Google URL Shortener ---
http://goo.gl/ 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.
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)
WILLIAM J. MAYEW and MOHAN VENKATACHALAM,
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
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
Continued in article
Hobson, J., W. Mayew, and M. Venkatachalam.
Analyzing speech to detect financial misreporting. Journal
of Accounting Research 50 (2): 349–392.
Lacerda, F. 2009.
LVA-Technology—The illusion of “lie
detection.” In FONETIK2009,
Stockholm, Sweden: Department of Linguistics, Stockholm University.
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:
Mayew, W., and M. Venkatachalam.
The power of voice: Managerial affective states and future firm
performance. The Journal of Finance 67 (1):
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).
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
The US Editor at Reuters Breakingviews, Jeff
asked me to write an OpEd about the name change
for that site. He may have seen this tweet:
Continued in article
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
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.
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.
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
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.
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.
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..
Orlando Patterson (Harvard) & Ethan Fosse (Harvard),
Don’t Rely on Pseudo-Science: "Implementation of mainstream
economic ideas has led to massive failures after expertise of other
academics were ignored."
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
The late evangelist always figured that most people
would dismiss anything that started in this little city, where he founded
"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
Continued in article
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
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
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 is re-entering the
world of education with a new effort called NYT EDUcation, the company
announced on Wednesday, though officials revealed
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
“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.
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 ---
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
I published some New York Times numbers over at
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
To say the trend for print advertising is very
negative would be an understatement. In a just published essay for the
“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,
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
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
tax filings since 2009, and some
experts warn that the heavy-equipment maker’s tax
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
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.
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
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.
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. Historically, subprime borrowers were defined as having a FICO
scores below 640, although "this has varied over time and circumstances."
These loans are characterized by higher interest
rates, poor quality collateral, and less favorable terms in order to
compensate for higher credit risk. Many subprime loans were packaged into
mortgage-backed securities (MBS) and ultimately defaulted, contributing to
the financial crisis of 2007–2008.
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’sAlan Zibel and
Annamaria Andriotisreport, 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
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
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.
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
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.
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
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
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
An SEC spokesman declined to comment.
Continued in article
From the CFO Journal's Morning Ledger on February 20, 2015
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
(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
“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
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.
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?
• 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
• 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
Before reading the tidbits below you may want to watch a video on the
Scenarios of Higher Education for Year 2020 --- http://www.youtube.com/watch?v=5gU3FjxY2uQ
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 "microcredential."
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
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.
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
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
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."
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
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
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
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
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.”
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
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
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
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?
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.
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
The proposed amendments are contained in the
exposure draftClassification of Liabilities
(Proposed Amendments to IAS 1). The IASB is seeking comments, which can be
made at the board’s
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.
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.
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
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.
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
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.
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
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.
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
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
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
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.
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
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.
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
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.
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.
Try that old under-the=mattress trick.
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
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.
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
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
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
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.
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.
to The Verge, AP has been able to do it by
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
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
do the type of deep analysis a $250,000 per year
consultant would do.
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), "
Over at Medium.com
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
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.
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
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.
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
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
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
Bob Jensen's threads on the lack of replication in accountics science are
There is little interest in replication since top journals will not publish
replications, summaries of replications, or even commentaries on published
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
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
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.
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.
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.
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
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.
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.
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
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.
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
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
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
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.
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.
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
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.
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
'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
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
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
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."
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"
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.
earns $180,000 after-tax withholdings and tax estimated additional payments per
year (assuming both adults work giving rise to the day care allowance).
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.
insurance seems relatively low for a family with young children.
"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.
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
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.
the other monthly estimates?
Are they realistic for the USA?
Are important items deleted in terms of most families?
Antonio where I watered my lawn with a sprinkling system my water and sewer
bills were over $200 per month
Warner cable bill is now over $160 per month
those monthly iPhone usage fees?
home owner insurance and umbrella (liability) insurance?
lawn and garden equipment such as a garden tractor and lawn mowers and snow
furniture and appliance costs? Up here in the boondocks I spend quite a lot on
extended on-site warranties.
teach from this budget you might go into more details regarding possible tax
strategy and retirement strategy pros and cons.
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
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?
2, 2015 reply from Bob Jensen
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
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,
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
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
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.
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.
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
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
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
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?
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
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 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
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.
"Why are we giving tax breaks to an industry that
doesn't need it?" Astorino said in a radio interview Wednesday.
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
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
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
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?
