...Financial Reporting Excello Telecommunications Catherine Richard ETH376 October 6th, 2014 Melanee Robertson Financial Reporting Excello Telecommunications Excello Telecommunications has had a good profit margin for several years. Recently they have had increased competition for their products by overseas manufacturers. With these increases their earnings will not be met for the first time in the company’s history. With the blow of this being felt high in the corporation, there are concerns about the effects on stocks, stock options and bonuses. There is currently talk of a sale of product to Data Equipment that needs to take place rapidly to benefit the company. The company has a few courses to take and must make the ethical decision that will benefit the company as well. Terry Reed, the Chief Financial Officer (CFO), is requesting that the accounting team find a way to record the revenue in the current month. Reed wants $1.2 million sale to happen with Data Equipment Systems. Marty Fuller is the accounting team lead. Marty is currently concerned about the legal and ethical consequences options available to the company. Breaking the law is not an option for the accounting department, so the decision needs to be evaluated carefully. Some of the laws that needs to be adhered to are Sarbanes-Oxley Act of 2012 (SOX), Generally Accepted Accounting Principles (GAAP), and the AICPA Code of Conduct. Marty and the accounting team have to come up with an ethical...
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...Excello Communications Camille O'Roarke ETH/376 September 15, 2014 Ding Hardin Excello Communications In the Excello Communications scenario, the CFO Terry Reed is faced with a dilemma. Sales have been dropping due to competition from overseas manufacturers. Mr. Reed’s concern with these reduced sales is the impact it will have on bonuses, stock options, and share prices. With a large order of $1.2 million placed on December 20, 2010 by Data Equipment Systems, Mr. Reed sees an opportunity to end the year with higher revenue than originally expected. The problem is that the customer has a stated contingency that the product is not delivered until January 11, 2011 as they do not have enough space in their warehouse to accommodate such a large order. Mr. Reed wants to be able to record this sale for the year ending 2010. This would violate the revenue recognition principle according to GAAP guidelines and would be looked at as an earnings management tactic, which is viewed as an unethical practice by the AICPA and GAAP. The CFO approaches his accounting department with the expectation that they come up with a solution to this problem. The accounting department is well aware of the rules and guidelines in place when it comes to revenue recognition, but as a team come up with three possible scenarios. One, to transfer this order to an offsite warehouse to hold until 2011, creating the perception that the product was sold. Two, transfer the product to Data Equipment...
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...RUNNING HEAD: EXCELLO TELECOMMUNICATIONS CASE Excello Telecommunications Case Kevin C ETH/376 February 10, 2014 Excello Telecommunications Case The year is quickly ending for Excello Telecommunications, and they are trying to maximize earnings for the company. With increased competition from foreign companies, Excello meeting its financial estimates are looking bleak. Failure to meet earnings expectations can reduce the availability of bonuses, stock options and could lessen the value of the company. Because of the threat in not meeting estimated earnings, the company’s CFO Terry Reed has a plan to make one last effort to meet company goals. Terry Reed has knowledge about a sale of $1.2 million to a customer in December 2010 and wants to move the sale quickly. Because of storage issues by the Data Equipment, the sale will have to occur in January 2011 when the buyer will have adequate space to hold the equipment purchased. Terry wants to make the revenue at all costs and will do whatever it takes to make it happen. That type of motivation can create questionable decision making that can potentially violate laws and the AICPA Code of Conduct. Excello Legal Issues The failure to meet earnings estimates are of significant concern for the organization where it will prompt questionable decisions by executives. Excello Telecommunications must adhere to accounting practices and regulations in the organization’s activities to ensure financial...
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...Excello Telecommunications: Profit at a Price There are moments in life that can forever define and potentially change not only an individual but an entire corporation as well. With the fiscal year of 2010 coming to a close, Terry Reed the operating CFO of Excello Telecommunications faced such a dilemma. For the first time, Excello was on track to finish out the year below anticipated financial goals, which would resonate throughout the company and its’ stock. This presented Excello with the task of searching for solutions while maintaining ethical and legal choices to the betterment of all parties involved. While searching through problem solving solutions, Reed learned of a pending sale on December 20, 2010 to Data Equipment Suppliers in the amount of $1.2M. The entering of this sale into Excello’s accounting system would cover the companies’ shortfall for the year thereby insuring satisfactory financial performance for 2010. However, the client has requested that due to a lack of storage space for the equipment at the present time, Excello hold the order under January 11, 2011. This information sent Reed to Marty Fuller, the Controller, to seek out the best way to record the sale in 2010 to enhance the years-end reports. While discussing the situation with Fuller, Reed emphasized that the transaction must be recorded in 2010 and that whatever accounting is done be defensible using the Generally Accepted Accounting Principles (GAAP). This is essential in maintaining...
