Wiley Accounting Updates

Posted December 9th, 2012 by Gerry La Rocca & filed under Accounting Careers, CPA.

Have female CAs come a long way?

Female CAs have come a long, long way since their beginnings in the profession. How do they see the road ahead?By all accounts, Janice Rennie is a pretty inspiring woman. Based in Edmonton, this FCA and mother of two sits on six boards, is a former owner of two businesses, has held numerous senior management positions and stays active in several charities. This year, she was elected a Fellow of the Institute of Corporate Directors, having already earned her fellowship from the Institute of Chartered Accountants of Alberta in 1998.

But Rennie will be the first to say the path to success has included its share of trials. During her early days as a CA in the 1980s, she recalls a client who didn’t want to work with her because she was a woman. “I was well regarded in the firm, but the client didn’t see how a woman could bring any value to the business,” she says. Her firm backed her up, but the experience set the precedent for how Rennie would approach her career going forward: “To be equal, I knew I had to be better than the guys.”

Rennie’s hard work paid off and in 1990, at the age of 33, she was asked to join her first board at NOVA Chemicals (then called Nova Corp. of Alberta). Not only was she the only female on the board; she was the youngest member by at least 20 years. “I knew I was plunging into an area where men traditionally walk,” she says.

Today, women make up a third of all members of the profession. About half of new entrants are female, compared with 23% when Rennie graduated in 1981 and a paltry 2% in 1970. From 2009 to 2011, women secured the overall highest standing in Canada on the Uniform Final Evaluation and last year, they garnered all the regional gold medals as well. (At the time of writing, the 2012 results had yet to be released.) Many of the major CA firms across the country have recognized the potential of their female employees by implementing initiatives geared specifically to helping women succeed in leadership roles.

As Boomers retire:

As the boomers retire and more women move through the profession, Taub says there will be an inevitable changing of the guard that will hopefully entail a leadership consisting of both women and men who are open to customizing the work environment. In the interim, she believes there should be policies in place to train people who evaluate talent to be more objective. “The traditional model of working in an office 80 hours a week may not work for everyone,” she says. “There is talent out there that will get the work done in an untraditional way.” Fortunately, some firms have already made major strides in introducing such policies. The CICA’s Work/Life Balance Report shows one in two respondents (52%) work for an employer that has policies to handle gender issues. Flexibility around work arrangements is also gaining popularity, with two in three respondents reporting that their employers offer flex time. Some benefits, such as summer hours and flex time, are catching on with both genders, although women are still the major users .

Discussions Questions:

1. Why is it still difficult for women to achieve the CEO positions?

2. What do you understand by Work/Life balance?

3. Would flex time be a good thing for all employers to offer their employees.

Article written by Rolalind Stefanac, read more about Woman at Work

Posted December 2nd, 2012 by Gerry La Rocca & filed under Accounting Careers, Auditing, Financial Accounting, Fraud Accounting.

What is the role of Forensic Accountants:

Forensic accountants are uniquely suited to help in-house counsel address issues involving financial reporting, accounting and internal controls. They also collect and analyze accounting and internal-controls evidence. They produce a fact-based report that can inform the decision-making process in inquiries, investigations and dispute resolution.

By product of Forensic Accountants work:

The forensic accountant’s work often include remediation strategies to help a company mitigate and remedy procedural or internal-controls gaps that allowed the underlying issue to occur. Inquiries into accounting and internal controls raise a host of technical issues requiring specialized knowledge that forensic accountants are uniquely positioned to provide.

How does Forensic Accounting differ from Auditing?

The objective of a forensic accounting assignment is to collect, analyze and report on the evidence or facts surrounding a particular act that often has litigious, fraudulent or criminal implications.

Auditors also collect and analyze evidence, but an independent auditor’s objective is to attest to the credibility of assertions that are under examination, such as the material accuracy of financial statements for which the audited company’s management is responsible.

Internal auditors examine evidence to determine whether people followed prescribed processes or internal controls; this occurs, for example, in an operational or Sarbanes-Oxley compliance audit.

Forensic accountants, independent auditors and internal auditors all have experience related to accounting and internal controls. All are process oriented and know how to spot issues.

