Bob Jensen's New Bookmarks for February 1-28, 2015 

Bob Jensen at Trinity University 

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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: 

Google URL Shortener ---
Thank you Scott Bonacker for the heads up

Information content of nonverbal vocal communication
Note that in these days of video transmission across the Internet, nonverbal communication does not ipso facto require physical presence. Much depends upon whether video captures the nonverbal communication.

Book Review by Michael Minnisis (University of Chicago)
The Accounting Review, January 2015, Vol. 90, No. 1, pp. 395-398 ---

Speech Analysis in Financial Markets, Foundations and Trends® in Accounting (Hanover, MA: now Publishers Inc., 2013, ISBN 978-1-60198-652-8, Vol. 7, No. 2, pp. ix, 60)

Mayew and Venkatachalam's monograph (hereafter, MV) reviews the budding literature examining the information content of nonverbal vocal communication. The monograph defines nonverbal vocal communication as “the communication process that is distinct from verbal usage,” which “includes facial expressions, gestures, postures, body movements, vocal tone” among other features (p. 2). The monograph focuses on features of the vocal tone portion of nonverbal communication.

While the objective of my review is to critically assess MV, not to review the literature per se, I ultimately do a bit of both. My overarching assessment of the monograph is that it provides the critical starting point for any researcher interested in investigating nonverbal communication in finance and accounting. The monograph is thorough (conditional on a focus of nonverbal vocal communication within the accounting and finance literatures, with a specific focus on vocal tone) and is clearly written. It includes citations to, and a very useful discussion of, both the linguistics and human behavior literatures, allowing readers who are even relatively ignorant of this area, admittedly including me, an expedient foray into the literature. While the initial results of the literature are certainly intriguing, I agree with MV that this research is in an “embryonic state” (p. 47). Causal interpretations and the relative economic importance of the statistical results need to be assessed, and I also agree with the authors that theoretical frameworks need to more rigorously motivate the research. Collectively, though, MV describes a research area with potentially exciting research possibilities, and the monograph provides an excellent starting line.

MV contains five chapters, with Chapters 2 and 3 containing the overwhelming majority of the substantive content. Chapter 2 sets the stage for the monograph by describing the elements of nonverbal research analysis. The authors describe two elements that are required for empirical nonverbal vocal research: a recording of speech, and a method to encode the speech. MV highlights various possibilities for both elements. A laboratory setting (providing a high-fidelity recording) and an intensively trained human judge may provide ideal circumstances, but the authors argue that corporate finance provides a novel setting, in the form of earnings conference calls, to study how humans' nonverbal communication is related to capital allocation in the economy. Corporate earnings conference calls are high-stakes events, occurring relatively frequently, and catalogued by data providers. While alternative settings may exist to study executives—such as analyst days and annual meetings—the interaction between analysts and managers (and between managers within the firm) provided during earnings conference calls provides a sufficiently high-quality recording to researchers in a relatively inexpensive format. With the minor exception of the statement on page 9, which states a common misperception that “every major corporation in America” offers a quarterly conference call, the authors describe this setting well and provide ample motivation for studying conference calls.1

After introducing the reader to the prerequisites of nonverbal vocal communication research in Chapter 2, the authors present and discuss extant empirical research in Chapter 3. Over half of the content of the monograph resides in this chapter. Framed mostly around the authors' own research, they discuss three themes that have been examined in nonverbal vocal research: market reaction to executive vocal tone, deception prediction, and managerial trait assessment. I will discuss each.

The authors articulate that tests of market reaction to managers' nonverbal cues require three factors: (1) the presence of nonverbal cues that are informative about either the discount rate or a firm's future cash flows (which are orthogonal to the text and numbers presented by the manager); (2) a process to measure the nonverbal cues; and (3) the ability of the market to recognize the cues and impound them into price (i.e., low frictions to receiving the message or trading on it). If one of the necessary conditions does not exist—e.g., managers are not sending information in their vocal cues, or analysts are not able to interpret it, or researchers cannot measure the cues effectively—then the null hypothesis of no relation between managers' nonverbal vocal cues and the market reaction is credible. The authors then discuss the results of Mayew and Venkatachalam (2012a), which finds that a manager's positive (negative) affective state as measured from vocal cues using LVA software is positively (negatively) associated with the firm's abnormal returns around the conference call date. Moreover, they extend and reinforce the results of Mayew and Venkatachalam (2012a) by replicating the results with a more recent sample of conference calls and find very similar results.

The monograph does a thorough job of describing the main result of Mayew and Venkatachalam (2012a), and the replication results are a useful reinforcement; however, the monograph is certainly not a substitute for reading the research paper itself (given the length of the original research paper, this is understandable). The monograph omits discussion of long-term return results and analyst reaction results, which are included in the original paper. Moreover, the monograph does not go much beyond discussing the statistical relation between CAR and measured managerial affect. For example, it does not provide much discussion about why this relation may exist. What is the news that the affect is revealing—cash flow or discount news? Is the market reacting in the right direction, or is the market temporarily misled by the manager's affect? The authors also do not provide the reader with much interpretation of the economic magnitude of the relation. For example, Table 2 in MV shows that the coefficient on PAFF (the measure of the manager's positive affect in his or her vocal cues) is 0.1690. Using the standard deviation from Table 1 of 0.0373, I calculate that a one standard deviation increase in PAFF results in an increase in CAR of only about 0.6 percent, or about 5 percent of one standard deviation of CAR. In comparison, a one standard deviation in POSWORDS (the number of positive words spoken by the manager) results in a 1.4 percent increase in CAR, or about 12 percent of one standard deviation. These results suggest that what is said has a stronger relation than how it is said. Of course, this could simply indicate that measurement of managerial affect is still in its infancy, with much more noise than the measurement of what is said. Regardless, discussion of the economic meaning would be helpful to the reader throughout the monograph.

Regarding the measurement of the manager's affect, the authors do a commendable job throughout highlighting weaknesses in the measures and reinforcing the idea that causal interpretations are limited. However, the monograph does not reference an informative exchange of unpublished work and blog posts between the authors and Francisco Lacerda, a linguistic academic, which occurred subsequent to the publication of Mayew and Venkatachalam (2012a). Because the monograph includes the concerns of Lacerda (2009)—wherein Lacerda asserts that the LVA software is essentially useless and does little more than generate noise—the omission of the subsequent exchange between the authors and Lacerda is not a serious gap; however, the exchange is informative, and future researchers in this area will likely want to be aware of both the concerns of Lacerda and the authors' response.

Continued in article

  Hobson, J., W. Mayew, and M. Venkatachalam. 2012. Analyzing speech to detect financial misreporting. Journal of Accounting Research 50 (2): 349392. [CrossRef] OpenURL TRINITY UNIV LIBRARY
  Lacerda, F. 2009. LVA-Technology—The illusion of “lie detection.” In FONETIK 2009, 220226. Stockholm, Sweden: Department of Linguistics, Stockholm University. OpenURL TRINITY UNIV LIBRARY
  Lacerda, F. 2012. Money Talks: The Power of Voice: A Critical Review of Mayew and Venkatachalam's The Power of Voice: Managerial Affective States and Future Firm Performance. Available at: OpenURL TRINITY UNIV LIBRARY
  Lisowsky, P., and M. Minnis. 2013. Financial Reporting Choices of U.S. Private Firms: Large Sample Analysis of GAAP and Audit Use. University of Chicago Booth Research Paper No. 14-01. Available at: OpenURL TRINITY UNIV LIBRARY
  Mayew, W., and M. Venkatachalam. 2012a. The power of voice: Managerial affective states and future firm performance. The Journal of Finance 67 (1): 143. [CrossRef] OpenURL TRINITY UNIV LIBRARY
  Mayew, W., and M. Venkatachalam. 2012b. A Reply to: Money Talks: The Power of Voice. A critical review of Mayew and Venkatachalam's The power of voice: Managerial affective states and future firm performance. Unpublished manuscript. Available at:∼vmohan/bio/files/Lacerdaresponse.pdf OpenURL TRINITY UNIV LIBRARY

1  Of course, the definition of “major corporation” is arbitrary, but in recent research with Pete Lisowsky, we use confidential IRS tax returns and find that there are three times as many privately held than publicly held U.S. firms with more than $100 million in revenues, suggesting that, in fact, most major corporations in the U.S. do not host quarterly conference calls, because they are privately held (Lisowsky and Minnis 2013).

2  Note that the omission of this exchange could have been a result of publication timelines for the monograph rather than an editorial choice. The exchange that I am referring to includes Lacerda (2012) and Mayew and Venkatachalam (2012b). Further responses are located at:


"More On My Reuters Breakingviews Column: The Andersen Tax Name Grab," by Francine McKenna, re:TheAuditors, September 8, 2013 ---

News broke on September 2 that a firm, made up of ex-Arthur Andersen tax partners and called Wealth and Tax Advisory Services LLC, bought the Andersen portion of the Arthur Andersen name from what’s left of that firm and will now call itself Andersen Tax.

The news, as you would expect, garnered much media attention. It says something—but maybe not what the firm’s partners think— that so many years after the destruction of Arthur Andersen by criminal indictment—twelve years—so many people care. Every major media and trade publication as well as several blogs wrote about it. I am quite sure, however, that this attention does not mean the general public has forgotten what the Andersen name stood for.

Better to be talked about than not talked about at all?

The US Editor at Reuters Breakingviews, Jeff Goldfarb, asked me to write an OpEd about the name change for that site.  He may have seen this tweet:

Continued in article

Jensen Comment
There must be a hundred or more local firms with the "Andersen" name. I don't see how you can buy a single name even if it was used by a well-known firm. For example, can Ralph Andersen in Denver name his firm Andersen Bookkeeping?

"Using the Codification to Research a Complex Accounting Issue: The Case of Goodwill Impairment at Jackson Enterprises," by  Casey J. McNellis, Ronald F. Premuroso, and Robert E. Houmes, Issues in Accounting Education, Volume 30, Issue 1 (February 2015) ---

This case is designed to help students develop research skills using the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (Codification or ASC). The case also helps develop students' abilities to analyze and recommend alternatives for a complex accounting issue, goodwill impairment, which is very relevant in today's business world. This case can be used in an undergraduate or graduate accounting class, either in groups of students or as an individual student project.

The requirements for assessing the valuation of goodwill subsequent to acquisition have significantly changed over the past 15 years, most recently with the option to perform qualitative assessments prior to the commencement of the two-step impairment test and the amortization alternative now available for private companies. Furthermore, the valuation of goodwill requires significant judgment, and thus the authoritative literature is accompanied by significant implementation guidance. The standards surrounding goodwill and the following case provide students the opportunity to (1) obtain a further understanding of the related concepts learned from textbooks, (2) sharpen their professional research skills, and (3) apply judgment in a relevant scenario.

Company Overview—Jackson Enterprises

Jackson Enterprises (JE), a publicly traded company, produces and sells products in several sectors of the U.S. economy. One of JE's major segments, which meets the Financial Accounting Standards Board (FASB) definition of an operating segment, is its semiconductor business comprised of two subsidiary companies: Dynamic Technologies (80 percent owned and publicly traded), and ZD Systems (wholly owned). Dynamic Technologies (hereafter, Dynamic) is headquartered in the northeastern section of the U.S. and specializes in the manufacture of electronic sensors and indicators used on automated production systems in North America, Europe, and Asia. In 2011, JE acquired 80 percent of Dynamic's common stock, a transaction resulting in $150 million of recognized goodwill. ZD Systems (hereafter, ZD), a company headquartered in the mid-western section of the U.S., manufactures sensor-type devices used solely for agricultural machines and systems in the U.S. At the time of the acquisition of ZD in early 2006, JE recorded $50 million of goodwill. While the two subsidiaries are classified within the same segment for segment reporting purposes, they are distinct entities and have no intercompany transactions.

Continued in article

February 6, 2014 Week's Top Five SSRN Downloads ---

January 30, 2014 Week's Recent Accounting SSRN Postings ---

Recent Accounting Downloads

Social Security Trust Fund Cash Flows and Reserves
Social Security Bulletin, 75(1): 1-34, 2015
David Pattison
Government of the United States of America - Social Security Administration
Date posted: 
15 Feb 2015

Accepted Paper Series

Using Unstructured and Qualitative Disclosures to Explain Accruals
Richard M. Frankel , Jared N. Jennings and Joshua A. Lee
Washington University in Saint Louis - Olin Business School , Washington University in St. Louis and Florida State University - Department of Accounting

Date posted: 
15 Feb 2015

working papers series

Short-Selling with a Short Wait: Trade- and Account-Level Analyses in Korean Stock Market
Kuan-Hui Lee and Shu-Feng Wang
Seoul National University Business School and Seoul National University - College of Business Administration

Date posted: 
14 Feb 2015

working papers series


Fundamental Relations between Market and Accounting Values
Victoria J. Clout , Michael Falta and Roger J. Willett
University of New South Wales, UNSW Business School , University of Otago and University of Tasmania
Date posted: 
14 Feb 2015

working papers series


Financial Crises, Debt Financing, and Default Risks
Wan-Chien Chiu , Juan Ignacio Peña and Chih-Wei Wang
Adam Smith Business School, University of Glasgow , Universidad Carlos III de Madrid - Department of Business Administration and Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development
Date posted: 
14 Feb 2015

working papers series

Logarithmic Transformations in Cross Section Regression Models of the Long Run Relation between Market and Accounting Values
Roger J. Willett
University of Tasmania

Date posted: 
14 Feb 2015

working papers series


Firm-Level Conditions to Engage in Public-Private Partnerships: What Can We Learn?
Journal of Economics and Business, Vol. 79, 2015
Ana Isabel Lopes and Tânia Caetano
ISCTE-IUL Instituto Universitário de Lisboa and ISCTE-IUL
Date posted: 
14 Feb 2015

Accepted Paper Series


Solving Semi-Linear Risky-Closeout PDE by Discount Boundary Optimization
Vladimir Piterbarg
Date posted: 
14 Feb 2015

working papers series


Corruption in Bank Lending: The Role of Timely Loan Loss Provisioning
Brian Akins , Yiwei Dou and Jeffrey Ng
Rice University - Jesse H. Jones Graduate School of Business , New York University (NYU) - Department of Accounting, Taxation & Business Law and Singapore Management University - School of Accountancy

Date posted: 
13 Feb 2015

working papers series

The Nonlinear Relationship between Accruals Persistence and Accounting Conservatism
Journal of Accounting Review, 2015
Chichuang Hsieh and Shu-hua Lee
Chung HuaTaipei University - Department of Accounting

Date posted: 
13 Feb 2015

Accepted Paper Series


What Can We Learn About the Effects of Food Stamps on Obesity in the Presence of Misreporting?
Lorenzo Almada , Ian M. McCarthy and Rusty Tchernis
Columbia University - School of Social Work , Emory University - Department of Economics and Georgia State University - Department of Economics
Date posted: 
13 Feb 2015

working papers series


Accounting for the Influence of Overall Justice on Job Performance: Integrating Self‐Determination and Social Exchange Theories
Journal of Management Studies, Vol. 52, Issue 2, pp. 231-252, 2015
Samuel Aryee , Fred O. Walumbwa , Reuben Mondejar and Chris W. L. Chu
Hong Kong Baptist University (HKBU) , University of Nebraska at Lincoln - Department of Management , City University of Hong Kong (CityUHK) and University of Surrey

Date posted: 
13 Feb 2015

Accepted Paper Series

Continued at SSRN (search on the word accounting)

From the Stanford University Encyclopedia of Philosophy
Science and Pseudo-Science ---

"Is Economics a Science," by Robert Shiller, QFinance, November 8, 2013 --- Click Here shiller/2013/11/08/nobel-is-economics-a-science?utm_source=November+2013+email&utm_medium=Email&utm_content=Blog2&utm_campaign=EmailNov13
Also see

"Overreliance on the Pseudo-Science of Economics," by Ethan Fosse and Orlando Patterson, The New York Times, February 9, 2015 ---

Every year a Nobel Prize in Economics is awarded when in fact there is no “Nobel Prize in Economics.” There is only a “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” That prize, which was invented by the Swedish central bank nearly 75 years after Alfred Nobel’s death, is an annoyance to the recipients of the five actual Nobel Prizes, those scholars from excluded scientific disciplines such as astronomy, and a living descendant of the donor, Peter Nobel, who has denounced it as a “PR coup by economists.”

This raises the question: Have we given economists too much authority based on mistaken views about their scientific reputation among established scientists and the public?

When asked about the degree to which various academic fields can be considered “scientific,” the American public is decidedly more mixed toward economics, ranking it well below established scientific fields such as physics or biology, and even below sociology.

It’s not the statistical models used by economists that is the problem, but the rejection of qualitative methods, other fields and viewpoints. The gulf between the economic view of the world and that of the lived experiences of the general population is often vast. For example, in June 2009, the National Bureau of Economic Research declared that the United States was no longer in a recession, in stark contrast with the felt, economic experience of 88 percent of Americans the following year.

It’s no wonder, then, that the real-world implementation of mainstream economic ideas has been a string of massive failures. Economic thinking undergirded the “deregulation” mantra leading up to the Great Recession of 2007-2009, and has fared no better in attempts to “fix” the ongoing crisis in Europe. However, nowhere is the discipline’s failure more apparent than in the area of development economics. In fact, the only countries that have effectively transformed from the “Third” to the “First World” since World War II violated the main principles of current and previous economic orthodoxies: China plus the “East Asian Tigers” of Singapore, Hong Kong, Taiwan and South Korea, whose policies entailed extensive state intervention into the economy, institutional reforms and the manipulation of prices and markets. Only recently have economists come to accept the primacy of institutions in explaining and promoting economic growth, a position long held by sociologists and political scientists.

The dominance of economistic thinking in domestic policymaking has similarly led to expensive, frequently disastrous failures. In many of these instances the expertise of sociologists and other academics more suited to the topics at hand were ignored or thoroughly rejected. A clear case in point is the Moving to Opportunity program, a randomized experiment in the 1990s that moved poor families to slightly less poor neighborhoods. Controversially, the researchers found no impact on earnings or educational attainment. The backlash was severe and swift, as sociologists, many of whom had been studying the impact of neighborhoods on poverty for decades, appropriately criticized the limited intervention and narrow focus on a small set of outcomes over a relatively short time period. It also meant scuttling policies that might have resulted in desegregation and real improvements in the housing and life chances of residents of America’s most impoverished neighborhoods.

While the annual ritual of economists awarding themselves a "Nobel Prize in Economics" may seem purely academic, the devastating consequences of placing too much authority in the ideas and policies of economists is too important to ignore.

Jensen Comment
I was tempted to write "ditto for accountics science," but pseudo science is more problematic in economics than accounting, because the media and practice world in economics often pays attention to "scientists" in economics. The media and practice world virtually ignores academic research in accountics science. There are quite a lot of citations in accountics science but those are accountics scientists citing each other. It's more or less a closed loop in the "Cargo Cult" world of accoutics science.

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"
One more mission in what's left of my life will be to try to change this

By way of illustration there are many blogs by economics scientists attempting to communicate with the economics profession and the public in general.  I don't know that a single accountics scientist maintains a blog trying to communicate with anybody..

The New York Times Debate
Are Economists Overrated?
February 9, 2015


Wall Street's brightest minds reveal the most important charts in the world ---

There are only 9 states in the US with little-to-no income tax ---

Jensen Comment
Property taxes are considered high in New Hampshire, but I think the property taxes were slightly higher in Texas. Property taxes valuations do not change very often in New Hampshire, whereas in Bexar County where I lived in Texas the valuations changed every year at a minimum. My valuations never went down in New Hampshire or Texas even when the values of my homes clearly declined. I just recently got a slight valuation downward adjustment in New Hampshire but the valuation is still much higher than what I could sell this home and land for in the dismal real estate market up in these mountains. NH does not in general re-value homes to the sales prices of recent transactions. This tends to frustrate buyers who bought their homes in arms length honest transactions and much less than property tax valuations. Our village tax assessor insists that when anybody buys property for less than the tax valuation amount it is, by definition, a "bahgain purchase."

Vermont taxes everything under the sun, but the loudest complaint I hear from Vermonters is about property taxes. Actually the property taxes are not any worse than those of New Hampshire, but New Hampshire does not tax everything else.  For example, NH has no regressive sales tax --- which is one of the reasons people in Vermont come to NH to shop for big ticket items like HDTVs and new sets of tires. New cars registered in Vermont must pay a sales tax whereas cars registered in NH have no sales tax no matter where they are purchased. This slightly helps car dealers in Vermont, Maine, and Massachusetts survive.

What I don't understand in the above article is the claim that Wyoming property owners pay a 9.5% property tax. That is a whopping rate relative to most states that have less than a 2%-5% property tax rate. Perhaps the base in in Wyoming is not truly the current fair value of the property.

Liberty University ---

"An Online Kingdom Come:  How Liberty U. became an unexpected model for the future of higher education," by Jack Stripling, Chronicle of Higher Education, February 23, 2015 ---

Maybe Jerry Falwell was right.

The late evangelist always figured that most people would dismiss anything that started in this little city, where he founded Liberty University.

"They think of my hometown as a rather primitive Blue Ridge Mountain village, a backwater on the James River," he wrote in his autobiography, Strength for the Journey.

More than four decades after Liberty’s founding, in 1971, few in higher education would count the Rev. Falwell among academe’s historic visionaries. But college leaders, grappling with how to position their institutions for the future, might want to take a closer look at the legacy of Mr. Falwell, who is often better remembered for his divisive reputation as a firebrand conservative.

The little experiment that Mr. Falwell started in his hometown is a pretty big deal now, and the residential campus here does not begin to tell the story. Liberty’s online program boasts nearly 65,000 students, more than any other nonprofit college in the United States, according to federal data. Only the University of Phoenix, the for-profit behemoth with an enrollment of 207,000, trumps Liberty.

At most colleges, the question about online education is no longer so much about whether it will play a role, but rather how big a role and how soon. Nearly three-quarters of academic leaders describe online education as crucial to their institutions’ long-term strategies, a recent national survey found. Yet the traditional classroom experience still dominates. Professors, concerned that face-to-face instruction is pedagogically imperative, can be particularly dubious about scaling up an educational operation to reach a mass audience online.

Continued in article

Jensen Comment
I doubt that every college trying to expand its ratio of online students to onsite students will achieve the success of Liberty University. Liberty is tied into a population of Christian families seeking a college culture of Christianity among students and faculty. The small town location does not hurt recruitment of onsite students as well where crime rates are lower than in most colleges located in larger cities. There are certain advantages to recruitment of faculty in small towns as well, faculty seeking shorter commutes and safer neighborhoods. Acreages may be more reasonably priced for living with a few horses. Of course, other faculty will prefer some of the life style advantages afforded by larger cities.

And certainly a large block of faculty will shy away from the religious and political culture of Liberty University. But not all small town colleges are religious and conservative. For example, nearly all the small colleges in Vermont are to the left of liberal. But the student recruiting base of liberal colleges is not as well defined as that of the recruiting base of Liberty University.

One problem with many small liberal arts colleges seeking to expand their online degree programs is that they may not have the undergraduate feeder programs into career. For example, I always look to see if a small liberal arts college has an accounting degree program. Since accounting faculty get paid more than most other faculty (aside from faculty in medical schools) many liberal arts colleges avoid having accounting degree programs.

Liberty currently has 45 degree programs (including certificate and associate degree alternatives)  ---
I noticed that Liberty has both onsite and online accounting degree programs. Keep in mind that in most states an accounting graduate has to take at least one more year to satisfy the 150-hour requirement to sit for the CPA examination.  In also noticed that Liberty now has a masters (MS) program in accounting as well.

I might add that Liberty apparently has not yet attained AACSB business school accreditation. Perhaps Liberty has not yet put the resources into faculty and programs required to be part of the AACSB.

What will the new initiative by the New York Times to "offer courses" really bring to higher education?

It's only bringing its brand name and not its resources. The real purpose is to sell its brand name for desperately needed cash.

"The New York Times to Offer Courses as Part of New Education Effort," by Casey Fabris, Chronicle of Higher Education, February 19, 2015 ---

The New York Times is re-entering the world of education with a new effort called NYT EDUcation, the company announced on Wednesday, though officials revealed few details.

The Times is collaborating with the CIG Education Group, which helps create branded academic institutions like Sotheby’s Institute of Art, to develop the program. Michael Greenspon, general manager of news services and international for the Times, said the effort had come from the business side rather than the newsroom.

Journalists on the Times staff are busy with their day jobs and would not be required to participate, though he said he could see them offering guest lectures or particularly interested staff members becoming otherwise involved—as long as it did not conflict with their editorial duties.

The Times has tried and failed at such educational efforts before. Its Knowledge Network, an online-education program the newspaper started in 2007 in collaboration with Stanford University, the University of Southern California, and other colleges, was suspended in 2012.

NYT EDUcation differs from the Knowledge Network primarily in its business model. “The Knowledge Network relied primarily on the New York Times brand alone, and I think the combination of the New York Times brand with the educators and the practitioners that CIG brings just is a combination that we alone could not beat,” Mr. Greenspon said.

When the Times suspended the Knowledge Network, it wasn’t trying to get out of the education game completely, he said.

“We took a step back, we didn’t take a step out,” Mr. Greenspon said. “For us, it was really just trying to figure out what was the right way to get back in.”

Though the plan is to offer courses starting this fall, the development of the courses is still in its very early stages. Officials did not say what topics would be covered, who would be teaching them, or how much the courses would cost.

“All the options are on the table,” said Michael Chung, chief executive of CIG. Some courses could be online, others could meet face to face, or they could be hybrids, he added.

Jensen Comment
This begs the question of what the NYT will bring to the colleges and college courses. It would seem that mostly it's bringing a brand name that, in theory, is a stamp of quality. But how rigorous will be the tests of quality? Is the NYT really entering the accreditation business. I don't think so. Is the NYT trying to raise revenue from its brand. I think so.

The Washington Post went even further by buying the for-profit Kaplan University. We must ask what the name name "Washington Post" did for the profits of Kaplan University and vice versa. I don't think it was a whole lot since The Washington Post was going down the tubes until the founder of Amazon, Jeff Bezos, bought The Washington Post and Kaplan University that now operate under a new name called Graham Holdings ---

Instead of bringing an image of quality of The Washington Post name Kaplan University dragged The Washington Post name down with legal battles over admission scams and poor academic quality of Kaplan University ---

What is the biggest deceit in the NYT re-emergence in higher education?

The biggest deceit is that the NYT is bringing resources to bear on higher education. It's quite the opposite. The NYT is trying to sell its brand name to higher education.

The fact of the matter is that the NYT has no spare resources to bring to anything.

"New At Forbes Online: The Precarious Financial Position Of The New York Times," by Francine McKenna, re:TheAuditors, November 11, 2014 ---

Update: The New York Times Public Editor Margaret Sullivan published a column, Shaky Times, Strong Journalism”, shortly after the 3rd Quarter earnings announcement with several critiques of the results and commentary.  My column in Forbes was cited. She said I provided a provided “a tough, and rather dire, analysis of the issues.”

This post was originally published on October 29,2014.

I published some New York Times numbers over at, Time Is Running Short For The New York Times”, in anticipation of the company’s 3Q earnings announcement on October 30. I plan to write a followup when we know if the company’s own predictions about its third quarter have come true.

The Times telegraphed its expected 3Q results to the market on October 1 when it filed a notice with the SEC regarding upcoming staff voluntary buyouts that may convert to involuntary layoffs later. Anything can happen. More important than the third quarter is how the company will end the year and move forward. Even its own predictions are less than encouraging, regardless of how much Paid Post-type storytelling they can put on the books.

I did put a nice link to PwC thought leadership in the piece.

To say the trend for print advertising is very negative would be an understatement. In a just published essay for the Brookings Institution, “The Bad News about the News,” veteran Washington Post reporter and editor Robert Kaiser says nearly 20 percent of advertising dollars still go to print media but “Americans only spend about 5 percent of the time they devote to media of all kinds to magazines and newspapers.” Revenue from print ads will nearly disappear when advertisers catch on.

Circulation revenues rose globally in 2013 after years of decline, but advertising revenue continued to crater, says PricewaterhouseCoopers in its latest Global and Media Entertainment Outlook. By 2018, circulation or subscription revenue will likely match advertising revenue. Consumers will have to become news media’s biggest source of revenue.

Read the rest at, “Time Is Running Short For The New York Times”.

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

The tax inversion wave receded after new Treasury rules sharply reduced the tax benefits to U.S. companies that relocate abroad through an acquisition. But Uncle Sam is still scrutinizing tax structures used by multinationals for evidence that companies are unfairly cutting their tax bills. For instance, the IRS is still reviewing Caterpillar Inc.’s tax filings since 2009, and some experts warn that the heavy-equipment maker’s tax liabilities could grow beyond the $1 billion in penalties and additional taxes the company has already disclosed by the time the agency is done.

At issue for Caterpillar is a 1999 restructuring that shifted profits on sales of replacement parts for its excavators, bulldozers and other equipment outside the U.S. from the company’s U.S. operations to a newly created Swiss subsidiary, a maneuver that sharply reduced its U.S. taxes. In some recent years, Caterpillar’s Swiss tax structure has yielded annual tax savings of about $300 million, according to a report last year by the U.S. Senate’s permanent subcommittee on investigations. If tax savings on that scale are disallowed, the company could face additional payments of as much as $1.5 billion for 2010 through 2014.

Caterpillar has repeatedly said it complied with tax laws, and said in a filing that it would “vigorously contest” the IRS’s position. University of Michigan professor of tax law Reuven Avi-Yonah said that to be blessed by the IRS, a restructuring like Caterpillar’s Swiss maneuver must have a business rationale that goes beyond tax savings. A law professor engaged by Caterpillar testified that the Swiss tax structure indeed was “a sensible business decision to remove a redundant middleman,” but Prof. Avi-Yonah said the IRS has uncovered “a lot of smoking guns,” suggesting the move was a pure tax play.

