," by Cooper Smith, Business Insider, January 1, 2015 ---
http://www.businessinsider.com/e-commerce-disrupting-huge-grocery-market-2014-12 

At $600 billion a year in sales, food and beverage is by far the largest retail category in the U.S. by a wide margin. However, it's also the category that has been the least disrupted by e-commerce; less than 1% of food and beverage sales currently occur online, according to BI Intelligence's estimates.

But shopping habits are changing, and niche online grocery services that compete on convenience and selection are gaining traction. Meanwhile tech giants like Amazon are fronting the cost of expensive delivery infrastructure that has so far held back grocery e-commerce. 

In a new in-depth report, BI Intelligence looks at why the grocery business has proved so challenging to e-commerce companies — from consumer reluctance to complicated and expensive logistics — and what new strategies e-commerce startups and big-name tech companies are pursuing to push more grocery sales online. Between 2013 and 2018, online grocery sales will grow at a compound annual growth rate (CAGR) of 21.1%, reaching nearly $18 billion by the end of the forecast period. For comparison, offline grocery sales will rise by 3.1% annually during the same period. 

Access The Full Report And Downloadable Charts By Signing Up For A Free Trial>>

Here are some of the key findings explored in the report: 

Jensen Comment
Even in the boon docks where we cannot get same-day delivery, we probably buy more groceries other than perishables from Amazon than we do from the local markets. The reason is a combination of things including point-and-click convenience, availability of harder to find items up here, savings in time and money (think fuel for 20 miles round trip), and "free" shipping via Amazon Prime. Since we buy in bulk, our basement looks like a supermarket with shelves to hold the items we now buy by the case.

If we still lived in San Antonio we probably would buy less online mainly because we would not want to leave our garage unlocked for deliveries from UPS, the Post Office, and FedEx. Up here, however, we never lock our garage and disconnected it from our home security system (that we mainly have for fire and pipe-freezing prevention).

In cities like San Antonio I think neighborhood convenience stores should add services for holding parcel deliveries from UPS, the Post Office, and FedEx. There has to be business opportunity here.


Coursera Free Courses --- https://www.coursera.org/

Jensen Comment on Coursera
Enter the search term for accounting and note the free accounting courses from the University of Illinois, University of California at Irvine, Penn (Wharton), and the University of West Virginia

200+ Free Courses and Certificates from Top Professors in Leading Universities
200 MOOCs (Massive Open Online Courses) Getting Started in January ---
http://www.openculture.com/2015/01/200-moocs-massive-open-online-courses-getting-started-in-january.html
Complete Listing --- http://www.openculture.com/free_certificate_courses

Note the free financial accounting courses from Penn (Wharton) and various free forensic accounting courses from elsewhere (not all begin in January)

"18 Free Online Business Courses That Will Boost Your Career," by John A. Byrne, Business Insider, December 18, 2014 ---
http://www.businessinsider.com/best-free-online-business-courses-in-january-2014-12

. . .

To learn more about these courses — and register for them — click on the links below.

Gamification / Wharton / January 26

Globalization of Business Enterprise / IESE / January 19

Entrepreneurship 101 and Entrepreneurship 102 / MIT / January 9

ContractsX: From Trust to Promise to Contract / Harvard / January 8

Technology Entrepreneurship / Stanford / January 6

Asset Pricing – Part One / University of Chicago / January 18

Innovation and Commercialization / MIT / January 13

Grow To Greatness: Smart Growth For Private Businesses – Part II / University of Virginia / January 12

Financial Analysis of Entrepreneurial Ideas / Babson College / January or February

Time to Reorganize! Understand Organizations, Act, and Build a Meaningful World / HEC Paris / January 13

Game Theory II: Advanced Applications / Stanford / January 11

U.Lab: Transforming Business, Society, and Self / MIT / January 7

Make An Impact: Sustainability for Professionals / University of Bath / January 12

Managing People: Engaging Your Workforce / University of Reading / January 12

Decision Making in a Complex and Uncertain World / University of Groningen / January 19

Project Management for Business Professionals / January 26

Subsistence Marketplaces / University of Illinois / January 26

DQ 101: Introduction to Decision Quality / Strategic Decisions Group / January 15

More from John A. Byrne:

This article originally appeared at LinkedIn. Copyright 2014. Follow LinkedIn on Twitter.

Read more: https://www.linkedin.com/pulse/best-mooc-courses-business-john-a.-byrne#ixzz3MLx1WEeQ

Bob Jensen's threads on free MOOCs, tutorials, learning videos, and course materials from prestigious universities ---
http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI

 


Apple’s Guided Tour to Using the First Macintosh (1984) ---
http://www.openculture.com/2015/01/apples-guided-tour-to-using-the-first-macintosh-1984.html
Bob Jensen's threads on computing history ---
http://www.trinity.edu/rjensen/bookbob2.htm#---ComputerNetworking-IncludingInternet

Laptop Market Shares in Q3 of 2014 ---
http://www.macrumors.com/2014/11/07/apple-mac-us-pc-record/
Bill Gates would probably be selling used cars today if Apple had outsourced its Mac OS and computer manufacturing to other companies like Dell and HP.


France Just Quietly Killed Off Its Failed 75% Supertax ---
http://www.businessinsider.com/france-ended-75-super-tax-2015-1

Jensen Comment
Tennis star Serena Williams once claimed she would prefer to live in Paris but would never do so with the 75% Supertax. Now she's free to reconsider.


Computer Sciences Corp. (CSC) reached a proposed settlement with the U.S. Securities and Exchange Commission over an accounting probe, agreeing to pay a penalty of $190 million and adjust its financial statements for three fiscal years ---
by Alex Barinka, Bloomberg News, December 29, 2014 ---
http://www.bloomberg.com/news/2014-12-29/csc-to-pay-190-million-to-settle-sec-accounting-probe.html

Bob Jensen's Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm


Math and Statistics Tutorials

Probability and Statistics --- http://en.wikipedia.org/wiki/Probability_and_statistics

Past, Present, and Future of Statistical Science ---
 http://www.crcpress.com/product/isbn/9781482204964

A Long Article
"Statisticians in World War II:  They also served How statisticians changed the war, and the war changed statistics," The Economist, December 20, 2014 ---
http://www.economist.com/news/christmas-specials/21636589-how-statisticians-changed-war-and-war-changed-statistics-they-also-served

Jensen Comment
The article above avoids the heated disputes especially those involving Ronald Fisher and Thomas Bayes ---
http://en.wikipedia.org/wiki/Ronald_Fisher
http://en.wikipedia.org/wiki/Thomas_Bayes

Common Mistakes in Statistical Analysis ---
http://www.cs.trinity.edu/~rjensen/temp/AccounticsScienceStatisticalMistakes.htm

Bob Jensen's threads on free online mathematics tutorials are at
http://www.trinity.edu/rjensen/bookbob2.htm


"Auditors Can Be Whistleblowers: A Guest Post On Recent Developments In Whistleblower Case Law," by Francine McKenna, re:TheAuditors, January 5, 2015 ---
http://retheauditors.com/2015/01/05/auditors-can-be-whistleblowers-a-guest-post-on-recent-developments-in-whistleblower-case-law/

It’s rare but it does happen. Employees of the largest audit firms do occasionally step up and blow the whistle on potentially illegal and/or unethical activities at their firm or its clients.

The Guardian writes about the whistleblower now formally charged in Luxemburg for leaking PwC’s copies of tax letter ruling documents:

A 28-year-old former PricewaterhouseCoopers auditor charged with theft and violating trade secrets in Luxembourg in the wake of the LuxLeaks tax avoidance scandal has revealed his identity and claimed he acted out of conviction, in an interview with the French newspaper Libération.

Antoine Deltour, who joined PwC from business school in 2008, resigned two years later. “Normally auditors are a bit like regulators. It is a useful profession, we verify the accounts of companies,” he told the newspaper. “But I wasn’t feeling at home in that environment [at PwC]. Bit by bit I discovered how extreme the system was in reality – it was a massive tax optimisation practice. I didn’t want to be part of that.

The most interesting thing about Deltour’s admissions is that he believes he is not alone.

Deltour, who said he had not passed information to the ICIJ, told Libération: “From the beginning, I acted out of conviction, for my ideas, not to appear in the media.”

He added that he was part of “a broader movement” — a reference to the fact that the Guardian and other media working with the ICIJ had this month published more revelations and further confidential tax rulings secured by Ernst & Young, KPMG and Deloitte.

It will be interesting to see if PwC and the other large firms can squelch this “movement” with threats and legal action or whether the cat is already out of the bag. If professionals in the US, UK or Australia become willing to act “out of conviction” and expose activities that their firms cover up on behalf of clients or that contravene public policy and the public good, we may witness a sea change return to the concept of the auditor’s “public duty” rather than the typical “pleaser” personality that is highly risk-averse, prone to group think,  and fears a black mark on his or her permanent record above all.

