International Accounting Issues The WritePass Journal

International Accounting Issues 1. Executive Summary: International Accounting Issues 1. Executive Summary:2. Earning Management:2.1 Definitions of Earning Management:2.2 Motivations for Earning Management: To Show Growth Trends:Directors Bonuses:Manipulating Share Price:Financial Problems:Insider Trading: 3. Abuses of Earning Management and International Accounting Standards:3.1 Revenue Recognition (IAS 18):3.2 Unusual Assets ( IAS 16/38 )3.2 Profit Smoothing ( IAS 37 )3.3 Change in accounting Policy (IAS 8):3.5 Off Balance Sheet Financing (IAS 1):Conclusion and Recommendations:References:Related 1. Executive Summary: Due to the global business expansion, management opportunities have grown and enhanced each day and issues and abuses have occurred. Therefore, I will try to explore how Earning Management works within finance and, will relate it with the principles of accounting. According to the IASB, there are many ways escape and create opportunities. Throughout my study I will present how a total impact is made, by explaining the different accounting standards and by relating them to Earning Management. 2. Earning Management: Earning Management is the practice of producing financial accounts that suit a particular purpose without really showing the true and fair views. Sometimes the accountant might want to show profits which are favorable e.g. to get a bonus, and sometimes losses e.g. to pay less tax. At other times the accountant may wish to show a healthy balance sheet e.g. to get a bank loan, whereas at other times an unhealthy balance sheet e.g. before a management buy-out to get a bargain. Various types of definitions have been produced to explain Earning Management as a special form of ‘’design’’ rather than ‘’principled accounting’’. 2.1 Definitions of Earning Management: Earning management is also referred to as income smoothing, earnings management, earnings smoothing, financial engineering and cosmetic accounting. Definitions of earning management vary, and include the following: ‘Is any action on the part of management which affects reported income and which provides no true economic advantage to the organization and may in fact, in the long-term, be detrimental’. (Merchant and Rockness, 1994) ‘Involves the repetitive selection of accounting measurement or reporting rules in a particular pattern, the effect of which is to report a stream of income with a smaller variation from trend than would otherwise have appeared’.(Copeland, 1968) 2.2 Motivations for Earning Management: Why earning management comes into being? How can earning management come into being? In this part motivations of the appearance of creative accounting will be worked over. To Show Growth Trends: Generally companies prefer reporting steady trends of growth in profit rather than showing volatile profit with series of dramatic rises and falls. Making unnecessarily high provisions for liabilities and against asset values in good years is achieved so that the provisions can be reduced thereby improving reported profits in bad years. Directors Bonuses: In most cases, bonuses of the management of the company are based on profits, so the higher the profit the higher the bonus or, if a certain level of profit is achieved only then the bonus is payable. Directors and employees have an incentive to use earning management practices in an effort to maximize the bonuses received when such bonus schemes are tied to reported earnings. Manipulating Share Price: Creative accounting may help maintain or boost share price, both by reducing apparent levels of borrowing, making the company appear subjected to less risk, and by creating the appearance of a good profit trend. By doing so the company is able to raise capital from new share issues, offer their own shares in takeover bids and, resist takeover by other companies. Financial Problems:    The business needs additional financing; that is, it requires a loan or aspires one at a favorable rate. Normally, less risk perceived by the lender leads to lower interest rate charged. High reported earnings, high assets, low liabilities and high shareholder equity amounts accompanied by high earnings, convey the impression of improved credit quality as well as, high debt rating to a lender, or bond investor. As a result, creative accounting practices used to improve reported financial measures can lead to lower corporate borrowing costs. Insider Trading: If directors engage in insider dealing in the shares of company , they can then use earning management to delay the release of information for the market enhancing opportunities to benefit from inside knowledge. 