http://www.theaustralian.com.au/business/millions-added-to-abc-learning-accounts-court-told/story-e6frg8zx-1225852939625
Summary:
ABC Learning's former acting chief financial officer, John Gadsby has said in court that the company's internal accountants were instructed to prepare a cash flow statement for the rest of the fiscal year 2008. The original cash flow statement, referred as "first cut" at the courts, showed no sign of receiving an "compensation fees" paid to ABC Learning Centres from childcare operators and developers from June to December 2008. However, after chief executive and founder Eddy Groves reviewed it, a "second cut" of the statement was presented; showing $44.79 million in fees received over that six-month period.
Connection:
Cash flow statement, according to the text book, is to be prepared to measure the company's performance on a cash basis. It cannot replace the income statement as it summarizes the cash flows. Groves has altered the numbers on the cash flow statement resulting in the betterment of the company's "performance". Cash flow statement is used for investors and users to ideally measure the company's performance over a period of time. This can help them better predict the investments made to the company and whether or not the investment shall continue. Groves, by altering the numbers on the cash flow statement, will mislead the users into thinking that the company is doing very well and will continue to invest; result of a fraud.
Conclusion:
As a company, I believe it is crucial to provide the correct and valid information in the books as this is part of ethics and also the ties in with the name of the company. As an investor, it is absolutely important to have the right information in front of me before I make my investment decisions. A fraud like this may cost me millions in loss. Referring back to the book, I believe it is important to have a separate statement to measure the company's performance on a cash basis as the cash flow statement shows the financing, operating and investing activities within the company. Hence, help users better predict the potential of the company.
3.01.2010
CHAPTER 4: GAAP vs. IFRS
http://www.cica.ca/ifrs/ifrs-transition-resources/implementing-ifrs/item2466.aspx
Summary:
As of January 1, 2011, all Canadian publicly accountable enterprises will adopt and replace Canadian Generally Accepted Accounting Principles (GAAP) to the International Financial Reporting Standards (IFRSs). The IFRS are the collection of financial reporting standards issued by the International Accounting Standards, an independent, international standard setting organization. The aim of IFRSs is to provide "a single set of high-quality, global accounting standards that require transparent and comparable information in general purpose financial statements". Because Canada comprises less than four per cent of world capital markets, IFRSs will provide more opportunities for Canadian businesses and investors by reducing the cost of capital, increasing access to international capital markets and reducing costs by eliminating the need for reconciliations. Rapidly becoming the global language of accounting, IFRSs have been adopted by over 100 countries, including all those of the European Union and much of the Pacific Rim. In the US, the debate over whether to adopt IFRSs continues, but foreign private issuers who prepare their financial statements in accordance with IFRSs are no longer required to file reconciliations to US GAAP.
Connection:
In our book, it stated that there are many similarities between IFRS & Canadian GAAP, but there are also significant differences. There will be some major changes to financial reporting, which have the potential to impact stakeholders considerably; planning and communication is critical to managing the change.
Generally, Canadian GAAP and IFRS are very similar in terms of the style and form of the individual standards, and the fact that the standards are based on a similar conceptual framework. However, in addition to some pervasive differences, there are many subtle differences in the details, the significance of which will vary by industry and individual organization.
The three areas of IFRSs considered to create the most significant changes from Canadian GAAP are:
I believe it is a good approach for Canadian publicly accountable enterprises to adopt the IFRS as we only make up less than 4% of the world's capital markets. As stated, in the long term, if all internationally traded companies and companies with international operations report under IFRSs, the need for reconciliations between national GAAPs will be eliminated. The financial information they report will be consistent and comparable, creating new opportunities in international financial markets, with increased access to and lower cost of capital. On the other hand, for short term, the impact on entities adopting IFRSs will vary, and for some it will be considerable. Every affected organization should assess the likely impact as soon as possible.
Summary:
As of January 1, 2011, all Canadian publicly accountable enterprises will adopt and replace Canadian Generally Accepted Accounting Principles (GAAP) to the International Financial Reporting Standards (IFRSs). The IFRS are the collection of financial reporting standards issued by the International Accounting Standards, an independent, international standard setting organization. The aim of IFRSs is to provide "a single set of high-quality, global accounting standards that require transparent and comparable information in general purpose financial statements". Because Canada comprises less than four per cent of world capital markets, IFRSs will provide more opportunities for Canadian businesses and investors by reducing the cost of capital, increasing access to international capital markets and reducing costs by eliminating the need for reconciliations. Rapidly becoming the global language of accounting, IFRSs have been adopted by over 100 countries, including all those of the European Union and much of the Pacific Rim. In the US, the debate over whether to adopt IFRSs continues, but foreign private issuers who prepare their financial statements in accordance with IFRSs are no longer required to file reconciliations to US GAAP.
Connection:
In our book, it stated that there are many similarities between IFRS & Canadian GAAP, but there are also significant differences. There will be some major changes to financial reporting, which have the potential to impact stakeholders considerably; planning and communication is critical to managing the change.
