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

Bob Jensen at Trinity University 

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David Johnstone asked me to write a paper on the following:
"A Scrapbook on What's Wrong with the Past, Present and Future of Accountics Science"
Bob Jensen
February 19, 2014
SSRN Download: 

From the Chronicle of Higher Education
Search for Job Openings in Higher Education ---

FASB's Technical Agenda ---

PwC:  Financial statement presentation guide - 2014 second edition (updated July 2015) ---

Seven Big Banks Trading Under Book Value ---

Jensen Question
Can your students explain how there can still be goodwill on the books under such circumstances?

"Management Accountant—What Ails Thee?" Editorial by Ranjani Krishnan, Journal of Management Accounting Research: Spring 2015, Vol. 27, No. 1, pp. 177-191 ---


For decades management accountants have made substantial contributions to the practice, research, and teaching of business. Economists such as Holmstrom (1979), Holmstrom and Milgrom (1991), and Jensen and Meckling (1976) identified agency problems that could exist between the firm and its owners, discussed the informativeness of signals of managerial effort, and the optimal use of these signals in contracting. Management accountants calibrated the properties of the signals, identified optimal weighting schemes for the signals, determined the relative values of signals in contracts, and assessed the difficulty in designing goal congruent systems using these signals (Banker and Datar 1989; Feltham and Xie 1994; Datar, Kulp, and Lambert 2001). Terms such as “controllability,” “congruence,” and “balance,” which form the bedrock of modern accounting and control systems, were first discoursed in the management accounting literature. It is practically impossible to think of a major corporation that does not have a Balanced Scorecard (Kaplan and Norton 1992). Topics such as Activity Based Costing (ABC), Time Driven ABC, Customer Lifetime Value, Capacity Cost Allocation, Target Costing, and the Balanced Scorecard, are the staples of undergraduate, master's, and M.B.A. curricula throughout the world.

Privately however, management accountants appear to have had two damaging hobbies—self-flagellation, and exchanging doomsday predictions. The same people who will laugh when told that a Zombie apocalypse is imminent have no trouble declaring (almost triumphantly) that the end of management accounting is within sight. The result is that we scare away the young, further damaging our dwindling numbers.

Little respect is accorded to a discipline that insists on endless debates about its own theoretical and methodological boundaries. We have no trouble teaching our undergraduate or graduate students that management accounting “measures, analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization” (Horngren, Datar, and Rajan 2012, 4), or that “A fundamental purpose of managerial accounting is to enhance firm value by ensuring the effective and efficient use of scarce resources” (Sprinkle and Williamson 2007, 415).

Continued in article

"Saving Management Accounting in the Academy," by Sue Haka (former AAA President), AAA Commons, Last Edited February 10, 2012 ---

Saving Management Accounting in the Academy
The long run place of management accounting in the academy seems in peril for several reasons. First, there is an ongoing migration of accounting topics to other disciplines. Second, evidence suggests that the diversity in management accounting research seems to be dwindling. Third, the value of our content for MBA programs is not apparent. Finally, our engagement with the management accounting practitioner community is weak.

First-topic migration: I don't know about your experiences, but at my institution I must be ever vigilant about traditional management accounting topics migrating into management, marketing, or supply chain classes. While I am delighted that cost-volume-profit topics are important to my marketing colleagues, unfortunately the students that come to my management accounting class after having been "taught" CVP by my marketing colleagues cannot distinguish between fixed and variable costs! Other topics taught by my colleagues include ABC in supply chain and balanced scorecard in management. Making sure that students are required to take a management accounting class prior to classes where discussions about how ABC is important for supply chain decision making requires constant vigilance. Years ago management accounting virtually gave capital budgeting up to the finance fair value measurement next!

Second-research diversity: I have often been among those who have suggested that general accounting research is not sufficiently diverse (i.e. an overabundance of financial archival focus). I forgot my mother's phrase--when you point at others, three fingers point back at you! Recent reviews of JMAR topical areas suggest a lack of diversity within our discipline. These reviews show an overwhelming focus on performance measurement--in 2008 (2007) 48% (50%) of submitted articles were focused on performance measurement. Only one other category is over 12%. It seems that management accounting research is fairly narrow.

Third-value in the MBA: Management accounting should be a bedrock of MBA programs. However, we have let financial accounting eclipse management accounting. MBA programs have, over the last decade, decreased accounting content and the majority of that reduction has come out of management accounting. Yet most MBAs become managers and management accounting should be highly value added for them.

Finally-practitioner engagement: While our colleagues in auditing and financial accounting have opportunities to serve as fellows at the SEC or FASB or take a semester or year to work at one of the big four firms, management accounting faculty have few established programs allowing us to experience first hand many of the issues that we teach and write about. I believe creating these types of opportunities would help us diversify our research and convince others of the value of management accounting for MBAs and in the practicing communities.

I'm sure you have other issues that imperil the discipline of management accounting. Please add your comments and discussion.

Note the relatively large number of comments to this article

Also see
Accounting at a Tipping Point (Slide Show) --
Former AAA President Sue Haka
April 18, 2009


The comment (from James Gong) may be of special interest to some of you.
Ken Merchant is a former faculty member from Harvard University who form many years now has been on the faculty at the University of Southern California.

Here are my two cents. First, on the teaching side, the management accounting textbooks fail to cover new topics or issues. For instance, few textbooks cover real options based capital budgeting, product life cycle management, risk management, and revenue driver analysis. While other disciplines invade management accounting, we need to invade their domains too. About five or six years ago, Ken Merchant had written a few critical comments on Garrison/Noreen textbook for its lack of breadth. Ken's comments are still valid. Second, on the research and publication side, management accounting researchers have disadvantage in getting data and publishing papers compared with financial peers. Again, Ken Merchant has an excellent discussion on this topic at an AAA annual conference.

Bob Jensen's threads on management accounting ---

Question for Cost Accounting Students
Every cost accounting student can explain why toilet seats purchased by the Navy cost over $1 million each?
Times are changing with technology.
Are cost accounting courses and textbooks  and professors keeping up with changing times in defense contracting?

Pictures of Midshipman Bob Jensen on a battleship ---
When I was on a battleship  salt water splashed underneath toilet seats over a trough --- with salt water flowing under ten toilet seats in each row. Privacy in the bathroom is was reserved only for officers' quarters above deck. Salt water is corrosive such that ship builders had to guarantee that toilet seats would not corrode from salt water splash in the trough.

But a guarantee against corrosion is only part of the cost of each toilet seat. Every cost accounting student knows that the bulk of the cost of a $1 million toilet seat is overhead cost allocation for costs having nothing remotely related to toilet seat manufacturing.

"Pentagon Purchasing Is Overdue for an Overhaul," by Charles Josef Duch, The Wall Street Journal, July 22, 2015 ---

Here’s an anecdote that illustrates the problems with U.S. defense acquisition: The Navy, concerned about corrosion of equipment that spends its operating life surrounded by salt water, began requiring paperwork to certify that new systems would be corrosion free. But the rule applies without exception, meaning Navy staff go through the motions to certify the corrosion resistance of, say, new software programs they acquire.

Rep. Mac Thornberry cited this example when rolling out legislation in March that would overhaul Pentagon procurement. Mr. Thornberry, who leads the House Armed Services Committee, wants to give program managers more responsibility and eliminate dozens of reports required by Congress or the Pentagon. “The system has just grown these barnacles around it that’s made it so sluggish it’s a wonder anything comes out the other end,” he told the Washington Post.

This is a worthwhile endeavor: For foes of excessive bureaucracy and paperwork, the Pentagon is what one would call a target-rich environment.

Continued in article

Jensen Comment
It seems like it's time to rewrite some of those badly out-of-date cost accounting textbooks.

Bob Jensen's threads on management and cost accounting ---

50 Cent’s accountant has no idea how much money he (the rapper) has ---

Jensen Comment
Estimates range from $4.4 million to $155 million. Shouldn't bean counters be able to do better than this?

Years ago when I started out as a staff accountant for Ernst & Ernst in Denver I worked on the tax returns of a very wealthy widow from Nebraska who inherited the oil wells, real estate, and other assets of her late husband. Estimating her net worth was an enormous challenge, because her husband hid so much of his wealth over the years. For example, each year following his death his widow discovered troves of uncut diamonds that were hidden in various parts of the world in the rafters and walls of buildings she inherited.

I suspect that 50 Cent is trying to hide his assets from creditors and the IRS such that bean counters will have similar problems trying to estimate his wealth.

California Proposition 13 ---

"McCubbins & Seljan: The Effect Of Proposition 13 On Municipal Revenue Sources," by Paul Caron, TaxProf Blog, July 27, 2015 ---

Jensen Comment
One enormous problem, especially in Silicon Valley, is that housing (even apartments) are no longer affordable by families of public service providers like police, fire fighters, and teachers. Proposition 13 constrains revenues intended for public services. Sleeping facilities can be provided for emergency workers on duty (like firefighters) but this leads to separations from their families living long commuting distances apart. It also leads to very long commutes by non-emergency workers like teachers.  This turns an eight-hour workday into an 10-12 hour workday. Highly-paid Wall Street workers don't seem to mind the long days, but the best lower-paid public service workers must be inclined to look for jobs in towns that they can afford.

Plato's Cave ---

Math Works Great—Until You Try to Map It Onto the World ---

In 1900, the great mathematician David Hilbert presented a list of 23 unsolved problems worth investigating in the new century. The list became a road map for the field, guiding mathematicians through unexplored regions of the mathematical universe as they ticked off problems one by one. But one of the problems was not like the others. It required connecting the mathematical universe to the real one. Quanta Magazine

Continued in article

"In Plato's Cave:  Mathematical models are a powerful way of predicting financial markets. But they are fallible" The Economist, January 24, 2009, pp. 10-14 ---

Bob Jensen's threads on Mathematical Analytics in Plato's Cave

"What The College Kids Are Reading (at recommendations from their professors)," LISNews, July 24, 2015 ---

Lots of colleges have these reading programs; some are just for freshmen, and for others, the entire campus or local community joins in. The idea is that books will stir discussion — and unite a class or campus around a topic. Some schools even have the author speak on campus, or weave the book's content into the year's curriculum.

Bob Jensen's threads to online libraries ---

Bob Jensen's Recommended (Cartoon) Book
The History of Economics & Economic Theory Explained with Comics, Starting with Adam Smith
This is not a free download ---

. . .

The book covers two (plus) centuries of economic history. It starts with the Physiocrats, Adam Smith and theoretical development of capitalism, and then steams ahead into the 19th century, covering the Industrial Revolution, the rise of big business and big finance. Next comes the action packed 20th century: the Great Depression, the New Deal, the threat from Communism during the Cold War, the tax reforms of the Reagan era, and eventually the crash of 2008 and Occupy Wall Street. Along the way, Goodwin and the illustrator Dan E. Burr demystify the economic theories of figures like Ricardo, Marx, Malthus, Keynes, Friedman and Hayek — all in a substantive but approachable way.

As with most treatments of modern economics, the book starts with Adam Smith. To get a feel for Goodwin’s approach, you can dive into the first chapter of Economix, which grapples with Smith’s theories about the free market, division of labor and the Invisible Hand. Economix can be purchased online here.

Related Content:

An Introduction to Great Economists — Adam Smith, the Physiocrats & More — Presented in a Free Online Course

60-Second Adventures in Economics: An Animated Intro to The Invisible Hand and Other Economic Ideas

Reading Marx’s Capital with David Harvey (Free Course)

Jensen Comment
I ordered a used copy of this book from Amazon. This book is a most interesting way to learn the history of economics succinctly.

One surprise is that the book has a relatively good index. Another surprise is that the book has some small sections on my special interest --- derivative financial instruments and hedging, although these play a miniscule role in the comic book.

A few interesting quotations are shown below:

Page 17and Page 19
Enter Jean-Baptiste Colbert (1619-1683), who became the finance minister of France in 1665. He thought money was wealth, end of story. ... French thinking on economics change. Maybe wealth wasn't a stockpile of silver like Colbert thought. Maybe wealth circulated, like blood circulates throughout a body. Laws, regulations, tariffs, subsidies, and so on would get in the way of that natural circulation.

Page 61
Marx's logic applied to the Ricardo model and we don't live in that model.
(Neither does Greece)

Page 22and Page 23
Bakers didn't work because some Bread Planner told them to, or because they were saints who wanted people to be well fed. They worked because it was good for them ... So in Smith's economy, competition kept everyone honest. Every baker --- saint or greedhead alike --- was led, "as if by an invisible hand," to sell bread at  fair price, high enough to pay for the baker costs and work, low enough that others didn't steal the customers.

Page 183
Way back in the 1920s, the Austrian economists Ludwig von Mises (1881-1973) and Freederick Hayek (1899-1992) saw economic planning become political dictatorship in country after country. They saw that when people lose their economic liberty, they lose their political liberty. ... Haye especially was a formidable thinker; instead of assuming the market worked, which economists had be doing since Ricardo, Hayek looked to how it worked --- how interaction of small units (people) creates a complex intelligence (the market), which responds to shortages, changes in taste, or new technologies far better than any human planner can ("invisible brain" might be a better term than "invisible hand.") . . .  People who try to replace this brain with their own systems will fail, and in the process of failing, they'll do a lot of dmagbe.

Page 184
Like Hayek, Friedman stressed that concentrated power is  threat to freedom. But he didn't seem to see that power cn concentrate in more than one form.

Page 185
(Market failure) refers to how --- even textbook-perfect markets--- can give bad results. for instance, with externalities which are essentially side effects of economic transactions. Bad externalities are everywhere, because the people mking decisions aren't the ones getting hurt. (in mathematical models these externalities are sometimes called non-convexities).

Page 240
By the 1980s, the IMF was full of neoliberals. Strure adjustment came down to adopting neoliberalism. Structural adjustment was hard to refuse; The World Bank, private lenders, business, the US Treasury, even aid donors would all steer cler of a country that the IMF was unsound (say what?) Still, people hated structural adjustment, and the IMF knew it. So part of the program was protected democracy in which the economic program was protected from democracy.

Continued in a nice summary of Economix

Added Comment
If you want to learn more about controversial Keynesian economics you might start with this book.

Misbehaving: The Making of Behavioral Economics
by Richard Thaler W. W. Norton & Company, $27.95 (Cloth)
Review by John McMahon on July 15, 2015---

"The mad, mad world of researching and publishing!" by Jim Hunton, AAA Doctoral Consortium, June 18, 2009 ---
This link was also posted to the AAA Commons ---

Jensen Comment
The above AAA Doctoral Consortium presentation preceded the first of 30 retractions of Jum Hunton's research publications allegedly because he faked the data. For Jim research and publishing did indeed become a "mad, mad" world. It would really be interesting if Jim in the future mustered up the courage and humility to make presentations at AAA conferences.

More about the Jim Hunton cheating scandals ---

Hunton and Other Professors Who Cheated (search repeatedly on the word "Hunton")  ---

July 15, 2015 reply from Paul Williams

Liked the slide about taking calculated risks to "maximize" success. Seems he certainly took his own advice. Perhaps Gary Previts and Tim Fogarty had the right idea about adding some diversity to the Doctoral Consortium. Three quarters of submissions were archival financial, but we don't have a problem because the "bias ratio" is negative. And that was said with an apparently straight face to a group of people allegedly trained to analyze data (fictitious or otherwise).

Are  rainbow options are eligible for hedge accounting under FAS 133 and/or IFRS 9?

Rainbow Options ---

Jensen Comment
I don't think rainbow options should be eligible for hedge accounting under FAS 133 that generally only allows hedge accounting for derivatives with one type of risk. An exception was subsequently made in FAS 138 for derivatives that hedge interest rates and foreign exchange risk in combination largely because hedging swaps for these "cross-currency" risks were so commonplace in the derivatives markets for simultaneous hedging ---

I really have not investigated the FASB and IASB stand on hedge accounting for rainbow options.
What do you think about hedging with these options?

The IRS on July 8, 2015  labeled the “basket options” strategy of converting short-term capital gains and ordinary income into lighter-taxed long-term gains as a “listed transaction" tax shelters that will be trouble for firms that are still using them ---

"Not-for-profit financial reporting headed for a change," by Larry Smith and Ken Euwema, Journal of Accountancy, July 1, 2015 ---

As a part of the response to the call for increased transparency and accountability among not-for-profit entities (NFPs), FASB has taken on a project to improve the existing NFP financial reporting model. The goal is to improve the usefulness of NFP financial statements by providing better information about an NFP's liquidity, financial performance, and cash flows to the primary users of financial statements, governing boards, donors, grantors, creditors, and other stakeholders of NFPs.

The fundamental reporting model for NFPs has existed for over 20 years. During that time, NFP organizations have developed different methods of reporting their operating results in a way that conveys the connection between financial choices and mission execution because existing GAAP does not prescribe a specific way of reporting operating performance. Additionally, changes in endowment laws together with the existing framework for reporting restricted and unrestricted net assets, and the lack of required information about the liquidity of an organization, have contributed to the confusion in determining whether an NFP is in sound or poor financial condition.

Continued in article

Bob Jensen's threads on NFP accounting ---

Teaching Case
"The City of Providence, RI: A Case Examining the Financial Condition of a U.S. Municipality." by Christine E. Earley, Nancy Chun Feng, and Patrick T. Kelly, Issues in Accounting Education, Volume 30, Issue 2 (May 2015)  ---
This case is not free

Continued in artciel

Bob Jensen's Threads on the Sad State of Governmental Accounting ---

"Insights from the 2014 CPA Passing Rate Data," by  Mark Goldman, MGR Accounting Recruiters, July 3, 2015 --- 

Jensen Comment
This shows the 2014 first-time pass rates broken down by age groups. The first-time pass rates have more than doubled relative to pass rates in the 1960s. As I've mentioned before there are many various possible reasons, especially the sophistication of CPA exam multimedia coaching courses and other aids that were virtually nonexistent in the 1960s.

I would like to say that in the 1960s the CPA exams were harder, but there are too many other explanations for increased passage rates. One explanation is the "denominator effect." By this I mean that virtually any college graduate could take the CPA exam in the 1960s and 1970s without so much as having had one accounting course. I had an advisee in the MBA Program at the University of Maine who dropped out of the program before the end of his first semester because he had so little money to remain in college and was no longer being funded by his parents.

He recently  graduated in philosophy from Colby College in the 1970s and had never had a single accounting course. I loaned him some CPA exam study materials that I scrounged from my office. He studied them like crazy every free minute that he was not sleeping or working as a waiter. He passed the CPA exam on his first try without ever having an accounting course. His native intelligence combined with a monumental amount of self study paid off much better than most people in the denominator of the CPA passage rate formulas of the 1970s.

In the 21st Century students applying to take the CPA exam must have 150-hours (a fifth year) with a relatively large number of courses aimed at passage of the CPA examination. Hence in this Century the denominator is much more constrained to contain only students who have studied accounting in college courses.

In other words, the "denominator effect" alone should account for the much of the doubling of the CPA Exam passage rates.

More CPA Examination data and advice ---

Harvard Business Review Case Studies ---
These are not free!

MIT’s Introduction to Poker Theory: A Free Online Course ---

Bob Jensen's threads on free online mathematics and statistics tutorials ---

When is marriage a bad deal for taxes?

Jensen Comment
There are many types of taxes and many complicated things to think about when relating taxes to marriage. Generally, marriage is a better deal when one spouse makes a lot more taxable income than the other spouse. It can be less so in divorce for the higher income spouse.

The Supreme Court has spread Iowa marriage law nationwide. That means more same-sex couples will tie the knot and learn about the sometimes surprising tax results of matrimony. In general, if only one member of the couple has income, it’s a good tax deal, but not so much for two-earner couples. The weird complexity of the tax law means there are lots of exceptions.
Tax Roundup, 6/29/15: Congratulations, newlyweds, here’s your tax bill! And windy subsidies, IRS stonewalling, more. ---

Jensen Comment
In same-sex marriages under a rainbow flag, always remember that sometimes in divorce "he/she gets the gold mine and he/she gets the shaft" ---
It's sad that there will be increases in fraud that accompany the rainbow marriage ruling. Of course we've known this for years when some men/women marry women/men more for money than for love. The same fraud risks now apply to gay marriages.

A recent Tax Court decision sheds light on the importance of lease terms to determine what is rent and how Sec. 467 may apply to advance rents ---

"Majority of CPAs polled had clients victimized by tax ID theft this year," by Paul Bonner, Journal of Accountancy, July 16, 2015 ---

Sixty-three percent of CPAs who answered the 2015 tax software survey conducted by The Tax Adviser and JofA said at least one of their clients was a victim of tax identity theft in the 2015 filing season.

CPAs interviewed in connection with the survey’s findings on identity theft also echoed National Taxpayer Advocate Nina Olson’s report to Congress released Wednesday detailing long telephone wait times and other frustrations experienced by victims of identity theft in dealing with the IRS (Objectives Report to Congress).

In the survey, conducted in May, most CPAs reporting theft of clients’ IDs said the problem affected fewer than 5% of their clients, although 76 respondents (2%) said between 6% and 10% of their clients were victims. Ten respondents reported between 11% and 15% of their clients were victims, and two respondents put the percentage at more than 15%.

Many respondents had some difficulty dealing with the IRS in resolving the issues, with only 27% saying it was easy or very easy to resolve, and 39% saying it was difficult or very difficult. A significant percentage of respondents, 44%, reported that the victims were unaware of the theft before attempting to file their 2014 returns, and another 42% said some victims were aware of it and others were not.

Continued in article

Over 90% of taxpayer ID theft victims were blocked from communicating with the IRS
"National taxpayer advocate: IRS falling down on the job of helping identity theft victims," y Alistair M. Nevius, Journal of Accountancy, July 15, 2015 ---

During some of the busiest weeks of tax season, less than one caller in 10 to the IRS’s Taxpayer Protection Program phone line was able to reach IRS staff for assistance, according to Nina Olson, the national taxpayer advocate, in her midyear Objectives Report to Congress released on Wednesday. And the average time that callers had to wait to get through was as high as 60.2 minutes, for the week of Feb. 7.

Olson reported that the Taxpayer Protection Program (TPP) stopped more than 3.8 million suspicious tax returns during this year’s filing season; however, 34% of those suspended returns turned out to be legitimate. At the end of May, the IRS had 671,773 identity-theft cases in its open inventory, a 69% increase from May 2014.

According to the report, stolen identity cases are the most common type of case that Olson’s Taxpayer Advocate Service deals with, which she attributes to the low level of service on the TPP phone lines and the high false positive rate for suspended returns.

Continued in article

Jensen Comment
Count me as one of the 90+ percent who could not get through to the IRS. However, since I guessed I was a victim due to a long-delayed refund I also filed a paper return in February that did not get processed by the IRS until July. Then I got a notice that the if I would not object the IRS would double my refund if I did not bother the IRS.

I never did find out why my refund was doubled. I'm certain it was not because I was an ID theft victim. Most likely I was an IRS ID theft a victim because of a hugeTurbo Tax database breach in 2013 that leaked SS numbers and IRS Pin numbers to hackers (Turbo Tax was  only place that had my PIN number outside the IRS).