3. Abuses of Earning Management and International Accounting Standards: In most cases where earning management is done, accounting policy choice and application simply fall within the range of flexibility inherent in international accounting standards, and GAAP. Whilst it can be argued that the manner in which the accounting policies is employed are largely a function of management judgment , in most cases this judgment results in the biasing of reported financial results and position in one direction or another. It presses the envelope of what is permitted under IAS and GAAP, although it remains within boundaries, and it is not fraudulent financial reporting. At some point, a line is crossed and accounting practices being employed move beyond boundaries of IAS and GAAP. Financial statements that result are not considered to provide a fair presentation of a subject company’s financial results and position once the line is crossed, and adjustments become necessary. Here are some common abuses and the particular international accounting standard. 3.1 Revenue Recognition (IAS 18): Faced with the slow growth, a company may overstate operating revenues by recognizing them too early .For example if item issued to distributers on a ‘’sale or return’’ basis are recorded as sales (even though they may be returned) this will inflate sales and profits. Since the sales have not yet been paid for, this will also increase the receivable figure in balance sheet. The increased receivable figures (longer debt collection period) is one way that analysts may be able to spot this kind of manipulation. The receivable figure tends to increase over time until the manipulation is discovered. Other examples include holding the books open and continuing to record shipments that clearly belong in subsequent periods and recording sales without the shipment of goods.If reported profit is significantly higher than the operating cash flow for the period, this may be another indicator that profits are being overstated. Sybase’s shares dropped an additional 20% when the company reported improper practices at the Japanese subsidiary, which Sybase said included booking revenue for purported sales that were accompanied by side letters allowing customers to return software later without penalty. The accounting standards dealing with this (principally IAS 18) has prescribed the criteria to decide when revenue should be recognized: In   case of goods,   that ownership has genuinely been transferred; that the economic benefits and risks of ownership lie with the buyer. The revenue that seller gains must be measurable. The costs of supplying the goods or services can be measured. It is probable that the revenue will be received. The completion stage of partially completed contract of services can be determined. According to IAS 18, the notes to the accounts should explain the revenue recognition policy. Although new rules and regulations imposed by IASB and other accounting bodies have improved the situation, revenues remain one of the most easily manipulated numbers in the accounts. 3.2 Unusual Assets ( IAS 16/38 ) Capitalizing expenditure involves posting transactions to the fixed assets in the Balance Sheet rather than the expenditure section in the Profit Loss or by amortizing capitalized amounts over extended periods. If the true and fair view would be to post it to the expenses then to post it to fixed assets (i.e. to capitalize it) could be classed as earning management  .Result of this would be that both the profits and asset values will be inflated. In the case of WorldCom, a large us telecommunication business, it was alleged that operating profits had been overstated by treating certain operating expenses, such as basic network maintenance, as capital expenditure during 2001 and 2002.To correct this overstatement ,net profit had to be reduced by $ 3.8 billion. Under IAS 16,costs such as servicing should be treated as an expense and should be recognized in the income statement. Subsequent expenditure should be capitalized only if it results in an enhancement of economic benefit beyond those previously recognized. A common charge seen at the time of the combination of technology firms is a charge for purchased in-process research and development. As the name suggests, purchased in process RD is an unfinished RD effort that is acquired from another firm. It might be an unfinished clinical study on the efficacy of a new drug or an unfinished prototype of a new electronics product. According to IAS 38, if the acquired RD has an alternative future use beyond a current research and development project, the expended amount should be capitalized. Capitalization also would be appropriate for purchased in process software development, a form of RD, if the software project has reached technological feasibility. 3.2 Profit Smoothing ( IAS 37 ) Income smoothing refers more specifically to the preference of reporting steadily rising profits. A form of earnings management designed to remove peaks and valleys from a normal earnings series, including steps to reduce and â€Å"store† profits during good years for use during slower years. For example, deliberately not disclosing a contingent liability, or significant going concern problems, in the notes to the financial statements means that the disclosures required (under IAS 37 and IAS 1 respectively) have intentionally not been made. From the preceding examples, it can be seen readily why earnings management is also known as income or profit smoothing. It is because the practice of earnings management often is designed to produce a smoother earnings stream, one that suggests a lower level of earnings uncertainty and risk. Earnings at General Electric Co. (GE) have grown steadily for decades. It is tough to expect such a smooth and growing earnings stream. Certainly the diverse nature of the company’s product and service mix provides a diversification effect that yields a more stable earnings stream. Beyond its product and service diversification, however, the company has in the past demonstrated a willingness to take steps that appear to manage its earnings to a smoother series. Analysts, noted that GE is â€Å"certainly a relatively aggressive practitioner of earnings management.