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

What clever robots mean for jobs ---
Experts are rethinking the belief that technology always lifts employment as machines take on skills once thought uniquely human. Technology has long displaced humans, always creating new, often higher-skill jobs in its wake. But recent advances including driverless cars and computers that can read facial expressions have pushed experts to consider that automation may be nearing a tipping point, when machines master traits that have kept human workers irreplaceable. But we’re not there yet. Tasks that require dexterity, such as folding laundry, are still simple for people but difficult for robots to master.

Map: The Most Common Job in Every State (changing times 1978-2014) ---

Jensen Comment
It's interesting to see how some professions declined since the 1970s. I guess word processing software and answering machines have taken their toll on secretaries.

Robotics are going to change careers even more in the future. I anticipate a time when covered lanes for drones and robot trucks will be developed in an effort to replace those parked delivery trucks blocking traffic on the streets. Farmers no longer will be in their tractors working in the fields. And students will be going one-on-one with robotic teachers.

Amazon now sells over 100,000 books that were written by computers.

Where will people find jobs?


Subprime Lending ---

In finance, subprime lending (also referred to as near-prime, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks such as unemployment, divorce, medical emergencies, etc.[1] Historically, subprime borrowers were defined as having a FICO scores below 640, although "this has varied over time and circumstances."[2]

These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.[3] Many subprime loans were packaged into mortgage-backed securities (MBS) and ultimately defaulted, contributing to the financial crisis of 2007–2008.[4]

Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market. Professor Harvey S. Rosen of Princeton University explained, "The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated-against, the people without a lot of money in the bank to use for a down payment."

From the CFO Journal's Morning Ledger on February 19, 2015

The proportion of loans awarded to subprime borrowers has risen to its highest level since the beginning of the financial crisis. As the Wall Street Journal’s Alan Zibel and Annamaria Andriotis report, the rise of a new breed of company extending credit to applicants with relatively low credit scores and the growth in car financing has fuelled the boom in subprime loans. These finance firms targeting subprime borrowers are often backed by Silicon Valley cash and subject to less scrutiny than conventional banks.

Almost four of every 10 loans for autos, credit cards and personal borrowing in the U.S. went to subprime customers during the first 11 months of 2014, according to data compiled by Equifax . That amounted to more than 50 million consumer loans and cards totaling more than $189 billion, the highest levels since 2007, when subprime loans represented 41% of consumer lending outside of home mortgages. Equifax defines subprime borrowers as those with a credit score below 640 on a scale that tops out at 850.

Lenders’ interest in customers hardest hit by the financial crisis reflects both the relative health of the U.S. economy and firms’ desires to take more risks at a time when ultralow interest rates are depressing profits. It also shows Americans are willing to take on more debt: a New York Fed report released Tuesday that showed total household debt increased $306 billion, or 2.7%, in the fourth quarter of 2014 from the year-ago period, to the highest level since the third quarter of 2010.

Jensen Comment

There's generally a huge difference with respect to subprime loans on assets that can  increase or decrease in value (such as houses and education) versus assets that will only go down in value (e.g., cars and trucks). The real estate bubble that burst in 2007 led borrowers to take out mortgages before 2007 that they had zero hope if repaying before subprime rates jumped up to market rates. The house flipping strategy was based on an assumption by home buyers that their home values would soon jump in value so they could sell it for a profit before the subprime mortgage rate jumped up.

Subprime borrowers on auto loans are not buying those automobiles for purposes of flipping gains because those automobiles will increase in value. Automobiles do not increase in value unless they've reached the status of being antiques. Generally such buyers either assume that they will have sufficient income to eventually pay the higher interest rates or that they will trade in the vehicle for a new vehicle with another subprime loan. However, generally frequent trading in for new vehicles does not pay except for commercial users that put lots and lots of miles on a vehicle every year.

Subprime borrowers on credit cards are sometimes desperate for cash. They borrow at subprime rates thinking they will change their spending habits so they can draw down credit card debt before the credit card rates jump to higher levels. Some succeed, but the majority fail to change their spending habits. Some take on partners (e.g., girl friends or husbands) hoping that the partnership will draw down old credit card debts. Sometimes this works, but often the new partners refuse to take on old debts of partners. This leads to a lot of dissolved partnerships. For example, divorces are caused more by money problems than problems in bed.

Student loans are generally subprime loans with rates that kick up after students graduate. These students assume that the added training or education will sufficiently increase their incomes so that they can afford the higher rates that kick in. However, when those hoped for increases in income do not kick in (beyond the income that would be earned without a diploma) then graduates often default on their loans. For example, college majors that graduate and are still waiting on tables and flipping burgers are highly likely to default or live with their parents because almost everything they earn goes toward paying back their student loans.

President Obama is now forgiving tens of millions of those student loans for the most unfortunate borrowers. However, the majority of graduates who default will not have their loans automatically forgiven by the President. A Republican Congress is less likely than a Democratic Congress to expand the student loan forgiveness program.

"SEC Probes Companies’ Treatment of Whistleblowers:  Agency Officials Concerned About Corporate Backlash Against Whistleblowers," by Rachel Louise Ensign, The Wall Street Journal, February 25, 2015 ---

The Securities and Exchange Commission is probing whether companies are muzzling corporate whistleblowers.

In recent weeks the agency has sent letters to a number of companies asking for years of nondisclosure agreements, employment contracts and other documents, according to people familiar with the matter and an agency letter viewed by The Wall Street Journal. The inquiries come as SEC officials have expressed concern about a possible corporate backlash against whistleblowers.

Some of these types of documents sometimes include clauses that impede employees from telling the government about wrongdoing at the company or other potential securities-law violations, according to lawyers who handle whistleblower cases and some members of Congress. In some cases, the firms require employees to agree to forgo any benefits from government probes, effectively removing the financial incentive for participating in the SEC program.

In a separate January letter to Rep. Maxine Waters (D., Calif.) that was reviewed by the Journal, SEC Chairman Mary Jo White said she was concerned about the agreements.

The SEC has made a push to bring more whistleblower cases since the 2010 passage of the Dodd-Frank financial-reform bill, which created the agency’s whistleblower program.

Whistleblowers have flocked to the SEC program, with the number of tips increasing each year. The agency fielded 3,620 tips on potential securities-law violations in the 2014 fiscal year, up 21% from two years before.

As part of the program, tipsters can get between 10% and 30% of the sum of penalties collected if their information leads to an SEC enforcement action with sanctions of more than $1 million. The program handed out an award for more than $30 million last year to an undisclosed foreign tipster, which was its largest ever.

Dodd-Frank regulations prohibit companies from interfering with employees reporting potential securities-law violations to the agency.

An SEC spokesman declined to comment.

Continued in article

From the CFO Journal's Morning Ledger on February 20, 2015

A whistleblower’s horror story
Recent exposés of less than proprietary behavior in government and in business has led 
Rolling Stone Magazine  to call this era the age of the whistleblower. As Matt Taibbi writes, “whistleblowers are becoming to this decade what rock stars were to the Sixties — pop culture icons, global countercultural heroes.” But today’s whistleblowers tend to partake in little of the spoils and almost none of the glamour. In fact their lives are very often almost destroyed in the process.

Bob Jensen's threads on other whistleblower horror stories ---

From the CFO Journal's Morning Ledger on February 23, 2014

SEC Commissioner Aguilar critiques agency with sharp edge ---
Luis Aguilar, the longest-serving commissioner of the Securities and Exchange Commission laid into the agency on Friday, CFO Journal’s Maxwell Murphy reports. Among his complaints to the audience at the Practising Law Institute’s SEC Speaks conference in Washington, D.C., Mr. Aguilar lamented the SEC’s slow progress on implementing Dodd-Frank reforms, and a dearth of bans on officers and directors that have committed fraud.

Bob Jensen's Fraud Updates ---

In general student loans are subprime loans

How do you repo a college education?

The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.
"Student-Loan Delinquencies Rise in U.S.," by Jeanna Smialek, Bloomberg News, February 17, 2015 ---

(Bloomberg) -- Student-loan delinquencies increased at the end of 2014, a troubling sign that Americans are failing to keep up with payments as education debt climbs, according to the Federal Reserve Bank of New York.

Data from the New York Fed released Tuesday showed 11.3 percent of student loans were delinquent in the final three months of 2014, up from 11.1 percent in the prior quarter. The share of auto loans at least 90 days overdue also rose, climbing to 3.5 percent from 3.1 percent the prior period, even as fewer credit card and mortgage loan payments were late.

“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student-loan balances and delinquencies is concerning,” Donghoon Lee, research officer at the New York Fed, said in an e-mailed statement. “Student-loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”

The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.

Education loan balances have skyrocketed over the past decade. In the first quarter of 2005, outstanding student debt stood at $363 billion -- about a third of the current level, based on a 2013 New York Fed report.

Delinquency rates for student loans probably understate the actual situation, according to today’s report. About half of the student loans are in deferment, in grace periods or in forbearance, temporarily removing them from the repayment cycle.

Education debt delinquency levels have come down since 2013, when the rate reached 11.8 percent, yet remain elevated from around 6 percent a decade ago, according to the New York Fed. Student loans are the type of debt most likely to be past-due, having surpassed credit-card delinquency rates in 2012.

Jensen Comment
When car and truck owners default a repo guy shows up in the dead of night and takes the vehicle to the bank. How do you repo a college education?

EY To the Point: New consolidation guidance will affect entities in all industries ---$FILE/TothePoint_BB2932_Consolidation_19February2015.pdf

What you need to know

• The FASB issued final guidance that eliminates the deferral of FAS 167 and makes changes to both t he variable interest model and the voting model .

• While t he new guidance is aimed at asset managers , all reporting entities involved with limited partnerships or similar entities will have to re - evaluate these entities for consolidation and revise their documentation .

• In some cases, consolidation conclusions will change. In other cases, a reporting entity will need to provide additional disclosures if an entity that currently isn’t considered a variable interest entity ( VIE ) is considered a VIE under the new guidance .

• Under the new guidance, a general partner will not consolidate a partnership or similar entity under the voting model.

• For public business entities, the guidance is effective for annual and interim periods beginning after 15 December 2015. Early adoption is permitted

Clawback ---

"Study: Companies Taking Own Action on Clawbacks," by Tammy Whitehouse, Compliance Week, February 10, 2015 ---

What Makes Us Human?: Chomsky, Locke & Marx Introduced by New Animated Videos from the BBC ---

Before reading the tidbits below you may want to watch a video on the Scenarios of Higher Education for Year 2020 ---
The above great video, among other things, discusses how "badges" of academic education and training accomplishment may become more important in the job market than tradition transcript credits awarded by colleges. Universities may teach the courses (such as free MOOCs) whereas private sector companies may award the "badges" or "credits" or "certificates." The new term for such awards is a

MOOC (including how to sign up for a free MOOC) ---

Coursera ---

Coursera /kɔərsˈɛrə/ is a for-profit educational technology company founded by computer science professors Andrew Ng and Daphne Koller from Stanford University that offers massive open online courses (MOOCs). Coursera works with universities to make some of their courses available online, and offers courses in physics, engineering, humanities, medicine, biology, social sciences, mathematics, business, computer science, and other subjects. Coursera has an official mobile app for iOS and Android. As of October 2014, Coursera has 10 million users in 839 courses from 114 institutions.

Continued in article

Jensen Comment
Note that by definition MOOCs are free courses generally served up by prestigious or other highly respected universities that usually serve up videos of live courses on campus to the world in general.  MOOC leaders in this regard have been MIT, Stanford, Harvard, Penn, and other prestigious universities with tens of billions of dollars invested in endowments that give these wealthy universities financial flexibility in developing new ways to serve the public.

When students seek some type of transcript "credits" for MOOCs the "credits" are usually not free since these entail some types of competency hurdles such as examinations or, at a minimum, proof of participation. The "credits" are not usually granted by the universities like Stanford providing the MOOCs. Instead credits, certificates, badges or whatever are provided by private sector companies like Coursera, Udacity, etc.

Sometimes Coursera contracts with a college wanting to give its students credits for taking another university's MOOC such as the now infamous instance when more than half of San Jose State University students in a particular MOOC course did not pass a Coursera-administered final examination.
"What Are MOOCs Good For? Online courses may not be changing colleges as their boosters claimed they would, but they can prove valuable in surprising ways," by Justin Pope, MIT's Technology Review, December 15, 2014 ---

The following describes how a company, Coursera, long involved with the history of MOOCs, is moving toward non-traditional "credits" or "microcredentials" in a business model that it now envisions for itself as a for-profit company. Also note that MOOCs are still free for participants not seeking any type of microcredential.

And the business model described below probably won't apply to thousands of MOOCs in art, literature, history, etc. It may apply to subsets of business and technology MOOCs, but that alone does not mean the MOOCs are no longer free for students who are not seeking microcredentials. They involve payments for the "microcredentials" awarded for demonstrated competencies. However these will be defined in the future --- not necessarily traditional college transcript credits. A better term might be "badges of competency."  But these will probably be called microcredentials.

Whether or not these newer types of microcredentials are successful depends a great deal on the job market.
If employers begin to rely upon them, in addition to an applicant's traditional college transcript, then Coursera's new business model may take off. This makes it essential that Coursera carefully control the academic standards for their newer types of "credits" or "badges."


"Specializations, Specialized," by Carl Straumsheim, Inside Higher Ed, February 12, 2015 ---

Massive open online course providers such as Coursera have long pointed to the benefits of the data collected by the platforms, saying it will help colleges and universities understand how students learn online. Now Coursera’s data is telling the company that learners are particularly interested in business administration and technology courses to boost their career prospects -- and that they want to take MOOCs at their own pace.

As a result, Coursera will this year offer more course sequences, more on-demand content and more partnerships with the private sector.

Asked if Coursera is closer to identifying a business model, CEO Rick Levin said, “I think we have one. I think this is it.”

Since its founding in 2012, Coursera has raised millions of dollars in venture capital while searching for a business model. Many questioned if the company's original premise -- open access to the world's top professors -- could lead to profits, but with the introduction of a verified certificate option, Coursera began to make money in 2013. By that October, the company had earned its first million.

In the latest evolutionary step for its MOOCs, Coursera on Wednesday announced a series of capstone projects developed by its university partners in cooperation with companies such as Instagram, Google and Shazam. The projects will serve as the final challenge for learners enrolled in certain Specializations -- sequences of related courses in topics such as cybersecurity, data mining and entrepreneurship that Coursera introduced last year. (The company initially considered working with Academic Partnerships before both companies created their version of Specializations.)

The announcement is another investment by Coursera in the belief that adult learners, years removed from formal education, are increasingly seeking microcredentials -- bits of knowledge to update or refresh old skills. Based on the results from the past year, Levin said, interest in such credentials is "palpable." He described bundling courses together into Specializations and charging for a certificate as “the most successful of our product introductions." Compared to when the sequences were offered as individual courses, he said, enrollment has “more than doubled” and the share of learners who pay for the certificate has increased “by a factor of two to four.”

“I think people see the value of the credential as even more significant if you take a coherent sequence,” Levin said. “The other measure of effectiveness is manifest in what you’re seeing here: company interest in these longer sequences.”

Specializations generally cost a few hundred dollars to complete, with each individual course in the sequence costing $29 to $49, but Coursera is still searching for the optimal course length. This week, for example, learners in the Fundamentals of Computing Specialization were surprised to find its three courses had been split into six courses, raising the cost of the entire sequence from $196 to $343. Levin called it a glitch, saying learners will pay the price they initially agreed to.

The partnerships are producing some interesting pairings. In the Specialization created by faculty members at the University of California at San Diego, learners will “design new social experiences” in their capstone project, and the best proposals will receive feedback from Michel "Mike" Krieger, cofounder of Instagram. In the Entrepreneurship Specialization out of the University of Maryland at College Park, select learners will receive an opportunity to interview with the accelerator program 500 Startups.

As those examples suggest, the benefits of the companies’ involvement mostly apply to top performers, and some are more hypothetical than others. For example, in a capstone project created by Maryland and Vanderbilt University faculty, learners will develop mobile cloud computing applications for a chance to win tablets provided by Google. “The best apps may be considered to be featured in the Google Play Store,” according to a Coursera press release.

Anne M. Trumbore, director of online learning initiatives at the University of Pennsylvania’s Wharton School, said the capstone projects are an “experiment.” The business school, which will offer a Specialization sequence in business foundations, has partnered with the online marketplace Snapdeal and the music identification app Shazam, two companies either founded or run by Wharton alumni.

“There’s not a sense of certainty about what the students are going to produce or how the companies are going to use it,” Trumbore said. “Snapdeal and Shazam will look at the top projects graded highest by peers and trained staff. What the companies do after that is really up to them. We have no idea. We’re casting this pebble into the pond.”

Regardless of the companies' plans, Trumbore said, the business school will waive the application fee for the top 15 learners in the Specialization and provide scholarship money to those that matriculate by going through that pipeline.

“The data’s great, but the larger incentive for Wharton is to discover who’s out there,” Trumbore said.

Levin suggested the partnering companies may also be able to use the Specializations as a recruitment tool. “From a company point of view, they like the idea of being involved with educators in their fields,” he said. “More specifically, I think some of the companies are actually hoping that by acknowledging high-performing students in a couple of these capstone projects they can spot potential talent in different areas of the world.”

While Coursera rolled out its first Specializations last year, Levin said, it also rewrote the code powering the platform to be able to offer more self-paced, on-demand courses. Its MOOCs had until last fall followed a cohort model, which Levin said could be “frustrating” to learners when they came across an interesting MOOC but were unable to enroll. After Coursera piloted an on-demand delivery method last fall, the total number of such courses has now reached 47. Later this year, there will be “several hundred,” he said.

“Having the courses self-paced means learners have a much higher likelihood of finishing,” Levin said. “The idea is to advantage learners by giving them more flexibility.”

Some MOOC instructors would rather have rigidity than flexibility, however. Levin said some faculty members have expressed skepticism about offering on-demand courses, preferring the tighter schedule of a cohort-based model.

Whether it comes to paid Specializations versus free individual courses or on-demand versus cohort-based course delivery, Levin said, Coursera can support both. “Will we develop more Specializations? Yes. Will we depreciate single courses? No,” he said. “We don’t want to discourage the wider adoption of MOOCs.”

Continued in article

"The Credit System in Science is Outdated," by Terry McGlynn, Chronicle of Higher Education, February 13, 2015 ---

As scientists, we get credit by having our names on journal articles. Authorship of a scientific paper is binary: Either you are one of the authors, or you aren’t. That coarse system is central to the practice of science but does not reflect the complex weave of collaborative work on which most scientific papers are built.

We are far more than just our papers, but those papers count, in the literal sense. How many papers you publish, and where they are published, affects who gets hired, who gets tenure, who gets funded, and with whom we collaborate. Other factors matter (such as gender, money, and personality), but authorship is foundational.

Now that authorship system is so outdated that it’s holding science back. We have the tools and volition to broadly collaborate and share information, but the formation of collaborations is hindered because the credit system does not adequately represent actual contributions.

What are the types of authorship? That varies among fields, but I can generalize quite a bit. The first author listed on a scientific paper did the most work and gets the most credit. That person usually ran the project and wrote most of the paper. Being first author is a big deal, so much so that we have invented a bizarre phenomenon: co-first authorship. In a co-first-authored paper, the first two authors allegedly share the honor of first authorship, by the grace of two asterisks indicating, “These authors contributed equally to this work.”

The final author named on the paper is often the senior scholar on the project. For scientists building their profile as a PI, being a senior author is important because it shows successful leadership in the laboratory and mentorship of junior scientists. Sometimes senior authors work really hard on the papers and are instrumental in the research. Other times, the senior author gets last position because he or she graciously let the first author use a shared desk in their lab.

But it’s not that simple. Sometimes the last author is not the senior author. The last author might have made the least contribution to the paper. How do you know? Unless you’re well involved in that subfield, I wish you luck. Sometimes the second-to-last author position is saved for the second-most senior scientist on the project. But you might not know for sure, because we don’t label senior authors as such. That would be uncouth.

What is middle authorship? It could mean almost anything. Someone listed in the middle could be instrumental or incidental. As a middle author, my contribution has ranged from a few hours to several weeks of working round-the-clock in challenging conditions. But there’s no way to tell just by looking at these papers or at my CV.

After a paper comes out, credit is harvested via citations.Suddenly authorship order no longer matters. I get the same measure of credit for a well-cited, single-authored paper as I do for a well-cited article in which I’m buried as middle author among dozens of other co-authors.

I hope I have convinced you that this nonsensical system is a hot mess. Is this truly how people who make career-altering decisions decide the magnitude of our scientific achievements? Oy.

To be fair, I do see some concern in scientific circles about preventing trivial co-authorships. Some journals list minimum criteria or have prescriptive publishing guidelines. An increasing proportion of journals require an “author contributions” section, wherein the individual contributions of each of the authors are specified. Nevertheless, as far as I can tell, these efforts haven’t changed the modus operandi within science.

There is a glaring disparity between what we claim about authorship, and how people actually become authors in practice. It is standard operating procedure to trade a contribution for authorship. Since authorship is the currency for credit, and few want to work for no credit, the only way to share effort is to make sure that all contributors are authors. That practice might subvert the official definition of authorship, but it is also the glue that keeps fertile collaborations intact.

When you help someone out, what qualifies as a professional courtesy and what constitutes grounds for middle authorship?

That depends on your altruism and negotiation skills. If a systematist publishes a paper with a taxonomic revision of a group of rare organisms, you don’t get authorship for sending especially needed rare samples. That’s just an expected courtesy. But if you have similar samples already sitting in your lab that are needed for a certain kind of specialized experimental project, then you can probably ask for authorship -- but not if you’ve already deposited those samples in a museum collection. - See more at:

Continued in article

Bob Jensen's threads on MOOCs are at

Monopoly: How the Original Version Was Made to Condemn Monopolies --- 

The Many and Varied Applications of the Monopoly Game in Accounting in Accounting, Economics, and Other College Courses ---

Ex-Wells Fargo banker gets 5 years for insider trading ring ---

Federal prosecutors say a former Wells Fargo Securities investment banker, his stockbroker friend and a network of friends and family were sentenced to prison after using insider information to pocket $11 million.

The U.S. attorney's office in Charlotte said Friday that 33-year-old former banker John Femeni of Greenwich, Connecticut; 34-year-old Shawn Hegedus of Centerreach, New York; and his 34-year-old wife Danielle Laurenti of Massapequa Park, New York, were sentenced to between 1 ½ and 10 years in prison. Thirty-four-year-old Matthew Musante of Miami, Florida, was sentenced to 3 ½ years.

All pleaded guilty to insider trading and money laundering conspiracy. Four others were sentenced earlier.

Continued in article

Bob Jensen's fraud updates ---

"IASB proposal would clarify how entities classify a liability," by Ken Tysiac, Journal of Accountancy, February 10, 2015 --- 

The International Accounting Standards Board (IASB) issued a proposal Tuesday that is intended to clarify how entities classify debt, particularly when it is coming up for renewal.

The proposal is designed to improve presentation in financial statements by clarifying the criteria for the classification of a liability as either “current” or “non-current.” The proposed amendments would accomplish this by:

  • Clarifying that the classification of a liability as either “current” or “non-current” is based on the entity’s rights at the end of the reporting period, and
  • Clearly describing the link between the settlement of the liability and the outflow of resources from the entity.

The proposed amendments are contained in the exposure draft Classification of Liabilities (Proposed Amendments to IAS 1). The IASB is seeking comments, which can be made at the board’s website.

Jensen Comment
Some types of "clarification" may not be possible. For example, one thing that's really hanging up the new accounting standard for operating lease contracts is the seemingly impossibility of booking operating lease renewals, especially when companies will react to the new leasing standard by shortening the lease terms with high probabilities of renewal of short-term lease contracts..

Another problem of liability accounting standards is that they may sometimes just be fiddling when firms like coal-burning power companies literally burn. We can try to measure and classify debt of a coal company balance sheets. But the future for coal-based energy is so uncertain that things like debt/equity rations may be almost nonsense in terms of measuring the real and uncertain "liabilities" of these power companies.

That of course does not mean that standard setters like the IASB should not be constantly seeking to fine tune existing standards. A little fine tuning could have made Nero's fiddle much sweeter sounding.

Jensen Note
Entry level accountants are usually called "staff accountants." Upon graduation some of the most plentiful jobs in the world are for staff accountants. Note that in the USA, however, CPA firms generally require that students become qualified to immediately take the CPA examination, and that generally takes a fifth year of study, usually but not always for a masters degree. The same can be said for chartered accountants in many other nations.

Staff Accountants are in the Top Ten Below
"10 jobs with the best salary potential," Jada A. Graves, US News & World Report, February 3, 2015 ---

Jensen Comment
Also important is job-change opportunity. Many college graduates go to work for CPA firms never intending to stay with those firms. Those firms offer terrific opportunity for technical training and exposure to clients needing accounting, internal auditing, forensics, information technology, and tax services. More often than not those that leave the CPA firms and stay in the work force go with clients.

Salaries may or may not be higher, but there is often less travel and job stress when working for a client. Making partner with a CPA firm often entails long hours and public relations skills requiring special talents. Partners are paid well, but less than 15% of the new hires in large CPA firms become partners. Partners generally have skills in obtaining and retaining clients. The same, by the way, is true of law firms where much of the technical work is often performed by lower-paid non-partners.

My point is that students hoping to become partners in CPA firms and law firms should take courses in communications. Foreign languages can also help since sometimes the path to partnership is easier for USA accounting graduates to work in off shore offices of multinational CPA firms such as working in offices in Moscow, Mexico City, and various cities in South America and Asia.

Bob Jensen's threads on careers ---

Map: The Most Common Job in Every State (changing times 1978-2014) ---

From the Chronicle of Higher Education
Search for the Latest Job Openings in any Discipline of Interest ---

Jensen Comment
When I search for "Accounting" and "Faculty & Research" today there are 256 jobs posted in the past 30 days. However, not all of these jobs seem property classified as both "Accounting" and "Faculty & Research." Also I know of some job openings for accounting professors that are not listed for major universities.

For persons seeking jobs as accounting faculty in the USA perhaps a better place to look might be the American Accounting Association Career Center ---
Job seekers may also post their resumes at this center.

Since there are so many faculty vacancies in accountancy, job seekers with Ph.D. degrees from AACSB-accredited universities are advised to contact colleges and universities where they would most like to be employed.

Bob Jensen's threads on careers are at

Careers Getting a Boost from Foreign Experience

Jensen Comment
On infrequent occasions I've witnessed how foreign experience seemed to improve the odds of my former students being admitted to a Big Four partnership. These were not top students, and on graduation day I would not have predicted that they would become partners in Big Four firms. I might add that some of these students also took double majors in foreign languages such as Russian, Chinese, and Spanish. That is perhaps why they were afforded opportunities to work for the Big Four in Moscow, China, and Latin America.

From the CFO Journal's Morning Ledger on February 10, 2015

How many stamps are in your passport? Or perhaps more importantly, how many work visas? Nearly 40% of CFOs at the largest 1,000 public and private companies in the U.S. have worked abroad, and that figure is expected to rise, CFO Journal’s Kimberly S. Johnson reports.

The trend follows the money: Companies in the S&P 500 got roughly half their sales outside the U.S. in 2013, up about 10% over the past decade, according to S&P Dow Jones Indices. And recent earnings figures underscore the value of understanding the local consequences of extreme volatility in currencies, commodities and politics.

Years spent in the trenches abroad can help an executive navigate cultural mores, regulations and supply-chain disruptions. “I don’t believe you can get there by being there a week or two and flying back out,” said Thomas Mangas, CFO of Starwood Hotels & Resorts Worldwide Inc.


"Does the College Major Really Matter?" by Jeffrey J. Selingo, Chronicle of Higher Education, February 10, 2015 ---

Jensen Comment
This begs the question of when majors do matter, and they matter most when choosing the wrong one can add a year or more to taking licensing examinations for careers. For example, it now takes five years (150 credits) to sit for the CPA examination. Not choosing accounting as a major in the second year can add more semesters to getting a degree.

When my university added the fifth year masters program in accounting, however, it did so in what I consider the correct way. It moved some of the advanced accounting courses to the masters program, thereby leaving more flexibility in the first four years for double majoring or at least taking minors in other disciplines like mathematics, communications, computer science, and even another language.

Not choosing engineering as a major can put a student out of synch in a curriculum plan. The same can be said of other majors like nursing and pharmacy and other careers with licensing examinations.

Of course the world does not come to an end if a student has to take more time to graduate due to uncertainty about a career plan. But often the trial and error process does not add a whole lot to critical reasoning skills that often come in more advanced courses like courses in philosophy, economics, etc.

Bob Jensen's threads on careers ---

From the CFO Journal's Morning Ledger on February 18, 2015

Foreign Corrupt Practices Act (FCPA) ---

Rash of civil suits complicates FCPA cases
Companies that disclose their entanglement in foreign corruption cases are increasingly exposing themselves to problems far beyond the need to settle with government regulators. Now, more and more, they also have to contend with being sued by their own investors – who say they have been harmed by their company’s alleged misconduct overseas. These lawsuits may have questionable success rates, but they are influencing the timing and degree of disclosure of possible misconduct by corporate counsels to the U.S. Justice Department. The suits are often filed soon after news breaks that a company is conducting an internal investigation into allegations that its employees bribed foreign officials, even when few facts have been established.

Bob Jensen's Fraud Updates ---

Word of Advice
If you cook the books, serve them up HOT!