I suspect that my 2014 refund was doubled by the IRS because Turbo Tax made a calculation error on my return. I never make mistakes. Yeah right!

In a CBS Sixty Minutes segment the IRS said that eliminating billions of dollars of fake return fraud is impossible unless electronic filing is eliminated. The IRS is not considering elimination of electronic filing. Hackers in Russia, China, and elsewhere make money on this fraud primarily by stealing ID information on taxpayers like the theft of IDs from the Turbo Tax database. They then sell that ID information to fraudsters here in the USA who use the purchased ID information. Often a single USA citizen or undocumented immigrant will file hundreds of tax returns. According to the CBS Sixty Minutes segment about 40% of the filed fake returns pay off with refunds to the crooks.

Unless forced to file electronically in the future I will only file a paper return via the USA Postal Service in the future. This delays refunds but is faster than getting a refund after being an electronic filer ID theft victim. If I don't ever have an IRS PIN number the odds of having a bad person file a phony tax return under my Social Security number are greatly reduced.

BDO International (fifth largest multinational accounting firm and closing in on KPMG) ---

"BDO Sees Annual Revenue Jump 26 Percent," by Michael Cohn, Accounting Today, July 21, 2015 ---

BDO USA saw a whopping 26 percent spike in annual revenue for the fiscal year ended June 30, 2015, growing to $1.05 billion from $833 million last year.

All of BDO’s business lines contributed to growth, particularly in the consulting and advisory practice, which experienced a 51.4 percent growth in revenue. The firm's tax practice also saw a large growth rate of 29.9 percent, while the assurance practice grew a healthy 17.5 percent.

Continued in article

Here you can build customized charts from our database of demographic, economic, and state financial reports data, as well as the Institute for Truth in Accounting's proprietary analysis on state assets and liabilities ---

"Medicine, Law, Business: Which Grad Students Borrow The Most?" NPR, July 15, 2015 --- Click Here

Hint:  Except for the outliers the correlation with starting salaries is less than I would have expected. However, the outliers increase this correlation. In some fields, especially business, the variance in lifetime earnings is much greater.

Partial Quotation from the Article

Students studying medicine and law typically borrow more than $100,000 to get through school, and many go on to high-paying careers.

At the other end of the spectrum, many Ph.D. students wind up in academia. Most get grants and subsidies — and the majority don't have to borrow any money at all to get through grad school.

One striking case: MBAs. People who go to business school take on significantly less debt than people at other professional schools. Most MBA programs are two years long — shorter than law school (three years) or med school (four).

But that's not nearly enough to explain the difference.

Jensen Question

I have a granddaughter who recently graduated in pharmacy with  enormous debt. It's not clear why pharmacists in general graduate with more debt than most other graduates outside of medicine. In her case the reason was that she chose an expensive small private college well beyond the means of her family for so many years.

 Her brother is now entering the University of Maine system intent of a nursing career. He has much more fear of debt than his sister. This is the main reason his undergraduate degree will cost so much less before he goes on to graduate school. As valedictorian of his high school class he also earned a scholarship of $1,000 per year  for any college of his choosing.

Bob Jensen's threads on student debt ---

Bob Jensen's threads on careers ---

"FASB Nears Proposal on Hedge Accounting," by Tammy Whitehouse, Compliance Week, July 15, 2015 ---

After several years of relative inaction on hedge accounting, now the Financial Accounting Standards Board is near issuing a proposed update to accounting standards that would have a big effect on what would qualify for hedge accounting and how the accounting would be explained in financial statements.

FASB has decided tentatively to propose a number of targeted amendments to hedge accounting rules for both financial and nonfinancial hedges. The board is developing a draft accounting standards update to amend Topic 815 in the Accounting Standards Codification while the staff also is planning to study the costs, benefits, and complexity of what the board plans to propose. An proposed update to accounting standards is expected by the end of 2015.

According to a PwC alert, FASB’s plan is to propose “targeted amendments” to several areas of existing hedge accounting guidance for both financial and nonfinancial hedges. “The goal is to better align hedge accounting with a reporting entity’s risk management objectives and simplify hedge accounting for preparers,” the firm says. “The changes, if finalized, will significantly change what qualifies for hedge accounting, how it is documented, how hedge effectiveness is assessed and hedge ineffectiveness is measured, and how the hedging results are presented and disclosed in the financial statements.” An exposure draft is expected by the end of the year.

Continued in article

Bob Jensen's free tutorials on hedge accounting ---

"Obama’s Overtime Proposal Could Be Costly for Colleges," by Paul Basken, Chronicle of Higher Education, July 1, 2015 ---

. . .

American institutions of higher education employ more than 3.8 million people, according to government data cited by the College and University Professional Association for Human Resources. That figure includes more than 1.5 million faculty members; 238,000 people in executive, administrative, or managerial positions; 800,000 in other professional positions; and more than 900,000 in other positions not exempted from federal overtime rules, the association said.

Many entry and midlevel professional positions — including many in student life, development, administration, and academic affairs — pay less than $50,440 per year, said Andy Brantley, the association’s president and chief executive officer.

An increase in the overtime threshold "was long overdue," Mr. Brantley said. "Unfortunately, a change of this magnitude will have a significant impact for every campus."

The effect will be most pronounced for colleges in parts of the country that have lower average wages and lack state laws that already set stricter rules on overtime pay, said Tara E. Daub, a partner at the law firm Nixon Peabody.

Colleges will have to absorb that cost in some way, such as cuts in services or tuition increases, said Shannon D. Farmer, a partner at Ballard Spahr, a law firm with clients in higher education. And the effect would linger, she said, as Mr. Obama’s proposal calls for automatic increases in the future tied to average incomes.

Worries About an ‘Ambush’

Even more concerning, Ms. Farmer said, is the possibility that the Department of Labor will end or revise the exemption for teaching positions. That exemption also applies to many doctors and lawyers, who, along with professors, are in positions that are either relatively well paid or involve wide fluctuations in numbers of hours worked each week, she said.

The administration’s proposed change does not explicitly suggest repealing the teaching exemption, she said, though it does invite comments on it. "So what people are concerned about is that there is going to be basically an ambush rule here," where the Department of Labor might endorse a change in the teaching exemption later in the process, she said.

That type of change — sought by many advocates of adjuncts as part of an overall campaign for improving pay and conditions for part-time, non-tenure-track faculty members — could perhaps happen some day, said Ms. Daub, a member of Nixon Peabody’s Labor and Employment group. But it won’t happen in the current rule-making process, she said, because revising the teaching exemption has not been included in the terms of the initial proposal.

"It would have to go through the whole notice-and-comment period," said Ms. Daub, who was scheduled to address the topic on Wednesday morning at the annual conference of the National Association of College and University Attorneys in Washington. "They can’t just slip that in at the end."

Either way, at least one university doesn’t seem especially concerned. At the University of Wisconsin at La Crosse, Mr. Obama’s scheduled visit on Thursday to outline the plan is largely a matter of celebration, given that it will be the first time a sitting U.S. president has ever visited the campus. It’s "an historic opportunity for our UW-L community," the chancellor, Joe D. Gow, said in a campuswide email.

Continued in article

EY:  PCAOB seeks comment on audit quality indicators ---$FILE/TothePoint_EE0992_AQI_2July2015.pdf

EY:  FASB simplifies the subsequent measurement of inventory ---$FILE/TothePoint_BB3019_Inventory_23July2015.pdf

What you need to know

• The FASB issued final guidance that simplifi es the subsequent measurement of inventor ies by replacing today’s lower of cost or market test with a lower of cost and net realizable value test.

 • The guidance applies only to inventories f or which cost is determined by methods other than last - in first - out (LIFO) and the retail inventory method (RIM) . Entities that use LIFO or RIM will continue to use existing impairment models.

• The guidance is effective for public business entities for fiscal years beginning after 15 December 2016, and interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after 15 December 2016, and interim periods within fiscal years beginning after 15 December 2017. Early adoption is permitted .

EY:  GASB overhauls government retiree health care rules

What you need to know

• The GASB issued final guidance that will change how state and local g overnment s calculate and report the costs and obligations associated with defined benefit other postemployment benefit (OPEB) plans .

• Government employers that do not prefund OPEB obligations will have to record a gross OPEB liability , while those that fund their OPEB plans through a trust that meets the specified criteria will have to record a net OPEB liability in their accrual - basis financial statements based on the plan fiduciary net position rather than plan funding.

• The new standard will make a government’s obligations more transparent, and m any governments will likely report a much larger OPEB liability than they do today.

• The guidance is effective for fiscal years beginning after 15 June 201 7 , and early application is encouraged.

"Europe is trying to hide a giant pile of debt," by Harry S. Dent Jr., Business Insider, July 24, 2015 ---

It’s kind of like selling goods to consumers with very bad credit and then being surprised when they don’t pay.

Continued in article

Jensen Comment
It's pretty much a north versus south thing that's revealed in one graph.
Scroll down the article to see this amazing graph.

The deep debtor nations are known for chronic political corruption, low economic productivity, and bloated public sector spending. This raises real questions about the sustainability of the EU.

Why should Americans who can afford a $100,000 Tesla get a free ride on USA roads and bridges?

Why America should start making drivers pay per mile ---

50-State Fiscal Condition Ranking ---

With new spending commitments for Medicaid and growing long-term obligations for pensions and health care benefits, states must be ever vigilant to consider both the short- and long-term consequences of policy decisions. Understanding how each state is performing in regard to a vari­ety of fiscal indicators can help state policymakers as they make these decisions.

A closer analysis of the individual metrics behind the ranking shows how each state’s fiscal condi­tion should be assessed. Notably, nearly all states have unfunded pension liabilities that are large relative to state personal income, indicating that all states need to take a closer look at their unfunded pensions, which represent a significant portion of each state’s economy. Another finan­cial crisis could mean serious trouble for many states that are otherwise fiscally stable.

State-Based Accounting 101: Ranking Fiscal Condition States must confront pension costs ---

. . .

First, let's look at the states with the best and worst fiscal conditions. At the top of the list are: Alaska (1), North Dakota (2), South Dakota (3), Nebraska (4), and Florida (5). Norcross explains, "these states are considered fiscally healthy relative to other states because they have significant amounts of cash on hand and relatively low short-term debt obligations." The bottom of the list includes: Illinois (50), New Jersey (49), Massachusetts (48), Connecticut (47), and New York (46). These states face large debt obligations and have very little cash on hand to pay short-term bills.

Continued in article

"Grant Thornton fined £975,000 over building society audit," by Harriet Agnew, Financial Times, July 8, 2015 ---

Grant Thornton agreed on Wednesday to pay a £975,000 fine to settle a two-year accounting probe into its audit of Manchester Building Society’s use of interest rate swaps.

Under the settlement with the Financial Reporting Council, Grant Thornton also received a severe reprimand. Alastair Nuttall and Marcus Swales, who were the firm’s audit engagement partners in relation to Manchester Building Society, have been fined £39,000 and £45,500, respectively. Both have been reprimanded.

Continued in article

Bob Jensen's threads on Grant Thornton ---

Internal Audit ---

"New mission, principles articulated for internal audit," by Ken Tysiac, Journal of Accountancy, July 6, 2015 --- f

P&G Settles Suit on Puffed-Up Packaging:   Olay containers raised eyebrows of California prosecutors, who called them deceptive ---

Olay is getting a makeover, though not entirely of its own accord.

Procter & Gamble Co. will change the packaging of some Olay skin-care products as part of a settlement with California prosecutors, who had accused the company of misleading consumers by selling jars of face cream in packaging that was at times much larger than the contents. The company also agreed to pay $850,000 in civil penalties and costs.

The civil protection lawsuit stems from an investigation that began in 2012, according to a spokesman for the district attorney’s office in California’s Riverside County, which was one of four counties that handled the case. Inspections of Olay containers and packages led to allegations that P&G was violating the state’s so-called slack-fill law, which prohibits the use of oversize packaging to make products appear larger.

Continued in article

Bob Jensen's Fraud Updates ---

"IRS Gets Happy (Pizza)," by Roger Russell, Accounting Today, July 17, 2015 ---
Thank you Elliot Kamlet for the heads up.

Happy Asker, the founder of a pizza chain based in Farmington Hills, Mich., that operated restaurants throughout Michigan, Ohio and Illinois, was sentenced last week to 50 months in prison for income and employment tax fraud.

He was also ordered to pay $2.5 million to the Internal Revenue Service as restitution.

Asker was convicted of three counts of filing false income tax returns for the years 2006 through 2008, 28 counts of aiding and assisting in the filing of false income and payroll tax returns for several of Happy’s Pizza franchise restaurants for the years 2006 through 2009, and corruptly endeavoring to obstruct and impede the administration of the Internal Revenue Code.

Continued in article

Bob Jensen's Fraud Updates ---

"Can corporate accounting ever be reformed?" by Eleanor Bloxham, Fortune, July 13, 2015 ---

Getting accountants and auditors to follow the rules, as well as their spirit, isn’t easy—keeping them honest has been an uphill battle for going on 80 years.

In a Fortune article three weeks ago, former SEC Chief Accountant Lynn Turner told me that the current accounting and auditing systems we all rely on need wholesale reform.

Since then, there has been a flurry of activity from regulators, who have issued proposals to shore up weaknesses in U.S. corporate accounting and auditing. The Securities and Exchange Commission (SEC) issued a concept release on potential new audit committee disclosures, including possible new requirements for information about how the audit committee actually oversees the company’s auditor. And the Public Company Accounting Oversight Board (PCAOB) issued two new proposals. One could require disclosure of the partner and others involved in a company audit. The second relates to the potential creation and disclosure of what the PCAOB calls “measures that may provide new insights into audit quality.”

Since audits have been required of public companies for 80 years, you’d think that measures of audit quality would already be clear, well established, and tracked. So why is this just now in the works? Given the choice between the stricter accountability of clear metrics and the greater freedom of none, companies, their auditors, and regulators have chosen flexibility.

Coninued in article

"Financial Engineering and the Arms Race Between Accounting Standard Setters and Preparers," by  Ronald A. Dye, Jonathan C. Glover, and Shyam Sunder, Accounting Horizons, Volume 29, Issue 2 (June 2015) ---
This article is free only to AAA members.

This essay analyzes some problems that accounting standard setters confront in erecting barriers to managers bent on boosting their firms' financial reports through financial engineering (FE) activities. It also poses some unsolved research questions regarding interactions between preparers and standard setters. It starts by discussing the history of lease accounting to illustrate the institutional disadvantage of standard setters relative to preparers in their speeds of response. Then, the essay presents a general theorem that shows that, independent of how accounting standards are written, it is impossible to eliminate all FE efforts of preparers. It also discusses the desirability of choosing accounting standards on the basis of the FE efforts the standards induce preparers to engage in. Then, the essay turns to accounting boards' concepts statements; it points out that no concept statement recognizes the general lack of goal congruence between preparers and standard setters in their desires to produce informative financial statements. We also point out the relative lack of concern in recent concept statements for the representational faithfulness of the financial reporting of transactions. The essay asserts that these oversights may be responsible, in part, for standard setters promulgating recent standards that result in difficult-to-audit financial reports. The essay also discusses factors other than accounting standards that contribute to FE, including the high-powered incentives of managers, the limited disclosures and/or information sources outside the face of firms' financial statements about a firm's FE efforts, firms' principal sources of financing, the increasing complexity of transactions, the difficulties in auditing certain transactions, and the roles of the courts and culture. The essay ends by proposing some other recommendations on how standards can be written to reduce FE.

Jensen Comment
The analytics of this Accounting Horizons article, rooted heavily in  Blackwell's Theorem, add academic elegance to the accountics science of the article but do not carry over well in the real world --- largely because of the limiting Plato's Cave assumptions of Blackwell's Theorem, However, the article lives up to the fine academic reputations of its authors in other respects that make it important to consider when pitting financial engineering against regulation.

What needs to be extended is how financial engineering is not something that can be reduced per se. Changes in regulation are more apt to impact some firms positively (i.e., opportunity) and other  firms negatively (i.e., cost) simultaneously. And there are always considerations of direct impacts versus externalities. For example, eliminating coal as an energy source cleans the air and water but puts generations of miners and entire towns out of work as well as increasing the cost of electric power.

 The FASB requirement to book employee stock options when vested makes employee compensation more transparent to investors while making startups more costly to operate. And with each significant increase in financial reporting and compliance regulations businesses are increasingly mummified in red tape. As the saying goes:  "The road to Hell is paved with good intentions."

The above article features lease accounting standards but ignores the positives and negatives of alternative details in setting such standards and the virtual impossibility of reliably measuring some liabilities such as estimating operating lease renewals ad infinitum.

The above article ignores trade-offs in the standards. The prominent example is how balance sheet priorities of the FASB and IASB greatly harmed income statements.

Net earnings and EBITDA cannot be defined since the FASB and IASB elected to give the balance sheet priority over the income statement in financial reporting ---
"The Asset-Liability Approach: Primacy does not mean Priority," by Robert Bloomfield, FASRI Financial Accounting Standards Research Initiative, October 6, 2009 ---

"Whither the Concept of Income?" by Shizuki Saito University of Tokyo and Yoshitaka Fukui Aoyama Gakuin University, SSRN, May 17, 2015 ---

Since the 1970s, the decision-usefulness has taken center stage and our attention has been concentrated on valuation of assets and liabilities instead of income measurement. The concept of income, once considered the gravitational center of accounting has lost its primacy and become a byproduct of the balance sheet derived from the measurement of assets and liabilities.

However, we have not been equipped with robust conceptual foundation supporting theoretically reasoned accounting measurement. It is not only theoretically but also practically important to renew our seemingly waned interest in the concept of income because ongoing reforms of accounting standards cannot be successfully implemented without a sound understanding of the concept of income.

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

Amazon posts surprising profit
For just the second time, Inc. shared sales figures Thursday for its cloud-computing division Thursday. Amazon Web Services sales rose to $1.82 billion from $1 billion a year earlier, and operating profit increased to $391 million from $77 million. Some believe the unit could operate on a stand-alone basis and, because of its growth, is a primary reason to invest in Amazon. Amazon posted a profit of $92 million for the third quarter, helped by sales which rose a better-than-expected 20% to $23.18 billion.

United, Southwest post record profits 
Two of the biggest U.S. airlines reported record profits for the second quarter but said they planned to reduce expansion plans for later this year, as demand has weakened.

Jensen Comment
"Surprising profits" and "record profits" make us wish that someday the accounting standard setters (think FASB and IASB) would someday be able to operationally define "profit" and make "profit" measures more comparable between business firms.

Net earnings and EBITDA are all-important because investors change their portfolios based on net earnings and its derivatives more than anything in the balance sheet.
"Accounting Alchemy," by Robert E. Verrecchia, Accounting Horizons, September 2013, pp. 603-618.
Verrecchia alleges that it's not that managers have a functional fixation for earnings metrics as it is that they believe that other managers and investors are so fixated with earnings that it because of monumental importance not because it is inherently a great metric but because they believe deeply that the market itself makes this index of vital importance.

. . .

In summary, my thesis is that managers project that others are fixated on earnings—independent of any evidence in support of, or contrary to, this phenomenon. This leads to managers resisting the inclusion in earnings items that fail to enhance performance, such as the amortization of Goodwill, or measures that make future performance more volatile, such as those based on fair value. In the absence of acknowledging PEF and attempting to grapple with it, I continue to see confrontations over accounting regulation along the lines of recent debates about fair value accounting, in addition to further impediments along the path to greater transparency in financial statements.

Investors change their portfolios based on earnings, eps, EBITDA, and P/E ratios when in fact those metrics are not defined and may have a lot of misleading noise and secret manipulation

Bob Jensen's threads on the differences between IASB versus FASB standards ---

Bob Jensen's threads on accounting theory can be found at

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

Corporate pension plans underfunded, outlook unclear, PwC says
Longer life expectancies combined with low interest rates have pushed corporate pension plans further into the red, according to a recent PricewaterhouseCoopers LLC study. The median funding level for large-company retirement plans in 2014 fell to 83%, compared with 90% in 2013. Those plans were 100% funded in 2007.

Bob Jensen's threads on pension accounting ---

Disabilities ---

Jensen Question
Are there any HTML processors that automatically code for sight and hearing impaired readers?
Are there any Web browsers that will read text aloud? See the Jaws Screen Reader cited below.

There is software available for captioning video for the hearing impaired but it is purportedly tedious to use for authors. Increasingly learning videos are captioned for the hearing impaired.

"The Challenges of Surfing While Blind:  My seeing-eye dog can’t help me with your website. Please code it for accessibility," by Deann Elliott, The Wall Street Journal, July 26, 2015 ---

. . .

A well-designed website that conforms to the Web Content Accessibility Guidelines 2.0 (WCAG) permits use by people of all abilities. In my case, text labels that identify the buttons and graphical features allow me to “see” what’s on the screen. The code is hidden and need not interfere with the way the website works for sighted customers. But without these features, a site that works beautifully with a mouse is useless to me.

Technology has removed many of the barriers that people with disabilities face in the physical world, making life in the mainstream tantalizingly close. Can’t drive to the mall? There’s Amazon! Can’t read the electric bill? Bank online! As my guide dog and I contemplate the 25th anniversary of the Americans with Disabilities Act (ADA), the landmark civil-rights law signed July 26, 1990, the gap between sight and blindness has never been narrower.

The ADA requires government websites to be accessible. Sadly, the law provides little guidance to the private sector on this point, since it was passed before the Internet became ubiquitous. It applies to a “place” of public accommodation—but is the Internet a place? That question has been wending its way through the courts.

Disability advocates have worked to broaden the law’s applicability, with some success. In April, Harvard University and M.I.T. announced plans to voluntarily make their edX website for online courses compliant with the WCAG after deaf advocates filed federal lawsuits alleging discrimination. In 2010 the Justice Department announced it would consider issuing Web-accessibility regulations under the ADA, though the rule-making process lumbers on. With the number of websites growing rapidly, change isn’t coming fast enough.

“More than 50 percent of the websites on the Internet are either inaccessible or unusable for people who use adaptive technology,” Brian Charlson, director of technology at the Carroll Center for the Blind in Newton, Mass., told me in his office a few months back.

The consequences range from inconvenient to significant. When I can’t place an online order at my favorite Vietnamese noodle shop, I get Chinese instead. If a task is urgent, I pester family and friends for “favors.” When they hover over my screen to help me navigate around a virtual barrier, I’m keenly aware that my charge-card number and the details of my transaction are on display. At work, unequal access in an increasingly networked economy contributes to an unemployment rate that’s more than twice as high for people with disabilities—and that’s not counting many who have given up looking for work.

Continued in article

Jensen Comment
The above article is disappointing in that it does not mention most technologies and newer products that can be tried by the sight-impaired learners.

