...Concern Designations and GAAP versus Non-GAAP Earnings Metrics James L. Bierstaker, Thomas F. Monahan, and Michael F. Peters ABSTRACT: Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the ‘‘Street.’’ Based on the facts of an actual company and utilizing the financial information drawn from this company’s 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach students: (1) to apply going concern audit standards, (2) about the potential...
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...Financial management is very essential for health care organization’s to succeed and accomplish goals. As a financial management has a major aspect on how it incorporates the ethical standards and proper reporting practices. To report practices and ethical standards in health care finance assist financial managers in conducting. They conduct effect analysis of the organization’s revenues, expenses, assets, and much more. In the next few paragraphs in the paper will be discussed is the four elements of financial management, the accepted accounting principles, and a few general financial, ethical standards will conduct. Plus, there would be examples of conduct and financial reporting practices in the health care organizations from other articles that will be discussed. The four elements of financial management are planning, controlling, organizing and directing, and decision making. The first element, planning is to set up the health care organization goals and objectives. Then to see what steps have to take and which steps would be more effective to achieve the goal. The second element is controlling; as a financial management will need to consist of verifying whether the department is following the plans, instructions issued, and the principles established. The third element is organizing and directing; which this can be a process that follows planning and controlling element in the health care organizations. While organizing established how resources can be effective...
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...Reporting Practices and Ethics Megan HCS/405 30 June, 2014 Reporting Practices and Ethics The accounting staff is a very large part of the healthcare industry. Accounting staff code and bill products and different services that are offered at that location and maintaining an ethical culture is imperative. There are accounting principles and standards and procedures that are part of the General Accepted Accounting Principles (GAAP). The GAAP principles have four key elements: Planning, Controlling, Organizing and Directing and Decision Making. Ethical Components and GAAP Accounting is the backbone of any medical organization because of it enormous impact on running as a cost effective organization. Every organization runs on its own set of principles and goals, but most are certainly guided by different federal, state, and government laws. There are accounting principles and standards and procedures that are part of the General Accepted Accounting Principles (GAAP). The GAAP principles have four key elements: Planning, Controlling, Organizing and Directing and Decision Making. The GAAP principle of Planning includes ways of setting goals and guidelines for the future of the organization. The principle of Controlling involves ensuring that planned goals are on track with previous goals and also that there is room to fix any issues that may arise. Organization and directing is to make sure that the organizations full potential is being provided and...
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...on the date of shipment. However, the customer requested that Excello hold on to the product until January 11, 2011, because Data Equipment lacked the warehouse capacity to hold the product until then. The firm must adhere to all the laws and other regulations as set. Among the regulations include Generally Accepted Accounting Principles (GAAP), Sarbanes-Oxley Act of 2002 (SOX), and AICPA code of conduct. The rules impact the mechanism, of financial reporting in the company and also help sin the actions of major principles of accounting. As a result of this, the accounting team must ensure they get the best method that will help in maximizing g the wealth of the shareholders. Albeit the earnings estimates could be gotten through the adoption of illegal treatment of accounting books, it would not be of more help to the firm as it would be more disastrous when the Wall Street detected it. 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...
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...objectives although some are made on generally accepted accounting principles). So the question I would ask is this “How good is the financial management of our health care organizations and do they hold a good financial reporting records”? GAAP The generally accepted accounting principles (GAAP) are considered as the framework of guidelines for the financial accounting and jurisdiction of all accounting standards. With these accounting standards the GAAP includes such things like standards, conventions and the rules the organization accountant follows when during a copy and summarizing all the transactions when doing the work on preparing the financial statements. All third parties that are involved with the reports must then rely on the information to be free from all bias and inconsistency without debate or not so GAAP standards are followed. All business states that, “generally accepted accounting principles are guidelines precisely, are a group objectives and conventions that have been set up permanently over time to set how financial statements are prepared and presented (FASAB, 2010). All organizations that do the dealing with any type of financial data must act in accordance with GAAP standards so that outside creditors can view their financial statements with any difficulty. Corporate Ethics In all groups composed there is a corporate...
