Legalization of Marijuana for Medicinal Usage - 800 Words

Legalization of Marijuana for Medicinal Usage The legalization of marijuana for medical purposes is a question that seems to be scourging many states. Have you ever experience excruciating pain? Or have you ever witnessed someone suffering from agonizing morning sickness? Then still there are those that feel plagued with the chronic arthritis pain, or the nausea and vomiting, which often accompany chemotherapy. These individuals would welcome the use of marijuana for medicinal usage. Medical marijuana is related to the possession, use and cultivation of marijuana for medical purposes. Some people suffering from a terminal illness or extreme painful conditions have given favorable reports concerning the benefits from the use of†¦show more content†¦Physicians recognized marijuana for medicinal use as early as 1840. It appeared in the Nation’s official list of acceptable drug from 1850 through 1942 in the United States Pharmacopoeia. It was sold in small packages for the treatment of migraines, rheumatism, and insomnia. (Anslinger) However, today, many individuals are left to choose between feeling better and breaking the law. More than twenty states have legalized the use and/or cultivation of marijuana for medicinal use, thereby removing any criminal penalties from the doctor who prescribe the drug and the patients who use it within the bounds set by state laws. As with any drug, one of the biggest dilemmas in legalizing marijuana is the potential for abuse and addiction. For this reason, under the federal Controlled Substances Act, it is classified as a â€Å"Schedule I drug†. (Rosenthal) It lacks safety acceptance, and has no accepted medical use in treatment in the U.S. Medical marijuana laws are constantly changing. There are many people out there that fear persecution so much that they would refuse to use marijuana for medicinal purposes. (Neihouse) In 1996, California was the first to legalize medical marijuana. Alaska, Connecticut, Hawaii, Maine, Massachu setts, and Nevada are among other states that have legalized marijuana for medical use. Colorado and Washington legalized marijuana for adults in 2012. However, there are certain boundaries that are required. For instance states mayShow MoreRelatedMarijuana as Medical Treatment917 Words   |  4 Pages Marijuana as medical treatment Should marijuana become legal in our country as a prescription and clinical drug for medicinal treatment? Imagine somebody that you love lying in bed at a hospital and having just undergone chemotherapy for their cancer treatment; Side effects of chemotherapy like constantly vomiting, fatigue and pain are difficult to tolerate every day. Doctor can prescribe medication, but any of it has absolutely no effectRead MoreIs Cannabis Dangerous? This Particular Issue Has Been Discussed,1291 Words   |  6 Pagessociety. Many individuals have their own opinions on marijuana, whether it be positive or negative, but an objective perspective is necessary to justly weigh the benefits and detriments of marijuana use and legalization. When an unbiased person analyzes the controversial topic of cannabis, he or she would realize that the substance does not plainly fall into a single category. There is ample, scientific proof that marijuana has numerous medicinal purposes, such as treating glaucom a and different seizureRead MoreEssay on Medicinal Marijuana: Miracle Drug Of the Future?1682 Words   |  7 PagesMedicinal Marijuana: Miracle Drug Of the Future? The many tales and legends surrounding the medical use of marijuana can be traced as far back to the ancient Chinese and Greek civilizations, who both believed that on top of its psychoactive capabilities, marijuana was effective in treating pain. Several thousand years later, Queen Victoria was urged by her doctor to take marijuana in order to relieve such pains as migraines or menstrual cramps. However, despite the many historicalRead MoreMarijuana Should Not Be Beneficial For Medical Purposes1080 Words   |  5 PagesMarijuana has proven to be beneficial for medical purposes. It has therapeutic effects that will ultimately allow patients with adverse health conditions to improve their quality of life. Legalizing marijuana can also improve the state of the United States’ economy through taxation and creation of job opportunities. Additionally, it can reduce the crime rate in the United States and save the United States tons of money. Contrarily, marijuana should not be legalized for recreational usage. ExtensiveRead MoreThe Risk Of Legalization Of Marijuana Essay722 Words   |  3 PagesThe risk of Legalization of Marijuana Marijuana, as we know, is a kind of drug. According to Thompson (2015), marijuana is not only one kind of drug, but also can be used as a medicinal material. The reason it can be a medicinal substance is that marijuana has a curative affect of relieving pain. Despite different states having a variety of regulations about the usage of marijuana, there is always one rule that is unified, which is the medicinal usage of marijuana must be approved by the FDA—theRead More Drugs and Alcohol Essay1599 Words   |  7 Pagesrecreational use. In the United States, marijuana has been and continues to be a very controversial drug. Some states have allowed marijuana consumption for medicinal purposes, while others have completely outlawed the drug. Those who are against the legalization and regulation of marijuana suggest the economical and health risk associated with consumption of the drug are too high. Although there is risk involved with the legalization of the marijuana, our cou ntry has already been risking tooRead MoreThe Legalization of Marijuana Essay966 Words   |  4 PagesIm for legalizing marijuana. Why pick on those drugs? Valium is legal. You just go to a doctor and get it and overdose on it - whats the difference? Prozac, all that stuff, so why not marijuana? Who cares? Its something that grows out of the ground - why not? Go smoke a head of cabbage. I dont care what you smoke (Stern). This particular quote is the reality of how many Americans actually feel about the supposed war on drugs. Mary jane, airplane, weed, reefer and dank are all commonly usedRead MoreShould Marijuana Be Legalized?1350 Words   |  6 Pagesin politics in the past decade would have to be the legalization of marijuana. The sale and production of marijuana have been legalized for medicinal uses in over twenty states and has been legalized for recreational uses in seven states. Despite the ongoing support for marijuana, it has yet to be fully legalized in the federal level due to cultural bias against â€Å"pot† smoking and the focus over its negative effects. However, legalizing marijuana has been proven to decrease the rate of incriminationRead MoreShould Marijuana Be Legalized?1232 Words   |  5 PagesIntroduction The possession, use, cultivation, transportation, and sale of marijuana are illegal under the federal law in the United States. However, the federal government announced that states are allowed to pass a law to legalize marijuana for medical and recreational use, provided that they develop a system to regulate the activities. Under the Controlled Substances Act, passed in 1970, Marijuana is classified as a substance of schedule 1, the highest listing under the legislation. The classificationRead MoreThe Regulation And Taxation Of Marijuana Act1618 Words   |  7 Pagessubmitted. Question four on the ballot was known as the â€Å"The Regulation and Taxation of Marijuana Act.† The numbers came in and beginning December 15, 2016 in Massachusetts, individuals above the age of twenty-one will now be able to legally purchase, possess, cultivate, and use marijuana, with limitations on quantity, for recreational and medicinal use under the statutes of the state laws. While the prohib ition of marijuana in Massachusetts has ended, many new movements must now begin to maintain, regulate