"For Bill on Disabled Access to Online Teaching Materials, the Devil’s in the Details," by Rebecca Koenig, Chronicle of Higher Education, September 30, 2014 ---

User:Steinsky/Encyclopaedia for the blind ---
Scroll down to Software for the Spoken Wikipedia

Free Monitor
I don't know anything about this free monitor or the open-source software for sight-impaired people, but it sounds wonderful
Thank you Scott Bonacker for the heads up.

Jaws Screen Reader ---

JAWS (Job Access With Speech) is a computer screen reader program for Microsoft Windows that allows blind and visually impaired users to read the screen either with a text-to-speech output or by a Refreshable Braille display.

JAWS is produced by the Blind and Low Vision Group of Freedom Scientific, St. Petersburg, Florida, USA.

A May 2012 screen reader user survey by WebAIM, a web accessibility company, found JAWS to be the most popular screen reader worldwide; 49.1% of survey participants used it as a primary screen reader, while 63.7% of participants used it often.[1]

Continued in article

"Awesome FingerReader Gadget Lets the Blind Read Printed Text," Chris Smith, Yahoo Tech, April 18, 2014 ---

Useful Products for the Blind ---

Carroll Store Products for the Blind ---
Web Accessibility Services --- 

World Access for the Blind ---

Royal Society for the Blind ---

Bob Jensen's threads on learning technologies for people with disabilities ---

17 Most Unreliable Cars To Own --- 
Recall that in the 2008 Chrysler was taken over by Fiat. It seems that did not help Chrysler's reputation for manufacturing unreliable cars --- sort of like the blind leading the blind. However. there are other unreliable models from supposedly more reputable manufacturing companies.

Fiat 500L (the least reliable of all)
Volkswagen Beetle
Ford Fiesta
Audi RS6
Nissan Pathfinder
Mercedes-Benz CLA 250
Chevrolet Silverado
Ford Escape
Cheverolet Cruze
Dodge Dart
Volkswagen Passat
Ford C-MAX Energi
Infiniti Q50
Mercedes-Benz S-Class
Mini Cooper Countryman
Volkswagan Touran
Jeep Grand Cherokee

Jensen Added Comment
My Jeep Grand Cherokee that sits in my barn most of the time is a real lemon. My friend (an elderly U-boat engineer) who bought a Mercedes became so frustrated with breakdowns that he traded it for a Subaru. Thus far he's more impressed with reliability. Years ago I had two German Beetles back in the days when they had air-cooled engines. Neither car seemed very reliable to me. Both were prone to oil leaks.

The most reliable cars I ever owned were a Plymouth stationwagon and a Cadillac sedan that I inherited from my father. But this is anecdotal. Cuban cars today provide some evidence that cars built in the 1950s were perhaps the best in terms keeping them running for ever and ever --- well maybe not the "best" compared to Model T Fords.

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

Record fine for Fiat Chrysler
Federal regulators hit Fiat Chrysler Automobiles NV with a record $105 million fine for recall lapses covering millions of vehicles, adding to mounting scrutiny of the auto maker’s safety practices.

What are the 10 most-expensive and 10 least-expensive states to own a car in the USA?

An important factor is insurance pricint. The most surprising outcomes are the outliers where Hawaii is the least-expensive state and Michigan is the most expensive state. I would have put Alaska, California, and  Hawaii on top with Michigan, Texas, and Louisiana near the bottom. Shows what I know!

Most-expensive car ownership states:

Michigan (most expensive)
North Dakota
West Virginia

Least-expensive car ownership states:

Washington State
North Carolina
New Hampshire
Hawaii (least expensive)

Jensen Comment
One factor that seems to be ignored is depreciation cost. One only has to look at the rust trim on older cars to realize what salting the roads does in the snowbelt. Vehicle bodies last much longer in most southern states. You can usually get better buys on used cars that have never been near snow, ice,  or salty ocean breezes.

Another factor that's ignored is parking cost. For example I think (without checking the facts) almost half the people in New York live in New York City. Most people living in Manhattan, for example,  avoid car ownership because of the cost and other hassles of parking (such as trying to find a parking place on a crowded street).

Maintenance costs are ignored in the above rankings. The first time we rented a car in Alaska a long-time resident (Professor Tom Robinson) who met us at the airport warned us not to sign anything until we inspected the windows of the car we were about to rent. Look for cracks and ships. Since there are only three paved highways in Alaska there are a lot of broken windows arising from flying rocks on unpaved roads. It's not that you should refuse to rent a car with some damage to windows. That may even be a good thing if you catch my drift. The important thing is to note the prior damage on paper before you drive off in the car. Sure enough the car we rented had a small crack in the windshield before we drove off from the airport in Fairbanks.

Even though it's expensive I generally take all the insurance I can get on a rental car just to avoid any hassle with having to deal with the insurance policies on my own cars. It would seem that there is an added consideration of insurance coverage variations in states. For example, maybe it is smarter to pay for rental car insurance in Michigan and Mississippi than in New Hampshire and Hawaii. I also advise paying for the added insurance in Maine where native drivers are "Maniacs"  even if drunk driving laws are strictly enforced. Also pay the added insurance cost in Texas where drunk drivers roam free.

I might add that I've never had an insurance claim on a rental car. I did have a claim on my new Subaru when somebody took out two doors while we were having a meal in a Maine restaurant. Must have been one of those "Maniacs."

Tax-Exempt Hospital Compliance With Sec. 501(r): No Violation Is Too Small to Ignore ---

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

The Nasdaq Composite Index has increased in value by $664 billion so far this year, but more than half of that can be attributed to just six companies, the WSJ’s Dan Strumpf reports: Inc., Google Inc., Apple Inc., Facebook Inc., Netflix Inc. and Gilead Sciences Inc. The concentrated gains are sparking fears that soft trading everywhere else in the market could signal a pullback to come.

Other indicators are also flashing yellow. In the Nasdaq, falling stocks have outnumbered rising stocks this year, sending the “advance-decline line” into negative territory, a phenomenon that has come before market downturns in the past, investors and analysts said.

A rally driven by just a handful of stocks doesn’t necessarily mean the market has turned unhealthy or that shares will fall. Still, many analysts are uncomfortable with the widening divergence between the top gainers and the rest of the market. Many see a stock market that is on the cusp of a shift— though of course no one can predict just what will happen.

Amazon Is Now Worth More Than Walmart ---

Jensen Comment
Worth and value can be defined in various ways depending a lot upon how intangibles are valued relative to tangible assets and whether the valuation is based upon aggregation of values of net assets versus stock market valuation of equity shares. Certainly Walmart is worth a lot more than Amazon in terms of tangible assets like stores, warehouses, and delivery trucks. Amazon is now worth slightly more in terms of stock market valuation of equity shares that are based on a whole lot of technology intangibles in the case of Amazon.

Walmart employs many more workers, and this carries with it a lot of unbooked financial obligations for such things as future payroll and employee benefit costs, especially medical insurance costs.  Add to this the constant costs of labor disputes and costs of fending off unions. Walmart also has much higher inventory costs since Amazon tends to pass many inventory  costs upstream to suppliers. Amazon has more robotics and is positioned for replacement of labor with even more robotics and other technologies.

Amazon is more vulnerable to risks of outsourcing such as the risks supplier pricing disputes and labor disputes in UPS/USPS and price gouging by UPS or the USPS.  My point is that a whole lot of important risks in Amazon's operations are outside the control of Amazon due to outsourcing.

Our current managerial accounting courses and textbooks do a poor job of analyzing financial risks when comparing companies like Amazon versus Walmart.

"After Five Years, Dodd-Frank Is a Failure:  The law has crushed small banks, restricted access to credit, and planted the seeds of financial instability," by Jeb Hensarling, The Wall Street Journal, July 19, 2015 ---

Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the legislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.”

None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums.

Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial services grew every year between 1999-2008. It wasn’t deregulation that caused the crisis, it was dumb regulation.

Among the dumbest were Washington’s affordable-housing mandates, beginning in 1977, that led to a loosening of underwriting standards and put people into homes they couldn’t afford. The Federal Reserve played its part in the 2008 financial crisis by keeping interest rates too low for too long, inflating the housing bubble. Washington not only failed to prevent the crisis, it led us into it.

Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.

Continued in article

Bob Jensen's Rotten to the Core threads ---

9 Microsoft analysts sound off about the company's future ---

Jensen Comment
It's future seems to be in the clouds and costs (read that cost containment). The "analysts" are not at all specific. I think its future is cloudy. By the way did you note that TurboTax will no longer offer cloud archiving of tax returns.

From the CFO Journal's Morning Ledger on July 21, 2015

Microsoft buys back stock, cuts costs ---

Microsoft Corp.
repurchased $4.3 billion of its shares during its fiscal fourth quarter, and returned another $2.5 billion to shareholders in the form of dividends, CFO Journal’s Vanessa O’Connell reports. The total is nearly double the amount from last year, said finance chief Amy Hood, during a conference call with analysts Tuesday.

Jensen Comment
This makes me wonder if the money could have been better spent on new and better products. Lately Microsoft is known more for its bad deals like buying Nokia for over $7 billion ---

From the CFO Journal's Morning Ledger on July 21, 2015

Top lawmakers in Congress have been hammering out the framework for a deal with the White House that could overhaul the way U.S. firms are taxed on their overseas earnings. The discussions are still in an early phase, but items on the table include the elimination of taxation on world-wide income, paired with a one-time tax on overseas holdings and safeguards to prevent future abuses, the WSJ’s John D. McKinnon reports.

Overhauling the U.S. system for taxing multinational businesses has been a priority for Republicans, as well as some Democrats. Propelling this year’s discussions, which are being led by Rep. Paul Ryan (R., Wis.), is the realization that a tax overhaul could be coupled with a boost in highway funding, a priority of the Obama administration and Democrats. Some experts say it is too difficult to fix the tax code piecemeal, given the complex intermingling of individual and corporate tax rules. But Mr. Ryan has made a practical calculation that the moment is ripe for what would still amount to a substantial revamp.

Meanwhile, the Senate Committee on Finance voted on Tuesday to approve semiannual extensions of dozens of popular business tax credits and deductions, CFO Journal’s Kristin Lin reports. If ultimately approved by Congress, businesses will be able to take advantage of more than 30 credits and deductions until the end of 2016.

"Triple Bottom Line Accounting and Energy-Efficiency Retrofits in the Social-Housing Sector: A Case Study," by Kathryn Bewley and Thomas Schneider, Accounting and the Public Interest, December 2013, Vol. 13, No. 1, pp. 105-131 ---
This is not a free download

This paper reports the findings of a case study conducted to learn about the information, actors, actions, and processes involved in energy-efficiency investment decisions in the social-housing sector. These decisions draw on environmental, social, and economic factors, which are studied from a “triple bottom line” (TBL) accounting perspective. The quantitative methods we use rely on Levels I, II, and III fair-value measures similar to those used in financial accounting. The qualitative methods rely primarily on interviews conducted and transcribed by the researchers. Our main findings show that a pure financial bottom-line approach would not fully indicate the overall desirability of the type of energy-efficiency investment undertaken in this case. By factoring in other quantitative and qualitative outcomes drawn from the research methods applied, a different conclusion may be reached.

Bob Jensen's threads on triple bottom line reporting ---

From the CFO Journal's Morning Ledger on July 21, 2015

Investors: sustainability disclosures are mostly fluff ---
About 75% of companies in the S&P 500 index published sustainability reports last year, CFO Journal’s Emily Chasan reports. But U.S. investors say they are mostly disappointed in the information companies are releasing on greenhouse gas emissions or waste reduction.

In the loop: Sustainability disclosures - Is your company meeting investor expectations? ---- Click Here

Sustainability Accounting ---  

 "Update on Social Accounting - Sustainability Reporting," by Jim Martin, MAAW's Blog, May 1, 2015 ---

Bob Jensen's threads on sustainability accounting ---

A New Assignment for Bob Herz
From the CFO Journal's Morning Ledger on October 15, 2014

Sustainability accounting group taps former FASB chairman ---
Robert Herz, the former chairman of the U.S. Financial Accounting Standards Board, will join the board of the nonprofit Sustainability Accounting Standards Board, which is working to write industry standards for corporate sustainability and environmental reporting, reports CFO Journal’s Emily Chasan. SASB sets voluntary standards for firms to disclose information on material social, governance, energy and environmental issues to investors.

July 20, 2015 reply from Zabihollah Rezaee

I coauthored with Ann Brockett of EY a book on “Corporate Sustainability: Integrating Performance and Reporting”, which was published by Wiley in 2012 and received the Axiom Gold Award in 2013 (see attached cover page). I am now working on a new book on “Business Sustainability: Performance, Compliance, Accountability and Integrated Reporting”, scheduled for publication by the Greenleaf in October 2015. Attached is cover page of the new book. I will send you a review copy if you are interested in submitting a review report by August 15th, 2015.

Best regards,


Jensen Comment

From the Inside Flap

Global businesses are under close scrutiny and profound pressure from lawmakers, regulators, the investment community, and their diverse stakeholders to focus on sustainability and accept accountability and responsibility for their multiple bottom lines of economic, governance, social, ethical, and environmental (EGSEE) performance. Would you like to leave more resources for the next generation? Watch your business grow continuously? Have an ethical and competent organizational culture?

Presenting recent developments in sustainability performance and sustainability reporting and assurance, Corporate Sustainability sheds light on the importance, relevance, and benefits of business sustainability and accountability reporting in all areas of EGSEE performance.

Filled with features and practical examples relevant to professionals of all levels, corporate leaders, directors and executives, as well as auditors, practitioners, and educators, this timely and essential book discusses:

Organizations worldwide recognize the importance of sustainability performance and accountability reporting. However, how to actually implement sustainability reporting remains a major challenge. Read Corporate Sustainability and discover how to fully—and successfully—integrate sustainability into your business's reporting and performance management systems.


From the Back Cover

Make sustainability happen, Corporate sustainability is the responsibility of every organization, not just a select few.

Corporate Sustainability explores business sustainability and accountability reporting and their integration into strategy, governance, risk assessment, performance management, and the reporting process. Written by renowned experts in the field of managing for sustainable performance, this important book also highlights how people, business, and resources collaborate in a business sustainability and accountability model.

Take a look inside for essential guidance on:

A significant contribution on how to put sustainability principles to work, Corporate Sustainability offers real-life tools and practices for creating an authentic corporate framework for sustainability.

"Companies seeking to embrace sustainability must navigate a thicket of policies and standards, from ethical performance to environmental protection to executive compensation—and do so transparently, comprehensively, and globally. Ann Brockett and Zabihollah Rezaee have created a valuable field guide to this brave new world of multiple bottom lines, providing guidance on how companies can engender public trust and investor confidence while pursuing their economic goals."
—Joel Makower, Executive Editor,, author, Strategies for the Green Economy


"The Fields That Students Flock to During Recessions," by Josh Zumbrun, The Wall Street Journal, July 16, 2015 --- 

Graduating into a recession stunts the careers of the young men and women entering the labor market. But it turns out a lot of students don’t sit back and passively accept this outcome: Many students who see a recession during their early college years switch to majors with better job prospects.

According to new research from Benjamin Keys at the University of ChicagoBrian Cadena at the University of Colorado Boulder and Erica Blom at Edgeworth Economics, the shifts can be dramatic.

When the national unemployment rate rises by 1 percentage point, the share of women studying business rises by nearly two-thirds of a percentage point. The share of women studying nursing climbs by nearly a third of a percentage point. An additional quarter percentage point switch into accounting. Meanwhile, enrollment in education, literature and languages, sociology and psychology drops.


Jensen Comment
Accounting ranks number three from the top. It may well be on the top if it did not take five years (150 selective credits) and a certification examination to become a CPA. It is true that accounting firms are always hiring when the economy goes up or down. However, in public accounting there's a lot of forced turnover before employees are eligible to become partners. The secondary market declines somewhat for accountants who do not become partners after working in CPA firms for 5-10 years.

The low-ranking fields tend to be low ranking in boom or bust in the economy. Also many high-ranking fields like nursing are high ranking in boom or bust.

Airbnb ---

AirBnB has a genius plan to steal more business from hotels ---

Jensen Comment
Technology gives rise to new business models, and few are more dramatic than Uber (transportation) and Airbub (apartment and home rentals). In my opinion academic accountants have not kept pace with changing times in research or classrooms or textbooks.

A noteworthy example is AirbuB.
What are the cost advantages and disadvantages of this new business model for providers and users of these rental properties? When and where are the AirBub competitions for traditional business and labor union models going  to become enormous over time? Why?

Whereas Uber is facing a lot of resistance in from labor unions and taxi companies that rely on  traditional business models, Airbub to date seems to be getting a free pass when it seems to me that hotel labor unions and their politician puppets should be up in arms. That may soon change as the competition is increasingly taking a bite out of the revenues of hotels and time shares.

In any case I hope for more academic literature in research and teaching that compares AirBub models with the traditional hotel models under varying locations and circumstances (such as minimum wage differences).  There should be more guidance for providers of AirBub apartments and houses. For example, how does liability insurance and casualty  increase and why? Do insurance companies already charge more for AirBub participation?

How do you calculate breakeven and prices? For example, AirBub does not compete well with hotels in terms of very short term rentals, e.g., one night stands. AirBuB competes very well in terms of monthly rentals. How about rentals more than one day and less than 30 days?

Should hotels be offering new menus of choice. For example, should a Marriott Courtyard offer differ rental prices for guests who want daily maid service versus those that are willing to make their own beds and clean their own rooms and bathrooms? Should Courtyard guests have an option of paying for swimming pools and beaches?

There may be some data already available. For example, how do revenue and costs differ between Marriott Residence Inns versus Courtyard and Fairfield Inns

As I study the Inn at Sunset Hill down the road under new management  it seems to me that bed and breakfast inns should perhaps offer more pricing choices. For example, guests that bring their own bedding and clean their own rooms could perhaps be given lower rates. This is problematic from a cost accounting standpoint. Outsourcing bedding laundry entails considerable fixed costs. It costs just as much for laundry pick up whether the truck picks up bedding for 10 rooms versus 20 rooms. The marginal cost of washing the bedding for each room is relatively low beyond the cost of picking up the laundry for one room.

My point here is that until costs of goods and services are analyzed it's easy to be misled by superficial ideas on such matters.

Also perhaps the Inn at Sunset Hill should seriously consider providing rooms to AirBub since competition is very keen up here among  traditional bed and breakfast inns.

IRS Scandal ---

The IRS Scandal, Days 701-800 ---
Jensen Comment
This has gone on so long that it's easy to forget the main focus of the "IRS Scandal" since months before the USA national election of 2014. The main focus is whether the IRS acquiesced (eagerly) to White House requests to abuse the IRS agency's powers to influence the outcome of the 2014 election. Beyond the original IRS admission of trying to discourage Tea Party political donations, the further scandal probably could have been put to bed if IRS executive Lois Lerner had been willing to back her Congressional testimony by taking an oath that she was telling the truth concerning not receiving her marching orders from the White House.  Instead when asked to take an oath she fell back on her Fifth Amendment rights which have always been perceived as a signal of guilt. What the Republicans really want is to embarrass the White House with evidence that the the IRS was illegally used for partisan politics --- something analogous to Nixon's Watergate. The scandal was exacerbated by the mysterious disappearance of Lois Lerner's IRS emails. 

The IRS scandal on Day 779 just got even worse ---

So the Obama IRS wasn’t just persecuting right-leaning nonprofits — it was out to prosecute them, too. And with the help of the Obama Department of Justice and FBI.

Via Freedom of Information Act lawsuits, the watchdog group Judicial Watch just got evidence of the plot. A “DOJ Recap” on an Oct. 8, 2010 meeting tells how officials from the three agencies discussed “several possible theories to bring criminal charges under FEC law” against groups “posing” as tax-exempt nonprofits.

As part of the project, the IRS handed the FBI 21 computer disks with 1.23 million pages of confidential IRS returns from 113,000 nonprofit 501(c)(4) groups — nearly every 501(c)(4). This, though federal law generally bans the IRS from sharing such data.

The evidence shows “that the Obama IRS scandal is also an Obama DOJ and FBI scandal,” noted Judicial Watch President Tom Fitton. “The FBI and Justice Department worked with Lois Lerner and the IRS to concoct some reason to put President Obama’s opponents in jail before his re-election. And this abuse resulted in the FBI’s illegally obtaining confidential taxpayer information.”

Coninued in article

Bob Jensen's Fraud Updates ---

"SEC Issues Another Big Whistleblower Award," by Jaclyn Jaeger,, Compliance Week, July17, 2015 --- 

The Securities and Exchange Commission today awarded a whistleblower more than $3 million to a company insider whose information helped the SEC crack a complex fraud case. It is the third highest award to date under the SEC’s whistleblower program.

“The whistleblower’s specific and detailed information comprehensively laid out the fraudulent scheme, which otherwise would have been very difficult for investigators to detect,” the SEC said. “The whistleblower’s initial tip also led to related actions that increased the whistleblower’s award

Continued in article

Is Whistleblowing a Moral Act?" by Steven Mintz, Ethics Sage, July 14, 2015 ---

Bob Jensen's threads on whistleblowing ---

"Los Angeles’ Garment Industry Frets Over (minimum wage) Pay Hike Some say a $15 minimum wage, slated by 2020, will drive them out," by Eric Morath and Alejandro Lazo, The Wall Street Journal, July 15, 2015 ---

Jensen Comment
One possible cost accounting student assignment is to compare relocation costs and revised operating costs of various types of companies such as garment manufacturing versus food processing versus food retailing versus furniture assembly. A complicating factor is the underground cash economy. For example, in garment manufacturing its somewhat common to hire home workers to sew on the basis of completed job lots rather than hourly wages.

Hack Brief: Attackers Spill User Data From Cheating Site Ashley Madison ---

"Hacker Pleads Guilty to Stealing Tax Filings from 4 CPA Firms," by Michael Cohen, Accounting Today, July 7, 2015 ---

A Bulgarian hacker has admitted to participating in a $6 million fraudulent tax return scheme in which he used tax-filing information stolen from at least four major CPA firms in the U.S.

Vanyo Minkov, 32, pleaded guilty Monday before U.S. District Judge Jose L. Linares in a Newark, N.J., federal court to a superseding information charging him with one count of conspiring to file false and fraudulent tax return.

In late 2012, Minkov and other conspirators allegedly hacked into the networks of at least four accounting firms and stole the 2011 tax filings for over 1,000 of the firms’ clients. The names of the accounting firms were not publicly identified by prosecutors, but according to the 2013 indictment and the more recent superseding information, one CPA firm was based in Connecticut, two of the others were in California, and the fourth was in Pennsylvania.

Continued in article

Bob Jensen's Fraud Updates ---

Commodities trader (Noble Group) has faced criticism for accounting irregularities ---

SINGAPORE—Commodities trader Noble Group Ltd. will launch an independent review into its accounting, which has come under some scrutiny this year, the company said Tuesday.

The Hong Kong-based company will appoint four nonexecutive directors and accounting consultant PricewaterhouseCoopers LLC to conduct the review, it said in the statement.