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...generally accepted accounting principles). The question I really like to ask then is "How good are the health care organizations' financial management and do they have accurate financial report records"? GAAP Generally accepted accounting principles (GAAP) usually are regarded as the set of guidelines for financial accounting and the jurisdiction of every accounting standards. Following these accounting guidelines the GAAP includes several things like conventions, standards and the different rules the organization's accountant must follow during a copy summarization of all the transactions and in doing the work in general like preparing all the financial statements. The third parties involved with these reports must rely on the stated information to be exempted from all inconsistency or bias without any debate. These could also ensure that all GAAP standards are being followed. All business currently states that, "the generally accepted accounting principles serves as guidelines precisely, a group of objectives and verified conventions that were permanently set up over time to standardize how financial statements must be prepared or presented (FASAB, 2010). Every organization that deals with all kinds of financial data should act in accordance to the GAAP standards to make sure outside creditors can see their financial statements without any difficulty or doubt. Corporate Ethics With...
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...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 date of shipment; however, Data Equipment Systems did not have the room to keep the stock. If Reed records the $1.2 million sale in 2010 instead of 2011, he deceives the internal and external users of the financial reports by artificially inflating the end of year reports for 2010. This is an ethical breach as well as an impropriety against GAAP standards. If Excello inflates earned...
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...Reporting Practices and Ethics Paper Bryan Luther HCS/405 April 30, 2012 Janine Lewis Reporting Practices and Ethics Paper Financial Management is important in all portions of health care financial planning. Numerous financial decisions are made on a day-to-day basis from all the accounting records and business dealings that occur. Chief financial officers make decisions according to the organization’s fiscal objectives or by using generally accepted accounting principles. Many sources have divided the elements or principles of financial management up into different 10 principles. Baker (2011), on the other hand, identifies four basic principles that are crucial to health care organizations reporting practices: planning, controlling, organizing/directing, and decision making. Initial planning requires financial managers to know the short term and long term objectives of their organization and to create plans for meeting those objectives. Planning is more than the higher management of a health care facility deciding what it wants to accomplish. Effective planners define strategies when planning and seek the input of everyone involved in the process. This ensures everyone supports the plan and understands their roles in executing the plan (Baker & Baker, 2011). To control the finances, the manager guarantees that every part of the organization is following the strategy of the corporation and all of the information has been established. To do this the manager will...
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...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 reporting is accurate. The SOX Act of 2002, Generally Acceptable Accounting Principles (GAAP), and the AICPA Code of Professional Conduct are some guidelines that the company must follow. However, the pressures of meeting financial goals can tempt employees to practice earnings management. Earnings management can effect financial reporting when used extensively to make the company look like...
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...Running Head: Accounting Principles and Ethics Article Accounting Principles and Ethics Articles Myrthe SaintLouis HCS/457 November 30, 2009 Victoria Odom Abstract A healthcare organization is one of the most successful business inside of a healthcare organization theres so many different profession within, from healthcare providers such as physician, nurses ,Medical assistants and so many more. .A healthcare organization also provide care, , consistency, and support.In addition to care being providing in health care Financial management is another important assets in healthcare organization. With todays econmy crisis healthcare organization face many financial issues for example, Decreasing revenues, increasing costs and terminating healthcare workers .Being a Mananager,Administrator in a healthcare organization is not a easy job because they have to ready lead in today’s climate and also position their organizations for later financial issues and potential political changes. . In order to have an effective financial management, organization, many health care organizations use the Generally Accepted Accounting Principles, corporate compliance, and the value of ethics. Accounting Principles and Ethics Articles A healthcare organization is one of the most successful business inside of a healthcare organization theres so many different profession within, from healthcare providers such as physician, nurses ,Medical assistants and...
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...formerly a partner with the accounting firm Deloitte& Touche LLP, with the improper conduct resulting in a violation of applicable professional standards. On July 24, 2009, the U.S. Court of Appeals for the District of Columbia supported the finding of the SEC that Dearlove engaged improper professional conduct. SEC found that Adelphia’s financial statements were not in accordance with the general accepted accounting principles and Dearlove violated general accepted auditing standards. The Adelphia communications Corporation was one of the largest cable television companies in the United States. Prior to 2000, the SEC found large amount Co-borrowed debt inside the company and its affiliated entities. After the big Enron scandal, SEC required public company to disclose the related-party transactions. As Adelphia disclosed its obligations as co-debtor with the Rigas entities, the stoke price of company declined sharply and finally was delisted from the NASDAQ. 2. What are the ethical issues? Dearlove had engaged in unreasonable conduct, such as approval of the Adelphia’s method of accounting for related-party transactions. His behaviors resulted in a violation of applicable professional standards. Deloitte, who engaged in auditing Adelphia, did not issued a fair auditor’s report. Adelphia violated the accounting and reporting standard, such as improper offsetting receivables and payables, improper disclosure of its co-borrowed debt and adequacy of the note disclosure of Adelphia’s...
