...Case 11-1: Polluter Corp. Page 1 Suggested Solution -- Case 01 Objectives of the Case This case gives students an opportunity to apply cash flow principles to determine the appropriate classification of various transactions in the statement of cash flows. Applicable Professional Pronouncements ASC 230, Statement of Cash Flows (ASC 230) IAS 7, Statement of Cash Flows (IAS 7) Discussion 1 — Purchase of 2012 Emission Allowances What is the appropriate classification in the statement of cash flows in Polluter Corp.’s (the ―Company’s‖) December 31, 2010, financial statements for its purchase of 2012 emission allowances (―EAs‖) from Clean Air Corp.? Accounting Alternatives — Purchase of 2012 Emission Allowances Alternative 1 — The Company should classify the purchase of the 2012 EAs from Clean Air Corp. as an investing cash outflow in its December 31, 2010, statement of cash flows. Proponents of Alternative 1 believe the Company should classify the purchase of EAs as investing activities in the statement of cash flows given the Company’s election to classify the EAs as intangible assets on its balance sheet. Although EAs are not specifically mentioned in ASC 230, proponents of Alternative 1 believe, given the Company’s accounting policy, the EAs represent ―productive assets.‖ ASC 230-10-20 defines investing activities as follows: Investing activities include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment...
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...Accounting 5110 – Fall 2012 Critical Writing Case Section 1 by 7:30 am Section 2 by 3:40 pm Section 3 by 10:45 am Due November 21, 2013 Please submit your memo in Canvas The attached case presents an accounting dilemma and asks you to provide guidance on the proper accounting. Prepare your guidance in memo format. The purpose of this assignment is to help you recognize an accounting problem, gather and weigh relevant information, consider and evaluate alternatives, and reach and articulate informed solutions. I strongly encourage you to make use of a service here on campus – the University Writing Center (UWC). UWC provides one-on-one writing consultation free to university students. Unlimited half hour sessions are available. UWC now has an office in the business building – SFE 1171. To make an appointment follow this link: http://uath.mywconline.com/. The final draft of your memo should not exceed two pages, single-spaced, one-inch margins, 12 point font. The memo will be graded based on the attached rubric. Criterion Organization Points possible 5 100% Appears neat and organized; no spelling or grammar errors; uses active voice; guides the reader through the case; gets to the point Summarizes the facts completely; key facts identified; distinguishes between facts and assumptions ...
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...Page » Business and Management Cash Flow Poluuter Corp In: Business and Management Cash Flow Poluuter Corp José A Valdés 3 de octubre de 2013 Sem. De Contabilidad Prof. Alejandro Méndez Case 11-1 Polluter Corp Facts of Case: Polluter Corp is an SEC registrant and manufacturer household cleaning products. In the course of operations, Polluter Corp emits emission pollutants; The Company receives emissions allowances, (EAs,) from the government for 2010 to 2030. Polluter Corp will upgrade their production facilities in 2014 in order to reduce their pollutants. Emissions Allowance are given by the government in order to offset pollution expense, with the goal being to reduce pollution 2010 Transactions After 2014, Polluter will emit less pollution, but until then it will need more EAs in order to avoid penalties. Transactions Fiscal Year 2010 After 2014, Polluter Corp will emit less pollution, but until then it will need more EA’s in order to avoid penalties, Polluter buys extra EA’s for 2012 from Clear Air Corp for $3 million. In an effort to offset the cost of the April 2, 2010 purchase of 2012 Eas, the company sold Eas with a vintage year of 2016 to Dirty Chemical Corp for $2 million. Answer Required: 1. What is the appropriate classification in the statement of cash flows in the company’s December 31, 2010, financial statements for its purchase of 2012 EAs from Clean Air Corp ? According to the FASB codification section...
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...José A Valdés 3 de octubre de 2013 Sem. De Contabilidad Prof. Alejandro Méndez Case 11-1 Polluter Corp Facts of Case: Polluter Corp is an SEC registrant and manufacturer household cleaning products. In the course of operations, Polluter Corp emits emission pollutants; The Company receives emissions allowances, (EAs,) from the government for 2010 to 2030. Polluter Corp will upgrade their production facilities in 2014 in order to reduce their pollutants. Emissions Allowance are given by the government in order to offset pollution expense, with the goal being to reduce pollution 2010 Transactions After 2014, Polluter will emit less pollution, but until then it will need more EAs in order to avoid penalties. Transactions Fiscal Year 2010 After 2014, Polluter Corp will emit less pollution, but until then it will need more EA’s in order to avoid penalties, Polluter buys extra EA’s for 2012 from Clear Air Corp for $3 million. In an effort to offset the cost of the April 2, 2010 purchase of 2012 Eas, the company sold Eas with a vintage year of 2016 to Dirty Chemical Corp for $2 million. Answer Required: 1. What is the appropriate classification in the statement of cash flows in the company’s December 31, 2010, financial statements for its purchase of 2012 EAs from Clean Air Corp ? According to the FASB codification section 805-50-3-1-2, these allowance will be recognized as intangible assets at their cost. When a company...
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...Memorandum to the File Date: August 1, 20XX From: Carie Ford Re: Summarize the tax issue/purpose of the memo. Background Provide a concise yet complete overview of facts/background. Issue State the issue(s) in question format. Authoritative Guidance List all authoritative guidance used to form conclusion and analysis. Refer to p. 718 in your tax textbook for citation reference guidance. Analysis Discuss each issue separately. Describe the logical, defendable, legal alternatives to each issue/problem. Provide support and detail for your reasoning. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx...
