There Is No Accounting For Fannie Mae

The Federal National Mortgage Association (FNMA, Fannie Mae), was created in 1938, as a part of the New Deal.  In 2003, regulators discovered serious accounting problems that may cost Fannie Mae several billion dollars in losses. In 2003, the Office of Federal Housing Enterprises Oversight (OFHEO) investigated Fannie Mae and found a culture of corruption, arrogance, and pervasive accounting violations in the company.   Executives at Fannie Mae cooked books to pocket an extra twenty-seven million dollars in bonuses.  This paper presents the accounting improprieties at Fannie Mae and the consequences that followed its investigation

Sarbanes Oxley Act Of 2002: Is It Worth The Price?

Sarbanes – Oxley Act (SOX) was hastily passed in July, 2002.  The Act requires public companies to establish internal control systems sound enough to prevent fraud.  Senior officers have to sign-off on the financial statements.  Section 404, dealing with internal controls, resulted in misery to US business firms.  Auditor fees have doubled. Some small-cap companies and foreign corporations are delisting from US stock exchanges.  The provisions of the Act, its impact on US firms, and some of the complaints against the Act are presented in this paper

Stock Buybacks: Good Or Bad For Investors?

A recent news flash announced that Warren Buffet’s Berkshire Hathaway would buy back $1.2 billion worth of its own Class A stock.  In recent times, such stock buybacks are happening in rapid succession among companies all over the world.  There are many advantages to investors of a company when the company buys back its own stock, generally known as treasury stock.  Stock buybacks result in higher earnings per share (EPS), theoretically resulting in higher stock prices.  Companies also resort to stock buybacks when they happen to have excessive cash balance.  Cash rich companies are generally considered attractive targets for takeover possibilities.  During times such as the present ones when returns on cash money market accounts do not yield attractive returns, companies usually implement stock buyback policies, thus earning better returns on excess cash while at the same time avoiding takeover possibilities.  There are also some hidden advantages to senior management resulting from stock buybacks because of higher prices for their substantial stock options.  There are also some disadvantages to investors resulting from stock buybacks. This paper presents some of the main reasons for stock buybacks, and the consequential advantages and disadvantages to investors and other stakeholders

Incorporating International Financial Reporting Standards Into The United States Financial Reporting System: Timeline And Implications

In the United States of America (US), all the accounting procedures and guidelines for measurement and reporting by business firms are governed by a body of principles and concepts known as “Generally Accepted Accounting Principles (GAAP).” These GAAP are presently issued by the Financial Accounting Standards Board (FASB) with the authority delegated by the Securities and Exchange Commission (SEC). Historically, each country developed its own GAAP and there was no uniformity among the GAAPs of different countries. Comparison of financial statements issued by business firms from different countries has become impossible leading toward suboptimal capital allocation across countries in the world. Gradually, with the advent of multinational corporations, there emerged a global demand for convergence of GAAP of different countries into a single set uniform accounting standards applicable to all countries. Initiative for uniform global accounting standards came from International Accounting Standards Committee (IASC) which was established in 1973. The IASC formed International Accounting Standards Board (IASB) in 2001 which began issuing International Financial Accounting Standards (IFRS). Till now about 100 countries have adopted IFRS for their financial reporting purposes. The SEC has yielded to the global pressure to adopt IFRS in the US. SEC has set a timeline for US business firms to change over from US GAAP to IFRS. This paper presents the background and development of the movement of IFRS, timeline for the change in US and the implications involved in the adoption of IFRS in the US

Cost Accounting In Auto Manufacturing Companies In Germany And The United States

Corporate accountants are mandated to prepare and distribute financial accounting reports for external U.S.ers at end of each accounting period.  However, there are no similar statutory requirements for corporate accountants to provide managers of their companies with the management accounting information necessary for decision making in their bU.S.iness operations.   Cost accounting is an important integral part of management accounting.  Product costing has always been a much debated issue in management accounting.  The area that has generated a host of conflicting views is the allocation of overhead costs to products.  Traditional absorption costing is claimed to be resulting in an unfair allocation of overhead costs to products.  New approaches such as the Activity Based Costing (ABC) did not receive widespread adoption. It is being realized in management accounting field that an emerging costing method known as Resource Consumption Accounting (RCA) is a better method for product costing.  It is a method adopted by the German manufacturing companies.  This paper describes the German cost accounting method and also compares the German cost accounting with the cost accounting in the United States, specifically in the automobile manufacturing indU.S.try

Small Business Entrepreneurships In The United States

A small business entrepreneur is defined as an individual who establishes and manages a business for the principal purpose of profit and growth. Small businesses constitute an increasingly large proportion of businesses generally in the United States’ economy. They account for 39 per cent of the United States’ gross national product and create two out of every three new jobs in our economy. Seven important prerequisites are identified as being necessary for successfully operating a small business. These include adequate financing, qualified personnel, efficient operation and production, marketing and sales, customer service, information management and administration. One of the most significant contributors to failure of a small business relates to acquisition of adequate capital. Small Business Administration (SBA) was established by Federal Government in 1953 to provide low interest loans to small business borrowers that would not otherwise have access to credit. However, there is some criticism that these SBA programs unfairly benefit, not the small businesses, but the financial institutions that participate in the SBA loan programs. Another significant source of debt financing to small businesses is known as ‘micro-financing,’ started as new wave in providing capital to small businesses by the Nobel Peace Prize winner, Muhammad Yunus, in Bangladesh