Noble Group has faced heavy criticism this year from several research firms, including U.S. short seller Muddy Waters, which accused it of accounting irregularities. The company has denied any wrongdoing.

The review will focus on Noble’s so-called mark-to-market of fair value accounting, the company said. Mark-to-market calculations, which are used to value assets, can include an element of subjectivity when estimating future commodity prices and production, for example. Noble’s critics say this practice led the company to report stronger results than it should have in the past.

Coninued in article

Bob Jensen's Fraud Updates ---

YouTube ---
YouTube Home ---
YouTube Education --- 

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

YouTube advertisers increase 40% in year ---
Top brands eager to reach millennial consumers have boosted the number of advertisers on Google Inc.’s video site by 40% in the past year, the Financial Times reports. YouTube also said advertisers from the top 100 brands based on a ranking by Interbrand were spending 60% more than last year.

Jensen Comment
This reveals the changing times in free communication, marketing, entertainment, education, and training --- yes free education and training. YouTube is playing a huge role in education and training as major universities and training companies now have YouTube channels for a vast amount of training and education videos.

See YouTube Education ---
Especially note the featured channels

But featured channels are almost a miniscule part of what you can learn on YouTube. For example, you can learn how to operate or trouble shoot almost any device in the market by searching YouTube in a clever way. You can learn how to do virtually anything in Excel via YouTube. You can learn how to analyze financial statements and prepare tax returns on YouTube. In fact there is very little that you cannot learn from YouTube.

My problem with YouTube learning is that it is less efficient than first trying other sources, especially Wikipedia. You can efficiently scan millions of Wikipedia modules with word searches and in many instances their table of contents. For example, compare searches of the "Capital Asset Pricing Model" in Wikipedia versus YouTube. Learning about the CAPM from YouTube takes much more time than learning about this model from Wikipedia.

And Wikipedia does not advertise --- yet!

Wikipedia ---

How to Mislead With Statistics
Output Per Hour Worked in the USA

From the CFO Journal's Morning Ledger on July 17, 2015

For a decade, economic output per hour worked has barely budged, and over the past two quarters it has fallen. That is, if you consult the federal government’s formula for calculating productivity, something that contrarian economists at Google Inc. and Stanford recommend against, the WSJ’s Timothy Aeppel reports. Google chief economist Hal Varian says sluggish U.S. productivity doesn’t reflect a high-tech wave of innovations that save people time and money. “There’s a lack of appreciation for what’s happening in Silicon Valley,” he says, “because we don’t have a good way to measure it.”

One measurement problem is that a lot of what originates in America’s technology hub is free or nearly free. But the only way goods and services move the official U.S. productivity needle is when consumers and businesses pay for them. Anything free, no matter how much it improves everyday life, isn’t included. Many in Silicon Valley say it is just a matter of time before new innovations surface in salable products and goose the official productivity tally. First, though, businesses must harness the innovations to the products they sell. Driverless-car technology, for example, won’t hit city streets for a while.

From the CFO Journal's Morning Ledger on July 16, 2015

The rest of this year should prove to be very interesting in the ongoing debate over U.S. corporate tax reform. And of all places, a seemingly mundane highway-funding bill that just cleared the House is the starting point for what could turn into an end-of-year clash over taxes on foreign earnings, among other matters, the WSJ’s John D. McKinnon reports. House Ways and Means Committee Chairman Paul Ryan (R., Wis.) wants to shore up the ailing highway fund with a one-time slug of money from a rewrite of U.S. taxes on American multinational firms’ foreign earnings. On its own, that’s not likely to sound terribly palatable to CFOs who are holding their money offshore specifically to avoid a tax hit. But Mr. Ryan aims to ease U.S. tax rules for multinationals’ future foreign earnings at the same time.

In broad terms, Mr. Ryan aims to modernize the much-criticized U.S. rules for taxing American multinationals to make them more competitive with their foreign rivals. At 35%, the U.S. corporate tax rate is among the world’s highest. The U.S. also continues to seek to tax American firms on their foreign earnings, while most other developed countries now tax only the profits earned within their borders. But the relatively narrow overhaul that Mr. Ryan and others envision likely wouldn’t seek to lower the basic U.S. rate. Instead, it would focus on easing the rules for money earned in foreign countries.

Overhauling the U.S. business tax code has always proved politically challenging, in part because many businesses themselves are nervous about it. Some skeptical Democrats say Congress should find a way to expand revenues to fund highways from fuel taxes or other user fees instead.

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

Toshiba executives likely to step down over accounting scandal
Toshiba Corp.
President Hisao Tanaka and several other executives are likely to step down soon over an accounting scandal at the Japanese company involving profit inflated by more than $1 billion. The other executives that people familiar with the situation expect to leave Toshiba include Norio Sasaki, a former president who is currently vice chairman. The board is also likely to undergo significant membership changes.

. . .

Toshiba has detailed a number of cases in which business units failed to book adequate costs for executing contracts, causing the company to overstate profit. Toshiba said in June that it would need to reduce operating profit for the 2009 through 2013 fiscal years by a total of ¥54.8 billion. People familiar with the matter said the figure has now ballooned to at least ¥150 billion ($1.2 billion). Toshiba declined to comment.

During those years, the company’s combined operating profit totaled ¥1.05 trillion, so even at the higher level, the reduction would amount to less than 15% of the company’s operating profit over the five years.

Continued in WSJ article

Bob Jensen's threads on creative accounting ---

Bob Jensen's Fraud Updates ---

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

Jeep-trial jurors skeptical of Chrysler’s safety efforts
A Georgia jury that hit Fiat Chrysler Automobiles NV with nearly $150 million in damages wasn’t swayed by the auto maker’s argument that U.S. regulators had found its gas-tank placement wasn’t a risk and didn’t require a recall.

Jensen Comment
Jeep looks and feels like a muscle car. But as a Jeep Cherokee owner I find that's a facade. Each year I spend hundreds (and sometimes thousands) on my Jeep that I mostly use to hall brush to the dump. The Jeep sits idle  in my barn all winter, because I don't trust driving it in the winter.

After the USA Government bailout in which Italy's Fiat took over Chrysler, the poorly made Fiats never did take hold in the USA --- mostly because they are even more poorly made than Jeeps. Now Fiat wants to sell Chrysler to GM, but GM is not showing much interest.

In the bailout of Chrysler the USA Government put up over $1 billion in trust to make good on Chrysler's stupid lifetime guarantees of Chrysler vehicle power trains (the lifetime warranty does not apply to Jeeps).

Lifetime warranties are really dumb and are difficult to account for in the financial statements.
I received 10 new batteries when K-Mart installed a new battery at no charge  in my Plymouth stationwagon in the 1970s. . For good reason K-Mart no longer provides new replacement of batteries for the lifetime of the vehicle. I did not get rid of my old Plymouth until it would only go in reverse after over  20 years of use. Plymouths were more reliable than  Jeeps. And if I still drove the Plymouth I would still be getting free new batteries from K-Mart.

From the CFO Journal's Morning Ledger on July 16, 2015

Ford to build new Lincoln Continental in Michigan
Ford Motor Co.
said the new Lincoln Continental luxury car will be built in Michigan, marking a win for U.S. workers, as contract talks with the United Auto Workers union kick into gear this week.

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

Ford to move current small car production outside U.S.
Ford Motor Co.
will move production of small cars from a plant in Michigan to a factory outside the U.S. in 2018 in a new setback to efforts to create a market for small cars made in the U.S. The move could put pressure on the United Auto Workers union to temper demands for wage increases in upcoming contract negotiations.

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

A Resource Guide for Audit Committees
Expectations for audit committees are higher than ever, and setting the appropriate tone at the top has never been more important. Deloitte’s “Audit Committee Resource Guide” includes regulatory requirements, leading practices and questions for audit committees to consider as they execute their responsibilities. It also includes tools and resources provided by Deloitte LLP’s Center for Corporate Governance and other governance organizations. The guide is a reference for both seasoned and new audit committee members as they address areas such as oversight of internal controls, financial reporting, risk, interaction with the internal and independent auditors, and review of earnings press releases.
Continue »

Read more Deloitte Insights »

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

Corporate America could use more competition
A decline in competition as market power becomes concentrated in the hands of fewer companies is bad for innovation and consumers. But policy makers can reverse the trend, writes Greg Ip. The answer isn’t just tougher antitrust oversight, since mergers can be good for customers and innovation, but for policy makers to take into account how any new policy or rule helps or hurts new entrants to an industry.

When Benefits of Corporate Inversions Exceed Tax Benefits

From the CFO Journal's Morning Ledger on July 8, 2015

For U.S. firms that relocated abroad before regulators cracked down on tax inversions, the benefits have turned out to be greater than just a residence in a lower-tax jurisdiction. Companies that got out while the getting was good have since enjoyed a competitive advantage with regard to corporate takeovers, in part due to the very regulations intended to block the inversions, the WSJ’s Liz Hoffman reports. Since the Treasury rules went into effect last fall, 55 U.S. companies have been sold to or targeted by foreign buyers, many of those acquirers formed by inversions themselves.

Take the case of Horizon Pharma PLC, which completed its takeover of a small, closely held Irish drug company last fall and then redomiciled in Dublin. On Tuesday, Horizon went public with a $1.75 billion, all-stock takeover bid for Depomed Inc. Horizon CEO Timothy Walbert said that buying Depomed, would generate “significant operating and tax synergies,” or savings. Depomed paid 38% of its profits in taxes last year, according to regulatory filings. Horizon is targeting a tax rate in the low 20s over the longer term. Ireland has a corporate tax rate of 12.5%.

LIBOR Reliability and Scandal ---

From the CFO Journal's Morning Ledger on July 8, 2015

No fix for Libor: benchmark still broken, regulators say
A top U.K. regulator says efforts to overhaul the London interbank offered rate, or Libor, haven't gone nearly far enough. The U.S. Federal Reserve says Libor is no longer fit to serve as the market’s main benchmark. And Intercontinental Exchange Inc.,  which is in charge of reforming Libor, says it is struggling to get enough support from the industry to make the benchmark better.

Jensen Comment
This is an enormous problem for hedge accounting, especially when implementing FAS 138
Illustrations in Bob Jensen's Tutorials ---

MF Global ---

John Corzine ---

From the CFO Journal's Morning Ledger on July 8, 2015

Corzine, other ex-MF Global officials settle suit for $64.5 million
Jon S. Corzine and other former MF Global officials will pay $64.5 million to settle an investor lawsuit, according to a court filing. The money from Mr. Corzine and former CFO Henri J. Steenkamp will come from directors’ and officers’ insurance policies they had while working at MF Global. The Tuesday filing said the insurance money is “being rapidly and continually depleted” by the litigation. Messrs. Corzine and Steenkamp must provide proof of their reported net worth or the plaintiffs can cancel the settlement, according to the filing.

Teaching Case
From The Wall Street Journal Weekly Accounting Review on April 24, 2015

PwC to Pay $65 Million to Settle Lawsuit Over MF Global
by: Michael Rapoport
Apr 18, 2015
Click here to view the full article on

TOPICS: Auditing

SUMMARY: PricewaterhouseCoopers LLP agreed to pay $65 million to settle class-action litigation over failed brokerage MF Global Holdings Ltd., a case in which investors claimed PwC botched its audits of the firm before it collapsed into bankruptcy in 2011. The lawsuit had said MF Global used customer funds to meet the increased liquidity demands of the firm's bets on European sovereign debt. MF Global didn't have sufficient internal controls to deal with that, a deficiency that PwC ignored.

CLASSROOM APPLICATION: This is a good article to use in an auditing class to show how costly audit errors or omissions can be.

1. (Introductory) What are the facts of the lawsuit discussed in the article? Who are the plaintiffs and who is the defendant?

2. (Advanced) What did the plaintiffs allege in the lawsuit? What was PwC's involvement in MF Global Holdings' business or bankruptcy? Why would PwC have any liability exposure in this situation?

3. (Advanced) What were the terms of the settlement? Why did PwC settle the case? Was this a good decision?

4. (Advanced) What could accounting firms do to prevent or to reduce the chances of these situations occurring?

Reviewed By: Linda Christiansen, Indiana University Southeast

Ernst & Young Reaches Settlement With N.Y. Attorney General
by Michael Rapoport
Apr 16, 2015
Online Exclusive

Ernst & Young Seeks Affirmation of Lehman Accounting Decision
by Joseph Checkler
Aug 12, 2014
Online Exclusive

Ernst & Young Agrees to Pay $99 Million in Lehman Settlement
by Michael Rapoport
Oct 08, 2013
Online Exclusive

Ernst & Young Settles Lehman Suits With New Jersey, California Municipalities
by Patrick Fitzgerald
Mar 13, 2015
Online Exclusive

"PwC to Pay $65 Million to Settle Lawsuit Over MF Global," by Michael Rapoport, The Wall Street Journal, April 18, 2015 ---

PricewaterhouseCoopers LLP agreed Friday to pay $65 million to settle class-action litigation over failed brokerage MF Global Holdings Ltd., a case in which investors claimed PwC botched its audits of the firm before it collapsed into bankruptcy in 2011.

MF Global shareholders had contended that PwC’s audits gave MF Global a clean bill of health even though the accounting firm knew or should have known that the firm’s financial statements were erroneous and its internal controls weren’t effective.

PwC denied any wrongdoing. In a statement Friday, the firm said it is “pleased to resolve this matter and avoid the cost and distraction of prolonged securities litigation.” The firm “stands behind its audit work and its opinions on MF Global’s financial statements,” PwC said.

The settlement, which is subject to court approval, was reached after the two sides went through a mediation process presided over by a former federal judge, according to court documents. The proceeds will be distributed among investors in MF Global securities.

MF Global filed for bankruptcy in October 2011 after customers balked at the firm’s big, risky bets on European sovereign debt. About $1.6 billion in customer funds were found to be missing, though customers have been reimbursed. The firm has agreed to pay $200 million in civil fines. Jon S. Corzine, MF Global’s former chairman and chief executive and a former New Jersey governor, still faces civil charges from the Commodity Futures Trading Commission for failure to supervise.

The lawsuit had said MF Global used customer funds to meet the increased liquidity demands of the firm’s bets on European sovereign debt. MF Global didn’t have sufficient internal controls to deal with that, a deficiency that PwC ignored, according to the lawsuit.

Continued in article


"Who Is The PwC Partner Responsible For MF Global? Someone With A Lot of Baggage," by Francine McKenna, re:TheAuditors, June 14, 2013 --- Click Here


Bob Jensen's threads on the MF Global Scandal
Search for "MF Global" at  

PwC:  In brief: Dodd-Frank clawback rule: recovery of erroneously awarded compensation ---

Greeks Vote No to EU Bailout Terms
From the CFO Journal's Morning Ledger on July 6, 2015

In a resounding “no” to austerity, Greeks have called Europe’s bluff by refusing to endorse its latest bailout terms, the WSJ reports. Greeks overwhelmingly voted against their international creditors’ conditions for further aid, in a result that could push the country closer to bankruptcy and an exit from the euro. More than 61% of Greeks voted no in Sunday’s referendum on austerity measures and other overhauls that European and International Monetary Fund officials had demanded in recent talks.

The stability of the eurozone could now hinge on whether Greece and its creditors can find a way out of their dangerous impasse. Hard-line eurozone policy makers, led by German Finance Minister Wolfgang Schäuble, believe that expelling Greece for its recalcitrance would strengthen the eurozone and put pressure on other economically underperforming countries—including Italy and France—to reform, officials in Berlin say.

. . .

The outcome of the vote in Greece pushes the eurozone into unknown territory. And whatever the outcome, it is unlikely to happen quickly. Eurozone governments are wary of delivering a quick sweetheart deal to the victorious left-wing government of Greek Prime Minister Alexis Tsipras. Such a deal would risk creating incentives for insurgent movements elsewhere in the bloc to follow suit.

"Debt Isn’t Killing Greece. Its Leaders Are The country was poised for 3% growth before Syriza took power. More debt relief would reward loony policies," by Holger Schmieding, The Wall Street Journal, July 17, 2015 ---

Half the world seems to be obsessed with debt relief for Greece. The farther observers are from Brussels, Berlin or Frankfurt, the more they seem to believe that only a massive upfront write-off of public debt can save Athens. Some proponents of such a “haircut” have clear motives: Greece wants any relief it can get, and the International Monetary Fund wants to safeguard its own exposure by asking eurozone governments to take losses on their own debt holdings. But in many cases, the haircut enthusiasts simply do not understand the basics.

Debt relief is only a side issue. Getting economic policies right matters much more. A government that pursues radical left-wing policies will suffer the same fate as the populists’ paradise of Venezuela, whether it gets debt relief or not. A country that enacts serious supply-side reforms can enhance its capacity to sustain debt via economic growth and the fall in financing costs that comes with improving credibility.

Continued in article

No Means Yes
Greece Agrees Its Third European Bailout After Marathon Talks

The terms of the deal are the harshest Greece has ever faced from its creditors

. . .

The details of the agreement were sketchy. But even from the rough contours outlined at a press conference on Monday morning, it was clear that Greece had bowed to nearly all the demands of its creditor nations, especially Germany, and had taken on commitments that would be extremely difficult for the Greek government to fulfill without losing the trust and support of its electorate.

Continued in article

Jensen Comment
A Greek friend on the AECM listserv mentioned, I suspect facetiously,  a few weeks back that since the then Greek Finance Minister, Yanis Varoufakis, was an expert on game theory such that the "fatherland did not have a chance." His exact words were:

In the current situation, I think Greece’s problem is mainly what Bismarck said “three professors and the fatherland is lost”.

Perhaps Varoufakis resigned in advance of the latest rounds of bailout negotiations to salvage  his honor  as a game theorist in our Academy.

The real test now is whether the Greek government will enforce its new austerity terms over the coming years.

June 14, 2015 reply from Tom Selling

Hi, Apostolos:
Thanks for providing important context and perspective.  
I didn’t understand what you meant by the quote you attributed Bismarck, so I spent 5 minutes on a google search.  Permit me a technical addendum from this Wikipedia article about the composition of the German parliament in the 19th century: 
The Frankfurt Assembly (German: Frankfurter Nationalversammlung, literally Frankfurt National Assembly) was the first freely elected parliament for all of Germany,[1] elected on 1 May 1848 
Because of this composition [underrepresentation of the entrepreneurial class]  the National Assembly was later often dismissively dubbed the Professorenparlament ("Professors' parliament") and ridiculed with verses such as „Dreimal 100 Advokaten – Vaterland, du bist verraten; dreimal 100 Professoren – Vaterland, du bist verloren!“[5] ("Three times 100 lawyers – Fatherland, you are betrayed; three times 100 professors – Fatherland, you are doomed”.)
I think that you are saying that the Germans are adopting a posture that, in their eyes, may be theoretically sound, but will nonetheless fail.  Am I correct?  


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

The four largest U.S. airlines—American Airlines Group Inc., United Continental Holdings Inc., Delta Air Lines Inc. and Southwest Airlines Co.—have confirmed that they are part of a Justice Department Probe into whether airlines colluded on expansion plans, the WSJ reports. Consumer advocates and politicians contend that the industry is trying to extend its recent run of prosperity by controlling capacity to keep airfares high.

While it wasn’t clear what triggered the probe, airline executives have repeatedly said in recent months that they would limit growth to protect profit margins. Those statements were in response to broad declines in airline stocks, sparked by investor fears that cheap fuel would prompt carriers to oversupply the market. While some carriers have scaled back their growth forecasts, the industry overall is still expanding the seats it offers at a healthy pace.

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

The debt crisis in Greece approached a fateful climax as its lenders were ordered to stay closed for six days starting Monday and its central bank moved to impose capital controls to prevent money from flooding out of the country, the WSJ reports. The moves put Greece closer than it ever has been to an exit from the euro and pushes the common currency itself into uncharted waters ---

The decision came after the European Central Bank—meeting in an emergency session Sunday—opted not to expand a lifeline of emergency funds that has been sustaining Greek banks while nervous depositors pulled their money out. In response, European stocks slumped Monday and the euro fell. Greece’s stock market will be closed for as long as banks are not open to the public, the country’s Capital Markets Commission said. On Athens’s rainy streets late Sunday, many ATMs already had been emptied.

Jensen Comment
The ball now seems to be in the court of the Greek electorate that purportedly is badly divided in terms of whether to accept an austerity deal from the EU or to enter into uncharted chaos of withdrawing from the Eurozone. There are no winners for the short-term future, and there's probably not a lot to be gained from attributing blame as to how Greece  got to this cliff edge.

Not enough voters in the USA are concerned that over $100 trillion in unfunded entitlements  (read that Medicare, Medicaid, and possibly free college) and uncontrollable fraud may lead us to a similar cliff. It was sad last night on CBS Sixty Minutes to learn from IRS officials that it may be impossible to stop the hemorrhage of tens of billions of dollars from ID theft phony tax returns. That fraud may alone may soon grow to hundreds of billions of dollars, much of which is going to Russia, China, etc. See the Tax Refund Scam at

Another crisis in Greece is that Greece, along with Italy, is burdened with tens of thousands of undocumented immigrants from African shores. The EU has a new policy for relocating many of these arrivals to other parts of Europe, but the new policy has no mechanism of enforcement unless other European nations put out the welcome mat --- dream on.  Will the USA put out the welcome mat for undocumented immigrants in Italy and Greece? Many of them are probably already close to the Rio Grande, but thousands are still begging for help in Greece and Italy. The world seems to be at a social and economic brink at a time when global leadership is at an all-time low amidst old tribal and religious strife all over the world. The answer in Russia and North Korea and places unknown is to build a bigger WMD arsenal. Remember the Kingston Trio lyric:  "Someone will set the spark off and we will all be blown away." ---

The Merry Minuet (slightly altered)

They're rioting in Africa.
The Russians build humungous tanks and kill more Ukrains. There's tornados in the Midwest and Texas California needs rains.
The whole world is festering with unhappy souls. Kenyans hate Somolians. Nigerians hate Bokos.
Americans hate ISIS. Greeks hate the Deutsch. And I don't like anybody very moich!
But we can be tranquil and thankful and proud for man's been endowed with a mushroom shaped cloud.
And we know for certain that some lovely day
someone will set the spark off and we will all be blown away.
They're raining rockets on Israel. We need nukes in  Iran. What nature doesn't do to us will be done by our fellow man

"SEC considers updating audit committee disclosure requirements," by Ken Tysiac, Journal of Accountancy, July 1, 2015 --- 

July 2, 2015 reply from Dennis Beresford

While the SEC Release is fairly long (55 pages) and lists 74 separate questions on which it seeks comment, its scope is actually pretty limited. As noted in the Release it is “focused on the audit committee and auditor relationship.” In other words, of the many different responsibilities of audit committees (see some of their published charters for examples), the SEC is focusing on oversight of the independent auditor. The Release goes on to say that “commenters may also provide views on other aspects of audit committee disclosures, such as those related to roles and responsibilities, audit committee qualifications, oversight of financial reporting, or oversight of internal control over financial reporting. However, of the 74 questions on which comments are requested, only the last two are directed to these “other aspects.”