Eth316 Community Profile Paper - 1362 Words

Community Profile Presentation The City of Kelsey is an environment friendly and diverse community with residents from different ethnicities and backgrounds. The City Kelsey where most people regardless of the entry-level position have an opportunity to find a job. One of the largest employers is Smith System consulting, followed by Huffman trucking company own and managed by family members. This community has a diverse population of professionals on different fields such as consulting, transportation, organic farming, and construction. The City of Kelsey also offers their citizens many activities like; annual ballroom, festivals, monthly famer’s market, annual St. Patrick’s Day parade, craft fair, memorial day soft ball tournament, golf†¦show more content†¦If the visitors or the locals are feeling a little more adventurous they can take advantage of its beautiful scenery. Visitors can enjoy a day of boating, sailing, swimming, fishing or water skiing in Beautiful Lake Lora, which is locate d five miles west of the city or the Kelsey River which runs in the southern boundary of the city or catch a Ferry and cross the river to enjoy Baderman island, the Kelsey Aquatic Center provides residents with swimming lessons in its outdoor swimming pool in the summer and in the indoor pool year round. There is also the Kelsey Country Club with one of the most challenging courses in the region, there club members can take advantage of the golf course in the summer months and the club house year round. (Oswaldo) How would you describe the responsibilities of the individual to the community? (Daisy) Individuals of The Kelsey community carry a huge responsibility to preserve the land, as well as the ways of the community. It is very clear that this community is a small one, yet still, a strong and very productive one. The individuals of this community have learned to work and communicate with one another, in harmony, to survive and improve their way of life together. Initially, they survived on what they themselves grew; making sure that it was of quality. Throughout the years, as the community grew, by reproducing and evolving,

Financial Reporting Essay Example For Students

Financial Reporting Essay OnSeptember 28, 1998, Chairman of the U.S. Securities and Exchange CommissionArthur Levitt sounded the call to arms in the financial community. Levitt askedfor, immediate and coordinated action to assure credibility andtransparency of financial reporting. Levitts speech emphasized theimportance of clear financial reporting to those gathered at New YorkUniversity. Reporting which has bowed to the pressures and tricks of earningsmanagement. Levitt specifically addresses five of the most popular tricks usedby firms to smooth earnings. Secondly, Levitt outlines an eight part action planto recover the integrity of financial reporting in the U.S. market place. Whatare the basic objectives of financial reporting? Generally accepted accountingprinciples provide information that identifies, measures, and communicatesfinancial information about economic entities to reasonably knowledgeable users. We will write a custom essay on Financial Reporting specifically for you for only $16.38 $13.9/page Order now Information that is a source of decision making for a wide array of users, mostimportantly, by investors and creditors. Investors and creditors who areresponsible for effective allocation of capital in our economy. If financialreporting becomes obscure and indecipherable, society loses the benefits ofeffective capital allocation. Nothing illustrates the importance of transparentinformation better than the pre-1930s era of anything goes accounting. An erathat left a chasm of misinformation in the market. A chasm that was acontributing factor to the market collapse of 1929 and the years of economicdepression. An entire society suffered the repercussions of misinformation. Families, and retirees depend on the credibility of financial reporting fortheir futures and livelihoods. Levitt describes financial reporting as, a bondbetween the company and the investor which if damaged can have disastrous,long-lasting consequences. Once again, the bond is being tested. Tested by afinancial community fixated on consensus earnings estimates. The pressure toachieve consensus estimates has never been so intense. The market demandsconsistency and punishes those who come up short. Eric Benhamou, former CEO of3COM Corporation, learned this hard lesson over a few short weeks in 1996. Benhamou and shareholders lost $7 billion in market value when 3COM failed toachieve expectations. The pressures are a tangled web of expectations, andconflicts of interest which Levitt describes as almostself-perpetuating. With pressures mounting, the answer from U.S. managershas been earnings management with a mix of managed expectations. March of 1997Fortune magazine reported that for an unprecedented sixteen consecutivequarters, more SP 500 companies have beat the consensus earnings estimatethan missed them. The sign of a quickly growing economy and a measure of theimportance the market has placed on consensus earnings estimates. The singularemphasis on earnings growth by investors has opened the door to earningsmanagement solutions. Solutions that are further being reinforced to managers bymarket forces and compensation plans. Primarily, managers jobs depend on theirability to build stockholder equity, and ever more importantly their owncompensation. A growing number of CEOs are recieving greater percentages oftheir compensation as stock options. A very personal incentive for executiveachievement of consensus earnings estimates. Companies are not the only ones tofeel the squeeze. Analysts are being pressured by large institutional investorsand companies seeking to manage expectations. Everyone is seeking the win. Auditors are being accused of being out to lunch, with the clients. Manyaccounting firms are coming under scrutiny as some of their clients are beinginvestigated by the SEC for irregularities in their practice of accounting. Cendant and Sunbeam both left accounting giant Arthur Anderson holding a bigolbag full of unreported accounting irregularities. Auditors from BDO Seidmanaddressed issues of GAAP with Thing New Ideas company. The Changes were made andBDO was replace for no specific reason. Herb Greenberg calls the episode,A reminder that the company being audited also pays the auditorsbill. The Kind of conflict of interests that leads us to question the ideaof how independent the auditors are. All of these pressures allow questionableaccounting practices to obfuscate the reporting process. Generally acceptedaccounting principles are intended to be a guide, not a procedure. They havebeen developed with intended flexibility so as not to hinder the advancement ofnew and innovative business practice. Flexibility that has left plenty of roomfor companies to stretch the boundaries of GAAP. Levitt focuss on five of themost widespread techniques used to deliver added flexibility. BigBath restructuring charges , creative acquisition accounting, CookieJar reserves, Immaterial misapplications of accountingprinciples and the premature recognition of revenues. These practices do notspecifically violate the letter of the law, but are gimmicks thatignore the spirit and intentions of GAAP. Gimmicks, according to Levitt, thatare an erosion in the quality of earnings and therefore the quality offinancial reporting. No longer is this just a problem perceived in smallcorporations struggling for recognition. Throughout the financial community,companies big and small are using these tools to smooth earnings and maximizemarket capitalization. The Big Bath restructuring charge is thewiping away of years of future expenses and charging them in the current period. .u3a4353c4f06ff90ed33401256a3e52cb , .u3a4353c4f06ff90ed33401256a3e52cb .postImageUrl , .u3a4353c4f06ff90ed33401256a3e52cb .centered-text-area { min-height: 80px; position: relative; } .u3a4353c4f06ff90ed33401256a3e52cb , .u3a4353c4f06ff90ed33401256a3e52cb:hover , .u3a4353c4f06ff90ed33401256a3e52cb:visited , .u3a4353c4f06ff90ed33401256a3e52cb:active { border:0!important; } .u3a4353c4f06ff90ed33401256a3e52cb .clearfix:after { content: ""; display: table; clear: both; } .u3a4353c4f06ff90ed33401256a3e52cb { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u3a4353c4f06ff90ed33401256a3e52cb:active , .u3a4353c4f06ff90ed33401256a3e52cb:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u3a4353c4f06ff90ed33401256a3e52cb .centered-text-area { width: 100%; position: relative ; } .u3a4353c4f06ff90ed33401256a3e52cb .