SEC Internet Exercise - Kmart Corporation
The company that I have chosen to research is the Kmart Corporation. They operate in the retail-variety stores sector. Their main headquarters is located in Troy, Michigan with retail outlets primarily situated in the Midwest. Their ticker symbol is KM.
The company's most recent 10-K was filed with the SEC on May 15, 2002. The 10-K for this company is 77 pages long. The company has been in business for many years and has hundreds of filings posted on the SEC website. For purposes of this report only those filed in 2002 will be considered. In 2002, the Kmart Corporation has Filed 10-Q, 10-Q/A, 8-K, NT 10-K, SC 13G, SC13G/A. The Kmart Corporation has filed many other forms in previous years.
The SEC website has a page entitled "Descriptions of SEC Forms." This page is subdivided into sections categorizing each type of form.…… [Read More]
Also, unlike the broad ethical guidelines provided by other professional organizations, the FASB's standards have been rule-based, as opposed to principle-based which may provide extremely detailed guidelines but also can eliminate the ability of the individual accountant to exercise personal judgments (Herdman 2002). The SEC, in contrast, attempts to provide principle-based guidelines and can back up those guidelines with the force of law.
However, there is still an argument for the existence of the FASB. Rule-based standards certainly have their place in a field as technically detailed as accounting. Also, because it is not a legal arm of the government, the FASB can have greater flexibility and sensitivity in setting accounting guidelines, as it is not establishing government policy. Finally, and perhaps most importantly, because it is primarily concerned with accounting, unlike the SEC which has host of other concerns pertaining to the open market and the sale of securities,…… [Read More]
SEC v Materia
Securities and Exchange Commission v. Anthony Materia
745 F.2d 197 (1984)
Anthony Materia, an employee of the printing business Bowne in New York City, had been entrusted with financial documentation containing sensitive information. Although the actual names of the corporations discussed in the documents were missing, enough details remained to allow Materia to deduce which companies were the targets of upcoming purchase bids. Materia then used this confidential information to purchase stock in the target companies in advance of the tender offers and then sold this stock once the offer had been made public, thereby making a profit. This had already occurred four times before the Securities and Exchange Commission (SEC) obtained a permanent injunction against further trading by Materia during a bench trial in front of Judge Brieant in District Court. Judge Brieant further agreed with the SEC and ordered Materia to return the nearly…… [Read More]
SEC v. Zurich Financial
It is important for reinsurance to transfer risk because that is the entire point of reinsurance. Any reinsurance that does not transfer risk is not reinsurance at all, by definition. The transfer of risk is key -- insurance companies bear risk in the course of their business. When they pay another firm to take on that risk, that risk needs to transfer in order for this to be a valid transaction. Should the risk not transfer, it begs the question of why the company is paying the other company. The SEC would rightly consider a payment for nothing with suspicion. Accounting fraud can be said to occur when a company is booking revenue in a situation where no service is being provided. Given that the service provided by reinsurance is risk transfer, any transaction that does not feature risk transfer cannot be reinsurance, and therefore may…… [Read More]
The move essentially confirmed that the market's valuation is not rational. Moreover, it allowed financial institutions to escape some degree of punishment by investors by recording values for bad assets that are unrealistic. This could be viewed as contributing to stronger short-term stock prices, but also to longer-term problems as companies continue to record higher asset levels than they actually possess.
Overall, the SEC has accomplished little thus far in terms of the financial crisis. The outcome of the agency's work on improving governance and board member standards for financial institutions will be the final determinant of the agency's performance with regards to the crisis. During the leadup to the crisis and its initial impacts, there was little that the SEC could have done within its mandate and with the tools supplied to it by Congress to prevent the crisis or to curtail its impacts. By defending against short-selling and…… [Read More]
The website was designed for the U.S. Securities and Exchange Commission. It is meant to educate the public and any other agencies like them who may have questions regarding their upcoming events their previous and current conference spending, strategic plans, and any select data. The About section is comprehensive and features many links and information on commissioners, laws and regulations, concise directory, SEC offices, and important budget reports, keeping anyone who ventures to the page, well informed. It was last modified 1/16/2015, meaning the admin of the website keeps data relatively continuously updated.
Business communication seems fairly comprehensive and straightforward. They provide all information easily in pdf format. They make sure to include the names and some contact information or office locations to allow for possible meetings and they include budget and other kinds of planning in easily accessible and easily recognizable sections of the website. Everything about the…… [Read More]
The Securities Exchange Commission issued a ruling on its website against Panasonic Corporation. It had investigated the company for violations under Section 21C of the Securities Exchange Act of 1934, and the investigation resulted in a cease-and-desist order. This paper will walk through the case, analyzing the facts and the ruling that was made.
Major Facts of the Case
The case against Panasonic concerns "violations of anti-bribery, anti-fraud, books and records, and internal accounting control provisions of the federal securities law by Panasonic, a global electronics corporation headquartered in Osaka, Japan."
The anti-fraud component of the case is based on an overstatement of pre-tax income by $38.5 million and net income by at least $22.4 million for the quarter ended June 30, 2012. The defendant backdated an agreement with a government airline and provided misleading information about the agreement to its auditor in order to include the…… [Read More]
Capital Management Blows Whistle
A whistleblower in the classic sense of the word possesses a number of key characteristics. Some of these pertain to the fact that whistleblowers tend to believe that there are acts of impropriety at their workplace. In this respect most whistleblowers have a keen sense of ethics as well as a sense of social justice that helps to actuate them. There is a duality to the sort of ethical conviction that a whistleblower has. Firstly, he or she must believe that his or her organization is making some sort of ethical violation in which they are taking advantage of other shareholders. Such shareholders include those in upper level management, those in conventional 'worker bee' roles, as well as public shareholders on the market and the extended friends and families of workers. Secondly, the whistleblower must consider the ethics of taking such information to an outside entity.…… [Read More]
K Annual SEC Report Review
hat 3 items of important information does the income statement reveal about the financial performance of the company over the last three years?