As also noted in the Release, the Sarbanes-Oxley Act defines an audit committee’s responsibilities as, “overseeing the accounting and financial reporting processes of the issuer and audits of the financial statements of the issuer.” While I am very supportive of improving audit committee reporting, it’s disappointing to me that the SEC has chosen to overlook the first part of that responsibility - oversight of the issuer’s accounting and financial reporting processes – in this Release. While independent audits can add value to the financial reporting process, if a company’s personnel and processes aren’t doing things right in the first place it’s a big problem. In my experience, the audit committee needs to and does spend considerably more time keeping tabs on company financial management (including internal audit, IT, risk management) than on overseeing the external audit. We certainly did the appropriate things with respect to the latter but the emphasis was always on the former.


"Instead of Converging Two Sacks of Mush, Let’s Reimagine What Accounting Could Be," by Tom Selling, The Accounting Onion, July 6, 2015 --- Click Here

Here is a summary of Chief Accountant James Schnurr’s recent remarks regarding IFRS:

As ludicrous as that sounds already, two further observations are in order.  First, we know that many of the comments on the record (written and oral) prior to Mr. Schnurr’s arrival began with some sort of hosanna in support of a single set of globally accepted accounting standards.  Even the strongest critics of the SEC’s 2008 convergence Roadmap proposal did it to avoid being sorted into the “crank” comment letter pile.    But, almost always, the hosanna had a dangling qualifier: something like the U.S. must not lose its sovereignty over financial reporting, or the U.S. must not compromise quality for the sake of convergence, or the costs of getting there are far greater than the benefits, yada yada.

My second observation is that Mr. Schnurr now resurrects a mere platitude as the basis for continuing convergence efforts without providing a single shred of supporting evidence.  His immediate predecessors were in spin mode for years against the decisively negative feedback to the Roadmap proposal, but they didn’t have the luxury of opacity.  The law required the SEC to solicit comments, which became part of the public record.  Judgment day finally arrived when the SEC staff had to finally issue its report conceding that convergence was a practical impossibility.  The Chief Accountant announced his resignation, effectively immediately, the day before the report was issued. About a year later he was appointed to the FASB.

Clearly, SEC Chairperson Mary Jo White has been stalling on the IFRS question for as long as she could get away with.  She is not interested in any more public discourse. Mr. Schnurr is doing nothing more or less than carrying her water as best as he knows how — with emphasis on opacity.

But, although, it may not matter too much, I have been heartened by one voice of reason near the top of the SEC’s leadership.

What Can We Do That Could Actually Make a Difference? 

SEC Commissioner Kara Stein provided her own assessment of the prospects for a single set of high quality accounting standards.  Even though her remarks were delivered months earlier, they read like a direct rebuttal of Mr. Schnurr:

Coninued in article

Jensen Comment
Many power centers are in favor on one set of global standards, including the multinational CPA firms, the AICPA, probably the SEC, and many business firms. Academics are split on the issue, but my reading is that most favor one set of global standards.

The opposition to USA adoption of IFRS comes, in my opinion, from the major clients of CPA firms who will have to foot the bill for the convergence, training, rewriting of software, etc. Major business firms are opposed on practical (e.g., cost) and theoretical grounds such as shifting the rule-making power from the FASB and SEC to an international body controlled by many nations. It's a little like shifting the USA lawmaking from the U.S. Congress to the United Nations where all sorts of enemies of the USA will do everything they can to harm the USA. I'm not saying that the IASB is out to hurt the USA (at least not yet), but giving the IASB the power to set domestic accounting standards is a worry in my opinion. Plus there are still some professionals in the USA that think principles-based IFRS standards are weaker standards and will subject USA businesses to more litigation costs in USA courts. Currently it's quite common for business firms to take comfort in FASB bright lines that do not exist in IFRS.

Important academics like Yale's Shyam Sunder have written a lot about providing the IASB monopoly powers in setting global accounting standards ---

Tom's article quoted above concludes as follows:

Two very different visions for the role of IFRS in U.S. capital markets have recently emerged from the SEC. One of them makes a clear-eyed assessment of the evidence, and it concludes that fundamental change is called for.  This could be the seeds for a constructive dialogue.

The other is a sack of mush.

Jensen Comment
For as long as I've known Tom he's been opposed to giving the IASB  a monopoly on setting global accounting standards, including USA accounting standards.

I'm opposed to giving the IASB a monopoly over global standards. But resistance is probably futile for the long run ---

From the CFO Journal's Morning Ledger on July 1, 2015

Accounting regulator proposes plan for naming audit partner
The Public Company Accounting Oversight Board formally proposed an idea that could let U.S. investors know precisely who is in charge of a company’s outside audit. Under the new rule, audit firms would disclose the names of their individual “engagement partners” in charge of each company’s audit, but in a less-prominent place than originally contemplated.

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

Fannie, Freddie CEOs to get $3.4 million raises
The chief executives of government-controlled mortgage-finance firms Fannie Mae and Freddie Mac will get multimillion-dollar paydays thanks to a massive raise approved by the companies’ regulator.

Bob Jensen's threads on outrageous executive compensation ---

From the CFO Journal's Morning Ledger on July 1, 2015

Apple loses federal appeal in e-books case
A federal appeals court upheld a 2013 decision finding Apple Inc. liable for conspiring with publishers to raise the price of e-books. The iPhone maker is expected to pay $450 million, most of it to e-book consumers, as part of a November agreement with private plaintiffs and 33 states that joined the Justice Department’s 2012 lawsuit accusing Apple of violating civil antitrust law.

IMF:  Greece's Debt Sustainability ---

From the CFO Journal's Morning Ledger on July 1, 2015

For Greek currency, it’s about options
Greece is poised between remaining a member of the eurozone or leaving it. In fact, there are five possible future currency arrangements for Greece.

Greece stays in the eurozone. z
This is the option likely to cause the smallest short-term disruption to the Greek economy. The Greek central bank would retain access to liquidity from the European Central Bank, and Greek banks would stay on life support. This looks increasingly likely to be accompanied by some kind of further negotiated debt relief. To get it, Greece would almost certainly have to agree to more conditions of the sort successive Greek governments have found it hard to accept.

Greece keeps the euro, but sits outside the eurozone.
Jacob Funk Kierkegaard, of the Peterson Institute for International Economics in Washington, calls this the “Montenegro option” and argues this is the most likely outcome for Greece. This wouldn’t be “a new drachma, but Montenegro—i.e. Greece becomes just another relatively poor unilaterally euroized non-EU Balkan economy,” he wrote.

In some ways, this would be the worst of all worlds because Greece would lose access to the ECB. Countries using a foreign currency as legal tender have no access to a lender of last resort, which means that every bank liquidity crisis becomes a solvency crisis. They therefore tend to have stunted domestic financial sectors, which almost every academic study shows is bad for growth, or have a banking system owned by foreigners, which exports the lender-of-last-resort role to other countries’ central banks. (Mexico didn’t adopt the dollar after the 1994-95 financial crisis, but in order to avoid an undue shrinkage of its banking sector, it allowed most of its banks to be bought by foreigners.)

A currency board.
In this case, Greece would create a new currency but lock it to the euro, as Estonia did with the German mark in 1992 after it gained independence from the Soviet Union. The amount of new drachmas in circulation would be limited by the size of Greece’s international reserves: about $5.8 billion at the last count. Advertisement

Advocates argue that this would impose discipline on the Greeks; poor economic policies lead to an outflow of reserves and, therefore, of the domestic monetary base, which pushes up drachma interest rates, while good policies have the reverse effect. The drawback is that again the central bank is limited in its lender-of-last-resort powers because it can’t create money freely. It also imposes discipline that, for now, may make it look unappetizing to Greece’s current rulers. It isn’t much talked about, has a few enthusiastic and long-standing cheerleaders, but is a theoretical possibility.

A dual system.
Here the drachma and the euro would circulate side by side. This has many historical precedents going back centuries. In practice, a dual system is likely to emerge when the Greek government runs out of euros and has to pay its domestic bills in government IOUs. The IOUs could at some future date be redeemed in euros or could be eventually redeemed in drachmas, but they would initially be euro-denominated obligations of the government that would have a lesser value in the public mind than euro notes or coins.

This state of affairs could continue for a long time, but there is an economic tendency called Gresham’s Law: ”Bad money chases out good.” Over time, euros would disappear from circulation because people would hoard them as a store of value, and people would spend the government IOUs. De facto, the drachma, whether or not it would be so called, would become the main means of exchange.

The new drachma.
The move to the new drachma may not come with a bang, but gradually. But an eventual formal switch of the currency would give Greece control over its own monetary policy. However, a new currency would likely create enormous short-term disruption, not least because a devaluation would follow and the banks would in effect be insolvent.


From the CFO Journal's Morning Ledger on June 30, 2015

Next Up for Banks: Implementing New Regulations
Banks are shifting their focus from scrambling to comprehend a wave of new regulations triggered by Dodd-Frank to the even bigger task of implementation and compliance, according to a Deloitte Center for Regulatory Strategies’ report. Learn some possible steps that banking institutions can take as part of their continual efforts to meet heightened regulatory expectations, as well as the importance of developing a strong risk culture
. Continue »

Read more Deloitte Insights »

But big employers are looking ahead to 2018, when a hefty excise tax kicks in on generous employee health-care plans. The tax is spurring them to consider moving workers to less costly plans, such as those with high deductibles. The tax, meant to help fund insurance for the previously uninsured under the Affordable Care Act, is 40% a year on the amount by which employer-sponsored plans exceed $10,200 for individual coverage and $27,500 for family coverage.

"The Accounting Faculty Shortage: Causes and Contemporary Solutions," Douglas M. Boyle, Brian W. Carpenter, and Dana R. Hermanson, Accounting Horizons, Volume 29, Issue 2 (June 2015), pp. 245-264 ---
Not a free download

The shortage of doctorally qualified accounting faculty has been a concern for the accounting profession for many years (Plumlee, Kachelmeier, Madeo, Pratt, and Krull 2006; Advisory Committee on the Auditing Profession [ACAP] 2008; Pathways Commission 2012; Plumlee and Reckers 2014). One potential strategy for mitigating the shortage is the expansion of more flexible doctoral programs that would allow interested practitioners the opportunity to pursue doctorates without completely exiting the labor market (Trapnell, Mero, Williams, and Krull 2009; Pathways Commission 2012; Association to Advance Collegiate Schools of Business International [AACSB] 2013). The success of this solution will depend largely on the acceptance of the resulting candidates by the parties that would hire them. This study examines factors associated with the accounting faculty shortage in general, and more specifically with the perceived value of attracting practitioners into more flexible doctoral programs as a means of potentially reducing the shortage. Based on a survey of over 800 accounting faculty and administrators, the results suggest that the expected future shortage of doctorates will be more pronounced in smaller, public, and non-doctoral institutions. Overall, faculty and administrators value attracting practitioners into academia, but only moderately support the creation of more flexible doctoral programs for such individuals. The perceived value of attracting practitioners into academia and support for the creation of more flexible doctoral programs are stronger in smaller, non-doctoral institutions
. Overall, the results suggest that non-traditional doctoral programs may initially provide graduates primarily for smaller, non-doctoral institutions, where the future shortage of doctorates is expected to be most acute.

. . .

The survey results indicate that, overall, the participants perceive a relatively high degree of value in attracting practitioners into academia. Moderate support was expressed for the creation of AACSB-accredited doctoral programs that would allow these practitioners to pursue their degrees on a part-time basis. However, participants from doctoral-granting institutions and larger institutions placed less value on bringing practitioners into academia and were less supportive of flexible programs. These findings imply that acceptance of graduates from flexible programs is dependent upon the nature of the hiring institution, with smaller, non-doctoral-granting institutions likely being most accepting of such graduates. This is possibly in part because, as noted above, smaller, non-doctoral institutions reflect the segment of the market facing a more serious future faculty shortage. This segment of the market also is likely to be open to a broader range of faculty research contributions beyond top-tier basic research, which is the primary focus of traditional Ph.D. programs and the focus of tenure requirements at doctoral-granting institutions.

We also find that tenure-track faculty and administrators have less positive views of non-traditional doctoral education than lecturers. Thus, academic support for non-traditional doctoral education is strongest in the group that has the least power in the academic hierarchy, reflecting a potentially important barrier to change in doctoral education. Despite this challenge, non-traditional doctoral education appears to be gaining some momentum in the academic marketplace, as evidenced by the number of new programs being established.

The next section provides background information. The following sections address the methodology, results, and discussion and conclusion.

. . .

Specific support for such an expansion of non-traditional approaches to doctoral education was recently expressed by the Pathways Commission (2012), which also pointed to the important role of practitioners in accounting education. Several of the Commission's recommendations and objectives highlighted the value of integrating accounting practitioners into the learning process. Specifically, objective 1.1 calls for academia to “integrate professionally oriented faculty more fully into significant aspects of accounting education, programs, and research” (Pathways Commission 2012, 11). In addition, the Commission noted that the traditional full-time model for accounting doctoral education is currently the “only one real path” to a terminal degree. To address this issue, the Commission called for accounting educators to “develop mechanisms to meet future demand for faculty by unlocking doctoral education via flexible pedagogies in existing programs and by exploring alternative pathways to terminal degrees that align with institutional missions and accounting research goals” (Pathways Commission 2012, 31).

. . .

In terms of variations in perceptions across groups, two main patterns appear most notable. First, participants from larger institutions and those with doctoral programs are less supportive of alternative paths to a doctorate. However, this lower level of support from larger institutions and those with doctoral programs may not greatly impede the overall acceptance of alternative models, since the aggregate negative impact of the faculty shortage appears to most heavily reside with smaller institutions (Plumlee and Reckers 2014), consistent with our survey results. Thus, the potential solution of attracting practitioners into newly created part-time AACSB-accredited doctoral programs is more strongly supported by the institutions that are most negatively impacted by the shortage. Overall, while flexible doctoral education does not have strong, broad-based support, it does appear that there is a match between the institutions most exposed to the faculty shortage and those most supportive of non-traditional doctoral education—namely, smaller, non-doctoral institutions. Thus, it is reasonable to expect non-traditional programs, at least initially, to primarily serve the faculty needs of smaller, non-doctoral institutions.

Second, lecturers often have perceptions that are quite different from those of the other academic ranks. In particular, lecturers are much more supportive of alternative paths to a doctorate. This finding highlights an important potential barrier to change, specifically that the strongest proponents of flexibility in doctoral education are those with the least power and influence in the academic hierarchy.

These results also suggest that further research should be performed to better understand how the factors of faculty retirement and accreditation requirements might be addressed to further mitigate the growing shortage, as well as examining potential solutions for the opportunity costs and significant time commitments for even the more traditional pools of potential doctoral candidates. The highest-ranking solutions to the faculty shortage included increasing the compensation for doctorally qualified faculty, subsidizing the educational cost incurred by practitioners who transition to academia, and reducing pressure on doctorally qualified faculty to publish research. While compensation for newly hired doctorally qualified accounting faculty has been on the rise, further research is needed to examine and ensure the competitiveness of faculty compensation at all ranks compared to other options within the broader accounting profession. The ADS Program has provided sustainable funding for early stage practitioners interested in pursuing doctoral study in traditional full-time programs and focusing on audit or tax. The results of this effort should be further studied and potentially replicated for practitioners with higher levels of experience or in other areas of accounting that are facing shortages of faculty. Additionally, the pressure expressed by the participants to publish research warrants further investigation, as the study's results indicate that such pressure was perceived to be a significant contributing factor to the current shortage. Investigating potential implementation issues related to all of these possible solutions also provides a robust area for future research.

Other avenues for future research exist as well. The AACSB recently implemented new faculty-qualification criteria, moving from two categories (academically or professionally qualified) to four categories of faculty. Future research can examine any effects of this change on the faculty shortage or the remedies to the shortage. Also, research may examine any effects within the college of business if accounting departments move to hiring a larger number of non-traditional doctoral faculty, while other business disciplines do not.

The findings and implications of the study should be viewed in light of several limitations. First, while the sample size is nearly 900 participants, it represents 12.4 percent of the population and as such may not reflect the views of the entire population. A comparison of the characteristics of the sample to the population indicates that the sample appears to be similar to the population on several dimensions. In addition, we note that the response rate appears reasonable in light of prior research (e.g., Bailey et al. 2008). Second, those who elected to participate and complete the survey may represent individuals who are more sensitive to the accounting faculty shortage, and thus the results may reflect a heightened perception of the shortage and different views of potential solutions than may actually exist in the population. Third, participants were asked to indicate the likely quality of part-time doctoral programs in accounting, but these programs currently exist in a limited number. Thus, it is likely that the majority of the participants have not had any direct exposure to such programs and may be without a meaningful basis to make such an assessment of quality.

The accounting faculty shortage has been of concern for at least two decades. We hope that the insights provided in this study will be useful to practitioners, faculty, administrators, and other parties in better understanding and mitigating the shortage. The results of this study suggest that there is perceived value in attracting practitioners into academia and that there is a moderate support for the flexible programs that may be required to attract practitioners in numbers great enough to notably impact the current doctorate shortage, primarily at smaller, non-doctoral institutions.

Jensen Comment
I would be more supportive of traditional accounting doctoral programs if they were doing a better job. In truth they are generating accounting Ph.D.s who do not understand the limitations of their models.

First of all accountics scientists have almost zero interest in validating their findings ---

Second they don't seem to understand the limitations of their models
Common Accountics Science and Econometric Science Statistical Mistakes -

Third they don't seem to be aware of the limitations of their craft or the power of non-traditional (read that non-mathematical) methodologies of research
"A Scrapbook on What's Wrong with the Past, Present and Future of Accountics Science"
But at the moment all power for generating accounting Ph.D. graduates resides with accountics scientists

Big Data ---
It's a very complicated concept

From Accounting Horizons, Volume 29, Issue 2 (June 2015), pp. 377-476 ---


Commentaries on Big Data's Importance for Accounting and Auditing
Paul A. Griffin and Arnold M. Wright
Citation | Full Text | PDF (46 KB) 
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Big Data in Accounting: An Overview
Miklos A. Vasarhelyi, Alexander Kogan and Brad M. Tuttle
Abstract | Full Text | PDF (469 KB) 
Full Access
How Big Data Will Change Accounting
J. Donald Warren Jr, Kevin C. Moffitt and Paul Byrnes
Abstract | Full Text | PDF (116 KB) 
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Consequences of Big Data and Formalization on Accounting and Auditing Standards
John Peter Krahel and William R. Titera
Abstract | Full Text | PDF (180 KB) 
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Big Data Analytics in Financial Statement Audits
Min Cao, Roman Chychyla and Trevor Stewart
Abstract | Full Text | PDF (87 KB) 
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Big Data as Complementary Audit Evidence
Kyunghee Yoon, Lucas Hoogduin and Li Zhang
Abstract | Full Text | PDF (104 KB) 
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Drivers of the Use and Facilitators and Obstacles of the Evolution of Big Data by the Audit Profession
Michael G. Alles
Abstract | Full Text | PDF (127 KB) 
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Behavioral Implications of Big Data's Impact on Audit Judgment and Decision Making and Future Research Directions
Helen Brown-Liburd, Hussein Issa and Danielle Lombardi
Abstract | Full Text | PDF (180 KB) 
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July 6, 2015 reply from Jagdish Gangolly

I have not yet read these papers on big data, but will sometime during the next month or so. Having had my foot in both Accounting and Computing camps, sometimes I must wonder if, in Accounting, it is just one more buzzword to be mastered. If it is so, I would most vigorously oppose introducing it as a course at any level in Accounting.

Big data is a term used in computing for an approach to processing data that is too Voluminous (bytes), of too high a Velocity (transaction density), too Varied (data formats), too varied (constantly changing focus), and high complexity (in terms of number of sources, analytical models to be supported,...).

In the real world, Big data evolved because the state of the art technologies (RDBMS with its query language) and their associated data structures were not equipped to support these requirements of high volume, dense, varied, and complex situations. In a sense it was a regression to the older technologies with no underlying basic model (RDBMS and its query language have a very sound mathematical basis with the former in Logic/mathematics, and the latter in its property of relational completeness of query languages).

In my humble opinion, accounting data is not voluminous (I do not know of any accounting database larger than a petabye or two (does any one on AECM know of such a database?), transaction densities in most accounting systems are not very high (I do not know of any accounting system where the transaction densities exceed a few million a second). accounting data, in terms of data formats are rather quite simple (numbers, letters, and a few fairly simple objects), And most analytical modeling in accounting, there there is not much of it, is not complex as in other domains (such as social networks, bioinformatics, and such where quite complex machine learning models are common).

I stand to be convinced that Accounting needs Big Data, but till now I am very sceptical and unconvinced. That does not mean we should stand still or ignore what is happening with Big data. Big data is probably gaining ground in areas peripheral to Accounting, such as in CRM, supply chains, and similar areas where it makes sense. And so we need to take notice. But I am not sure it is time to introduce it in the curriculum when VERY few of us accounting academics have a good grasp of some newer technologies such as Big Table, no-SQL, Hadoop,.... or even longstanding machine learning techniques such as pattern recognition, computational learning, dimensionality reduction, etc.

Big Data is the new fad in the corporate world, but its foundations is just being developed as "Data Science". If we are to introduce Big Data in our curriculum a decade or two from now, we must try to introduce basic elements of Data Science first today. Engineers did not start studying the emerging field suddenly, they started with basic sciences such as Physics and Chemistry literally well over a century before engineering was introduced into the undergraduate curriculum. The first undergraduate engineering curriculum in the English speaking world was introduced at the University Manchester only around 1910 or so, and one of the first class graduate around 1914 (my grandfather, I am proud toi say was in that class). But basic sciences were introduced over a century earlier.

Until we realise the above all we will be doing is to use buzz words of Big Data to impress each other and appear erudite and profoundly intellectual. Anf to teach our students how to use those buzzwords to impress others.

And one last comment. Much of the work in Big Data is based on open source/public domain technologies; domains which most of us accounting academics have not just ignored but shunned in the past (how many of us have used no-sql (such as MongoDB), Big Table, Hadoop,...?). Until we have, Big Data will just be a buzzword for us.

Sorry for being pessimistic, but I think that is the way things are now. Or at least as I see them.



Jagdish S. Gangolly Department of Informatics College Engineering & Applied Sciences State University of New York at Albany 1400 Washington Ave Albany, NY 12222 Phone: 518-956-8251, Fax: 518-956-8247

July 6, 2015 reply for Patricia Walters

Denny, Jagdish, and Others:

In reading the responses to this thread, I felt it might not be clear why Accounting Horizons was addressing this issue.

In September 2014, the AACSB published a white paper on Accounting Accreditation Standard A7: Information technology skills and knowledge for accounting graduations: An Interpretation.

