Tough budget

Posted by & filed under Canadian governments, Personal Tax.

Description: Canada’s oil producing provinces are facing pressures on their finances with decreasing royalty revenues. This past week, the Province of Newfoundland and Labrador released its budget for 2016-17, showing an increase in a range of taxes and fees. This included an increase in the Harmonized Sales Tax as well as a special deficit reduction levy of up to  $900 on high income earners. Despite this levy, the province is still forecasting a deficit of up to $2 billion. The government is blaming the previous administration for the tough times, arguing that not enough was done to secure the future when royalties were flowing in more liberally.

Date: April 14, 2016

Source: ctvnews.ca

Link: http://www.ctvnews.ca/politics/newfoundland-and-labrador-budget-delivers-2b-deficit-tax-hikes-1.2859419

Discussion Points:

1) Are you from Newfoundland and Labrador? If so, how will you and your family be impacted by this budget, considering as well the reduction in funding for Memorial University?

2) If you were an accountant advising the government would you have chosen this approach to the downturn in revenues?

3) How do you think the financial statements of the province should account for the special deficit reduction levy?

Shareholder pressure up; salaries down

Posted by & filed under Accounting Careers, Accounting Theory.

Description: With shareholder pressure on the uptick, the latest survey of salaries among Canadian bank executives shows that overall compensation is down. Board’s may be looking at performance benchmarks more closely, accounting for some of the reduction in salary. But it is possible that the fact that four of the five CEO’s at the largest Canadian banks are new to the job may be having some influence as well. Increasing public pressure may also be at work here.

Date: April 11, 2016

Source: theglobeandmail.com

Link: http://www.theglobeandmail.com/report-on-business/economy/new-research-shows-bank-chiefs-paid-less-than-predecessors/article29580660/

Discussion Points:

1) Which factor do you think has had the most influence on these lower salaries for bank executives?

2) What are some things accounting theory tells us about setting compensation packages for executives?

3) Imagine yourself some years from now as a successful accountant who has been asked to join a board for a major bank. Further, you have been appointed to the compensation committee that sets the compensation for executives. What are two or three of the main things you have learned during your university training that you would like to share with the committee?

Profits up; time for cuts

Posted by & filed under Advanced Accounting, Marketing & Strategy.

Description: Despite the fact that profits are up, Scotiabank announced that it is cutting jobs and closing branches. With consumers moving more and more transactions online, and banks bracing for Uberization of the banking world, Scotia is looking towards an uncertain future. But Scotia is not alone. Other banks have been cutting as well, and last year TD Bank booked a restructuring charge of almost $700 million while cutting 1,600 employees.

Date: April 13, 2016; updated April 14, 2016

Source: theglobeandmail.com

Link: http://www.theglobeandmail.com/report-on-business/streetwise/scotiabank-launches-new-round-of-jobs-cuts-as-consumers-move-online/article29626579/

Discussion Points:

1) What percentage of your banking do you actually do at a branch these days? Have you seen any impact of the bank cuts on the way you do your banking?

2) Do you think the banks have hooked onto the right strategy for dealing with the influence of tech upon the industry?

3) The article states how TD Bank incurred a major restructuring charge last year. What would be some of the conditions that a company would have to meet to record such a restructuring charge?

Budget transparency?

Posted by & filed under Canadian Government, Ethics, Taxation.

Description: Last year, the Liberals under Justin Trudeau latched onto the transparency theme. But last week the Parliamentary Budget Office (PBO) criticized the Trudeau government for what we might call a lack of transparency. The PBO said the latest federal budget contains some unrealistic forecasts, in particular one which underestimates the level of private sector growth, thereby lowering the tax base.

Date: April 6, 2016

Source: cbc.ca

Link: http://www.cbc.ca/news/politics/pbo-budget-finance-letter-macdonald-1.3523421

Discussion Points:

1) Why do you think the government may have underestimated private sector growth as part of its budget?

2) What do you see as some of the ethical issues in this situation?

3) The article also discusses the issue where the Canada Revenue Agency has refused to provide the PBO with information on tax havens? How do you think this issue could be resolved?

Those Panama Papers

Posted by & filed under Accounting Careers, Ethics, Taxation.

Description: It was hard to miss the news this past week of the so-called Panama Papers. This vast leak of over 12 million documents has provided lots of data on potential tax avoidance for journalists to sort through, and plenty of headaches for politicians and public figures forced to account for dealing with the Panamanian law firm Mossack Fonseca. The Prime Minister of Iceland has had to resign under intense scrutiny, and,  David Cameron, Prime Minister of Britain, has had to deal with public pressure around the revelation that his father has been named in the Panama Papers.

Date: April 9, 2016

Source: cbc.ca

Link: http://www.cbc.ca/news/world/panama-papers-david-cameron-protest-1.352843

Discussion Points:

1) Have you been following the stories around the Panama Papers? What is the single most interesting thing about them that has struck you so far?

2) What are some of the strategies Canadian  governments could employ to determine if those named in the Panama Papers have a tax liability in Canada ?