Continued in article

Bob Jensen's threads on whistle blowing ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing


Question
We used to think of divorcing spouses spitting 50-50. What happens mathematically when you repeatedly split net assets 50-50?
Seems like remarriages can be profitable if one spouse only gets the assets and not the debt.

Elon Musk Divorces His Wife For A Second Time ---
http://www.businessinsider.com/elon-musk-divorces-his-wife-for-a-second-time-2015-1

Jensen Comment
I once had a colleague auditing professor who became wealthy dealing in Florida real estate during the S&L boom, divorced his wife, and resigned from the Academy. He lost his entire 50% and declared bankruptcy when the S&L bust transpired in the 1980s. Soon thereafter he remarried his first wife who still had her pre-divorce 50% in solid assets. I always wondered if remarriage was for love or money on his part? Seems like it had to be for love on her part.

Suppose Elon and Talulah Riley go for a third-time or fourth-time marriage etc. Seems like Talulah can't lose much except for losing Elon. However, she should be cautious about prenuptial contracts regarding sharing of debts!


Teaching Case on Taxation Outlook
From The Wall Street Journal Accounting Weekly Review on January 9, 2015

The Outlook for Taxes in 2015
by: Laura Saunders
Jan 03, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Individual Taxation, Tax Planning

SUMMARY: The new year could bring important changes to the tax landscape. This article discusses several issues that will affect how much taxpayers owe for 2015 and beyond, including overhaul of the federal tax code, secret offshore accounts, expatriate tax issues, and expired provisions.

CLASSROOM APPLICATION: This article can be used to discuss or study possible changes to the current tax law. Business professionals should make it a practice to be informed of possible tax changes for planning purposes.

QUESTIONS: 
1. (Introductory) What areas of tax law might be changed by Congress in the coming year? Why is Congress targeting these areas?

2. (Advanced) What does the article state about possible changes to federal tax policy? Are these changes like to occur? Why or why not?

3. (Advanced) For individuals, what tax breaks are the largest for individuals? Which of the tax breaks would legislators be more comfortable changing?

4. (Advanced) What is a secret offshore account? Why do they pose a problem for the U.S. government? What is the government doing to address this problem? Have these actions been successful?

5. (Advanced) What is an expatriate? What are the tax issues associated with expatriates? What might Congress change? What impact could those changes make?

6. (Advanced) What tax breaks have expired? What is the outlook for renewal? How can taxpayers plan in these areas?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"The Outlook for Taxes in 2015," by Laura Saunders, The Wall Street Journal, January 3, 2015 ---
http://www.wsj.com/articles/the-outlook-for-taxes-in-2015-1420230167?mod=djem_jiewr_AC_domainid

The new year could bring important changes to the tax landscape. Here are several issues that will affect how much taxpayers owe for 2015 and beyond:

Federal tax policy

There is serious talk of overhauling the federal tax code. “There appears to be a consensus” on making changes, says Stephen Baxley, a tax specialist at Bessemer Trust—though it isn’t clear if Congress will agree on the details.

The details matter when it comes to the individual income tax. Attempts to improve the system, such as the plan from outgoing House Ways & Means Chairman Dave Camp (R.-Mich.), often aim to simplify the code by applying lower tax rates to a broader base of income, without affecting overall revenue.

If lawmakers want to go that route, they face hard choices. Lowering rates means cutting or eliminating popular tax breaks, such as deductions for mortgage interest and charitable donations, to offset lost revenue.

The tax breaks that cost the government the most often serve policy goals. For example, breaks encourage retirement savings and support employer-based health coverage.

Where the money is ---
http://www.wsj.com/articles/the-outlook-for-taxes-in-2015-1420230167?mod=djem_jiewr_AC_domainid

That makes tinkering with them painful for many taxpayers. “The losers are likely to be people who make the most use of existing tax breaks,” says Dave Kautter, who follows tax policy for accounting firm McGladrey in Washington.

Despite those hurdles, lawmakers have an incentive to strike a deal in advance of the 2016 presidential election, experts say.

Serious overhaul proposals could emerge by late spring. Change, if it actually comes, would likely need to happen by year-end or early in 2016, says Mr. Kautter. “After that, the election could complicate things,” he says. Secret offshore accounts

The U.S. campaign against offshore tax evaders is expanding. In late December, Bank Leumi Group became the first Israeli financial institution to admit that it helped U.S. taxpayers hide money abroad. It agreed to pay $400 million and to name more than 1,500 account holders.

Among other things, the bank helped customers evade U.S. taxes by making loans using Bank Leumi’s U.S. affiliate, collateralized by assets abroad, according to court filings. In effect, the clients could use offshore accounts to obtain capital in the U.S. while keeping the accounts secret from U.S. officials, according to the filings.

Bank Leumi also admitted sending private bankers to the U.S. to meet secretly with clients at hotels, coffee shops and parks to discuss their holdings.

The bank said in a statement that the agreement with the U.S. government removes “a cloud of uncertainty that has weighed heavily.”

“This agreement is a major development in the push against undeclared foreign accounts, and we’re likely to see further expansion in 2015,” says Scott Michel, a lawyer with Caplin & Drysdale in Washington who wasn’t involved in the case.

Also last month, the Internal Revenue Service obtained a court order seeking to identify U.S. taxpayers who it says may have evaded taxes using a Panama-based firm, Sovereign Management & Legal Ltd.

According to its website, the company offers a range of offshore services. For example, its “Panama Corp. & Foundation Combination” promises “asset protection, complete privacy, and potential tax deferral.” Also offered are “Anonymous Offshore ATM/Debit Cards.”

The company didn’t respond to requests for comment.

The court order obtained by the IRS doesn’t seek information directly from Sovereign Management & Legal, according to the U.S. Department of Justice. Instead, the order authorizes the IRS to issue summonses to eight U.S. firms that made deliveries or money transfers to or from Sovereign on behalf of U.S. customers for records identifying those customers.

“The IRS views the use of Panama corporations to add a layer of secrecy as egregious conduct that often indicates tax evasion,” says Jeffrey Neiman, who led the federal prosecution of a major offshore case in 2009 and is now a lawyer in Fort Lauderdale, Fla.

Since the campaign against secret offshore accounts began, more than 45,000 taxpayers in an IRS limited-amnesty program have paid more than $6.5 billion in taxes, interest and penalties.

Expatriate tax issues

The U.S. campaign against offshore tax evasion also has raised difficult issues for 7.6 million ordinary American citizens living abroad.

Unlike most countries, the U.S. taxes nonresidents on world-wide income. There are limited offsets for double taxation as well as complex reporting requirements with severe potential penalties. For decades the law generally wasn’t enforced, but it is now.

As a result, “many Americans abroad are finding it virtually impossible to have bank accounts, save for retirement, and make investments—all the normal activities of financial life,” says David Kuenzi, an investment adviser with Thun Financial in Madison, Wis., who has many clients abroad.

Now expats see a ray of hope. A December report by the Republican staff of the Senate Finance Committee calls for major change.

“The United States needs to rethink its taxing rules for nonresident U.S. citizens,” the report says. One option: tax long-term nonresidents on income from U.S. sources instead of world-wide income, it says.

The proposal’s future is unclear, but its appearance is noteworthy, experts say. “Until now, this issue was completely ignored by policy makers,” Mr. Kuenzi says.

Expired provisions

As of Jan. 1, a one-year extension of dozens of tax provisions expired. If that sounds familiar, it’s because Congress didn’t renew these provisions for 2014 until mid-December, giving taxpayers about two weeks to use them.

Continued in article


A Model for Teaching About Corrections and Criticisms in Lies With Statistics
"Ranking The States From Most To Least Corrupt," by Harry Enten, Nate Silver's 5:38 Blog, January 23, 2015 ---
http://fivethirtyeight.com/datalab/ranking-the-states-from-most-to-least-corrupt/

Jensen Comment
The article itself is great for pointing out how corruption rankings are misleading in this ranking that paints Louisiana and Mississippi as the most corrupt and Oregon and Washington states as the least corrupt.

Bob Jensen's threads on ranking controversies ---
http://www.trinity.edu/rjensen/HigherEdControversies2.htm#BusinessSchoolRankings



Teaching Case on Personal Finance
From The Wall Street Journal Accounting Weekly Review on January 9, 2015

Is a Roth Account Right for You?
by: Laura Saunders
Dec 20, 2014
Click here to view the full article on WSJ.com
 

TOPICS: Roth IRA, Tax Planning

SUMMARY: This article covers Roth accounts, which include both tax-sheltered individual retirement accounts and company-sponsored 401(k) savings plans. Roths and traditional plans vary considerably in many important ways. The biggest difference: With traditional IRAs and 401(k) plans, savers typically contribute pretax dollars and then owe tax at ordinary income rates on withdrawals made after age 59½. But savers using Roth IRAs and Roth 401(k)s put after-tax dollars instead of pretax ones into their accounts.

