Shadow Flipping

Posted by & filed under Canadian Economy, Ethics.

Description: You may be familiar with the stories of sky-high prices on real estate in Vancouver. One of the forces behind the rise is a practice known as shadow-flipping. In a shadow-flip, an agent earns multiple commissions on the same property by arranging resales of the property before the closing date. As well, those in the middle of these shadow flips may be able to avoid land transfer taxes. Meanwhile, prices keep going up.

Source: Globeandmail.com

Date: February 12, 2016

Link: http://www.theglobeandmail.com/opinion/reporting-from-the-middle-class-vancouver-trenches-send-help-or-money/article28742027/

Discussion Points:

1) Have you ever heard of this practice of shadow flipping before?

2) Do you see this practice of shadow flipping as ethical?

3) What can the provincial and federal governments do to help make housing more affordable for those in over-heated markets?

Protect that RRSP

Posted by & filed under Personal Tax, Tax Planning.

Description: When faced with a financial challenge or a big purchase, Canadians might look longingly towards the funds they have stored away in their RRSPs. But dipping into the RRSP probably should be a last resort. One exception might betaking advantage of the federal home buyers program to make a tax free withdrawal of up to $25,000 for a first home purchase.

Source: Globeandmail.com

Date: February 11, 2016

Link: http://www.theglobeandmail.com/globe-investor/retirement/retire-taxes-and-portfolios/the-perils-of-using-your-rrsp-like-an-abm/article28700447/

Discussion Points:

1) Would you consider withdrawing from your RRSP to make a home purchase?

2) What advice would you give to someone who was considering using the RRSP as an emergency fund?

3) What are the main  impacts of withdrawing from your RRSP?

Going Private

Posted by & filed under Accounting Principles, Corporate Restructuring.

Description: It appears that the owners of the Canadian arm of Sirius XM radio are planning to take the company private. This means that the US bsed company Sirius  XM Holdings Inc and several major Canadian investors will have to acquire the shares that are publicly held, estimated at over 30 percent of over 100 million shares outstanding. Sirius has about 2.7 million subscribers in Canada and its subscription list is growing.

Source: Globeandmail.com

Date: February 11, 2016; last updated February 12, 2016

Link: http://www.theglobeandmail.com/report-on-business/streetwise/sirius-xm-canada-set-to-transition-toward-private-company-ownership/article28735215/

Discussion Points:

1) What might be some of the reasons that investors would have for wanting to take the company private?

2) Although Sirius has been growing, its stock price has fallen about 40 % in the last year. What might be some reasons for this?

3) What are some of the accounting considerations that the CFO will have to consider if the company goes private?

Alphabet tops Apple

Posted by & filed under Financial Reporting and Analysis.

Description: In the battle between the two huge letter A tech companies, Apple and Alphabet, Alphabet (formerly known as Google), has supplanted Apple as the largest company in the world as measured by market valuation. Apple had held the top spot since replacing Exxon in 2012. Alphabet, the new holding company that owns Google and a second division known as ‘Other Bets”, has been rising on Google’s growing advertising sales. Meanwhile, Apple’s decline is linked to the end of explosive growth in iPhone sales.

Source: Globeandmail.com

Date: February 1, 2016; updated February 2, 2016

Link: http://www.theglobeandmail.com/report-on-business/international-business/us-business/alphabet-reports-178-per-cent-rise-in-fourth-quarter-revenue/article28488337/

 

Discussion Points:

1) Alphabet is trading at roughly 38 times earnings. What ratios commonly studied in introductory accounting are relevant here?

2) Apple is known as a dividend-paying company while Alphabet is not. What financial ratio or ratios would help an investor see which company is a better choice for investors interested in dividends?

3) Do you think Apple will be able to reach the top again? What will it take?

Tax rates: Who’s highest?

Posted by & filed under Canadian Economy, Personal Tax.

Description: This week the New Brunswick government released its budget for the coming fiscal year. And one budget item got first page attention on the front page of Canada’s national newspaper, the Globe and Mail. The Globe featured an article noting how New Brunswick’s budget promises a tax cut for the wealthiest citizens in order to offset the effects of Justin Trudeau’s planned tax increase. The NB Finance Minister said “we did that to be more competitive.”

Source: Globeandmail.com

Date: February 3, 2016

Link: http://www.theglobeandmail.com/news/politics/new-brunswick-first-to-lower-top-rate-over-federal-plan-to-tax-the-rich/article28548631/

Discussion Points:

1) Do you agree with the Finance Minister’s notion that lowering personal taxes will make the province more competitive? Explain your answer.

2) The article notes that other provinces may also follow suit and lower their income tax rates on high earners. Which jurisdictions do you think might do this?