3) If you were an accountant in practice, what ethical issues would you see if a client asked you to connect them with a firm like Mossack Fonseca?

Secret bank fine

Posted by & filed under Financial Accounting, Internal control.

Description: FinTRAC, the Financial Transaction and Reports Analysis Centre of Canada, imposed its first fine on a Canadian bank this past week. The fine of $1.1 million was because a Canadian bank did not report some type of suspicious transaction to the authorities. The only problem was FinTRAC didn’t reveal who got fined. And all of the Big Six Canadian banks said “not me.” One of the criticisms is that if FinTRAC doesn’t say who is guilty, what kind of a deterrent effect does the fine present?

Date: April 6, 2016; updated April 7, 2016

Source:  theglobeandmail.com

Link: http://www.theglobeandmail.com/report-on-business/financial-watchdogs-fine-against-bank-stokes-uproar-over-anonymity/article29548687/

Discussion Points:

1) What type of activity do you think may have caused FinTRAC to impose this fine?

2) Do you think that FinTRAC’s control would be more effective if the identity of the offending bank was revealed publicly?

3) If you were an accountant tasked with preparing the financial statements of this bank, how would you account for this $1.1 million payment? What type of note disclosure might you consider?

Profiting from the FBI success

Posted by & filed under Corporate Strategy, Data security.

Description: This past week the FBI announced that it had cracked the Apple iPhone associated with the San Bernadino tragedy. Subsequently, the FBI withdrew from its court action against Apple as the need for Apple’s co-operation in unlocking the phone was now a moot point. Speculation is that the FBI’s success against the iPhone may be a boon for security companies such as Symantec and FireEye.

Date: March 30, 2016

Source: yahoo.com

Link: http://finance.yahoo.com/video/winner-apples-battle-fbi-035023313.html;_ylt=A0LEVi3wAv9W3mgAeQ4nnIlQ;_ylu=atX3oDMTByMHZ0NG9yBGNvbG8DYmYxBHBvcwM3BHZ0aWQDBHNlYwNzcg–

Discussion Points:

1) Had you followed any of the media accounts on the legal battle between Apple and the FBI? Which of the two parties – Apple versus the FBI – did you believe had the strongest position?

2) Were you surprised that the FBI was able to crack the phone?

3) Do you think that the fact that the FBI got into the phone means that third party vendors may benefit through creating new iOS security apps?

And so it continues . . .

Posted by & filed under Accounting Careers, Marketing & Strategy.

Description: And so it continues. The Blackberry bad news keeps coming, almost like the old football penalty of piling on. Despite introducing a new Android device called the Priv phone, revenue for the quarter declined. Blackberry failed to meet analysts’ revenue projections, despite this new device which combines the advantages of Blackberry’s vaunted security with the multitude of apps available at Google Play.

Date: April 1, 2016

Source: WSJ.com

Link: http://www.wsj.com/articles/blackberry-results-mixed-as-revenue-falls-1459510685

Discussion Points:

1) Do you think the new Priv phone can help Blackberry reestablish itself as a leading smartphone vendor?

2) If you were the CFO of Blackberry, what might be some of the questions you would be dealing with from financial analysts right now?

3) What strategy would you recommend for Blackberry? For instance, should it concentrate more on the software and security offerings or should it still try to compete in the hand set business?

Good time to cut the debt

Posted by & filed under Accounting Principles, Financial Accounting.

Description: The general theme is that things have been tough for the last little while in the oil patch. But some companies with cash to spare have been taking advantage of the downturn to repurchase their own bonds at “60 cents on the dollar.” Companies like Encana and Repsol SA are reducing their long-term debt through these transactions.

Date: March 28, 2016

Source: 24news.ca

Link: http://www.24news.ca/the-news/economic-news/212145-energy-firms-encana-and-repsol-sa-buy-back-bonds-amid-oil-slump

Discussion Points:

1) If you were a CFO would you advise this type of debt-reduction strategy?

2) How will these transactions be shown on the companies’ statement of cash flows?

3) What key financial ratios will be impacted by these buy back transactions?

A cautionary tale

Posted by & filed under Ethics, Internal control.

Description: Michael Koonin is in sales. His employer, Salbro Bottle of Woodbridge, Ontario normally paid his bill for data usage on his iPad and his cellphone each month. But in February Salbro balked when Telus billed $25,000 for roaming charges. The data misadventures began when Koonin sold the iPad on eBay to someone in California. Koonin didn’t tell his employer or Telus. And he failed to remove the SIM card. Meanwhile, some Californian was riding free on Salbro’s data dime. The CRTC cap code does not apply to business accounts, but Salbro feels there should still be some type of early warning system for accounts with unusual activity.

Date: March 21, 2016

Source: thestar.com

Link: http://www.thestar.com/business/personal_finance/2016/03/21/a-25000-phone-bill-and-one-big-lesson-roseman.html

Discussion Points:

1) Have you ever been hit with an unexpected bill for data roaming? How did you respond?

2) What are the ethical issues at play in this story?

3) What controls might the accounting staff establish to help ensure their company does not get hit with an expensive data usage bill like this?