CLASSROOM APPLICATION: This article offers explanations of aspects of Roth IRAs and 401(k)s, and contrasts them to traditional IRAs and retirement plans.

QUESTIONS: 
1. (Introductory) What is a Roth account? What are the two types explained in the article?

2. (Advanced) What are the differences between Roth accounts and traditional ones? Are the differences significant?

3. (Advanced) What are the advantages of Roth accounts? What are the advantages of traditional accounts? What are the disadvantages of each?

4. (Advanced) For what people would a Roth account be a better option? Who should choose the traditional option? Why?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

RELATED ARTICLES: 
Why Roth Accounts Are Better
by Laura Saunders
Dec 20, 2014
Online Exclusive

Roth Accounts: What Will Congress Do?
by Laura Saunders
Dec 20, 2014
Online Exclusive

"Is a Roth Account Right for You?" by Laura Saunders, The Wall Street Journal, December 20, 2014 ---
http://www.wsj.com/articles/is-a-roth-account-right-for-you-1419014490?mod=djem_jiewr_AC_domainid&autologin=y

Roth accounts can be a great way to save for retirement—and it is getting easier to use them.

Roths include both tax-sheltered individual retirement accounts and company-sponsored 401(k) savings plans, and, as with traditional versions of these accounts, assets grow tax-free.

In many other important ways, though, Roths and traditional plans vary considerably.

The biggest difference: With traditional IRAs and 401(k) plans, savers typically contribute pretax dollars and then owe tax at ordinary income rates on withdrawals made after age 59½. But savers using Roth IRAs and Roth 401(k)s put after-tax dollars instead of pretax ones into their accounts.

Roth owners thus forgo a valuable upfront tax break, but they can get a better one in return: tax-free withdrawals of assets after age 59½. Roth accounts have a host of other benefits as well, such as more flexibility.

Jared Guyer, a 38-year-old meteorologist in Norman, Okla., likes the fact that, unlike with a traditional IRA, he and his wife can withdraw contributions to their Roth IRAs without penalty—making them a de facto emergency fund.

“Fortunately, we haven’t had to take money out,” says Mr. Guyer, whose wife just had the couple’s first child. “But it’s nice to know we could, if push came to shove.”

To be sure, Roth savings aren’t always best. “Roth accounts are wonderful to have, but not if the price of admission—taxes—is too high,” says Natalie Choate, a lawyer specializing in retirement benefits at Nutter McClennen & Fish in Boston.

Making the right choice depends on multiple factors, including income, future tax rates and changes Congress could make in the law. Here’s what you need to know.

Easier Access

Until recently, many affluent savers didn’t have access to Roth accounts. Income limits set by Congress kept many people from contributing to Roth IRAs, and Roth 401(k)s weren’t widely available.

Now that is changing. According to benefits firm Aon Hewitt, millions of workers have the option of putting some or all of their 401(k) dollars into a Roth 401(k). Out of nearly 400 large and midsize firms surveyed, more than half now offer such an option, compared with only 11% in 2007—and Aon Hewitt expects the number to grow.

In addition, the Internal Revenue Service recently issued a ruling making it easier for workers to move after-tax dollars in a 401(k) plan into a Roth IRA. And in 2010, Congress removed an income cap so that all taxpayers can convert part or all of a traditional IRA to a Roth IRA.

These expanded options are likely to boost the trend toward Roth accounts. Although traditional IRAs hold about $6 trillion—more than 10 times the assets that Roth IRAs do—Roths are growing much faster.

According to the Investment Company Institute, a fund-industry trade group, the number of households with one or more traditional IRAs has held steady at about 27 million over the past decade, while the number with Roth IRAs has grown 47%, to about 13 million.

A spokesman for brokerage firm Charles Schwab says it now has nearly 1.2 million Roth IRAs, up 32% in the past five years alone—more than double the growth of its traditional IRAs.

Tax Breaks

In essence, savers have to decide whether it’s better to get a tax break now for putting dollars into a traditional IRA or 401(k) plan, or to put after-tax dollars into a Roth account and take tax-free withdrawals later—perhaps in several decades.

The short answer: If you expect your tax rate on withdrawals will be higher than or the same as your current tax rate, a Roth account is often the better choice, experts say.

“The tax comparison is often the main driver,” says Maria Bruno, a retirement specialist at financial-services firm Vanguard Group.

In general, many young savers should opt for Roth accounts, as Mr. Guyer and his wife have done. But for savers in their peak earning years, it often makes sense to grab the upfront break a traditional IRA or 401(k) plan offers.

Many savers appear to understand this rule of thumb. At Vanguard, says Ms. Bruno, people under 30 are putting 92% of their IRA contributions into Roth accounts.

At the same time, conversions of traditional IRAs into Roth IRAs, which are fully taxable, peak between age 65 and 70 at Vanguard. Many of the converters are probably retirees whose tax rate has recently dropped.

There may be other savers who should avoid Roth accounts—those who lose tax benefits when their income is too high.

For example, the American Opportunity Credit is a valuable tax offset for people paying college tuition that’s worth up to $2,500 per student each year. But it phases out beginning at $160,000 of adjusted gross income for most married couples in 2014.

Continued in article

"Kahng: Path Dependence in Tax Subsidies for Home Sales," by Paul Caron, TaxProf Blog, January 29, 2014 ---
http://taxprof.typepad.com/taxprof_blog/2014/01/kahng.html

How Income Taxes Work (including history) --- http://money.howstuffworks.com/income-tax.htm

Tax Foundation Facts & Figures (Free) ---
http://taxfoundation.org/files/ff2012.pdf

Why not start with the IRS? (The best government agency web site on the Internet) http://www.irs.gov/ 

IRS Site Map --- http://www.irs.gov/sitemap/index.html

FAQs and answers --- http://www.irs.gov/faqs/index.html

Taxpayer Advocate Service --- http://www.irs.gov/advocate/index.html

Forms and Publications, click on Forms and Publications

Tax --- http://en.wikipedia.org/wiki/Tax

"Tax Time:  Why we pay," by Jill Lepore, The New Yorker, November 26, 2012 ---
http://www.newyorker.com/reporting/2012/11/26/121126fa_fact_lepore

Bob Jensen's taxation helpers ---
http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

Bob Jensen's personal finance helpers ---
http://www.trinity.edu/rjensen/Bookbob1.htm#InvestmentHelpers


Teaching Case on Accounting for Private Companies
From The Wall Street Journal Accounting Weekly Review on January 9, 2015
Private companies just got a break in their reporting of intangible assets.

FASB Issues Guidance for Private Companies
by: John Kester
Dec 25, 2014
Click here to view the full article on WSJ.com
 

TOPICS: FASB, Intangible Assets

SUMMARY: The Financial Accounting Standards Board, tasked with setting U.S. private sector financial standards, released guidance that lets private companies consolidate their reporting of some intangible assets. FASB's alternative allows some companies to lump noncompetition agreements and some "customer-related intangible assets" such as the value of having an existing customer base, into goodwill items. However, some customer-related intangible assets would continue to be recognized separately, such as mortgage servicing rights, commodity supply con­tracts, core deposits, and customer information such as names and contact information.

CLASSROOM APPLICATION: This is an update to the rules for accounting for intangible assets.

QUESTIONS: 
1. (Introductory) What are intangible assets? Why are they classified separately from other assets?

2. (Introductory) What is FASB? What is its purpose? What are the details of its new guidance for reporting intangible assets?

3. (Advanced) What is the reason for the new rule? How are companies benefited? How are users of the financial statements benefited? Will the change have a negative impact on any of these parties?

4. (Advanced) What intangible assets must be recognized separately? Why? Does this take away any value of the new rule? Is it an appropriate exception to the new rule?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"FASB Issues Guidance for Private Companies," by John Kester, The Wall Street Journal, December 25, 2014 ---
http://blogs.wsj.com/cfo/2014/12/25/fasb-issues-guidance-for-private-companies/?mod=djem_jiewr_AC_domainid

Private companies just got a break in their reporting of intangible assets.

The Financial Accounting Standards Board, tasked with setting U.S. private sector financial standards, today released guidance that lets private companies consolidate their reporting of some intangible assets.

The new guidance is an effort to “avoid…unnecessary costs and complexity,” said Russell Golden, FASB’s chairman. It responds to feedback from FASB’s Private Company Council, which modifies accounting standards for private companies.

FASB’s alternative lets companies lump noncompetition agreements and some “customer-related intangible assets” such as the value of having an existing customer base, into goodwill items.

Private businesses must decide whether or not to use FASB’s alternative with their next transaction in its scope.

