Wiley Accounting Updates

Posted October 26th, 2015 by Brent White & filed under Financial Reporting and Analysis, Fraud, MD&A.

Description: Quebec based Valeant Pharmaceutical suffered a punishing week on the stock markets this week with shares dropping for four days before recovering Friday. The drop had cost the CEO over a billion in market value of his shares. Valeant stemmed the tide by announcing it would hold a conference call to address suggestions it had inflated revenues. Valeant had already been under the microscope by Massachusetts and New York for price hikes on drugs.

Source: Globeandmail.com

Date: October 23, 2015

Link: http://www.theglobeandmail.com/report-on-business/class-action-lawsuit-filed-against-valeant/article26948579/

Discussion Points:

1) What did you find most interesting about this article?

2) If you were an executive with Valeant, what strategy would you use in the conference call to restore confidence in your company?

3) if you were preparing the MD&A for Valeant, how would you address the negative publicity of these pricing and disclosure issues?

Posted October 26th, 2015 by Brent White & filed under Accounting Theory, Canadian Economy, Corporate Social Responsibility.

Description: Shell has been given permission to begin test drilling offshore of Nova Scotia. Shell told the regulator that it would be able to have capping technology available in event of a blowout in 12 to 13 days, versus its previous statement that it would take 21 days to bring the technology to a well. This reduction in time frames seemed to be enough for the Canada-Nova Scotia Offshore Petroleum Board to grant Shell the drilling approvals it was seeking.

Source: Globeandmail.com

Date: October 20, 2015

Link: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/shell-gets-greenlight-for-exploration-drilling-off-nova-scotia/article26889623/

Discussion Points:

1) What do you think of the time frames involved in order to bring capping technology to a blowout?

2) What are some of the accounting considerations involved around the disclosure of oil reserves?

3) If you were a CFO of a major oil company, what would be some of the challenges you might face in disclosure of environmental issues?

Posted October 19th, 2015 by Brent White & filed under Advanced Accounting, Cloud computing, Marketing & Strategy.

Description: Computer maker Dell is buying in big to the data storage business with a $67 billion takeover of EMC Corp. With the computer market stagnating, this move is seen as one which opens doors for Dell to participate in the expanding market for cloud services. The market’s initial reaction has been lukewarm to this huge tech deal.

Source: Globeandmail.com

Date: October 12, 2015

Link: http://www.theglobeandmail.com/report-on-business/international-business/us-business/dell-to-buy-emc-in-record-67-billion-deal/article26769952/

Discussion Points:

1) Dell is a private company while EMC is publicly traded. What might be some of the accounting issues that emerge from this acquisition involving a private and a publicly traded company?

2) What type of growth do you anticipate with cloud computing? What cloud services are you currently using?

3) What is your opinion of this EMC acquisition as a strategic move by Dell?

Posted October 19th, 2015 by Brent White & filed under Contemporary Business Issues, Corporate Governance, Corporate Social Responsibility.

Description: Mountain Equipment Co-op, better known perhaps by its signature letters MEC, is a much admired Canadian co-operative. Members can still join for simply putting down $5 for a share. But recently some members have been concerned that MEC seems to be shifting its governance profile to be more corporate like, meaning that some members without the appropriate senior corporate experience have been excluded from running for the board.

Source: Globeandmail.com

Date: October 16, 2015

Link: http://www.theglobeandmail.com/report-on-business/mec-governance-changes-sparks-dissent-among-long-time-loyalists/article26852082/

Discussion Points:

1) Are you a MEC member? If so, do you participate by voting for the board members?

2) If you were responsible for setting up a governance structure for a complex retail organization like MEC, how would you reconcile the business demands with the co-operative organizational structure? In other words, what type of characteristics would you like to see represented on the board?

3) MEC has a goal of directing 1% of gross sales to environmental causes. What are some other important measures of corporate social responsibility you have seen?

Posted October 19th, 2015 by Brent White & filed under Accounting Principles, Managerial Accounting.

Description: TD Bank, CIBC, the National Bank and the Bank of Nova Scotia, all representatives of a highly profitable Canadian banking sector, all appear to be in a cost-cutting mode. One of TD’s moves will be to shrink its branch footprint through amalgamations and closures of branches. But TD is also proposing shrinking the actual square footage of some branches by approximately 2,000 square feet. As more banking moves online, the theory seems to be that branches require less space.

Source: Globeandmail.com

Date: October 15, 2015

Link:http://www.theglobeandmail.com/report-on-business/td-targets-7-earnings-growth-from-canadian-retail-unit/article26820537/

Discussion Points:

1) What managerial accounting techniques might help a bank identify areas of potential cost savings?

2) The article notes that 2/3 of TD’s customers use both online and traditional branch services. What strategies might TD use to ensure that the cost-cutting moves did not alienate those customers?

3) What are some of the accounting issues that might be associated with branch closures?

Posted October 12th, 2015 by Brent White & filed under Ethics, Fraud, Internal control.