† Sometimes   in a bad year a company may decide to write-down assets in a wholesale fashion. Earnings expectations have not been met. The implicit view is that there will be no additional penalties for making the year even worse. By writing down assets now, taking a â€Å"big bath,† as it is called- the balance sheet can be cleaned up and made particularly conservative. As such, there will be fewer expenses to serve as a drag on earnings in future years. 3.3 Change in accounting Policy (IAS 8): Another way of earning management is through a firm’s selection of the accounting policies it employs in the preparation of its financial statements or in the manner in which those accounting policies are applied. The companies involved are simply using available flexibility in accounting principles. It does not mean that the applicable financial reporting framework has not been followed. It may be that the manipulation of published figures is the result of selecting an accounting policy which is allowed under the financial reporting framework, but which does not reflect economic reality. For example, changing the estimated life of a non-current asset is allowed under financial reporting standards, but if it is done purely to manipulate the depreciation charge (and therefore earnings), then it becomes an example of earnings management. IASB in international accounting standard 8 has prescribed the criteria for selecting and changing accounting policies together with the disclosure and accounting treatment of changes in a reporting entity’s accounting policies, accounting estimates and corrections of errors. An enterprise may voluntarily change the accounting policy only if believes that the change will improve the presentation of the financial statements. An enterprise discloses any change in accounting policy that has a material effect in the current period or is reasonably expected to have a material effect in later periods. It should also disclose, to the extent ascertainable, the amount by which any item in the financial statements is affected by a change that has a material effect in the current period. Where the enterprise is unable to ascertain the amount with reasonable efforts, the fact should be disclosed. Entities must adopt consistent accounting policies for similar transactions unless an IFRS/IAS requires a more specific policy to be adopted. Entities are only allowed to change an accounting policy if it is required by an IFRS or IAS; or, it results in financial statements providing more reliable and relevant information about the effects of transactions on the entity’s financial position, performance or cash flows. 3.5 Off Balance Sheet Financing (IAS 1): â€Å"Off balance sheet financing† is when debt financing is not shown on the face of the balance sheet. This allows a company to borrow without calculations being affected of measures of indebtedness such as gearing.   Motives for this may be to mislead investors and remain within the terms of debt covenants. It may also sometimes be a side effect of the method for raising capital chosen therefore, it is probably best to be suspicious of the motives for raising debt in a manner that is not visible to investors. As standards have caught up with loopholes that allowed off balance sheet financing. The scope for off balance sheet financing has reduced over the years which in the past have included leasing and borrowing through special purpose vehicles. Conclusion and Recommendations: It is a difficult task for the regulators to cope with earning management. They need to update the rules to control earning management on one hand, allow flexibility and promote the culture of voluntary disclosure on the other hand. The danger of over regulation is that companies will assume it is the regulators’ responsibilities to ensure transparency rather than their own. By a mixture of regulations aimed at special abuses and more fundamental accounting and auditing standards that require the application of the spirit of the law rather than merely the letter, regulators have been successful in eradicating many of these practice. It is to be stated that the impact of creative and fraudulent accounting can be reduced by streamlining the accounting and auditing system and more effective corporate governance. Earning management can be reduced by: 1. Introduction of forensic accounting for white collar fraud detection and fraud prevention; 2. Minimizing the alternative choices of accounting treatment in accounting standards; 3. Enhancing the quality of corporate governance; 4. Amending Companies Act; 5. Enforcing strong regulation, and 6. Increasing the effectiveness of audit. References:

Conjunctive Adverbs vs. Adverbs

Conjunctive Adverbs vs. Adverbs Conjunctive Adverbs vs. Adverbs Conjunctive Adverbs vs. Adverbs By Mark Nichol A conjunctive adverb is an adverb that has been authorized to perform the function of a conjunction, which simply means that it links one part of a sentence with another. (Standard conjunctions consist of the phrase and clause connectors for, and, nor, but, or, yet, and so, acronymized in that order as the mnemonic FANBOYS.) However, they are not pure conjunctions, as the FANBOYS words are, and in this role they cannot follow a simple comma; this error is called is a comma splice. Instead, as the examples below demonstrate, conjunctive adverbs- words such as however, otherwise, thus, meanwhile, and hence, when used to express addition, apposition, concession, contrast, reinforcement, result, summary, or time- signal the beginning of an independent clause and must be preceded by a semicolon and followed by a comma. (Alternatively, conjunctive adverbs may appear parenthetically in the middle of the independent clause or may begin or interrupt a separate sentence.) Each use of a conjunctive adverb below is contrasted with the use of the same word as a simple adverb. Notice that when a word performs the latter function, a semicolon is unnecessary before it (though a comma might be required there to separate two clauses), and no comma must follow it. However Adverbial conjunction: â€Å"Jones was released last Friday after posting $100,000 bail; however, it was unclear who paid for his release.† Adverb: â€Å"For your sake, however much I abhor that actor, I will go see the movie.† Otherwise Adverbial conjunction: â€Å"The settlements are an acknowledgment that our business model is sound; otherwise, we would not have agreed to the terms.† Adverb: â€Å"The memory troubled him through the otherwise pleasant afternoon.† Thus Adverbial conjunction: â€Å"Margins on manufacturing and other businesses have become razor thin; thus, companies must undertake careful analysis of profitability for products and services on a real-time or near real-time basis.† Adverb: â€Å"The enemy struck, and Smith took the bait, thus weakening the left flank of his division.† Meanwhile Adverbial conjunction: â€Å"Some indicated that they would not respond to the question; meanwhile, others gave their thoughts.† Adverb: â€Å"That’s a good idea for the long term, but meanwhile, we have to address the immediate problem.† Hence Adverbial conjunction: â€Å"We were preoccupied by the sound of the breaking glass; hence, it is quite possible that somebody planted the gun without being noticed.† Adverb: â€Å"Not too many years hence, the average reader won’t ever have seen a card catalog.† Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Grammar 101 category, check our popular posts, or choose a related post below:12 Greek Words You Should KnowConfusing "Passed" with "Past"5 Keys to Better Sentence Flow

'Poetry exists to disrupt habitual perception' Essay

'Poetry exists to disrupt habitual perception' - Essay Example Jonathan Swift an Anglo-Irish poet of the eighteenth century, is considered a skilled satirist whose most famous work would be Gulliver’s Travels, a novel that which satires human nature and political struggle. Considered to be his best poem and perhaps his best work, â€Å"A Description of a City Shower† is a commentary on urban life and the way that life in a city can be inauthentic and artificial. The poem is constructed with lines in a loose version of iambic pentameter, in heroic couplets. It can be said that the poem evokes that feeling of ’shared experience’ as those portrayed are collectively together and captured in the event of a storm. However, the other shared experience that is just past The subjects of his words are treated with wit and social relevance. The poem is filled with small references some of which may not be immediately revealed, but on repeated readings the joyful mockery has extraordinary appeal. At one point within the poem a direct jab is taken towards the political parties who forever argue and accomplish little in the process. Swift says, â€Å"Triumphant Tories, and desponding Whigs, forget their feuds, and join to save their wigs.†[1]. In one quick stab of wit, Swift suggests that in this moment of rain, the Tories and the Whigs finally have a common element in their experience. The rain may destroy their wigs. In this manner, he reduces the members of these groups to a common element of humanity. With skill and a great, quiet power, Swift is able to reduce his subjects and require humility as they must step off of their pedestal for a moment - all disguised within a cleverly crafted rambling of the story of a rain shower. Louis MacNeice‘s, another Irish poet, wrote â€Å"London Rain† (1941) which also speaks of a rain shower. MacNeice’s work wasn’t intended to have quite the wit of Swift’s work, however his thoughtful and

Letter of Intent for college admission Essay Example | Topics and Well Written Essays - 250 words

Letter of Intent for college admission - Essay Example I will gain enough knowhow on how to integrate technology into the teaching process, assess the school environment, and make relevant recommendations towards improvement relying on successful research studies. The program will equally enable me to create a safer and positive learning, environment that foster performance. Moreover, the Concordia’s M.Ed. Program will accord me leadership skills that will enhance my teaching practice. Indeed, the inclusion of leadership aspect in this program will mould me personally and professionally. Actually, for me this is the right time to pursue my Masters degree.  This is because am readily available to study and I have considerably completed the credential program and attained the advanced course work and capstone experience which are the requirements to admission in this program. More so, I have chosen the Concordia’s M.Ed. Program in my pursuit to attaining a Master in Education degree in Environmental Education because of its flexibility, its availability online, and the short time it takes to complete the full program. Indeed, the one year it takes to complete the degree motivates me. Additionally, the inclusion of leadership lessons in the program and the fact that the program is available throughout the year motivated me to choose the Concordia’s M.Ed.