However, some customer-related intangible assets would continue to be recognized separately, such as mortgage servicing rights, commodity supply con­tracts, core deposits, and cus­tomer information such as names and contact information, said Daryl Buck, a FASB member.

Companies can sell or buy some intangible assets, including customer information or commodity supply contracts, but noncompetition agreements and the existence of a customer base can be more difficult to value.

Importantly, public companies and not-for-profit companies must still report intangible assets as they previously did. FASB however plans to consider offering the alternative for public companies and not-for-profits.

Bob Jensen's threads on accounting for intangibles ---
http://www.trinity.edu/rjensen/Theory02.htm#Paradox


Teaching Case on Information Overload in Financial Statements
From The Wall Street Journal Accounting Weekly Review on January 9, 2015

IASB Amends Disclosure Guidance to Trim Glut
by: John Kester
Dec 18, 2014
Click here to view the full article on WSJ.com
 

TOPICS: Disclosures, IASB

SUMMARY: The International Accounting Standards Board announced amendments to its guidelines for financial statements to combat unnecessary and repetitive disclosures. The amendments are part of a global effort, which has also been taken up by the Securities and Exchange Commission and the Financial Accounting Standards Board, to make financial statements easier to read. In a 2014 survey, IASB found that investors and analysts felt companies could better communicate the most relevant issues in financial statements without forcing them to sift through a surfeit of disclosure. Businesses often over-disclose rather than justify after the fact why they failed to mention something, but that practice has led to bloated financial documents with so much information they can be difficult to parse.

CLASSROOM APPLICATION: This is an interesting update from the IASB. Because the SEC joins the IASB in desiring financial statements to be more readable, a similar initiative could be on the way for the U.S. An important issue related to this topic is over-disclosure of information as a reaction to the litigious nature of society today. Corporate counsel will likely advise companies to continue to over-disclose as protection from some litigation.

QUESTIONS: 
1. (Introductory) What is the International Accounting Standards Board? What is its mission? Does it govern U.S. accounting rules?

2. (Advanced) What new guidelines did the IASB release? What is the reasoning for these new guidelines? For what companies is this required?

3. (Advanced) Why do businesses often over-disclose? What are good reasons supporting this decision? How does it affect the financial statements and annual reports? Why can this be problematic?

4. (Advanced) How should a company strike a balance between disclosing too much and disclosing too little?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"IASB Amends Disclosure Guidance to Trim Glut," by John Kester, The Wall Street Journal, December 18, 2014 ---
http://blogs.wsj.com/cfo/2014/12/18/iasb-amends-disclosure-guidance-to-trim-glut/?mod=djem_jiewr_AC_domainid

Unnecessary and repetitive disclosures are mucking up corporate financial disclosure, and the International Accounting Standards Board wants to cut the clutter.

Today the board, which sets the international accounting standards used in more than 100 countries, announced amendments to its guidelines for financial statements to combat the problem.

The amendments are part of a global effort, which has also been taken up by the Securities and Exchange Commission and the Financial Accounting Standards Board, to make financial statements easier to read. In a survey early last year, IASB found that investors and analysts felt companies could better communicate the most relevant issues in financial statements without forcing them to sift through a surfeit of disclosure.

Companies should know that “if something’s clearly not material enough or important enough to disclose, you don’t have to,” said Alan Teixeira, a senior technical director at IASB.

Businesses often over-disclose rather than justify after the fact why they failed to mention something, Mr. Teixeira said. But that practice has led to bloated financial documents with so much information they can be difficult to parse.

The changes are part of a broader IASB effort. The board also proposed plans for amending cash flow statements to have companies clearly explain their sources of capital.

The announced amendments will be required for annual periods beginning on or after Jan. 1, 2016.

IASB is “just a part” of improving disclosures, Mr. Teixeira said, noting that companies themselves will have to determine what information is immaterial and withhold it. Nonetheless, he said the board has an advantage because it is a standard-setter.

“We’re at the very beginning,” he said, hoping the board can be a “catalyst for behavioral change.”


GAAP versus Non-GAAP Accounting for IPOs
From the CFO Journal's Morning Ledger on January 8, 2015

Forty companies went public last year reporting losses under traditional accounting rules but showing profits under their own tailor-made measures, the WSJ’s Michael Rapoport reports. That is 18% of all U.S. IPOs for the year. Some IPO market observers have raised fears that companies’ increased use of nonstandard earnings measures could confuse or mislead investors.

Companies that use the non-GAAP measures insist that they give investors a better picture of the company. But that worries some experts, and hasn’t stopped the SEC from demanding that some of the companies revise their filings, saying that they give too much prominence to the specialty calculations over more standard measures.

Nonstandard metrics give investors “the best measure” of continuing performance, said Jason Morgan, chief financial officer of Zoe’s Kitchen Inc., one of the firms that had to revise its filings at the request of the SEC. Do you feel that you need to look beyond GAAP to tell the full story of your company’s performance? Send us a note to let us know or tell us in the comments

 


Teaching Case on Creative Accounting
From The Wall Street Journal Accounting Weekly Review on January 16, 2015

Tailored Accounting at IPOs Raises Flags
by: Michael Rapoport
Jan 08, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Financial Reporting, Initial Public Offerings, IPOs

SUMMARY: Forty companies went public in 2014 reporting losses under traditional accounting rules but showing profits under their own tailor-made measures. That is 18% of all U.S. initial public offerings for the year the highest level since at least 2009. Of 2014's 10 biggest IPOs, nine used nonstandard earnings measures alongside the official accounting treatment to some degree. Many companies prefer highlighting their own customized measures, saying they give investors a better picture of the company. That worries some experts, and the Securities and Exchange Commission has written letters to Zoe's and other companies telling them the bespoke figures they use are given too much prominence in regulatory filings and asking for revisions.

CLASSROOM APPLICATION: This is very interesting information to add to the topics of financial accounting and IPOs.

QUESTIONS: 
1. (Introductory) What is an IPO? Who is involved? Why have the numbers of IPOs grown in recent years?

2. (Advanced) Why is financial reporting needed as a part of an IPO? Who would be using the financial information? Why is accuracy and full disclose important?

3. (Introductory) What is the issue presented in the article? Who is concerned by these activities? Why are they concerned?

4. (Advanced) Why do companies wish to use their own customized measures? What do they say in support of using them? Is their defense of their actions reasonable? Why or why not?

5. (Advanced) What are some examples of changes companies have made in their financial reporting? What problems or misunderstandings could this "tailored accounting" cause?
 

Reviewed By: Linda Christiansen, Indiana University Southeast
 

RELATED ARTICLES: 
What Companies Strip Out of 'Non-GAAP' Earnings: Fines, Exec Bonuses, Severance, Rebranding Costs...
by Michael Rapoport
Jan 08, 2015
Online Exclusive

"Tailored Accounting at IPOs Raises Flags," by Michael Rapoport, The Wall Street Journal, January 7, 2015 ---
http://www.wsj.com/articles/tailored-accounting-at-ipos-raises-flags-1420677431?mod=djem_jiewr_AC_domainid&autologin=y

Critics Say Companies’ Increased Use of Customized Earnings Measures Could Confuse Investors

Zoe’s Kitchen Inc. is serving up profits—but only after leaving some of its expenses off the menu.

Zoe’s, a chain of 125-plus Mediterranean-theme restaurants that went public in April, reported an adjusted profit of $13.2 million for the first nine months of 2014 under its own accounting treatments that strip out a variety of expenses.

Including those expenses, as is required under standard accounting rules, Zoe’s reported a loss of $8.4 million.

It is far from an isolated example. Forty companies went public in 2014 reporting losses under traditional accounting rules but showing profits under their own tailor-made measures. That is 18% of all U.S. initial public offerings for the year, according to consulting firm Audit Analytics, the highest level since at least 2009. Of 2014’s 10 biggest IPOs, nine used nonstandard earnings measures alongside the official accounting treatment to some degree.

Many companies prefer highlighting their own customized measures, saying they give investors a better picture of the company. That worries some experts, and the Securities and Exchange Commission has written letters to Zoe’s and other companies telling them the bespoke figures they use are given too much prominence in regulatory filings and asking for revisions.

Nonstandard metrics give investors “the best measure” of continuing performance, said Jason Morgan, chief financial officer of Zoe’s, who added that the SEC’s concerns were addressed in the company’s case by revising its prospectus.

But as the IPO market heated up last year, observers have raised fears that companies’ increased use of these nonstandard measures could confuse or mislead investors at a time when they are forming their first impression of a company.

“I think it’s a sign of frothiness” in the IPO market, said Brandon Rees, deputy director of the AFL-CIO’s Office of Investment. “Why investors tolerate it, I don’t know.”

Some say the costs that companies strip out of their nonstandard measures are increasingly things that should be counted in earnings calculations, such as executive bonuses, fees for stock offerings and acquisition expenses.