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...Ethical and Legal Implications of Excello Telecommunications Cheryl Moore ETH/376 March 4, 2012 Susan Paris Ethical and Legal Implications of Excello Telecommunications Excello Telecommunications has suffered a downward financial spiral. This downward spiral will affect bonuses, share prices, and stock options (Mintz & Morris, 2011). Terry Reed, the Chief Financial Officer of Excello Telecommunications, frets over showing the downswing in profits. In searching for additional reportable income, he came across a delayed sale of equipment. Per contract, the equipment should not be billed or shipped until the next year, when the equipment would ship. This is standard practice for Excello. The financial crunch has provided Mr. Reed with an urgency to log the sale in the current year. However, logging the sale without shipping the material is a breach in protocol and financial regulations. Legal Issues The accounting staff was tasked to find a way to log the sale of equipment in the current business year instead of the next year. The staff did recognize that the Generally Accepted Accounting Principles should not be violated. However, they still contemplated violating the Sarbanes-Oxley Act by reporting sales that did not occur and going against reported financial controls. Not to mention the potential misleading financial information reported to the shareholders and the share price becoming falsely inflated. The Sarbanes-Oxley Act was instilled in 2002. In this act...
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...The Ethicality of Excello Telecommunications Cody S. Smith ETH/376 April 22, 2013 Ding Hardin The Ethicality of Excello Telecommunications Excello Telecommunications has been a profitable company for many years, but recently the competitive landscape has become tougher. Competition from overseas manufacturers has lowered Excello’s market share and profits. For the first time it looks as is Excello will not meet earnings estimates. This information directly impacts bonuses, stock options, and the company’s share price. Top level management is concerned about the extent this impact will have on the company. This paper will serve to determine the ethicality of Excello’s actions and demonstrate what ethical standards and regulations are acceptable under GAAP. Possible Solution and Dilemma Terry Reed, the chief financial officer, uncovered a transaction on December 20, 2010 that might solve the problem. Excello sold $1.2 million of equipment to Data Equipment Systems. Typically this type of transaction would be recorded as a sale on the date of shipment. However, Data Systems has requested that the equipment not be delivered until January 11, 2011, because Data Systems did not have the warehouse availability for the product. Ethical Standards and GAAP Excello is faced with a serious problem. The company must record this revenue for the period ending 2010, but the transaction is not set to complete until 2011. The first issue that must be detailed is how and when revenue...
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...Excello Telecommunications Abstract This paper will explain the legality and ethicality of financial reporting as it pertains to the Excello Telecommunications case. Other topics that will be touched on will be reporting standards, SOX Act criteria, and alternatives for Excello. Excello Telecommunications Introduction Excello has a dilemma with end of year reporting and in meeting their earnings estimates in accordance to calculations at the beginning of the year. What the CFO wishes to achieve is finding a way to include a large sale in the 2010 year-end reporting statements. By having a hold on the sale, and it remains on their property, they cannot claim this revenue. The team has to look into alternatives that will not only allow this claim but will also meet all GAAP standards. The Legality Mr. Reed discussed the issue with the controller Mr. Fuller and explained what he wanted to obtain on the reports. During this conversation Mr. Fuller advised Mr. Reed of legal criteria in reporting and Mr. Reed indicated that he did not want to break any laws, but he still needed to find a way around certain rules of accounting. When a meeting was called with the accounting department he made sure that the team understood both important aspects of the decision, which are to record the sale and to maintain all GAAP guidelines. At first this sounded like what Mr. Sullivan did is the previous case of Ms. Cooper and WorldCom but then after reading the section in Chapter...