Early Childhood Education and Childcare Essay Example for Free

Early Childhood Education and Childcare Essay Summary â€Å"Why Universal Childcare? † is a great title for an article such as this one. The question enters the reader into a vast pool of potential answers to the question. First off, what does universal childcare mean? For me, I believe that universal childcare means all around childcare, not only in a general sense, but all over the map childcare. Most people don’t see a problem with childcare in Canada, but it seems as if there are some issues pertaining to the system of childcare in Canada. â€Å"In a country of close to five million children of 0-12 years of age, Canada now has fewer than 900,000 regulated childcare spaces. The percentage of children for whom a space is available increased only to 17. 5 percent about a 10 percent increase over the past fifteen years†. (Prentice, 2009, p. 1). A frequent problem most organizations/programs run into is often funding the programs. Without funding, the programs usually suffer and do not meet the maximum amount of care and quality that it should be able to meet. Along with this, the childhood educators/childcare providers may be undertrained. â€Å"The quality of the care is frequently troubling: limited public financing forces programs to operate as cheaply as possible, and requirements for programs are low. The early childhood educators who provide the care are underpaid and often undertrained. Overall, Canada’s early childhood education and care situation suffers from chronic neglect. † (Prentice, 2009, p. 1). Another reason why this situation may come across as shocking to most people, is because Canada is an extremely wealthy country, so you could expect Canada to have a very strong childcare programs. Childcare programs are always changing, they have changed drastically in the last few years, most programs are now looking for ways to interpret ways of learning and more social support for children. â€Å"ECEC (Early Childcare Education and Care) is about an integrated and coherent approach to policy. It is about providing care that includes all children and all children regardless of employment or socio-economic status. † (Prentice, 2009, p. 4). Integrating social support and learning into these childcare programs will expand the knowledge and adaptability of children when entering their later childhood educations. The history of childcare helps explain why today childcare programs are poorly put together. â€Å"The origins of childcare were in philanthropy and benevolence. From the mid- nineteenth century to the middle of the twentieth century, most of what we know today as childcare programs were provided by educational, philanthropic, or religious organizations, often led by prominent women. † (Prentice, 2009, p. 71). Women were the ones who normally ran the childcare centers, but as we see today, women are entering the paid workforce. The governments did not play a role back then, hence they did not play a part in the responsibility. Today, we count on the government to help fund and organize these programs, which is still a  developing task. After World War II, the federal government stopped funding childcare. This lead out into outbursts which lead to : The Day of Nurseries Act, which became Canada’s first provincial legislation. This lead to the number of childcare programs expanding. We saw a leading change in childcare happen in 2006, when the Harper Conservatives made childcare one of their five leading promises. â€Å"In the 2006 election the Harper Conservatives made childcare one of their five leading promises†. (Prentice, 2009, p. 84. ). Unfortunately, what was promised to parents never happened. Childcare disappeared in importance. How were parents supposed to trust anyone with their ‘childcare money’? â€Å"Following the cancellation of the national childcare plan, childcare space expansion showed the smallest increase in regulated child care in some years: an increase of only 26,661 spaces since 2006. † (Prentice, 2009, p. 86). The author is trying to show the reader the importance of history, and how the little things contribute to how childcare as a whole has developed over the years. Also, the importance of funding programs for childcare.