"Former accountant pleads guilty to cooking the books for adult entertainment businesses," by Nina Lincoff, South Florida Business Journal, February 17, 2015 ---

Bob Jensen's recipes for book cooking ---

From the CFO Journal's Morning Ledger on February 17, 2014

A nine-month workers dispute that has hamstrung West Coast port activity is starting to bite into business sectors across the U.S. and beyond. The standoff between the Pacific Maritime Association, which represents port employers, and the International Longshore and Warehouse Union saw ships remain unloaded over the holiday weekend. The White House announced Saturday that Labor Secretary Tom Perez will meet with both parties on Tuesday.

In the meantime, the economic cost of the dispute is mounting, the Wall Street Journal reports. The Agriculture Transportation Coalition estimates that port delays and congestion have reduced U.S. agricultural exports by $1.75 billion a month, while the North American Meat Institute put losses to U.S. meat and poultry producers at more than $85 million a week. For retailers, the rerouting and carrying costs and other expenses could bring the industry’s total costs to $7 billion this year, according to analysis by consulting firm Kurt Salmon.

The port delays also are causing problems for auto makers. On Monday, Honda Motor Co. said it was experiencing parts shortages at plants in Ohio, Indiana and Canada that will affect its production on multiple days over the next week. Small-business owners with limited inventory to cover sales are also being pummeled.

GM is just trying to do the right thing --- Yeah Right!

From the CFO Journal's Morning Ledger on February 17, 2014

GM heads back into court
Gen Motors Co. is in court Tuesday fighting to maintain a bankruptcy shield blocking legal claims from customers seeking compensation for declining resale values and injuries stemming from a defective ignition switch linked to at least 56 deaths. The legal battle, with plaintiffs seeking billions of dollars in damages, is largely the result of a significant concession GM made more than five years ago to expedite its emergence from bankruptcy proceedings. The auto maker is now back in court because that deal weakened the very bankruptcy shield that GM is now trying to keep.

Jensen Comment
An illustration of how difficult it is to measure contingent liabilities.

Not Democracy in Theory But Democracy in Action

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

Companies with a healthy revenue stream must routinely balance between returning cash to shareholders through buybacks and dividends and spending more on themselves to fuel future growth—or simply hoarding the cash for a rainy day. But for General Motors Co., if an architect of its 2009 bailout gets his way, its hand will be forced and $8 billion will go toward reducing its outstanding share count.

Harry J. Wilson, a former hedge-fund executive who helped usher GM through a government-led restructuring that ultimately cost taxpayers about $10 billion, has emerged as one of the auto maker’s chief antagonists. Mr. Wilson, who holds GM shares and represents hedge funds collectively holding more than 34 million shares, nominated himself as a GM board candidate and wants the nation’s largest car maker to spend on buybacks.

Mr. Wilson’s move is the latest challenge to hit America’s biggest companies. Activists have collected record amounts of cash to launch campaigns against blue chips including Procter & Gamble Co., DuPont Co. and even Apple Inc. As for GM, the company says it has had regular contact with Mr. Wilson’s group and would evaluate him as a board nominee, making a recommendation “based on the best interest of all shareholders.”

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

2015 Technology Industry Outlook

Enterprise quests for greater efficiency and competitive advantage through IT will drive significant tech sector growth in 2015 and beyond, says Paul Sallomi, vice chairman and U.S. Technology leader, Deloitte Tax LLP. Mr. Sallomi points to the Internet of Things and digital disruption as major trends that will create new tech sector opportunities this year and explains why being a large technology conglomerate could become a competitive disadvantage in the sector.

Continue Reading Today's Article »

Read more Deloitte Insights »

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

Denmark’s negative rates spark creativity
Banks in Denmark are taking highly unusual steps to deal with negative interest rates arising from the central bank’s efforts to defend its currency peg to the euro. FIH Erhvervsbank announced plans to charge retail customers to hold money in their deposit accounts, the first Danish bank to do so.

Jensen Comment
Try that old under-the=mattress trick.

Instructor Indicted Over Textbook Sales ---

Jensen Comment
Colleges should be very explicit about policies in this regard. It's common for authors of textbooks to adopt their own textbooks in classes they teach. However, the ethical thing to do is not to profit from those sales. It's difficult to refund textbook royalties to students. Some authors donate the funds to the university or charities, but they still might be capitalizing on tax breaks. Some authors, however, simply pocket the royalties from sales of the books to their own students.

In accounting it's common for publishers to seek out coauthors in their largest markets such as universities where thousands of students buy the textbook every term. With eBook publishing there are added incentives since there's no market for used eBooks.

I was at a university where there were two accounting professors who were coauthors on different basic accounting texts. To be "fair to the authors," the departmental policy became to alternate the basic textbook every year. Yeah right!

It's quite another matter to promote your own publishing company within a college. This may even intimidate assistant professors if the owner of the company is also the Department Chair or sits on the P&T Committee.

Bob Jensen's Fraud Updates ---

Harvard Business School students list the best and worst parts of their experience there ---

Jensen Comment
The word "push" in relation to student assignments and examinations needs to be defined with more precision. The Harvard Business School is noted for extensive writing assignments each week that are generally graded by professors themselves. The HBS is noted for its case study assignments and competitive pedagogy in case discussion courses.

However, without knowing the facts my hunch is that flunking out of the Harvard Business School, apart from voluntarily dropping out, is probably a rare event. Hence the term "push" is a relative term. The same can probably be said for the Harvard Law School. In both the HBS and Harvard Law the hardest thing is getting into these programs. Students who are admitted usually have high academic skills plus unique talents and backgrounds.

To date there are 83 HBS professors rated on RateMyProfessor. Sometimes the ratings tell more about the students than their professors. However, keep in mind that students who send in evaluations to RMP are self-selecting. This is not a random sample of the thousands of HBS graduates. The numerical ratings are generally nonsense due to a sparse number of evaluations sent in for given professors. The most revealing information can sometimes be in the added commentaries.

An example of a commentary on one HBS professor:

too easy after all this is harvard dammit. we were featured in legally blonde with reese witherspoon


"Time to Get Better," by Joe Hoyle, Teaching Blog, February 4, 2015 ---

Jensen Comment
I think how well students read/memorize textbooks depends both upon how you teach classes (e.g., by calling on students to answer questions from the chapters) and how you test (e.g., model problems directly after textbook illustrations). Many teachers teach directly from textbooks. This is sad, because students can learn from textbooks on their own such that the teacher is not much value added in the course other than his or her role in forcing textbook learning.

Risk averse students often give high teaching evaluations to textbook teachers, because those students do no like uncertainty in quizzes, examinations, and class call outs. This also is sad, because life on the job is full of uncertainties that are not covered in textbooks.

This makes me wonder how much of our future popular textbooks and textbook supplements will be written by robots
"America’s oldest news agency wrote 10X more articles by having robots do what reporters used to do," by Eugene Kim, Business Insider, January 30, 2015 ---

If you thought robots could never replace journalists, think twice.

That’s certainly been the case at The Associated Press, America’s oldest 24-hour news agency. AP produced roughly 3,000 articles on company earnings last quarter, 10X more than it used to, by using automated technology.

According to The Verge, AP has been able to do it by partnering with Automated Insights, a company that specializes in “robot journalism.” Automated Insights uses artificial intelligence and Big Data analysis to automatically generate data-heavy articles, such as earnings reports.

Initially there was some human editing involved, but now most of the articles are fully automated — with far fewer errors than human reporters and editors. In theory, it could crank out 2,000 articles per second.

But AP says the purpose of having "robot journalists" is not about replacing its reporters, at least in the foreseeable future. Instead, it is to allow the reporters to spend more time on high-quality journalism.

Of course, this is not the first time we’ve seen a computer software do a better job than its human counterparts. Last year, we wrote about Narrative Science, another story automation company, that claims it can do the type of deep analysis a $250,000 per year consultant would do.

Read more:

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 ---

"The Newest Employees at Lowe’s Hardware Store: Robots," by Mae Anderson, Yahoo Tech, October 28, 2014 ---

No More Jobs on the Farms or Most Anywhere Else
"Get Ready for Robot Farmers,"  by Jodi Helmer, CNNMoney via Yahoo Tech, October 24, 2014 ---

"Patented Book Writing System Creates, Sells Hundreds Of Thousands Of Books On Amazon," by David J. Hull, Security Hub, December 13, 2012 ---


Jensen Comment
This makes me wonder how much of our future popular textbooks and textbook supplements will be written by robots.

Before looking up one estimated answer, try to figure out what Tom Brady will owe when both receiving the now-famous truck award plus what he owes for giving it to his teammate Malcomb Butler.

The truck's value is estimated at $34,000. "Assuming Brady has made [$5.43] million of taxable gifts up to this point in his life (a safe bet), "

One Answer

Will Butler also have to pay a tax on the gift?

"Advances in Accounting: Incorporating Advances in International Accounting 2014 Update," by Jim Martin, MAAW's Blog, February 4, 2015 ---
List of articles from the 2014 issues of Advances in Accounting: Incorporating Advances in International Accounting.

"Behavioral Research in Accounting 2014 Update," by Jim Martin, MAAW's Blog, February 6, 2015 ---

For a complete bibliography from 1989-2014 see

"When Auditors Get Mixed Up In M&A, Smaller Clients Get Hurt," by Francine McKenna, re:TheAuditors, February 3, 2015 ---

Over at I’ve written about a new academic study, Shared Auditors in Mergers and Acquisitions, to be published soon in the Journal of Accounting and Economics that documents an interesting, rarely commented on auditor conflict of interest. The data suggests that when an acquiring company and its target share the same auditor, the audit firms favor acquirers at the expense of the smaller target audit clients. The researchers are also more bold than I have ever seen in an academic study in alleging that auditors prioritize their own self-interest and larger clients by using confidential information about the smaller clients to benefit the big ones.

From the study:

“Results suggest that auditors frequently violate their duty to put the interests of their clients ahead of their own in what appears to be a failure to protect confidential client information within their practice offices.”

There are plenty of studies that talk about shared advisors in M&A like investment banks and lawyers. (There is also a study cited in the above paper and also to be published soon in the Journal of Accounting and Economics that focuses solely on the finance impact of this shared auditor scenario, Cai, Kim, Park and White (2014)) Banks and lawyers are well known to favor the larger clients. But companies choose those advisors for the deals and, I assume, do so willingly and knowing that conflicts must be managed.

From the study:

We anticipate that shared auditors may favor acquisitive clients over targets for at least two reasons. First, an auditor’s long-term incentives (even within an auditor’s practice office) are more closely aligned with those of their acquisitive clients. Our intuition follows that applied to shared investment bank advisors who are more likely to favor acquiring firms when representing both a target and an acquirer in the same deal (Agrawal et al., 2013).


We do not incorporate selection into our main analysis as selection issues with shared auditors in M&A appear to be less of a concern as compared to shared advisors in M&A deals (Agrawal et al., 2013). This is because both an acquirer and a target make the explicit choice to have a shared investment bank advise each of them for a specific transaction. In contrast, a shared auditor is a result of both a target and acquirer independently contracting with an audit firm to receive audit services prior to a bid being announced.

Recently the New York State Department of Financial Services (NYSDFS) fined and sanctioned Deloitte and PricewaterhouseCoopers for sacrificing independence, integrity and objectivity while providing consulting services to Standard Chartered and Bank of Tokyo-Mitsubishi, respectively, that were mandated by regulatory sanctions against the banks. These regulatory actions go beyond a typical focus by the SEC and PCAOB on the audit relationships of public accounting firms only.

From my article at Medium:

Continued in article

Bob Jensen's threads on professionalism in auditing and accounting ---

"The Rich Man’s Dropout Club:  Whatever happened to the teenage entrepreneurs whom Peter Thiel paid to forgo college?" by Beth McMurtrie, Chronicle of Higher Education, February 8, 2015 ---

Jensen Comment
This article is too long and too complicated to summarize here. In the late 1960s a colleague of mine named Jack Muth taught operations at Michigan State University where I taught accounting as an assistant professor. Jack put off getting getting his Ph.D. diploma at Carnegie-Mellon University because he saw no need for the foreign language requirement. He continued working at CMU as a research associate ABFL (All-But-Foreign-Language).

As a ABFL research associate Jack had an opportunity at some point to go to France. He then saw a need to learn some French, took some coursework, met the language requirement for his Ph.D. at CMU, and picked up his diploma. He then worked for several years as an assistant professor but was not awarded tenure at CMU. He later joined the faculty at MSU, was given tenure in advance, had almost no record of research and publication beyond his famous rational expectations model developed when he was still at CMU, and spent much of his time pursuing his obsession with playing in a string quartet ---

My point is that some people, often brilliant people with resources to be financially independent, are upset over time wasters that include requirements in college curriculum and job duties that they view as a waste of time for themselves. In college they're in a hurry to go places and do things. In Jack's case Bill Gates and many other well-known college dropouts had not yet entered college so they were not his role models. I'm not sure Jack had a role model. Unlike Bill Gates and the Thiel Fellows discussed in the above article Jack Muth did not have entrepreneurial aspirations ---
What Jack really wanted was to what he was good at but not brilliant --- playing the viola.

Some brilliant students try to avoid the traditional role models of graduating from college, going to work for an organization, and performing according to job specifications. For example, some view joining a tenure track as a waste of time if it entails counting publications in research journals to get tenure and pay raises. Many like Jack Muth who who do get tenure early on do so on the basis on one noted contribution and don't play the career game like us other drudges had to play the publish or perish game. Jack was a bit problematic at MSU. He did not make noted research contributions beyond those contributions before he joined MSU. Students avoided his classes like the plague, because he was seldom prepared for class and often wandered over their heads on tangents that were not intended parts of the course.

When I was at Stanford there was a famous professor in the mathematics department that even the best math majors avoided like the plague. He was so ill prepared for his classes that students generally considered taking his courses to be a waste of their time. Maybe he was burned out. When he tried to explain solutions to problems he generally became all muddled up to to lack of preparation. Jack was a bit like that back at MSU, although I could still recognize brilliance that was not burned out. I think Jack just lost interest in mathematical economics. He loved his music.

As a colleague I thought Jack was brilliant. On occasion I became hopelessly lost in the mathematics of my own research. I would take my troubles down to Jack and without the least bit of preparation he would reveal his brilliance by showing me a way. Jack was an outstanding colleague that most of my other colleagues and MSU students failed to appreciate because they did not tap his brilliance in the right way.

I advise students to avoid anything like a Thiel Fellowship that tempts them to bypass a college degree. The odds are against becoming a Bill Gates or anything like Bill Gates. Being a Thiel Fellow is an invitation to fail and being left with nothing but failure. And returning to college later in life often gets complicated by such things as having children and losing that drive to compete in college --- where being in college is even more painful later in life than it was when being young.

"Replications in Economics: A Progress Report," by Maren Duvendack Richard W. Palmer - Jones W. Robert Reed, WORKING PAPER No. 2 6 /201, Department of Economics and Finance, University of Canterbury, December 3, 2014 ---

Abstract: This study reports on various aspects of replication research in economics. It includes (i) a brief history of data sharing and replication; (ii) the results of the authors’ survey administered to the editors of all 333 “Economics” journals listed in Web of Science in December 2013; (iii) an analysis of 155 replication studies that have been published in peer - reviewed economics journals from 1977 - 2014; (iv) a discussion of the future of replication research in economics, and (v) observations on how replications can be better integrated into research efforts to address problems associated with publication bias and other Type I error phenomena.

. . .

23 economics journals is unreliable. The task o f identifying which results are reliable, and which are not, should be an important priority for the economics discipline. The future of replications . The fields of science and political science have been very active in calling for an increase in replication activities . For example, the Center for Open Science received 1.3 Million USD to start the Reproducibility Initiative 42 , 43 , which aims to independently verify the results of major scientific experiments. There have also been renewed calls for replication in the political sciences, e.g. Gary King’s website 44 is a good resource, the political science replication blog 45 is another. More recently the Berkeley Initiative for Transparency in the Social Sciences (BITSS) 46 was started with the objective to make empirical social science research more transparent which includes promoting replications.

The area of economics has seen some but relatively few replication initiatives, one is the “Replication in Economics” project at Goettingen University which is funded by the Institute for New Economic Thinking and which has compiled a wiki containing an extensive number of replication studies published in economic journals. Another replication initiative in the field of development economics has been launched by 3ie.

. . .

We expect that elite journals will likely continue to find little benefit to publishing replication studies, as they receive high quality , original research with much citation potential. However, journals of lesser quality may find that replications of widely - cited papers can be expected to produce more citations than original research submitted to those journals. If that is the case, the pursuit of citations may help replication studies to establish a niche within the hierarchy of economics journals

Technological innovation also affects journal demand. The Journal of Applied Econometrics’ practice of publishing summaries of replications allows it to allocate less journal space for a replication study relative to an original research study. The increasing sophistication of online publishing also creates opportunities for journals to use their scarce journal space more efficiently. Public Finance Review publishes a summary version of a replication study in its print edition, but attaches the full - length manuscript as “ Supplemental material” that can be accessed at the journal’s online website. These innovations increase the ratio of citations/journal page, and hence can shift the demand for replication studies relative to original studies at some journals

Finally, widespread attention directed towards the replicability of scientific research may affect journal editors’ and researchers’ “tastes” for replication studies. This also generates dynamic externalities that simultaneously increases the demand and supply of replication studies.

Continued in article

Economics has met the enemy, and it is economics," by Ira Basen, Globe and Mail, October 15, 2011 --- 
 Thank you Jerry Trites for the heads up.

Bob Jensen's threads on the lack of replication in accountics science are at
There is little interest in replication since top journals will not publish replications, summaries of replications, or even commentaries on published research outcomes.

There is great interest in the models and methods of accountics science but little interest findings of those models.
The Cargo Cult of Accountics Researchers ---

The second is the comment that Joan Robinson made about American Keynsians: that their theories were so flimsy that they had to put math into them. In accounting academia, the shortest path to respectability seems to be to use math (and statistics), whether meaningful or not.
Professor Jagdish Gangolly, SUNY Albany

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"
One more mission in what's left of my life will be to try to change this

"The Story of the First Female African-American CPA in the United States," by Adrienne Gonzalez, Going Concern, February 19, 2015 ---

From the Chicago Tribune on July 14, 2005 ---
By all accounts, Mary T. Washington Wylie's search for perfection made her a tough, but kind, taskmaster.

It also helped propel her into becoming the first African-American woman in the U.S. certified as a public accountant. And it helped the Chicago accounting company she founded to become one of the largest black-owned CPA firms in the country, while serving as a gateway for dozens of African-Americans into the field.

"Mary was a very driven woman but also very conscious of people and their feelings," said Frederick Ford, vice chairman of the board at Draper and Kramer Inc. He cut his accounting teeth as a staff auditor with her firm in the late 1940s and early '50s. "She was a stickler for details and for getting it right, and, for me anyhow, it was a wonderful place to get a start. I learned how important it was to do as nearly to perfect work as you could."

Born in Vicksburg, Mississippi, Mary T. Washington first became interested in accounting in high school and worked for Douglas National Bank after school and on weekends. At the bank, she was mentored by Arthur J. Wilson, the first black CPA in Illinois and 2nd in the country overall.

While studying for her degree, she opened an accounting firm, Mary T. Washington and Co., in 1939 in a corner of her basement. Most of her clients were small black-owned businesses and non-profit groups. But her firm also came to design and maintain accounting systems for such large black-owned firms as Fuller Products and Seaway National Bank.

Her office became a destination for young black men looking for apprenticeships and jobs in accounting.

During the 1960s, there were more black CPAs in Chicago than elsewhere in the country because of her assistance to them, colleagues said.

Ms. Washington remained the only female black CPA in the United States until 1968.

Eight Special Women of Accounting ---

Among the AICPA-donated volumes at Ole Miss are two binders containing photographs of individuals appearing in the JofA or at accounting conventions from 1887 to 1979. Of the 446 individuals featured, eight are women—Christine Ross, Ellen Libby Eastman, Miriam Donnelly, Mary E. Murphy, Helen Lord, Helen H. Fortune, Mary E. Lewis and Beth M. Thompson. In a time when the profession was the all-but-exclusive domain of men, they stood out not only because of their gender but in many cases because of their accomplishments and contributions to accounting. Consider that in 1933, slightly more than 100 CPA certificates had been issued to women. By 1946, World War II had changed traditional notions of gender in the workplace, and female CPAs had more than tripled to 360—still a small contingent but, as information gleaned from the AICPA Library indicates, one capable of exerting a strong and beneficial influence on the profession.

Christine Ross

Born about 1873 in Nova Scotia, Ross took New York by storm in the late 1890s. New York state enacted licensure legislation in 1896 and gave its inaugural CPA exam in December 1896. Ross sat for the exam in June 1898, scoring second or third in her group. Six to 18 months elapsed while her certificate was delayed by state regents because of her gender. But she had completed the requirements and became the first woman CPA in the United States, receiving certificate no. 143 on Dec. 21, 1899.

Ross began practicing accounting around 1889. For several years, she worked for Manning’s Yacht Agency in New York. Her clients included women’s organizations, wealthy women and those in fashion and business.

Helen Lord
Lord received her CPA certificate from New York in 1934 and in 1935 joined the American Society of Certified Public Accountants, which merged with the American Institute of Accountants (later AICPA) the following year. In 1937, she was a partner with her father in the New York firm of Lord & Lord and a member of the AIA. She served in the late 1940s as business manager of The Woman CPA, published by the American Woman’s Society of Certified Public Accountants–American Society of Women Accountants. Lord reported the journal then had a circulation of more than 2,200.

Helen Hifner Fortune
Fortune, one of the first women CPAs in Kentucky, received certificate no. 174 in 1935 and was admitted to the AIA the following year. She became a member of an AIA committee in 1942 and by 1947 was a partner in the Lexington, Ky., firm of Hifner and Fortune.

Ellen Libby Eastman
Eastman began her career as a clerk in a Maine lumber company, eventually becoming chief accountant. She studied for the CPA exam at night and became the first woman CPA in Maine, receiving certificate no. 37 dated 1918. She was also the first woman to establish a public accounting practice in New England. Arriving in New York in 1920, Eastman focused on tax work and audited the accounts of the American Women’s Hospital in Greece. In 1925, she was a member of the ASCPA. In 1940, Eastman began working with the law firm of Hawkins, Delafield & Longfellow in New York.

She was outspoken and eloquent regarding a woman’s ability to succeed in accounting. In a 1929 article in The Certified Public Accountant, Eastman recounted her adventures:

One must be willing and able to endure long and irregular hours, unusual working arrangements and difficult travel conditions. I have worked eighteen out of the twenty-four hours of a day with time for but one meal; I have worked in the office of a bank president with its mahogany furnishings and oriental rugs and I have worked in the corner of a grain mill with a grain bin for a desk and a salt box for a chair; I have been accorded the courtesy of the private car and chauffeur of my client and have also walked two miles over the top of a mountain to a lumber camp inaccessible even with a Ford car. I have ridden from ten to fifteen miles into the country after leaving the railroad, the only conveyance being a horse and traverse runners—and this in the severity of a New England winter. I have done it with a thermometer registering fourteen degrees below zero and a twenty-five mile per hour gale blowing. I have chilled my feet and frozen my nose for the sake of success in a job which I love. I have been snowbound in railroad stations and have been stranded five miles from a garage with both rear tires of my car flat. I have ridden into and out of open culvert ditches with the workmen shouting warnings to me. And always one must keep the appointment; “how” is not the client’s concern.

Mary E. Murphy
A long-lived pioneer, Murphy (1905–1985) lectured, researched and taught in the United States and abroad, retiring in 1973. The Iowa native earned her bachelor of commerce degree with a major in accounting from the University of Iowa in 1927, then obtained a master’s in accountancy in 1928 from Columbia University Business School. In 1938, she received a doctorate in accountancy—only the second woman in the United States to do so—from the London School of Economics.

In 1928, Murphy began working in the New York office of Lybrand, Ross Bros. & Montgomery. Two years later, she took the CPA exam in Iowa and received certificate no. 67, to become the first woman CPA in Iowa. She joined the AIA in 1937.

Following her public accounting stint, she served for three years as the chair of the Department of Commerce at St. Mary’s College in Notre Dame, Ind. Murphy also was an assistant professor of economics at Hunter College of the City University of New York until 1951. In 1952, she received the first Fulbright professorship of accounting, with assignments in Australia and New Zealand. In 1957, she was appointed as the first director of research of the Institute of Chartered Accountants in Australia. Murphy retired in 1973 from the accounting faculty at California State University.

She published or collaborated on more than 20 books and 100 journal articles and many book reviews and scholarly papers. From 1946 to 1965 she was the most frequently published author in The Accounting Review. Murphy investigated the role of accounting in the economy, made the case for accounting education improvements and paved the way for other aspiring women accountants to prosper. More than half her publications explored international accounting, often advocating standardization. She also emphasized accounting history and biographies.

Mary E. Lewis
Lewis received California CPA certificate no. 1404 in 1939. She was admitted to the AIA that year and by 1947 had her own firm in Los Angeles.

Beth M. Thompson
Thompson worked as the office manager in the Kentucky Automobile Agency she and her husband, Charles R. Thompson, owned. After closing the car business, they moved to Florida, where she worked for an accounting firm. She passed the CPA exam in 1951 with the encouragement of her husband and opened her own accounting business in Miami. In 1955, Thompson was one of only 900 women CPAs and the only female president of a state association chapter—the Dade County chapter of the Florida Institute of CPAs.

Miriam Donnelly
From 1949 to 1955, Donnelly was head librarian of the AIA library. (In 1957, the AIA was renamed the AICPA.) She began her career with the library as assistant librarian and cataloger in 1927, after working for two governmental libraries and the New York Public Library.


History of women accountants in the 1880. US Federal Census ---

Christine Ross (The First Woman CPA) --- Click Here

Mary Jo McCann (First Woman CPA in Kansas) ---

Bertha Aldrich (First Woman CPA in California) ---

Accounting Reform (search for women) ---

American Society of Women Accountants ---

Bob Jensen's threads on the history of women in accountancy ---

"Deloitte’s Engelbert to be first female U.S. CEO of a Big Four firm," by Ken Tysiac, Journal of Accountancy, February 9, 2015 --- 

Bob Jensen't threads on the history of women professionals in accountancy ---

"38 Percent Of Women Earn More Than Their Husbands," by Mona Chalabi, NPR via Nate Silver's 5:38 Blog, February 8, 2015 ---

Jensen Comment
I don't know how this study factored for misleading statistics, but here are a few considerations. It's quite common for women to support husbands who are students such as students or residents in medical school. For example, surgical residents get paid, but they get paid very little relative to what their wives may be still earning to support the completion of their husband's training requirements. Of course sometimes it is husbands who support aspiring female physicians.

Many men are in the USA military. Their wives who work are almost certain to have higher income, although the benefits of a military are substantial --- including free family medical care, base housing, base schools, and lifetime pensions commencing at a young age, sometimes before reaching 40 years of age.

Times are changing for professional women at work. The big CPA firms now hire more female accounting graduates than male accounting graduates. There are also cracks in the glass ceiling. Deloitte, one of the top Big Four firms, just appointed a woman CEO.

Bob Jensen's threads on the history of working women ---

A Totally Different Kind of "Audit" by PwC

"Review ‘Validates’ a Controversial Ranking, Missouri University Says," by Charles Huckabee, Chronicle of Higher Education, February 2, 2015 ---

The University of Missouri at Kansas City says in a news release that an independent audit and review have validated an academic journal’s ranking of its Henry W. Bloch School of Management as first in the world in innovation-management research. The Kansas City Star, however, reports that the audit also confirms many details of a newspaper investigation last year that described “a pattern of exaggerations, misstatements, and cherry-picking data” by officials of the Bloch School in pursuit of top rankings.


The audit, by the international accounting firm PricewaterhouseCoopers LLP, was commissioned by the University of Missouri system’s Board of Curators at the request of Gov. Jay Nixon in response to the newspaper’s report. The Board of Curators released a report on the auditor’s findings on Friday. The curators also released an analysis of the auditors’ findings by Robert D. Hisrich, a professor emeritus of entrepreneurship at the Thunderbird School of Global Management, in Arizona, whom the board hired to review and comment on the audit report.


The audit focuses in part on data submitted by Bloch School officials to Princeton Review, a test-preparation-services company that publishes rankings of universities and academic programs. Princeton Review, which is not affiliated with Princeton University, has ranked the Bloch School’s graduate and undergraduate entrepreneurship programs in its top 25 every year since 2011.


The auditors also examined interactions among Bloch School officials and the authors of a 2012 article in the Journal of Product Innovation Management, “Perspective: Ranking of the World’s Top Innovation Management Scholars and Universities.” The journal article ranked the Kansas City institution’s entrepreneurship program as No. 1 worldwide.


Among the audit’s findings are that an official at the Bloch School had, under pressure from his boss, submitted flawed or false data to Princeton Review, and that another Bloch official had participated in the editing of the journal article. The audit does not challenge whether the article’s or the company’s rankings were deserved.


Mr. Hisrich, in his review, acknowledged that information provided to Princeton Review “was inaccurate in three subject-matter areas” but added, “I cannot conclude that the inaccurate information made a material difference in UMKC’s rankings.” Regarding the journal article, he concluded that the methodology the authors used and the circumstances surrounding the article’s publication “were consistent with generally acceptable professional practices.”


Leo E. Morton, chancellor of the University of Missouri at Kansas City, said he was “pleased to have the Bloch School’s No. 1 ranking in innovation-management research validated,” but asserted that he also took seriously the findings about flawed data submitted to Princeton Review. “We have already implemented changes and will continue to seek ways to improve our data collection,” Mr. Morton said.