Colleges, like TCU, with accounting programs that are separately accredited need to abide by this standard. Standard A7 states:

"Consistent with mission, expected outcomes, and supporting strategies, accounting degree programs include learning experiences that develop skills and knowledge related to the integration of information technology in accounting and business. Included in these learning experiences is the development of skills and knowledge related to data creation, data sharing, data analytics, data mining, data reporting, and storage within and across organizations (Information Technology Skills and Knowledge for Accounting Graduates)."

The Basis for Judgment states that accounting degree programs should "integrate current and emerging accounting and business information technologies throughout the academic curricula" and that graduates of such programs should "demonstrate the ability to effectively utilize technology, understand its capabilities, impacts, risks, and opportunities. Finally, its states that "there will be a transitional period of 3 years, from 2013-2016, related to this standards."

Here's an answer to one of the document's "anticipated questions."

"Standard A7 may be interpreted to be primarily focused on information technology and to a lesser extent to the areas of data/business analytics. Is this the correct interpretation?

Since the approval of the revised standards in 2013, more clarity is emerging that reinforces the importance of Standard A7 and, moving forward, additional perspectives and guidance will emerge on the learning expectations across these fields. In all cases, the response of an accounting academic unit to Standard A7 must be based on its mission and strategic management plan. The continuing evolution of big data, data/business analytics, cloud computing, etc. strongly supports the dual focus of Standard A7 relating to information technology issues and developments in this dynamic environment but also to the analytical skills and knowledge related to data management and analysis needed by accounting graduates."

If other separately accredited accounting programs are not implementing such courses, how are they planning to meet this standard?


"The enemy within Rogue employees can wreak more damage on a company than competitors," The Economist, July 25, 2015 ---

. . .

The most familiar type of enemy within is the fraudster. The Economist Intelligence Unit, a sister organisation of The Economist, conducts a regular poll of senior executives on the subject of fraud committed by insiders. In 2013 the poll discovered that about 70% of companies had suffered from at least one instance of fraud, up from 61% in the previous survey. Fraud is often petty: a survey of British employees for YouGov in 2010 found that a quarter of staff eligible for expenses admitted to inflating claims. But fraud can also be more audacious and more harmful: think of former employees setting up rivals using stolen technology and purloined client lists.

Even more dangerous than the fraudster is the vandal. Thieves at least have a rational motive. Vandals are driven by a desire for revenge that can know no limits. David Robertson of K2 Intelligence, a company that specialises in corporate investigation, recounts the story of a British manufacturing company that was undergoing restructuring. A member of the information-technology department discovered that his name was on the list of people whose services would no longer be required. He built a “backdoor” into the company’s IT system from his home computer and set about wreaking damage—deleting files, publishing the chief executive’s e-mails and distributing pornographic pictures.

Some enemies-within start out as star employees. A striking number of the worst corporate scandals in recent years have been the work of high-flyers who bend and then break the rules in order to please their bosses. Barings, a collapsed British investment bank, showered Nick Leeson with rewards before it discovered that he had produced his outsized results because he took outsized (and unauthorised) risks.

Other enemies-within are the very opposite of high-flyers. The HSBC execution squad are only the latest example of low-level employees who have either wittingly or unwittingly used the power of the internet to blacken their employer’s reputation. In April 2009 two employees of Domino’s, a fast-food chain, posted videos of themselves “abusing takeaway food”. And in July 2012 a Burger King employee posted photos of himself online which showed him standing in a tub of lettuce in filthy shoes along with the caption “This is the lettuce you eat at Burger King”.

Continued in article

Jensen Comment
If employees do not get greedy and limit themselves to relatively small damages to the company they are almost impossible to detect --- such as those that pad expense accounts, use business vehicles for personal use, take home office supplies, etc. The greater the greed the greater the risk.

Probably the most effective way to detect employee misdeeds is to reward or at least encourage whistle blowing. This of course is no panacea "if everybody is doing it." For example, if a lot of professors are attending phony research conferences in Europe in order to partly fund family vacations it becomes less likely that they will rat on each other.

Almost everything boils down to having internal controls. Universities are notorious for lack of controls on most everything concerning faculty behavior and performance. Professors do not check up on each other to see of data is faked. Administrators generally do not inspect submitted receipts with a magnifying glass. We pride ourselves on trust even though, as accounting professors, we preach otherwise when it comes to internal controls that we teach to our students.

Bob Jensen's Fraud Updates ---

Bob Jensen's threads on managerial accounting and controls ---

Peter Schiff ---

Life of a Financial Analyst Often in the Media:  Win a Few Times, Lose a Lot of Times ---

It’s worth noting that Schiff did accurately predict in 2006 and again in 2007 that the U.S. economy would not be strong, that the housing market would crash and that we would have high unemployment.” However, an article from U.S. News & World Report analyzing Schiff’s forecasts about the crisis also found 12 ways Schiff was wrong in 2008:

By nearly any measure, sunny South Florida is tops in fraud ---

Jensen Comment
Part of the problem is that so many Cuban immigrants fleeing Castro were highly educated in professions like medicine and law. They prospered in the USA by inventing ways to defraud Medicare, Medicaid, and the courts with piñatas of punitive damages for phony liability claims.

Bob Jensen's Fraud Updates ---

From the CPA Newsletter on June 6, 2015

Retirement planning tactics that could be eliminated
The U.S. government may take action to eliminate three "loopholes" related to retirement savings. These include back-door Roth IRA conversions, certain "aggressive" tactics for claiming Social Security benefits and stretch IRAs.
Money magazine/Reuters (6/30)


From the CPA Newsletter on June 29, 2015

Puerto Rico can't pay its debt, governor says  
Puerto Rican Gov. Alejandro Garcia Padilla said the commonwealth won't be able to pay approximately $72 billion of debt. Government officials were working with creditors of the electric authority to avert a default on a $416 million payment due Wednesday. The New York Times (tiered subscription model) (6/28

Jensen Comment
Signs of more defaults to come. Chicago? Illinois? California? Major problems seem to be debt piled up for overly generous, probably fraudulent,  public pensions? In the long-run there are more serious problems such as the drought in California and other parts of the west like Nevada.


Forwarded by Sharon Garvin on June 30, 2015

Of possible interest to AECM members, here is a YouTube video some of FASB's recent meeting:
Sharon Garvin

PWC:  Financial and nonfinancial hedges: Significant changes to be exposed ---

Jensen Comment
I especially enjoyed the part about hedging effectiveness of non-financial items which must be really confusing to students.

"Police: Accountant stole $423K from client," by Eric Veronikis, PennLive, June 29, 2015 ---

Police arrested a Red Lion accountant Monday for allegedly pilfering $423,000 from a client, police said.

Shirley Cottrell, owner of Complete Business Accounting, stole the money during the past 12 years from a company she handled accounting duties for, according to police.

Police encouraged anyone who has hired Complete Business Accounting to audit their accounts thoroughly and to contact their local police department should they find any discrepancies.

Continued in article

Bob Jensen's  Fraud Updates ---

"Some Ernst & Young Audits Had Deficiencies, PCAOB Says, by Michael Rapoport, The Wall Street Journal, June 30, 2015 ---

The government’s audit regulator found deficiencies in 20 audits conducted by Ernst & Young LLP in the latest annual inspection of the Big Four accounting firm.

The deficient audits found by the Public Company Accounting Oversight Board represent 36% of the 56 reviewed by the board in its 2014 inspection report of Ernst & Young, issued Tuesday. That is an improvement from last year’s report, in which the board found 28 deficient audits at E&Y out of 57 audits or partial audits surveyed, a deficiency rate of 49%.

A deficiency, as defined by the PCAOB, means the audit firm hadn’t obtained enough evidence to support its approvals of a company’s financial statements and internal controls. It doesn’t mean the financial statements are inaccurate or that the problems found haven’t since been addressed.

In a statement, E&Y said it is “fully committed to delivering high-quality audits.” The firm said it believes its audit quality and that of the profession as a whole are “improving and we are committed to continuing this process.”

Among the types of deficiencies the inspectors found in E&Y’s audits were insufficient testing of controls related to revenue recognition, problems with testing of controls related to oil and gas properties and insurance reserves, and a failure to identify that a company had miscalculated its loss on conversion of its convertible notes.

In two of the audits surveyed, E&Y revised its opinion of the company’s internal controls after the inspection to issue a negative opinion, the PCAOB said.

The PCAOB didn’t identify the companies involved in each deficient audit, in accordance with its usual practice.

Continued in article

Bob Jensen's threads on Ernst & Young ---

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


Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 26,2015

Beware the Stock-Buyback Craze
by: John Waggoner
Jun 20, 2015
Click here to view the full article on

TOPICS: Stock Buybacks

SUMMARY: Companies are spending vast amounts of perfectly good capital to buy back their own shares. Whether or not you think buybacks are a good way for companies to spend their cash, the strategy of buying companies that have reduced their shares through buybacks has worked well-except when buyback fever bursts. In theory, buying back your own stock reduces the number of shares, thereby making the remaining shares more valuable. But it isn't a precise formula: Stocks can go down despite a buyback program. And companies can use repurchased shares to pay executives and employees who get shares or options as part of their compensation, so the share count remains more or less the same despite the buyback program. Even when buybacks do reduce a company's float and drive up the stock price, it is hard to argue that buying back shares is a particularly wise use of a company's capital. After all, management could use the money for more practical things that will expand the business: research and development, for example, or new products.

CLASSROOM APPLICATION: This is a good article about the current trends in stock buybacks, as well as its impact on the company, its growth and strategy, and the financial statements.

1. (Introductory) What is a stock buyback? Why do some companies choose to participate in stock buybacks?

2. (Advanced) How do stock buybacks affect a company's financial statements? How is the transaction entered into the company's financial records? What accounts are affected?

3. (Advanced) How is a business affected by the stock buyback? How does it affect the company's stock price? How does it affect the company's strategies and options for growth?

4. (Advanced) Why are stock buybacks so common now? Are certain economic conditions encouraging this behavior at this particular time?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Beware the Stock-Buyback Craze," by John Waggone, The Wall Street Journal, June 20, 2015 ---

Investing in companies that are buying back shares is a time-tested strategy. But the rapid pace of buybacks is one reason for caution.

Sometimes people do silly things with money, particularly if everyone else is doing it. There simply is no other way to explain the box-office success of “Avengers: Age of Ultron.”

Companies aren’t any different. Currently, they are spending vast amounts of perfectly good capital to buy back their own shares. And now you can buy mutual funds that invest in the biggest players in the buyback craze.

Whether or not you think buybacks are a good way for companies to spend their cash, the strategy of buying companies that have reduced their shares through buybacks has worked well—except when buyback fever bursts.

Chief executives can be just as faddish as anyone else, and currently, corporate buybacks are what all the cool kids are doing. Companies in the S&P 500 stock index bought back about $148 billion of their own shares in the first quarter of 2015, says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. That’s up from $132.6 billion in the fourth quarter of 2014, although still shy of the $172 billion record set in the third quarter of 2007.

The ETFs that buy stocks of companies engaged in buybacks are “a twist on a traditional equity portfolio, and there’s plenty of evidence that supports the rationale for the strategy,” says Stoyan Bojinov, ETF analyst at, an online guide to exchange-traded funds.

In theory, buying back your own stock reduces the number of shares, thereby making the remaining shares more valuable. But it isn’t a precise formula: Stocks can go down despite a buyback program. And companies can use repurchased shares to pay executives and employees who get shares or options as part of their compensation, so the share count remains more or less the same despite the buyback program.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 26,2015

GOP's Rand Paul Calls For 14.5% Flat Tax
by: John D. McKinnon and Janet Hook
Jun 18, 2015
Click here to view the full article on

TOPICS: Taxation, Flat Tax

SUMMARY: Sen. Rand Paul is pledging to "blow up the tax code and start over" with a federal flat tax of 14.5%. The plan would eliminate payroll taxes on workers, as well as gift and estate taxes and all duties and tariffs. His flat tax would apply to all personal income, including wages, salaries, dividends, capital gains, rents and interest. It would exempt the first $50,000 of income for a family of four. For businesses, Mr. Paul would adopt the same 14.5% rate. Corporations currently pay at rates up to 35%, while small-business owners' profits are taxed at rates as high as 39.6%.

CLASSROOM APPLICATION: This article offers details of an example of a flat tax. You can use this to compare and contrast with the current tax law.

1. (Introductory) What is a flat tax system? What are the details of the plan recommended by Rand Paul?

2. (Advanced) How does a flat tax differ from the current tax system? What is the philosophy behind a flat tax?

3. (Advanced) What current tax law would remain the same under Sen. Paul's plan? Why would some of the current law be retained, while much of it would be eliminated?

4. (Advanced) How would individuals and businesses plan and operate differently under a flat tax? What behaviors would it encourage and what would it discourage? In contrast, what behaviors are encouraged and discouraged with the current tax system?

Reviewed By: Linda Christiansen, Indiana University Southeast

Blow Up the Tax Code and Start Over
by Rand Paul
Jun 18, 2015
Online Exclusive

"GOP's Rand Paul Calls For 14.5% Flat Tax," by John D. McKinnon and Janet Hook, The Wall Street Journal, June 18, 2015 ---

Sen. Rand Paul is pledging to “blow up the tax code and start over” with a federal flat tax of 14.5%, as he seeks to boost his support among conservatives in the Republican presidential field.

Tax plans increasingly have become a defining issue for Republicans in the 2016 nomination fight, and Mr. Paul’s proposal represents one of the more detailed—and aggressive—so far.

Mr. Paul said his plan, laid out on The Wall Street Journal’s opinion pages, would reduce the government’s tax take by over $2 trillion over 10 years, or at least 5%, based on congressional revenue estimates for 2016 to 2025. It would require substantial spending cuts to avoid adding to deficits—an amount roughly equal to all deficit reduction the federal government has done since 2010.

He predicted his plan would boost economic growth by nearly a percentage point a year.

The plan would eliminate payroll taxes on workers, as well as gift and estate taxes and all duties and tariffs. His flat tax would apply to all personal income, including wages, salaries, dividends, capital gains, rents and interest. It would exempt the first $50,000 of income for a family of four.

The plan would eliminate many deductions but preserve two widely used ones, for mortgage interest and charitable contributions. One of the few targeted tax breaks it would retain is the earned-income tax credit, a wage supplement for lower-income working families.

For businesses, Mr. Paul would adopt the same 14.5% rate. Corporations currently pay at rates up to 35%, while small-business owners’ profits are taxed at rates as high as 39.6%.

To further accelerate economic growth, Mr. Paul called for allowing the expensing of all capital purchases—deducting the cost from income immediately—and eliminating the current complicated system of depreciation.

The main aim of his plan would be to “turbocharge the economy and pull America out of [its] slow-growth rut of the last decade,” Mr. Paul wrote.

In an interview, Mr. Paul said the most distinctive element of his plan compared with other flat-tax proposals is the idea of repealing the payroll taxes on workers that are used to fund Social Security and Medicare, leaving more money in workers’ pockets.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 26,2015

Welcome Back, Wal-Mart Greeters
by: Sarah Nassauer
Jun 19, 2015
Click here to view the full article on

TOPICS: Internal Controls, Managerial Accounting, Shrink

SUMMARY: Wal-Mart Stores Inc. is keeping a closer eye on the front door. Three years ago, the retailing giant moved its "greeters" away from entrances in many stores so they could do double duty directing shoppers to open registers or tidying shelves. Now, it is experimenting with moving them back, in part to deter theft. Wal-Mart is testing the approach in around 300 of its 4,500 or so U.S. stores. It also has added "asset protection customer specialists" to some door areas-employees tasked with the dual job of saying welcome with a smile and deterring shoplifters by checking receipts before some shoppers leave and giving a preliminary scan of merchandise being returned. The renewed focus on "door presence" is part of Wal-Mart's efforts to improve the profitability of its U.S. operations by making the stores friendlier, keeping them well stocked, and reducing theft.

CLASSROOM APPLICATION: This is a good managerial accounting article to show how internal controls outside of the financial system can impact financial results.

1. (Introductory) What is a Wal-mart greeter? Which of their duties are most obvious to a customer? What other duties and responsibilities of the greeter are not so obvious to customers?

2. (Advanced) What are internal controls? What are their purposes in an organization? Why is establishing, implementing, and monitoring internal controls an important part of management's duties?

3. (Advanced) How are the greeter's duties part of Wal-Mart's internal control plan? What tasks do they do that impact the financial success and security of the business?

4. (Advanced) Please give a few examples of what a greeter does and how each of those duties ultimately relate to the financial statements.

5. (Advanced) What are the costs associated with having a greeter? What are the potential gains or savings from having a greeter? Should the company continue with the greeter position? Why or why not?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Welcome Back, Wal-Mart Greeters," by Sarah Nassauer, The Wall Street Journal, June 19, 2015 ---

To deter theft, and improve its customer service, the chain is bringing back a Sam Walton invention.

Three years ago, the retailing giant moved its “greeters” away from entrances in many stores so they could do double duty directing shoppers to open registers or tidying shelves. Now, it is experimenting with moving them back, in part to deter theft.

Wal-Mart is testing the approach in around 300 of its 4,500 or so U.S. stores. It also has added “asset protection customer specialists” to some door areas—employees tasked with the dual job of saying welcome with a smile and deterring shoplifters by checking receipts before some shoppers leave and giving a preliminary scan of merchandise being returned, spokesman Brian Nick said.

The APCS, as they are known by employees, will wear bright yellow vests, not the chain’s standard blue, he said.

The renewed focus on “door presence” is part of Wal-Mart’s efforts to improve the profitability of its U.S. operations by making the stores friendlier, keeping them well stocked, and reducing theft. The company is also boosting wages for some employees to give them more incentive to be more helpful and attentive, a sign that labor cuts in recent years likely went too far.

Greeters are a storied part of Wal-Mart’s playbook. Sam Walton created the role in the 1980s to offer a warm hello to customers and act as “a warning to the thief,” according to the founder’s 1992 autobiography.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 26,2015

CFOs Attempt to Rally Risk Busters
by: Emily Chasan
Jun 23, 2015
Click here to view the full article on

TOPICS: Accounting Careers, Auditing, Internal Audit, Internal Controls

SUMMARY: Many corporate finance chiefs, facing worries ranging from cybersecurity threats to new financial regulations, are trying to build up their company's first line of defense: teams of internal auditors. Unlike external auditors-outsiders who inspect a company's financial records-internal auditors, often employees, report to senior management and the board of directors. They evaluate a company's risk-management and control systems, and recommend ways to improve them. These days, however, executives with the right mix of skills for those tasks aren't easy to find. The number of job openings for internal auditors posted with the Institute of Internal Auditors has more than doubled from a year earlier, while the number of résumés posted by job seekers is down 42%.

CLASSROOM APPLICATION: This is an excellent article explaining the employment needs and trends in internal auditing, as well as explaining how the positions' responsibilities have evolved.

1. (Introductory) What is an internal auditor's position in an organization? What tasks do they do and what purposes do they serve? Why is the internal auditing function so important?

2. (Advanced) How does internal auditing differ from external auditing? Why are both needed?

3. (Advanced) How has internal auditing evolved in recent years? What are the reasons for these changes?

4. (Advanced) What are the job prospects for an internal auditing position? What is the supply and demand for candidates for the positions? What are the necessary qualifications and experience? How have the changes in internal auditing changed the qualifications for the position and the supply of candidates for the positions?

Reviewed By: Linda Christiansen, Indiana University Southeast

"CFOs Attempt to Rally Risk Busters," by Emily Chasan, The Wall Street Journal, June 23, 2015 ---

Companies race to build up teams of internal auditors, but the right mix of skills can be hard to find

Many corporate finance chiefs, facing worries ranging from cybersecurity threats to new financial regulations, are trying to build up their company’s first line of defense: teams of internal auditors.

Unlike external auditors—outsiders who inspect a company’s financial records—internal auditors, often employees, report to senior management and the board of directors. They evaluate a company’s risk-management and control systems, and recommend ways to improve them. These days, however, executives with the right mix of skills for those tasks aren’t easy to find.

The job has become “a very key role,” said Dan Fairfax, chief financial officer of Brocade Communications Systems Inc., which last year completed a six-month search for a new internal-audit chief.

A competitor poached the previous one last year, which Mr. Fairfax says is a sign of increasing demand for executives who can mount proper responses to potential business risks.

The San Jose, Calif., data and storage networking company, which has about $2.2 billion a year in revenue, has expanded its requirements for the position in the past few years. It needed someone who could quickly understand its operations and take a hard line on the need for strong internal-control systems, but who could be “thoughtful” in finding efficiencies, proposing changes and following through with them, Mr. Fairfax said.

As finance chief, Mr. Fairfax had to explain to Brocade’s head of human resources that he wasn’t being too picky and ask for patience from the board’s audit committee as he kept searching for the right executive.

In the end, Brocade hired Adrian Barry, an audit executive with 20 years of experience in technology companies—most recently as a vice president at rival networking company Aruba Networks Inc., a Hewlett-Packard Co. unit.

“We couldn’t be happier, but it was a long road,” Mr. Fairfax said.

Companies are coping with a growing regulatory burden, including nearly 400 new rules issued under the 2010 Dodd-Frank Act, provisions of the 2010 Affordable Care Act and new guidelines for internal-control systems. That has upped the stakes on compliance.

Meanwhile, companies are facing the most severe internal-auditor shortage in more than a decade, said Richard Chambers, chief executive of the Institute of Internal Auditors, a Florida-based professional group with more than 180,000 members.

“It’s a classic supply-and-demand dilemma,” said Mr. Chambers.

The number of job openings for internal auditors posted with the Institute of Internal Auditors has more than doubled from a year earlier, while the number of résumés posted by job seekers is down 42%.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 26,2015

Netflix Plans 7-for-1 Stock Split
by: Maria Armental
Jun 24, 2015
Click here to view the full article on

TOPICS: Stock Dividend, Stock Split

SUMMARY: Netflix Inc. plans to split its highflying stock 7-for-1, a move intended to make the shares more attractive to retail investors as the video streaming company presses on with an ambitious international expansion.

CLASSROOM APPLICATION: This article would be great to use for discussions of stock splits and stock dividends because many of our students are customers of this company.

1. (Advanced) What are Netflix's plans regarding its stock? What is Netflix's reason for this decision?

2. (Advanced) What is a stock split? What is its impact on a company's financial statements? What is a stock dividend? How does it impact financial statements? How are stock splits and stock dividends similar? How do they differ?

3. (Advanced) The article mentions both a stock split and a stock dividend. Which of the two is this transaction? Why do you think it is reported as both?

4. (Advanced) What impact do stock splits and stock dividends typically have on the price of the stock? Why?

5. (Introductory) The article states that 7-for-1 stock splits are unusual. Why?