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u3a4353c4f06ff90ed33401256a3e52cb .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u3a4353c4f06ff90ed33401256a3e52cb .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u3a4353c4f06ff90ed33401256a3e52cb:hover .ctaButton { background-color: #34495E!important; } .u3a4353c4f06ff90ed33401256a3e52cb .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u3a4353c4f06ff90ed33401256a3e52cb .u3a4353c4f06ff90ed33401256a3e52cb-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u3a4353c4f06ff90ed33401256a3e52cb:after { content: ""; display: block; clear: both; } READ: My healthy lifestyle EssayA practice that paves the way to easy future earnings growth by allowing futureexpenses to be absorbed by restructuring liabilities. Large one time chargesthat will be ignored by analysts and the financial community through a littleconvincing and notation. In note fifteen of the Coca-Cola companys 1998annual report shows seven nonrecurring items from the past three years. Fours ofthese charges are restructuring charges, most significantly in 1996 in thisnote. In 1996, we recorded provisions of approximately $276 million in selling,administrative and general expenses related to our plans for strengthening ourworld wide system. Of this $276 million, approximately $130 million related tostreamlining our operations, primarily in Greater Europe and Latin America. These one time write-offs become virtually insignificant footnotes to thefinancial reporting process. Extraordinary charges that are becoming unusuallycommon. Kodak has taken six extraordinary charges since 1991 and Coca-Cola hastaken four in two years. The financial community has to wonder howunusual these charges are. Creative acquisition accounting is whatLevitt calls Merger Magic. With the increasing number of mergers inthe 90s, companies have created another one time charge to avoid futureearnings drags. The in-process research and development chargeallows companies to minimize the premium paid on the acquisition of a company. Apremium that would otherwise be capitalized as goodwill: and depreciatedover a number of years. Depreciation expenses that have an impact on futureearnings. This one time charge allowed WorldCom to minimize the capitalizationof goodwill and avoid $100 million a year in depreciation expensesfor many years. A charge hiding in this complex note on WorldComs 1996 annualfinancial statement. (1) Results for 1996 include a $2.14 billion charge forin-process research and development related to the MFS merger. The charge isbased upon a valuation analysis of the technologies of MFS worldwide informationsystem, the internet network expansion system of UUNET, and certain otheridentified research and development projects purchased in the MFS merger. Theexpense includes $1.6 billion associated with UUNET and $0.54 billion related toMFS. (2) Additionally, 1996 results include other after-tax charges of $121million for employee severance, employee compensation charges, alignmentcharges, and costs to exit unfavorable telecommunications contracts and $343.5million after-tax write-down of operating assets within the companys non-corebusinesses. On a pre-tax basis, these charges totaled $600.1 million. The dollaramounts are staggering and the future implications far reaching. Since thisapproach was introduced by IBM in 1995 these charges have become co mmonplace foracquisition accounting. A popularity, largely due to the level of room allowedin research and development estimations. The Third earnings manipulation tooldiscussed by Levitt is what he calls Miscellaneous Cookie JarReserves. The technique involves liability and other accrual accountsspecifically sensitive to accounting assumptions and estimates. These accountscan include sales returns, loan losses, warranty costs, allowance for doubtfulaccounts, expectations of goods to be returned and a host of others. Under theauspices of conservatism, these accounts can be used to store accruals of futureincome. Restructuring liabilities created by Big Bath charges alsoprovides these Cookie jar reserve effect. Jack Ciesielski, whomanages money and writes the Analysts Accounting Observer, calls theseaccounts the accounting equivalent of turning lead into gold a virtualhoneypot for making rainy-day adjustments. Various adjustments and entriesthat can produce almost any desired results in the pursuit of consistency. Thestatement of financial accounting concepts No. 2 (FASB, May 1980), definesmateriality as: The magnitude of an omission or misstatement ofaccounting information that, in light of surrounding circumstances, makes itprobable that the judgement of a reaonable person relying on the informationwould have been changed or influenced by the omission or misstatement. Todaysmanagement has started to ignore this fundamental principle. Materiality isbeing defined as a range of a few percentage points. Companies defend immaterialomissions by referring to percentage ceilings that draw a line on materiality. The amount falls under our ceiling and is therefore immaterial. Themateriality gimmick is one more method companies are using to stretch a nickelinto a dime. Simply put, In markets where missing an earnings projectionby a penny can result in a loss of millions of dollars in market capitalization,I have a hard time accepting that some of these so-called non-events simplydont matter, says Levitt. Finally, Levitt briefly touches on thecomplex issue of the manipulation occuring in revenue recognition. Moderncontracts, refunding, delaying of sales, up front and initiation fees all add tothe complications in some industries to follow specific rules of revenuerecognition. With plenty of holes in revenue recognition the door is open fortweaking. Microsoft is a good example of the problems facing todayscompanies. Concerned with proper revenue recognition, Microsoft started apractice in the software industry that allows companies to recognize revenueover a period of time. This recognition allo ws for better matching of revenuesto future expenses generated by the sale of the software. Expenses such asupgrades and technical support are related to the revenue generated by the saleof the software but are incurred at a later date. The complexities of modernbusiness transactions have left modern standards of accountancy years behind. .uaa8c71f0c7e93eacf7043563f9054df3 , .uaa8c71f0c7e93eacf7043563f9054df3 .postImageUrl , .