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
board member saying that Warren Buffett is about to
invest $5 billion in the bank. Over the past few years, federal prosecutors
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
Bloomberg TV, or on financial websites; when the
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
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
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
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. 1Prestige hierarchies in faculty
hiring networks. (Fig. 1 not quoted here)
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.
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,
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.
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.
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?
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
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
From the CFO Journal's Morning Ledger on February 3, 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
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
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.
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.
KPMG and its chief operating officer James Marsh
have been fined by the Financial Reporting Council for breaching ethical
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
KPMG was fined £350,000, though this was similarly
reduced to £227,000. In addition KPMG agreed to pay the majority of the
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.”
One hundred objects from museums across the UK with
resources, information and teaching ideas to inspire your students’ interest
More about this project
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.---
http://en.wikipedia.org/wiki/Ledger (note some of the early
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.
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.
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
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
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
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
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
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
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.
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.
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.
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
Let us know.
From the CFO Journal's Morning
Ledger on February 2, 2015
Amazon makes a push on college campuses
Amazon.com 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
This may be something to think about when teaching cost accounting. Who gets
paid and who gets screwed?
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.
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
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
“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
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 ---
Why do stockholders take a beating while the bad guys just go on scheming new
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
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:
"Software-defined" is a huge trend in the $3 trillion enterprise
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
Software-defined networking (SDN) is already
happening, forcing market leader Cisco to respond.
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
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.
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.
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, theWSJ’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.
Case on Pension Write Downs From The Wall Street Journal Accounting Weekly Review on January 23, 2015
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.
is a good article to use when covering accounting for pensions.
QUESTIONS: 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
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 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
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
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.
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.
is an interesting look at the price of tax return preparation to use in tax
QUESTIONS: 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
How much will it cost to have a professional prepare your tax return this
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
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.
$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
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 --- http://www.wsj.com/articles/fbi-to-probe-fraudulent-tax-filings-1423614826
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.
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
States (e.g. Minnesota) Are Refusing eFiled TurboTax Returns
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
Intuit says state tax returns already filed since Thursday will be
transmitted as soon as possible. Users can still submit their federal income
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
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
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.
Nongrantor Trust, State Taxation, Tax Planning, Trusts
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.
article is appropriate for an individual taxation class.
QUESTIONS: 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
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
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
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
“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
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
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.
of Human Memory Does this explain the helicopter memory lapse of NBC's news anchor Brian
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.
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.
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.
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.
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
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
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
Professor Antony Ting, at the University of Sydney Business School, said
Apple's latest accounts suggested it was continuing to shift profits
"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 profitsfrom
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
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.
article and the related ones would be an excellent update to share with students
in a corporate tax class.
QUESTIONS: 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.
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
The administration proposal totax foreign earnings of U.S. companieshave
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, PresidentBarack 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
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
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
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
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.
Case on Warranty Accounting From The Wall Street Journal Weekly Accounting Review
on February 6, 2015
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.
article could be used when discussing financial reporting related to warranty
QUESTIONS: 1. (Introductory) What facts did the article report regarding Beazer
Homes December quarter's results? What impact have warranty costs had on Beazer
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
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 USA Inc. ’s loss widened in its December quarter as home
closings fell and the company was hit by unexpected warranty costs that
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.
Question How would you account for warranty obligations of Tesla electric automobiles? Note that Tesla has an eight-year unlimited mileage warranty.
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
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."
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.
is an excellent article on audit committees for financial accounting classes, as
well as for auditing and forensic accounting classes.
QUESTIONS: 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
Workload of the Audit Committee Has Expanded Well Beyond Oversight of
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
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
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
“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,” saysJames Quigley
, audit committee chairman forWells Fargo
For some, however, the increased demands are taking a toll. E. Follin Smith
resigned as audit committee chairman and a director ofDiscover Financial Services
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
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
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.
article offers insight on some areas of individual taxation, especially areas
that have experienced recent changes.
QUESTIONS: 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
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
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 email@example.com.
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:
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.” Seeirs.gov/aca for details. For some “this will be very complicated,” warns
Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax &
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.
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.
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
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.
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
Herman is a writer in New York City. He was formerly The Wall Street
Journal’s Tax Report columnist.
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.
is an excellent update regarding new revenue-recognition rules.
QUESTIONS: 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
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
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, includingAdobe Systems
Inc.,SymantecCorp. andVMwareInc., 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
Auto makers such asFord Motor
Co. andGeneral MotorsCo. 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
Inc. andVerizon 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
“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.
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
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 IntelCorp.
“If they do allow an extension, we would like to early adopt.”
Defense contractorGeneral 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.
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
is a good article to use in an auditing class, or to use when covering
accounting for international business.