Description: Apparently it was cheaper for the organization running the rink where the Edmonton Oilers play hockey to fire all the parking lot cashiers rather than track down which cashiers had been stealing parking fees. Investigations this past summer caused management at Northlands to conclude that they were losing about 20% of the possible revenue from parking fees. They estimated that specifically identifying the offenders would take four months and cost $400,000, so instead all the attendants were let go. Some of these ex-employees are considering lawsuits.

Source: Globeandmail.com

Date: October 9, 2015

Link: http://www.theglobeandmail.com/sports/northlands-ceo-defends-mass-firing-of-parking-cashiers-at-oilers-arena/article26761188/

Discussion Points:

1) What is your opinion to the action taken by management to stomp out improper activity?

2) If you were responsible for cash handling at Northlands, what controls might you implement to prevent or detect these cash irregularities?

3) What are some of the key ethical issues that emerge from this story?

Posted October 12th, 2015 by Brent White & filed under Accounting Theory, Managerial Accounting.

Description: Ousted Lululemon Chair, Chip Wilson, had some things to say about the company he founded. The clothing company has been facing pressure from rivals such as Under Armour, pressures which had driven down Lululemon’s market value in recent months. Wilson remarked that while Under Armour has about three times the market value of Lululemon, “Lululemon has a much better business model, makes bigger margins, makes bigger profit”. Wilson also apologized for comments in 2013 that hurt Lululemon’s image.

Source: Globeandmail.com

Date: October 6, 2015

Link: http://www.theglobeandmail.com/report-on-business/lululemon-founder-takes-responsibility-for-controversial-remarks/article26692505/

Discussion Points:

1) Why do you think Under Armour would have a higher market value than Lululemon if Lululemon has bigger margins and a higher profit?

2) What reasons might you give for Lululemon having bigger margins than Under Armour?

3) What do you think of Chip Wilson taking responsibility for his 2013 comments?

Posted October 12th, 2015 by Brent White & filed under Accounting Careers, Taxation.

Description: The BC government has stated it intends to crack down on a tax loophole that appears to be allowing foreign investors to escape paying property transfer taxes in a red-hot real estate market. An investigation by the Globe and Mail revealed the disturbing news that some foreign investors were using trusts or transferring property into relatives’ names to avoid tax. On the federal taxation side, the Canada Revenue Agency is investigating these real estate transactions as well. A BC immigration lawyer, Sam Hyman, told the Globe and Mail that “Canada has the reputation of being very soft on tax evasion, money laundering and vigorous enforcement of its tax code.”

Source: Globeandmail.com

Date: October 7, 2015; updated October 8, 2015

Link: http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/bc-pledges-to-close-loophole-that-allows-some-real-estate-investors-to-dodge-taxes/article26713509/

Discussion Points:

1) What do you think of Mr. Hyman’s comments about Canada being soft on tax evasion and enforcement of taxation law?

2) What techniques might CRA auditors be using to identify possible transactions where foreign investors are avoiding paying tax on property transfers?

3) What are the determinants of residency under Canadian taxation law?

Posted October 6th, 2015 by Brent White & filed under Canadian governments, Personal Tax.

Description: Canadians are anticipating some personal income tax changes following Justin Trudeau’s election victory on October 19. The Prime Minister designate campaigned on a platform of tax breaks for the middle class while stating his intention to raise the rates of the highest income earners. All this has prompted New Brunswick’s Finance Minister, Roger Melanson, to speculate that the province may have to cut its top marginal tax rate to avoide taxing the wealthiest at a combined rate exceeding 50%.

Source: CBC.ca

Date: October 22, 2015

Link: http://www.cbc.ca/news/canada/new-brunswick/melanson-tax-changes-1.3283334

Discussion Points:

1) Were you surprised by the recent Canadian federal election results?

2) What tax measures do you think should be implemented by the new government?

3) What is your opinion regarding setting tax rates? Is there a number – such as a 50% rate – that you think will negatively impact investment in a province?

Posted October 5th, 2015 by Brent White & filed under Accounting Careers, Auditing, Fraud Accounting.

Description: A former Quebec lieutenant governor will remain in jail until at least Tuesday after being sentenced to 18 months in jail for fraud and breach of trust. Lise Thibault’s problems started with a 2007 report by federal and provincial auditors general that pointed out questionable expense claims of over $700,000. Thibault’s lawyer is arguing that she should be released to serve her time in the community because of her poor health.

Source: Globeandmail.com

Date: October 1, 2015

Link: http://www.theglobeandmail.com/news/national/ex-quebec-lieutenant-governor-to-remain-in-jail-until-at-least-tuesday/article26615500/

Discussion Points:

1) If you were the accountant responsible for reviewing the expense claims of an important public official like this, what type of financial controls could you put in place to prevent or detect improper activity?

2) Are you familiar with the concept of the fraud triangle? How might the triangle be applied to this case?

3) Canada has seen a number of cases of expense scandal of high public officials. What do you think has lead to this series of failures?