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text-area { min-height: 80px; position: relative; } .uaa8c71f0c7e93eacf7043563f9054df3 , .uaa8c71f0c7e93eacf7043563f9054df3:hover , .uaa8c71f0c7e93eacf7043563f9054df3:visited , .uaa8c71f0c7e93eacf7043563f9054df3:active { border:0!important; } .uaa8c71f0c7e93eacf7043563f9054df3 .clearfix:after { content: ""; display: table; clear: both; } .uaa8c71f0c7e93eacf7043563f9054df3 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .uaa8c71f0c7e93eacf7043563f9054df3:active , .uaa8c71f0c7e93eacf7043563f9054df3:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text-area { width: 100%; position: relative ; } .uaa8c71f0c7e93eacf7043563f9054df3 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .uaa8c71f0c7e93eacf7043563f9054df3 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .uaa8c71f0c7e93eacf7043563f9054df3 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .uaa8c71f0c7e93eacf7043563f9054df3:hover .ctaButton { background-color: #34495E!important; } .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .uaa8c71f0c7e93eacf7043563f9054df3 .uaa8c71f0c7e93eacf7043563f9054df3-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .uaa8c71f0c7e93eacf7043563f9054df3:after { content: ""; display: block; clear: both; } READ: The Absent Male In Little Women EssayGimmicks, that all must be addressed by the financial community. The task ofreturning integrity to U.S. financial reporting is of paramount importance. Theinterests of our financial system are at stake. Arthur Levitt and the SECstand ready to take appropriate action if that interest is not protected. But, a private sector response that obviates the need for public sectordictates seems the wisest choice. A nine part plan that involves theentire financial community is proposed by Levitt. Levitt has made it very clearthat the SEC is prepared to start forcing change. A line Levitt hopes will notbe necessary to cross. The SEC will begin to issue guidance on a wide array ofissues concerning the credibility and transparency of financial reporting. Guidance that must be acted on to Obviate the need for large scaleSEC involvement. The SEC will also act more proactively in two of itstraditional roles of information regulation and enforcement. First, the SEC willbegin requiring companies to provide additional disclosure details on changes inaccounting assumptions. Supplemental beginning and ending balances andadjustments of sensitive restructuring liabilities and other loss accruals willalso be required. Secondly, the SEC is unleashing the dogs on companies usingany practices that appear to be managing earnings. The gauntlet has been thrown,and it is up to the financial community to accept the challenge. FASB and otherstandard setting bodies have fallen behind a rapidly changing and evolvingeconomic environment. FASB and the AICPA are being coercively encouraged toclean up auditing and disclosure practices. The pressure is on and standardsetting bodies are scrambling to close the holes in GAAP. FASB has establishedcommittees to in vestigate a number of concerns and is diligently working towardsolutions that obviate. Auditors and the public accounting industryreceived a good scolding from Levitt. Glaring failures in the auditing processat Sunbeam, Waste Management Inc., and Cendant have put the whole industry atrisk of public solutions. The auditors have failed to be the watchdog of investors. It is time to clean up your industry. Criticism by theentire financial community has questioned the auditors, qualifications, methodsand their ability to police themselves. Finally Levitt challenges corporatemanagement, and investors to begin a cultural change. Change that resists thepressures to follow the leader in accounting chicanery. Investors are encouragedto set financial standards of integrity and transparency and punish those whodepend on illusion and deception. American markets enjoy the confidence ofthe world. How many half-truths, and how much sleight-of-hand, will it take totarnish that faith? With the shift away form company run pension planseveryone has become their own personal financial planners. What hangs in thebalance is the future of us all. BibliographyLevitt, Arthur. Quality Information: The Lifeblood of OurMarkets. Speech, 18 Oct. 1999. Fox, Justin, Searching for Nonfictionin Financial Statements, Fortune 23 Dec. 1996. Adams, Jane B. Remarks. Speech, 9 Dec. 1998. Ciesielski, Jack, More SecondGuessing. Barrons. Johnson, Norman S. Recent Developments at theSEC. Speech. 20 August 1999. Fox, Justin. Learning to Play theEarnings Game (And Wallstreet will Love You). Fortune 31 Mar. 1997Greenberg, Herb, The Auditors are Always Last to Know, FortuneInvestor 17 Aug. 1998. Melcher, Richard, Where are the Accountants.Business Week 5 Oct. 1998. Melcher, Richard and Sparks, Debra EarningsHocus Pocus Business Week 5 Oct. 1998. Bartlett, Sarah, CorporateEarnings: Who Can You Trust Business Week 5 Oct. 1998. Turner, Lynn E. Continuing High Traditions Speech, 5 Nov. 1998. Turner, Lynn E. Remarks Speech, 10 Feb. 1999. Aeppel, Timothy EatonsEarnings Increase but Miss Analysts Forecasts 20 Oct. 1999. Tran, KhanhExcite At Home Posts Quarterly Loss Due to Charges but MeetsEstimates 20 Oct. 1999. Bank, David Microsoft Earnings ExceedExpectations 20 Oct. 1999.

Financial Reporting Essay Example For Students

Financial Reporting Essay OnSeptember 28, 1998, Chairman of the U.S. Securities and Exchange CommissionArthur Levitt sounded the call to arms in the financial community. Levitt askedfor, immediate and coordinated action to assure credibility andtransparency of financial reporting. Levitts speech emphasized theimportance of clear financial reporting to those gathered at New YorkUniversity. Reporting which has bowed to the pressures and tricks of earningsmanagement. Levitt specifically addresses five of the most popular tricks usedby firms to smooth earnings. Secondly, Levitt outlines an eight part action planto recover the integrity of financial reporting in the U.S. market place. Whatare the basic objectives of financial reporting? Generally accepted accountingprinciples provide information that identifies, measures, and communicatesfinancial information about economic entities to reasonably knowledgeable users. We will write a custom essay on Financial Reporting specifically for you for only $16.38 $13.9/page Order now Information that is a source of decision making for a wide array of users, mostimportantly, by investors and creditors. Investors and creditors who areresponsible for effective allocation of capital in our economy. If financialreporting becomes obscure and indecipherable, society loses the benefits ofeffective capital allocation. Nothing illustrates the importance of transparentinformation better than the pre-1930s era of anything goes accounting. An erathat left a chasm of misinformation in the market. A chasm that was acontributing factor to the market collapse of 1929 and the years of economicdepression. An entire society suffered the repercussions of misinformation. Families, and retirees depend on the credibility of financial reporting fortheir futures and livelihoods. Levitt describes financial reporting as, a bondbetween the company and the investor which if damaged can have disastrous,long-lasting consequences. Once again, the bond is being tested. Tested by afinancial community fixated on consensus earnings estimates. The pressure toachieve consensus estimates has never been so intense. The market demandsconsistency and punishes those who come up short. Eric Benhamou, former CEO of3COM Corporation, learned this hard lesson over a few short weeks in 1996. Benhamou and shareholders lost $7 billion in market value when 3COM failed toachieve expectations. The pressures are a tangled web of expectations, andconflicts of interest which Levitt describes as almostself-perpetuating. With pressures mounting, the answer from U.S. managershas been earnings management with a mix of managed expectations. March