QUESTIONS: 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
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 andordered the four accounting firms suspendedfrom 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
Case on Deducting Expenses That Were Paid as a Gift From The Wall Street Journal Weekly Accounting Review
on February 13,
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
article can be used in an individual taxation course when discussing deductions
QUESTIONS: 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
Reviewed By: Linda Christiansen, Indiana University Southeast
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.
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.
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
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
Case on Tax Traps From The Wall Street Journal Weekly Accounting Review
on February 13,
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
is an excellent summary of new and challenging issues in individual taxation.
QUESTIONS: 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
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
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, www.irs.gov.
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 atWolters Kluwer
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.
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.
These payments can be tricky: Sometimes they are taxable, and sometimes they
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
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 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.
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
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.
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.
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.
your kicks on ______ ___________
Skeleton's hobo character was named ______ ___ ___ and Red always ended his
television show by saying, 'Good Night, and ________ ________ ___ ___ ________ Hint: Five words
Americans who protested the Vietnam War did so by burning their ______ _______ Hint: Something besides flags and bras.
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
knows what secrets lie in the hearts of men? Only The _____ Knows! Hint: He or she works best in the sunlight
mislead with Statistics Mix known facts with speculations
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
straight to the sex scroll down to Number 28.
http://thechive.files.wordpress.com/2014/08/places-ranked-2.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-36.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-35.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-5.jpg 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).
http://thechive.files.wordpress.com/2014/08/places-ranked-6.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-9.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-11.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-18.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-19.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-43.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-20.jpg 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
http://thechive.files.wordpress.com/2014/08/singapore.jpg 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
http://thechive.files.wordpress.com/2014/08/places-ranked-24.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-25.jpg 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.
http://thechive.files.wordpress.com/2014/08/sexyworld.jpg 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.
http://thechive.files.wordpress.com/2014/08/nigeria.jpg 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
http://thechive.files.wordpress.com/2014/08/places-ranked-29.jpg 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.
http://thechive.files.wordpress.com/2014/08/places-ranked-39.jpg 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.
http://thechive.files.wordpress.com/2014/08/seoul.jpg 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.
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.
discussion, he finally bought a talking centipede, (100-legged bug), which came
in a little white box to use for his house.
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.
asked the centipede
box, "Would you like to go to church with me today? We will have a good time."
was no answer from his new pet.
bothered him a bit, but he waited a few minutes and then asked again, "How about
going to church with me and receive blessings?"
there was no answer from his new friend and pet. So he waited a few minutes
more, thinking about the situation.
decided to invite the centipede one last time.
he put his face up against the centipede's house and shouted,
there! Would you like to go to church with me and learn about God?"
GOING TO LOVE THIS ......
a little voice came out of the box,
you the first time! I'm putting my shoes on!
AECM (Accounting Educators)
http://listserv.aaahq.org/cgi-bin/wa.exe?HOME The AECM is an email Listserv list which
started out as an accounting education technology Listserv. It has
mushroomed into the largest global Listserv of accounting education
topics of all types, including accounting theory, learning, assessment,
cheating, and education topics in general. At the same time it provides
a forum for discussions of all hardware and software which can be useful
in any way for accounting education at the college/university level.
Hardware includes all platforms and peripherals. Software includes
spreadsheets, practice sets, multimedia authoring and presentation
packages, data base programs, tax packages, World Wide Web applications,
Roles of a ListServ --- http://www.trinity.edu/rjensen/ListServRoles.htm
CPAS-L (Practitioners) http://pacioli.loyola.edu/cpas-l/
(closed down) CPAS-L provides a forum for discussions of
all aspects of the practice of accounting. It provides an unmoderated
environment where issues, questions, comments, ideas, etc. related to
accounting can be freely discussed. Members are welcome to take an
active role by posting to CPAS-L or an inactive role by just monitoring
the list. You qualify for a free subscription if you are either a CPA or
a professional accountant in public accounting, private industry,
government or education. Others will be denied access.
http://groups.yahoo.com/group/xyztalk This forum is for CPAs to discuss the
activities of the AICPA. This can be anything from the CPA2BIZ portal
to the XYZ initiative or anything else that relates to the AICPA.
Concerns That Academic Accounting Research is Out of Touch With Reality
I think leading academic researchers avoid applied research for the
profession because making seminal and creative discoveries that
practitioners have not already discovered is enormously difficult.
Accounting academe is threatened by the twin
dangers of fossilization and scholasticism (of three types: tedium,
high tech, and radical chic) From
“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 theshift from Gemeinschaftto
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