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...Excello Telecommunications Ethical Obligations Jonathan Carpenter ETH/376 November-3, 2014 Susan Paris Excello Telecommunications Ethical Obligations Up until just recently, Excello Telecommunications has been a very successful business that has never had to worry about unethical implications until competitors took away from the income that was expected to be reported for the end of the fiscal period. The failure to reach the expected estimates for the year has the company leaders worried about investor confidence, stock prices and the yearly bonuses for management. Being back into a corner, the companies CFO, Terry Reed, has decided to book the 1.2 million in sales regardless of the laws and requirements provided by GAAP, SOX, and The AICPA Professional Code of Conduct. If Terry Reed does not comply with all laws and requirements of these accounting authorities, the company could face large enough penalties that will shut down the business for good such as Enron and WorldCom. 2001 marks a big year for corporate fraud which in turn forced the birth of the Sarbanes-Oxley Act of 2002 (SOX). The biggest known scandals of this time were WorldCom, Enron and Tyco. The main purpose of SOX is to force corporate leaders to provide factual documentation based on the sales and expenses of any given company. Excello’s CFO, Terry Reed, has thought of a couple different ways to report the 1.2 million in sales, however, his ideas do not comply with SOX. Reed wants to report a sales transaction...
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...Legality and Ethicality of Financial Reporting Petra Clark ETH / 376 June 3, 2013 Ding Hardin Abstract Excello Telecommunications is a successful organization, but because of a growing rivalry, the organization has begun to notice their earnings estimations might not be achieved. Excello’s top administrators are worried how this will impact the organization. We will look at possible options as well as their moral ramifications as well as the federal laws which can be applied to the situation. Legality and Ethicality of Financial Reporting There are a number of rules that Excello must follow to comply with if it is to fall in line with accounting actions, especially when it comes to posting dealing as well as financial statements. Some of the regulations include the SOX act of 2002, the GAAP as well as the AICPA Code of Conduct. Excello’s accounting team must take into account the laws and regulations to make the best decision that will be legal, ethical and honest for the organization as well as its clients and vendors. The Sarbanes-Oxley (SOX) act of 2002 was created in reaction to the accounting scams of WorldCom and Enron. The act is a body of provisions that provide guidelines on the responsibilities of the higher management as well as penalties for unethical activities. The CFO of Excello, Terry Reed, wanted to post the sale of $1.2 million of equipment before the end of 2010. This type of transaction would typically be recorded as a sale on the...
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...Legality and Ethicality of Financial Reporting Janet Tran ETH/376 Kathrine Parks University of Phoenix/Axia July 21, 2014 Excello Telecommunications was presented with a dilemma on how the company should report earnings so that they would appear to have met earning estimates for the 2010 financial year. The CFO, Terry Reed, was concerned with how failure to meet earning estimates would affect bonuses, stock options, and the share price of Excello stock. On December 201, 2010, the company sold $1.2 million of equipment to Data Equipment Systems. However, Data Equipment Systems requested that Excello hold on to the product until January 11, 2011, because they do not have the capacity to hold the product until then. This means the $1.2 million sale cannot be recorded until Data Equipment Systems receives the product, which would be in the next financial year. The accounting team came up with three scenarios on how to creatively report this $1.2 million in sales for 2010 financial reports. This paper will examine the legal aspects, the financial standards involved, and ethicality of the Excello Telecommunications case. In this case, legally the company must adhere to many accounting laws and regulations. One of the laws called Sarbanes-Oxley Act of 2002 (SOX) would have a huge impact and influence in this case. SOX was created to restructure and further explain the role of corporate governance in corporate America...
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...guidelines that demonstrate the contrast between ethical and unethical values and behavior, establishing the first step in creating a company culture emphasizing and reinforcing ethical standards. In the accounting industry, professionals not only have the standard practices of accounting but also, board accountancy rules, such as SOX and GAAP, when creating ethical standards. Federal and state laws play a big consideration during this time. Such a time came for CFO of Excello Telecommunications when he considered inappropriately posting a $2.1 million transaction to boost year-end earnings. At the end of 2010, Excello faced the possibility of not meeting earnings estimates, which affects bonuses, stock options, and shareholders’ earnings (Mintz & Morris, 2011). At this time CFO Terry Reed learned about a transaction that would be recorded as a sale but the buyer requested that Excello hold on to the product until January 11, 2011. According to Generally Accepted Accounting Principles (GAAP), Excello...