of 1997Fortune magazine reported that for an unprecedented sixteen consecutivequarters, more SP 500 companies have beat the consensus earnings estimatethan missed them. The sign of a quickly growing economy and a measure of theimportance the market has placed on consensus earnings estimates. The singularemphasis on earnings growth by investors has opened the door to earningsmanagement solutions. Solutions that are further being reinforced to managers bymarket forces and compensation plans. Primarily, managers jobs depend on theirability to build stockholder equity, and ever more importantly their owncompensation. A growing number of CEOs are recieving greater percentages oftheir compensation as stock options. A very personal incentive for executiveachievement of consensus earnings estimates. Companies are not the only ones tofeel the squeeze. Analysts are being pressured by large institutional investorsand companies seeking to manage expectations. Everyone is seeking the win. Auditors are being accused of being out to lunch, with the clients. Manyaccounting firms are coming under scrutiny as some of their clients are beinginvestigated by the SEC for irregularities in their practice of accounting. Cendant and Sunbeam both left accounting giant Arthur Anderson holding a bigolbag full of unreported accounting irregularities. Auditors from BDO Seidmanaddressed issues of GAAP with Thing New Ideas company. The Changes were made andBDO was replace for no specific reason. Herb Greenberg calls the episode,A reminder that the company being audited also pays the auditorsbill. The Kind of conflict of interests that leads us to question the ideaof how independent the auditors are. All of these pressures allow questionableaccounting practices to obfuscate the reporting process. Generally acceptedaccounting principles are intended to be a guide, not a procedure. They havebeen developed with intended flexibility so as not to hinder the advancement ofnew and innovative business practice. Flexibility that has left plenty of roomfor companies to stretch the boundaries of GAAP. Levitt focuss on five of themost widespread techniques used to deliver added flexibility. BigBath restructuring charges , creative acquisition accounting, CookieJar reserves, Immaterial misapplications of accountingprinciples and the premature recognition of revenues. These practices do notspecifically violate the letter of the law, but are gimmicks thatignore the spirit and intentions of GAAP. Gimmicks, according to Levitt, thatare an erosion in the quality of earnings and therefore the quality offinancial reporting. No longer is this just a problem perceived in smallcorporations struggling for recognition. Throughout the financial community,companies big and small are using these tools to smooth earnings and maximizemarket capitalization. The Big Bath restructuring charge is thewiping away of years of future expenses and charging them in the current period. .u3a4353c4f06ff90ed33401256a3e52cb , .u3a4353c4f06ff90ed33401256a3e52cb .postImageUrl , .u3a4353c4f06ff90ed33401256a3e52cb .centered-text-area { min-height: 80px; position: relative; } .u3a4353c4f06ff90ed33401256a3e52cb , .u3a4353c4f06ff90ed33401256a3e52cb:hover , .u3a4353c4f06ff90ed33401256a3e52cb:visited , .u3a4353c4f06ff90ed33401256a3e52cb:active { border:0!important; } .u3a4353c4f06ff90ed33401256a3e52cb .clearfix:after { content: ""; display: table; clear: both; } .u3a4353c4f06ff90ed33401256a3e52cb { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u3a4353c4f06ff90ed33401256a3e52cb:active , .u3a4353c4f06ff90ed33401256a3e52cb:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u3a4353c4f06ff90ed33401256a3e52cb .centered-text-area { width: 100%; position: relative ; } .u3a4353c4f06ff90ed33401256a3e52cb .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u3a4353c4f06ff90ed33401256a3e52cb .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u3a4353c4f06ff90ed33401256a3e52cb .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u3a4353c4f06ff90ed33401256a3e52cb:hover .ctaButton { background-color: #34495E!important; } .u3a4353c4f06ff90ed33401256a3e52cb .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u3a4353c4f06ff90ed33401256a3e52cb .u3a4353c4f06ff90ed33401256a3e52cb-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u3a4353c4f06ff90ed33401256a3e52cb:after { content: ""; display: block; clear: both; } READ: My healthy lifestyle EssayA practice that paves the way to easy future earnings growth by allowing futureexpenses to be absorbed by restructuring liabilities. Large one time chargesthat will be ignored by analysts and the financial community through a littleconvincing and notation. In note fifteen of the Coca-Cola companys 1998annual report shows seven nonrecurring items from the past three years. Fours ofthese charges are restructuring charges, most significantly in 1996 in thisnote. In 1996, we recorded provisions of approximately $276 million in selling,administrative and general expenses related to our plans for strengthening ourworld wide system. Of this $276 million, approximately $130 million related tostreamlining our operations, primarily in Greater Europe and Latin America. These one time write-offs become virtually insignificant footnotes to thefinancial reporting process. Extraordinary charges that are becoming unusuallycommon. Kodak has taken six extraordinary charges since 1991 and Coca-Cola hastaken four in two years. The financial community has to wonder howunusual these charges are. Creative acquisition accounting is whatLevitt calls Merger Magic. With the increasing number of mergers inthe 90s, companies have created another one time charge to avoid futureearnings drags. The in-process research and development chargeallows companies to minimize the premium paid on the acquisition of a company. Apremium that would otherwise be capitalized as goodwill: and depreciatedover a number of years. Depreciation expenses that have an impact on futureearnings. This one time charge allowed WorldCom to minimize the capitalizationof goodwill and avoid $100 million a year in depreciation expensesfor many years. A charge hiding in this complex note on WorldComs 1996 annualfinancial statement. (1) Results for 1996 include a $2.14 billion charge forin-process research and development related to the MFS merger. The charge isbased upon a valuation analysis of the technologies of MFS worldwide informationsystem, the internet network expansion system of UUNET, and certain otheridentified research and development projects purchased in the MFS merger. Theexpense includes $1.6 billion associated with UUNET and $0.54 billion related toMFS. (2) Additionally, 1996 results include other after-tax charges of $121million for employee severance, employee compensation charges, alignmentcharges, and costs to exit unfavorable telecommunications contracts and $343.5million after-tax write-down of operating assets within the companys non-corebusinesses. On a pre-tax basis, these charges totaled $600.1 million. The dollaramounts are staggering and the future implications far reaching. Since thisapproach was introduced by IBM in 1995 these charges have become co mmonplace foracquisition accounting. A popularity, largely due to the level of room allowedin research and development estimations. The Third earnings manipulation tooldiscussed by Levitt is what he calls Miscellaneous Cookie JarReserves. The technique involves liability and other accrual accountsspecifically sensitive to accounting assumptions and estimates. These accountscan include sales returns, loan losses, warranty costs, allowance for doubtfulaccounts, expectations of goods to be returned and a host of others. Under theauspices of conservatism, these accounts can be used to store