Most important trait of Forensic Accounting:

The most important trait of a good forensic accountant stems from the difference in the work’s objective as previously discussed.Once an independent or internal auditor spots a concern, protocol is to notify company management about the issue but not investigate further; that’s management’s responsibility. This is where the objective shifts and one of the forensic accountant’s strongest skills comes in: an investigative mind that drives him or her to answer questions about what occurred, when and how it happened, and who was involved.

Sometimes forensic accountants also may need to gather facts about why an event may have occurred. This is true, for example, in a fraud claim where the trier of fact must find intent to determine fraud. Forensic accountants always look for answers to such questions or for red flags in the evidence.

Many forensic accountants have additional training and experience in skills such as evidence collection and preservation, witness interviews, and data-mining and analysis. They often are well aware of legal procedures and protocols, and they also may be subject-matter experts with specific specializations, such as corruption, bribery or money laundering.

Practical Considerations

One consideration is whether to hire a forensic accountant directly as an employee or to engage an outside third party that provides such services. A factor in this decision is whether it’s useful to have the skill set in-house or preferable to have the forensic accountant be completely independent of management.

If in-house counsel decides to hire the forensic accountant as an employee, the department to which the individual should be assigned is a consideration. Should the forensic accountant be part of internal audit, for example, or legal and compliance?

In the past, companies have used existing internal auditors to do this type of work as a way to reduce costs and due to the perceived similarities in the skill set and work product. More and more, however, forensic accountants employed by an organization are assigned to the legal and compliance department because of the legal implications surrounding the work. This structure also allows the forensic accountant to maintain an objective approach to an assignment as he or she is not governed by management or influenced by potential biases within the organization.

Assigning the forensic accountant to the legal and compliance department also could result in more privilege protection than assigning him or her to internal audit or another department. In some instances, outside counsel may need to engage the forensic accountant on behalf of the company to invoke the attorney-client privilege.

Collaboration with a forensic accountant can be especially effective for developing case strategy when financial reporting, accounting or internal controls are involved.

Article written by:Elizabeth M. Junell, click to obtain the complete article

Discussion Questions:

1. Would you consider a career in Forensic Accounting, based on what you have read in the newspapers and the heard in the News?

2. Are the differences between a Forensic Accountant and an Auditor , clearly differentiated?

3. What are the risks of choosing a Forensic Accounting career?

Posted November 4th, 2012 by Gerry La Rocca & filed under Canadian Economy, Managerial Accounting.

Succeeding in Turbulent Times

The credit crisis is just one of several factors influencing Canadian companies today. The Canadian dollar, rising energy costs, pressure from off-shore competitors and the economic slowdown in North America are also contributing to widespread economic uncertainty; creating challenges and opportunities and a need for businesses to focus on value preservation and enhancement.

Liquidity, Cash and Working Capital

Liquidity, cash and working capital are keys to survival and growth of a business. Businesses need to manage their cash and related assets and liabilities in an efficient and cost effective way, in order to optimize liquidity, improve profitability and respond to market conditions in a timely manner.

Liquidity

For a financially distressed company, cash release or preservation may mean survival. For a non-distressed company, cash release can be used to reduce debt, fund growth and investment or provide a better return to stakeholders.

Reducing Costs While Maintaining Performance

Reducing costs while maintaining performance means helping identify ways of saving costs in some areas of the business and enabling it to operate more cost efficiently.

But wherever costs are reduced, this action must be done in a way that delivers lasting business performance improvements, rather than in a quick hit with short-term gains and long-term difficulties.

Proactive cost management is critical to running an effective organization. Strategic plans need to be driven, tools built to track progress and a cultural commitment must be created to minimize unnecessary costs.

Managing Risk

Managing organizational risk in tough times means taking a holistic view. This requires an integrated cross-departmental framework of controls, checks and balances.

Organizations can no longer afford to treat risk in silos, in separate departmental level initiatives. Risk management needs to be an integrated, enterprise wide approach, keeping focus on multiple key indicators which show early warning signs of potential business problems, with pre-planned strategies to address potential risks.