"Fibbing for Rankings," by Scott Jaschik, Inside Higher Ed, February 2, 2015 ---

The University of Missouri at Kansas City gave the Princeton Review false information designed to inflate the rankings of its business school, which was under pressure from its major donor to keep the ratings up, according to an outside audit released Friday.

The audit -- by PricewaterhouseCoopers -- described the process by which business school officials came up with creative reasons to provide data that many at the school believed to be false, and that the audit found to be false. In one case, for example, the university created a wish list of clubs that it might support to promote entrepreneurial students. The university then reported that its wish list was reality and that it had all of those clubs, which in fact did not exist.

Another part of the audit found that an article published in The Journal of Product Innovation Management -- an article that ranked the university's business school as the top institution in the world in the field of innovation management -- did not violate professional norms. However, the audit also found that the journal was unaware when accepting the article that it was written by scholars with ties to the university.

UMKC issued a news release Friday that reads: "Independent review upholds No. 1 research ranking."

But the audit also confirmed many of the findings of an August article in The Kansas City Star that found "a pattern of exaggerations and misstatements" by the business school. At the time, the university disputed the Star's report, but Missouri governor Jay Nixon requested an investigation, and that request led to the report issued Friday.

'By All Means Necessary'

PricewaterhouseCoopers officials had access to senior UMKC officials (including some who left positions they had held in the period covered by the audit) and to relevant e-mail messages. The e-mail revealed a focus on finding ways to do well in the rankings in order to keep happy the business school's largest donor (of $32 million), for whom the school, the Henry W. Bloch School of Management, is named.

An e-mail from the then dean to colleagues said, for example: "Henry Bloch gets very upset when our rankings go down. We must do everything we can to increase it when we can by all means necessary.”

The audit then describes some of the things UMKC did to rank high in the Princeton Review's evaluation of business schools' (undergraduate and graduate) entrepreneurial programs.

For example, in answering a question about how many students are enrolled in an entrepreneurship program, the university started counting anyone who was taking a class in entrepreneurship. Not surprisingly, the numbers jumped. For example, UMKC reported that undergraduate enrollment in entrepreneurship programs increased in a year (the year in which the university changed how it was filling out the form) from 99 to 438. A dean told the auditors that he knew that figure "isn't right."

Another change UMKC made helped it inflate answers on another Princeton Review question: about what percentage of students launch a business while enrolled. The university, the audit found, started using primarily data from its e-scholar program (a certificate program for entrepreneurs in which they must develop a business plan). The e-scholar program students are not degree students or enrolled in the university, but officials said they believed it was legitimate to use this group for reporting, even though the Princeton Review ranks degree programs. Since all of the e-scholar students must create business plans, the proportion of undergraduates reported as launching a business increased from 44 percent to 100 percent from 2010 to 2011.

And then there was the question on clubs. The Princeton Review asks: “How many officially recognized clubs/organizations do you offer that are specifically for entrepreneurship students?”

The answers in 2009 were three each for undergraduates and graduate students, and in 2010 were four each. In 2011 the figure jumped to 29 for graduate students and 28 for undergraduates.

Here's how the number of clubs "grew," according to the audit. A business school official asked a colleague to put together a wish list of clubs that might show an entrepreneurial focus at the university. A second official "then instructed a UMKC graduate student to populate these clubs onto the university’s webpage." UMKC "used the clubs' existence on the university’s webpage as the only proof the club existed." Officials believe "these additional 20-plus clubs never actually existed at UMKC." Since the Star article, the number of clubs being reported is down to five each for graduate students and undergrads.

The PricewaterhouseCoopers report says the Princeton Review does not review the accuracy of information submitted to it by colleges and universities and so did not do any independent analysis of UMKC data. The audit also said it was not clear that any of the false information would affect the business school's overall ranking.

But on Sunday night, Robert Franek, senior vice president and publisher of the Princeton Review, said in an email to Inside Higher Ed that Princeton Review would be removing UMKC from the lists of best colleges and business schools for entrepreneurial programs.

“At The Princeton Review, for the past 34 years we have provided accurate and timely information to students and parents to help them make decisions about colleges and graduate schools. We were extremely disappointed to learn that  the University of Missouri-Kansas City falsified data about the school per a report from PricewaterhouseCoopers on January 30. As a result of this new information, we are removing the University of Missouri-Kansas City from our 2014 ranking lists of the best college and business school entrepreneurial programs," said a statement Franek released. "Schools earn a spot on our entrepreneurship ranking through school-reported data. Every school signs an affidavit to ensure their information is accurate. We take these affidavits and this news very seriously.”

Questions on a Journal Article

Another major part of the audit was a look at the journal article published in The Journal of Product Innovation Management.

On this question, the audit found that the article was based on data analysis and that no shortcomings could be found in it. But the article has been questioned from the time it was published. The original Star article quoted a professor (anonymously, because he feared speaking out) as saying that “We all knew that this was bullshit. We knew that UMKC was not better than MIT and Stanford.”

While the audit didn't question the article's findings, it did note concerns about it. The authors who asserted that UMKC was tops in the world in innovative management did not disclose to the journal that they were both visiting scholars at the university and knew some of the players. Because the article was based on data (number of articles written in journals of various influence, etc.), the journal's editor said that the article's findings still stood. However, he said he wished he had known about the authors' ties to the institution they praised.

The authors are two scholars from China. They gave a letter to the auditor in which they said that there was no need to identify their UMKC connections because the "double-blind" peer review process -- in which they don't know who reviews their work, and the reviewers don't know the author -- prevented conflict of interest. The audit, however, found that at the journal in question "papers are solely reviewed by the editor and not subject to the typical double-blind review of other research papers."

Continued in article

Bob Jensen's threads on ranking controversies ---

Jensen Comment
Perhaps we should be more precise in using the term "audit" versus the term "review." The article content uses the word audit whereas the title more appropriately uses the term review. Then again maybe this was an audit since it validated the numbers.

Price Waterhouse years ago was willing to lend its name to the possible limits of the term "review." Over ten years before its merger with Coopers & Lybrand, PW signed off on a review in 1987 of Days Inn financial statement forecasts prior to a planned IPO of Days Inn. This was not an audit of the forecast numbers themselves. But it was a "review" of the forecast procedures of Days Inn and a review of the "underlying assumptions" in those forecasts.

I still have a prized copy of that 1987 Days Inn annual report in which PW audited the 1987 financial statements and reviewed the financial statement forecasts. A real estate appraisal company, Landhauer Associates, signed off on the estimates of over 300 hotel exit values based on a sampling of the real estate appraisals. I provide more details at
Perform search on the phrase "Days Inn"

Princeton Review Strips U. of Missouri at Kansas City of Its Controversial Ranking ---

"Here's The Painstakingly Detailed Budget Of A Couple Who Earns Nearly $15,000 A Month," by Libby Kane, Business Insider, January 26, 2015

Suppose you were teaching a financial literacy course and used the following monthly budget for a couple. What would you focus on to stimulate student debates on the issues.



·        The couple earns $180,000 after-tax withholdings and tax estimated additional payments per year (assuming both adults work giving rise to the day care allowance).


·        My calculation assuming a 4% APR 30-year mortgage initially is that the couple owns a home originally costing $345,150 plus whatever they made in a down payment. This price would be relatively high in a decadent farming town in Iowa and relatively low in a suburb of most major cities. It would be a tent in Silicon Valley. It would not be much of a house within a walking distance of virtually all major universities in the USA.

The house probably cost a lot less if the $1,647.80 payment also covers property taxes and mortgage insurance. Have your students estimate the original cost of the home if the payments on the mortgage itself are only $1,000 per month. They must be living in an old shack or a cramped town house.


·        The life insurance seems relatively low for a family with young children.


·        The "out-to-eat" budget is relatively low and can be used up entirely with two nights out at nice restaurants per month. The family must eat out mostly at fast-food and pizza joints. One way to save money plus eat healthy meals is to eat at a nearby hospital like we did in both San Antonio (where the Northeast Baptist Hospital was only a block away). Eating at the hospital was cheaper than cooking at home. Erika worked full time at this hospital.


·        The electric bill of $200 would not cover our electric bill with heating and air conditioning while we lived in San Antonio where the electricity and gas bill was over $400 per month. In the White Mountains of New Hampshire electricity, propane and heating oil would be more like $1,000 per month. It's very cold up here.


·        I think for a younger family not of Medicare the medical, dental, and prescription drug allowance is way too low in the budget shown in the article below. For retired folks like us on Medicare the medical, dental and prescription outlays would be much, much higher --- more like $1,500 per month. Younger folks naively think Medicare is "free"  after you retire. It's not free when you add in the cost of Medicare itself, the cost of Medicare supplemental insurance, and the out-of-pocket costs of medicine not covered by Medicare D.


·        How about the other monthly estimates?
Are they realistic for the USA?
Are important items deleted in terms of most families?


o   In San Antonio where I watered my lawn with a sprinkling system my water and sewer bills were over $200 per month

o   My Time Warner cable bill is now over $160 per month

o   What about those monthly iPhone usage fees?

o   How about home owner insurance and umbrella (liability) insurance?

o   How about lawn and garden equipment such as a garden tractor and lawn mowers and snow throwers?

o   What about furniture and appliance costs? Up here in the boondocks I spend quite a lot on extended on-site warranties.


When you teach from this budget you might go into more details regarding possible tax strategy and retirement strategy  pros and cons.


"Here's The Painstakingly Detailed Budget Of A Couple Who Earns Nearly $15,000 A Month," by Libby Kane, Business Insider, January 26, 2015 --- 


February 1, 2015 reply from Patricia Walters


Not every place charges for water. We had a well in VA and we paid electricity and maintenance for the pump, not for the water.

We had a lawn mower in VA. Here we have someone come and cut our grass who has the equipment, about 100 per month in the growing season only. No snow. Even in VA we had shovels, not power tools.

No TV, only cable for internet. Biggest utility charges electricity (we have big OLD house) and phones.

We don't know where these people live. Costs vary widely depending on location, even within counties.

Are there homes in Fort Worth that cost over a million? Sure. But there are also homes in reasonable neighborhoods for less than $150,000. I live in one of those neighborhoods.

I've lived in NYC, NJ, VA and now TX. Costs vary widely across those places and within those places.

One if their biggest expenditure was school, which seemed likely to me.

Why do you doubt the truth of their budget?



February 2, 2015 reply from Bob Jensen

Hi Patricia,

I did not doubt the truth of their budget, but I did think they left a few things out or were ambiguous about some things that need to be clarified by a teacher or students using this budget in a financial literacy course.

For example, the $1,687 mortgage payment could be the mortgage alone or it could also cover property taxes, homeowner insurance, and mortgage insurance. Take those away from the payment and you are left with a fairly low-sized mortgage.

In my case the property taxes are $1,000 per month but they are not part of my mortgage payment in these mountains. In fact the property tax payment and the mortgage payment only differ by $200 because I paid over 60% down at the time of purchase. Later I refinanced the remaining mortgage for 3.6% for 30 years. I pay the homeowners insurance separately, and that's not cheap up here.

Most people cannot afford such a large down payment unless they're retired. In rural mountain and ocean properties the banks typically require larger down payments than in towns. In many instances former owners must finance the homes they sell.

When I taught at the University of Maine I had an ocean cottage that could not be financed except by an owner. Banks would not loan on shore property in those days. That made interest rates highly variable, because they were part and parcel to sales price negotiations. Owners also typically demand large down payments when they finance sales properties.

I also wanted a mortgage so I could play the game of having more itemized tax deductions plus invest more in a long-term insured tax-exempt mutual fund that pays only slightly less than by mortgage interest rate. The standard deduction sucks, but you have to have a sizable amount of itemized deductions to cover the minimum threshold for itemized deductions..

I could pay the mortgage off any time, but I don't want to due to a tax strategy that might be debated by students in a financial literacy course. That's why I suggest having students debate alternate tax strategies at the same time they are discussing household budgeting.

Having a deep water well makes me not concerned about the cost of water usage. Wells only get expensive when you have to replace the well and or the pressure tank and pump. Two of my neighbors had to replace their wells, and it cost each of them thousands of dollars.

With a well also comes a septic system. The risk here is having to replace the drain fields for broken tiles. That expense depends a lot on having sufficiently high ground for another field. You can't put a new drain field over an old drain field or in low land that does not drain well from rain and snow melt.

A B&B down the road is having all sorts of troubles finding a suitable place for a new drain field. The small hotel has been empty for over a year in part because of this problem and the need for a new well.

In San Antonio you could get housing relatively close to Trinity University for less than $200,000 but most faculty who do so either do not have children or send their children to private schools (which is really expensive). Also crime risks are higher near campus relative to most outer northern parts of the city. By higher crime risk I mean that I don't recommend walking near campus at night and having to have high quality home security systems.

Trinity has very safe and well lighted walking, jogging, and biking trails on campus that are heavily patrolled by officers on bicycles. These trails are used a lot by neighbors not affiliated with the University. It's a public service.

Thanks for your thoughts,

Added Later
I think the bottom line of a study of this budget is that if budgeting is difficult for a family making $180,000 after taxes think about the "poor" family trying to do it on half as much income per year after income taxes.

The real bottom line is that you cannot divide each line item in this $180,000 budget by two for a family making half as much ($90,000) after-tax income.

Times have changed. In the 1970s when I lived in Maine I had a beautiful and huge house beside the Eastern Maine Medical Center plus an ocean cottage on 12 acres of shore front near Acadia National Park.

The cost of the ocean property was $37,500 that I financed with the former owner. My wife only worked at home in those days, and my income was about $50,000 per year from the University of Maine --- and we could still afford two cars, attend NYC theater, etc. I was writing accountics research articles in those days and earned zip in consulting.

In Florida I owned an acreage with horses while earning less than $80,000 per year. Only in Texas did my income jump to over $200,000 per year such that I could get more serious about retirement savings for 24 years.

I don't know how a family earning less than $100,000 can make it in a city like San Antonio, send the kids to decent schools, and still save for retirement.

It's no wonder that in the 21st Century both parents must work outside the home to make it all work.

PS It was a mistake to sell (in 1978 when we moved to Florida) the Maine shore property for about what I paid for it in 1972. Today this shore property most likely is worth more than a million dollars since it is so close to Acadia National Park. In those days my property taxes on this parcel were about $25 per month. Today they are more than likely to be over to $2,000 per month on the shore.

When I think about it, keeping the shore property may have been a bad deal because eventually the property taxes would've eaten me alive over the decades. The cottage was and still is inaccessible in the winter and would not obtain enough in summer rental to pay for the annual property taxes.

Thanks for your thoughts,


Bob Jensen's personal finance helpers ---

Professor Albrecht reveals quitting school to prevent a string of F grades and his "beloved" Professor Donald Johnson

"The Ripple Effect," by David Albrecht, Skills for Young Professionals Blog, February 4, 2015

Bob Jensen's threads on careers ---

PwC US Launches CareerAdvisor, January 7, 2015
New platform of tools to provide students with resources they need for the career they want

Academic careers --- ---


Careerzone ---


JobApps ---


Careers in Logistics --- In Logistics by CSCMP.pdf


Resume Writing Helpers and Samples ---

My Next Move (career change helpers) ---
For example feed in the word "accountant"


Science Careers ---

Accounting Career Network --- ---

The Big Four Accounting Firms Are All in the Ten:  Who dares say that accounting is a dull career?
"Fifty Most Popular Employers for Business Students," Bloomberg Businessweek, May 9, 2013 ---

"How To Get Hired If You Have A Tattoo," by J.T. O'Donnell, Business Insider, October 22, 2013 ---


If they lost government jobs you know they had to be really awful on the job.

"IRS Rehires Hundreds Of Problem Former Employees," by Robert W. Wood, Forbes, February 6, 2015 ---

As an employer, would you rehire a former employee guilty of misconduct? Say, someone you caught falsifying official forms, peeking at secured confidential files, or misusing company property? How about rehiring hundreds of such misbehaving workers? These aren’t trick questions. Most employers breathe a sigh of relief when such an employee departs. You don’t hire them back.

Rehiring is for someone you want back, not someone who was a problem. But the IRS may be different from your average employer. So suggests a new report by the Treasury Inspector General for Tax Administration. The watchdog report says the IRS rehired hundreds of former employees with prior substantiated conduct or performance issues.

The Inspector General identified hundreds of rehires despite prior substantiated conduct or performance issues. Some were serious. They ranged from unpaid taxes, unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct. The Treasury Inspector General for Tax Administration concluded that the rehires pose increased risks to the IRS and taxpayers.

Continued in article

U.K. Lawmakers Accuse PwC of Promoting Multinational Tax Dodges ---

February 3, 2015 message from Elliot Kamlet

To All Lazy Professors Out There

Wisconsin GOP Gov. Walker Takes Aim at College Outlays, Professors Likely Presidential Candidate Proposes a $300 Million Cut to State’s University System ---


February 4, 2015 reply from Bob Jensen

Hi Elliot,

Having been one of those "lazy" professors who taught five hours per week (two three credit courses) most of my career and worked 60+ hours per week in academic tasks I view myself as the opposite of "lazy," I typically was in my faculty office before 6:00 am. On days when I was back home at 4:00 pm I was in my home office doing academic work. I also did not "waste" weekend time.

However, I'm sure we all know professors who abused the tenure system. In the gray zone are those who got paid for full time work by the university but worked more hours each week on supplementary-income tasks such as textbook writing and consulting. Quite a lot of my colleagues over the years, before the days of tax and accounting software, had full-time tax and bookkeeping businesses on the side.

In the red zone are professors who got paid for full-time by the university, but worked many more hours per week in less professional activities such as farming as a full-time hobby or sometimes as a full-time business. I recall two acquaintances who were relatively big-time hog farmers --- one at Kansas State University and the other at a Canadian university.

As an MBA student at Denver University one of my hero professors showed up on campus about 12-15 hours a week and spent much more time tending his cattle and horses on a 4,000 acre ranch in South Park, Colorado. That was how I hoped to live when I first went into a doctoral program.

By far the most common abuse of the tenure system came from lifetime associate professors who, for one reason or another, became disgruntled faculty members. Often they were unhappy due to low pay raises for lackluster performance. They took out their unhappiness by abusing the system henceforth and forever more --- spending as little time as possible for the university that still paid them for full-time work. Many just gave up on trying to do research and writing. That's the main reason they never were promoted to full professor status.

Our profession is one of the most lenient in terms of parenting. I've seen some parents abuse the system by spending as little time as possible on campus during their years of child rearing.

Faculty members also take advantage of employers when they are chronically ill. In other lines of work they would have to seek disability status. For example, in most lines of work workers cannot put in 12 hours a week for full-time pay when they are chronically depressed or bipolar or whatever absentees on the job.

A depressed professor might go on "working" 12 hours per week with a medical condition that would lead to termination in most other jobs.. I'm very close with one such faculty member who only after ten years finally took a pay cut to be declared disabled. That professor was usually badly prepared for class, hopelessly out of date, and did not do a whole lot for students in those ten years.

My point is that many faculty members in this profession are not "lazy" so much as they are teaching on automatic pilot for 12 or less hours per week while drawing full time pay for less than full time effort.

I don't think Governor Walker will get a whole lot of benefit from increasing teaching loads of faculty from 6-12 hours per week to 12-18 hours per week.
Those putting in minimal effort in the classroom will still put in minimal effort and otherwise abuse the spirit of their full-time faculty jobs.

The best hope for college students will be from innovations in the combination of faculty and technology for getting more learning for the dollars expended.

My beef is more at the K-12 level.
I think the average time spend by students in school is now about 4.5 hours per day plus meal times. The school bus returning two little children down the road goes by my house around 1:30 pm each afternoon. These kids are home alone, probably watching cartoons and playing video games, until their parents return after 5:00 pm.

In contrast, our minister's children are home schooled for roughly seven intense hours per day. Which children will be better prepared for college?

When I was in school we were in school 8:30 am to 4:30 pm with less than an hour for lunch (that we brought from home in a bag) and one class period in study hall. I think that those longer hours spent in school contributed greatly to what I still proudly call my work ethic.



With all the horror publicity about taxes in Manhattan why aren't the wealthiest residents leaving for more tax friendly residences?
Why doesn't Wall Street move to Houston?

"New York’s $100 million penthouse is getting a 95% tax break," by Megan Willett, Business Insider, February 2, 2015 --- 

The wealthy have lots of good reasons to invest their money in New York's residential real estate market, panoramic views and strong returns among them.

But another perk, incredibly low taxes for some penthouse buyers, have people furious.

The latest, most egregious example is the  penthouse at ultra-luxury highrise One57, which just sold for a record $100.5 million. That apartment will receive a 95% tax cut, saving the mystery buyer an estimated $360,000 in taxes annually, according to The New York Times.

The tax cut comes from a controversial housing program known as 421-a. It offers huge tax breaks for luxury properties that can last up to 25 years as long as the developers also build affordable and moderate-income apartments.

But the 44-year-old program has been criticized for only stimulating the luxury market, costing the city billions in lost taxes, and allowing developers to “double-dip” by receiving benefits for future luxury projects with previously-built affordable housing units. 

In fact, the tax cuts are so extreme that US Attorney Preet Bharara launched an investigation into the 421-a program after a state investigation on whether developers were receiving tax breaks in exchange for political contributions was abruptly shut down by Governor Andrew Cuomo.

Continued in article

Jensen Comment
And there are other ways to avoid personal income taxes, business income taxes, sales taxes, and property taxes in New York, including Manhattan.

New York Gives the Most Tax Breaks in the USA ---

New York may have among the highest taxes in the nation, but it also gives out the most tax breaks, too.

New York has 71,759 tax-subsidy deals worth $21 billion on its books — more than five times any other state, found a review Wednesday by the Mercatus Center at George Mason University.

"Corporate welfare is a significant problem at the state level, with New York state leading the rest," wrote Veronique de Rugy, a researcher for the conservative group based in Arlington, Virginia.

New York is one of the highest-taxed states in the nation, so political leaders have long relied on tax breaks to keep businesses and lure new ones.

It gives out about $7 billion a year in tax breaks, the largest being more than $1 billion to help clean up old industrial sites.

The biggest subsidy in the state was $5.6 billion awarded by the state Power Authority in 2007 to aluminum-maker Alcoa, the center's report said. The company received a 30-year break on energy costs for its plant in St. Lawrence County..

The deal ranks on a variety of lists as the second biggest subsidy a state has ever given to a private company; only the $8.2 billion in incentives Washington state gave in 2013 to Boeing through 2040 for the assembly of a new jet ranks higher.

New York has given out some other big ones in recent years: $1.2 billion in 2006 went to AMD, now GlobalFoundries, for its semiconductor plant in Saratoga County. That ranked 14th on the center's list. Another was $660 million to IBM in 2000 for its Dutchess County plant. IBM now appears close to selling the plant to GlobalFoundries.

Gov. Andrew Cuomo in January started one of the largest tax-break programs in state history: Start-Up NY, which offers tax-free zones for 10 years to businesses. About two dozen small businesses have already signed up. Earlier this month, Cuomo launched Global NY to promote the state's improved tax climate internationally.

"With companies already thriving and creating jobs on the heels of programs like Start-Up NYSTART-UP NY, the Empire State has quickly become a top choice for companies of all kinds," Kenneth Adams, president of Empire State Development, the state's business arm, said in a statement Oct. 7.

Republican gubernatorial candidate Rob Astorino, the Westchester County executive, has blasted Cuomo's tax policies.

He has proposed cutting income-tax rates and lowering business taxes further, arguing that Cuomo's strategy picks certain industries for tax breaks.

Astorino said he would get rid of the $420 million a year the state provides in tax breaks for film and movie productions — one of the largest incentives offered to any industry in New York and one of the most generous tax breaks for films.

"Why are we giving tax breaks to an industry that doesn't need it?" Astorino said in a radio interview Wednesday.

Jensen Comment
A lot of wealthy people live in or move to New York for the tax breaks. The little guys, however, move to Florida when they retire. Of course one of the reasons is sunshine. And another reason is to be closer to older friends and relatives. But NY taxes on the little guy are more onerous, including such things and state income taxes and state inheritance taxes for those whose estates are just large enough to get hit by NY

"Physics in finance: Trading at the speed of light," by Mark Buchanan, Nature, February 11, 2015 ---

Financial traders are in a race to make transactions ever faster. In today's high-tech exchanges, firms can execute more than 100,000 trades in a second for a single customer. This summer, London and New York's financial centres will become able to communicate 2.6 milliseconds (about 10%) faster after the opening of a transatlantic fibre-optic line dubbed the Hibernia Express, costing US$300 million. As technology advances, trading speed is increasingly limited only by fundamental physics, and the ultimate barrier — the speed of light.

Through glass optical fibres, information travels at two-thirds of the speed of light in a vacuum (300,000 kilometres per second). To go faster, data must travel through the air. The corridors between Chicago and New York and New Jersey, and between London and Frankfurt, are bristling with efficient microwave and millimetre-wave links. An even more efficient network of lasers — based on military technology for in-flight signalling between aeroplanes — has been installed to link the New York and New Jersey as well as the London and Frankfurt financial exchanges1.

Next up may be hollow-core fibre cables, through which light would travel in a tiny air gap at light speed. Trading firms speculate about a fleet of balloons or uncrewed solar-powered drones carrying signal repeaters to support a network of links across the oceans. In a decade or so, firms may even communicate using neutrinos, which travel at the speed of light and can go through obstacles, including Earth. It all spells big profits for high-tech trading firms, which now account for around 50% of equity trading in the United States and in Europe.

But some firms claim that uneven access to extreme speed erodes trading fairness. And system-wide failures occur when algorithms interact in unforeseen ways — such as in the 'flash crash' of 6 May 2010, when the Dow Jones Industrial Average fell by the largest daily amount ever within minutes (see 'Flash crash'). No one knows when a similar event might spill over into global markets.

Avoiding these risks will require intensive research on how markets work — as complex ecologies of interacting algorithms — and how countermeasures could avert disasters. Getting ahead

High-frequency trading relies on fast computers, algorithms for deciding what and when to buy or sell, and live feeds of financial data from exchanges. Every microsecond of advantage counts. Faster data links between exchanges minimize the time it takes to make a trade; firms fight over whose computer can be placed closest; traders jockey to sit closer to the pipe. It all costs money — renting fast links costs around $10,000 per month.

Communications technology is a limiting factor. Fibre-optic cables carry the most data, but do not give the speed required. The fastest links carry information over a geodesic arc — the shortest path on Earth's surface between two points. So line-of-sight microwaves are a better option; millimetre waves and lasers are better yet, because they have higher data densities.

Open-air communications systems are prone to weather disruption. Anova Technologies, a network provider for trading firms headquartered in Chicago, Illinois, has augmented its New York laser network with millimetre waves to overcome rain, fog and snow. Adaptive alignment mechanisms keep the links working even if winds make towers twist by up to 3°. But microwaves and lasers cannot be used over long distances without repeaters. They attenuate quickly in the atmosphere and do not curve around Earth.

Continued in article

History of High Frequency Trading ---

The big investors cheating the small investors
High Frequency Trading and Its Insider Trading Frauds (not exactly insider trading but, yeah, insider trading)

"Is High-Frequency Trading Insider Trading?" by Matthew Philips, Bloomberg Businessweek, April 4, 2014 ---
Watch the Video

Ever since Michael Lewis went on 60 Minutes Sunday night to accuse high-frequency traders of rigging the stock market, it has been hard to avoid the debate over HFT’s merits and evils. Some of it’s been useful; most has been a lot of angry yelling. The peak of the frenzy came on Tuesday afternoon in a heated segment on CNBC with IEX’s Brad Katsuyama and BATS Chief Executive Officer William O’Brien.

To me, this debate is just circling the ultimate question: Should high-frequency trading be considered insider trading?

Classically defined, insider trading means having access to material, non-public information before it reaches the rest of the market; it’s like getting a heads-up about a merger before it’s announced, or maybe a phone call from a Goldman Sachs (GS) board member saying that Warren Buffett is about to invest $5 billion in the bank. Over the past few years, federal prosecutors have collected a number of big insider-trading convictions of people who got early word about a piece of highly valuable information and made a lot of money as a result.

To its most vehement critics, high-frequency trading is not terribly dissimilar. The most common accusation is that these traders get better information faster than the rest of the market. They do this through three primary methods:

First, they put computer servers next to those of the exchanges, cutting down the time it takes for an order to travel from their computers to the exchanges’ electronic matching engines. Second, they use faster pathways—fiber-optic cables, microwave towers, and yes, even laser beams—to trade more quickly between far-flung markets such as Chicago and New York.

Last, they pay exchanges for proprietary data feeds. This is where it gets really complicated. These proprietary feeds are different than the public, consolidated data feed maintained by the public exchanges, called the securities information processor, or the SIP. Though it’s now a piece of software, the public feed is the modern-day equivalent of the ticker tape that provided stock price data to brokers, traders, and media outlets. It’s what feeds the stock quotes crawling along the bottom of the screen on CNBC (CMCSA) Bloomberg TV, or on financial websites; when the public feed broke in August, trading on NASDAQ stopped for 3 hours.

While the purpose of the public feed is to ensure that everyone gets the same price information at the same time, the playing field isn’t as level as it would seem since exchanges sell proprietary feeds. And not just to HFT firms. Lots of different types of investors buy proprietary market data from exchanges. By law, prices must be entered into the SIP and the proprietary feeds at the same time, but once the data leaves the exchanges, the proprietary systems often process and transmit the information faster. These feeds arrive sooner and contain more robust information—including all prices being offered, not just the best ones.