The Have Nots Have It: Triumph Of Developing Countries At The World Trade OrganizationMeeting In Geneva

In July 2004, 147 World Trade Organization (WTO) member countries met in Geneva where the developed countries agreed to cut back and eventually eliminate an estimated $350 billion of their farm and export subsidies. The accord was hammered out by five WTO members including India and Brazil and submitted to the WTOs plenary session where it was finally ratified on July 31, 2004. The Fifth Ministerial Conference of the World Trade Organization held in Cancun in September 2003 collapsed from inside as internal squabbles and irreconcilable philosophical differences developed between the developed countries and the developing countries. The WTO, which started with noble objectives of raising the global standards of living through international trade agreements and cooperation among the WTO member countries, appeared to be teetering on the verge of a complete collapse. Over the past decade, through five ministerial conferences, the WTO member countries gradually got polarized into two main blocks, the haves and the have nots, the developed countries and the still developing countries respectively. One of the important items of contention was the issue of reduction and elimination of the huge farm subsidies in the European Union (EU) and the United States (US). At the 2003 WTO conference in Cancun, 21 of the developing countries formed a group, known as G-21 initiated under the leadership of Brazil and India, and insisted on discussions for elimination of the farm subsidies of the EU-US combine. The EU and US governments give billions of dollars worth of agricultural and export subsidies annually to their farmers that allow them to have a competitive advantage in international markets in effect preventing agricultural producers in developing countries from having access to global markets. The EU delegates insisted that the four Singapore issues must be dealt with first before including any discussions on the issues of farm subsidies on the agenda. The G-21 over night swelled into G-70. The developing countries refused to be pushed into a corner and have proved that they are now a force to reckon with. The WTO Cancun conference came to a dramatic end without any agreement, leaving the negotiations in a deadlock. At the historic July 2004 WTO negotiations in Geneva, an accord has been reached under which the developed countries agreed to reduce and eventually eliminate their export and farm subsidies. The developing countries also agreed to lower their tariffs on imports from EU-US and other developed countries. The accord is expected to pave the way for the resumption of the WTO Doha Round of multilateral negotiations to liberalize world trade

One Of The Prime Beneficiaries Of The Sarbanes Oxley Act Of 2002: The London Stock Exchange!

In the late 1990s, financial markets in the United States (U S ) were rocked by accounting scandals in companies such as Enron and WorldCom. Public confidence in American business was at a low ebb. As a knee-jerk reaction to the scandals, the U S Congress hastily passed the Sarbanes-Oxley Act of 2002 (SOX) hoping to restore the lost image of the U S business firms. SOX rendered corporate governance and protecting corporate assets a matter of Federal mandates. Penalties for violation of the provisions of SOX include a maximum of 25 years of prison and/or a fine of twenty five million dollars. For small and mid-size firms, the implementation costs became prohibitive. The exorbitant implementation costs of Section 404 of SOX and the draconian criminal sanctions for senior management are driving companies to flee from The New York Stock Exchange to more favorable exchanges overseas. The London Stock Exchange appears to be the most benefited one from the passage of SOX. This paper presents the salient provisions of SOX, the havoc caused to the business firms by its implementation costs, and the present trend of flight of capital from American stock exchanges to overseas stock exchanges such as the London Stock Exchange

The Prospects Of Replacing GAAP With IFRS In The United States

Historically, each country developed its own Generally Accepted Accounting Principles (GAAP) for financial accounting and reporting and there was no uniformity among the GAAPs of different countries. Comparison of financial statements issued by business firms from different countries has become difficult leading toward suboptimal capital allocation across countries in the world. Gradually, there emerged a global demand for convergence of GAAP of different countries into a single set uniform accounting standards applicable to all countries. As a result, the International Accounting Standards Committee (IASC) was established in 1973. The IASC formed International Accounting Standards Board (IASB) in 2001 which began issuing International Financial Accounting Standards (IFRS). At this point about 100 countries have adopted IFRS for their financial reporting purposes. In 2010, the US Securities Exchange Commission (SEC) stated that it would be able to make a decision on the adoption of the IFRS in the United States within that year and would allow a five-year period for complete transition, if it is decided to incorporate the IFRS into the U S reporting standards. An intense debate ensued for and against incorporation of IFRS into the US GAAP. Four alternative processes are suggested for the transition - outright adoption, convergence, endorsement, and co-endorsement. This paper presents details of each of these suggested alternatives and future perspective of the adoption of IFRS into the U S accounting and reporting system

Innovation In Business Education: Developing A High Quality Online MBA

Online degree programs were probably pioneered by for-profit universities such as University of Phoenix. Many online degree programs were initially considered low quality academic programs compared to traditional programs. Therefore, many public and private universities were slow to adopt the online programs.  However, gradually more and more "non-traditional" students began to enter schools. Employees already holding jobs began to seek to better their qualifications by coming back to school while still working.  For both these groups, online degree programs offered an opportunity to go to school while still employed. Consequently, many schools offering traditional MBA programs are forced to offer online MBA programs to meet the demand and to beat the competing schools. In keeping up with the trend, Arkansas State University launched a high quality online MBA program that parallels the best of the ongoing online MBA programs.  This MBA program has been ranked number 1 in faculty credentials and training and in the top 15 in all categories among all online MBA programs by U. S. News and World Report for three consecutive years. This paper presents how the Graduate Faculty of Arkansas State's College of Business developed its high quality online MBA and how the program operates with revenue sharing for the College of Business