There are many different items that the income statement reveals about Southwest Airlines. In 2015, the company really had a good year financially. The company's total revenues grew considerably, while at the same time the total operating expenses also dropped significantly which lead to the total operating income that was nearly double that of the previous reporting year. However, many of these points were already made in the report introduction. Passenger ticket sales were up, fueling revenue growth, while at the same time, costs, primarily from decreases in fuel costs, which resulted in the company having one of its best years in the company's history.
There are some more subtle insights that can also be gained from the income statements…… [Read More]
However, the study made by obert J. Warth-Ethics in the Accounting Profession- concludes the necessity of better planning of the structure of education, improvements in the measure of compliance and a variation in the concentration on ethics training and discussions.
The studies made by Curtis C. Verschoor-Accounting involve Ethics, not just technical issues emphasize the significance of ethics to the profession and the accounting involves morality and not just technical issues. The study made by Lynda on 'Should we teach ethics in accounting education' reveals that accounting students should be taught about the ethical aspects so that they can form sound decisions which are reasoned. She stressed on inclusion of ethics into several phases of the profession, including academia and that ethics training and education are to be stressed upon in both the workplace and academia. The studies have established that the ethics is essential in the accounting profession and…… [Read More]
What sources of information are most useful to an investment decision?
There are various sources of information that are most useful to an investment decision. One of the key sources beneficial to making an investment decision is the firm's financial performance. This encompasses the evaluation and scrutiny of the reported financial statements. Some of the items to be analyzed include the revenue generated, profits attained and the cash flow as well. Financial ratio analysis is also an imperative source of information for investment decision making. For instance, ratios such as return on investment (ROI) and return on investment capital (ROIC), are beneficial. The accounting practices used by the company, whether it is the Generally Accepted Accounting Principles (GAAP) or others such as International Financial Reporting Standards (IFRS) are also a beneficial source of information for making decisions on investment. In this case, it can be perceived that Groupon undertook forceful…… [Read More]
The implementation of the Sarbanes-Oxley Act section 404 as federal law was a necessary step in order to regain public trust in the financial controls and reporting of companies. Huge corporate scandals, such as the ones affecting Enron, and WorldCom, shook the public to their core, and resulted in the demand for consistent measures that would make companies accountable for all financial operations. This legislation was necessary and useful, but the focus of the law may be off the mark.
Accounting practices may have unfairly received the blame for corporate scandals in recent years. As outlined by Lin and Wu (2006), the aim of the Sarbanes-Oxley Act section 404 is somewhat misguided, and is placing undue attention on accounting as the culprit in the case of these crimes. Instead, the focus of measures to improve accuracy and reliability of financial controls and reporting should be directed at management practices. The…… [Read More]
Securities and Exchange Commission (SEC)
Accounting Irregularities and Missing Internal Controls in the LIBOR Currency Manipulation Scandal
The London Interbank Offered Rate, or Libor for short, was the recent subject of collusion between some the world's largest banks to manipulate the exchange rates; no one seems to know for sure when these banks began to manipulate the exchange rate, but some reports show these activities beginning in 2003, or possibly much earlier (McBride, Alessi, & Sergie, 2015). The Libor rate represents a benchmark interest rate in which banks lend to each other in London interbank market. The exchange rate is calculated daily and determined by a submission of eleven and eighteen banks who submit their average borrowing rates for the day.
The Libor rate was considered to be a fairly reliable benchmark for determining an amount of interest that was used in determining short-term transactions and this rate had indirect…… [Read More]
This is a major oversight because as stated above, one of the areas in which the use of former SEC officials seems to have been most successful is in the securing of waivers and releases. In leaving out these areas, the prime evidence in support of the revolving door demonstrates itself to be woefully inadequate. In contrast, the POGO report details a number of problems with this earlier academic study while demonstrating that some of the things the academic study tried to downplay, such as the SEC's tendency to settle rather than pursue charges to their fullest, are actually evidence of SEC regulation being affected by its close relationship with the industry it is meant to regulate (POGO, 2013, p. 28).
The study's findings are persuasive precisely because they are so comprehensive in their dismantling of the primary academic justification of the revolving door. By demonstrating the critical errors in…… [Read More]
Wealth, Power and Insider Trading on Wall Street
In today's increasingly internationalized worldwide economic system, defined by the expansion of multinational corporate conglomerates into foreign shores, the necessity for effective and efficient financial regulation to prevent criminal conduct covered by the catchall term "insider trading" has never been greater. Whereas autonomous countries once maintained clear authority over businesses which were built on their shores, through levying taxes, enforcing fiscal regulations, and instituting a lawful system of commerce, today the most successful companies are those with the wherewithal to transfer their operations abroad. Global financial management requires a comprehensive comprehension of foreign exchange and currency markets, derivatives securities, international financial debt and equity markets, international portfolio investments and the global market for real assets. Due to the fact that "financial markets and intermediaries today are globally linked through a vast international telecommunications network," with this continual process resulting in "the trading…… [Read More]
Several terms and definitions are valuable to understand financial statements. In the United States, financial statements of public corporations are produced in accordance with the U.S. Generally Accepted Accounting Principles. These principles govern how the information for financial statements is compiled and presented. The purpose of these principles is so that all stakeholders can easily understand the statements and make comparisons across both time and across different companies, because the statements are produced and presented in a consistent manner. The International Financial eporting Standards (IFS) are the international equivalent of GAAP. While several countries utilize a national version of GAAP (U.S., Canada, UK, etc.), more than 100 countries use IFS, making this set of standards the most widely-adopted in the world. There is a move to converge national GAAP standards with IFS, including a multi-year project to converge U.S. GAAP with IFS. For now, however, IFS represents a different…… [Read More]
International Financial eporting Standards
IFS and Canada
Canada was one of the first prominent nations involved in the North American Free Trade Agreement to consider switching their financial reporting to the International Financial eporting Standards. For years, Canada had been under the pressure of the United States to adopt a system aligned with the GAAP. Still, growing opportunities across the globe made the adoption of the IFS in Canada a better option. It was announced in early 2008 that the move was going to be made in Canada. Canada officially adopted the IFS standards in January of 2011 (PWC, 2014). Actually, the IFS standards were quite similar to the already existing Canadian GAAP standards. Thus the transition, for most businesses, was not extremely different than what they had encountered in the past.