“I was just astounded at the wide variety of elements that people thought were appropriate to exclude,” said Curtis Verschoor, a DePaul University emeritus professor of accountancy. Investors should be aware that a company’s nonstandard numbers “are more likely to be slanted rather than balanced,” he said.

Companies must still prominently disclose their earnings under generally accepted accounting principles, the standard set of U.S. accounting rules, even if they also spotlight their earnings under “non-GAAP” measures.

“It’s knee-jerk to say that’s a place where companies put bad stuff,” said Mike Guthrie, chief financial officer of TrueCar Inc., an auto-buying-and-selling platform that went public in May.

For the first nine months of 2014, TrueCar had a $38.6 million loss under standard rules but a $6.6 million profit under “adjusted Ebitda”—earnings before interest, taxes, depreciation and amortization, modified further to exclude other costs, such as an $803,000 expense to acquire rights to the company’s stock symbol.

Mr. Guthrie said it would be more misleading for the companies not to present adjusted measures; the stock-symbol cost, for instance, was a one-time expense that won’t affect TrueCar’s future results. TrueCar closed Wednesday at $20.94 a share, up 133% from its IPO price of $9.

According to Audit Analytics data, 59% of the companies that filed for an IPO since 2012 have used nonstandard metrics, compared with 48% in 2010 and 2011.

Many go beyond the items that companies most frequently strip out of their preferred measures, such as employee stock compensation and foreign-exchange gains and losses. A PricewaterhouseCoopers LLP survey found 80% of IPO companies that made adjustments to their Ebitda from 2010 to 2013 had at least one adjustment beyond the more-common strip-outs, though PwC said it couldn’t comment on individual companies.

The growth in such reporting by IPO companies comes in part because more technology and service-based companies are coming public. Those companies are more likely to use accounting estimates and subjective measures when compared with traditional bricks-and-mortar companies, said Jay Ritter, a University of Florida finance professor who tracks IPOs.

The SEC has expressed concern in the past about companies’ non-GAAP metrics, notably with regard to daily-deals company Groupon Inc. Before Groupon’s 2011 IPO, the SEC raised questions about its use of “adjusted consolidated segment operating income,” a metric that excluded Groupon’s marketing costs to land new subscribers. Groupon scaled back its use of the metric in response to the SEC concerns. Groupon couldn’t be reached for comment.

In the past two years, the commission has sent comment letters to more than 30 companies, both pre-IPO companies and those already public, criticizing them for giving nonstandard earnings measures “undue prominence” in their securities filings.

Zoe’s received such a letter in January 2014.

Zoe’s had mentioned its adjusted Ebitda first in the “management’s discussion and analysis” section of its prospectus, four pages before providing an earnings table that followed standard accounting rules. The SEC also questioned Zoe’s exclusion of some cash expenses from its adjusted Ebitda, such as the costs of opening new restaurants and management and consulting fees.

Zoe’s prospectus had been filed under seal with the SEC at the time, and the company revised its filings to address the “undue prominence” criticism before it filed a public prospectus in March, the company’s finance chief, Mr. Morgan, said. Whether the expenses should be excluded “came down to an interpretation” of regulations, and the company didn’t change its methodology, he added.

Zoe’s stock closed Wednesday at $31.63 a share, more than twice its IPO price of $15.

Bob Jensen's threads on creative accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#Manipulation

Bob Jensen's threads on pro forma reporting ---
http://www.trinity.edu/rjensen/Theory02.htm#ProForma


Teaching Case on Section 1031 of the Internal Revenue Code, which enables investors to defer the capital-gains tax that they would normally owe on the profit they make from the sale of real estate.
From The Wall Street Journal Accounting Weekly Review on January 16, 2015

Tower Sale Pegged to IRS Rule
by: Robyn A. Friedman
Jan 07, 2015
Click here to view the full article on WSJ.com
 

TOPICS: Like-Kind Exchange, Section 1031

SUMMARY: An investment group consisting of a well-known Charlotte, N.C., developer and an Atlanta entrepreneur, philanthropist and former U.S. Air Force pilot has purchased the Winston-Salem, N.C., headquarters of financial-services giant BB&T Corp. with plans to sell stakes in the property to investors who want to take advantage of Section 1031 of the Internal Revenue Code, which enables investors to defer the capital-gains tax that they would normally owe on the profit they make from the sale of real estate. Current tax law allows them to do this if they use the proceeds of their sale to invest in a "like-kind," or comparable, property.

CLASSROOM APPLICATION: Use this article when covering Section 1031.

QUESTIONS: 
1. (Introductory) What is Section 1031? To what kind of transactions does it apply?

2. (Advanced) What are the plans for the investors in the article? What are the tax advantages of their plan? Are there business benefits for this type of transaction, other than tax advantages?

3. (Advanced) Does Section 1031 allow for a deferral of taxes or a permanent savings? Why?

4. (Advanced) Why does the tax code allow for the Section 1031 treatment? What are the policy reasons? What are some practical reasons?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"Tower Sale Pegged to IRS Rule," by Robyn A. Friedman, The Wall Street Journal, January 7, 2015 ---
http://www.wsj.com/articles/tower-sale-pegged-to-irs-rule-1420584297?mod=djem_jiewr_AC_domainid

Investors Plan to Sell Stakes in BB&T Building to Purchasers Seeking Capital-Gains Tax Break.

An investment group consisting of a well-known Charlotte, N.C., developer and an Atlanta entrepreneur, philanthropist and former U.S. Air Force pilot has purchased the Winston-Salem, N.C., headquarters of financial-services giant BB&T Corp. with plans to sell stakes in the property to investors who want to take advantage of a much-loved provision of U.S. tax law.

The venture of Charlotte investor Ray Gee and Atlanta investor Tyson “Ty” Rhame paid $60 million for the 240,000-square-foot building at 200 W. Second St. in Winston-Salem’s central business district.

The 20-story office tower is fully occupied by BB&T under a 23-year lease and is also home to the Piedmont Club, a private business and social club.

Messrs. Gee and Rhame plan to sell stakes in the building to investors who want to take advantage of Section 1031 of the Internal Revenue Code, which enables investors to defer the capital-gains tax that they would normally owe on the profit they make from the sale of real estate. Current tax law allows them to do this if they use the proceeds of their sale to invest in a “like-kind,” or comparable, property.

Large institutional investors frequently make use of this tax shelter. When Hilton Worldwide Holdings Inc. announced plans in October to sell the Waldorf-Astoria Hotel in New York to Anbang Insurance Group Co. for $1.95 billion, it also stated its intention to use the proceeds from the sale to acquire additional hotels in the U.S. as part of a like-kind exchange.

But as the commercial-real-estate market recovers in many parts of the nation, industry experts report that smaller investors are increasingly taking advantage of the tax benefits of like-kind exchanges.

“The less taxes they pay, the more they have to reinvest,” said Gerard Sansosti, an executive managing director in the Pittsburgh office of HFF Inc.

Under Internal Revenue Service rules, Section 1031 exchanges have to be like-kind, and the properties have to be held for use in a trade or business or for investment. Property held for personal use, such as a primary residence, doesn’t qualify. Most real estate is considered to be like-kind. In other words, an apartment building can be exchanged for an office building.

Messrs. Gee and Rhame put 10% down on the purchase and financed the balance. Since they took title as a Delaware statutory trust, IRS rules allow them to syndicate 1031 exchange interests in the BB&T building to investors.

The 1031 structure “allows the smaller investor to play at an institutional level,” Mr. Gee said. He and his partner said they are hoping stakes in the property will be attractive because it is leased long term to a strong tenant. “They can rest easy at night knowing that the tenant is most likely not going to default,” Mr. Gee said.

Brian Davis, a spokesman for BB&T, said, “The sale doesn’t affect our long-term lease or our long-standing commitment to the Winston-Salem community.”

Mr. Gee said he and Mr. Rhame are seeking three to five investors to reimburse them for 100% of the equity they invested in the deal, but that the number could climb to as many as 10 investors.

Experts on 1031 exchanges point out that potential investors in these deals need to understand that they are passive investments. That means they have less control than they might have had in the strip center or apartment complex they sold.

“You’re wrapped up in ownership with other people,” said Edward N. Cooper, director of tax services at Berkowitz Pollack Brant in Miami. “So if you swapped an apartment complex that you sold for $4 million in which you had control and invest in a [1031 exchange property], you don’t get the same flexibility.”

A like-kind exchange doesn’t need to be a simultaneous swap. Tax rules allow the seller of a property 45 days from the date of relinquishment to identify potential replacements. The seller then has 180 days from the sale of the relinquished property to complete the exchange.

Many investors in like-kind exchanges are seeking single-tenant net lease properties like the BB&T building, said Kenneth L. Zakin, a senior managing director with Newmark Grubb Knight Frank Capital Markets in New York.