Reviewed By: Linda Christiansen, Indiana University Southeast

Why Netflix's Stock Could Keep Running Post-Split
by Maureen Farrell
Jun 24, 2015
Online Exclusive

What Netflix's Stock Split Could Mean for Investors
by Maureen Farrell
Jun 23, 2015
Online Exclusive

Apple's 7-for-1 Stock Split Is 'Very Unusual'
by Paul Vigna and Steven Russolillo
Apr 23, 2014
Online Exclusive

Here's How Visa's Stock Split Will Affect the Dow
by Kristen Scholer
Jan 30, 2015
Online Exclusive


"Netflix Plans 7-for-1 Stock Split," by Maria Armental, The Wall Street Journal, June 24, 2015 ---

Netflix Inc. plans to split its highflying stock 7-for-1, a move intended to make the shares more attractive to retail investors as the video streaming company presses on with an ambitious international expansion.

A dividend of six additional shares for each outstanding share would be paid out on July 14. Shares would begin trading at the new price the following day.

Netflix went public in 2002 and split its stock 2-for-1 in 2004.

Shares, which have nearly doubled in price since the beginning of the year, surged in late trading to a record $703.50.

A 7-for-1 stock split is unusual. Apple Inc. did it last year, and its stock has surged 37% since then, closing at $127.03 on Tuesday.

Netflix’s shares, which traded just under $100 at the beginning of 2013, closed Tuesday at $681.19.

While splits don’t change a company’s value, they tend to generate renewed interest in the stock as the lower price makes it more attractive to a larger group of investors, driving up the value.

Popular in the 1990s, stock splits had largely fallen out of favor following the financial crisis. From 2008 through 2013, only 12 S&P 500 companies, on average, split their stocks each year. Among the S&P 500 companies that have split their stock this year are Visa Inc. and Starbucks Corp.

Continued in article

Inheritance Tax ---

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 17, 2015

A New Tax Break for (Wealthy) Married Couples
by: Laura Saunders
Jul 11, 2015
Click here to view the full article on

TOPICS: Estate Tax, Gift Tax, Trusts

SUMMARY: The Internal Revenue Service recently released final rules detailing a generous estate- and gift-tax break for married couples who don't set up expensive trusts before death. The break, known as "portability," allows spouses to pass nearly $11 million of assets to heirs free of estate tax. Without it, many couples would qualify only for one estate-tax exemption instead of two.

CLASSROOM APPLICATION: This is an excellent update for tax classes regarding portability of estate-tax exemptions.

1. (Introductory) What is estate tax? What is the current estate tax exemption? Why does tax law allow for an exemption? Does it change? If so, when?

2. (Advanced) What is portability? Why does tax law allow for it? What advantages does it offer taxpayers? Which taxpayers would be benefited? Who are not benefited?

3. (Advanced) What is the important tax-planning issue explained in the article? Why is time of the essence? Why do many taxpayers miss the filing and the deadline?

4. (Advanced) How is portability limited? What costs are required to taking advantage of portability? Are these costs nominal, reasonable, or exorbitant?

5. (Advanced) How do the estate tax rules relate to taxation of gifts? How should taxpayers coordinate tax-planning of both areas together?

Reviewed By: Linda Christiansen, Indiana University Southeast

"A New Tax Break for Married Couples," by Laura Saunders, by Laura Sanders, The Wall Street Journal, July 11, 2015 ---

You can’t take it with you, but it’s getting easier to leave it to your heirs.

The Internal Revenue Service recently released final rules detailing a generous estate- and gift-tax break for married couples who don’t set up expensive trusts before death.

The break, known as “portability,” allows spouses to pass nearly $11 million of assets to heirs free of estate tax. Without it, many couples would qualify only for one estate-tax exemption instead of two.

This exemption, which is indexed for inflation, is $5.43 million per individual in 2015. This year, only a tiny fraction of estates—about 4,000—are expected to owe taxes, according the data from the Tax Policy Center, a nonpartisan group in Washington.

But the new rules come with crucial caveats, experts say. “Individuals and advisers need to be aware that they must act quickly after the first spouse dies,” says Laura Hirschfeld, an estate-tax lawyer at McDermott Will & Emery in New York.

Continued in article

Forbes:  IRS Announces 2015 Estate And Gift Tax Limits ---

. . . the federal estate tax exemption rises to $5.43 million per person, and the annual gift exclusion amount stays at $14,000.

2015 State Death Tax Exemption and Top Tax Rate Chart ---

EY:  Worldwide Estate and Inheritance Tax Guide 2014 ---$FILE/Worldwide-Estate-and-Inheritance-Tax-Guide-2014.pdf

Crowe Clark Whitehill:  UK Inheritance Tax in a Nutshell --- to iht.pdf

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 17, 2015

Google Takes Stricter Approach to Costs
by: Alistair Barr
Jul 14, 2015
Click here to view the full article on

TOPICS: Cost Accounting, Managerial Accounting

SUMMARY: With revenue growth ebbing, profit margins shrinking and shares flat, Google is curbing hiring and seeking ways to run its sprawling empire more efficiently. Google is a long way from cutting jobs and the company is still growing. But the scrutiny on expenses is a significant change for a company that long favored expansion and experimentation over bottom-line concerns. Some employees cite examples of increased frugality, albeit at a workplace that is luxurious compared with most others. Travel, supplies and events all require more justification or approvals than in the past.

CLASSROOM APPLICATION: This article offers a good example of a company using managerial accounting tools to manage costs in an attempt to maintain/increase profitability.

1. (Introductory) What is Google's current financial condition? How has the situation changed in recent years?

2. (Advanced) What is a company's most recent profit margin? How has Google's profit margin changed? What is the reason for this? How should Google management approach this issue?

3. (Advanced) How has Google's approach to hiring employees changed in recent times? What other expense categories are being examined and changed?

4. (Advanced) What is a fixed cost and what is a variable cost? How do they differ? What different approaches should managers take when a particular expense is in one of those categories or the other?

5. (Advanced) In general, is the expense of employing employees a fixed expense or a variable expense? What information would you need to decide accurately? Which type of expense would Google employees likely be? Why? How would this affect how Google manages hiring and employee totals?

6. (Advanced) In what areas is Google slowing or restricting hiring, and in what areas is hiring continuing? Why? Show how Google could use managerial accounting tools - segmenting and others - to effectively analyze hiring and employment priorities.

7. (Advanced) The article states travel, supplies and events all require more justification or approvals than in the past. What managerial accounting tools could help the company analyze these expenses, manage the spending levels, and help to keep track of spending throughout the year and in total?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Google Takes Stricter Approach to Costs," by Alistair Barr, The Wall Street Journal, July 14, 2015 ---

With revenue growth ebbing, profit margins shrinking and shares flat, Google is curbing hiring and seeking ways to run its sprawling empire more efficiently, according to recruiters, venture capitalists and others familiar with the matter.

New Chief Financial Officer Ruth Porat, who joined the company in late May, is active in the effort. Ms. Porat, who reduced expenses and reallocated capital while CFO of Morgan Stanley, is involved in an internal audit examining costs, revenue and accounting systems, according to one of the people. She is looking to make her mark on what has become a more stable but more complex company, another person said.

Google will offer an update on its expenses on Thursday, when it reports second-quarter financial results after regular trading hours and Ms. Porat is expected to speak during a conference call with Google analysts for the first time. The company declined to comment for this article.

The clearest sign of the new attitude: Google added 1,819 employees in the first quarter, bringing its total to 55,419. That was the smallest increase since the final quarter of 2013; last year, Google added an average of 2,435 employees per quarter.

For many years, Google teams assumed they could add staff each year. Now, Google executives are selecting which groups can hire, based on the company’s strategic priorities. Since late last year, many Google teams have had to submit plans describing how additional employees will produce specific business objectives, such as increased revenue or more users.

Continued in article

Bob Jensen's threads on managerial and cost accounting ---

Teaching Case in Taxation
From The Wall Street Journal Weekly Accounting Review on July 17, 2015

Energy Companies to Merge in $15.8 Billion Deal
by: Alison Sider and Chelsey Dulaney
Jul 14, 2015
Click here to view the full article on

TOPICS: Partnership Taxation, Partnership Accounting, Master Limited Partnerships, Mergers, Master Limited Partnerships, Mergers, Partnership Accounting

SUMMARY: A partnership controlled by Marathon Petroleum Corp., a refinery and pipeline company, will buy MarkWest Energy Partners LP for $15.8 billion in one of the biggest oil-patch deals since crude prices began to slump last summer. The deal will marry Marathon's oil pipeline network with MarkWest's business separating natural gas into fuels such as propane and ethane. The deal is the latest consolidation between energy partnerships, which don't pay corporate income taxes but distribute their available cash to shareholders. The need to keep these hefty payouts growing means the partnerships are always looking to expand.

CLASSROOM APPLICATION: This is a good example of a merger involving master limited partnerships.

1. (Introductory) What is a partnership? What are the other forms of doing business? How do they differ? How does partnership accounting differ from accounting for other forms of doing business?

2. (Advanced) What is a master limited partnership? What tax laws apply to these types of partnerships?

3. (Advanced) What are the benefits of MLPs? What challenges are associated with them? Why would a business choose this form of doing business?

4. (Advanced) What is a merger? Why are these partnerships interested in this kind of deal?

5. (Advanced) How will this transaction be entered into the accounting records? What accounts will be affected? How will it impact the financial statements?

Reviewed By: Linda Christiansen, Indiana University Southeast

Marathon Takes Gold With MPLX and MarkWest
by Liam Denning
Jul 14, 2015
Online Exclusive

"Energy Companies to Merge in $15.8 Billion Deal," by Alison Sider and Chelsey Dulaney, The Wall Street Journal, July 14, 2015 ---

A partnership controlled by Marathon Petroleum Corp. , a refinery and pipeline company, will buy MarkWest Energy Partners LP for $15.8 billion in one of the biggest oil-patch deals since crude prices began to slump last summer.

The deal will marry Marathon’s oil pipeline network with MarkWest’s business separating natural gas into fuels such as propane and ethane.

The combined company would have a market capitalization of $21 billion, making it the fourth-largest master limited partnership. These partnerships, which typically own infrastructure like pipelines that earn steady revenue from long-term contracts, have fared better than traditional drilling companies during the energy downturn but still have faced headwinds.

Shares of MPLX closed 15% lower to $59, while shares of MarkWest rose nearly 14% to $68. Shares of Marathon Petroleum Corp. rose 7.9%.

The deal is the latest consolidation between energy partnerships, which don’t pay corporate income taxes but distribute their available cash to shareholders. The need to keep these hefty payouts growing means the partnerships are always looking to expand.

Gary R. Heminger, Marathon’s chief executive, said the deal would allow the partnership to boost its annual distribution by 25% through 2017.

“The combination significantly increases our size, scale and the opportunity to grow over a very long period of time,” Mr. Heminger told analysts during a conference call on Monday.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 17, 2015

A Resource Guide for Audit Committees
by: Deloitte CFO Journal Editor
Jul 09, 2015
Click here to view the full article on

TOPICS: Audit Committees, Auditing

SUMMARY: For audit committees, expectations are higher than ever and setting the appropriate tone at the top has never been more important, but getting it right is no small undertaking. Shareholders and other interested parties rely on audit committees to execute their oversight duties while keeping up with an increasingly complex financial reporting environment and an ever-changing regulatory landscape. The Audit Committee Resource Guide includes regulatory requirements, leading practices and questions for audit committees to consider as they execute their responsibilities.

CLASSROOM APPLICATION: This article offers a good explanation of the oversight responsibilities of audit committees.

1. (Introductory) What is an audit committee? Why do companies have audit committees?

2. (Advanced) What are an audit committee's responsibilities regarding the financial reporting process? What value does this offer to the financial statements?

3. (Advanced) Besides financial statements, what other reporting does an audit committee oversee? How involved are the committee members in the process?

4. (Advanced) What does an audit committee do regarding ethics of the company? What does it do regarding fraud prevention and detection?

5. (Advanced) In general, what are the responsibilities of internal auditors? What are the responsibilities of external auditors? How should the audit committee be involved with internal and external auditors?

Reviewed By: Linda Christiansen, Indiana University Southeast

"A Resource Guide for Audit Committees," by Deloitte CFO Journal Editor, The Wall Street Journal, July 9, 2015 ---

For audit committees, expectations are higher than ever and setting the appropriate tone at the top has never been more important, but getting it right is no small undertaking. Shareholders and other interested parties rely on audit committees to execute their oversight duties while keeping up with an increasingly complex financial reporting environment and an ever-changing regulatory landscape.

“The experience and judgment of an audit committee member is important to management and shareholders who depend on them to appropriately execute their governance responsibilities. To fulfill their responsibilities, audit committees need a clear understanding of what is required by the committee‘s charter, NYSE and NASDAQ listing requirements, and relevant SEC and PCAOB rules,” says Larry Patrick, an audit partner and national managing partner of audit committee programs and client matters at Deloitte & Touche LLP.

Deloitte’s Audit Committee Resource Guide includes regulatory requirements, leading practices and questions for audit committees to consider as they execute their responsibilities. It also includes tools and resources provided by Deloitte’s Center for Corporate Governance and other governance organizations. The guide is a reference for both seasoned and new audit committee members as they address areas such as oversight of internal controls, financial reporting, risk, interaction with the internal and independent auditors, and review of earnings press releases.*

Continued in article

Audit Committee Resource Guide ---

Teaching Case on Audit Committees and Corporate Governance
From The Wall Street Journal Weekly Accounting Review on February 6, 2015

Meet the Corporate Board's 'Kitchen Junk Drawer'
by: Michael Rapoport and Joann S. Lublin
Feb 03, 2015
Click here to view the full article on

TOPICS: Audit Committees, Sarbanes-Oxley

SUMMARY: As new risks multiply, the audit committee has become the "kitchen junk drawer" for many corporate boards. The workload of the powerful committees has expanded sharply beyond their core role of overseeing a company's financial reporting. They are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. In addition, the Securities and Exchange Commission is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

CLASSROOM APPLICATION: This is an excellent article on audit committees for financial accounting classes, as well as for auditing and forensic accounting classes.

1. (Introductory) What is an audit committee? What are their duties? Why are audit committees important?

2. (Advanced) What is the Sarbanes-Oxley Act? How has it affected the work of audit committees?

3. (Advanced) How have the duties of audit committees expanded in recent years? What are the reasons for this?

4. (Advanced) What qualifications should a company seek in a member of the audit committee? As top management in a business, how would you attract these kinds of people? What benefits could they add to your business?

5. (Advanced) What does the SEC expect to release regarding the activities of audit committees? What could this change? Would it increase responsibilities of the audit committee or relieve some of their burdens?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Meet the Corporate Board's 'Kitchen Junk Drawer'," by Michael Rapoport and Joann S. Lublin, The Wall Street Journal, February 3, 2015 ---

Workload of the Audit Committee Has Expanded Well Beyond Oversight of Financial Reporting.

As new risks multiply, the audit committee has become the “kitchen junk drawer” for many corporate boards.

The workload of the powerful committees has expanded sharply beyond their core role of overseeing a company’s financial reporting. They are grappling with new regulations, whistleblower claims and issues like cybersecurity and foreign corruption. In addition, the Securities and Exchange Commission is expected to suggest new rules by the end of next month requiring them to disclose more about their activities.

“It’s not the favorite committee,’’ says Fredric Reynolds, a retired CBS Corp. chief financial officer and audit committee chairman at Mondelez International Inc. To attract committee members, he sometimes promises relatively short stints: “You’ll be released for time served and good behavior,’’ he tells directors.

Mr. Reynolds estimates he spends 100-plus hours a year on Mondelez’s audit committee. One key part of that is the audit committees’ oversight of whistleblower complaints, which is required by the 2002 Sarbanes-Oxley Act. The vast majority are from people frustrated with their work colleagues, he adds. But when there’s smoke, “you don’t know if it’s fire.”

The speed and complexity of business and risk oversight “are stretching and straining many audit committee agendas,” according to a global survey of audit committee members released last week by accounting firm KPMG. Three-quarters of the 1,500 respondents said the amount of time required to carry out their responsibilities has increased at least “moderately” over the past two years.

Serving on an audit committee “has taken more time than I expected,’’ says a former tech-industry finance chief who sits on the board of a fast-growing community bank.

Continued in article

Bob Jensen's threads on Audit Committee Professionalism ---

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 17, 2015

Microsoft Write-Down Stokes Valuation Concerns
by: Kimberly S. Johnson
Jul 09, 2015
Click here to view the full article on

TOPICS: Acquisitions, Goodwill, Write-Down

SUMMARY: Finance chiefs may need to tread more carefully when pricing acquisitions, to avoid hefty write downs at a later date. Microsoft Corp.'s $7.6 billion write-down of its 2014 acquisition of Nokia's handset business is the latest, and among the largest in the tech industry in recent years. Hewlett-Packard Co. wrote down $8.8 billion in 2012 on its acquisition of U.K. software maker Autonomy. A year prior, the company wrote down $885 million based on its 2010 Palm acquisition.

CLASSROOM APPLICATION: This article is appropriate for financial accounting, especially coverage of goodwill and write-downs.

1. (Introductory) What is goodwill? How is it related to acquisitions? Why do they occur?

2. (Advanced) What is a write-down? What are the details of Microsoft's write-down? Why did the company have to do a write-down?

3. (Advanced) Are write-downs problematic in all situations? How can write-downs be avoided? What should management be doing to manage these situations?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Microsoft Write-Down Stokes Valuation Concerns," by Kimberly S. Johnson, The Wall Street Journal, July 9, 2015 ---

Finance chiefs may need to tread more carefully when pricing acquisitions, to avoid hefty write downs at a later date.

Microsoft Corp.’s $7.6 billion write-down of its 2014 acquisition of Nokia ’s handset business is the latest, and among the largest in the tech industry in recent years. Hewlett-Packard Co. wrote down $8.8 billion in 2012 on its acquisition of U.K. software maker Autonomy. A year prior, the company wrote down $885 million based on its 2010 Palm acquisition.

Sale premiums are typically higher on technology assets, because they’re “priced on growth, rather than near-term profitability,” said Glen Kernick, technology industry leader at Duff & Phelps Corp., a valuation and corporate finance advisory firm.

“Tech companies are carrying a higher proportion of goodwill…with allocations of greater than 50%,” he said. “Deals and valuations are premised on risker synergies and future technologies.”

Five information technology companies in the S&P 500 recorded goodwill impairment charges or write-downs during their 2014 fiscal year, according to S&P Capital IQ. Communications equipment maker Juniper Networks Inc. recorded the largest goodwill impairment in 2014, $850 million, for its security reporting unit.

Yahoo Inc. took an $88.4 million impairment hit in 2014 based on the value of its units in the Middle East, India and Southeast Asia, according to a regulatory filing.

In 2013, Earthlink Holdings Corp. and Applied Materials Inc. reported the largest tech write-downs, according to Duff &Phelps, at $256.7 million and $224 million, respectively. The companies did not return requests for comment.

Mr. Kernick said he expects to see more tech company impairment charges as valuations in certain parts of the sector are getting “a little frothy.” Pricing for cloud-computing and mobile payment companies are worth watching, he said.

Continued in article

Bob Jensen's threads on the controversies of fair value accounting ---

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 24, 2015

L.A.'s 'Red-Hot' West Side Story
by: Matt Hudgins
Jul 22, 2015
Click here to view the full article on

TOPICS: 1031 Exchange, Capital Gains Tax, Tax Planning, Taxation

SUMMARY: The founder and president of California Landmark, Ken Kahan, purchased and razed a circa-1950 apartment complex in 2003 to make way for the on Villa Montana project, which he completed in 2005. That same year, Mr. Kahan obtained local and state approvals to divide the property into condominiums. He built as a condo play and could have exited at that time, since the market was very hot, however, he would have paid ordinary income taxes on any sale proceeds. As an alternative to condominium sales, Mr. Kahan decided to operate the complex as rental apartments. And by selling the 20 units as a single, income-producing property, he will have the option to reinvest the proceeds via a tax-deferred exchange. Regulated under Section 1031 of the federal tax code, a so-called 1031 exchange enables a seller to avoid paying capital-gains tax on proceeds from the sale of certain business or investment properties, as long as the seller reinvests those funds in a similar property.

CLASSROOM APPLICATION: This is an excellent article to show how tax planning influences business decisions and how deals are structured. This particular case involves a 1031 exchange of real estate.

1. (Introductory) What aspect of real estate is the focus of this article? What are the details of Ken Kahan's real estate transaction? How does Mr. Kahan's transaction fit into the main idea of this article?

2. (Advanced) What is a 1031 exchange? How must the deal be structured? What are the tax benefits?

3. (Advanced) How did the tax law regarding a 1031 exchange influence Mr. Kahan decisions regarding Villa Montana when he built it? How did he structure the sale for better tax treatment?

4. (Advanced) How did Villa Montana's buyer structure the deal to take advantage of the tax law?

5. (Advanced) How can tax law influence aspects of a business deal? How could the price negotiations be influenced by tax advantages or consequences? How is the real estate market affected by 1031 exchanges in particular?

6. (Advanced) Why is the 1031 exchange a part of U.S. tax law? What purpose does it serve? Who is benefited?

Reviewed By: Linda Christiansen, Indiana University Southeast

"L.A.'s 'Red-Hot' West Side Story," by Matt Hudgins, The Wall Street Journal, July 21, 2015 ---

Even though apartment rents in Los Angeles have risen 20% over the past five years, some real-estate investors are betting that rents still have more room to grow.

That partly explains why earlier this month, investor and developer Darius Joe Meraj paid $20.1 million for Villa Montana, a 20-unit apartment complex in the affluent Los Angeles neighborhood of Brentwood. The price works out to more than $1 million per unit, the highest price ever paid in the city for apartments not directly adjacent to the beach. Moreover, the price is four times the $223,122-per-unit average price that Los Angeles apartments sold for in 2014, according to Real Capital Analytics, a New York-based researcher.

The deal “shows how red-hot the west side of Los Angeles is,” said Ron Harris, one of the Marcus & Millichap brokers who represented the seller, California Landmark Group.

But monthly rents at Villa Montana already far surpass the norm. Rents in the 90049 ZIP Code, which includes Brentwood, averaged $3,200 a month in the second quarter this year, up from $2,984 a month in the second quarter last year, according to Marcus & Millichap. The average rent in Villa Montana is close to $5,000 a month, Mr. Harris said.

A marketing package that Marcus & Millichap sent to potential buyers stated that Villa Montana’s new owner would have “the opportunity to increase rental price points by approximately 19% to 20% through aggressive management and by instituting a minor upgrade program to the flooring, countertops and appliances.”

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 24, 2015

Accounting Roundup-Second Quarter 2015 in Review
by: Deloitte CFO Journal Editor
Jul 17, 2015
Click here to view the full article on

TOPICS: FASB, Financial Accounting, GAAP, GASB, Governmental Accounting, IASB

SUMMARY: The second quarter of 2015 was a productive one for the Financial Accounting Standards Board (FASB). The Board made significant progress on its simplification initiative and amended certain aspects of the joint FASB-IASB revenue standard. Governmental Accounting Standards Board (GASB) issued three Statements related to pensions and other postemployment benefits as well as a Statement that simplifies the GAAP hierarchy for state and local governments. On the international front, the IASB issued an exposure draft that would defer the effective date of its counterpart revenue standard, IFRS 15. The IASB also issued a series of amendments to its IFRS for Small- and Medium-sized Entities as well as proposals that would (1) revise its conceptual framework for financial reporting and (2) make narrow-scope amendments to its pension accounting requirements.

