Posted by & filed under Accounting Principles, All Articles, Auditing, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, Intermediate Accounting.

Many have debated the cost of Sarbanes-Oxley (SOX) versus its benefits, given the recent accounting scandals that continue to “pile on”. However, according to Harvard Business School professor, Francois Brochet, the little discussed 2002 provision known as Section 403 is actually making a difference for investors and small companies (and with little cost, unlike some costly Section 404 provisions regarding internal controls).   


1. What is Section 403 of SOX?

2.  In Brochet’s review of more than 50,000 filings of insider trades, what was the benefit of Section 403? Why is this important?

3. What is a Form 4 filing?

4. What measures did the article say that some companies are taking to prohibit executives from making trades based on material nonpublic information?

Source: Johnson, Sarah. (2010). Something to Like about Sarbox,, April 14. (Retrievable online at

Posted by & filed under Accounting Principles, All Articles, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, IFRS, Intermediate Accounting, International Accounting.

At a recent conference in Orlando, financial executives discussed one of the top reasons for employee fatigue – a continuous stream of regulatory and accounting standard-setting guidance that has been issued in recent years and the promise of more to come over the foreseeable future.


1. Although the article provides little detail, what accounting standard-setters and regulators do you think CFO’s are referring to?
2. What areas will be affected by the six major projects currently under way, which are expected to be revealed next June?
3. Explain why Jay Hanson of McGladrey & Pullen says that “more principles-based rules will require seasoned professionals, not recent graduates.”
4. What particular area of accounting is one that will demand “an army of people”?

Source: Johnson, Sarah. (2010). “A Growing Contagion: Accounting Fatigue Syndrome,”, March 9. (Retrievable online at

Posted by & filed under Accounting Principles, All Articles, Auditing, Fraud Accounting, Managerial Accounting, Video Updates.

When you hear the word “deadbeat,” you automatically think bad things.  According to former MBNA employee, Jerry Young, a credit card deadbeat is the insider term used by credit card company executives, that refers to credit card users who pay off their bills promptly and in full each month. Doesn’t sound too bad, right? By doing so, such customers pay no interest and prevent the bank or creditor from making any profit. Alternatively, what endears you to the credit card folks is to be a “revolver.” A revolver is a credit card user that constantly carries a balance and is charged regular, monthly interest on their charges. Sounds a little bit like Alice in Wonderland?


1.  Look at the article, ” I’m a Credit Card Deadbeat: You Can Be One Too!” by Stephanie Andrews (!&id=81004). What was the most interesting way that she was able to get credit card companies to pay her for using their cards?

2. According to Ms. Andrews, ” To be a credit card deadbeat you need persistence, determination, and discipline.”  If you were doing a cost/benefit analysis of following her advice, what do you think were the costs that the article did not discuss?

3.   According to Jerry Young, how long did it take on average for a credit card company to develop a revolver?  Do you think this has changed under the current economic conditions?  Explain.

4.  Research Jerry’s old company, MBNA.  What happened to the firm? 


Andrews, Stephanie. ” I’m a Credit Card Deadbeat: You Can Be One Too!”, Finance/Credit Section (Retrievable online at!&id=81004)

Americans for Fairness in Lending. “Deadbeat Customers” video (Retrievable online at

Posted by & filed under Accounting Principles, Financial Accounting, Financial Reporting and Analysis, IFRS, Intermediate Accounting, International Accounting.

The Effects of Converting to IFRS

The primary question raised in this article is:  “What effects would switching to IFRS have for companies, if forced to switch by the SEC?” Based on a panel of four executives from four major companies, most agreed that there will be almost no material effects in areas that investors care about. 


1.  Based on the opinion of Jack Klinger, director of accounting research at Alcoa, what would be the greatest impact of IFRS for his company?

2.  What did Aaron Anderson, director of IFRS policy at IBM see as the benefit of converting to IFRS?

3.  Based on comments by HSBC’s chief accountant, John McGinnis, what was a benefit to the bank of reporting U.S. results in IFRS?


Leone, M. (2010). Unfazed by IFRS., Today in Finance, April 30. (Retrievable online at

Posted by & filed under Accounting Principles, Cost Accounting, Managerial Accounting.

A Cost Allocation Dilemma

The CIO Executive Board is a membership of senior executives with a shared commitment to steward enterprise-wide IT initiatives. In their role of offering cross-functional perspectives on IT and practical tools to promote strategic agendas, the Board found via a survey that most companies are using a “lump sum” cost allocation method to distribute IT operating costs and that this method typically provides little connection between the costs and the volume of services actually consumed.


1. Based on the article, some companies used a “granular-chargeback model.”  Explain what this is and its benefits or costs.