Ongoing board level attention is required, as risk management is no longer a purely compliance issue. Globally, organizations are facing uncertain times, and management of risk at the highest level is critical. Only with a systematic, but strategically led approach to risk management, can organizations of today be more assured of avoiding, or better managing, the pitfalls of difficult market conditions.

Discussion Questions

1. Based on your everyday experience, do you see changes in the economy? Do you feel that we are in turbulent times?

2. What must businesses do to stay alive or in business during tough times?

3. Managing Risk! What are some of the risks faced by businesses today?

See KPMG Succeeding in Turbulent Times link for more details

Posted October 28th, 2012 by Gerry La Rocca & filed under Accounting Careers, Taxation & Planning.

Reducing tax complexity a key to economic recovery

The Canadian Institute of Chartered Accountants (CICA) today (Oct. 23, 2012) in Ottawa outlined what it views as priorities for the next federal budget if the country is to experience economic growth, job creation and enhanced competitiveness.

Gabe Hayos, the CICA’s vice-president of taxation, told the House of Commons Standing Committee on Finance that prudent fiscal management and a focus on Canada’s tax system are crucial factors to achieving a sustained economic recovery.

The CICA applauded the federal government for its plan to balance the budget over time through expenditure controls and for fulfilling its commitment to lower the corporate tax rate to 15 per cent.

“Attention must now turn to reducing the complexity of the country’s tax system,” stressed Hayos. “A real commitment to tax simplication is required from the federal government if change is going to occur.

Simplification would increase productivity and improve competitiveness and we can look to other jurisdictions for guidance.”

The CICA recommends a two-staged approach. First, the federal government should establish an independent office that would provide advice on reducing both the legislative and administrative complexity of Canada’s tax system. This body would focus on immediate or short-range actions.

The UK Office of Tax Simplification could serve as a model.

For a more long-term focus, the CICA suggests the government establish an expert panel to explore major structural changes to the tax system.

Other taxation matters were addressed as well including a call to ease the personal income tax burden to help attract and retain talent.

“We are closely monitoring the pulse of Canadians on taxation matters,” explained Hayos. “The CICA is active all year long, whether it be through special committees devoted to tax or conferences and courses we offer.”

The CICA presentation also addressed financial literacy, innovation funding, reducing red tape, expanding international trade agreements and helping internationally trained professionals succeed in their chosen fields.

Chartered Accountants (CAs) are Canada’s most valued, internationally recognized profession of leaders in senior management, advisory, financial, tax and assurance roles. Through their integrity, expertise, and internationally recognized qualification standards, Canada’s 82,000 CAs sustain their influence and leadership position both in Canada and globally. As trusted business advisors to Canadian organizations of all sizes, Canada’s CAs foster confidence in Canadian business and contribute to the health and sustainability of Canada’s capital markets and economy. The Canadian Institute of Chartered Accountants (CICA) represents Canada’s CA profession both nationally and internationally. The CICA is a founding member of the International Federation of Accountants (IFAC) and the Global Accounting Alliance (GAA).

Discussion Questions:

1. Will simplification of the Canadian Tax system help economic growth?

2. Reducing corporate taxes for small business from 18% to 15%: Will this increase more businesses to venture and invest to help increase economic growth?

3. Will simplification of the tax system ever be achieved due to the complex nature of business?

To read more visit CICA, reducing tax complexity

Posted October 21st, 2012 by Gerry La Rocca & filed under Accounting Careers, Financial Statement Analysis, International Accounting, IPO.

Facebook’s IPO price: $38 per share

A little while back facebook’s IPO (Initial Public Offering) would take the financial community by storm. The stock would certainly rise to double its Initial Public Offering. This is the reason investors crave to have the opportunity to purchase an IPO.

After four months of paperwork, hype and speculation, the last piece of the Facebook IPO is in place: Facebook priced its IPO at $38 a share.

At that price, Facebook’s IPO will raise $16 billion, making it the largest tech IPO in history. It’s the third largest U.S. IPO ever, trailing only the $19.7 billion raised by Visa (V, Fortune 500) in March 2008 and the $18.1 billion raised by automaker General Motors (GM, Fortune 500) in November 2010, according to rankings by Thomson Reuters.