Generally, Canadian GAAP and IFRS are very similar in terms of the style and form of the individual standards, and the fact that the standards are based on a similar conceptual framework. However, in addition to some pervasive differences, there are many subtle differences in the details, the significance of which will vary by industry and individual organization.
The three areas of IFRSs considered to create the most significant changes from Canadian GAAP are:
- Impairment – Under IFRSs impairments will generally be triggered more often but unlike Canadian GAAP, impairments under IFRS can be reversed
- Securitization – IFRSs are fundamentally different in this area from Canadian standards
- Revaluations – Some IFRSs including Property, Plant and Equipment,Investment Property and Intangibles allow the re-valuation of assets under certain circumstances.
I believe it is a good approach for Canadian publicly accountable enterprises to adopt the IFRS as we only make up less than 4% of the world's capital markets. As stated, in the long term, if all internationally traded companies and companies with international operations report under IFRSs, the need for reconciliations between national GAAPs will be eliminated. The financial information they report will be consistent and comparable, creating new opportunities in international financial markets, with increased access to and lower cost of capital. On the other hand, for short term, the impact on entities adopting IFRSs will vary, and for some it will be considerable. Every affected organization should assess the likely impact as soon as possible.
1.20.2010
Chapter 3: Ethics at Work
http://www.camagazine.com/archives/print-edition/2006/aug/features/camagazine8392.aspx
Summary:
In this article fromt he CAmagazine, the topic is on ethics at workplaces. There was a case where an employee found suspicious pay cheques to employees where he didn't know. After consulting with other co-workers, he decided to report this situation through the company's ethics hotline. It turns out that the boss made up fictitious job positions and pocketed the extra pay cheques to his own account. It turns out that many employees who account similar situations does not do anything, in fear of being called backstabbers or getting fired. The article continues to state how important ethics is at work due to leading to fraud and resulting in fictitious accounts being journalized and recorded for.
Connections:
In our accounting textbook on page 163 there's a side blog talking about ethics in accounting. It states that many adjusting entries require estimates and the exercise of judgement by management, which provide opportunities for managers to manipulate both balance sheet values and income amounts. Relatively speaking, the accounts can be changed accordingly. Thus, this can lead to fraud, inaccurate income statements which defect decisions made based on income statements such as evaluating a company's period performance. The book asked the reader to think about what they would do in a similar situation. Thinking about who will be affected by your decision (including yourself), and how they will be helped or hurt by your decision help structure the person's understanding of the situation and make an ethical decision in context of these effects.
Conclusions:
If I was placed in a situation similar to the article on the CAmagazine, I think I would do the same as the employee, reporting the boss. It might be in my character to not care as much about having my job kept after reporting my boss, at least not at the moment. It would be in my nature to report something that I think is suspicious. I may be called a backstabber or a whistleblower, but if it is for the betterment of the company, then I believe is worth it. I think ethics in accounting or any other work force is extremely important because it determines the atmosphere and the kinds of people at work. Most importantly, it will affect greatly to the income value, as fraud might lead a company to bankruptcy. I think a better security system in the accounting software would help reduce the amount of fraud in a company, as everything is computerized through each transaction and automatically placing the numbers in the correct accounts.
Summary:
In this article fromt he CAmagazine, the topic is on ethics at workplaces. There was a case where an employee found suspicious pay cheques to employees where he didn't know. After consulting with other co-workers, he decided to report this situation through the company's ethics hotline. It turns out that the boss made up fictitious job positions and pocketed the extra pay cheques to his own account. It turns out that many employees who account similar situations does not do anything, in fear of being called backstabbers or getting fired. The article continues to state how important ethics is at work due to leading to fraud and resulting in fictitious accounts being journalized and recorded for.
Connections:
In our accounting textbook on page 163 there's a side blog talking about ethics in accounting. It states that many adjusting entries require estimates and the exercise of judgement by management, which provide opportunities for managers to manipulate both balance sheet values and income amounts. Relatively speaking, the accounts can be changed accordingly. Thus, this can lead to fraud, inaccurate income statements which defect decisions made based on income statements such as evaluating a company's period performance. The book asked the reader to think about what they would do in a similar situation. Thinking about who will be affected by your decision (including yourself), and how they will be helped or hurt by your decision help structure the person's understanding of the situation and make an ethical decision in context of these effects.
Conclusions:
If I was placed in a situation similar to the article on the CAmagazine, I think I would do the same as the employee, reporting the boss. It might be in my character to not care as much about having my job kept after reporting my boss, at least not at the moment. It would be in my nature to report something that I think is suspicious. I may be called a backstabber or a whistleblower, but if it is for the betterment of the company, then I believe is worth it. I think ethics in accounting or any other work force is extremely important because it determines the atmosphere and the kinds of people at work. Most importantly, it will affect greatly to the income value, as fraud might lead a company to bankruptcy. I think a better security system in the accounting software would help reduce the amount of fraud in a company, as everything is computerized through each transaction and automatically placing the numbers in the correct accounts.