“They don’t want to risk too much, so they look for safe, secure investment income,” he added.

Continued in article


Teaching Case on How New Health-Care Rules Affect Your 2014 Tax Return
From The Wall Street Journal Accounting Weekly Review on January 16, 2015

How New Health-Care Rules Affect Your 2014 Tax Return
by: Maria Armental
Jan 09, 2015
Click here to view the full article on WSJ.com
 

TOPICS: ACA, Individual Taxation

SUMMARY: For 2014, there are only two important federal income-tax changes for individual taxpayers, beyond the usual inflation-indexing of tax-rate brackets and various other parameters. Both have to do with the Affordable Care Act, and both may be complicated enough to inspire many people to engage the services of a professional tax preparer.

CLASSROOM APPLICATION: This article offers a good explanation of tax penalties under the Affordable Care Act.

QUESTIONS: 
1. (Introductory) What is the Affordable Care Act? Why are individual tax returns affected by the ACA?

2. (Advanced) What is minimum essential coverage? What are the penalties for failure to carry that coverage?

3. (Advanced) Who should be concerned about the penalty? How is the penalty calculated? How is it reported and paid?

4. (Advanced) What is the premium assistance tax credit? Who is eligible for the credit? What are the options for disbursement of this credit?

5. (Advanced) What is a refundable credit? Why are some credits refundable and others are not?
 

Reviewed By: Linda Christiansen, Indiana University Southeast

"How New Health-Care Rules Affect Your 2014 Tax Return," by Maria Armental, The Wall Street Journal, January 9, 2015 ---
http://blogs.wsj.com/totalreturn/2015/01/09/how-new-health-care-rules-affect-your-2014-tax-return/?mod=djem_jiewr_AC_domainid

Tax forms for 2014—such as W-2s and 1099s—will soon be arriving in the mail, which means it isn’t too early to start thinking about putting together your Form 1040 for last year.

For 2014, there are only two important federal income-tax changes for individual taxpayers, beyond the usual inflation-indexing of tax-rate brackets and various other parameters. Both have to do with the Affordable Care Act, also referred to as “Obamacare”—and both may be complicated enough to inspire many people to engage the services of a professional tax preparer.

Here’s what taxpayers need to know. Penalty for failure to carry “minimum essential coverage”

The health-care overhaul established a new federal income-tax penalty for the failure to carry what it deems minimum essential coverage. Last year was the introductory year for the penalty, which can potentially be owed for any month when qualifying health coverage wasn’t in force. (In Internal Revenue Service speak, the penalty is called a “shared responsibility payment.”)

You don’t have to worry about the penalty if you—and all members of your family, if applicable—had qualifying coverage for all of last year. In this case, simply check the box on line 61 of Form 1040, and you’re done.

If you didn’t have qualifying coverage for the entire year, the first task is to determine if you are exempt from the penalty. For that, see the instructions to new IRS Form 8965 Health Coverage Exemptions (and instructions for figuring your shared responsibility payment). If you were exempt for last year, file Form 8965 with your 2014 Form 1040 to prove it.

For additional information on exemptions, see IRS Publication 5187, Health Care Law: What’s New for Individuals and Families. (All IRS forms and publications discussed in this article can be found at www.irs.gov.)

If you weren’t exempt, the next step is to calculate the penalty amount that you owe using the work sheet in the instructions to Form 8965. Enter the penalty amount on line 61 of your return. For 2014, the penalty can range from $95 or less to a good deal more for higher-income folks. Also be aware that the penalty for 2015 and beyond can be much higher than the penalty for last year. Premium assistance tax credit

The other Affordable Care Act-related change for 2014 was the debut of the so-called premium assistance tax credit, or PTC. It is available to eligible individuals and families who obtain health coverage in a qualifying plan by enrolling through a state-run insurance exchange or through the federal exchange (www.healthcare.gov).

In general, you are eligible for the credit if your household income was between 100% and 400% of the federal poverty line and you didn’t have access to affordable employer-sponsored coverage last year. The allowable credit amount can vary widely depending on your specific circumstances. (For additional information on the PTC, see IRS Publication 974.)

The PTC can be advanced directly to the insurance company to lower your monthly premiums, or it can be claimed when you file your return. You may not know the exact amount of your allowable PTC for last year until you actually file your 2014 Form 1040. Calculate the PTC using the new IRS Form 8962.

If advance PTC payments were made on your behalf last year, the amount of those payments should be reported by the exchange to you on the new Form 1095-A, Health Insurance Marketplace Statement. You should receive Form 1095-A by no later than early February. Then calculate the difference between your advance PTC payments (if any) and the PTC amount you are actually entitled to claim on Form 8962. Enter any excess PTC amount on line 46 of Form 1040 and pay it when you file.

The PTC is a “refundable credit.” That means you can collect the full allowable credit amount even when it exceeds your federal income tax liability for last year. Specifically, the PTC amount is first used to reduce your federal income tax bill. After your bill has been reduced to zero, any remaining PTC can be either refunded to you in cash or used to make estimated tax payments for the 2015 tax year.

Bob Jensen's taxation helpers ---
http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

Bob Jensen's threads on the ACA legislation ---
http://www.trinity.edu/rjensen/Health.htm

 

 





Humor January 1-31, 2015

Rumor has it that the New England patriots had to issue all new and smaller jock straps for the Super Bowl.
Bob Jensen
I know, but it's the best I could come up with on short notice.

The 25 Funniest SNL Cast Members Of All Time ---
http://www.businessinsider.com/best-snl-cast-members-2015-1

Pasadena Conference on Aging Part 2 (humor) ---
https://www.youtube.com/embed/LR2qZ0A8vic?rel=0

23 Clever License Plates That Slipped by the DMV
http://www.odometer.com/lifestyle/5787/29-clever-license-plates-that-slipped-past-the-dmv#slide/0

Ten Things We Love About Italy ---
http://player.vimeo.com/video/70776419

Marilyn Monroe’s Go-Getter List of New Year’s Resolutions (1955) ---
http://www.openculture.com/2015/01/marilyn-monroes-go-getter-list-of-new-years-resolutions-1955.html
She forgot to resolve to save Kennedy half dollars when they were only worth 50 cents each.

Why does this remind me of Madam Boxer in the USA Senate?
Councilman orders newspaper to stop using his name. Newspaper prints hilarious response ---
I did not quote from the article in fear of having to use his name.

Southwest Airlines Flight Attendant --- https://www.youtube.com/watch?v=TxNrizGdhtY&app=desktop

International Pi Day on March 14 ---
http://www.piday.org/
Note the Pi Sightings link


Forwarded by Gene and Joan

Brains of older people are slow because they know so much. People do not decline mentally with age, it just takes them longer to recall facts because they have more information in their brains, scientists believe. Much like a computer struggles as the hard drive gets full, so, too, do humans take longer to access information when their brains are full. Researchers say this slowing down process is not the same as cognitive decline. The human brain works slower in old age, said Dr. Michael Ramscar, but only because we have stored more information over time The brains of older people do not get weak. On the contrary, they simply know more. Also, older people often go to another room to get something and when they get there, they stand there wondering what they came for. It is NOT a memory problem, it is nature's way of making older people do more exercise.

SO THERE!!


Forwarded by Gene and Joan

If you can read this, you have a strange mind, too. Only 55 people out of 100 can.

I cdnuolt blveiee that I cluod aulaclty uesdnatnrd what I was rdanieg. The phaonmneal pweor of the hmuan mnid, aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it dseno't mtaetr in what oerdr the ltteres in a word are, the olny iproamtnt tihng is that the frsit and last ltteer be in the rghit pclae. The rset can be a taotl mses and you can still raed it whotuit a pboerlm. This is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the word as a wlohe. Azanmig huh? Yaeh and I awlyas tghuhot slpeling was ipmorantt! If you can raed this forwrad it

 


John Cleese on How “Stupid People Have No Idea How Stupid They Are” (a.k.a. the Dunning-Kruger Effect) ---
http://www.openculture.com/2014/12/john-cleese-on-stupidity-and-a-cornell-study.html


A woman has been jailed on charges she broke into a stranger's central Pennsylvania home after a night of drinking and was found by police in bed ---
http://bigstory.ap.org/article/0d183df47def4205b5cef54ee0cde9f7/police-burglary-suspect-found-sleeping-bed


Police say they matched a would-be pizza shop robber to a roll of toilet paper in his Pennsylvania home.
http://bigstory.ap.org/article/3c129eff3e9041a789b1ee035df9a613/police-toilet-paper-links-man-heist-attempt

Uniontown police say 29-year-old Eric Frey tried to rob Michael Maria's Pizza on Saturday by handing an employee a note written on toilet paper that read: "I have a gun. Give me $300."