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...Legality and Ethicality in Financial Reporting In week3, we are looking into the case of Excello Telecommunications, and study their behavior base on the knowledge of legality and ethicality in financial reporting. Excello Telecommunications has been successful in the past. However, in recent years, the company is facing more and more competitors. For the first in the company’s history, the earnings estimate won’t be met. This means nervous investors and drop in value of Excello stocks. And the top management worries about the effect on bonus and stock options. Someone needs to find a solution to steer the situation around. This is when CFO Terry Reed notices a sale on December 20, 2010. Data Equipment Systems made a purchase of $1.2 million, but requested that no delivery should be made until January 11, 2011. By previous procedures, all sales are recorded when the deliveries are made. Only this time the recording of the transaction, if made by the end of 2010, would solve the problems. Reed consulted with the controller Marty Fuller, and called the accounting department for a solution. Reed’s bottom line is very straight forward: find a creative way to record the sales to Data Equipment Systems before December 31, 2010. Legal Issues and Applicable Laws The accounting team must consider the actions that will take place under the restrictions of laws and regulations. In the accounting profession, the regulations included GAAP (Generally Accepted Accounting Principles), SOX...
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...Legality and Ethicality of Financial Reporting ETH/376 August 25, 2014 Legality and Ethicality of Financial Reporting Excello Telecommunications has a history of excellent performance but with a surge in oversea competitors the company may not be able to meet its financial estimates for the first time. Executives were worried that not being able to meet the financial estimates could impact stock options, bonuses, and the share price of company stock. While looking to find a way to meet the financial estimates Terry Reed, the CFO, discovers a transaction on December 20, 2010 that might solve the problem. Excello sold $1.2 million of equipment to Data Equipment Systems. This type of transaction would be recorded as a sale on the date of the shipment. In this case the customer had requested that Excello hold the product until January 11, 2011. This was due to Data Equipment Systems not having the needed warehouse room for the product until then. This means that the sale would not be recorded until the product is shipped in 2011 but if there was a way to record the transaction before December 31 then it could help to meet the financial estimates. Reed went to the controller, Marty Fuller, to discuss this dilemma. Fuller and Reed both understand the rules for accounting for the sale of goods that are help for future delivery. Reed then went to the accounting department to discuss what can be done to record the revenue in 2010 while keeping the decision defensible from...
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...1 Legality and Ethicality of Financial Reporting Paula E. Noble University of Phoenix January 19, 2015 Mrs. Juanita Davis 2 Introduction Excello Telecommunications has been a profitable company for several years, but for the first time they have encountered an increase in competition for its products by overseas manufactures. It seems that their earnings will not be met for the year ending 2010. Therefore, management is worried of how the company’s future with investors will be impacted (Legality and Ethicality of Financial Reporting Anti Essays, 2013). A large sale has been made right at the end of the year and this sale could make the company better or not. At the end of the year is when buyers can purchase the items. This is not entered in the accounting period and that’s a problem. The CFO wants to draw attention of the investors, so he is asking if there is a way to report the sales for this year, in this year’s books Legal Issues and Laws In a business, there a federal and state laws that must be followed when financial transaction are being reported. These three important components of accounting go hand and hand when to come down to enforcing laws are the Sarbanes-Oxley act, the AICPA Code of Conduct and the Generally Accepted Accounting Principles. Sarbanes- Oxley was created to protect investors from Corporations that may try to do fraudulent accounting activities. AICPA Code of Conduct sets standards for the professionalism and auditing...
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...Legality and Ethicality of Financial Reporting Excello Telecommunication is a company that has historically been successful. Hoe!er"due to rising competition in their industry" they may not meet their earnings estimates. The failure to meet earnings estimates can rea# ha!oc on an organi$ation. %hareholders get ner!ous" stoc# prices decrease" and analysts could gi!e the company negati!e press. &n top of that" executi!es are orried about ho the failure to meet these estimates could impact their stoc# options and bonuses. 'n order to meet expectations" there is a critical sale that is ta#ing place. Hoe!er" the sale re(uires the goods to be deli!ered in the subse(uent accounting period" not the current period. 'n folloing )**+" the company cannot recogni$e re!enue during the current period. Hoe!er" Terry Reed" the ,F&" re(uires that the accounting team figure out a ay to boo# the sale during the current accounting period. The accounting team is lead by -arty Fuller. e are going to loo# at the legal and ethical ramifications of underta#ing this route. e ill loo# not only at the moral conse(uence" but also at hether or not the company is brea#ing the la. Legal Issues and Applicable Laws Excello Telecommunication must adhere to many las and regulations. *mong them are %arbanes/&xley *ct of 0110 2%&4" )enerally *ccepted *ccounting +rinciples 2)**+4" and the*',+* code of ,onduct. These rules impact not only the financial reporting mechanism of the company" but also...
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