10.09.2009
Chapter 2: Amortization Insurance?!
http://businessmirror.com.ph/home/companies/17173-moratorium-on-payment-of-loan-amortization.html
Summary:
Connection:
Reflection:
Summary:
According to the online dictionary - Investopedia, the definition of moratorium is "...the legally binding halt to the right of collecting debt." This article is an explanation of how moratorium on payment of loan amortization would be like. If companies whom have borrowed money from creditors and have just been in a some sort of crisis, they should be allowed to deffer to pay their monthly amortization. In the article, it stated some reasons on why borrowers sometimes failed to repay. The article explained that maybe the borrowers have just been through an global crisis, for example, a typhoon. The typhoon can be disastrous which leads a company going bankrupt, which leads to thousands of workers to be unemployed. Moratorium on payment of loan amortization is like a insurance for the less fortunate borrowers, creditors should be more lenient on them by including their loss in their loan balance. In all, moratorium gives more protection to the borrowers and provides a more understanding and socially acceptable business cooperation.
Connection:
Quoting from our textbook, amortization is "..the amount shown as an expense in any period, which sometimes is known as depreciation..." A loan is a liability. The companies lost the ability to pay back their debt and is therefore a negative net worth to the creditors. Regularly, other companies' asset depreciate at a steady rate, calculated by the original cost subtracting the estimated residual value and dividing the whole number by the estimated useful life. Like so, the companies that been through a financial crisis, their assets depreciated maybe more than everyone else, they cannot pay it back even more. At first, when the companies asked for a loan, it is their liability and the accounts receivable for the creditors. However now, when the companies cannot pay back their accounts payable, it creates a negative net worth for the creditors. This may cause the creditors to be in a bit of financial trouble for the creditors as they might not be able to recover their cash flow quick enough to continue their running.
Reflection:
I think that natural disasters can happen anytime of the day. This can be a great risk to companies if they're taking out a loan from creditors because there might a chance that a natural disaster destroys the company and the company will not have the ability to repay the debt. I think this moratorium on payment of loan amortization is a good thing because instead of pushing indebted companies to a financial disaster it gives them a leeway to slowly repay their debt back. If the creditors were to force those companies to repay immediately after a downfall, the companies might file for bankruptcy, that way the creditors will not get their money back for sure. Having a moratorium may be more beneficial for both sides. A great example of this is Hurricane Katrina. The storm had a massive physical impact on the land, affecting 90,000 square miles – an area the size of Great Britain. Over 80 percent of the city of New Orleans flooded. Til now, after 4 years, New Orleans have not yet recover from this horrendous nightmare. The government is giving compensation to all those affected. They are rebuilding communities, providing mortgage and foreclosure relief and counseling for homeowners, creating unique partnerships...etc. For those companies who were indebted, they were given compensation and time to repay their debt back. They were given a chance to start over rather than pushed to the tip of the financial cliff. The creditors, government, and the companies found a balance in between that can be beneficial in the long run.
Kate Wong
9.14.2009
Chapter 1 auditors: Auditors to the rescue!
Summary
The supervisors of the town Warminster in Wiltshire, England, has just unanimously decided to hire an outside auditory to monitor and pursue the hundreds and thousands of dollars that the businesses are trying to escape paying. McCarthy & Co., a Lafayette Hills accounting firm will be responsible for collecting the business taxes of Berkheimer. The object of this mission is to identify the businesses who have underpaid their business taxes or have not paid at all. Township Manager, Robert Tate, suggested that paying the auditors an hourly wage of $115 will be more favorable when businesses challenge auditors in the courts. For those businesses who have avoid paying taxes, the township offers an amnesty program to help businesses pay back the taxes owed by the end of the year.
Connection
In our textbook - Financial Accounting, page.34, describes the job of an auditor. The description of auditors are "...professionally trained accountants who add credibility to the financial statements by expressing their professional opinion as to whether the financial states fairly present the company's result." And that is what McCarthy & Co. is doing here. As their job description outlined, they will be investigating the company and will then verify the various procedures and the reasonableness of the financial numbers that the company has provided. Sometimes while commissioned to verify the financial states of a certain company, the auditors might come across fake statements made up by the company. The company will insert beautiful numbers to create a fake statement with the objective to capture investor's interest into investing into their company. Auditors help stop these frauds.
ReflectionI think now that Wiltshire begin to have auditors monitor the business companies, there will be less frauds, scandals and tax evasions. In a sense, this will be the law and order in the business world. In my point of view, auditors are like investigators and judges. They investigate and verify if a company's financial statements are true. If they are, the auditors will consent the numbers that the company has provided. If not, then penalties and consequences will follow. I was also thinking that maybe the township has suddenly unanimously decided to hire outside auditors is maybe because of the tax evasions and scandals that might be increasing over the years significantly.
Kate Wong
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