accruals of futureincome. Restructuring liabilities created by Big Bath charges alsoprovides these Cookie jar reserve effect. Jack Ciesielski, whomanages money and writes the Analysts Accounting Observer, calls theseaccounts the accounting equivalent of turning lead into gold a virtualhoneypot for making rainy-day adjustments. Various adjustments and entriesthat can produce almost any desired results in the pursuit of consistency. Thestatement of financial accounting concepts No. 2 (FASB, May 1980), definesmateriality as: The magnitude of an omission or misstatement ofaccounting information that, in light of surrounding circumstances, makes itprobable that the judgement of a reaonable person relying on the informationwould have been changed or influenced by the omission or misstatement. Todaysmanagement has started to ignore this fundamental principle. Materiality isbeing defined as a range of a few percentage points. Companies defend immaterialomissions by referring to percentage ceilings that draw a line on materiality. The amount falls under our ceiling and is therefore immaterial. Themateriality gimmick is one more method companies are using to stretch a nickelinto a dime. Simply put, In markets where missing an earnings projectionby a penny can result in a loss of millions of dollars in market capitalization,I have a hard time accepting that some of these so-called non-events simplydont matter, says Levitt. Finally, Levitt briefly touches on thecomplex issue of the manipulation occuring in revenue recognition. Moderncontracts, refunding, delaying of sales, up front and initiation fees all add tothe complications in some industries to follow specific rules of revenuerecognition. With plenty of holes in revenue recognition the door is open fortweaking. Microsoft is a good example of the problems facing todayscompanies. Concerned with proper revenue recognition, Microsoft started apractice in the software industry that allows companies to recognize revenueover a period of time. This recognition allo ws for better matching of revenuesto future expenses generated by the sale of the software. Expenses such asupgrades and technical support are related to the revenue generated by the saleof the software but are incurred at a later date. The complexities of modernbusiness transactions have left modern standards of accountancy years behind. .uaa8c71f0c7e93eacf7043563f9054df3 , .uaa8c71f0c7e93eacf7043563f9054df3 .postImageUrl , .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text-area { min-height: 80px; position: relative; } .uaa8c71f0c7e93eacf7043563f9054df3 , .uaa8c71f0c7e93eacf7043563f9054df3:hover , .uaa8c71f0c7e93eacf7043563f9054df3:visited , .uaa8c71f0c7e93eacf7043563f9054df3:active { border:0!important; } .uaa8c71f0c7e93eacf7043563f9054df3 .clearfix:after { content: ""; display: table; clear: both; } .uaa8c71f0c7e93eacf7043563f9054df3 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .uaa8c71f0c7e93eacf7043563f9054df3:active , .uaa8c71f0c7e93eacf7043563f9054df3:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text-area { width: 100%; position: relative ; } .uaa8c71f0c7e93eacf7043563f9054df3 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .uaa8c71f0c7e93eacf7043563f9054df3 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .uaa8c71f0c7e93eacf7043563f9054df3 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .uaa8c71f0c7e93eacf7043563f9054df3:hover .ctaButton { background-color: #34495E!important; } .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .uaa8c71f0c7e93eacf7043563f9054df3 .uaa8c71f0c7e93eacf7043563f9054df3-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .uaa8c71f0c7e93eacf7043563f9054df3:after { content: ""; display: block; clear: both; } READ: The Absent Male In Little Women EssayGimmicks, that all must be addressed by the financial community. The task ofreturning integrity to U.S. financial reporting is of paramount importance. Theinterests of our financial system are at stake. Arthur Levitt and the SECstand ready to take appropriate action if that interest is not protected. But, a private sector response that obviates the need for public sectordictates seems the wisest choice. A nine part plan that involves theentire financial community is proposed by Levitt. Levitt has made it very clearthat the SEC is prepared to start forcing change. A line Levitt hopes will notbe necessary to cross. The SEC will begin to issue guidance on a wide array ofissues concerning the credibility and transparency of financial reporting. Guidance that must be acted on to Obviate the need for large scaleSEC involvement. The SEC will also act more proactively in two of itstraditional roles of information regulation and enforcement. First, the SEC willbegin requiring companies to provide additional disclosure details on changes inaccounting assumptions. Supplemental beginning and ending balances andadjustments of sensitive restructuring liabilities and other loss accruals willalso be required. Secondly, the SEC is unleashing the dogs on companies usingany practices that appear to be managing earnings. The gauntlet has been thrown,and it is up to the financial community to accept the challenge. FASB and otherstandard setting bodies have fallen behind a rapidly changing and evolvingeconomic environment. FASB and the AICPA are being coercively encouraged toclean up auditing and disclosure practices. The pressure is on and standardsetting bodies are scrambling to close the holes in GAAP. FASB has establishedcommittees to in vestigate a number of concerns and is diligently working towardsolutions that obviate. Auditors and the public accounting industryreceived a good scolding from Levitt. Glaring failures in the auditing processat Sunbeam, Waste Management Inc., and Cendant have put the whole industry atrisk of public solutions. The auditors have failed to be the watchdog of investors. It is time to clean up your industry. Criticism by theentire financial community has questioned the auditors, qualifications, methodsand their ability to police themselves. Finally Levitt challenges corporatemanagement, and investors to begin a cultural change. Change that resists thepressures to follow the leader in accounting chicanery. Investors are encouragedto set financial standards of integrity and transparency and punish those whodepend on illusion and deception. American markets enjoy the confidence ofthe world. How many half-truths, and how much sleight-of-hand, will it take totarnish that faith? With the shift away form company run pension planseveryone has become their own personal financial planners. What hangs in thebalance is the future of us all. BibliographyLevitt, Arthur. Quality Information: The Lifeblood of OurMarkets. Speech, 18 Oct. 1999. Fox, Justin, Searching for Nonfictionin Financial Statements, Fortune 23 Dec. 1996. Adams, Jane B. Remarks. Speech, 9 Dec. 1998. Ciesielski, Jack, More SecondGuessing. Barrons. Johnson, Norman S. Recent Developments at theSEC. Speech. 20 August 1999. Fox, Justin. Learning to Play theEarnings Game (And Wallstreet will Love You). Fortune 31 Mar. 1997Greenberg, Herb, The Auditors are Always Last to Know, FortuneInvestor 17 Aug. 1998. Melcher, Richard, Where are the Accountants.Business Week 5 Oct. 1998. Melcher, Richard and Sparks, Debra EarningsHocus Pocus Business Week 5 Oct. 1998. Bartlett, Sarah, CorporateEarnings: Who Can You Trust Business Week 5 Oct. 1998. Turner, Lynn E. Continuing High Traditions Speech, 5 Nov. 1998. Turner, Lynn E. Remarks Speech, 10 Feb. 1999. Aeppel, Timothy EatonsEarnings Increase but Miss Analysts Forecasts 20 Oct. 1999. Tran, KhanhExcite At Home Posts Quarterly Loss Due to Charges but MeetsEstimates 20 Oct. 1999. Bank, David Microsoft Earnings ExceedExpectations 20 Oct. 1999.