From 2006 to 2012, Nasdaq’s proprietary market data revenue more than doubled, to $150 million. The money it earns from the public feed fell 21 percent over roughly the same period. So while Nasdaq used to earn more money from its public feed, it now makes more from proprietary ones. Especially after the August outage, this has stirred a lot of complaints from market players that the SIP has been neglected in favor of prop feeds. For its part, Nasdaq has been lobbying the committee that oversees the SIP to beef it up.

Speed traders spend a lot of money for faster access to better information. This allows them to react more quickly to news and, in some cases, jump in front of other people’s orders by figuring out which way the market is going to move. So is that insider trading?

New York Attorney General Eric Schneiderman has called HFT “insider trading 2.0″ on a number of occasions. His office is looking into the relationships between traders, brokers and exchanges and asking whether it all needs to be reformed. The FBI spent the last year looking to uncover manipulative trading practices among HFT firms; the federal agency is now asking speed traders to come forward as whistleblowers.

U.S. laws dealing with insider trading were first passed 80 years ago. Some restrict the way corporate executives and board members can trade in and out of their company’s shares. Others deal with the fair disclosure of important information—which, when it comes to high-frequency trading, is what we’re talking about here. These laws essentially require companies to release material information, such as earnings, to everyone at the same time. No playing favorites.

Bob Jensen's Fraud Updates ---

Racial and Other Social Inequality in the Acdemy
"Systematic inequality and hierarchy in faculty hiring networks," by Aaron Clauset, Samuel Arbesman, and Daniel B. Larremore, Science Advances, February 1, 2015

The faculty job market plays a fundamental role in shaping research priorities, educational outcomes, and career trajectories among scientists and institutions. However, a quantitative understanding of faculty hiring as a system is lacking. Using a simple technique to extract the institutional prestige ranking that best explains an observed faculty hiring network—who hires whose graduates as faculty—we present and analyze comprehensive placement data on nearly 19,000 regular faculty in three disparate disciplines. Across disciplines, we find that faculty hiring follows a common and steeply hierarchical structure that reflects profound social inequality. Furthermore, doctoral prestige alone better predicts ultimate placement than a U.S. News & World Report rank, women generally place worse than men, and increased institutional prestige leads to increased faculty production, better faculty placement, and a more influential position within the discipline. These results advance our ability to quantify the influence of prestige in academia and shed new light on the academic system.


Faculty hiring is a ubiquitous feature of academic disciplines, the result of which—who hires whose graduates as faculty—shapes nearly every aspect of academic life, including scholarly productivity, research priorities, resource allocation, educational outcomes, and the career trajectories of individual scholars . Despite these fundamental roles, a clear and systematic understanding of the common patterns and efficiencies of faculty hiring across disciplines is lacking.

From the institutional perspective, faculty hiring is an implicit assessment: when an institution u hires as faculty the graduate of another institution v, u makes a positive assessment of the quality of v’s teaching and research programs. Similarly, when an individual accepts a job offer from u, he or she makes a positive assessment of u’s quality. As a collection of such pairwise assessments, a discipline’s faculty hiring network (Fig. 1) represents a collective assessment (5) of its own educational and research outcomes. When institutions are unequally successful in faculty placement, achieving more placements at other successful institutions implies a more positive collective assessment of that institution’s outcomes.

Fig. 1 Prestige hierarchies in faculty hiring networks. (Fig. 1 not quoted here)

(Top) Placements for 267 computer science faculty among 10 universities, with placements from one particular university highlighted. Each arc (u,v) has a width proportional to the number of current faculty at university v who received their doctorate at university u (≠v). (Bottom) Prestige hierarchy on these institutions that minimizes the total weight of “upward” arcs, that is, arcs where v is more highly ranked than u.


Differential success rates in such competitions are a hallmark of social hierarchy, which may emerge from either physical dominance or social prestige mechanisms (6). Among academic institutions, physical dominance may be neglected, leaving social prestige, in which less prestigious institutions seek to emulate the successful behaviors of more prestigious institutions in an effort to bolster their own prestige (7, 8). In this context, prestige in faculty hiring is an operational variable that encompasses differences in both scholastic merit and nonmeritocratic factors such as social status or geography. If such factors are irrelevant, then prestige is equivalent to merit. More realistically, nonmeritocratic factors play a role, and the greater their importance, the lesser the correlation between prestige and merit.

Continued in article

"NLJ: Minorities Gain at Less Prestigious Law Schools," by Paul Caron, TaxProf Blog, February 17, 2015 ---

The percentage of African-American and Hispanic students enrolled in law school increased between 2010 and 2013, but those gains came almost exclusively at less prestigious law schools with lower admission standards, according to new research.

Aaron Taylor, an assistant professor at the Saint Louis University School of Law, examined application trends, Law School Admission Test (LSAT) scores and enrollment figures for minority and white students in both 2010 and 2013. He hoped to better understand how the dramatic downturn in law school applications nationwide has affected diversity.

He found that law schools at the bottom of the prestige ladder — those with the lowest median LSAT scores for incoming students — have relied disproportionately on African-American and Hispanic students to fill their classes. That shift may have served as an economic lifeline for law schools during a difficult period, but bolstered the racial stratification that already existed. Elite law schools with higher median LSAT scores actually saw a proportional decrease in African-American and Hispanic students between 2010 and 2013, Taylor found.

"You've got more black and Hispanic students attending schools that are considered less prestigious in 2013," he said of his paper, Diversity As A Law School Survival Strategy, which will appear in the Saint Louis University Law Review.

Continued in article

Bob Jensen's threads on
Controversial Issues in Affirmative Action Hiring and Pay Raises

Most outstanding claims for FICA tax refunds will be denied, IRS announces ---

From the CFO Journal's Morning Ledger on February 6, 2015

Sprint takes $1.9 billion write-down
Sprint Corp
. wrote down the value of its brand name by $1.9 billion, helping drag the wireless carrier to a wider loss than a year ago. The wireless carrier also lost 205,000 mainstream “postpaid” cellphone customers in the final three months of the year and posted a higher monthly customer loss rate. The results extended a streak of customer losses, and revenue declined 1.8% over the past year.

Jensen Comment
Among the most difficult things to value are brand names and goodwill, especially when that value becomes impaired and must be written down. The Sprint case might be a useful topic for academic research into why and how the write down was so huge.

Could this be an earnings bath this year in an effort to show earnings growth in future years?

Arthur Levitt ---

. . .

In September 1998 at New York University, he gave a speech entitled "The Numbers Game". It addressed five ways in which corporations were managing earnings (big bath charges, creative acquisition accounting, cookie-jar reserves, materiality, revenue recognition). In his speech, Levitt advocated improving the transparency and comparability of financial statements

Continued in article.


From the CFO Journal's Morning Ledger on February 3, 2015

U.S. multinationals with major Chinese operations, as well as U.S.-traded Chinese firms, may soon breathe a sigh of relief regarding their audit procedures. A tentative deal in the works between the Securities and Exchange Commission and the Chinese arms of the Big Four accounting firms tosses out a six-month suspension from auditing U.S.-traded companies, the WSJ reports. The suspension, which has been on hold while the firms appeal the ruling, was levied last year after an SEC administrative judge ruled the firms violated U.S. law by not handing over requested documents on their clients. The audit firms said that by doing so, they would have risked jail time in China, where the documents are treated as state secrets.

Overturning the suspension means U.S. multinationals operating in China would be able to continue using the Chinese Big Four firms to assist with their audits, without worrying a suspension will preclude them from doing so. It also should spare more than 90 Chinese clients the possibility of having to seek new auditors.

Most multinationals have kept quiet about the potential effects the audit-document dispute might have had on them. But if a suspension had gone into effect, it could have forced them to scramble for new auditors. Companies can’t sell securities in the U.S. or stay listed on U.S. exchanges without audited financial statements. The settlement also includes a strong framework for the firms to cooperate with the SEC and for the agency to obtain audit documents in the future, though the details of the framework weren’t clear Wednesday.

From the CFO Journal's Morning Ledger on February 3, 2015

Audit Committees: Issues to Consider for 2015

The responsibility to oversee financial reporting and compliance and to monitor management activities remains fundamental for audit committees. However, items such as information technology, regulatory matters, globalization, risk oversight and tax issues have recently played a significant role in many audit committees' activities, and may become more prominent in 2015, as discussed in a recent edition of Deloitte's Audit Committee Brief.

Continue Reading Today's Article »

Read more Deloitte Insights »


From the CFO Journal's Morning Ledger on February 3, 2015

U.S. firms agree that corporate tax reform belongs at the top of the legislative agenda. But many financial chiefs disagree with President Obama’s proposed remedies—and are doubtful about his ability to find agreement with a Republican Congress, write Vipal Monga and Joann S. Lublin for CFO Journal. While Obama’s proposed 14% tax rate on overseas cash and 19% rate on future foreign earnings represent a significant discount to the 35% standard corporate rate, businesses remain clear on what they think would be a fair rate on foreign earnings—zero. Only then, many argue, would the playing field be leveled with rivals in most other developed countries.

And it isn’t just large multinationals that are unhappy with the White House proposal. Small exporters say that the move would make them unable to compete with foreign competitors, and require them to pivot to focus on domestic markets. Those firms are already struggling with a stronger U.S. dollar making their products more expensive overseas.

Although many proclaimed the proposal to be dead on arrival, the plan also ignited a push for dealmaking. Mr. Obama’s call for sweeping tax increases in a budget proposal dropped any quest for fiscal grand bargains with Congress, but also laid out narrower domestic priorities that may appeal to Republicans, including a boost to military spending and the possibility of a corporate-tax revamp.

Jensen Comment
I don't quite understand the jurisdictional rights the USA has to familiar companies that have really become foreign corporations. For example, isn't Burger King now a Canadian company? Isn't Accenture an Irish corporation?

It would seem that the President's tax proposal would motivate many USA multinationals to relocate their headquarters off shore if this proposal was not already DOA in the Republican-controlled House and Senate. Otherwise would this a good time for Exxon to move to Ireland or Canada?

Also most of this cash parked off shore was not tax free cash. The multinationals paid taxes to other countries when earning this cash earned by operations outside the USA.

I would rather commence a fight to eliminate corporate taxation in favor of a VAT taxation ---

From the CFO Journal's Morning Ledger on February 3, 2015

Companies too big to invert would take brunt of Obama tax plan
If President Obama’s attempt to get some of companies’ foreign money back in the U.S. comes to pass, “business leaders and tax lawyers” said it “could encourage all but the largest companies” to invert, Accounting Today reported. Those biggest companies that stay stateside “would take a big one-time hit to earnings,” the report said.

Audit Committee ---

New Definition of the Audit Committee as the Corporate Board's "Kitchen Junk Drawer"

From the CFO Journal's Morning Ledger on February 3, 2015

Meet the corporate board’s “kitchen junk drawer” ---
As new risks multiply, the audit committee has become the “kitchen junk drawer” for many corporate boards, expanding its workload sharply beyond its core role of overseeing a company’s financial reporting, write Michael Rapoport and Joann S. Lublin for CFO Journal. Audit-committee members are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. The SEC is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

"Olympus Under Investigation By U.S. Justice Department:  U.S. Subsidiary Investigated Under Anti-Kickback, False Claims Laws," by Takashi Mochizuki, The Wall Street Journal, February 6, 2015 ---

Bob Jensen's threads on Olympus Scandals that involved Ernst & Young ---
Search for "Olympus"

"KPMG and chief operating officer fined over ethical standards breach,"  Catherine Neilan, CityA.M., February 2, 2015 ---

KPMG and its chief operating officer James Marsh have been fined by the Financial Reporting Council for breaching ethical standards

The auditing firm and its executive were taken to tribunal over Marsh's failure to sell shares in Cable and Wireless Worldwide when he became a partner of KPMG in 2011.

The telecoms giant, where Marsh had previously “been in a position to exert significant influence over the financial statements” was a client of the Dutch financial firm.

The tribunal agreed this was a form of misconduct, and fined Marsh £60,000, though this has been reducd to £39,000 to reflect his admissions.

KPMG was fined £350,000, though this was similarly reduced to £227,000. In addition KPMG agreed to pay the majority of the FRC’s costs.

Paul George, executive director of conduct at the FRC, said: “I welcome the sanctions imposed by the tribunal in these matters which serve to emphasise the central importance of the ethical standards for auditors to the audit process.

“As the tribunal observes, they are at the very heart of trust in the audit process on which public confidence in capital markets and the conduct of public entities depends.”

Bob Jensen's threads on KPMG ---


Teaching History with 100 Objects

Humanity is forgetting its history more rapidly. And celebrities are losing their fame faster than ever.
Marc Parry, "Scholars Elicit a 'Cultural Genome' From 5.2 Million Google-Digitized Books," Chronicle of Higher Education, December 16, 2010 ---


"A Very Short History Of Data Science," by Gil Press, Forbes, May 28, 2013 --- Click Here


Go to the article itself to see the historic paintings
"The vanished grandeur of accounting Once, bookkeepers were valorized in great art. Sound funny now? The joke might be on us," by Jacob Soll, Boston Globe, June 8, 2014 ---


Teaching History with 100 Objects ---

One hundred objects from museums across the UK with resources, information and teaching ideas to inspire your students’ interest in history.
More about this project

Jensen Comment
As I scanned the above site it dawned on me how we might add historical objects (or pictures or videos) of those objects into some of our accounting courses, especially when teaching topics where accounting history is virtually ignored.

For example rather than just define the term "ledger" in bookkeeping the rich history could be taught with images or even objects of this history such as papyrus, quill pens, etc.---   (note some of the early history)

Or when teaching modules from "data science" there are various objects that might be visualized ---
For examples perhaps objects of machine learning, signal processing, etc. could catch student's attention.

For example, one possible assignment on a give topic might be to ask teams of students to discover possible objects of historical interest on this topic.

I kick myself for having given or thrown away a succession of six of early laptop computers that I owned over the years.

A good place for accounting teachers to start when looking for history "object" ideas is the Accounting Historians Journal with now has free archives of articles about old stuff ---

Some Accounting History Sites

Accounting History Libraries at the University of Mississippi (Ole Miss) ---
The above libraries include international accounting history.
The above libraries include film and video historical collections.
Accounting Historians Journal ---  and

Accounting Historians Journal Archives ---
Accounting History Photographs ---

MAAW Knowledge Portal for Management and Accounting ---

Academy of Accounting Historians and the Accounting Historians Journal ---

Sage Accounting History ---

A nice timeline on the development of U.S. standards and the evolution of thinking about the income statement versus the balance sheet is provided at:
"The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards (1930-1973)," by Stephen A. Zeff, CPA Journal, January 2005 ---
Part II covering years 1974-2003 published in February 2005 --- 

A nice timeline of accounting history ---

From Texas A&M University
Accounting History Outline ---

Canadian Printer and Publisher (history of various trades and industries) ---
You can search for various industry terms such as accounting, cost, bookkeeping, etc.

Bob Jensen's timeline of derivative financial instruments and hedge accounting ---

History of Fraud in America ---
Also see

Archive of the History of Financial Regulation ---

American Accounting Association  Past Presidents are listed at 

Accounting History Journals

September 1, 2012 message from Jim McKinney

Accounting History Review was formerly titled Accounting, Business & Financial History is based out of Cardiff  University. Accounting History is a journal published by Sage as a journal of the Accounting History Special Interest Group of the Accounting and Finance Association of Australia and New Zealand. The Accounting Historians Journal a publication of the Academy of Accounting Historians is independently published (and as a result far cheaper in price) than the other two. The Accounting Historians Journal is much older than the other two having entered its 39th year of publication.  Older editions of the AHJ are available on JSTOR and other databases, with older back issues available for free at the University of Mississippi Libraries website that also maintains the AICPA libraries. I know editors at all three journals and all are quite capable and respected individuals. There is a considerable debate which of the journals are considered better than the other with arguments made for each of the three.


Jim McKinney, Ph.D., C.P.A.
Accounting and Information Assurance
Robert H. Smith School of Business
4333G Van Munching Hall
University of Maryland
College Park, MD 20742-1815

Go to the article itself to see the historic paintings
"The vanished grandeur of accounting Once, bookkeepers were valorized in great art. Sound funny now? The joke might be on us," by Jacob Soll, Boston Globe, June 8, 2014 ---

In Washington’s National Gallery of Art hangs a portrait by Jan Gossaert. Painted around 1530, at the very moment when the Dutch were becoming the undisputed masters of European trade, it shows the merchant Jan Snouck Jacobsz at work at his desk. The painter’s remarkable gift for detail is evident in Jacobsz’s dignified expression, his fine ermine clothes and expensive rings. Rendered just as carefully are his quill pen, account ledger, and receipts.

This is, in short, a portrait of not only wealth and material success, but of accounting. It might seem strange that an artist would lavish such care on the nuts and bolts of something so mundane, like a poet writing couplets about a corporate expense report. But the Jacobsz portrait is far from unique: Accounting paintings were a significant genre in Dutch art. For 200 years, the Dutch not only dominated world trade and portrayed themselves that way, but in hundreds of paintings, they also made sure to include the account books.

This was not simply a wealthy nation crowing about its financial success. The Dutch were the leading merchants of their time, and they saw good accounting as the key to both their wealth and the moral health of their society. To the audience of the time, the paintings carried a clear message: Mastering finance was an achievement requiring both skill and humility.

Today when we see accountants in art or entertainment, they are marginal figures—comically boring bean-counters or fraudsters cooking the books. Accounting is almost a synonym for drudgery: from the hapless daydreamer Walter Mitty to the iconic nerd accountant Rick Moranis plays in “Ghostbusters.” Accounting is seen as less a moral calling than a fussy brake on the action.

In the wake of decades of financial scandal—much of it linked to creative accounting, or to no accounting all—the Dutch tradition of accounting art suggests it might be us, not the Dutch, who have misjudged accounting’s importance in the world. Accounting in the modern sense was still a new idea in the 1500s, one with a weight that carried beyond the business world. A proper accounting invoked the idea of debts paid, the obligation of nightly personal reckonings, and even calling to account the wealthy and powerful through audits.

It was an idea powerful enough to occupy the attention of thinkers in religion, art, and philosophy. A look back at the tradition of accounting in art shows just how much is at stake in “good accounting,” and how much society can gain from seeing it, like the Dutch, not just as a tool but as a cultural principle and a moral position.


Scratches on ancient tablets show us that accounts have been kept for as long as humans have been able to record them, from ancient Mesopotamians to the Mayans. This kind of accounting was about measuring stores: Merchants and treasurers recorded how much grain, bread, gold, or silver they had. Most ledgers were simple lists of assets or payments.

Accounting in the modern sense started around 1300 in medieval Italy, when multipartner firms had to calculate their investments in foreign trade. We don’t know who, if anyone, can take credit for the invention, but it was around this time that double-entry bookkeeping emerged in Tuscany. Instead of a simple list, it consisted of two separate columns, recording income in one against expenditures in the other. Every transaction of expenditure could be checked against corresponding income: If one sold a goat for three florins, one gained three florins and, in the other column, lost a goat. It was a kind of self-checking mechanism that also helped calculate profit or loss. In Hogarth’s “Marriage a la Mode: The Tête a Tête,” the man with the account books walks off in disgust (left).

HIP/Art Resource, New York

In Hogarth’s “Marriage a la Mode: The Tête a Tête,” the man with the account books walks off in disgust (left).

It would come to change finance, but was not an immediate hit. Any system of enforcing fiscal discipline is an incursion against the absolute control of the account-holder, and kings and the powerful tended to see themselves above the merchant-like calculations of bookkeeping. They not only hid their wealth and debts: They often did not bother to calculate them. In the end, they saw themselves as only accountable to God; if they needed more ready cash, they could always lean on their inferiors. At least in the short run, it was far more comfortable to govern without the constraints of financial accountability.

But in one place, the idea of financial accountability did take hold. By the early 1500s, Holland had become the center of global trade, with Antwerp and later Amsterdam acting as the most important ports in the world. Ships arrived laden with spices, exotic fruit, minerals, animals, whale oil, cloths, and other luxury goods. In 1602, the Dutch government in essence created modern capitalism by founding both the first publicly traded company—the Dutch East India Company, or VOC—and the Amsterdam Stock Exchange.

Accounting was central to managing not only these companies, but also the Dutch government itself. While not all tax collectors or company managers kept perfect double-entry books, it represented an ideal. It was also seen as a necessary skill for civic participation. Most members of Dutch society were fluent in accounting, having studied at home or in publicly funded city accounting schools.

Double-entry accounting made it possible to calculate profit and capital and for managers, investors, and authorities to verify books. But at the time, it also had a moral implication. Keeping one’s books balanced wasn’t simply a matter of law, but an imitation of God, who kept moral accounts of humanity and tallied them in the Books of Life and Death. It was a financial technique whose power lay beyond the accountants, and beyond even the wealthy people who employed them.

Accounting was closely tied to the notion of human audits and spiritual reckonings. Dutch artists began to paint what could be called a warning genre of accounting paintings. In Jan Provost’s “Death and Merchant,” a businessman sits behind his sacks of gold doing his books, but he cannot balance them, for there is a missing entry. He reaches out for payment, not from the man who owes him the money, but from the grim reaper, death himself, the only one who can pay the final debts and balance the books. The message is clear: Humans cannot truly balance their books in the end, for they are accountable to the final auditor.

This message rubbed off on political and financial leaders. They were expected to keep good books, and they could expect to be publicly audited—a notion fiercely resisted in the great monarchies of the Continent. In the 17th century, another genre of paintings emerged, showing public administrators holding their books open for all to see. More than 100 of these paintings were produced between 1600 and 1800. Transparency became a cultural ideal worthy of art.

The Dutch also appreciated that ledgers, bills of exchange, and files, like any tool in human hands, were liable to misuse in the interest of wealth or pride. Dutch painters like Marinus van Raemerswaele warned against hubris and greed with paintings of bookkeepers as twisted, grotesque figures in absurd hats who would be as likely to commit fraud as to keep good books.

The value the Dutch placed on accounting made a large impression on the English, who sought to emulate “the Mighty Dutch” in many ways, including this new business technique. By the 1700s, they were also the only other nation to paint accounting pictures. The English celebrated the wealth of their Industrial Revolution and Empire with portraits of successful merchants smiling over their books—and, like the Dutch, also used account books as a way to wag a finger. In one scene from William Hogarth’s “Marriage à la Mode,” a popular series of paintings from the 18th century, a noble couple squanders their lives on parties and gambling. In a final signal of disapproval, almost like a punctuation mark, their accountant walks away in disgust.


By the late 19th century, accounting had become a profession of its own, rather than fundamentally a shared practice and value. It receded from the lives of individuals, and began to take on more the reputation it holds today.

Continued in article

"Stock Prices and Earnings: A History of Research," by Patricia M. Dechow, Richard G. Sloan, and Jenny Zha, SSRN
(no longer available free as a download from SSRN), 
Annual Review of Financial Economics, Vol. 6, pp. 343-363, 2014
December 2014 ($32 unless accessed free via your university's library subscription)

Accounting earnings summarize periodic corporate financial performance and are key determinants of stock prices. We review research on the usefulness of accounting earnings, including research on the link between accounting earnings and firm value and research on the usefulness of accounting earnings relative to other accounting and nonaccounting information. We also review research on the features of accounting earnings that make them useful to investors, including the accrual accounting process, fair value accounting, and the conservatism convention. We finish by summarizing research that identifies situations in which investors appear to misinterpret earnings and other accounting information, leading to security mispricing.

Jensen Comment
AAA Members may want to accompany this paper with Bill Beaver's recollections of his own pioneering research on stock prices and earnings --- recollections given at the American Accounting Association Annual Meetings as the 2014 Presidential Scholar.
Video (free to AAA members who are subscribed to the AAA Commons) ---

It is somewhat surprising that a predictor variable its extended versions (e.g., earnings per share) that cannot be defined by the FASB and IASB can be an effective predictor after it no longer can be defined. By not being definable, there is little assurance that earnings, eps, etc. are consistently measured over time for a single firm and across firms at a point in time.

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 ---

Bob Jensen's threads on accounting history ---

JournalTOCs (Tables of Contents and Article Titles) --- 

Jensen Comment
I was not impressed by the search engine, but note the categories under the search box such as "Accounting and Finance"

From the CFO Journal's Morning Ledger on February 2, 2015

President Obama’s 2016 budget lays out his vision for a corporate tax overhaul, including a one-time 14% tax on the approximately $2 trillion of overseas earnings that businesses have accumulated, the WSJ reports. Companies would face a 19% minimum tax on future foreign profits, but could reinvest those funds in the U.S. without paying additional tax.

Some conservative commentators voiced optimism that the proposal could mark the opening of productive negotiations with Republicans, who control both houses of Congress. Still, Mr. Obama linked the one-time tax to spending on infrastructure, and Rep. Pat Tiberi (R., Ohio) said in a statement “Changes to our tax code just to fund more spending by our already bloated government is not the way to boost our economy and encourage job creation.��

While a mandatory tax on existing overseas profits is at odds with some recent proposals in Congress, some leading Republican tax writers have embraced such an approach in recent years. That suggests that it could become a part of a final deal with Congressional Republicans. How would a mandatory tax on overseas earnings affect your plans for cash held abroad? Let us know.

From the CFO Journal's Morning Ledger on February 2, 2015

Amazon makes a push on college campuses --- Inc.
 has struck deals with Purdue University, the University of Massachusetts, Amherst, and the University of California, Davis, to operate co-branded websites selling textbooks and other student related-items. While the deals aren’t exclusive, they acknowledge the reality that students already shop on Amazon.  The websites will offer next-day delivery service, giving students one fewer reason to head to a brick-and-mortar store. And the hope is that when they graduate, they will spend more with Amazon.

Societal Cost Versus Company Costs

I needed an adapter plug that I ordered from Amazon for less than $2 and had it shipped "free" as an Amazon Prime member. I say "free" because if I was not an Amazon Prime member my total shipping costs from Amazon would greatly exceed the $95 2015 annual flat rate ---

In the past I would have driven about 30 miles round trip to a Radio Shack that's been out of business for years.

On Friday UPS delivered the adapter plug to my garage. UPS probably had stops along the way before the hill to our cottage, but chances are that there were no stops on Friday for about four miles up our hill and four miles back down. UPS got paid for this tiny shipment that only weighed about three ounces.

It dawned on me that the real value of delivery of this $2 item hardly justified the costs of the fuel, driver time, etc. to custom deliver a $2 item. The issue of course is that UPS will deliver one item up this hill no matter what is the value of the item itself. And even if Amazon had a minimum cost per order, chances are I would have ordered other things that arrive at UPS on different days. To my knowledge UPS delivers five days a week up here without consolidating orders that arrive on different days before delivering up our hill.

This may be something to think about when teaching cost accounting. Who gets paid and who gets screwed?

IASB Proposed amendments to IAS 7 Statement of Cash Flows ---

IASB Classification and Measurement of Share-based Payment Transactions (Proposed amendments to IFRS 2) ---

IESBA Improving the Structure of the Code of Ethics for Professional Accountants ---

PwC:  IFRS news - February 2015 ---

Jensen Comment
The outcome of this lawsuit could have very expensive ramifications on tens of millions of online videos and live broadcasts. Many learning videos will simply be withdrawn from the Internet. It might be a good time to consider downloading and archiving the videos most likely to be withdrawn from the Internet such as those on YouTube learning channels and those now available at links provided at

What I think is at issue here is whether free learning materials should be subject to the same criteria as fee-based materials.

For example, providers of fee-based courses and learning materials can factor in the extra cost of learning aids such as when a live course factors in the cost of employing "signers" when delivering a live course on campus or over the Internet ---

"Harvard and MIT Are Sued Over Closed Captioning for Online Materials," by Andy Thomason, Chronicle of Higher Education, February 12, 2015 ---

A new lawsuit accuses Harvard University and the Massachusetts Institute of Technology of failing to provide closed captioning in online teaching materials, in violation of federal antidiscrimination laws, The New York Times reports. The lawsuits were filed by the National Association of the Deaf, and seek an injunction requiring that closed captioning be provided for all online materials.

Both colleges provide extensive educational resources free online, including through their membership in edX, which offers dozens of MOOCs to students around the world.

Advocates for the deaf on Thursday filed a federal class action against Harvard and M.I.T., saying both universities violate antidiscrimination laws by failing to provide closed captioning in their online lectures, courses, podcasts and other educational materials.

Bob Jensen's links to free learning materials, videos, tutorials, and complete courses provided free ---

Bob Jensen's threads on new technology tools for disabled students, including the hearing and sight impaired, ---



Moochers are Losers
Moody's: Default rates show government aid didn't solve corporate financial problems 
"Repeat Default Rates Rise Since Great Recession, Says Moody’s," by Vipal Monga, The Wall Street Journal, January 29, 2015 ---

Kicking the can down the road doesn’t seem to work for many distressed companies.

The percentage of repeat defaulters since the Great Recession is more than double the historical average. That suggests that lax credit markets allowed troubled companies to paper over their problems without fixing them, according to a report Thursday by Moody’s Investors Service MCO -0.56%.

Nearly 39% of companies that defaulted between Sept 1, 2010 and Sept. 30, 2014, did so more than once, according to Moody’s. That’s more than twice the 17% historical average of repeat defaulters, going back to 1987.

Many companies that either sought Chapter 11 bankruptcy protection or missed bond payments during the Great Recession used the wide-open credit markets to borrow more money or restructure their debt.

“They were pushing off the inevitable,” said David Keisman, a Moody’s analyst.

Moody’s tallied 72 companies registering a default during the 2010 to 2014 timeframe.

Repeat defaulters include casino operator Caesars Entertainment Corp.CZR -1.79%, formerly Harrah’s Entertainment Inc., which filed for Chapter 11 bankrupt protection earlier this month, after several debt exchange offers.