The country made the official decision to adopt the IFS over their own GAAP system came in a…… [Read More]
SEC that is responsible for the policing the accounting and ethics of publicly held companies is:
Public Company Accounting Oversight Board.
The financial statement that summarizes the assets, liabilities, and stockholders' equity of an entity at a specific point in time is the:
At December 31, 2002, Robinson's Home Improvement has $100,000 of assets, $40,000 of liabilities, and $60,000 of stockholders' equity. On January 15, 2003, Robinson's purchased $30,000 of assets by incurring a liability. Robinson's total assets, liabilities, and stockholder's equity at January 15, 2003 (after the purchase) are, respectively, ____, ____, and,
$130,000; $70,000; and, $60,000
4. Gadsden Lawn and Mowing Service began operations on January 1, 2002. At the company's inception, Bob Morgan contributed $100,000 of cash and equipment. During the year, Gadsden earned $200,000 of revenue, incurred $100,000 of expenses, and incurred no liabilities. Total owner's equity at December 31, 2002 is:
a. $200,000…… [Read More]
On June 4, 2003, the Securities Exchange Commission announced that it was pursuing charges against investor Martha Stewart and stock broker Peter Bacanovic for securities fraud. The fraud occurred on December 27, 2001 when Stewart sold stock in ImClone Systems, after receiving an unlawful tip from Bacanovic, who at the time was working for Merrill Lynch. The SEC also accused the two of attempting to cover up the insider actions, and of making false statements regarding the ImClone trades to SEC investigators (SEC, 2003). Stephen Cutler, the SEC director of enforcement said in the SEC's press release about the charges that "It is fundamentally unfair for someone to have an edge on the market just because she has a stockbroker who is willing to break the rules and give her an illegal tip. It's worse still when the individual engaging in the insider trading is the Chairman and…… [Read More]
fictional firm (RMD) can be able to offer pre-IPO's to investors. This is accomplished by looking at the way various policies can be implemented that is in compliance with the Securities Act of 1933 along with the Securities and Exchange Act 1934. Once this occurs, is when we can be able to see how they can create a unique market that will address this demand from retail and institutional investors.
Over the last several decades, demand for pre-IPOs (initial public offerings) has been increasing exponentially. Part of the reason for this, is because there has been a shift in the focus of investors. As a large number are realizing that they can make significant returns by investing in these companies before they are going public. Evidence of this can be seen by looking at the below table which is highlighting how high investor demand for pre-IPO's had an impact on…… [Read More]
The political pressure of the past several years following the dot.com bubble and the collapse of several major companies created a need for new securities legislation, which culminated last year in the Sarbanes-Oxley Investor Protection Act, which establishes new guidelines for the securities industry. Initially a Democratic brainchild, the act became favored by epublicans in the House when it was realized that such adjustments would be of great benefit to shareholder value in that they enhanced general financial stability. This is the most prominent piece of financial legislation since the establishment of the Securities and Exchange Commission in the early 1930's. The most widely recognized feature of the new legislation, which was introduced in 1992, is that board members are held personally and criminally liable for the accounting practices that the company employees. This act also establishes guidelines as to the coverage of securities by sell-side analysts who face…… [Read More]
- Have been around 10 years
- Often mirror mutual funds
- are less regulated that mutual funds
- explosion in ETF approval requests
- SEC has other priorities
-ETFs that mirror Mutual fund performance should probably be regulated like mutual funds
- Investment dealers are looking to get around mutual fund restrictions
-ETFs do improve liquidity in mutual funds, but funds are made up of liquid stocks while ETFs are fiat securities
Alternative strategic action to meet your objective(s) 
[Figure 1-4 p. 23 Blue sheet
Info, Societal, Political, Legal -- w / # from Blue sheet]
Alt market + Nonmkt [6 + 7]
analysis Mkt reactions
Select strategic action 
Is it legal and ethical?
Selected? (Yes / No / Wait)
Implementation of strategic action for " each" strategy 
Provide details of what you will do to achieve your objective(s)
Id strategy by…… [Read More]
Explain the Securities and Exchange Commission's rationale to charge Cardillo executives with each of the following violations:
Making false representations to outside auditors
Without a doubt, executives of Cardillo Travel Systems made incorrect accounting transactions. As a result, this gave rise to false representations to external auditors. The rational for the SEC to charge these executives with this particular violation is linked to Management's Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934. In accordance to this guideline, the SEC expects the company's management to be accountable for maintaining an internal control system over financial report. This is so as to offer sensible guarantee with respect to the reliability of preparing and reporting of financial statements for external users of such statements, comprising of the external auditors (SEC, 2007).