Police arrived before Frey could leave because an employee hit a panic button.

Frey told officers he was forced to commit the robbery by a large, bearded man with a gun who accosted him in a nearby alley.

But police say a search of Frey's apartment wiped out that explanation: That's where they say they found a newly opened roll of toilet paper with the pen impression from Frey's note on an outer sheet.

Online court records don't list an attorney for Frey.


Great Female Comebacks forwarded by Paula

Man: "So, wanna go back to my place ?"
Woman: "Well, I don't know. Will two people fit under a rock?"

Man: "Your place or mine?"
Woman: "Both. You go to yours and I'll go to mine."

Man: "I'd like to call you. What's your number?"
Woman: "It's in the phone book."|
Man: "But I don't know your name."
Woman: "That's in the phone book too."

Man: "So what do you do for a living?"
Woman: "I'm a female impersonator."

Man: "What sign were you born under?"
Woman: "No Parking." Or  (“Stop”) my daughter Dawn used it!

Man: "Hey, baby, what's your sign?"
Woman: "Do not Enter"

Man: "How do you like your eggs in the morning?"
Woman: "Unfertilized!"

Man: "Hey, come on, admit it. We're both here at this bar for the same reason"
Woman: "Yeah! Let's pick up some chicks!"
Man: "I know how to please a woman."
Woman: "Then please leave me alone."

Man: "I want to give myself to you."
Woman: "Sorry, I don't accept cheap gifts."

Man: "I can tell that you want me."
Woman: "Ohhhh. You're so right. I want you to leave."

Man: "If I could see you naked, I'd die happy:
Woman: "Yeah, but if I saw you naked, I'd probably die laughing."

Man: "Hey cutie, how 'bout you and me hitting the hot spots?"
Woman: "Sorry, I don't date outside my species."

Man: "Your body is like a temple."
Woman: "Sorry, there are no services today."

Man: "I'd go through anything for you."
Woman: "Good! Let's start with your bank account."

Man: "I would go to the end of the world for you.
Woman: "Yes, but would you stay there?

 


Forwarded by Paula

Actual call center conversations!

Customer: 'I've been calling 700-1000 for two days and can't get through;
can you help?'
Operator: 'Where did you get that number, sir?'
Customer: 'It's on the door of your business.'
Operator: 'Sir, those are the hours that we are open.'
----------------------------------------------------------------------
Samsung Electronics
Caller: 'Can you give me the telephone number for Jack?'
Operator: 'I'm sorry, sir, I don't understand who you are talking about.'
Caller: 'On page 1, section 5, of the user guide it clearly states that
I need to unplug the fax machine from the AC wall socket and
telephone Jack before cleaning. Now, can you give me the
number for Jack?'
Operator: 'I think it means the telephone plug on the wall.'
----------------------------------------------------------------------
RAC Motoring Services
Caller: 'Does your European Breakdown Policy cover me when I am
traveling in Australia ?'
Operator: 'Does the policy name give you a clue?'
----------------------------------------------------------------------
Caller (inquiring about legal requirements while traveling in Europe )
'If I register my car in France , and then take it to England ,
do I have to change the steering wheel to the other side of the car?'
----------------------------------------------------------------------
Directory Inquiries
Caller: 'I'd like the number of the Argo Fish Bar, please'
Operator: 'I'm sorry, there's no listing. Are you sure that the spelling is correct?'
Caller: 'Well, it used to be called the Bargo Fish Bar but the 'B' fell off.'
----------------------------------------------------------------------
Then there was the caller who asked for a knitwear company in Woven.
Operator: 'Woven? Are you sure?'
Caller: 'Yes.. That's what it says on the label -- Woven in Scotland ...'
----------------------------------------------------------------------
On another occasion, a man making heavy breathing sounds from a phone box told a worried operator: 'I haven't got a pen, so I'm steaming up the window to write the number on.'
----------------------------------------------------------------------
Tech Support: 'I need you to right-click on the Open Desktop.'
Customer: 'OK..'
Tech Support: 'Did you get a pop-up menu?'
Customer: 'No.'
Tech Support: 'OK. Right-Click again. Do you see a pop-up menu?'
Customer: 'No.'
Tech Support: 'OK, sir. Can you tell me what you have done up until this point?'
Customer: 'Sure. You told me to write 'click' and I wrote 'click'.'
----------------------------------------------------------------------
Tech Support: 'OK. At the bottom left hand side of your screen, can
you see the 'OK' button displayed?'
Customer: 'Wow! How can you see my screen from there?'
----------------------------------------------------------------------
Caller: 'I deleted a file from my PC last week and I just realized that I need it.
So, if I turn my system clock back two weeks will I get my file back again?'
----------------------------------------------------------------------

The following has to be one of the funniest things in a long time. I think this guy should have been promoted, not fired. This is a true story from the WordPerfect Helpline, which was transcribed from a recording monitoring the customer care department.
Needless to say the Help Desk employee was fired; however, he/she is currently suing the WordPerfect organization for Termination without Cause.'

Actual dialogue of a former WordPerfect Customer Support employee.
(Now I know why they record these conversations!):

Operator: 'Ridge Hall, computer assistance; may I help you?'
Caller: 'Yes, well, I'm having trouble with WordPerfect .'
Operator: 'What sort of trouble?'
Caller: 'Well, I was just typing along, and all of a sudden the words went away.'
Operator: 'Went away?'
Caller: 'They disappeared'
Operator: 'Hmm. So what does your screen look like now?'
Caller: 'Nothing.'
Operator: 'Nothing??'
Caller: 'It's blank; it won't accept anything when I type.'
Operator: 'Are you still in WordPerfect, or did you get out?'
Caller: 'How do I tell?'
Operator: 'Can you see the 'C: prompt' on the screen?'
Caller: 'What's a sea-prompt?'
Operator: 'Never mind, can you move your cursor around the screen?'
Caller: 'There isn't any cursor; I told you, it won't accept anything I type..'
Operator: 'Does your monitor have a power indicator?'
Caller: 'What's a monitor?'
Operator: 'It's the thing with the screen on it that looks like a TV.
Does it have a little light that tells you when it's on?'
Caller: 'I don't know.'
Operator: 'Well, then look on the back of the monitor and find where
the power cord goes into it. Can you see that??'
Caller: 'Yes, I think so.'
Operator: 'Great. Follow the cord to the plug, and tell me if it's
plugged into the wall..
Caller: 'Yes, it is.'
Operator: 'When you were behind the monitor, did you notice that
there were two cables plugged into the back of it, not just one? '
Caller: 'No.'
Operator: 'Well, there are. I need you to look back there again and
find the other cable.'
Caller: 'Okay, here it is.'
Operator: 'Follow it for me, and tell me if it's plugged securely into
the back of your computer..'
Caller: 'I can't reach.'
Operator: 'OK. Well, can you see if it is?'
Caller: 'No...'
Operator: 'Even if you maybe put your knee on something and lean way over?'
Caller: 'Well, it's not because I don't have the right angle -- it's because it's dark.'
Operator: 'Dark?'
Caller: 'Yes - the office light is off, and the only light I have is
coming in from the window.'
Operator: 'Well, turn on the office light then.'
Caller: 'I can't..'
Operator: 'No? Why not?'
Caller: 'Because there's a power failure.'
Operator: 'A power .... A power failure? Aha. Okay, we've got it
licked now. Do you still have the boxes and manuals and
packing stuff that your computer came in?'
Caller: 'Well, yes, I keep them in the closet..'
Operator: 'Good. Go get them, and unplug your system and pack it
up just like it was when you got it, Then take it back to
the store you bought it from.'
Caller: 'Really? Is it that bad?'
Operator: 'Yes, I'm afraid it is.'
Caller: 'Well, all right then, I suppose. What do I tell them?'
Operator: 'Tell them you're too damned stupid to own a computer!'