Texas power company Energy Future Holdings Corp., the former TXU Corp., which is reorganizing under Chapter 11, was another repeat defaulter, after making a series of deals to exchange existing debt for other bonds with longer maturities and higher rates

The judge was brutal on the Venezuelan financier who ran the biggest Ponzi scheme in Connecticut history ---

Jensen Comment
Note that in Club Fed it is less likely than in state prisons to get off early on parole even if the living is easier.

Bob Jensen's Fraud Updates ---

That some bankers have ended up in prison is not a matter of scandal, but what is outrageous is the fact that all the others are free.
Honoré de Balzac

Bankers bet with their bank's capital, not their own. If the bet goes right, they get a huge bonus; if it misfires, that's the shareholders' problem.
Sebastian Mallaby. Council on Foreign Relations, as quoted by Avital Louria Hahn, "Missing:  How Poor Risk-Management Techniques Contributed to the Subprime Mess," CFO Magazine, March 2008, Page 53 --- .

Jensen Question
Why do stockholders take a beating while the bad guys just go on scheming new crimes?

"JPMorgan is about to shell out $99.5 million to settle a currency rigging lawsuit," by Jonathan Stempel, Reuters, January 31, 2015 --- 

Bob Jensen's Fraud Updates ---

EMC Corporation (Data Strorage, Security and mining) ---

New IBM Business Model
"In another brilliant move, IBM just budgeted $1 billion to take down EMC," Julie Bort, Business Insider, February 17, 2015 ---

On Tuesday, IBM announced that it is investing $1 billion over the next five years in a hot new area of enterprise tech called "software-defined storage."

This is important and interesting for a whole bunch of reasons — and shows that CEO Ginni Rometty has her competitive game on.

She's got a plan to move her massive 400,000-ish strong workforce from shrinking businesses and towards growth areas, even though it's painful, with a number of quiet layoffs involved.

To understand why this new $1 billion investment is cool, you need to know two things:

  1. "Software-defined" is a huge trend in the $3 trillion enterprise technology market.
  2. This is the second big move that IBM has made that puts it on a collision course with storage giant EMC, and the $17 billion storage market that it dominates with about 30% market share, according to IDC as reported by Forbes.

Software is eating the enterprise data center

"Software-defined" is a term that refers to taking expensive hardware, removing the all the fancy features from it that makes it expensive and putting those fancy features into software apps that run on special computers. You still need the hardware, but you need less of it, less expensive varieties and your data center becomes faster, more efficient, and less expensive — important for today's cloud computing needs.

Software-defined networking (SDN) is already happening, forcing market leader Cisco to respond.

Continued in article

Self Proclaimed “Queen Of IRS Tax Fraud” Gets 21 Years In Prison ---

A Florida resident who taunted authorities as she stole millions from the IRS, has been jailed for 21 years

It’s tax season again, and everyone is waiting on the big refund check from good old Uncle Sam. For those who don’t save receipts, or think they can outsmart the IRS; think again.

Rashia Wilson, who pleaded guilty to wire fraud and aggravated identity theft earlier this year, admitted to stealing over $3 million from the IRS. Tampa police were first alerted to the fraud in 2010 when they noticed a drop in drug dealing in the area. Wilson’s fraud was discovered during a two-year investigation called ‘Operation Rain Maker’. The multi-agency investigation included Hills­borough County Sheriff’s Office, Tampa Police Department, IRS-Criminal Investigations, the Secret Service, and the U.S. Postal Inspection Service.

Wilson became a prime suspect in the investigation. Her mother was addicted to cocaine when she was born, while her father was in prison while she was growing up. She came up from a life of poverty, having been diagnosed as Bi-Polar when she was 14; and then suddenly becoming rich.

Those involved in the tax fraud operation used stolen social security numbers to file returns. The scam caused ordinary taxpayers to have to wait for up to a year to even receive their refunds.

She still claimed food stamps, and became reckless spending money she supposedly didn’t have…$90,000 on an Audi A8, $30,000 on her son’s first birthday party, designer handbags from Prada, Gucci, and Louis Vuitton, and custom jewelry. Then she wore a diamond studded piece holding racks of money, and put herself on blast on social media. When police searched her residence in Wimauma they removed electronic goods, including large flat-screen TV’s, and designer goods. Police say the number of security cameras around the property had raised suspicions.

Continued in article

"Shelly Silver’s Asbestos Gold A case study in the links between politicians and the plaintiffs bar," The Wall Street Journal, February 1, 2015 ---

The recent corruption charges against New York Assembly Speaker Sheldon Silver reveal the rot that has long plagued Albany. But the story deserves more national attention for exposing the links between politicians and the asbestos-plaintiffs bar.

The 70-year-old Mr. Silver, among the state’s most powerful Democrats, stands accused of five counts of extortion, fraud and conspiracy. But the core of U.S. Attorney Preet Bharara’s 35-page complaint is the allegation that Mr. Silver engaged in an asbestos kickback scheme for more than decade. He allegedly used his Albany power to steer taxpayer money to an asbestos doctor, who in return gave him the names of patients for high-dollar asbestos lawsuits.

As some courts have grown more skeptical about asbestos claims that are often bogus, the trial bar has focused on mesothelioma cases. Mesothelioma is a cancer linked to asbestos and has long been considered a legitimate tort claim. The Silver complaint is a case study in how lawyers, doctors and politicians conspire to recruit mesothelioma victims and pump up court payouts.

Prosecutors say Mr. Silver recruited plaintiffs through Robert Taub, who until recently led a research center for mesothelioma at Columbia University. Mr. Silver used his discretionary power over state funds to direct $500,000 in grants to Dr. Taub’s center. He also sent $25,000 to a nonprofit associated with Dr. Taub’s wife, sponsored a state Assembly resolution honoring the doctor, and helped get the doctor’s son a job, according to the complaint.

In return, the complaint says, Dr. Taub gave Mr. Silver names of mesothelioma patients who could be plaintiffs in asbestos lawsuits. Mr. Silver passed the names to Weitz & Luxenberg, a powerhouse asbestos firm where Mr. Silver worked as a lawyer and was paid a salary of $120,000. Weitz & Luxenberg also paid Mr. Silver a fee for mesothelioma patient referrals, totaling $3.2 million.

Mr. Silver has resigned as Speaker but says he will be “vindicated.” Dr. Taub is serving as a witness in the government’s case against Mr. Silver and hasn’t been charged, though he resigned from the Columbia center after the Silver complaint became public. Weitz & Luxenberg says it is “shocked” by the charges against Mr. Silver, who has taken a leave of absence from the firm. Prosecutor Bharara says the firm was unaware that Mr. Silver directed state money to Dr. Taub in return for referrals.

But it’s important to recognize that a contributions-for-patients arrangement isn’t rare. The complaint against Mr. Silver refers to “law firms” that have contributed to mesothelioma researchers. The complaint also refers to “the Other Asbestos Firm” whose affiliated foundation donated to Dr. Taub’s center and also received the names of potential plaintiffs. News reports have identified that other firm as the Simmons Law Firm of Illinois and the donation amount as $3.2 million. The Simmons firm has not been charged and the New York Times reports the firm said in a statement that it is proud to fund research at Columbia.

Though it is not part of the criminal case, Mr. Silver also used his political influence to promote judges who look favorably on asbestos claims. Mr. Silver appointed Arthur Luxenberg, a founder of Weitz & Luxenberg, to a state judicial screening committee that vets candidates for appointed judicial posts.

One state judge who has advanced during Mr. Silver’s tenure is Sherry Klein Heitler, now chief judge of New York City Asbestos Litigation (NYCAL). More than half the cases in the NYCAL docket are Weitz & Luxenberg’s. In the past four years the firm won $273.5 million of the $313.5 million (87% of the total) awarded in 15 mesothelioma verdicts—$190 million in 2014.

The American Tort Reform Association’s most recent report on “judicial hellholes” notes that this windfall was aided by Judge Heitler’s ruling last year, made at the request of Weitz & Luxenberg, to reverse a 20-year policy deferring punitive damages in asbestos cases. Judge Heitler’s predecessor had explained in a legal paper that punitive damages for wrongs committed 30 years ago serve no corrective purpose, and money could be better used to compensate genuine victims.

Judge Heitler’s ruling opened the cases to fatter verdicts and settlements that allow bigger paydays for plaintiffs firms. Judge Heitler has said that only the legislature can “deny plaintiffs the opportunity to seek punitive damages.”

NYCAL judges have also allowed the consolidation of cases, which stacks the deck against defendants who feel compelled to settle rather than risk a jackpot verdict. The consultants at Bates White report that the average NYCAL asbestos award is now $16 million—two to three times the average in courts nationwide. Sixty percent of Weitz & Luxenberg’s revenue comes from asbestos cases, much of it from mesothelioma patients.

Media commentary about the Silver case is playing as a familiar morality play about money in politics. But the real problem is a New York state government that protects incumbents with gerrymandered seats and provides enormous and largely unchecked power to bestow political favors. The link between politicians and the asbestos bar is one example that is ripe for further investigation. The Silver case isn’t an aberration.

Bob Jensen's fraud updates ---


From the CFO Journal's Morning Ledger on February 24, 2015

Longevity isn’t all it’s cracked up to be, especially if you’re trying to balance the books for a defined benefit plan. The Society of Actuaries’ revised mortality assumptions, released in October, now have to be reflected on corporate balance sheets, the WSJ’s Michael Rapoport reports. According to the new estimates, the average 65-year-old man today will live 86.6 years, up from 84.6 the Society of Actuaries estimated a decade and a half ago. The average 65-year-old woman will live 88.8 years, up from 86.4. Good news for humanity, but bad news for recent earnings reports.

Teaching Case on Pension Write Downs
From The Wall Street Journal Accounting Weekly Review on January 23, 2015

AT&T to Take $7.9 Billion Pension Hit
by: Josh Beckerman and Vipal Monga
Jan 20, 2015
Click here to view the full article on

TOPICS: Mark-to-Market, Pension Accounting

SUMMARY: AT&T Inc. said it would take a $7.9 billion charge for pension-related costs at least partially because people are living longer. The telecommunications giant said the losses were in part due to "updated mortality assumptions" in addition to a decrease in the rate it uses to measure its pension obligations. AT&T, along with about 30 other companies, in the past few years has switched to mark-to-market pension accounting to make it easier for investors to gauge plan performance. With the switch, pension gains and losses flow into earnings sooner than under the old rules, which are still in effect and allow companies to smooth out the impact over several years. Companies that switch to valuing assets at up-to-date market prices may incur more volatility in their earnings, but it offers a more current picture of a pension plan's health.

CLASSROOM APPLICATION: This is a good article to use when covering accounting for pensions.

1. (Introductory) What are the details of AT&T's announcement? What is the reason for the changes?

2. (Advanced) Please explain how the changes will impact each of the financial statements. Will those changes be material?

3. (Advanced) In general, what is mark-to-market? How does mark-to-market affect pension accounting? What are the benefits of mark-to-market? What are potential challenges?

4. (Advanced) How have AT&T pensions adjustments changed from year-to-year? How does this impact financial statement analysis?

Reviewed By: Linda Christiansen, Indiana University Southeast

AT&T Posts Pension Hit As Rates Fall and Mortality Increases
by Vipal Monga
Jun 26, 5081
Online Exclusive

"AT&T to Take $7.9 Billion Pension Hit," by Josh Beckerman and Vipal Monga, The Wall Street Journal, January 20, 2015 --- 

AT&T Inc. on Friday said it would take a $7.9 billion charge for pension-related costs at least partially because people are living longer.

The telecommunications giant said the losses were in part due to “updated mortality assumptions” in addition to a decrease in the rate it uses to measure its pension obligations.

The nonprofit Society of Actuaries recently updated its mortality tables for the first time since 2000 to reflect the longer lifespans, estimating today’s retirees will live about two years longer than in 2000. That means companies will have to sock away more money to pay benefits for those added years.

Mercer LLC estimates that corporate pension liabilities totaled about $2 trillion at the end of 2013. The increased life expectancy will add about 7% to the pension obligations on balance sheets, according to consulting firm Aon Hewitt. The increased costs may be enumerated in the coming weeks as companies report earnings.

AT&T, along with about 30 other companies, in the past few years has switched to mark-to-market pension accounting to make it easier for investors to gauge plan performance.

With the switch, pension gains and losses flow into earnings sooner than under the old rules, which are still in effect and allow companies to smooth out the impact over several years.

Companies that switch to valuing assets at up-to-date market prices may incur more volatility in their earnings, but it offers a more current picture of a pension plan’s health.

A year ago, AT&T posted a $7.6 billion pretax gain tied to pension accounting.

AT&T also said it would take a $2.1 billion noncash charge in the fourth quarter after it determined that certain copper assets won’t be necessary to support future network activity, because of lower demand for legacy voice and data services and the move toward new technology. It said those copper assets will be abandoned in place.

Continued in article

Bob Jensen's threads on pension accounting are at


Teaching Case on Tax Return Preparation
From The Wall Street Journal Accounting Weekly Review on January 23, 2015

What Tax Preparers Are Really Charging for 2014 Returns
by: Laura Saunders
Jan 16, 2015
Click here to view the full article on

TOPICS: Individual Taxation

SUMMARY: How much will it cost to have a professional prepare your tax return this year? The national average fee for 2014 returns will be $273, according to a survey by the National Society of Accountants. Tax-preparation fees vary widely based on an individual's circumstances and also the preparer-who could have a great deal of formal training or none at all. The National Society of Accountants says its members are "owners, principals and partners of local 'Main Street' practices who hold a variety of credentials." That average $273 fee is for a Form 1040 plus Schedule A (for itemized deductions such as mortgage interest and charitable donations), plus a state return. This year's average fee is 11% higher than two years ago.

CLASSROOM APPLICATION: This is an interesting look at the price of tax return preparation to use in tax class.

1. (Introductory) What are the ranges of tax return preparation fees reported in the article?

2. (Advanced) What group collected the fee data? How are the member described? Does this survey give an accurate representation of tax preparers? What groups of preparers or companies are missing? How might the reported data change if all paid preparers were included?

3. (Advanced) What are some possible explanations for fees varying in different parts of the country? Must this work be done locally? Could national competition affect and reduce local differences? Why or why not?

4. (Advanced) Review the prices for the various schedules and types of returns. Are those price reasonable? Would you be willing to do that work for those prices? How could preparers justify higher prices?

Reviewed By: Linda Christiansen, Indiana University Southeast

IRS Woes Keeping Taxpayers on Hold
by John D. McKinnon
Jan 15, 2015
Online Exclusive

TurboTax Triggers a Revolt
by Laura Saunders
Jan 17, 2015
Online Exclusive


"What Tax Preparers Are Really Charging for 2014 Returns," The Wall Street Journal, January 16, 2015 ---

How much will it cost to have a professional prepare your tax return this year?

The national average fee for 2014 returns will be $273, according to a survey by the National Society of Accountants.

Tax-preparation fees vary widely based on an individual’s circumstances and also the preparer—who could have a great deal of formal training or none at all. The National Society of Accountants says its members are “owners, principals and partners of local ‘Main Street’ practices who hold a variety of credentials.”

That average $273 fee is for a Form 1040 plus Schedule A (for itemized deductions such as mortgage interest and charitable donations), plus a state return. This year’s average fee is 11% higher than two years ago, the last time the survey was conducted.

(In other tax news, increased charges for TurboTax tax-preparation software provoked a revolt among some users, and taxpayers should expect the worst service from the Internal Revenue Service since at least 2001.)

The average cost reported by the National Society of Accountants conceals a wide variation among regions, as seen in the graphic below. The group found that the highest average fee, $348, will be charged by survey participants in the Far West—a region encompassing California, Oregon and Washington, as well as Hawaii and Alaska.

The lowest average fee, $198, is expected in the upper Midwest—Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.

Graph Not Exhibited Here

The survey also reported average fees for preparing additional tax forms. They include:

$174 for Schedule C (business)
$115 for Schedule D (investment gains and losses)
$126 for Schedule E (rental income)
$158 for Schedule F (farm)
$634 for Form 1065 (partnership)
$817 for Form 1120 (corporation)
$778 for Form 1120S (S corporation)

According to the survey, many tax preparers offer prospective clients a free consultation that could be worth $100 or more—but they also charge an average fee of $114 for dealing with disorganized or incomplete records.

The average fee for expediting a return is $88, and there’s often a charge the client does not provide information by an agreed-upon deadline.

The average hourly rate to handle an Internal Revenue Service audit is $144.

Continued in article

TurboTax is Suspected Since the Other Tax Preparation Software Has Not Yet Been Breached
"FBI to Probe Fraudulent Tax Filings:   As States Move to Contain Bogus Returns Through TurboTax, Signs Emerge That Fraud May Involve Federal Filings," by Laura Saunders. Liz Moyer in New York, and Devlin Barrett, The Wall Street Journal, February 11, 2015 ---

The Federal Bureau of Investigation has opened a probe to determine whether a computer data breach led to the filing of false tax returns through TurboTax software, according to a person familiar with the case.

The move comes as states try to contain a wave of bogus state tax filings through TurboTax amid signs that the fraud may also involve federal returns, according to some security specialists and taxpayers.

FBI investigators are still working to determine exactly how personal information was obtained to file bogus returns in about 19 states and whether that information may have been stolen from TurboTax or somewhere else, the person said.

TurboTax parent Intuit Inc. says it believes recent instances of fraud didn’t result from a breach of its systems, based on a preliminary examination conducted with the assistance of independent security experts.

“Tax fraud is an industrywide issue and Intuit is actively engaged with federal and state governments, as well as industry associations, to fight fraud,” the company said in a statement. “Intuit has not been notified, nor are we aware, that we are the target of an FBI investigation. We work with law-enforcement agencies, including the FBI as appropriate, on matters such as identity theft.”

Continued in article

Some States (e.g. Minnesota) Are Refusing eFiled TurboTax Returns

"Minnesota stops taking TurboTax returns due to possible fraud," by Mary Lynn Smith and Ricardo Lopez, Minneapolis Star Tribune, February 6, 2015 ---

Possible fraud activity tied to the software will be investigated.

Minnesota has stopped accepting tax returns filed through TurboTax, a popular tax preparation software, because of possible fraudulent activity.

Just as tax season is ramping up, Revenue Department officials made the urgent announcement late Thursday after two taxpayers reported that they had logged into Intuit’s TurboTax to file but were advised a return had already been filed. Because it could indicate fraud, state officials are blocking new TurboTax returns from coming in. They also are reviewing a “couple of thousand” returns that have already been filed using TurboTax.

“If we identify a problem, we will contact the taxpayer,” said Revenue Commissioner Cynthia Bauerly.

Meanwhile, TurboTax says it has temporarily stopped processing state tax returns due to the increase in fraudulent fillings. Intuit Inc., the company behind the popular tax preparation software TurboTax, said it is working with security company Palantir to investigate the problem. So far, Intuit says there was no security breach of its systems. Instead, it believes personal information was taken elsewhere and used to file returns on TurboTax.

Intuit says state tax returns already filed since Thursday will be transmitted as soon as possible. Users can still submit their federal income tax returns.

Utah state tax officials also announced Thursday that they have discovered 28 fraudulent filings from third-party vendors. Some taxpayers there also reported logging into TurboTax to file and then getting a message that their returns already had been filed.

Utah officials said 18 other states have identified similar problems.

Minnesota officials said Intuit, which is based in Mountain View, Calif., will open a dedicated phone number beginning at 8 a.m. Friday for people with concerns about the issue. TurboTax users can call 1-800-944-8596.

Minnesota Revenue Department officials said they were made aware of the issue with TurboTax on Wednesday night and “worked around the clock” to investigate the problem. They will continue to accept returns filed with Intuit professional preparer products, including Lacerte, Intuit Tax Online and ProSeries.

Bauerly said the Department of Revenue systems have not been breached and that the state has a “robust fraudulent protection system in place.”

Bauerly said her department has contacted Intuit and requested information on their security solutions and any other issues the company has discovered, along with solutions to resolve them.

Efforts to reach Intuit for comments Thursday night were not successful.

Continued in article

February 6, 2015 messagte from Scott Bonacker

Krebs on Security has posted a new item.

TurboTax owner Intuit Inc. said Thursday that it is temporarily suspending the transmission of state e-filed tax returns in response to a surge in complaints from consumers who logged into their TurboTax accounts only to find crooks had already claimed a refund in their name.

Teaching Case on Tax Strategies Using Trusts
From The Wall Street Journal Accounting Weekly Review on January 23, 2015

Trusts That Can Trim State Income Tax
by: Liz Moyer
Jan 24, 2015
Click here to view the full article on

TOPICS: Incomplete Nongrantor Trust, State Taxation, Tax Planning, Trusts

SUMMARY: Incomplete nongrantor trusts are serious tax-minimization tools. They are often formed in Delaware, Nevada and sometimes Wyoming, chosen because they don't tax the income of trusts established there, even by people who live elsewhere, or have favorable tax rules. In a typical scenario, an individual would put into the trust an asset or assets that already have gone up a lot in value or that he or she hopes will appreciate sharply, such as shares in a private company that plans to go public. The aim is usually to sell the securities, at which point federal tax would be due-but not state tax. Alternatively, the trust could be used to hold assets that throw off a lot of income each year, sheltering that income from state tax.

CLASSROOM APPLICATION: This article is appropriate for an individual taxation class.

1. (Introductory) What is an incomplete nongrantor trust? How are they structured? What is the purpose of those trusts? What are the benefits?

2. (Advanced) Where are incomplete nongrantor trusts formed? Why? Where do the taxpayers who utilize these trusts reside?

3. (Advanced) In general, how do states tax residents? Do states tax nonresidents? How do these trusts work for taxpayers in high-tax states?

4. (Advanced) How are incomplete nongrantor trusts eligible for the tax-saving treatment? Who owns the trust? Who owns the assets?

5. (Advanced) What are private-letter rulings? For what are they used? What is the IRS changing regarding private-letter rulings?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Trusts That Can Trim State Income Tax," by Liz Moyer, The Wall Street Journal, January 24, 2015 ---

These trusts may have funny-sounding names, but for some high-net-worth individuals, they are serious tax-minimization tools.

Known as incomplete nongrantor trusts, they are often formed in Delaware, Nevada and sometimes Wyoming, hence their acronyms “DING,” “NING” and “WING.” Those states are chosen because they don’t tax the income of trusts established there, even by people who live elsewhere, or have favorable tax rules.

In a typical scenario, an individual would put into the trust an asset or assets that already have gone up a lot in value or that he or she hopes will appreciate sharply, such as shares in a private company that plans to go public. The aim is usually to sell the securities, at which point federal tax would be due—but not state tax. Alternatively, the trust could be used to hold assets that throw off a lot of income each year, sheltering that income from state tax.

At some point, the dollars in the trust would typically be distributed to the person who created the trust and other beneficiaries.

Advisers say the strategy is especially in demand with residents of California and New Jersey, where top marginal income-tax rates are 13.3% and 8.97%, respectively. (Those rates apply to capital gains as well as to ordinary income.)

New York, another high-tax state, clamped down on the practice last year and won’t let New York residents use the trusts to avoid state taxes.

One risk is that additional states could negate the tax benefits for their residents. In California, Denise Azimi, a spokeswoman for the state Franchise Tax Board, says, “We are aware of the trust instruments. We are actively monitoring them. We will evaluate the situation to determine the best course of action.”

Says Andrew Katzenstein, a lawyer at Proskauer Rose in Los Angeles: “There’s a pretty good bet that the [California tax authority] is going to try to blow this up, but with careful planning there are opportunities to avoid California tax using these.”

A spokesman for New Jersey’s Office of Legislative Services says, “There is no pending legislation on this subject.”

Even before President Barack Obama proposed raising federal taxes on high earners in his State of the Union address this past week, earlier increases imposed by a 2012 law had encouraged high-net-worth people to look hard for tax savings.

“People are being crushed by the effect of federal and state taxes and looking for ways to reduce their effective rate,” says Brent Lipschultz, an accountant and adviser at EisnerAmper in New York.

To see the benefits of a DING or related trust, consider an example from Suzanne Shier, the chief tax strategist at Northern Trust, of a hypothetical individual who has a $10 million asset he originally acquired at a $1 million cost basis. He wants to sell it, but lives in a state where the tax is 10%.

If he puts the asset in a DING trust and then sells it, he avoids a state-tax bill of $900,000. He would still owe $2,142,000 in federal tax, assuming the top capital-gains rate of 20% plus the 3.8% surtax on net investment income. The assets remaining after the federal tax bill was paid would be $7,858,000 compared with $6,958,000 if it weren’t in a DING trust.

To pull this off, a little legal maneuvering is needed, because the trust has to accomplish two things. It has to be designed so that the individual gives up enough control of the asset to not be considered an owner under federal income-tax rules; that nonowner status is indicated by “nongrantor.” But the individual must retain enough control of the asset so as not to trigger gift taxes.

A gift is considered “incomplete” if the person giving it retains some level of control. With a DING, NING or WING, the individual usually sits on a committee of beneficiaries that has the power to change or direct the distribution of the assets, including making distributions back to him or herself.

A number of taxpayers have gotten private-letter rulings from the Internal Revenue Service OK’ing aspects of their particular arrangements for U.S. tax purposes, including verifying that gifts are incomplete, says William Lipkind, a partner at the New Jersey law firm Lipkind Prupis & Petigrow. He has obtained letter rulings on these trusts for several clients, including residents of New Jersey and California. He recently helped form a trust for three individuals who have a $30 million private business.

Advisers say people contemplating the creation of such trusts should think about timing. If an asset put into a trust is immediately sold and the money distributed back to the person forming it, that is likely to raise red flags with state tax authorities as a sham.

But setting up a trust, selling the assets a few years down the road and then distributing them some time after that is less likely to raise negative attention, especially if the person obtains a private-letter ruling from the IRS, Mr. Lipkind says.

On that note, the fees for an IRS private-letter ruling are going up as of Feb. 1, to $28,300 from $19,000 now. And if multiple beneficiaries want an identical IRS letter for their files, the cost for those will increase to $2,700 each next month from $1,800.


Mysteries of Human Memory
Does this explain the helicopter memory lapse of NBC's news anchor Brian Williams?

"You Have No Idea What Happened," by Maria Konnikova, The New Yorker, February 4, 2015 ---

Fraud ---

Ethics ---

"A few thoughts on teaching Ethics:  Are Business Schools using the Best Approach to Teach Ethics?" by Steven Mintz, Ethics Sage, January 27, 2015 --- 

Jensen Comment
For me role playing did not work so well in teaching ethics or most any other topic. I think it went too slow and got boring.  There are tons of cases, but these also tend to get boring.

For me short videos seemed to work the best, especially when followed by review discussions. At the time the IMA had some very good videos for classroom use.

I think it's important to stress the occasional murky line between unethical acts and illegal acts. You can teach both, but it's important to stress when behavior is possibly unethical but probably not illegal.

CGMA Portfolio of Tools for Accountants and Analysts ---
Includes ethics tools and learning cases.

Ethics Games and Puzzles ---

Scruples Game ---

Ethics Training for the Workplace ---

The bottom line is that both ethics and political leanings more often than not are impacted more by what is learned growing up at home and possibly by what is learned in church and K-12 schooling.  Sometimes we learn ethics best by watching our teachers, coaches, and supervisors recommending things that are not ethical.

For example, my high school football coach encouraged playing dirty ---

Apple's Tax Bill in Australia Doubles (suspicions of profit shifting)

Apple paid just $80.3 million in Australian tax last year, despite making more than $6 billion in local revenue, accounts filed with the corporate regulator show.

While a fraction of its overall income, Apple's tax bill was more than double what it paid the previous year.  

The tax-expense figure, disclosed in accounts filed with the Australian Securities and Investments Commission, comes as a Senate inquiry prepares to grill the heads of Australian and multinational corporations over their tax affairs.

It also comes amid an investigation by the Australian Tax Office of tech companies suspected of shifting profits out of Australia.

While the actual amount of tax a company pays is confidential under Australian law, an expense figure is calculated for the purpose of annual accounts.

Professor Antony Ting, at the University of Sydney Business School, said Apple's latest accounts suggested it was continuing to shift profits overseas.

"It appears that Apple is still able to shift most of its profits from Australia with its tax structure, which most likely is perfectly legal under the current tax law," he said.

"That leaves little profits, after deducting sales and marketing costs in Australia, to be taxed in Australia."

An Apple spokeswoman declined to comment on whether the accounts reflected tax paid accurately.

Apple has been in the spotlight over its taxes in Australia, after an investigation by Fairfax Media last year showed it had shifted $8.9 billion in untaxed profits from its Australian operations to Ireland in the past decade.

It is one of the companies expected to be hauled in front of a Senate inquiry into corporate tax avoidance, with hearings due to start as soon as March.

Read more:

Teaching Case on Tax Reform
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Obama Aims to Change Tax System Many Call Worst of All Worlds
by: John D. McKinnon
Feb 02, 2015
Click here to view the full article on

TOPICS: Corporate Taxation

SUMMARY: Mr. Obama wants U.S. companies to pay a 14% tax on the approximately $2 trillion of overseas earnings they have accumulated as part of a plan to overhaul the federal corporate tax system. They would face a 19% minimum tax on future foreign profits. Many Republicans ultimately want to largely forgo U.S. tax on future foreign earnings altogether. That is the direction most other developed countries have gone in recent years. GOP lawmakers believe their plan would do more to restore U.S. firms' competitiveness.

CLASSROOM APPLICATION: This article and the related ones would be an excellent update to share with students in a corporate tax class.

1. (Introductory) What are the details of the president's proposal to overhaul the corporate tax system?

2. (Advanced) Why do some companies have so much money "parked" in other countries? What encourages this behavior? How do these activities affect U.S. tax revenues?