3) While New Brunswick cut this personal income tax rate, it raised corporate taxes and the harmonized sales tax. What do you think is the right mix of tax measures to help provinces struggling with deficit financing?

Where are the savings?

Posted by & filed under Canadian governments, Managerial Accounting.

Description: Federal Auditor General Michael Ferguson released his latest report on Tuesday. One of the key findings seems to be around the relatively new department, Shared Services Canada, founded in 2012. Shared Services Canada has a mandate to consolidate various information services throughout the government’s 43 departments by 2020, but Mr. Ferguson’s work points out that cost savings do not appear to have materialized.

Source: Globeandmail.com

Date:  Febuary 2, 2016

Link: http://www.theglobeandmail.com/news/politics/ottawas-push-to-centralize-it-services-plagued-with-challenges-auditor-says/article28506784/#content

Discussion Points:

1) What’s your feeling about the Auditor General’s findings in this situation?

2) Why does it seem that major projects or reorganization like this sometimes fail to achieve their projected savings?

3) What managerial accounting techniques might help organizations like this project their cost savings?

Google and taxes

Posted by & filed under Accounting Theory, Taxation.

Description: Google has settled a six year tax audit with the British government; the amount owing – 130 million British pounds. And Google faces a similar tax bill in Italy while the government of France threatens to collect about three times as much from the Internet search-engine king. But don’t feel too sorry for Google. Some calculate that even with this settlement in Britain, Google is paying a tax rate of about three percent there, due to its complex means of booking revenue in low tax locations.

Source: Globeandmail.com

Date: January 29, 2016

Link: http://www.theglobeandmail.com/report-on-business/rob-commentary/executive-insight/googles-uk-tax-avoidance-a-threat-to-its-success/article28435936/

Discussion Points:

1) What’s your personal feeling about Google’s tax avoidance strategies described in the article?

2) Do you agree with the article’s conclusion that because of public outcry,  “it is only a matter of time before the game of multinational tax avoidance . . . is banned?”

3) Would accounting theory have anything to tell us about where the revenue of Internet companies like Google and Facebook should be recorded?

TD Bank sued in Ponzi scheme

Posted by & filed under Auditing, Fraud.

Description: TD Bank is being sued in Ontario Superior Court for $5.5 billion for its role in correspondent banking for the Stanford International Bank.  Stanford’s founder, Allen Stanford, is serving a 110 year prison sentence for leading a fraud that removed $5.5 billion from the pockets of over 20,000 investors. The claim filed against TD, which  had a long relationship with Stanford, alleges that TD kept doing business with the disgraced firm after other banks ceased doing so, thereby permitting the Ponzi scheme to continue. It appears though that only a small cadre of Standford staff were in on the scheme with the real financial results concealed on a well-protected hard drive.

Source: Globeandmail.com

Date: January 29, 2016

Link: http://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/td-missed-warning-signs-about-notorious-fraudster-lawsuit-alleges/article28467721/

Discussion Points:

1) What do you think the audit community should do to respond to massive frauds like this?

2) Why do you think the Stanford insiders called the hard drive “the football?”

3) From your reading of the article, how do you feel about TD’s position?

Think twice before using company email

Posted by & filed under Accounting Careers, Ethics.

Description: One major outcome of the Ashley Madison security failure last year was the number of public-sector email addresses implicated as users. The hack revealed users at the RCMP, the Canada Revenue Agency, the Justice Department and the armed forces were using their employers’ email service to search the Ashley Madison site. This raises questions for both employees and employers around policy direction for emails and at what point does an employee’s use of email bring harm to an employer, perhaps triggering a firing.

Source: Globeandmail.com

Date: January 26, 2016

Link: http://www.theglobeandmail.com/report-on-business/careers/career-advice/life-at-work/ethical-issues-and-e-mail-accounts-in-the-workplace/article28396683/

Discussion Points:

1) Do you know your employer’s policy on use of e-mail for personal reasons? What does it say?

2) What is your personal view of employees using employers’ accounts to access sites like Ashley Madison?

3) What surprised you most about this article?

Debt loads troublesome

Posted by & filed under Canadian Economy, Financial Reporting and Analysis.

Description: The Parliamentary Budget Officer (PBO) is concerned. But this time it’s not about government forecasts. Rather, this week the PBO warned that Canadians debt to income level has reached a point not seen in over 25 years. House prices and other pressures are expected to raise those debt to income levels to close to 175 percent by later this year.

Source: Globeandmail.com

Date: January 19, 2016

Link: http://www.theglobeandmail.com/report-on-business/economy/canadians-household-debt-to-hit-new-record-this-year-report-says/article28254553/

Discussion Points:

1) What’s your own personal debt to income level?

2) Debt to income level is a solvency measure for individuals. What are some common measures of solvency for corporations?

3) How do you think these high levels of debt by Canadian families will impact the economy?