Financial Reporting Essay Example For Students

Financial Reporting Essay OnSeptember 28, 1998, Chairman of the U.S. Securities and Exchange CommissionArthur Levitt sounded the call to arms in the financial community. Levitt askedfor, immediate and coordinated action to assure credibility andtransparency of financial reporting. Levitts speech emphasized theimportance of clear financial reporting to those gathered at New YorkUniversity. Reporting which has bowed to the pressures and tricks of earningsmanagement. Levitt specifically addresses five of the most popular tricks usedby firms to smooth earnings. Secondly, Levitt outlines an eight part action planto recover the integrity of financial reporting in the U.S. market place. Whatare the basic objectives of financial reporting? Generally accepted accountingprinciples provide information that identifies, measures, and communicatesfinancial information about economic entities to reasonably knowledgeable users. We will write a custom essay on Financial Reporting specifically for you for only $16.38 $13.9/page Order now Information that is a source of decision making for a wide array of users, mostimportantly, by investors and creditors. Investors and creditors who areresponsible for effective allocation of capital in our economy. If financialreporting becomes obscure and indecipherable, society loses the benefits ofeffective capital allocation. Nothing illustrates the importance of transparentinformation better than the pre-1930s era of anything goes accounting. An erathat left a chasm of misinformation in the market. A chasm that was acontributing factor to the market collapse of 1929 and the years of economicdepression. An entire society suffered the repercussions of misinformation. Families, and retirees depend on the credibility of financial reporting fortheir futures and livelihoods. Levitt describes financial reporting as, a bondbetween the company and the investor which if damaged can have disastrous,long-lasting consequences. Once again, the bond is being tested. Tested by afinancial community fixated on consensus earnings estimates. The pressure toachieve consensus estimates has never been so intense. The market demandsconsistency and punishes those who come up short. Eric Benhamou, former CEO of3COM Corporation, learned this hard lesson over a few short weeks in 1996. Benhamou and shareholders lost $7 billion in market value when 3COM failed toachieve expectations. The pressures are a tangled web of expectations, andconflicts of interest which Levitt describes as almostself-perpetuating. With pressures mounting, the answer from U.S. managershas been earnings management with a mix of managed expectations. March of 1997Fortune magazine reported that for an unprecedented sixteen consecutivequarters, more SP 500 companies have beat the consensus earnings estimatethan missed them. The sign of a quickly growing economy and a measure of theimportance the market has placed on consensus earnings estimates. The singularemphasis on earnings growth by investors has opened the door to earningsmanagement solutions. Solutions that are further being reinforced to managers bymarket forces and compensation plans. Primarily, managers jobs depend on theirability to build stockholder equity, and ever more importantly their owncompensation. A growing number of CEOs are recieving greater percentages oftheir compensation as stock options. A very personal incentive for executiveachievement of consensus earnings estimates. Companies are not the only ones tofeel the squeeze. Analysts are being pressured by large institutional investorsand companies seeking to manage expectations. Everyone is seeking the win. Auditors are being accused of being out to lunch, with the clients. Manyaccounting firms are coming under scrutiny as some of their clients are beinginvestigated by the SEC for irregularities in their practice of accounting. Cendant and Sunbeam both left accounting giant Arthur Anderson holding a bigolbag full of unreported accounting irregularities. Auditors from BDO Seidmanaddressed issues of GAAP with Thing New Ideas company. The Changes were made andBDO was replace for no specific reason. Herb Greenberg calls the episode,A reminder that the company being audited also pays the auditorsbill. The Kind of conflict of interests that leads us to question the ideaof how independent the auditors are. All of these pressures allow questionableaccounting practices to obfuscate the reporting process. Generally acceptedaccounting principles are intended to be a guide, not a procedure. They havebeen developed with intended flexibility so as not to hinder the advancement ofnew and innovative business practice. Flexibility that has left plenty of roomfor companies to stretch the boundaries of GAAP. Levitt focuss on five of themost widespread techniques used to deliver added flexibility. BigBath restructuring charges , creative acquisition accounting, CookieJar reserves, Immaterial misapplications of accountingprinciples and the premature recognition of revenues. These practices do notspecifically violate the letter of the law, but are gimmicks thatignore the spirit and intentions of GAAP. Gimmicks, according to Levitt, thatare an erosion in the quality of earnings and therefore the quality offinancial reporting. No longer is this just a problem perceived in smallcorporations struggling for recognition. Throughout the financial community,companies big and small are using these tools to smooth earnings and maximizemarket capitalization. The Big Bath restructuring charge is thewiping away of years of future expenses and charging them in the current period. .u3a4353c4f06ff90ed33401256a3e52cb , .u3a4353c4f06ff90ed33401256a3e52cb .postImageUrl , .u3a4353c4f06ff90ed33401256a3e52cb .centered-text-area { min-height: 80px; position: relative; } .u3a4353c4f06ff90ed33401256a3e52cb , .u3a4353c4f06ff90ed33401256a3e52cb:hover , .u3a4353c4f06ff90ed33401256a3e52cb:visited , .u3a4353c4f06ff90ed33401256a3e52cb:active { border:0!important; } .u3a4353c4f06ff90ed33401256a3e52cb .clearfix:after { content: ""; display: table; clear: both; } .u3a4353c4f06ff90ed33401256a3e52cb { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u3a4353c4f06ff90ed33401256a3e52cb:active , .u3a4353c4f06ff90ed33401256a3e52cb:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u3a4353c4f06ff90ed33401256a3e52cb .centered-text-area { width: 100%; position: relative ; } .u3a4353c4f06ff90ed33401256a3e52cb .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u3a4353c4f06ff90ed33401256a3e52cb .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u3a4353c4f06ff90ed33401256a3e52cb .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u3a4353c4f06ff90ed33401256a3e52cb:hover .ctaButton { background-color: #34495E!important; } .u3a4353c4f06ff90ed33401256a3e52cb .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u3a4353c4f06ff90ed33401256a3e52cb .u3a4353c4f06ff90ed33401256a3e52cb-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u3a4353c4f06ff90ed33401256a3e52cb:after { content: ""; display: block; clear: both; } READ: My healthy lifestyle EssayA practice that paves the way to easy future earnings growth by allowing futureexpenses to be absorbed by restructuring liabilities. Large one time chargesthat will be ignored by analysts and the financial community through a littleconvincing and notation. In note fifteen of the Coca-Cola companys 1998annual report shows seven nonrecurring items from the past three years. Fours ofthese charges are restructuring charges, most significantly in 1996 in thisnote. In 1996, we recorded provisions of approximately $276 million in selling,administrative and general expenses related to our plans for strengthening ourworld wide system. Of this $276 million, approximately $130 million related tostreamlining our operations, primarily in Greater Europe and Latin America. These one time write-offs become virtually insignificant footnotes to thefinancial reporting process. Extraordinary charges that are becoming unusuallycommon. Kodak has taken six extraordinary charges since 1991 and Coca-Cola hastaken four in two years. The financial community has to wonder howunusual these charges are. Creative acquisition accounting is whatLevitt calls Merger Magic. With the increasing number of mergers inthe 90s, companies have created another one time charge to avoid futureearnings drags. The in-process research and development chargeallows companies to minimize the premium paid on the acquisition of a company. Apremium that would otherwise be capitalized as goodwill: and depreciatedover a number of years. Depreciation expenses that have an impact on futureearnings. This one time charge allowed WorldCom to minimize the capitalizationof goodwill and avoid $100 million a year in depreciation expensesfor many years. A charge hiding in this complex note on WorldComs 1996 annualfinancial statement. (1) Results for 1996 include a $2.14 billion charge forin-process research and development related to the MFS merger. The charge isbased upon a valuation analysis of the technologies of MFS worldwide informationsystem, the