3. (Advanced) How does the current U.S. corporate tax system compare with those in other countries? How does this affect competitiveness of corporations around the world? Corporations in which countries are benefited, and which corporations are at a disadvantage?

4. (Advanced) How does this proposal compare with what members of Congress want? Is Obama's proposal likely to pass? Why or why not?

Reviewed By: Linda Christiansen, Indiana University Southeast

Obama Proposes One-Time 14% Tax on Overseas Earnings
by Nick Timiraos and John D. McKinnon
Feb 02, 2015
Online Exclusive

Obama's Corporate Tax Plan? CFOs Weigh In
by CFO Journal Staff
Feb 02, 2015
Online Exclusive

Firms Back Tax Reform-Just Not Obama's
by Vipal Monga and Joann S. Lublin
Feb 03, 2015
Online Exclusive

5 Areas for Possible Compromise in Obama Budget
by Staff
Feb 02, 2015
Online Exclusive

New Taxes Would Hit Wealthy, Companies
by John D. McKinnon
Feb 03, 2015
Online Exclusive

"Obama Aims to Change Tax System Many Call Worst of All Worlds," by John D. McKinnon, The Wall Street Journal, February 2, 2015 ---

The administration proposal to tax foreign earnings of U.S. companies have parked offshore fills in important details of a plan that officials have been discussing in broad terms for several years.

One prominent feature is that it would be mandatory. Instead of relying on ultralow tax rates to induce companies to bring their money home voluntarily, as some lawmakers have recently proposed, President Barack Obama wants to impose a 14% tax on those profits. He also would tax future foreign profits at 19%—far lower than his proposed 28% top rate for corporate profits and the existing 35% top rate, but still significant given the direction many other developed countries have taken.

While a mandatory tax on existing overseas profits is at odds with some recent proposals in Congress, some leading Republican tax writers have embraced such an approach in recent years. That suggests it could become part of a deal to overhaul the tax system and help pay for big new domestic infrastructure investments.

Read More in Capital Journal

·        Obama Opens Bidding on Corporate Taxes

·        Q&A: What the $18 Trillion National Debt Means for the U.S. Economy

·        Obama Aims to Change Tax System Many Call Worst of All Worlds

·        Obama Budget Proposes 7% More in Spending Above Sequestration Caps

·        GOP Split Over Expected Obama Request for More Defense Outlays

Mr. Obama generally wants to make the U.S. system of taxing its multinationals more world-wide in scope, by imposing tax immediately on firms’ future foreign earnings as well as their existing ones.

Many Republicans ultimately want to largely forgo U.S. tax on future foreign earnings altogether. That is the direction most other developed countries have gone in recent years. GOP lawmakers believe their plan would do more to restore U.S. firms’ competitiveness, a concern that Democrats say is overblown.

At a minimum, Mr. Obama’s proposals help to bring a long-running debate over U.S. company taxation to an important crossroad. While it is still unclear which direction Washington will take, almost nobody wants to keep slogging down the current path when it comes to taxing U.S. multinational corporations.

For years, many other countries have been slashing corporate-tax rates in an effort to hold on to company headquarters and jobs and attract new investment. They also have moved to a system known as territorial taxation that generally seeks to tax firms only on their domestic profits, not their global earnings, as a further inducement to firms.

As a partial concession, the U.S. for many years has allowed firms to defer federal tax on their foreign earnings until the money is brought home—a sort of hybrid of world-wide and territorial taxation. But the result has been anything but a happy medium.

As the tax differential has grown between the U.S. and the rest of the world, U.S. firms have chosen to leave more earnings offshore, where the U.S. tax is deferred. That means they typically can’t make use of the cash for dividends, stock buybacks or domestic reinvestment. Some have even sought to move overseas to escape the U.S. tax system and reunite with their cash.

Many experts regard it as the worst of both worlds: a system that scares off new investment because of a high statutory rate, yet also collects relatively little money for the government. The system’s daunting complexity also adds to compliance costs for everyone. And multinationals often pay very little in tax, while domestic-focused companies sometimes pay a lot.

The Obama plan appears unconnected to a separate effort by some lawmakers of both parties to declare a temporary tax holiday, allowing multinationals to bring home foreign profits at a special low rate, to spur domestic investment. The administration warned that it still opposes such measures.

Teaching Case on Warranty Accounting
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Beazer Homes Loss Widens Amid Warranty Charge
by: Chelsey Dulaney
Jan 31, 2015
Click here to view the full article on

TOPICS: Warranty Expenses

SUMMARY: Beazer Homes USA Inc.'s loss widened in its December 2012 quarter as home closings fell and the company was hit by unexpected warranty costs that eroded profitability. Chief Executive Allan Merrill said that the quarter's results were weighed by a low backlog conversion rate and an unexpected $13.6 million charge stemming from stucco installation issues in some of its Florida homes that resulted in water intrusion. Shares were down 2.3% at $16.85 in premarket trading.

CLASSROOM APPLICATION: This article could be used when discussing financial reporting related to warranty expenses.

1. (Introductory) What facts did the article report regarding Beazer Homes December quarter's results? What impact have warranty costs had on Beazer Homes?

2. (Advanced) How are warranty expenses usually booked? When are those expenses accrued? What accounts are increased or decreased?

3. (Advanced) What should a company do if it unexpectedly experiences an unusually large number of warranty claims or a large dollar amount? How would that be recorded in journal entries? How would it affect the financial statements?

4. (Advanced) What has been the impact of the warranty expense information on the market price of the company's shares? Why did that happen?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Beazer Homes Loss Widens Amid Warranty Charge," Chelsey Dulaney, The Wall Street Journal, January 31, 2015 ---

Beazer Homes USA Inc. ’s loss widened in its December quarter as home closings fell and the company was hit by unexpected warranty costs that eroded profitability.

Chief Executive Allan Merrill said Friday that the quarter’s results were weighed by a low backlog conversion rate and an unexpected $13.6 million charge stemming from stucco installation issues in some of its Florida homes that resulted in water intrusion.

Shares were down 2.3% at $16.85 in premarket trading.

Mr. Merrill said Friday that an improving sales environment and a higher backlog should help boost the company’s future performance.

At the end of the quarter ended Dec. 31, Beazer’s backlog was up 1.2% to 1,771 homes, with a sales value of $560.5 million.

Overall, Beazer reported a loss of $22.3 million, or 84 cents a share, compared with a loss of $5.14 million, or 21 cents a share, a year earlier.

Revenue fell 9.3% to $265.8 million.

Analysts polled by Thomson Reuters had expected a per-share loss of 12 cents on revenue of $296.4 million.

Total home closings fell 14.7% in the quarter, as the average sales price from closings grew 5.8%.

The home-building gross margin, excluding impairments and abandonments, and interest, fell to 16.6% from 21.2%. Excluding the aforementioned items and the Florida warranty costs, margins would have edged up to 21.8% from 21.2%.

New home orders increased 7.9% in the quarter.

How would you account for warranty obligations of Tesla electric automobiles?
Note that Tesla has an eight-year unlimited mileage warranty.

"Tesla's Earnings Quality Is Sketchy, But Its Stock Keeps Soaring," by Herb Greenberg, Business Insider, May 16, 2013 ---

If profits matter going forward, so does earnings quality. And according to Gradient Analytics, the earnings quality gets a grade of 'F."

What stands out the most?

"So many things," says Gradient research director Donn Vickrey. "By declaring themselves profitable, I said there is just no way. How can this be at this point in the cycle? It has to be purely a paper profit and at that some elements of the paper may be lower quality than usual."

Paper or not, Vickrey believes whatever Tesla's profitability, it isn't sustainable.

Rather than go through all of his points, let's focus on just one: warranty accruals. This is the amount the company puts aside for expected warranty expenses — a non-cash charge that hits earnings as a cost of goods sold. The lower the provision, the less of a hit to earnings.

It's highly subjective, and Tesla current reserves at a rate, relative to sales, in-line with Ford and General Motors. But its warranty is longer than mainstream auto companies and "its product is based on new technology with unproven reliability," according to Gradient's report on Tesla." Of particular concern: The firm's eight-year, 100,000 mile battery warranty could prove to be extremely costly."

But what if the company is so new it simply doesn't know — so uses existing auto companies as a benchmark?

Under accounting rules, Vickrey says, if you don't know what they'll be "they should be higher, not lower."

Continued in article

Bob Jensen's threads on warranty accounting

Teaching Case on Audit Committees and Corporate Governance
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Meet the Corporate Board's 'Kitchen Junk Drawer'
by: Michael Rapoport and Joann S. Lublin
Feb 03, 2015
Click here to view the full article on

TOPICS: Audit Committees, Sarbanes-Oxley

SUMMARY: As new risks multiply, the audit committee has become the "kitchen junk drawer" for many corporate boards. The workload of the powerful committees has expanded sharply beyond their core role of overseeing a company's financial reporting. They are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. In addition, the Securities and Exchange Commission is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

CLASSROOM APPLICATION: This is an excellent article on audit committees for financial accounting classes, as well as for auditing and forensic accounting classes.

1. (Introductory) What is an audit committee? What are their duties? Why are audit committees important?

2. (Advanced) What is the Sarbanes-Oxley Act? How has it affected the work of audit committees?

3. (Advanced) How have the duties of audit committees expanded in recent years? What are the reasons for this?

4. (Advanced) What qualifications should a company seek in a member of the audit committee? As top management in a business, how would you attract these kinds of people? What benefits could they add to your business?

5. (Advanced) What does the SEC expect to release regarding the activities of audit committees? What could this change? Would it increase responsibilities of the audit committee or relieve some of their burdens?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Meet the Corporate Board's 'Kitchen Junk Drawer'," by Michael Rapoport and Joann S. Lublin, The Wall Street Journal, February 3, 2015 ---

Workload of the Audit Committee Has Expanded Well Beyond Oversight of Financial Reporting.

As new risks multiply, the audit committee has become the “kitchen junk drawer” for many corporate boards.

The workload of the powerful committees has expanded sharply beyond their core role of overseeing a company’s financial reporting. They are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. In addition, the Securities and Exchange Commission is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

“It’s not the favorite committee,’’ says Fredric Reynolds, a retired CBS Corp. chief financial officer and audit committee chairman at Mondelez International Inc. To attract committee members, he sometimes promises relatively short stints: “You’ll be released for time served and good behavior,’’ he tells directors.

Mr. Reynolds estimates he spends 100-plus hours a year on Mondelez’s audit committee. One key part of that is the audit committees’ oversight of whistleblower complaints, which is required by the 2002 Sarbanes-Oxley Act. The vast majority are from people frustrated with their work colleagues, he adds. But when there’s smoke, “you don’t know if it’s fire.”

The speed and complexity of business and risk oversight “are stretching and straining many audit committee agendas,” according to a global survey of audit committee members released last week by accounting firm KPMG. Three-quarters of the 1,500 respondents said the amount of time required to carry out their responsibilities has increased at least “moderately” over the past two years.

Serving on an audit committee “has taken more time than I expected,’’ says a former tech-industry finance chief who sits on the board of a fast-growing community bank.

In August, he became interim chief executive of a closely held aerospace company, and says he warned the bank he didn’t have enough time for both roles. But, he says, the bank’s chairman told him, “We want you to stay involved in the audit committee.” He concedes that he has since skipped two board meetings.

Some boards appear to view the audit committee as a place to hand off any internal oversight issues, even if they are outside the committee’s traditional purview.

“Sometimes the audit committee is viewed as the kitchen junk drawer,’’ says Cindy Fornelli, executive director of the Center for Audit Quality, an accounting-industry group. Boards feel “if we don’t know what to do with it, we’ll give it to the audit committee.”

Some directors remain unfazed by the heavy workload because they enjoy being where the action is. “It’s where you have a very broad access to management time and information about the business,” says James Quigley , audit committee chairman for Wells Fargo & Co.

For some, however, the increased demands are taking a toll. E. Follin Smith resigned as audit committee chairman and a director of Discover Financial Services last spring because of the intense demands, according to people familiar with the situation. The retired CFO of Constellation Energy Group already was Ryder System Inc. ’s lead director, as well as an audit panel member there and at Kraft Foods Group Inc.

Ms. Smith told Discover Financial directors that she had more board work than she wanted, recalls one person with knowledge of the matter. “She had a lot on her plate.’’

Ms. Smith didn’t respond to phone calls seeking comment.

Government investigations can boost an audit committee’s work. Wal-Mart Stores Inc. ’s audit committee held an additional 13 meetings during fiscal 2014, because of probes into allegations that the big retailer had bribed officials in Mexico and other countries, according to its proxy. Wal-Mart has said it is cooperating with U.S. and Mexican government investigations in the matter.

Christopher Williams, head of Wal-Mart’s audit committee, couldn’t be reached.

Sarbanes-Oxley contributed to the more expansive view of the audit committee’s role. In addition to requiring such committees to establish procedures to handle whistleblower complaints, the law made it clear the audit committee hires the outside auditor, and that it must be made up entirely of independent directors.

“From the perspective of the board, the audit committee looks like the entity that has the most expertise on anything related to risk,” says Daniel Goelzer, a Baker & McKenzie lawyer and former interim chairman of the Public Company Accounting Oversight Board, the government’s audit regulator.

The SEC plans to issue a “concept release” by the end of March on what audit committees should tell investors—a step toward revamping disclosure requirements for the first time since 1999.

Accounting and corporate-governance groups have urged audit committees to voluntarily disclose more to shareholders, but the SEC thinks the voluntary disclosures lack uniformity. Only 13% of companies in the S&P 500 disclosed to investors their audit commitees’ specific considerations in approving their auditor, such as qualifications and geographic reach, according to a recent analysis by the Center for Audit Quality and consulting firm Audit Analytics.

Continued in article

Bob Jensen's threads on audit committee professionalism ---

Teaching Case on ACA Health Care Tax Issues
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

The ACA and Other Changes to Watch Out for This Tax Season
by: Tom Herman
Feb 02, 2015
Click here to view the full article on

TOPICS: Individual Taxation

SUMMARY: Before firing off a 2014 income tax return, taxpayers should take some time to master a few important, but easily overlooked, deductions, credits and other breaks-including a few that were revived at the end of last year. Even if a taxpayer considers him or herself a tax wizard who loves studying the Internal Revenue Code, it's increasingly easy to make costly bloopers. Also, taxpayers should watch out for a few new wrinkles in 2015, notably those stemming from the Affordable Care Act. The article offers some areas that deserve extra attention.

CLASSROOM APPLICATION: This article offers insight on some areas of individual taxation, especially areas that have experienced recent changes.

1. (Advanced) What are the tax issues involving health insurance for 2014 tax returns? Will the changes affect all taxpayers, some, or just a few? Why is health insurance a part of tax returns?

2. (Introductory) What is the income ceiling for the Social Security tax? How could this be a problem for people who have more than one job?

3. (Advanced) How is income taxed if capital losses exceed capital gains? How does that differ from when capital gains exceed capital losses? How are gains and losses from a personal residence different from other capital gains and losses?

4. (Advanced) What is the standard deduction? How many taxpayers elect to claim it? What is the other alternative? Why do the majority of the taxpayers choose the option they choose?

5. (Introductory) What taxpayers should choose to deduct sales taxes? What is the other option?

6. (Introductory) What is the simplified calculation for the home office deduction? Why did the IRS develop this calculation? What is the other option?

Reviewed By: Linda Christiansen, Indiana University Southeast

Before firing off your 2013 income tax return, take some time to master a few important, but easily overlooked, deductions, credits and other breaks—including a few that were revived at the end of last year.
"The ACA and Other Changes to Watch Out for This Tax Season," by Tom Herman, The Wall Street Journal, February 2, 2015 ---

The complexity and questions that arise from the nation’s ever-changing tax laws are as certain as taxes themselves. So we introduce a new column, written by Tom Herman, a former tax columnist for The Wall Street Journal, that will look at developments affecting taxpayers and individual investors. We welcome your thoughts and questions about tax issues, big and small. Send them to

Early birds, be careful.

Before firing off your ... income tax return, take some time to master a few important, but easily overlooked, deductions, credits and other breaks—including a few that were revived at the end of last year.

Even if you consider yourself a tax wizard who loves studying the Internal Revenue Code, it’s increasingly easy to make costly bloopers. Also, watch out for a few new wrinkles this year, notably those stemming from the Affordable Care Act.

Here are some areas that deserve extra attention:

HEALTH INSURANCE Get ready for some new lines on this year’s forms because of the Affordable Care Act. For most, this should be fairly simple. “The majority of taxpayers—more than three out of four—will simply need to check a box to verify they have health-insurance coverage,” the IRS says. Others will face trickier issues. Some may be eligible to claim an exemption from the coverage requirement. But those who don’t have qualifying coverage or who don’t qualify for an exemption will need to make “an individual shared responsibility payment.” Others may qualify for a “premium tax credit.” See for details. For some “this will be very complicated,” warns Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting U.S.

SOCIAL SECURITY TAX Some people who worked for two or more employers last year may have paid too much in Social Security tax. The maximum amount that should have been withheld by all your employers for 2014 was $7,254. (That’s 6.2% of $117,000, the maximum amount of wages subject to the Social Security tax.) If you had too much withheld, you typically can claim the excess as a credit. See IRS Publication 17 for details.

INVESTMENT LOSERS Did you lose money on stocks, bonds and other investments you sold last year? Use your capital losses to offset capital gains. But what if your losses exceeded your gains? You can deduct as much as $3,000 a year ($1,500 for married taxpayers filing separately) of net losses against your wages and other ordinary income. Carry over excess losses into future years. Warning: You can’t deduct a loss on the sale of your personal residence.

IRA CHARITABLE TRANSFERS Late last year, lawmakers revived a provision that allowed many people age 70½ or older to transfer as much as $100,000 directly from an IRA to charity, tax-free, during 2014. The transfer counted toward the taxpayer’s required minimum distribution. You’re supposed to report your “qualified charitable distribution” on your return even if it’s tax-free. Just make sure you don’t put it on the wrong line. For example, if you file Form 1040, report your “QCD” on Line 15a. Don’t include any of that distribution on the line for “taxable amount” (Line 15b). Instead, write “QCD” next to the line.

HIGHER STANDARD About two out of every three returns typically claim the standard deduction. For 2014, the basic standard deduction is $12,400 for those married and filing jointly, or $6,200 if single or married and filing separately. There are additional amounts for people who were 65 or older, or blind. Before taking the standard deduction, check to see if you might be better off itemizing.

SALES TAXES Late last year, Congress revived a law that gives taxpayers who itemize an important choice: They can deduct either state and local income taxes paid in 2014—or their state and local sales taxes. (But they can’t deduct both.) The sales-tax option offers welcome relief for people in states with no income tax, such as Texas and Florida. But taxpayers in other states may benefit from taking the sales-tax deduction, says Mr. Luscombe, including those who paid large amounts of sales tax on major purchases such as cars or boats or those who reside in states with high sales-tax rates.

HOME OFFICE Many people who work at home don’t bother deducting their home-office expenses because the rules can be fiendishly complex and because of fears it would increase their chances of getting audited. But if you qualify to deduct home-office expenses, you may benefit from a simplified calculation method allowed by the IRS. Multiply the square footage of the home used for your home office (but not more than 300 square feet) by an IRS-approved rate of $5 a square foot. Thus, the maximum deduction in this case would be $1,500.

Mr. Herman is a writer in New York City. He was formerly The Wall Street Journal’s Tax Report columnist.

IRS ACA Health Insurance Site ---

Teaching Case on New Revenue Recognition Rules
From The Wall Street Journal Weekly Accounting Review on January 30, 2015

For New Revenue-Recognition Rules, It's Ready vs. Not
by: Maxwell Murphy
Jan 27, 2015
Click here to view the full article on

TOPICS: Deferred Revenues, Revenue Recognition

SUMMARY: Will sweeping revisions in revenue-recognition rules take effect as scheduled? The planned changes, part of a broader effort to align U.S. and international accounting standards, involve so-called deferred revenue-money companies have already collected from their customers but which they recognize as revenue over time. The change is set to start Jan. 1, 2017, but officials at the FASB received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts and adjust past financial results. A group of U.S. software companies asked the FASB for more guidance and a two-year delay.

CLASSROOM APPLICATION: This is an excellent update regarding new revenue-recognition rules.

1. (Introductory) What accounting rules are changing? When is the change set to begin? Who is changing the rules?

2. (Advanced) What is revenue recognition? What is deferred revenue? How are the financial statements impacted by each of these? How will the new rules affect company's financial statements? Will different companies or industries be affected differently?

3. (Advanced) What is the reasoning behind the change in rules? Who will be benefited by the change?

4. (Advanced) What parties are concerned about the effective date of the new rules? What challenges are they reporting? What did they request?

Reviewed By: Linda Christiansen, Indiana University Southeast

Push to Tax '529' Plans Stokes Debate
by Josh Mitchell
Jan 23, 2015
Online Exclusive

Tax Benefits of College-Savings Plans Would Be Cut by Obama
by Annamaria Andriotis
Jan 20, 2015
Online Exclusive

Obamas Pump Up College Savings
by Jane J. Kim
Apr 18, 2009
Online Exclusive

Treasury Secretary Optimistic on Business Tax Overhaul
by John D. McKinnon
Jan 22, 2015
Online Exclusive

Obama Drops Plan to Raise Taxes on '529' College Savings Accounts
by John D. McKinnon
Jan 28, 2015
Online Exclusive

"For New Revenue-Recognition Rules, It's Ready vs. Not," by Maxwell Murphy, The Wall Street Journal, January 27, 2015 ---

Call it the $360 billion question: whether to delay one of the biggest accounting changes in decades.

The answer isn’t expected until early in the second quarter.

The sweeping revisions in revenue-recognition rules “will represent a change for many industries,” said Christine Klimek, a spokeswoman for the Financial Accounting Standards Board, after a joint meeting Monday with its international counterparts. “There are bound to be questions. The answers to most of those questions can be found within the standard itself.”

The final draft of the new rules, unveiled last May after years of deliberations, would change the way thousands of companies book revenue. They would affect how auto makers account for car sales and telephone companies account for mobile-phone contracts.

The planned changes, part of a broader effort to align U.S. and international accounting standards, involve so-called deferred revenue—money companies have already collected from their customers but which they recognize as revenue over time. The idea is to make it easier for investors to compare companies across countries and industries.

Companies in the S&P 500 index have about $360 billion of such revenue on their books, according to S&P Capital IQ. Boeing Co. , Microsoft Corp. and International Business Machines Corp. have a combined $60 billion in deferred revenue, and the new rules will determine how much of that they will move to the top line—and when.

The accounting shakeup is set to start Jan. 1, 2017, but officials at the FASB received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts and rejigger past financial results.

Last Wednesday, a group of U.S. software companies, including Adobe Systems Inc., Symantec Corp. and VMware Inc., asked the FASB for more guidance and a two-year delay.

Exactly what deferred revenue will be counted as sales will vary widely between companies and industries. According to the Securities and Exchange Commission, as many as 250 questions linger as to how to implement the rules.

Auto makers such as Ford Motor Co. and General Motors Co. say the rules might force them to account separately for each car sold around the world, rather than group them into comparable transactions. They estimate they might have to spend as much as $300 million each on accounting technology, and they claim new financial figures based on per-car accounting will provide little benefit for investors.

AT&T Inc. and Verizon Communications Inc. said the current deadline doesn’t give them enough time. Both companies cited difficulty in restating results for prior periods.

Microsoft signaled investors over the summer that the rules “will have a material impact” on its financial results. A company spokesman declined to elaborate.

“The amount of work that it will mean for an accounting team can be overwhelming,” said Ken Goldman, chief financial officer of Fiksu Inc., a mobile marketing company that is preparing its books to potentially go public. He agrees with the rules conceptually, but said they could be more complicated and costly for companies than the Sarbanes-Oxley financial reforms of 2002.

Moreover, if companies don’t adequately prepare Wall Street, the revenue changes could be jarring.

When Apple Inc. changed the way it accounted for software updates for the iPhone in early 2010, the company’s financial results surpassed analysts’ expectations by billions of dollars. Though Apple was simply complying with new accounting rules that affected the way it booked the sales, the Nasdaq Stock Market had to temporarily halt after-hours trading of Apple’s shares to give investors time to digest the news.

Some big companies say they plan to be ready if the new revenue-recognition rules take effect as scheduled. “We do not need an extension,” said Liesl Nebel, accounting-policy controller at Intel Corp. “If they do allow an extension, we would like to early adopt.”

Defense contractor General Dynamics Corp. said any delay would cause it to spend more time and money to run parallel books with two different standards. “Do not penalize the companies that have moved forward,” wrote Kimberly Kuryea, its controller, in a letter to the FASB this month. “[The] costs will naturally and inevitably grow if the implementation period is extended.” The company declined to comment further.

The FASB needs to consider that argument “very seriously,” said Prabhakar Kalavacherla, a partner at auditor KPMG LLP who was a board member of the International Accounting Standards Board and worked on the project to align global revenue rules.

But smaller public companies with fewer resources generally will have a harder time getting their books in order, even though they wouldn’t have to report comparative figures for farther back than the prior year. Most large companies expect to produce figures for the previous two years.

Continued in article

Bob Jensen's threads on revenue recognition ---

Teaching Case on the SEC's Surrender to the Big Four in China
From The Wall Street Journal Weekly Accounting Review on February 13, 2015

SEC, Big Four Accounting Firms in China Settle Dispute
by: Michael Rapoport
Feb 07, 2015
Click here to view the full article on

TOPICS: Auditing, Big Four Accounting, China, SEC

SUMMARY: The Chinese affiliates of the Big Four accounting firms agreed to pay $500,000 each to settle a yearslong dispute with the Securities and Exchange Commission over their reluctance to give the agency documents about Chinese companies under investigation. The settlement also allows the firms to avoid a temporary suspension of their right to audit U.S.-traded firms - a potential outcome of the dispute that would have complicated life for dozens of Chinese companies and many U.S. multinationals with significant operations in China. Under the $2 million agreement, the Chinese arms of PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG and Ernst & Young also agreed to follow procedures designed to ensure that the SEC is able to obtain audit documents from them in the future. The settlement follows a judge's ruling that the accounting firms had violated U.S. law when they refused to give the SEC the audit-work papers about some Chinese clients the SEC was investigating. Even though the clients' securities traded in the U.S., the firms had argued they were prevented from sharing the work papers by strict Chinese laws that treat such documents as akin to state secrets.

CLASSROOM APPLICATION: This is a good article to use in an auditing class, or to use when covering accounting for international business.

1. (Introductory) What are the details of the settlement described in the article? Who are the parties involved in the settlement?

2. (Advanced) What are the details of the dispute that led to this settlement? Why is it important for the SEC to gather information?

3. (Advanced) What defense did the Chinese firms present? How were those issues and concerns addressed in the settlement?

4. (Advanced) What could have been the ramifications if the Chinese firms had refused to settle? Who would have been affected? How could that have affected the accounting firms, the Chinese businesses, and other parties?

5. (Advanced) What is the PCAOB? What is its area of responsibility? How is its work affected by the dispute and the settlement?

Reviewed By: Linda Christiansen, Indiana University Southeast

SEC, Chinese Affiliates of Accounting Firms Near Settlement
by Michael Rapoport and Jean Eaglesham
Feb 05, 2015
Online Exclusive

Judge Suspends Chinese Units of Big Four Auditors
by Michael Rapoport
Jan 23, 2014
Online Exclusive

How the Big Four Audit Firms' Chinese Units Ended Up in Hot Water
by Michael Rapoport
Jan 22, 2014
Online Exclusive

SEC, Big 4 Firms Make Progress in China Audit Dispute
by Michael Rapoport
Dec 15, 2014
Online Exclusive

"SEC, Big Four Accounting Firms in China Settle Dispute," by Michael Rapoport, The Wall Street Journal, February 7, 2015 ---

Deal Over Refusal to Turn Over Audit Documents Lifts Threat of Suspension.

The Chinese affiliates of the Big Four accounting firms agreed to pay $500,000 each to settle a yearslong dispute with the Securities and Exchange Commission over their reluctance to give the agency documents about Chinese companies under investigation.

The settlement also allows the firms to avoid a temporary suspension of their right to audit U.S.-traded firms—a potential outcome of the dispute that would have complicated life for dozens of Chinese companies and many U.S. multinationals with significant operations in China.

Under the $2 million agreement, the Chinese arms of PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG and Ernst & Young also agreed to follow procedures designed to ensure that the SEC is able to obtain audit documents from them in the future.

The settlement follows a judge’s ruling last year that the accounting firms had violated U.S. law when they refused to give the SEC the audit-work papers about some Chinese clients the SEC was investigating. Even though the clients’ securities traded in the U.S., the firms had argued they were prevented from sharing the work papers by strict Chinese laws that treat such documents as akin to state secrets.

Many of the documents were later turned over to the SEC after they were routed from the firms through Chinese regulators. SEC officials said their access to such audit documents is crucial to efforts to protect investors from fraud by Chinese companies, and they said the settlement helps secure their future access to such documents.

The settlement is “a positive step in attempting to preserve the forward momentum,” Andrew Ceresney, the SEC’s enforcement director, told reporters on a conference call.

In a joint statement, the four firms’ Chinese affiliates said they were “pleased” to have reached a settlement.

While some outside experts welcomed the settlement, Paul Gillis, a professor at Peking University’s Guangua School of Management, said it “falls far short of what investors need….The settlement just lets the firms off the hook and kicks the can down the road.”

The dispute stems from the wave of 170-plus U.S.-traded Chinese companies—most of them smaller, not China’s best-known and largest companies —that have faced accounting questions in recent years.

The issues range from allegations of embezzlement and inflated revenues to a lack of proper disclosure to investors.