Failing to maintain accurate financial records
Management of a company is…… [Read More]
It appears that little will change under Obama, with the appointed head of the EC, Mary chapiro, similarly concerned with protecting Wall treet sharks.
James Petras (2008) similarly believes that Madoff's failure is not a personal one, but a failure of the current social, political and economic justice. In addition to an economic culture that most favors the very rich, Petras also believes that the EC and its actions are completely predictable, precisely because the regulators are selected from those are regulated. Madoff was so successful for so long because he was able to play the fraud game better than others.
According to a radio interview conducted with (2008), Maurice chweitzer explains the exact principles that worked together in enabling the Madoff scandal, as well as others like it. These principles include scarcity, authority, social proof, and the liking principle. According to the first, the client is told that the…… [Read More]
Accounting Question on Form 8-K
The process used to regulate the submission and examination of corporate financial document filings -- which is overseen by the United States Securities and Exchange Commission (SEC) -- is fundamental to the sustainable growth of a capitalist economy, because these filings act as a necessary measure of transparency for investors and financial managers. Without the meticulously gathered data compiled and submitted by public companies within regular SEC filings, investors would have no legitimate ability to analyze variables to arrive at the most prudent course of financial action. Furthermore, in the absence of SEC filings unscrupulous corporate executives would be inordinately tempted to manipulate certain aspects of the financial system, either in the pursuit of personal profit or to protect their company's interests in the event of losses. As the SEC's website states, "companies with more than $10 million in assets whose securities are held by…… [Read More]
hile it can be argued that auditors bear a degree of responsibility to evaluate management practices, Cousteau clearly took the view that on the whole the financial statements did accurately reflect the firm's circumstances; that the fraud did not constitute a widespread attempt to deceive the markets. Thus, evidence of fraud does not in and of itself render financial statements materially misleading. The nature and dollar amount of the fraud must also be taken into consideration, all within the context of the totality of publicly available information about the firm.
Braun, K. (2001). The Disposition of Audit-Detected Misstatements: An Examination of Risk and Reward Factors and Aggregation Effects. Contemporary Accounting Research. Vol 18, No. 1 (Spring 2001), pp.71-99.
Shunglu, V.K. (1998). Role of the Auditor in Promoting Good Governance. International Journal of Government Accounting. Retrieved September 7, 2009 from http://findarticles.com/p/articles/mi_qa3662/is_199804/ai_n8794931/
Babu, T.R.R. (2004). Audit Materiality. Oxford University. Retrieved…… [Read More]
Securities and Exchange Commission (SEC) are one of the most well-known entities that regulate markets, protect investors and facilitate the capital market structure. The SEC was founded in 1934 in the wake of the Great Depression -- The SEC was created by section 4 of the Securities Exchange Act of 1934. The SEC was established by the United
States Congress as an independent, quasi-judicial regulatory agency during the Great
Depression that followed the Crash of 1929. Now, more than ever, first time investors turn to the market to protect their future income, send their children to college, pay for homes. The primary duty of the SEC is to promote sound market regulation, sustain economic growth and encourage capital formation.
The Capital Market strategy is one of many used by this entity. It is a market for securities (debt or equity), where business enterprises and governments can raise their long-term funds.…… [Read More]
XM has taken a more target product strategy, attempting to increase depth of programming services over the pervasive offering of devices. Industry analysts have commented that Sirius is now competing with Apple and their iPod series based on the breadth of their devices (Sirius Satellite adio Investor elations and SEC Filings 2008). Sirius' approach to personal satellite players has only been marginally successful and clearly given the operations expenses shown in Table 1's analysis of Income Statements. The breadth of the product line is forcing Sirius to also develop expertise in supply chain operations and fulfillment, two series of business processes that are significantly different than broadcasting and entertainment. Having to contend with a value-based business model with entertainment channels while also concentrating on a price-based model that must focus on continual price reductions forces Sirius into multiple and often confusing accounting systems and practices. It is highly recommended that…… [Read More]
Organizations Establish ules for the Creation or Use of Accounting Information:
- Securities and Exchange Commission
- New York Stock Exchange
Internal evenue Service
Describe what kind of rules each makes, why they make them, and how they enforce them. Which organizations make laws, and which publish guidelines? What is the difference? What are the different consequences for those who bend various sets of rules? (Causey Enron case) How might Causey's defense be stronger or weaker under IFS guidelines rather than GAAP?
The rules that govern the three organizations may not be specifically made by that organization, but they are enforced by it. The Securities and Exchange Commission (SEC) is not a law or even rule making body, but the members do suggest legislation and, as one of its main functions, enforces the laws that have been passed by congress (SEC, 2012). The New York Stock Exchange (NYSE) is a…… [Read More]
Ethical and Legal obligations in financial reporting is extremely important in today's world, fraught as it is with corporate frauds and accounting scams and scandals of every other sort. One Company, the Thornburg Investment Company, has taken a firm stand on financial reporting within its company, wherein all concerned officials are expected to report accurately, any actual, as well as suspected violations and breaches in the laws and rules and regulations of the company, to the appropriate personnel, immediately. (Code of Business Conduct and Ethics) Another Company, the 'Trinity Capital Corporation' stresses the importance of adhering to the rules and regulations created by the Company so that the company's loyalty to its numerous shareholders may be apparent. Where financial reporting is concerned, all the employees of the firm are expected to comply with the generally accepted rules laid down by the accounting principles of the United States of America, so…… [Read More]
In the first-round survey, a majority of investors cited diversification as their main objective in allocating to hedge funds. Among the second-round interviewees who were planning to increase their target allocations by 10% or more, half named diversification as the motivating factor. Among the approximately one in ten who were planning to decrease allocations by at least 10%, concern with a lack of transparency was the most frequently cited reason.