2.  What is the CIO Executive Board recommending at the best practice for allocating IT costs?

3.  Explain in your own words what you see as the benefits of implementing the CIO Executive Board’s recommendations.


McCann, David. (2010) The New Star of IT Cost Allocation., Today in Finance, April 28. (Retrievable online at

Posted by & filed under Accounting Principles, All Articles, Financial Accounting, Intermediate Accounting, Video Updates.

What If You Can’t Pay Payroll Taxes?

In this video, Darrin T. Mish, tax attorney discusses some of the questions businesses ask about non-payment of payroll taxes.  His advice is to “get current” as soon as possible, even though the IRS may not catch the lapse for up to four years and because IRS payroll tax problems can quickly escalate, once identified.


1.  What form is the Employer’s Quarterly Federal Tax Form?

2.  What is known as the trust fund portion of the payroll tax obligation?

3. In general, if an agreement is made with the IRS to pay back payroll taxes, over how many years is this agreement?

Source: What to do if you are behind on payroll taxes, June 23, 2009. (Retrievable online at

Posted by & filed under Accounting Principles, Advanced Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting.

New accounting rules governing off-balance-sheet transactions went into effect for most companies in January 2010. The rules force companies to put assets, like mortgage servicing rights, back on their balance sheets.


1. What financial accounting standards (FASs) are forcing companies to put such assets back on their balance sheets?
2. What are some of the reasons that these assets are returning to the balance sheet?
3. Since their enactment, which industry is most impacted by the new accounting rules?
4. Can you speculate why companies, like Harley Davidson and Marriott International, showed big jumps in assets, due to these new rules?

Source: Leone, Marie. (2010). Balance Sheets Are Busting Out All Over,, April 23.
(Retrievable online at

Posted by & filed under Accounting Principles, All Articles, Financial Accounting, Financial Reporting and Analysis, Intermediate Accounting, Video Updates.

A security deposit is money paid by the tenant to the landlord. This deposit protects the landlord if the tenant vacates without making required payments or damages the rental property. If the tenant gives proper notice and vacates without owing any rent or damages, the landlord must return the security deposit to the tenant in accordance with laws in the state where the rental property is located.  This video looks at some New York regulations pertaining to accounting for security deposits.


1.  Using the example in the video, make the journal entries that a landlord or rental company would record upon the receipt of the security deposit and the final disposition of the forfeited security deposit to the rental company or landlord.

2. Using the example in the video, make the journal entries to that the landlord or rental company would  record for the interest on the security deposit, including administrative fees collected on the interest and the distribution of interest to the tenant.

3.  Go to the following website and access a partial form itemizing deductions from a tenant security deposit for a residential rental unit.  Do you see the interest listed on this form, as discussed in this video? Which item number is it?  Have you ever received such a form when you vacated a rental property?

4.  Does your state have a similar law about interest earned on a security deposit, as was explained in the video?

Source: “Tenants’ Security Deposits: The Law and Accounting  – Landlording TV, February 3, 2010.  (Retrievable online at

Posted by & filed under Accounting Principles, All Articles, Financial Accounting, Financial Reporting and Analysis.

Wisconsin lawmakers agreed on Thursday, April 22, 2010, to regulate payday lenders. Wisconsin had been the only state not to regulate this industry, which consumer advocates said allowed its rapid growth and trapped too many borrowers who take out short-term loans with high interest rates in a cycle of debt.


1. What were some provisions of the plan?
2. According to the plan, if a person’s monthly income was $5,000, how much could he/she borrow from a payday lender?
3. Why do you think that Wisconsin was the last state to pass some type of regulation on this industry? What are the regulations on payday lenders in your state?
4. If a person wanted to take out a short-term auto title loan with a payday lender in the state of Wisconsin and had a car with a value of $14,000, how much could they borrow under this new regulation?

Bauer, S. (2010). Wisconsin Lawmakers Agree to Regulate Payday Lenders, Associated Press, April 23 (Retrievable online at

Posted by & filed under Accounting Principles, All Articles, Cost Accounting, Managerial Accounting.

Tracking efforts in companies like Wal-Mart, Hewlett-Packard and Clorox, authors Ram Nidumulo, C.K. Prahalad, and M.R. Rangaswami, identified a five-stage process that will benefit companies as they navigate through the adoption of green business models.  In the article, the authors contend that early adopters of this process will develop competencies that will be difficult for their competitors to match. They also submit that adoption of these processes by corporate leaders will be key to real change within our economy.


1. If consumers will not pay more for eco-friendly products, where do the authors suggest that profitability will come from?

2. Give a specific example of how the authors point to redesigning operations can save money.

3.  How would you define “greenwashing?” Is it a good thing or a bad thing?  Explain.

 Source: Nidumulo, Ram, C.K. Prahalad, and M.R. Rangaswami (2009). Why Sustainability Is Now the Key Driver of Innovation. Harvard Business Review, September, pp. 3-10 (Retrievable at