internet network expansion system of UUNET, and certain otheridentified research and development projects purchased in the MFS merger. Theexpense includes $1.6 billion associated with UUNET and $0.54 billion related toMFS. (2) Additionally, 1996 results include other after-tax charges of $121million for employee severance, employee compensation charges, alignmentcharges, and costs to exit unfavorable telecommunications contracts and $343.5million after-tax write-down of operating assets within the companys non-corebusinesses. On a pre-tax basis, these charges totaled $600.1 million. The dollaramounts are staggering and the future implications far reaching. Since thisapproach was introduced by IBM in 1995 these charges have become co mmonplace foracquisition accounting. A popularity, largely due to the level of room allowedin research and development estimations. The Third earnings manipulation tooldiscussed by Levitt is what he calls Miscellaneous Cookie JarReserves. The technique involves liability and other accrual accountsspecifically sensitive to accounting assumptions and estimates. These accountscan include sales returns, loan losses, warranty costs, allowance for doubtfulaccounts, expectations of goods to be returned and a host of others. Under theauspices of conservatism, these accounts can be used to store accruals of futureincome. Restructuring liabilities created by Big Bath charges alsoprovides these Cookie jar reserve effect. Jack Ciesielski, whomanages money and writes the Analysts Accounting Observer, calls theseaccounts the accounting equivalent of turning lead into gold a virtualhoneypot for making rainy-day adjustments. Various adjustments and entriesthat can produce almost any desired results in the pursuit of consistency. Thestatement of financial accounting concepts No. 2 (FASB, May 1980), definesmateriality as: The magnitude of an omission or misstatement ofaccounting information that, in light of surrounding circumstances, makes itprobable that the judgement of a reaonable person relying on the informationwould have been changed or influenced by the omission or misstatement. Todaysmanagement has started to ignore this fundamental principle. Materiality isbeing defined as a range of a few percentage points. Companies defend immaterialomissions by referring to percentage ceilings that draw a line on materiality. The amount falls under our ceiling and is therefore immaterial. Themateriality gimmick is one more method companies are using to stretch a nickelinto a dime. Simply put, In markets where missing an earnings projectionby a penny can result in a loss of millions of dollars in market capitalization,I have a hard time accepting that some of these so-called non-events simplydont matter, says Levitt. Finally, Levitt briefly touches on thecomplex issue of the manipulation occuring in revenue recognition. Moderncontracts, refunding, delaying of sales, up front and initiation fees all add tothe complications in some industries to follow specific rules of revenuerecognition. With plenty of holes in revenue recognition the door is open fortweaking. Microsoft is a good example of the problems facing todayscompanies. Concerned with proper revenue recognition, Microsoft started apractice in the software industry that allows companies to recognize revenueover a period of time. This recognition allo ws for better matching of revenuesto future expenses generated by the sale of the software. Expenses such asupgrades and technical support are related to the revenue generated by the saleof the software but are incurred at a later date. The complexities of modernbusiness transactions have left modern standards of accountancy years behind. .uaa8c71f0c7e93eacf7043563f9054df3 , .uaa8c71f0c7e93eacf7043563f9054df3 .postImageUrl , .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text-area { min-height: 80px; position: relative; } .uaa8c71f0c7e93eacf7043563f9054df3 , .uaa8c71f0c7e93eacf7043563f9054df3:hover , .uaa8c71f0c7e93eacf7043563f9054df3:visited , .uaa8c71f0c7e93eacf7043563f9054df3:active { border:0!important; } .uaa8c71f0c7e93eacf7043563f9054df3 .clearfix:after { content: ""; display: table; clear: both; } .uaa8c71f0c7e93eacf7043563f9054df3 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .uaa8c71f0c7e93eacf7043563f9054df3:active , .uaa8c71f0c7e93eacf7043563f9054df3:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text-area { width: 100%; position: relative ; } .uaa8c71f0c7e93eacf7043563f9054df3 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .uaa8c71f0c7e93eacf7043563f9054df3 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .uaa8c71f0c7e93eacf7043563f9054df3 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .uaa8c71f0c7e93eacf7043563f9054df3:hover .ctaButton { background-color: #34495E!important; } .uaa8c71f0c7e93eacf7043563f9054df3 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .uaa8c71f0c7e93eacf7043563f9054df3 .uaa8c71f0c7e93eacf7043563f9054df3-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .uaa8c71f0c7e93eacf7043563f9054df3:after { content: ""; display: block; clear: both; } READ: The Absent Male In Little Women EssayGimmicks, that all must be addressed by the financial community. The task ofreturning integrity to U.S. financial reporting is of paramount importance. Theinterests of our financial system are at stake. Arthur Levitt and the SECstand ready to take appropriate action if that interest is not protected. But, a private sector response that obviates the need for public sectordictates seems the wisest choice. A nine part plan that involves theentire financial community is proposed by Levitt. Levitt has made it very clearthat the SEC is prepared to start forcing change. A line Levitt hopes will notbe necessary to cross. The SEC will begin to issue guidance on a wide array ofissues concerning the credibility and transparency of financial reporting. Guidance that must be acted on to Obviate the need for large scaleSEC involvement. The SEC will also act more proactively in two of itstraditional roles of information regulation and enforcement. First, the SEC willbegin requiring companies to provide additional disclosure details on changes inaccounting assumptions. Supplemental beginning and ending balances andadjustments of sensitive restructuring liabilities and other loss accruals willalso be required. Secondly, the SEC is unleashing the dogs on companies usingany practices that appear to be managing earnings. The gauntlet has been thrown,and it is up to the financial community to accept the challenge. FASB and otherstandard setting bodies have fallen behind a rapidly changing and evolvingeconomic environment. FASB and the AICPA are being coercively encouraged toclean up auditing and disclosure practices. The pressure is on and standardsetting bodies are scrambling to close the holes in GAAP. FASB has establishedcommittees to in vestigate a number of concerns and is diligently working towardsolutions that obviate. Auditors and the public accounting industryreceived a good scolding from Levitt. Glaring failures in the auditing processat Sunbeam, Waste Management Inc., and Cendant have put the whole industry atrisk of public solutions. The auditors have failed to be the watchdog of investors. It is time to clean up your industry. Criticism by theentire financial community has questioned the auditors, qualifications, methodsand their ability to police themselves. Finally Levitt challenges corporatemanagement, and investors to begin a cultural change. Change that resists thepressures to follow the leader in accounting chicanery. Investors are encouragedto set financial standards of integrity and transparency and punish those whodepend on illusion and deception. American markets enjoy the confidence ofthe world. How many half-truths, and how much sleight-of-hand, will it take totarnish that faith? With the shift away form company run pension planseveryone has become their own personal financial planners. What hangs in thebalance is the future of us all. BibliographyLevitt, Arthur. Quality Information: The Lifeblood of OurMarkets. Speech, 18 Oct. 1999. Fox, Justin, Searching for Nonfictionin Financial Statements, Fortune 23 Dec. 1996. Adams, Jane B. Remarks. Speech, 9 Dec. 1998. Ciesielski, Jack, More SecondGuessing. Barrons. Johnson, Norman S. Recent Developments at theSEC. Speech. 20 August 1999. Fox, Justin. Learning to Play theEarnings Game (And Wallstreet will Love You). Fortune 31 Mar. 1997Greenberg, Herb, The Auditors are Always Last to Know, FortuneInvestor 17 Aug. 1998. Melcher, Richard, Where are the Accountants.Business Week 5 Oct. 1998. Melcher, Richard and Sparks, Debra EarningsHocus Pocus Business Week 5 Oct. 1998. Bartlett, Sarah, CorporateEarnings: Who Can You Trust Business Week 5 Oct. 1998. Turner, Lynn E. Continuing High Traditions Speech, 5 Nov. 1998. Turner, Lynn E. Remarks Speech, 10 Feb. 1999. Aeppel, Timothy EatonsEarnings Increase but Miss Analysts Forecasts 20 Oct. 1999. Tran, KhanhExcite At Home Posts Quarterly Loss Due to Charges but MeetsEstimates 20 Oct. 1999. Bank, David Microsoft Earnings ExceedExpectations 20 Oct. 1999.