(4) Institutions are thinking and acting as long-term investors. While almost a quarter of second-round interviewees said they have liquidated some investments or plan to do so, overall the investors surveyed showed no inclination toward a long-term exodus from hedge funds. This is understandable, considering that 93% of all interviewees said they make hedge fund investments with a time horizon of at least three years, and more than half have a time horizon of five years or more.
(5) Investors…… [Read More]
This quotation shows how arbitrary MTM can be. Simply by terming Enron's cash shortage a sa minority interest as opposed to the proper term for it, debt, Enron was able to manipulate MTM to prevent such a sizeable loss from appearing on its balance sheet. Moreover, MTM's role in this transaction allowed Enron to repair its problem of a cash flow shortage since it credited $500 million via its sale of Treasury securities. The relative short duration in which Enron was able to take out a loan and repay it indicates how effective MTM was in providing Enron a favorable balance sheet, and in singled-handedly dancing around the reality of its shortages. Additionally, it also kept others (shareholders, stakeholders, not to mention its hard working employees) to know how tenuous an economic position the company was actually in.
In discussing Enron's MTM approach to accounting and the considerable role…… [Read More]
ite Aid Fraud
Over the years, there have been numerous cases of financial fraud perpetuated within the organizational mainstream of major companies. Financial fraud is often a well-coordinated sort of white-collar crime that often -- but not always - requires complicity and collusion amongst financial accountants, top management and auditors. ite Aid came to the limelight after the U.S. Securities and Exchange Commission announced that it would be filing accounting fraud charges against the company in 2002
Meanwhile, the United States Attorney for the Middle District of Pennsylvania leveled similar criminal charges accusing former CFO Frank Bergonzi, former CEO Martin Grass and former Vice Chairman Franklin Brown of perpetuating an immense accounting fraud scheme
. Compounding the crisis, according to former ite Aid COO, Timothy Noonan, were years of legal coaching amongst staff and mid-level employees. As investigations ensued, evidence of fraudulent manipulation of accounts, corporate malfeasance, and financial overstatement…… [Read More]
reporting of capital and operating leases and their impact on fair value measurements. The essay surveys lease accounting standards from 1976 thru the present.
The basic principle of lease accounting is that some leases are merely rentals, while others are in effect purchases. U.S. regulations that specify lease accounting rules are issued by the Financial Accounting Standards Board (FASB). The primary FASB statement on leases was Number 13, issued in 1976, and is also known as FAS 13, SFAS 13 and FASB 13. Over the years it has been amended several times by additional FAS, including FAS 22, FAS 23, FAS 27, FAS 28, FAS 29, FAS 98, and FAS 121. In addition to financial accounting standards, various interpretations and technical bulletins have also been issued to provide additional guidance. Lease accounting rules were previously labeled as section L10 in the FASB Current Text, while the new FASB Codification uses…… [Read More]
Clone case came to the attention of the SEC because it involved the CEO of ImClone, Sam Waksal, who had the same stockbroker as Martha Stewart, and the two were friends. Waksal found out at about an FDA ruling that was going to negatively affect the value of ImClone shares, and sold his shares on the basis of this information. That alone is insider trading, because Waksal was in a privileged position within the company, and traded on information that had yet to be released publicly. The relationship between Waksal and Stewart, along with the broker, brought the case to the attention of the SEC. Undoubtedly, the high profiles of the individuals involved was a factor.
The specific issue here was insider trading, yet ultimately Stewart was never convicted on that. Waksal was, because he was the insider. Stewart was in a position to receive this privileged information, but she…… [Read More]
33% on the 2013s; 27.78% on the 2018s 16.67% on the 2028s and 22.2% on the 2038s.
Using market value the weighted-average cost of debt is 6.798%. The weights are 35.42% on the 2013s; 28.39% on the 2018s; 16.14% on the 2028s and 20.03% on the 2038s. Thus, it does make a difference if book or market value weights are used. In this case, the market value weights skew more towards the short maturities, which have the lowest yields. This gives the weighted-average cost of debt for market value weights a slightly lower figure.
5) by book value, the weight for debt is 30.85% and equity 69.45%. This gives a weighted average cost of capital of:
e (Re) + d (Rd) (1 - T) =.6945(9.94) + (.3085)(6.854)(.65) = 8.277%
By market value, the weight for debt is 7.345% and the weight for equity is 92.645%. This gives a weighted average…… [Read More]
Tax Research Memo
Personal Injury winning treatment and other issues research
John Smith tax issues
Treatment for purposes of Federal Tax Income of $300,000 fee received out of the amount awarded by Jury.
Applicable Law:Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC SEC 104(a)(2).Taxability also depends upon the place of residence of the taxpayer.
$300,000 received by John Smith as fees from jury award is taxable for federal tax income purposes.
Treatment for purposes of Federal Tax Income of $25,000 expenses paid upfront and received out of the amount awarded by Jury.
Applicable Law: Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Any expenses can be claimed as a deduction.Taxability…… [Read More]
Earnings were strong for employees as well as shareholders. Many employees owned stock or were dependent upon a rising balance sheet to ensure that they received their bonus and salary. Additionally, as at HealthSouth, there can be kind of a 'groupthink' effect, where people assume that something is 'okay' because everyone else, including powerful upper-level managers, are 'doing it.'