The $38 IPO price is the rate at which Facebook’s underwriters (including lead banker Morgan Stanley) will sell shares to their clients, which typically include large institutional investors, mutual funds and hedge funds.

What does the founder stand to make on this deal?

Who’s selling shares: Facebook CEO and founder Mark Zuckerberg plans to sell 30.2 million shares in the IPO offering. That will net Zuckerberg about $1.1 billion.

What is the stock selling at today?

In early September 2012, with Facebook’s stock down by more than 50% since its IPO, the world’s biggest social networking company moved to shore up its stock price. Mark Zuckerberg, Facebook’s CEO, conducted his first public interview since the debacle. He also promised he wouldn’t sell any of his personal shares for one year and the company said it would withhold 101 million shares.

But the rebound in Facebook’s stock that the company tried to engineer appears to be over for now. Facebook’s shares changed hands on Thursday for less than $19 and the stock closed around $18.99, 50% lower than Facebook’s IPO price of $38.

One of the reasons why the stock dropped!

Ironically, it was one of Facebook’s biggest competitors that caused Facebook’s stock to drop by more than 4.5% on Thursday. Google mistakenly released disappointing quarterly earnings during the trading day, fueling general investor concern over online advertising sales and the shift to mobile.

Stock Options may not be in the money!

Facebook will itself report earnings on Tuesday. So far the leading tech indicators are not good with Google, Intel and IBM all reporting weak earnings. Halloween might truly get scary for Facebook’s stock as lock-up restrictions on many millions of Facebook shares owned by Facebook employees expire the following Monday.

Facebook’s shares first traded 50% lower than their IPO price in August. Now, five months after the IPO, they are back below this symbolic threshold.

Shares in Facebook hit new market lows in Friday trading in New York , leaving them at half their original flotation value.

The stock closed down 4.1% at $19.05 and fell to $19 for the first time, meaning it has lost half its market value since the company’s initial public offering in May 2012.

Are investors concerned?

Investors have been concerned about Facebook’s ability to increase revenue and make money from its growing mobile audience, although many analysts still hold positive opinions of the company’s long-term prospects.

Following the social media network’s notorious initial public offering (IPO) in May, the lock-up period that forced pre-float investors to keep hold of shares ended on Thursday, suddenly placing millions of shares on the market.

When Facebook went public three months ago, 421 million shares were issued at $38 (£24.20) each, rising as high as $45 (£28.66) each after trading began.

But the stock closed on its first day barely above its initial public offering price of $38 and has been below that level since.

Analysts are now questioning the moves shareholders, including Goldman Sachs (NYSE: GS – news) and Microsoft (NasdaqGS: MSFT – news) , will make – testing their long-term investment commitments to the social networking site.

What will happen next?

Currently companies only have the ability to advertise products or brands to users who have ‘liked’ their pages.

Facebook is believed to be testing the scheme which, if successful, would open advertisers up to the site’s one billion users, who have not necessarily become fans of particular brand pages.

Paul Armstrong, head of social at media agency Mindshare UK said: “Facebook have to walk a fine line now as they have to keep both stakeholders and users happy.

“Mark Zuckerberg has a colourful past with user privacy and has a clear vision for a more open future web for all.

“It is important to remember this is still only a test at the moment and Facebook has a history of reversing decisions made on these subjects when users stand up in large numbers.”

Mr Armstrong added: “It is early days still after Facebook floated – those expecting a quick windfall have been disappointed but Facebook are in for the long haul as brands should be.”

Discussion Questions:

1. After reading this article did you ever expect the stock of facebook to decline by more than half its initial public offering?

2. Based on the new privacy laws and customer concerns over their personal lives being exploited, will facebook continue to grow at its unprecedented rate?

3. Based on your experience and usage of facebook: Will the company’s advertising revenues continue to grow?

To read more about facebook: Facebook Fiasco Facebook IPO: Initial Price

Posted October 14th, 2012 by Gerry La Rocca & filed under Corporate Social Responsibility, Taxation & Planning.