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...however mention that there were necessary steps taken to streamline management. Also, GAAP requires Nike to make numerous estimates that may have actual amounts that differ. According to Note 16, restructuring charges of $195 millionwere incurred to streamline management on Nike’s behalf. Additional costs are not expected to be incurred in future periods. Because this is an indirect cost of a change in accounting, the restructuring charge isincluded in corporate expense and pre-tax retained earningsin 2009 only, which is required under GAAP.Also, because this change was made by choice, the notes explain why, where, and when the change was made as well as the qualitative effects recorded. This meets all disclosure requirements by GAAP. According to Note 4, Nike made revisions to preliminary estimates, including valuations of tangible and intangible assets. Nike meets GAAP disclosure requirements by presenting the effect on income and per-share amounts. Nike goes on to mention in Note 15 thatcurrently there are nocommitments, contingencies, or legal proceedings to be estimated that they believe could have a material impact on future financial statements or operations. This disclosure is not required but could be helpful to usersin letting them know risk is not a concern at this point in time regarding these three areas. There have been numerous recently adoptedaccounting standards but majority are expected not to have a material impact on the consolidated financial statements...
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...business, and without the tracking and upkeep of funding, a company cannot run properly. According to "Healthcare Financing And Accounting " (2015), “the great thing about working in accounting is that everybody counts”. This information pretty much states and says that it doesn’t matter what part of a health care facility you may work in, all employees are a vital part of the day. Financial management involves handling routine financial operations, such as negotiating contracts, making cash available for expenses such as payroll, and maintaining a cash cushion for unexpected costs. The accounting department has a lot of responsibility and needs to be done with care, dedication, and seriousness. The Generally Accepted Accounting Principles (GAAP) are rules in which regulations and guidelines are...
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...sold on December 20, 2010 for $1.2 million; however, the receiver of the product is not able to take control of this product until January 11, 2011. Terry Reed needs to find a way to record the transaction before December 31, 2010 in order to meet their obligations. The accounting principle for reporting on the financial statements is the product must be posted in the quarter the product leaves the warehouse. (Mintz, S., Morris, R.E, 2011). In the accounting world, there are several different agencies, which regulate the reporting of financial statements. These rules and regulations protect the stakeholders and public from any wrong, fraudulent reporting and unethical behavior. The main agencies are (SOX), Sarbanes and Oxley Act of 2002, (GAAP), Generally Accepted Accounting Principles and the AICPA Code of Professional Conduct. In order for Terry Reed, and his accounting team to come up with a viable solution to their reporting dilemma, they must follow the rules and regulations of these agencies to make a sound decision which is legal and ethical for their clients. There is a great potential...
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...Golden Bear Golf, Inc. The assertions that were relevant to Paragon’s construction projects are: existence and occurrence, completeness, valuation or allocation, and presentation and disclosure. Existence and occurrence: should have been used to test the revenue and gross profit on its construction projects. By testing to see if the assertion is appropriate to make sure that all revenue and gross profit exist would have brought the attention to the $4 million of un-invoiced construction costs that materialized at the end of fiscal 1997. This assertion test also would have revealed that the earned value method in practice was allowing Paragon to book much larger amounts of revenue and gross profit on its construction projects than it would have under the cost-to-cost method. Completeness: the SEC said that Sullivan and his subordinates should have rigorously tested Paragon’s large amounts of unbilled revenues at the end of 1997. A significant amount of unbilled revenue that is reported as complete should be tested to determine the reason no billing has been posted for the work that was done. It also should be determined the reason income is being recognized for jobs that have not been identified as works in progress to determine the exact completion date of the project. By testing this assertion it would have been discovered that $4 million of work was fictitious. Valuation or allocation: Paragon overstated its revenue and profits by using the earned value method which...
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