There are a number of laws that protect whistleblowers. The Dodd-Frank Wall Street eform and Consumer Protection Act was established to encourage individuals to report financial fraud to the SEC (Securities and Exchange Commission). ecognizing the profound financial sacrifice many whistleblowers make, Section 922 of the Dodd-Frank Act mandates that the SEC reward individuals who provide original information that results in sanctions in excess of $1 million in civil or criminal proceedings against the offending company (Oswald & Zuckerman 2010).
In a HealthSouth-like situation, being a whistleblower is not simply a…… [Read More]
Financial Fraud Fannie Mae
eview of Fraud Schemes within Fannie Mae 1998-2004
The agency found the fraud understatements of earnings and illegal gratuities that led to accounting violations and inability to meet Wall Street goals.
The investigation of Lee Frakas, executive of a major mortgage company which had dealings with Fannie Mae with hundreds of fake mortgages. The Securities Exchange Commission cited that Fannie Mae had to repay earnings and correct their books for the period 2001 through 2004. This major undertaking will cost the company over $11 billion by SEC estimates. In addition the Department of Justice has conducted a criminal investigation on the board members.
The top executive managing Fannie Mae were found guilty of illegally reporting accounting information that led to their receiving million dollar payments. Under Fraudulent Financial Statement Schemes this case is one of corruption and financial fraud. The specific areas include Illegal…… [Read More]
O'Hagan, the SEC could successfully bring a lawsuit against Leo for damages in connection with his purchase of the shares.
Larry was not bound by fiduciary duty to Hawke. As such, the higher standard of Chiarella v. United States applies. While this 10b-5 rule applies to deliberate omission, Larry may or may not have known specifically about Leo's relationship with Hawke. Legally, however, the SEC still has recourse. The broker in the ImClone case, Peter Bacanovic, received a conviction for trading on Sam Waksal's inside information. The same legal standard is likely to apply to Larry as well, since he is a broker. There is a question as to whether this standard would apply to Foster in the case involving Howard, as he is less likely to have known that his omission constituted a fraud. For Howard, however, his position makes it evident that he knew he was committing a…… [Read More]
The U.S. Supreme Court then granted a writ of certiorari to determine the meaning of the language "in connection with the purchase or sale of any security" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008).
What argument did the security dealer make in seeking to have the civil complaint dismissed?
andford's defense in this matter was particularly interesting as he does not deny his involvement in the "simple theft of cash or securities in an investment account" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). For andford the issue is not that he sold the securities which he contends "were perfectly lawful," rather that the fraudulent activity of "misappropriation of the proceeds is desultory from the actual sale of the securities. If andford's argument is believable then the sales of securities would have been aligned with the investment strategy designed to secure principal and generate income.…… [Read More]
As required under Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, WB must evaluate the carrying value of PC and T. against the fair value, as determined by the market capitalization of the two companies at the official spin-off date. In this case, both PC and T. will qualify as discontinued operations because after the confirmation of the transaction neither will be a part of the business or parent company.
WB maintains a March 31 end of year and the stock sale was dated May of 2000 which may cause a reporting concern. It is crucial that WB reports these events properly for the sake of accuracy. WB will be responsible to verify if any changes occur in their end of year reporting under SFAS No. 131. "The registrant, in consultation with its counsel, is responsible for determining whether a fundamental change…… [Read More]
Company Initiative Analysis
Analysis of New Initiative by Office Depot
Office Depot is a company that was incorporated in 1986, and that year opened its first store in Fort Lauderdale, FL that year (Office Depot, 2012). The company has continued to expand during the past 26 years and continues that tradition by initiating plans to move even farther with its international business. According to one portion of the company website "In addition to doing business in 47 countries, Office Depot has over 1,500 retail locations across the globe. In the U.S., Office Depot has stores in 49 states with 34 Distribution Centers or Crossdock facilities scattered across the country" (Office Depot, 2012). However, this global acquisition and expansion is currently only in the early stages. The company has plans to expand its reach in the United States and abroad by partnering with similar firms in other parts of…… [Read More]
financial statements of Barnes and Noble and Borders Group for fiscal year 2009. The companies' statements provide information about their financial health, as well as discuss plans for the coming fiscal year.
The balance sheet reveals detailed information about each company's assets, liabilities and owners' equity (net worth). It is based on the accounting equation Assets = Liabilities + Stockholders' Equity; the two sections of the balance sheet must equal each other just as they do in the equation. This equation represents the basic accounting premise: assets, the means used to operate the company, are balanced by a company's financial obligations, along with the equity investment brought into the company along with its retained earnings (Investopedia, n.d.).
As both the Barnes and Noble and Borders Group statements show, there are four main financial statements:
The balance sheet, which shows what a company owns and what it owes at a fixed…… [Read More]
The 2009 Annual eport for instance argues that the company was "in compliance with the only financial covenant in both credit agreements, which requires us to maintain a coverage ratio of at least three times earnings before interest, taxes, depreciation, and amortization to interest expense. No amounts were drawn against these credit facilities during the year ended June 30, 2009."
Compliance is also emphasized upon in terms of ownership issues. From this standpoint, all of the Microsoft shareowners of more than 10 per cent, all executive officers and all directors develop reports on their owned parts, as well as changes in ownership. The reports are constructed on vast and accurate information and verified. They are written as part of the strategy of compliance with the sections and demands of the Securities and Exchange Commission. The analysis of all information available against the constructed reports leads to the belief that the…… [Read More]
In terms of the employees, a system should be made available to provide them with the confidence to report any suspected fraud within the company. This should occur on a confidential basis to prevent situations such as those of Employee 1 above. The employee was fully aware of the fraud and felt that it was unethical, but was reluctant to report it because of the lack of adequate systems by means of which to do so. Managers and employees alike should be aware of this reporting system, and therefore encouraged to report any suspected misconduct.