Occupy Montreal: Victoria Square, Montreal,Quebec

if you’re looking for Canada’s richest 1%, the compensation tables in the proxy circulars of Canadian publicly listed corporations are a good place to start.

Canada’s Richest

If you’ve made it into Canada’s richest 1% club, you’re among the 246,000 prestigious few tax filers who made a minimum of $169,300 and an average income of $404,500 (as of 2007, when the most recent data available is from).

Canada’s CEO Elite

Canada’s CEO Elite 100 — the 100 highest paid CEOs of companies listed in the TSX Index — readily surpass this entrance requirement: Their total average compensation hit the heady $8.38 million mark in 2010. That represents a 27% increase over the average $6.6 million they pocketed the previous year.

Lowest paid Canadian paid CEO

The lowest paid among Canada’s CEO Elite 100 ‘earned’ $3.9 million in 2010. Soaring executive salaries have played a significant role in driving the growth in income inequality in Canada. In 2010, 188 of the CEOs of companies in the TSX Index had enough compensation to get them into the 0.01 %club.

In the words of the Occupy movement, what about the 99%?

In stark contrast to Canada’s CEO Elite 100, Canadians working full-time, full-year for the average weekly wage earned a humble $44,366 in 2010.

Between September 2010 and September 2011, average weekly earnings in Canada rose by only 1.1%. After taking inflation into account, weekly earnings are now lower than they were during the worst of Canada’s 2008–9 recession, resulting in a dangerous mix:

Canadians are feeling the squeeze of shrinking disposable incomes, a rising cost of living, and record-high household debt.

What are people saying about Occupy Montreal/Wall Street

“I think that there’s a process and people are becoming more aware that they can and should do something political to force the government to do something about economic injustice. In that sense, I think it was very successful.”

“In an objective way, it’s changed people’s ways of thinking and speaking about the rich. We’ve done that for the country. As un-ideal as ‘The 99%’ is, it has focused people on the 1%.” Indeed — hard to imagine Mitt Romney getting the media ride he’s gotten had OWS (Occupy Wall Street) not focused attention on wealth inequity in the world’s richest country.

The Reality

Reality is even harsher for Canada’s minimum wage workers: If they were lucky enough to have a full-time job, minimum wage workers earned, on average, $19,798 in 2010.

Here’s how the income gap between Canada’s CEO Elite 100 and the rest of us plays out in real time: By 12:00 noon January 3, the Elite 100 already have what it takes the average Canadian the rest of the year, working full-time, to earn. The highest paid pockets the average Canadian wage by about 10:30 a.m. on January 2, the first paid day of the year. It takes the lowest paid among the Elite 100 a little longer to fill their glasses and raise a toast to their success: By 4:43 pm January 4 they’ve surpassed the average Canadian wage earner.

Discussion Questions:

Search the web for Occupy Wall Street/Montreal: Do you think that this movement has slowed down? Will people rise up again and ask governments to stop the inequalities in salaries?
Should Chief Executives Officers (CEO) continue to earn such high wages and benefits?
Would it be feasible to put a salary cap for Executives, similar to the National Hockey League (NHL) salary cap? How is this salary cap presently working out in the NHL?

To read the complete report , Canada’s CEO Elite 100 , authored by Hugh Mackenzie

Can the Occupy movement gain new traction one year later? read more

Posted October 8th, 2012 by Gerry La Rocca & filed under Canadian Economy, Corporate Social Responsibility.

A Business Case for Sustainability

Regardless of your corporate size or industry Corporate Social Responsibility (CSR) and sustainability will have an impact on the future of your business.

Business Case

The business case for adopting socially responsible and sustainable business practices is clear, regardless of what industry you are in. Just look at the environmental landscape.

Demand for energy is rising as a result of population growth and changing climate patterns. This is happening when government is pushing for less coal and fossil fuels and more green power.

Where does Sustainability come from?

Sustainability derives from the concept of sustainable development that entered the world in the early 1980’s. It largely comes down to the realization that when making economic decisions, you need to consider the impact of your actions on the environment and on society .

Economic sense!

It was an economic theory that stated if you consider things beyond immediate financial returns, it’s good for business in the long-run because a healthier, more vibrant society makes for a healthy economy. In effect, sustainable development was a business model for growth.