CLASSROOM APPLICATION: This article offers updates from FASB, GASB, and IASB.

1. (Introductory) What is FASB? What is GASB? What is IASB? What are the areas of authority for each of these organizations?

2. (Advanced) What did FASB accomplish in the second quarter of 2015? How will those changes impact accounting? Are they significant changes or minor ones?

3. (Advanced) What is an ASU? Why are they issued? How do they differ from other FASB issuances?

4. (Advanced) What did GASB do in the second quarter of 2015? Who was impacted?

5. (Advanced) For the second quarter of 2015, what were IASB's activities? Do these impact U.S. companies?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Accounting Roundup-Second Quarter 2015 in Review," by Deloitte CFO Journal Editor, The Wall Street Journal, July 17, 2015 ---

The second quarter of 2015 was a productive one for the Financial Accounting Standards Board (FASB). The Board made significant progress on its simplification initiative (i.e., the Board’s effort to reduce the cost and complexity of current U.S. GAAP while maintaining or enhancing the usefulness of the related financial statement information) by issuing (1) final ASUs on cloud computing, debt issuance costs and a practical expedient for measuring retirement benefit plans and (2) proposed ASUs on the accounting for share-based payments, equity method accounting and the accounting for measurement-period adjustments. In addition, the Board amended certain aspects of the joint FASB-IASB revenue standard, releasing two proposed ASUs that would (1) amend certain portions of the guidance in ASU 2014-09 on performance obligations and licensing and (2) defer the standard’s effective date by one year.

There was also a flurry of activity at the Governmental Accounting Standards Board (GASB), which issued three Statements related to pensions and other postemployment benefits as well as a Statement that simplifies the GAAP hierarchy for state and local governments.

On the international front, the IASB followed the FASB’s lead in issuing an exposure draft that would defer the effective date of its counterpart revenue standard, IFRS 15. The IASB also issued a series of amendments to its IFRS for Small- and Medium-sized Entities as well as proposals that would (1) revise its conceptual framework for financial reporting and (2) make narrow-scope amendments to its pension accounting requirements.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 24, 2015

Audit Regulator Finds 17 Deficient Audits at PricewaterhouseCoopers
by: Michael Rapoport
Jul 22, 2015
Click here to view the full article on

TOPICS: Audit Inspections, Auditing, PCAOB

SUMMARY: Audit regulators found 17 deficient audits at PricewaterhouseCoopers LLP in its latest annual inspection of the Big Four accounting firm, a slight improvement from the level of problems found a year ago. The 17 deficient audits were out of 58, for a deficiency rate of 29%. That is down from 32% a year ago. A deficient audit means the audit firm hasn't obtained enough evidence to support its opinions that bless a company's financial statements and internal controls. It doesn't mean the company's financial statements are inaccurate or that the problems found with the audit haven't since been addressed.

CLASSROOM APPLICATION: This article is good for auditing and financial accounting discussions of the PCAOB and inspection of audits.

1. (Introductory) What is the PCAOB? What is its purpose and area of authority?

2. (Advanced) What is an audit inspection? Why does the PCAOB conduct them?

3. (Advanced) What is a deficiency? What are the implications of a deficiency? If a deficiency is found, should the financial statements be restated? Why or why not? What problems could deficient audits cause?

4. (Advanced) What are internal controls? Why do companies implement them? Why are they important? What are auditor duties regarding client's internal controls? Why does the PCAOB look at an auditor's assessment of internal controls?

5. (Advanced) What are the Big Four accounting firms? Why are they the focus of this article? Are other firms' audits inspected?

6. (Advanced) How are the Big Four firms doing with audit inspections? Are the errors at an acceptable level? How could the deficiency rates be improved?

Reviewed By: Linda Christiansen, Indiana University Southeast

PCAOB Warns on Internal-Control Problems
by Emily Chasen
Oct 25, 2015
Online Exclusive

Big Firms Getting Better Grades on Internal Control Audits: PCAOB
by Emily Chasen
Jun 04, 2015
Online Exclusive

Corporate Audits to Get Wider Review
by Noelle Knox
Dec 15, 2014
Online Exclusive

"Audit Regulator Finds 17 Deficient Audits at PricewaterhouseCoopers," by Michael Rapoport, The Wall Street Journal, July 21, 2015 ---

Audit regulators found 17 deficient audits at PricewaterhouseCoopers LLP in its latest annual inspection of the Big Four accounting firm, a slight improvement from the level of problems found a year ago.

The 17 deficient audits were out of 58 PwC audits and partial audits reviewed by the Public Company Accounting Oversight Board in its annual inspection report issued Tuesday, for a deficiency rate of 29%. That is down from a year ago, when PCAOB inspectors found 19 deficient audits out of 59 reviewed, a rate of 32%.

A deficient audit, under the PCAOB’s definition, means the audit firm hasn’t obtained enough evidence to support its opinions that bless a company’s financial statements and internal controls. It doesn’t mean the company’s financial statements are inaccurate or that the problems found with the audit haven’t since been addressed.

In a statement, PwC said it is “pleased” with its improvement, and that further enhancements in audit quality were its audit practices’s “top priority.”

Among the types of deficiencies the inspectors found at PwC in one audit or another were deficiencies in testing controls over revenue; problems with testing whether a company should write down its goodwill; and insufficient procedures with regard to testing a company’s accounting for a business combination.

The PCAOB didn’t identify the companies involved in each deficient audit, in accordance with its usual practice.

Continued in article

Bob Jensen's threads on PwC woes ---

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 24, 2015

Lawmakers, White House Explore Tax Revamp for U.S. Firms Overseas
by: John D. McKinnon
Jul 22, 2015
Click here to view the full article on

TOPICS: Corporate Taxation, International Business

SUMMARY: Top lawmakers and the White House are in the early stages of discussing an ambitious overhaul of how the U.S. taxes its multinational firms. Topics being discussed include whether to eliminate the U.S. system of taxing companies on their world-wide income, what safeguards to adopt to prevent future abuses, and whether to provide special tax treatment for intellectual property.

CLASSROOM APPLICATION: This article is a very good update regarding the current issues with corporate taxation and possible changes being discussed by Congress.

1. (Introductory) What are the tax issues and problems being discussed by Congress? What is a major funding concern?

2. (Advanced) What goals do the politicians have with any of these possible tax changes? What are the various plans to achieve these goals?

3. (Advanced) Where are the areas of consensus between the parties? What are the areas of disagreement?

4. (Advanced) How could businesses incorporate tax planning into managing operations and transactions given the information included in this article? For what kinds of deals should businesses act before these potential changes are passed by Congress? In what ways should businesses wait until after changes are made?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Lawmakers, White House Explore Tax Revamp for U.S. Firms Overseas," by John D. McKinnon, The Wall Street Journal, July 22, 2015 ---

Top lawmakers and the White House are in the early stages of discussing an ambitious overhaul of how the U.S. taxes its multinational firms, according to officials involved in the effort.

The talks, part of an effort to find funding for a long-term highway bill, are preliminary and could yet fall apart or be overtaken by other approaches. But both Republicans and Democrats appear open to accommodating each other’s priorities, which could make the path to a deal smoother, according to the officials.

Topics being discussed include whether to eliminate the U.S. system of taxing companies on their world-wide income, what safeguards to adopt to prevent future abuses and whether to provide special tax treatment for intellectual property.

There is already one area of clear agreement. All sides acknowledge that an overhaul could raise revenues for highways by imposing a one-time tax on foreign corporate earnings sitting offshore.

“Everyone is largely in agreement on the building blocks of a deal,” said Rep. John Delaney (D., Md.), a longtime backer of the idea. Mr. Delaney said negotiators are thinking, “Let’s get the framework set, so then we can arm wrestle on the numbers.”

Overhauling the U.S. system for taxing multinational businesses has been a priority for Republicans, as well as some Democrats. Propelling this year’s discussions, which are being led by Rep. Paul Ryan (R., Wis.), is the realization that a tax overhaul could be coupled with a boost in highway funding, a priority of the Obama administration and Democrats.

Continued in article

Teaching Case
From The Wall Street Journal Weekly Accounting Review on July 24, 2015

Coal Miners Pressed on Cleanup Costs
by: John W. Miller and Dan Frosch
Jul 17, 2015
Click here to view the full article on

TOPICS: Cost Analysis, Financial Accounting, Managerial Accounting

SUMMARY: State and federal regulators are pressing U.S. coal companies to prove that they can pay for the cost of cleaning up after they are finished mining, putting new financial pressure on an industry already facing historic strains. Under a 1977 federal law, coal companies operating in the U.S. must set money aside to pay to restore lands after mines close, by planting trees and grass, burying exposed waste rock and building barriers that protect waterways from contamination. At issue for regulators is whether coal companies should continue to qualify for a practice known as "self-bonding" to pay for future mine cleanups - essentially using their own finances as insurance - or whether they should be required to post cash or secure outside guarantees to keep mining.

CLASSROOM APPLICATION: This is an interesting article that could be used as a case study for managerial accounting.

1. (Introductory) What are coal mining companies required to do after closing the mine? What are the reasons for this requirement?

2. (Advanced) The article states that federal law requires coal companies to set aside money to restore land. What does this mean for accounting purposes? How would the accountants record this in the financial records? How would the company's financial statements be affected? Would money have to be placed into a separate bank account? Is the cash account affected?

3. (Advanced) How could a company account for these costs from a managerial accounting perspective? How should the clean-up costs be incorporated into the cost of the product? Does the fact that the cost comes after the mine closes affect how to account for it?

4. (Advanced) When would the costs of the clean up be an expense on the financial statements? When would those costs be deducted on the company's tax return?

5. (Advanced) If the estimated cost of the clean-up is different than the actual cost, how should the company report that?

Reviewed By: Linda Christiansen, Indiana University Southeast

"Coal Miners Pressed on Cleanup Costs," by John W. Miller and Dan Frosch, The Wall Street Journal, July 17, 2015 ---

State and federal regulators are pressing U.S. coal companies to prove that they can pay for the cost of cleaning up after they are finished mining, putting new financial pressure on an industry already facing historic strains.

Regulators even in energy-friendly states such as Wyoming and West Virginia are stepping up oversight on coal companies amid concerns that taxpayers could be left on the hook for expensive and environmentally complicated cleanups if the companies go bankrupt. That has created a political challenge for governors of coal states, who don’t want to be viewed as pushing vital industries into further financial trouble.

“It is tough times in the coal fields right now,” said Harold Ward, acting director of the mining and reclamation division at the West Virginia Department of Environmental Protection. “You hope for them to be successful, but you anticipate the worst.”

Coal producers have been rocked by competition from inexpensive natural gas, tougher environmental rules and a global coal glut that has decimated prices. On Thursday, the Obama administration proposed new mining rules, including a prohibition on mining within 100 feet of streams.

The nation’s three largest publicly listed coal companies— Peabody Energy Corp. , Alpha Natural Resources Inc. and Arch Coal Inc.—have seen their cumulative value collapse to below $1 billion from more than $25 billion four years ago.

Alpha is in talks to obtain financing for a potential bankruptcy filing early next month, The Wall Street Journal reported this past week. On Thursday, the New York Stock Exchange suspended trading in Alpha’s stock and said it would begin a process to delist the company.

Continued in article

Humor July 1-31, 2015

Jokes on MAAW ---

Hump-Day Humor ---

Humor at Bob Jensen's Website Since 2000 or Before
Go to

  1. Select a date span
  2. Search repeatedly on the word "humor"
    Most of the humor that I post is forwarded by grandmothers --- Go Figure!

Mystery pooper targeting holes of Norwegian golf course ---
Jensen Comment
This guy just set a word's record in the number of holes-in-one.

A Bit of Accountancy Humor Inspired by Enron and Related Scandals ---

It's No Laughing Matter: Analyzing Political Cartoons

A Redneck Love Song ---

Becoming Richard Pryor ---

Darwin Awards ---
Nominated for a Darwin Award in July 2015
Devon Staples, 22, was killed in a bizarre incident that took place in a backyard as Staples and his friends were firing off fireworks. Investigators said Staples had placed the fireworks mortar tube on top of his head and set it off.

Forwarded by Paula

Something for  everyone to do to keep those "aging" gray cells active!  

1. Johnny's mother had three children. The first child was named April. The second child was named May.

...What was the third child's nam e?
2. There is a clerk at the butcher shop, he is five feet ten inches tall and he wears size 13 sneakers

...What does he weigh?
3. Before Mt. Everest was discovered,

  what was the highest mountain in the world?
4. How much dirt is there in a hole

...that measures two feet by three feet by four feet?
5. What word in the English language always spelled incorrectly?
6. Billy was born on December 28th, yet his birthday is always in the summer.

....How is this possible?

7. In California , you cannot take a picture of a man with a wooden leg.

...Why not?
8. What was the President's name
  in 1975?
9. If you were running a race,
...and you passed the person in 2nd place, what place would you be in now?
10. Which is correct to say,

"The yolk of the egg are white" or "The yolk of the egg is white"?
11. If a farmer has 5 haystacks in one field and 4 haystacks in the other field,
how many haystacks would he have if he combined them all in another field?  

Here are the Answers

1. Johnny's mother had three children. The first child was named April The second child was named May. What was the third child's name?
Answer:  Johnny, of course
2. There is a clerk at the butcher shop, he is five feet ten inches tall, and he wears size 13 sneakers. What does he weigh?
Answer:  Meat.
3. Before Mt. Everest was discovered, what was the highest mountain in the world?
Answer:  Mt.  Everest; it just wasn't discovered yet. [You're not very good at this are you?]
4. How much dirt is there in a hole that measures two feet by three feet by four feet?
Answer:  There is no dirt in a hole.
5. What word in the English language is always spelled incorrectly?
Answer:  Incorrectly

6. Billy was born on December 28th, yet his birthday is always in the summer. How is this possible?
Answer:  Billy lives in the Southern Hemisphere

7. In  California , you cannot take a picture of a man with a wooden leg. Why not?
Answer:  You can 't take pictures with a wooden leg. You need a camera to take pictures.
8. What was the President's name in 1975?
Answer: Same as is it now -  Barack Obama [Oh, come on.....]
9. If you were running a race, and you passed the person in 2nd place, what place would you be in now?
Answer:  You would be in 2nd. Well, you passed the person in second place, not first.
10. Which is correct to say, "The yolk of the egg are white" or "The yolk of the egg is white"?
Answer:  Neither, the yolk of the egg is yellow [duh!]
11. If a farmer has 5 haystacks in one field and 4 haystacks in the other field, how many haystacks would he have if he combined them all in another field?
Answer:  One. If he combines all of his haystacks, they all become one big one.  


1) You can't count your hair.

2) You can't wash your eyes with soap.

3) You can't breathe through your nose when your tongue is out.

Put your tongue back in your mouth, you silly person.

Ten (10) Things I know about you.

1) You are reading this.  

2) You are human.

3) You can't say the letter ''P'' without separating your lips.

4) You just attempted to do it.

6) You are laughing at yourself.

7) You have a smile on your face and you skipped No. 5.

8) You just checked to see if there is a No. 5.

9) You laugh at this because you are a fun loving person and everyone does it too.

Oldies That Are Good for Another Round

 Tower: "TWA 2341, for noise abatement turn right 45Degrees."
TWA 2341: "Center, we are at 35,000 feet. How much noise can we make up

Tower: "Sir, have you ever heard the noise a 747 makeswhen it hits a 727?"

O'Hare Approach Control to a 747: "United 329 heavy, your traffic is a
Fokker, one o'clock, three miles, Eastbound."

United 329: "Approach, I've always wanted to say this...I've got the little Fokker in sight." 

A student became lost during a solo cross-country flight. While attempting to locate the aircraft on radar, ATC asked: "What was your last known position?" 

Student: "When I was number one for takeoff."

A DC-10 had come in a little hot and thus had an exceedingly long roll out after touching down.

San Jose Tower Noted: "American 751, make a hard right turn at the end of
the runway, if you are able. If you are not able, take the Guadeloupe exit
off Highway 101, make a right at the lights and return to the airport."

Message from Tower: "Delta 351, you have traffic at 10 o'clock, 6 miles!"
Delta 351: "Give us another hint! We have digital watches!"

A Pan Am 727 flight, waiting for start clearance in Munich, overheard
the following: 

Lufthansa (in German): "Ground, what is our start clearance time?"

Ground (in English): "If you want an answer you must speak in English."

Lufthansa (in English): "I am a German, flying a German airplane, in
Germany.Why must I speak English?"

Unknown voice from another plane (in a beautiful British accent): "Because you lost the bloody war!"

One day the pilot of a Cherokee 180 was told by the tower to hold short of
the active runway while a DC-8 landed. The DC-8 landed, rolled out, turned
around, and taxied back past the Cherokee.

Some quick-witted comedian in the DC-8 crew got on the radioand said, "What
a cute little plane. Did you make it all by yourself?"

The Cherokee pilot, not about to let the insult go by, came back with a real
zinger: "I made it out of DC-8 parts. Another landing like yours and I'll
have enough parts for another one."

The German air controllers at Frankfurt Airportare renowned as a
short-tempered lot. They not only expect one to know one's gate parking
location, but how to get there without any assistance from them. So it was
with some amusement that we (a Pan Am 747) listened to the following
exchange between Frankfurt ground control and a British Airways 747, call
sign Speedbird 206.

Speedbird 206: "Frankfurt,Speedbird 206 clear of active runway."

Ground: "Speedbird 206. Taxi to gate Alpha One-Seven."

The 747 pulled onto the main taxiway and slowed to a stop.

Ground: "Speedbird, do you not know where you are going?"

Speedbird 206: "Stand by, Ground, I'm looking up our gate location now."

Ground (with quite arrogant impatience): "Speedbird 206, have you not been
to Frankfurt before?"

Speedbird 206 (coolly): "Yes, twice in 1944, but it was dark -- And I didn't land." 

While taxiing at London's Gatwick Airport, the crew of a US Air flight
departing for Ft. Lauderdale made a wrong turn and came nose to nose with a United 727. 

An irate female ground controller lashed out at the US Air crew, screaming:
"US Air 2771, where the hell are you going?! I told you to turn right onto
Charlie taxiway! You turned right on Delta! Stop right there. I know it's
difficult for you to tell the difference between C and D, but get it right!"

Continuing her rage to the embarrassed crew, she was now shouting
hysterically: "God! Now you've screwed everything up! It'll takeforever to
sort this out! You stay right there and don't move till I tell you to! You
can expect progressive taxi instructions in about half an hour, and I want
you to go exactly where I tell you, when I tell you, and how I tell you! You
got that, USAir 2771?"

"Yes, ma'am," the humbled crew responded.

Naturally, the ground control communications frequency fell terribly silent
after the verbal bashing of US Air 2771. Nobody wanted to chance engaging
the irate ground controller in her current state of mind.Tension in every
cockpit out around Gatwick was definitely running high.

Just then an unknown pilot broke the silence and keyed his microphone,
asking: "Wasn't I married to you once?"

Forwarded by Paula


Question 1: If you knew a woman who was pregnant, Who had 8 kids already, Three who were deaf, One mentally retarded, And she had syphilis, Would you recommend that she undergoes an abortion?

Read the next question before looking at the response for this one.

Question 2:

It is time to elect a new world leader, and only your vote counts.. Here are the facts about the three candidates.

Candidate A: Associates with crooked politicians, and consults with astrologists. He's had two mistresses. He also chain smokes And drinks 8 to 10 martinis a day.

Candidate B: He was kicked out of office twice, Sleeps until noon, Used opium in college And drinks a quart of whiskey every evening.

Candidate C: He is a decorated war hero, He's a vegetarian, Doesn't smoke, Drinks an occasional beer And never committed adultery.

Which of these candidates would be your choice?

Decide first ... No peeking, and then scroll down for the response.

Candidate A is Franklin D. Roosevelt. Candidate B is Winston Churchill. Candidate C is Adolph Hitler.

And, by the way, on your answer to the abortion question:

If you said YES, you just killed Beethoven.


Humor July 1-31,  2015 ---

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Humor August 1-31, 2014 ---

Humor July 1-31, 2014---


And that's the way it was on July 31, 2015 with a little help from my friends.


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For an elaboration on the reasons you should join a ListServ (usually for free) go to

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This discussion group is headed by Randy Schostag [RSchostag@BUSVALGROUP.COM



Concerns That Academic Accounting Research is Out of Touch With Reality

I think leading academic researchers avoid applied research for the profession because making seminal and creative discoveries that practitioners have not already discovered is enormously difficult. Accounting academe is threatened by the twin dangers of fossilization and scholasticism (of three types: tedium, high tech, and radical chic)

“Knowledge and competence increasingly developed out of the internal dynamics of esoteric disciplines rather than within the context of shared perceptions of public needs,” writes Bender. “This is not to say that professionalized disciplines or the modern service professions that imitated them became socially irresponsible. But their contributions to society began to flow from their own self-definitions rather than from a reciprocal engagement with general public discourse.”


Now, there is a definite note of sadness in Bender’s narrative – as there always tends to be in accounts of the shift from Gemeinschaft to Gesellschaft. Yet it is also clear that the transformation from civic to disciplinary professionalism was necessary.


“The new disciplines offered relatively precise subject matter and procedures,” Bender concedes, “at a time when both were greatly confused. The new professionalism also promised guarantees of competence — certification — in an era when criteria of intellectual authority were vague and professional performance was unreliable.”

But in the epilogue to Intellect and Public Life, Bender suggests that the process eventually went too far. “The risk now is precisely the opposite,” he writes. “Academe is threatened by the twin dangers of fossilization and scholasticism (of three types: tedium, high tech, and radical chic). The agenda for the next decade, at least as I see it, ought to be the opening up of the disciplines, the ventilating of professional communities that have come to share too much and that have become too self-referential.”


What went wrong in accounting/accountics research? 
How did academic accounting research become a pseudo science?

Avoiding applied research for practitioners and failure to attract practitioner interest in academic research journals ---
"Why business ignores the business schools," by Michael Skapinker
Some ideas for applied research ---


Clinging to Myths in Academe and Failure to Replicate and Authenticate Research Findings


Poorly designed and executed experiments that are rarely, I mean very, very rarely, authenticated

Discouragement of case method research by leading journals (TAR, JAR, JAE, etc.) by turning back most submitted cases ---

Economic Theory Errors
Where analytical mathematics in accountics research made a huge mistake relying on flawed economic theory and interval/ratio scaling


Accentuate the Obvious and Avoid the Tough Problems (like fraud) for Which Data and Models are Lacking


Financial Theory Errors
Where capital market research in accounting made a huge mistake by relying on CAPM


Philosophy of Science is a Dying Discipline
Most scientific papers are probably wrong


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