This is not to say that company loyalty should not be an important part of the company's operations. Employees should be encouraged to be loyal to the company and to take pride in the work they do. Without such loyalty and pride, the work that employees perform will not adhere to the necessary standards of…… [Read More]
However there is a huge difference after these lines. Morgan quickly wraps it up saying that controls were deemed effective while Citigroup goes on to add who is responsible in the company for ensuring the effectiveness of the procedures. This additional bit of information gives a reader the feeling that the company cares about its disclosure statement and wants to be seen as a responsible firm. Morgan seemed uninterested in this additional information. Even the ending for both are though similar yet for Citigroup it's more thorough and for Morgan, it ends in two lines.
See how the two companies end their disclosures: Citigroup Inc. says, "The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15 (e) under the Exchange Act) as of December 31, 2005 and, based…… [Read More]
What are five steps in building a Web Service?
The five steps in building a web service are:
Exposing the code
Writing a service description
Publishing the service
Finding the service
Invoking a Web service d. What is a quick-hit DSS? Define three types quick-hit DSS is a computer-based system that allows decision makers to interact directly with data and analysis models. Three types include data mining, executive information systems, and expert systems.
Question 8 a. Describe three kinds of knowledge representation
One kind of knowledge representation has knowledge as cases. This involves comparing a current case with many other past cases. A second kind of knowledge representation involves neural networks. This involves storing knowledge as nodes in a network. The third form of knowledge representation stores knowledge as rules, where the rules are obtained from experts, laws, or experience.
b. What is a smart tag and how might it…… [Read More]
accounting discipline has taken a public relations beating over the past few years as a result of scandals in corporate accounting; much of this abuse has been well-deserved. Regulations regarding conflicts of interest, independent monitoring, reporting, and full disclosure to stockholders were thin at best, and in many cases were not enforced even when they did exist. The corporate accounting scandal wave changed that; public outcry for accountability resulted in Congress passing the Sarbanes-Oxley Act of 2002. This act contains many new regulations that have a profound effects on publicly traded companies, and that will directly affect this team and your corporation.
First, a quick summary of the actors involved: the FASB, or Financial Accounting Standards Board, and the Securities Exchange Commission, or SEC, have a mutually reciprocal relationship. The FASB issues standards regarding accounting standards which the SEC enforces; although the FASB is not an official government body (it…… [Read More]
economic globalization over the past twenty years sparked demand for a single, worldwide set of high-quality accounting standards" (Benjamin 2012). The SEC's allowance for American companies with international holdings to use IFS supports convergence to some extent by providing an incentive for filers to use IFS. Companies that use IFS can be compliant with both U.S. And international filing requirements, without having to keep 'double books.' All firms with an international scope are now likely to consider using IFS because of its compatibility with U.S. And worldwide standards. Given the globalization of the economy, even small and mid-sized U.S. organizations may begin using IFS, which will make firms which use GAAP more isolated. Convergence will be facilitated, with a likely bias in the new, universal standards towards using IFS with minor (or no) modifications.
Q2. The EU is one of the most powerful trading blocks in the world. The wholesale…… [Read More]
Corporation Transactions and Misrepresentation of Financial eports
Business law also called commercial law is a branch of civil law that governs business as well as, commercial transactions, and deals with both the private and public law. The branch created to ensure that, they are no exploitation and manipulation of people as well as rules and regulation in order to benefit some members of a business. This means that should one break or manipulate the rules and regulation in his favor. The or she must face the court in accordance with the law. With legal rights of all investors considered as an important element of the business law, we examine the board changes within the filling of the shareholder derivative lawsuits and might not be frivolous. Also, lack of highly competent employees within a business can lead to tremendous losses and to some extent closure of the business in accordance with…… [Read More]
Strategic Management EVISED
Crocs Inc. is a publicly traded corporation on the NASDAQ under the symbol COX: the company completed its initial public offering in February of 2006, and is thus a little over eight years old. The Colorado-based company is known primarily for its brightly-colored foam-based shoes, which were first manufactured in 2002 as footwear for beaches and spas, but which quickly expanded. The company went public at the precise moment when its popularity with consumers was experiencing explosive growth, and thus the eight years as a publicly-traded corporation have been difficult and tumultuous. At its peak in 2006, shortly after the initial public offering, shares of Crocs Inc. traded at over sixty dollars apiece; in 2014, shares now trade at less than thirteen dollars apiece (Mattoli & Spector, November 2013, para.2). However, because of the limitations inherent in Crocs' business model, the company makes an excellent case study…… [Read More]
(Ferrel, Fraedrich, & Farrel, 2009)
How will the implementation of the Sarbanes-Oxley Act of 2002 prevent future dilemmas in Tyco?
Sarbanes-Oxley increases: the penalties for such actions, limits the role that the board of directors will have with managers, it creates an accounting oversight board and it requires the CEO / CFO to certify under oath that all financial information is correct. This will severe as a deterrent and help to provide mechanisms, to the prevent ways that the fraud was able to be perpetuated at Tyco. (Ferrel, Fraedrich, & Farrel, 2009)
Can the SEC trust Tyco's new board?