Corporate Social Responsibility

Over time, corporate social responsibility (CSR) ethics and the role of business in society,started to co-mingle with sustainability. In today’s world, are are interchangeable terms. So what is considered socially responsible is to care for the environment, to respect the rights of others, especially the vulnerable, and to consider the impact of today’s actions on the future generations.

Discussion Questions:

1. How would you communicate Corporate Social Responsibility to the corporate shareholder’s? What processes would you implement immediately if you were the new Chief Executive Officer?

2. How would you identify the impacts of your company on the environment if you were responsible for the Alberta Tar Sands?

3. Should sustainability be a responsibility of corporations or should we all play a role to protect the environment? Can consumers play an important role in Corporate Social Responsibility?

Article written by: PWC, see pwc.com/ca/private , title of article: A Business Case for Sustainability

Posted September 30th, 2012 by Gerry La Rocca & filed under Fraud Accounting.

GLOBAL ECONOMY AND ITS IMPACT ON CURRENT FRAUD TRENDS

Frauds in general continue to be on the rise at an alarming rate in direct correlation with both the domestic and global downturn in the economy.

Those who might otherwise be predisposed to committing crime find themselves reaching states of desperation as a result of their inability to provide, in some cases, even the necessities of life.

In addition, organized crime groups capitalize on desperation by preying on those who are most vulnerable financially to join their forces in defrauding the wealthy. As recently shown in the Charbonneau Commission taking place in Quebec.

The recent “Occupations” ( The othe 99% demonstrating in the streets of New York and Montreal) that occurred throughout the world’s economic powers were a clear sign of many people’s frustration with the perceived divide between the wealthy and the impoverished. There is evidence to support that organized crime factions infiltrated those groups with a view to heightening the demonstrations and to recruiting potential fraudsters to assist in their attack against “the 1%”, which to many represents the growing wealth gap between America’s wealthy elite compared to the overall citizenry.

Difficult economic times:

Difficult economic times by nature give rise to increased fraudulent activity, while positive economic times open the flood gates for opportunity. What changes are the approaches and methods used by the fraudsters, and the potential victims they target.

What to watch out for in poor economic times:

In poorer economic times crimes such as identify theft, tax fraud, frauds against seniors, and mortgage fraud are prevalent. In more lucrative times investment frauds and ponzi schemes rise to the top of the criminal ladder.

Organized crime continues to play a lead role in financially based crime, particularly evident in North America. Italian mafia groups continue to launder funds through legitimate stock trading, resulting in a corruption of the North American markets. Even the non-financial based criminal activity controlled by organized crime, such as prostitution and narcotics trafficking, results in funds being laundered through otherwise legitimate entities, further corrupting the world’s economic systems.

The impact of fraud on a global scale is apparent, from increased tax burdens facing both the private and public sectors, to increased insurance premiums, to a decrease in economic growth and consumer spending, fraud impacts everyone.

Internal fraud is clearly on the rise during times of economic strife, resulting in price increases across the board, budget reductions, and in more extreme cases, layoffs to offset the loss of income.

The “Catch-22” in all of this is that oftentimes these layoffs result in increased exposure to corporate fraud resulting from the reduction in safeguards and internal controls provided by employees who were laid off – fewer eyes watching the corporate coffers.

Corporate Accounting Implications:

Staff reduction during poor economic conditions, has the effect of reducing Internal Control procedures or processes. These staff reductions can cause an increased opportunity to commit fraud and manipulate financial data in order to present Financial Information that appears better than the actual results.

As internal security measures and controls decrease, opportunity rises.

As indicated, the state of the economy in large part dictates the types of frauds that are perpetrated, identifies target groups for organized crime factions, provides unique opportunities for fraudsters, and reduces internal control measures aimed at preventing fraud.

Discussion Questions:

1. Do you agree that poor economic times, may increase opportunities for fraud.

2. How does fraud hurt you the taxpayer?

3. What is a Ponzi scheme? Read this article on the most recent Canadian Ponzi scheme.

Article written by ,Jeffrey R. Filliter, see ACFI (Association of Canadian Forensic Investigators)

Posted September 23rd, 2012 by Gerry La Rocca & filed under Canadian Economy, Taxation & Planning.