Humor Between January 1-31 --- http://www.trinity.edu/rjensen/book15q1.htm#Humor013115

Humor Between December 1-31, 2014 --- http://www.trinity.edu/rjensen/book14q4.htm#Humor123114

Humor Between November 1-30, 2014 --- http://www.trinity.edu/rjensen/book14q4.htm#Humor113014

Humor Between October 1-31, 2014 --- http://www.trinity.edu/rjensen/book14q4.htm#Humor103114

Humor Between September 1-30, 2014 --- http://www.trinity.edu/rjensen/book14q3.htm#Humor093014

Humor Between August 1-31, 2014 --- http://www.trinity.edu/rjensen/book14q3.htm#Humor083114

Humor Between July 1-31, 2014--- http://www.trinity.edu/rjensen/book14q3.htm#Humor073114

Humor Between June 1-31, 2014 --- http://www.trinity.edu/rjensen/book14q2.htm#Humor063014

Humor Between May 1-31, 2014, 2014 --- http://www.trinity.edu/rjensen/book14q2.htm#Humor053114

Humor Between April 1-30, 2014 --- http://www.trinity.edu/rjensen/book14q2.htm#Humor043014

Humor Between March 1-31, 2014 --- http://www.trinity.edu/rjensen/book14q1.htm#Humor033114

Humor Between February 1-28, 2014 --- http://www.trinity.edu/rjensen/book14q1.htm#Humor022814

Humor Between January 1-31, 2014 --- http://www.trinity.edu/rjensen/book14q1.htm#Humor013114

Humor Between December 1-31, 2013 --- http://www.trinity.edu/rjensen/book13q4.htm#Humor123113

Humor Between November 1-30, 2013 --- http://www.trinity.edu/rjensen/book13q4.htm#Humor113013,

Humor Between October 1-31, 2013 --- http://www.trinity.edu/rjensen/book13q4.htm#Humor103113

Humor Between September 1 and September 30, 2013 --- http://www.trinity.edu/rjensen/book13q3.htm#Humor093013

Humor Between July 1 and August 31, 2013 --- http://www.trinity.edu/rjensen/book13q3.htm#Humor083113

Humor Between June 1-30, 2013 --- http://www.trinity.edu/rjensen/book13q2.htm#Humor063013

Humor Between May 1-31, 2013 --- http://www.trinity.edu/rjensen/book13q2.htm#Humor053113

Humor Between April 1-30, 2013 --- http://www.trinity.edu/rjensen/book13q2.htm#Humor043013

 




And that's the way it was on January 31, 2015 with a little help from my friends.

 

Bob Jensen's gateway to millions of other blogs and social/professional networks ---
http://www.trinity.edu/rjensen/ListservRoles.htm

Bob Jensen's Threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Blogs --- http://www.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://www.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm
Bob Jensen's past presentations and lectures --- http://www.trinity.edu/rjensen/resume.htm#Presentations   

Free Online Textbooks, Videos, and Tutorials --- http://www.trinity.edu/rjensen/ElectronicLiterature.htm#Textbooks
Free Tutorials in Various Disciplines --- http://www.trinity.edu/rjensen/Bookbob2.htm#Tutorials
Edutainment and Learning Games --- http://www.trinity.edu/rjensen/000aaa/thetools.htm#Edutainment
Open Sharing Courses --- http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Bob Jensen's Resume --- http://www.trinity.edu/rjensen/Resume.htm
 

Bob Jensen's Homepage --- http://www.trinity.edu/rjensen/

Accounting Historians Journal --- http://www.libraries.olemiss.edu/uml/aicpa-library  and http://clio.lib.olemiss.edu/cdm/landingpage/collection/aah
Accounting Historians Journal
Archives--- http://www.olemiss.edu/depts/general_library/dac/files/ahj.html
Accounting History Photographs --- http://www.olemiss.edu/depts/general_library/dac/files/photos.html


 

For an elaboration on the reasons you should join a ListServ (usually for free) go to   http://www.trinity.edu/rjensen/ListServRoles.htm

AECM (Accounting Educators)  http://listserv.aaahq.org/cgi-bin/wa.exe?HOME
The AECM is an email Listserv list which started out as an accounting education technology Listserv. It has mushroomed into the largest global Listserv of accounting education topics of all types, including accounting theory, learning, assessment, cheating, and education topics in general. At the same time it provides a forum for discussions of all hardware and software which can be useful in any way for accounting education at the college/university level. Hardware includes all platforms and peripherals. Software includes spreadsheets, practice sets, multimedia authoring and presentation packages, data base programs, tax packages, World Wide Web applications, etc

Roles of a ListServ --- http://www.trinity.edu/rjensen/ListServRoles.htm
 

CPAS-L (Practitioners) http://pacioli.loyola.edu/cpas-l/  (closed down)
CPAS-L provides a forum for discussions of all aspects of the practice of accounting. It provides an unmoderated environment where issues, questions, comments, ideas, etc. related to accounting can be freely discussed. Members are welcome to take an active role by posting to CPAS-L or an inactive role by just monitoring the list. You qualify for a free subscription if you are either a CPA or a professional accountant in public accounting, private industry, government or education. Others will be denied access.

Yahoo (Practitioners)  http://groups.yahoo.com/group/xyztalk
This forum is for CPAs to discuss the activities of the AICPA. This can be anything  from the CPA2BIZ portal to the XYZ initiative or anything else that relates to the AICPA.

AccountantsWorld  http://accountantsworld.com/forums/default.asp?scope=1 
This site hosts various discussion groups on such topics as accounting software, consulting, financial planning, fixed assets, payroll, human resources, profit on the Internet, and taxation.

Business Valuation Group BusValGroup-subscribe@topica.com 
This discussion group is headed by Randy Schostag [RSchostag@BUSVALGROUP.COM

 


 

Concerns That Academic Accounting Research is Out of Touch With Reality

I think leading academic researchers avoid applied research for the profession because making seminal and creative discoveries that practitioners have not already discovered is enormously difficult. Accounting academe is threatened by the twin dangers of fossilization and scholasticism (of three types: tedium, high tech, and radical chic)
From http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm
 

“Knowledge and competence increasingly developed out of the internal dynamics of esoteric disciplines rather than within the context of shared perceptions of public needs,” writes Bender. “This is not to say that professionalized disciplines or the modern service professions that imitated them became socially irresponsible. But their contributions to society began to flow from their own self-definitions rather than from a reciprocal engagement with general public discourse.”

 

Now, there is a definite note of sadness in Bender’s narrative – as there always tends to be in accounts of the shift from Gemeinschaft to Gesellschaft. Yet it is also clear that the transformation from civic to disciplinary professionalism was necessary.

 

“The new disciplines offered relatively precise subject matter and procedures,” Bender concedes, “at a time when both were greatly confused. The new professionalism also promised guarantees of competence — certification — in an era when criteria of intellectual authority were vague and professional performance was unreliable.”

But in the epilogue to Intellect and Public Life, Bender suggests that the process eventually went too far. “The risk now is precisely the opposite,” he writes. “Academe is threatened by the twin dangers of fossilization and scholasticism (of three types: tedium, high tech, and radical chic). The agenda for the next decade, at least as I see it, ought to be the opening up of the disciplines, the ventilating of professional communities that have come to share too much and that have become too self-referential.”

 

What went wrong in accounting/accountics research? 
How did academic accounting research become a pseudo science?
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

Avoiding applied research for practitioners and failure to attract practitioner interest in academic research journals ---
"Why business ignores the business schools," by Michael Skapinker
Some ideas for applied research ---
http://www.trinity.edu/rjensen/theory01.htm#AcademicsVersusProfession

 

Clinging to Myths in Academe and Failure to Replicate and Authenticate Research Findings
http://www.trinity.edu/rjensen/theory01.htm#Myths

 

Poorly designed and executed experiments that are rarely, I mean very, very rarely, authenticated
http://www.trinity.edu/rjensen/theory01.htm#PoorDesigns
 

Discouragement of case method research by leading journals (TAR, JAR, JAE, etc.) by turning back most submitted cases --- http://www.trinity.edu/rjensen/000aaa/thetools.htm#Cases
 

Economic Theory Errors
Where analytical mathematics in accountics research made a huge mistake relying on flawed economic theory and interval/ratio scaling

http://www.trinity.edu/rjensen/theory01.htm#EconomicTheoryErrors

 

Accentuate the Obvious and Avoid the Tough Problems (like fraud) for Which Data and Models are Lacking
http://www.trinity.edu/rjensen/theory01.htm#AccentuateTheObvious

 

Financial Theory Errors
Where capital market research in accounting made a huge mistake by relying on CAPM

http://www.trinity.edu/rjensen/theory01.htm#AccentuateTheObvious

 

Philosophy of Science is a Dying Discipline
Most scientific papers are probably wrong
http://www.trinity.edu/rjensen/theory01.htm#PhilosophyScienceDying

 

Accountancy, Tax, IFRS, XBRL, and Accounting History News Sites  --- http://www.trinity.edu/rjensen/AccountingNews.htm

Accounting Professors Who Blog --- http://www.trinity.edu/rjensen/ListservRoles.htm

Cool Search Engines That Are Not Google --- http://www.wired.com/epicenter/2009/06/coolsearchengines

Free (updated) Basic Accounting Textbook --- search for Hoyle at
http://www.trinity.edu/rjensen/ElectronicLiterature.htm#Textbooks

CPA Examination --- http://en.wikipedia.org/wiki/Cpa_examination
Free CPA Examination Review Course Courtesy of Joe Hoyle --- http://cpareviewforfree.com/
 


Bob Jensen's Pictures and Stories
http://www.trinity.edu/rjensen/Pictures.htm

 

Bob Jensen's Homepage --- http://www.trinity.edu/rjensen/