Yes. This is because those members who were involved with Kozlowski were purged and none of the current members have committed any acts of wrong doing. These facts along with the Sarbanes-Oxley in place, means, that there is no reason for the SEC not to trust the board. (Ferrel, Fraedrich, &…… [Read More]
Also, on April 1, 2004, Sony recognized a charge of 4,713 million yen (net of income taxes of 2,675 million yen) as a cumulative effect of an accounting change. (Form 20F Year Ended Mar. 31, 2008)
126.96.36.199 During the quarter ended December 31, 2004 Sony adopted EITF Issue No. 04-8 which requires that the maximum number of common stock that could be issued upon the conversion of contingently convertible debt instruments be included in diluted EPS computations from the date of issuance regardless of whether the conditions to exercise the stock acquisition rights have been met. As a result of the adoption of EITF Issue No. 04-8, Sony's diluted, Sony's diluted EPS of income before cumulative effect of an accounting change and net income for the fiscal year ended March 31, 2005 decreased by 7.26 yen and 7.06 yen, respectively, as a result of adopting EITF Issue No. 04-8. (Form…… [Read More]
The first three organizations in line to recuperate their funds were Citigroup, J.P. Morgan and General Electric Group. They had been offering financial solutions and encouragement to purchase the WorldCom stock based on a favorable business relationship. However, at the time when bankruptcy procedures were commenced, the three organizations recognized their losses and intended to recuperate them.
A succinct presentation of the period surrounding the crisis could be reveled by the media stories:
27 June 2002 - information on the people affected by the WorldCom crisis become available - about 60 banks across the globe had granted loans to the organization or purchase bonds
27 June 2002 - SEC charges the organization with fraud and three organizational leaders are subpoenaed before a governmental committee
28 June 2002 - John Sidgmore announced a cut in costs by $1 billion and the downsize on 17,000 employees
U.S. President George Bush condemns organizational…… [Read More]
Investors want to know how a stock will perform in the future, not just its historical value and capital maintenance expenses.
hat arguments can be raised against the "politicization" of accounting standard setting?
One accountant believes that the FASB "has outlived its usefulness and that the SEC, adequately funded, should exercise its 1934 mandate and take full control of accounting standards. Furthermore, the SEC should also reaffirm the use of historic cost as the measurement base, and the basic need for the attestation by an independent public accountant as to the stewardship of management," in short that accountants should serve the public good (the public good including the shareholder's 'good) and the public good does not gain a really good assessment of future performance, because too many subjective variables are present in the portrait of corporate health created by current accounting policies (Flegm, 2005). The "FASB does not recognize that…… [Read More]
The findings of this report will be valuable to two different audiences. The first consists of accounting regulatory bodies. These bodies are working towards convergence and are presently struggling with the resistance from the business community. Understanding the nature of that resistance is key to finding ways of overcoming it. For the large publicly traded corporations themselves, this report will help them understand why they and their peers are resistant, and this will shed light on whether or not that resistance is justified. Convergence is coming whether the corporate world is ready for it or not, but the key for corporations is to understand what convergence is, why it is important, and which elements of their resistance are not worth the effort. For both parties, it is important to work together to make the convergence process as smooth as possible, and that is going to take a greater…… [Read More]
Burlington School Comm. V. Mass. Dept. Of Ed. (1985)
Compensation for learners with extraordinary requirements that is not provided in the states education laws bring costs to parents and the laws do not provide for compensation of this. Termed 'compensatory education' courts have exercised their jurisdiction in awarding costs to claimants and the courts have been relying on sec.20 USC 1415(2) (B) (ii) for students. The Burlington School Committee V Massachusetts Dept. Of Education 1984 heralded the change in the definition and eligibility for the compensatory education. The salient awards pertain to the recognition of the power of courts to grant reimbursement to the applicants from private school education that was not included in the 'Individuals with Disabilities Education Improvement Act' -- IDEA.
Following this judgment, courts held that where the parent was able to afford the private school education, the reimbursement was shown to be the remedy. Further, for…… [Read More]
Mission and Vision tatement Analysis
Linking Wal-Mart's Mission and Vision to Their trategic Goals and Objectives
Assessing the Link Between Wal-Mart's Financial Performance And Its trategic Goals
Wal-Mart Competitive and Marketing Analysis
Wal-Mart Marketing Analysis
Potential Wal-Mart Merger & Acquisition trategy
Incentive and Reward trategies for Wal-Mart Employees
Evaluating How Current trategies Define Ethicacy Levels at Wal-Mart
Wal-Mart Ratio Analysis
Income tatement Analysis, 2007 -- 2012
Analysis of WalMart Corporation
Mission and Vision tatement Analysis
All internal systems, processes, external stakeholder management initiatives, supply chain management, sourcing, quality management and merchandising initiatives in WalMart revolve around the fulfillment of the expectations they create with their customers daily. Their Low Price Everyday (LPED) value proposition permeates their entire value chain, galvanizing it around the mission of delivering exceptional value on a consistent basis to customers. The mission and vision of WalMart rely on LPED as the catalyst and unifying…… [Read More]
Full Analysis of Staples for 2012
Throughout 2012, Staples has been in the process of going through a major restructuring. This is because the firm is experiencing challenges associated with the fiscal cliff, intense competition from rivals and stagnant consumer spending in key markets (most notably: North America, Australia and Europe). ("Staples Inc.") This is illustrating how the company has been dealing with major challenges that are hurting their business model.
The valuation analysis reveals that, the company is unstable. This is because they are having trouble adjusting with the difficult economic environment. It has an average PE ratio of 10.25. On the surface, this appears to be undervalued. However, the company has been lowering guidance citing difficult conditions in North America, Australia and Europe. As a result, Value Line has the stock listed as underperform for 2013. ("Staples Inc.") ("Staples Inc. Data")
Capital Structure and Impacts…… [Read More]