New method for calculating the QST

As of January 1, 2013, the QST will be calculated on the selling price not including GST. However, to ensure the total taxes payable remain the same, the QST rate will be increased to 9.975%.

Calculating the Taxes

Currently, GST and QST are collected on most goods and services supplied in Québec.

Example
You sell a taxable good for $100. Taxes are calculated as follows:
Selling price	$100.00
GST ($100 × 5%)	$5.00
QST ([$100 + $5] × 9.5%)	$9.98
Total	$114.98

From a business point of view: The rate you use for calculating the taxes will depend on your cash register:

You must use the 9.5% rate to calculate the QST if your cash register calculates the GST and QST in three stages, that is, if it calculates 5% GST on the sale price, adds the GST to the sale price, then applies the QST to the resulting subtotal.
You must use the 9.975% rate to calculate the QST if your cash register calculates the GST and QST intwo stages, that is, if it calculates 5% GST on the sale price, then also calculates the QST on the sale price. This rate may be rounded off to 9.97% only if your cash register does not process three-decimal numbers.
You must use the 14.975% rate to calculate the GST and QST if your cash register calculates these taxes in one stage, that is, if it uses a single rate to calculate the GST and QST on the sale price. This rate may be rounded off to 14.97% only if your cash register does not process three-decimal numbers.

The rates of 9.97%, 9.975%, 14.97% and 14.975% must not appear on the document attesting to the sale.

Only fractions equal to or greater than one-half of a cent ($0.005) are counted as a whole cent ($0.01) of sales tax. If more than one good or service is being sold, you can calculate the taxes on the total price of all the goods or services purchased before rounding off the fractions.

Change in the calculation of QST as of January 1, 2013

As of January 1, 2013, QST will be calculated directly on the selling price not including GST. The QST rate will also increase from 9.5% to 9.975%. For consumers, the total taxes payable will generally not change.

Example of sales tax calculation as of January 1, 2013
You sell a taxable good for $100. Taxes will be calculated as follows:
Selling price	$100.00
GST ($100 X 5%)	$5.00
QST ($100 X 9.975%)	$9.98
Total	$114.98

The QST paid remains the same.

To ensure you are ready to use the new way of calculating the QST on January 1, 2013, we suggest that you contact the manufacturer of your cash registers to verify their configuration. If your cash registers cannot process three-decimal numbers, you may, only in this instance and solely for the purposes of calculating the taxes payable, round the rates to 9.97% or 14.97%.

What does all this mean to the consumer?

For the consumer the harmonized sales tax is the same as the two tax rate system, now the tax rate is 14.975% of the purchase price.

Businessess will continue to remit the amount to Revenue Quebec as usual.

This should help simplify the accounting process for businesses.

The Journal Entry to record a Sale by a company will be as follows:

Dr Accounts Receivable or Cash $114.98

Cr Sale $100.00

Cr HST due to Rev.Quebec $ 14.98

The original entry prior to January 1, 2013 would have been as follows:

Dr Accounts Receivable or Cash $114.98

Cr Sale $100.00

Cr GST payable $ 5.00

Cr QST payable $ 9.98

Comment: As you can see from the above the amount due to Revenue Quebec is the same (Note that the Federal GST and Quebec QST is collected by the Quebec government)

Discussion Questions:

1. Will the harmonized sale tax increase , tax revenues for the Quebec and Federal government?

2. In your opinion why do you think, Quebec is moving towards a Harmonized Sales Tax format?

3. You must realize that not all products and services are taxed as 14.975% rounded to 14.98% : Financial services and food are exempt from tax. In your opinion having zero rated taxes on financial services and exemption on food a good policy decision?

Information taken from the Revenue Quebec link:

Posted September 15th, 2012 by Gerry La Rocca & filed under Accounting Principles, Financial Accounting, Financial Statement Analysis, IFRS, MD&A.