The Pardoner as Symbol in Geoffrey Chaucer’s Canterbury Tales Essay

The Pardoner as Symbol for the Pilgrims’ Unattainable Goals in Geoffrey Chaucer’s The Canterbury Tales Geoffrey Chaucer’s work, The Canterbury Tales, paints a portrait of medieval life through the voices and stories of a wide variety of speakers. The people on the Pilgrimage tell their stories for a wide range of reasons. Each Tale is told in order to accomplish two things. The Tales provoke their audience as much as they are a kind of self-reflection. These reactions range from humor, to extreme anger, to open admiration. Each story is symbolic for a meaning above the actual plot of the narrative itself. The theme of social and moral balance is one theme which ties every character and Tale together. The character of the Pardoner exemplifies this ideal. By embodying imagery of balance in his character and in his story, the Pardoner becomes a symbol for the Pilgrims’ unattainable goal of spiritual and moral balance. All the characters in The Canterbury Tales are on a pilgrimage. Their physical journey takes them to the cathedral at Canterbury, to visit the shrine of a former archbishop, Thomas a Becket. When their stories are looked at allegorically, the pilgrimage takes on a new meaning. Beyond a physical journey, these Pilgrims engage their minds and thoughts upon a symbolic journey. The subjects of their stories vary widely, but common to all is the desire for self-knowledge and understanding. The Knight’s Tale, with its emphasis on courtly love and chivalric ideals, is a portrayal of the changes happening within the higher classes of medieval English society. The drunken Miller shows his anger towards the aristocracy by telling a parody of the Knight’s Tale. The Pardoner’s Tale tells the story of three young men who wa... ...omes a way of reconciling the unbalanced portions of human experience in order to promote growth in the face of sin and death. Works Cited and Consulted Ames, Ruth M. God’s Plenty Chaucer’s Christian Humanism. Loyola University Press: Chicago, 1984. Chaucer, Geoffrey. "The Pardoner’s Tale." The Canterbury Tales: Nine Tales and the General Prologue. Ed. V.A. Kolve. New York: W. W. Norton & Company, 1989. Colby, Elbridge. Chaucer’s Christian Morality. The Bruce Publishing Company: Milwaukee, 1936. Ellis, Roger. Patterns of Religious Narrative in the Canterbury Tales. Banes & Noble: Totowa, 1986. Patterson, Lee. "Redemption in Chaucer's Pardoner’s Tale.† Journal of Medieval and Early Modern Studies. Durham; Fall 2001. 507-560 Reiff, Raychel Haugrud. â€Å"Chaucer’s The Pardoner’s Tale.† The Explicator. Washington, Summer 1999. 855-58

Evolutionary Psychology

Evolutionary psychologists view human behavior and psychological traits as a result of evolutionary adaptation in response to reproductive needs – much like the concept of natural selection applied to reproduction, or sexual selection. Drawing from this perspective, evolutionary psychologists and professionals seek to explain the differences between male and female dating and mating rituals and sexual attitudes and how they have evolved throughout the centuries.For example, researchers employ the evolutionary perspective to discuss the differences in male and female promiscuity, aggressiveness, dominance, dating patterns, and the development of sexual attitudes – differences which seem to become less apparent in modern times than the more traditional sexual values expressed throughout history. Evolutionary psychologists would propose that differences between male and female promiscuity are a result of the evolving need to ensure reproduction.While traditional female sex ual attitudes and values are evolving and females are increasingly becoming more comfortable in expressing sexual aggression or dominance in modern times, these traditional differences may be explained from the standpoint of adaptation to reproductive demands as well. Women are more limited in reproductive opportunity than men, having a limited number of eggs and a limited amount of time in which to reproduce optimally, while men have a much more unlimited reproductive opportunity with hundreds of thousands of available sperm and a many more reproductively-viable years than women.Evolutionary psychologists would propose that the differences in sexual attitudes and behaviors among men and women are directly attributable to these reproductive differences as evidenced by the innate desire of men for sexual promiscuity, as compared to the highly selective manner of reproductive behavior among women.While the evolution of social attitudes towards female sexuality has produced an acceptan ce of evolving sexual behavior among women, evolutionary professionals propose that the innate differences between men and women with regard to parenting style, romantic behavior, preferences in sexual partners, and the extent to which looks and personality play a role in mating selection, are a result of evolutionary adaptations.Evolutionary psychology would propose that male and female sexual behavior is centered on the innate need to optimize reproductive opportunity – men being visually stimulated and aggressive in order to ensure a fertile mate and reproductive opportunity, while women express nurturance and attraction towards partners who can provide, ensuring survival of the family unit. These sexual and mating differences, according to evolutionary psychology, ensure the passing on of ones’ genes.