The SEC has investigated some of these companies and has filed about 25 enforcement cases against Chinese firms and their executives. But the agency was frustrated in some of its investigations because the companies’ China-based auditors refused to give the SEC documents from their audits, contending the Chinese government could throw their auditors in jail if they did. (All of the major accounting firms are international networks made up of individual, freestanding firms in each country where they do business.)

In January 2014, Cameron Elliot, an SEC administrative law judge, sided with the SEC enforcers and ordered the four accounting firms suspended from auditing U.S.-traded companies for six months. That suspension has been on hold while the firms appeal the ruling to the five-member SEC itself.

The settlement requires the firms to follow detailed procedures to give the SEC access to Chinese firms’ audit documents via the China Securities Regulatory Commission, similar to the method in use since 2013. If the firms don’t follow the procedures, the SEC could impose penalties such as suspensions, or it could restart the current enforcement case.

The China Securities Regulatory Commission wasn’t a party to Friday’s settlement, and a spokesman for the CSRC said he had no information on the matter. But Mr. Ceresney said he was hopeful Chinese regulators would maintain their willingness to act as a conduit. In any event, he said, “ultimately in our view it’s the firms who are responsible” to make sure any SEC requests are satisfied. The firms didn’t admit to or deny wrongdoing as part of the settlement, except that they acknowledged they initially didn’t give the documents to the SEC.

Continued in article

Teaching Case on Deducting Expenses That Were Paid as a Gift
From The Wall Street Journal Weekly Accounting Review on February 13, 2015

Strange but True: Deduct Expenses That Others Paid
by: Bill Bischoff
Feb 04, 2015
Click here to view the full article on

TOPICS: Deductions, Taxation

SUMMARY: In a 2010 decision worth reviewing this tax season, the U.S. Tax Court concluded that a daughter could deduct medical expenses and real-estate taxes on her Form 1040 even though they were covered by gifts from her mother. The gifts were in the form of direct payments by the mother to the medical service providers and local government entities. The Tax Court's decision may be surprising, because people probably think a taxpayer can never deduct expenses that were paid by someone else. Not necessarily true! This article discusses how this decision could apply to medical expenses, real-estate taxes, and seller-paid points for a home mortgage.

CLASSROOM APPLICATION: This article can be used in an individual taxation course when discussing deductions or gifts.

1. (Introductory) What was the U.S. Tax Court's decision regarding a taxpayer's deduction for expenses paid by her mother? Why might that decision surprised some people?

2. (Advanced) What are the tax rules regarding deduction of medical expenses for 2014? How did the Tax Court's decision impact this deduction?

3. (Advanced) Why was the daughter in this case allowed to deduct all of the real-estate taxes?

4. (Advanced) What are seller-paid points? What is the tax treatment for them? Why is it odd that the buyer could deduct this in the situations described?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Strange but True: Deduct Expenses That Others Paid," by Bill Bischoff, The Wall Street Journal, February 4, 2015 ---

In a 2010 decision that is worth reviewing this tax season, the U.S. Tax Court concluded that a daughter could deduct medical expenses and real-estate taxes on her Form 1040 even though they were covered by gifts from her mother. The gifts were in the form of direct payments by the mother to the medical service providers and local government entities.

The Tax Court’s decision (Judith Lang, TC Memo 2010-286) may surprise you, because you probably think a taxpayer can never deduct expenses that were paid by someone else. Not necessarily true!

Since it is now tax-return time, let’s put this in the context of how it might affect your 2014 Form 1040.

Medical Expenses

For the 2014 tax year, you can generally deduct medical expenses to the extent they exceed 10% of your adjusted gross income (AGI), or 7.5% of AGI if either you or your spouse was age 65 or older as of Dec. 31, 2014. AGI is the number at the bottom of the first page of your Form 1040; it includes all taxable income items and selected deductions such as the ones for alimony paid, self-employed health-insurance premiums and moving expenses.

In this Tax Court case, the Internal Revenue Service argued that the daughter couldn’t deduct the medical expenses because she didn’t pay for them with her own money. The Tax Court disagreed. The facts of the case demonstrated that the mother intended the medical-expense payments to be gifts to her daughter. Therefore, the Tax Court characterized the transactions as gifts from the mother to the daughter followed by payment of the medical expenses by the daughter with the gifted funds. So the daughter was allowed to count $24,559 of medical expenses that were actually paid by the mother plus some expenses the daughter paid with her own funds in calculating her medical-expense deduction.

Thanks to the tax-law exemption for gifts that are made in the form of direct payments to medical service providers, the payment of the daughter’s medical expenses had no gift-tax consequences for the mother.

Important point: When you directly pay medical expenses for a person who is your dependent (meaning you pay over 50% of that person’s total support), you can add the expenses you pay for the dependent to your own expenses and claim a deduction for the total to the extent it exceeds the applicable percent-of-AGI threshold. In the Tax Court case, the daughter was evidently not the mother’s dependent, so the deduction for the daughter’s expenses belonged to the daughter rather than the mother.

Real-Estate Taxes

The daughter in the Tax Court case was also allowed to claim an itemized deduction for $5,508 of local real-estate taxes that were paid by the mother plus some taxes that the daughter paid with her own funds. Thanks to the annual federal gift-tax exclusion (currently $14,000), the mother’s payment of the real-estate taxes had no gift-tax consequences, because the amount involved was less than the gift-tax exclusion that applied for the year in question.

Seller-Paid Points for a Home Mortgage

Assuming you itemize deductions, you can write off points (including loan-origination fees) that you pay to take out a mortgage to buy your principal residence. Surprisingly enough, you can also deduct mortgage points paid by the seller to sweeten the deal. In fact, IRS Revenue Procedure 94-27 actually requires you to claim the deduction. Don’t ask why! Just follow directions and claim that deduction, even though the seller paid for it.

Teaching Case on Tax Traps
From The Wall Street Journal Weekly Accounting Review on February 13, 2015

Don't Fall Into a Tax Trap
by: Laura Saunders
Feb 07, 2015
Click here to view the full article on

TOPICS: Individual Taxation

SUMMARY: Tax hazards that can trip up taxpayers. These errors aren't the obvious bloopers that cause trouble, such as entering income information incorrectly or misstating Social Security numbers. Instead, they are tricky issues that often confuse taxpayers who do their own returns - and even some paid preparers - and cause people either to overpay Uncle Sam or invite an IRS challenge. The article includes issues to be aware of, starting with those that are new this year, including the new healthcare forms, new IRS reporting for options, charitable donations, state-tax refunds, unemployment benefits, mileage deductions, passive losses on real estate, new investment income tax, alimony, and foreign accounts or payments.

CLASSROOM APPLICATION: This is an excellent summary of new and challenging issues in individual taxation.

1. (Introductory) What are the facts of Joseph Mohamed's case? What is the applicable tax law? What did the court decide? Should there be an exception for a fact situation like this?

2. (Advanced) What is the purpose of Form 8962? What are potential complications facing taxpayers and their tax preparers? What is the purpose of Form 8965? Why is health insurance a part of the tax law and why is it included in tax returns?

3. (Advanced) What are options? What are the new rules affecting the tax treatment of options? How have the rules changed? What challenges are taxpayers facing as a result of these changes?

4. (Advanced) What are the rules regarding the various income levels of charitable contributions of noncash property? How can taxpayers sometimes miss the opportunity to deduct contributions?

5. (Advanced) In what situations are state-tax refunds taxable and in what situations are they not taxable? What is the reasoning for this rule?

6. (Advanced) What are the rules for deducting driving expenses? Why do the allowances differ for different types of driving?

7. (Advanced) What are passive losses? Why are they restricted for some taxpayers? Who can deduct passive losses fully? Why are some taxpayers restricted and others are not?

8. (Advanced) What is the net investment income tax? What issues should taxpayers consider if subject to this tax?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Don't Fall Into a Tax Trap," by Laura Saunders, The Wall Street Journal, February 7, 2015 ---

With taxes, what you don’t know can hurt you.

Consider the case of Joseph Mohamed, a real-estate developer in Sacramento, Calif. In 2012, Mr. Mohamed and his wife, Shirley, were denied a deduction for charitable donations of property worth $18.5 million by the U.S. Tax Court—on a technicality.

The loss still stings. “It left me with a very bad feeling about my country, although I served 32 years with the Army,” he says. “I followed their instructions explicitly, and we were penalized so heavily.”

The couple had contributed valuable properties to a trust for the benefit of charities such as Shriners Hospitals for Children, a Sacramento food bank and the Pacific Legal Foundation.

The judge said he had to side with the Internal Revenue Service and denied the Mohameds’ deduction because they didn’t secure independent appraisals for the gifts before filing their return—which the law requires for noncash donations greater than $5,000.

It didn’t matter that qualified appraisals later valued the properties at more than $20 million at the time of the donation, or that the instructions on the IRS form could be confusing to nonexperts like Mr. Mohamed, who prepared his own return. Despite these facts, the judge said, Congress put specific language in the law and he couldn’t undermine the rules, even though it was “a sympathetic case.”

Mr. Mohamed says he didn’t appeal the decision because of the time and money involved, even though he believes the IRS didn’t follow its own rules. “I’m 86 now, and they told me it could take years and at least $1 million,” he says.

With tax season in full swing, the Mohameds’ misfortune is a reminder of hazards that can trip up taxpayers—although, to be sure, fewer dollars typically are at stake.

These errors aren’t the obvious bloopers that cause trouble, such as entering income information incorrectly or misstating Social Security numbers. Instead, they are tricky issues that often confuse taxpayers who do their own returns—and even some paid preparers—and cause people either to overpay Uncle Sam or invite an IRS challenge.

Here are issues to be aware of, starting with those that are new this year.

New health-care forms. The Affordable Care Act, the health-care law passed by Congress in 2010, brings two new forms many taxpayers will need to file with 2014 returns.

Form 8962 is for people claiming a tax credit to help pay for coverage through federal or state exchanges, the online marketplaces for buying health insurance. Some taxpayers who received this credit when they bought coverage last year may need to pay back part or all of it if their income was higher than expected.

Since this is the first year for such reporting, the IRS has said it won’t impose certain underpayment and late-payment penalties related to this form. But to qualify for the relief, people must file their tax return or an extension request by April 15.

Form 8965 is for millions of people who qualified for exemptions from ACA coverage. Its instructions also explain how people who didn’t have approved coverage should calculate the extra tax they owe and report it on Line 61 of Form 1040. For more information, see “The Health Care Law’s Effect on Your Tax Return” on the IRS website,

New IRS reporting on options. New rules affect options, both those traded on the open market and those received as compensation by employees.

Brokerages and other financial firms must report to the IRS sales of stock and debt options acquired in 2014 if they involve an exchange of cash, says Stevie Conlon, a tax lawyer at Wolters Kluwer Financial Services.

Firms must also report on Form 1099-B the adjusted cost of such options, if they were acquired for cash, so the IRS can more easily track taxable gains. Previously the taxpayer was supposed to report this information to the IRS, but the brokerage didn’t have to.

“Taxpayers with these investments need to check 1099s carefully this year,” Ms. Conlon says.

There are important wrinkles in the reporting of stock options that employees receive as compensation. If such options are exercised and the shares sold at the same time, as is often the case, Ms. Conlon says the employer will report income on the W-2, and the brokerage also will report proceeds on Form 1099-B.

This year, for the first time, brokerages aren’t permitted to report the investment’s cost on the 1099-B form, which would help lower the taxable gain on the sale. It is up to the taxpayer to include it. People who are unaware of this omission could easily overpay their taxes, Ms. Conlon adds.

A different problem arises if the employee ignores the brokerage’s 1099-B report for sales of option shares because the income already has appeared on the W-2 form.

This information on 1099-B forms must be accounted for on forms associated with Schedule D (Capital Gains and Losses). If it isn’t, the IRS will likely notice that it is missing and send a letter. But if the income and the cost are properly reported, the taxpayer won’t overpay and the IRS won’t think the taxpayer has unreported income, Ms. Conlon says.

Charitable donations. Numerous strict rules apply to deductions for charitable gifts, and errors are common. For pure cash donations of less than $250, a bank record may suffice. For donations of property such as used clothes or books that total less than $500, a receipt from the charity also may be adequate.

In many cases, however, it is best to have a notice from the charity in hand before taking a deduction. The notice should state the date and the amount of the gift and also the value of any goods and services you received—such as a tote bag, dinner or auction prize.

Donors of noncash property worth more than $500 also need to fill in the relevant section of Form 8283, and gifts of property worth more than $5,000 typically need an independent appraisal as well.

This requirement trips up many people besides the Mohameds, says Ed Mendlowitz, a certified public accountant at WithumSmith+Brown in New Brunswick, N.J. “People who clean out a house after a death in the family and donate items to Goodwill often don’t know to keep the deduction below $5,000 or else get an appraisal,” he says.

Special rules apply to donations of cars, inventory and appreciated assets, as well as to noncash property worth more than $500,000. For more information, see IRS Publications 526 and 561.

Melissa Labant, a tax specialist at the American Institute of CPAs in Washington, reminds people who contribute to a charity, such as United Way, through payroll deductions to remember to deduct their gifts. “Usually there’s no letter, and the total doesn’t appear on the W-2 form, so people have to remember to deduct it,” she says.

She also cautions owners of individual retirement accounts who are 70½ or older and who made direct transfers of assets to charities in 2014 to remember to exclude such income from total IRA withdrawals on line 15b of the 1040 form. Such charitable transfers aren’t noted on the 1099-R form sent by the brokerage.

State-tax refunds. These payments can be tricky: Sometimes they are taxable, and sometimes they aren’t.

If you received a state-tax refund for 2013 last year, and you took the standard deduction in 2013, then the refund isn’t taxable, says Jonathan Horn, a CPA in New York.

If you itemized your deductions, the refund is likely to be partly or fully taxable, and your state will tell the IRS about it—although it may not send you a paper copy. An omission on your tax return, however, will probably bring a letter from Uncle Sam.

Figuring the nontaxable portion of the refund often is difficult, Mr. Horn says, especially if a taxpayer was subject to the alternate minimum tax, or changed filing status, in the year the refund applies to. In such cases, it often is necessary to recalculate—but not refile—the previous year’s tax return.

This calculation sometimes requires high-level software, Mr. Horn says, so for many self-preparers the safest course is to report the refund as fully taxable. For more information, see IRS Publication 525.

Unemployment benefits. Unemployment pay is taxable, and forgetting to claim it as income often will generate a letter from the IRS. But don’t forget to account for tax already withheld from the unemployment pay, which experts say some people overlook.

Mileage deductions. Taxpayers who qualify are allowed to deduct the expenses of driving their own cars for business, medical, moving or charitable purposes. For 2014, the allowance is 56 cents a mile for business travel; 23.5 cents for medical and moving travel; and 14 cents for travel on behalf of a charity. For more information, see IRS Publication 17 or, for moving expenses, 521.

Taxpayers must be able to support the deduction with a log or other records, and the IRS looks askance at large deductions.

“Keep a log as you go, or at least make sure you have records before you file the return,” says John Dundon, a Denver-based enrolled agent, a term for tax specialists federally licensed to represent taxpayers before the IRS.

In one case, he had to reconstruct records using an appointment book and Google Maps three years after the fact to help a pharmaceutical representative support a $50,000 deduction she had claimed on Schedule C.

Passive losses on real estate. Certain real-estate professionals can fully deduct losses on rental properties immediately, while for other investors they often are postponed until the property is sold—which could be years later.

Experts caution that many self-preparers who own rental real estate think they are professionals when they aren’t, and some software allows the mistake. But “it’s very hard to prove that you’re a professional if you have W-2 income from a full-time job,” Mr. Dundon says, and the IRS is on the lookout for this error.

Some software for individuals isn’t good at tracking losses that were postponed for later use, he says. Without good multiyear records, it is easy to miss valuable deductions.

Net investment income tax. This 3.8% surtax—enacted as part of the Affordable Care Act—applies to certain net earnings from investments owned by most couples with more than $250,000 of adjusted gross income and singles with more than $200,000. Such income can be reduced by deductions for applicable state and local taxes, investment interest expenses, tax-preparation fees and net operating losses, among other items.

The surtax took effect in 2013, and experts say last year’s tax-prep software often overestimated it because deductions could be figured using “any reasonable method.” The overstatements were large enough that some investors later were advised by their preparers to redo their 2013 taxes.

This year taxpayers who owe the 3.8% surtax also should check carefully to make sure they aren’t overpaying, Mr. Horn says. But people who deducted state and local taxes from the surtax last year and then received a refund need to take that into account when figuring out this year’s levy.

Alimony. This spousal support is deductible by the payer and taxable income to the recipient—unlike payments for child support and property settlements. But a government study released last year found huge discrepancies between total alimony deducted and total alimony claimed as income. The IRS has since changed its audit filters to pick up more of these discrepancies.

Experts say that while some people cheat, others are simply confused. For example, say the ex-spouse paying alimony picks up the cost of a child’s summer camp one year and the recipient agrees to a reduction in alimony by that amount. That move could lower the payer’s allowable tax deduction because the camp tuition doesn’t qualify as alimony, says Bill Nemeth, an Atlanta-based enrolled agent.

Foreign accounts or payments. U.S. taxpayers with global financial ties face some of the worst tax hazards of all, as they can wind up owing large penalties simply for not reporting information to Uncle Sam, as well as for not paying taxes owed.

David Lifson, a CPA at Crowe Horwath in New York, had a client who faced a $10,000 penalty for not disclosing a $200,000 inheritance from an elderly relative in France he barely knew. Because he had no foreign accounts, he was unaware he needed to report it.

Continued in article



Humor February 1-28, 2015

Explanations to 13 jokes only smart people understand ---
Also at
Some are sort of dumb. These are not the "meanest" jokes around. Some are very clever.

Humorous or Otherwise Interesting Super Bowl Advertisements ---

Dancing Priests ---

Watch the Coen Brothers’ TV Commercials: Swiss Cigarettes, Gap Jeans, Taxes & Clean Coal ---

The ways people described computers in the 1990s are hilarious
Thank you Linda Specht for the heads up

These HBR cartoons aren't particularly good, but I like the first one ---

'Dilbert' creator Scott Adams illustrates why 'goals are for losers and passion is overrated' --- 

Those aren't so great, and these are better ---

Dilbert on Beating the Averages ---

More of them here ---

Forwarded by Paula
01.  After the Lone Ranger saved the day and rode off into the sunset, the grateful citizens would ask, Who was that masked man? Invariably, someone would
answer, I don't know, but he left this behind. What did he leave behind? _________?
Hint:  It was silver but not his horse named Silver.

03  Get your kicks on ______   ___________

10.  Red Skeleton's hobo character was named ______ ___ ___ and Red always ended his television show by saying, 'Good Night, and
________   ________  ___   ___   ________
Hint:  Five words

11. Some Americans who protested the Vietnam War did so by burning their ______   _______
Hint: Something besides flags and bras.

13.  In 1971, singer Don MacLean sang a song about, 'the day the music died.' This was a tribute to _______   ____________.
Hint:  Happiness is Lubbock in your rear view mirror

18.  Who knows what secrets lie in the hearts of men? Only The _____ Knows!
Hint:  He or she works best in the sunlight

How to mislead with Statistics
Mix known facts with speculations

Forwarded by Paula from an unknown source
Here is a wealth of trivia information, for questions no one would have thought to ask.
I removed the pictures and replaced them with the picture URLs

To get straight to the sex scroll down to Number 28.

The world's hottest place: Death Valley National Park The highest air temperature ever recorded on Earth was 134 degrees Fahrenheit, at Death Valley National Park on July 10, 1913.
Jensen Comment
A long time ago I read that the highest recorded temperature in a city was 130 degrees in Tehran.

The world's coldest place: East Antarctic Plateau On the high ridge of the East Antarctic Plateau, the temperature can drop to as low as -135.8 degrees Fahrenheit, recorded in August, 2010.

World's most populated city: Shanghai At a whopping 24,150,000 permanent inhabitants, Shanghai is the single city that is home to the most people in the world.

World's least populated city: Vatican City
With a paltry population of 842, the city-state of Vatican City is the smallest city and state in the world.

World's wealthiest city: Tokyo That tower might as well be made of gold, since Tokyo tops the charts with a GDP of $1,520 billion (only beating New York by a mere $310 billion).

World's poorest city: Kinshasa Kinshasa is probably the poorest city in the Democratic Republic of the Congo, the poorest country in the world, at a GDP of $55 billion. Many of its residents live on less $1 a day.

Highest point in the world: Mount Everest Towering 29,029 feet in the air, the top of Mount Everest is the closest you can get to touching space, while still standing on Earth.

Lowest point in the world: Challenger Deep
The lowest known natural point in the world is Challenger Deep, 35,797 ft below sea level at the bottom of the Mariana Trench. Only three people have ever made it to the bottom, one of which was filmmaker James Cameron.

Most photographed place: The Guggenheim
Photos have always told stories, but in today's world of cell phone cameras and social media, that story is relayed as data to companies who monitor everything we do. Geotagged data was culled by Sightsmap using a Google-based image sharing software, and can now show us the most photographed places in the world, right down to the landmark. The Winner? The Guggenheim in New York.

The world's most popular country: Germany
The results of the annual BBC World Country Rating Poll are in, and Germany came out on top as the most positively viewed country in the world among people probably under the age of 85 (at a 59% positivity rating).

The wettest spot on Earth: Mawsynram, India
Rainwise, anyway. In Mawsynram, India, it rains an average of 467.35 inches per year, and with a record of 1000 inches in 1985.

The driest spot on Earth: The Atacama Desert
The 600 miles of South America's Atacama desert is the driest place on Earth, no contest. The Desert sees an average of 4 inches of rain every thousand years. Yes, you read that right.

Sunniest Place on Earth: Yuma, Arizona In Yuma, Arizona, the sun shines for an average of 11 hours a day. Its forecast is sun for 90 percent of the year, averaging a total of 4015 daylight hours a year.

Most expensive city to live in: Singapore The new champion of the world, Singapore has recently beat out Tokyo for the title of "most expensive city" for 2014. Cars can cost between 4-6 times in Singapore what they cost in the US or UK (for example, a Toyota Prius actually costs about $150,000.00 there).

Least expensive city to live in: Mumbai, India At the other end of the spectrum, Mumbai, India, is the cheapest place to live in the world, according to the Worldwide Cost of Living Index 2014. For some perspective, a loaf of bread that would cost $3.36 in Singapore, would only cost $0.91 in Mumbai.

Country that consumes and wastes the most food (per capita): United States I suppose there must be a reason why Americans have a food-related reputation when it comes to other countries: we eat an average of 3,770 calories a day each.

The world's oldest city: Damascus There's quite a bit of controversy over which city gets to officially claim the title of "oldest continuously inhabited city." With evidence of civilization that extends back over 11,000 years, Damascus in Syria is probably the safest bet.

Youngest country in the world: South Sudan The people of South Sudan were formally recognized as an independent country in 2011, making it the youngest country in the world to-date.

The world's most visited city: London After a several-year bout with Bangkok, London has regained its place as the world's most visited city (according to MasterCard's 2014 Global Destinations City Index). The city sees about 18.69 million international visitors annually, generating $19.3 billion in revenue.

The world's least popular country: Iran On that same rating scale, Iran has come in dead last (at a 59% negativity rating). Only 15% of people polled viewed Iran in a positive light.

The world's most dangerous city: San Pedro Sula, Honduras In San Pedro Sula, Honduras, there are over 3 murders a day. The violence stems from the city's role as a major hub for illegal drug and arms trafficking.

Most caffeinated country in the world: Sweden The coffee in Sweden will put a spring in your step, and hair on your tongue. The Swedes consume an average of 388 mg of caffeine in coffee per person, per day (that's almost 5 Red Bulls).

Most drunken country in the world: Belarus In Belarus, each person above the age of 15 drinks an average of 4.62 gallons of alcohol every year.

The most bicycle friendly city in the world: Groningen, Netherlands By comparing cities along the criterion of average number of bicycle trips made daily, one city reigns supreme: Groningen in the Netherlands. In Groningen about 50 percent of the population commute via bike daily, making it the city with the greatest proportion of cyclists on the planet.

World's most energy efficient city: Reykjavik, Iceland All of the energy and heat used by the citizens of Reykjavik Iceland come from geothermal plants and renewable hydropower, making it the most sustainable and energy efficient city in the world. On their mission to be completely free of fossil fuels by 2050, the city has also been replacing traditional buses with hydrogen-fueled buses, from which the only emissions are water.

Most cat friendly country: United States With a pet cat population of 76.43 million feline friends, the United States dominates the world stage for most cat friendly country in the world.

  Most dog friendly country: United States Similarly, America more than doubles the amount of pet dogs any other country has, with a dog population of 61.1 million.

Most sexually satisfied country: Switzerland Switzerland might just be the most progressive and least sexually repressed country in the world. Between liberal views on pornography and prostitution, and sex ed that starts in Kindergarten, over a fifth of the population consider their sex-lives "excellent." They even recently opened up a very successful array of tax-funded drive-in sex boxes in Zurich. Bonus, in spite of all this, Switzerland also holds the title as one of the lowest teen birth rates in the world.

Least sexually satisfied country: Japan With its extreme conservatism, Japan is the country with the least sexual satisfaction, as only 15% of individuals reported having a fulfilling sex life. Furthermore, over 45% of Japanese women report being either uninterested in, or actually despising, sexual contact

Most emotional country in the world: Philippines Polling citizens in 150 countries over the years of 2009-2011, researchers found that the people of the Philippines were the most likely to respond emotionally to simple questions about their day.

Least emotional country in the world: Singapore That same study revealed that Singaporeans experience the least emotion on the day-to-day. Only 3 out of every 10 reported having any emotional reactions to basic scenarios or when describing their days.

Country with the longest life expectancy in the world: Monaco According to the World Health Organization's study from 2013, Monaco tops the charts for longest living citizens, with an average life expectancy of 87.2 years. Men in Monaco live an average 85.3 years, and women live to an average of 89 years.

Country with the shortest life expectancy: Sierra Leone On the other side of that coin, the population of Sierra Leone live to an average of 47 years. The men of Sierra Leone live to an average of 47 years old, whereas women live an average of 48 years.

Sexiest country in the world: Brazil and Australia There will always be a debate about which countries are home to the most attractive people, in part because who's to say what is objectively attractive? Though the means are hardly scientific, a recent poll found quite a disparity between which countries men believe are the sexiest, and which countries women find the sexiest. For men, Brazil tops the charts for the most attractive people. For women, it's about the thunder down under in Australia.

Most stressed-out country in the world: Nigeria  by looking at the dimensions of Homicide Rate, GDP per capita, Income inequality, Corruption, and Unemployment, one thing is clear: Nigeria is hands-down the most stressed out country in the world.

Least stressed-out country in the world: Norway Along the same dimensions, Norway was at the far-end of the other side of the spectrum, and is deemed the least stressed-out country in the world (until oil prices spiraled downward in late 2014). Norway is also becoming more stressed with its recent immigrant population and returned many not yet documented for lawlessness.

Country with the highest average IQ: Hong Kong* There are a lot of factors that can affect an IQ score, ranging from national and personal wealth to simply who makes the test. As a result, these findings are highly controversial, but seem to suggest that Hong Kong is the country* with the highest IQ, at an average of 107 points. *Hong Kong is a special administrative region of China meaning that it falls within the sovereignty of the People's Republic of China, yet does not form part of Mainland China, and has it's own government.

Country with the lowest average IQ: Equatorial Guinea According to "IQ and the Wealth of Nations," Equatorial Guinea caps the low end of the global IQ range, with a national average of 59 points.

World's most well-connected city (for internet): Seoul, South Korea Surprisingly, despite it's 618 million internet users spending an average of 18.7 hours a week surfing the net, China didn't even make the top 10. Along the dimensions of average connection speed, availability (weighted towards free access), openness to innovation, support of public data, and privacy/security, Seoul in South Korea is the champion of internet-connectedness. With 10,000 government supported free WiFi spots dotting the city, and an internet speed that goes unchallenged globally, Seoul is an internet junkie's paradise.

Forwarded by Paula

The Talking Centipede

A single guy decided life would be more fun if he had a pet.

So he went to the pet store and told the owner that he wanted to buy an unusual pet.

After some discussion, he finally bought a talking centipede, (100-legged bug), which came in a little white box to use for his house.

He took the box back home, found a good spot for the box, and decided he would start off by taking his new pet to church with him.

So he asked the centipede

in the box, "Would you like to go to church with me today? We will have a good time."

But there was no answer from his new pet.

This bothered him a bit, but he waited a few minutes and then asked again, "How about going to church with me and receive blessings?"

But again, there was no answer from his new friend and pet. So he waited a few minutes more, thinking about the situation.

The guy decided to invite the centipede one last time.

This time he put his face up against the centipede's house and shouted,

"Hey, in there! Would you like to go to church with me and learn about God?"



This time, a little voice came out of the box,

"I heard you the first time! I'm putting my shoes on!


Humor Between February 1-28, 2015 ---

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And that's the way it was on February 28, 2015 with a little help from my friends.


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For an elaboration on the reasons you should join a ListServ (usually for free) go to

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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)

“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?

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 ---


Clinging to Myths in Academe and Failure to Replicate and Authenticate Research Findings


Poorly designed and executed experiments that are rarely, I mean very, very rarely, authenticated

Discouragement of case method research by leading journals (TAR, JAR, JAE, etc.) by turning back most submitted cases ---

Economic Theory Errors
Where analytical mathematics in accountics research made a huge mistake relying on flawed economic theory and interval/ratio scaling


Accentuate the Obvious and Avoid the Tough Problems (like fraud) for Which Data and Models are Lacking


Financial Theory Errors
Where capital market research in accounting made a huge mistake by relying on CAPM


Philosophy of Science is a Dying Discipline
Most scientific papers are probably wrong


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