MD&A (Management Discussion & Analysis) – Counterpart to or Distraction from Financial Reporting

Introduction

The MD&A is an important component of a company’s reporting obligation. Intended to provide

investors with more comprehensive information of financial outcomes, MD&A permits greater

opportunity to present both short and long-term analysis. A study published by Contemporary

Accounting Research indicated that there is a strong relationship between MD&A content

and the accuracy of financial projections, suggesting that the quality of the MD&A is vital in

this relationship. As such, the effectiveness of the MD&A greatly depends on the quality of its

explicit content.

Attention directed to the quality and importance of the MD&A particularly intensified once

such large cases as those of Enron and WorldCom became public. In response to uncovered

malpractices, securities regulators strengthened disclosure rules for publicly traded companies

and toughened enforcement practices.

MD&A content has been an ongoing topic of debate in recent years. Management’s concern is

primarily related to the impact of regulated content on the quality of the MD&A and its usefulness

to investors. Anecdotally, it is suggested that regulators and not investors are increasingly becoming

the MD&A’s target audience. Regulators, in turn, continue to be preoccupied with the fact that

financial statements are not sufficiently informative for investors to determine whether past results

are indicative of future performance.

The Purpose of Management Discussion & Analysis:

The purpose of the Management Discussion & Analysis (MD&A) is to complement and

supplement the information provided through financial statements by affording balanced

discussions of company’s operating results and financial conditions.

Complexity has amplified as a result of emerging issues of particular importance to investors such as transition to International Financial Reporting Standards (IFRS), the environment and executive compensation.

MD&A – An Overview

The MD&A is a narrative explanation of how the company performed during the period covered

by the financial statements, the company’s financial conditions, and its future prospects. The

MD&A aims to improve overall financial disclosure by providing a balanced discussion of

company results and financial conditions. Moreover, the MD&A not only discloses changes in

financial conditions, but also enables the reader to understand trends, events and transactions.

Publicly traded companies: Click to view the Bombardier Annual Report

Publicly traded companies file their MD&A together with their financial statements. The

responsibility for preparing the MD&A rests with the management of the company. Similarly

to financial statements, the MD&A of publicly traded companies are signed off by the CEO

and CFO, and approved by the board (or, in the case of interim reporting, the audit committee);

certifying that provided information accurately reflects the state of the company.

The MD&A is an interim and annual document. The interim MD&A builds on past MD&A’s and

therefore should contain the most current information. Often, analysts and investors show more

interest in the interim MD&A as it provides renewed insight and revised company information.

The annual MD&A discloses financial year end information and often confirms what investors

already know. Additionally, CSA regulations state that the interim MD&A must update the annual

MD&A for all required sections in addition to providing analysis of current quarter and year to

date results, changes in operations, and any seasonal aspects that may affect financial conditions

The MD&A should supplement and complement financial statements, but not form part of

the financial statements. The MD&A should complement financial statements by integrating

financial information with managerial discussions about the business that is not evident in the

financial statements. For example, a manufacturing company may disclose new employee safety

expenditures under its operating expenses with a follow-up discussion on the actual safety

measure and its future benefits. The MD&A also supplements financial statements by providing

additional information about reported information in financial statements through the explanation

of events or decisions. For example, a farming company can present its quarterly earnings

which show better than expected growth. As an explanation, the company may mention that this

unexpected growth is expected to plateau in the near future, thereafter perhaps normalizing back

to projected activity and profit levels.

Forward looking MD&A:

A forward looking MD&A communicates management’s objectives for the entity and strategies in

pursuing those objectives. It also discusses known trends or uncertainties that may affect company

business. Disclosed information needs to be clearly defined as being forward looking. In addition,

factors that are subject to changing the outcome of disclosed forward looking information

need to be identified through material assumptions, appropriate risk disclosures, and use of

cautionary language.

Discussion Questions:

Do you agree that the MD&A should supplement and complement the financial statements?
Review the a Financial Statements from “Bombardier” do you find these financial statements easy to understand?
Read the MD&A : Does the MD&A provide a better and clear view of the company results and financial position?

Original text by:By Kevin Girdharry, Elena Simonova, and Rock Lefebvre, information obtained from the CGA website.

Click to view :Bombardier Annual Report link