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...maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations). Suggested Solution -- Case 01 Objectives of the Case This case gives students an opportunity to apply cash flow principles to determine the appropriate classification of various transactions in the statement of cash flows. Applicable Professional Pronouncements ASC 230, Statement of Cash Flows (ASC 230) IAS 7, Statement of Cash Flows (IAS 7) Discussion 1 — Purchase of 2012 Emission Allowances What is the appropriate classification in the statement of cash flows in Polluter Corp.’s (the ―Company’s‖) December 31, 2010, financial statements for its purchase of 2012 emission allowances (―EAs‖) from Clean Air Corp.? Accounting Alternatives — Purchase of 2012 Emission Allowances Alternative 1 — The Company should classify the purchase of the 2012 EAs from Clean Air Corp. as an investing cash outflow in its December 31, 2010, statement of cash flows. Proponents of Alternative 1 believe...
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...POLLUTER CORP. Polluter Corp is a leading household cleaning products manufacturing company based in the United States. The Company operates three manufacturing facilities as an SEC registrant. Company emission allowances of vintage years are granted by U.S government to be used 2010 and 2030. According to the Federal Energy Regulatory Commission, Polluter Corp. recorded EAs as intangible assets with a zero cost basis when government issued EAs to company and has a fiscal year end of December 31. Government has special guidance to control or reduce the emission of pollutants and greenhouse gases to participating companies. These are explained as follow; companies have a specified level of pollutants to emit EAs. EAs with same vintage year designation are exchangeable or replaceable by any companies to reduce pollution. That means company can buy EAs from other companies when it needs EAs or sell excess its EAS to other companies who need to satisfy pollution control obligation through a broker. According to EAs regulation, company is required to deliver to the governing bodies EAs sufficient to offset the company’s actual emission or pay a fine for overage of EAs. Currently, Polluter has facing a significant increase in emission due to its old manufacturing facilities and forecasted a need for EAs in fiscal year 2010-2014. In order to reduce green house gas emission to a significant low level, company plans to upgrade its facilities in 2014 and it will cost $15 millions. Under...
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...2010, financial statements for its purchase of 2012 EAs from Clean Air Corp? Provide the logic for each alternative and indicate which alternative you believe is best and why. In regards to the information given in the Polluter case, there are several ways the company can classify the $3 million purchase of emission allowances (“EAs”) from Clean Air Corp. First, it is important to understand the Polluter’s intention for the EAs and nature of their ‘business.’ In order to understand what are the “feasible alternative classifications in the statement of cash flows” for the $3 million purchase, Polluter will determine what type of asset they will classify the EAs as on their balance sheet. Following are three alternatives Polluter can consider as outlined in Deloitte’s “Accounting for Emission Rights” paper: 1. The EAs are intangible assets as defined under SFAS No. 142, Goodwill and Other Intangible Assets, because they lack physical substance but do not meet the definition of a financial asset under SFAS 140. 2. EAs are listed as financial assets because markets and exchanges for the trading of EAs provided evidence that they qualified as financial assets as the allowances would be readily convertible to cash. 3. An alternative view is that they are listed as inventory, as they are part of the necessary costs to comply with environmental regulations and emissions reduction schemes. Polluter currently has significantly high levels of greenhouse gas pollution,...
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...Background: An emission allowance is an authorization by a permitting authority or the Environmental Protection Agency Administrator to emit a specified amount of pollutant during a specified period of time. （http://www.ferc.gov/help/faqs/form-580.asp#question4） Case Summary： Polluter Corp. is a company features in manufacturing household cleaning products. The government allocated the emission allowances (EAs) for each year. According to the Federal Energy Regulatory Commission accounting guidance for EAs, the EAs is recorded as intangible asssets. The Polluter Corp. is going to upgrade its facilities in 2014 in order to decrease the amount of greenhouse gas emitted. However, the corporation still needs additional EAs before upgrades. Hence, the Company spent $3 million to purchase EAs with a vintage year of 2012 from Clean Air Corp. In order to compensate the cost, the Corp sold EAs worthy of $2 million with the vintage year of 2016 to Dirty Chemical Corp. We need to analyze the classification of the statement of cash flows for these two transactions. In addition, we need to differentiate the method of recording these two transactions according to IFRS and U.S. GAAP. Case Analysis: In terms of classification, emission allowances satisfy the definition of an intangible asset. Specifically, they are assets (not including financial assets) that lack physical substance. [FASB, Appendix F, Glossary to SFAS 142, Goodwill and Other Intangible Assets]. Although they have...
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...From: Date: Subject: Case 11-1 Polluter Corp. Statement of Relevant Facts Polluter Corporation, an SEC registrant, operates three manufacturing plants in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (“EAs”) of varying vintage years (i.e., the years in which the allowance may be used) to be used between 2010 and 2030. Upon receipt of the EAs, the Company recorded the EA’s as intangible assets with a cost basis of zero. The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 2014, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 2010–2014. However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 2014 because of reduced emissions as a result of the upgrade. The Company entered into the following two separate transactions in fiscal year 2010, which will impact the Company’s results as presented in the statement of cash flows: 1. To meet its need for additional EAs in fiscal years 2010–2014, on April 2, 2010, the Company spent $3 million to purchase EAs with a vintage year of 2012 from Clean Air Corp. 2. In an effort to offset...
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...MEMORANDUM Polluter Corp operates three manufacturing facilities in which various household cleaning products are manufactured and sold to retail stores. Polluter has a certain emission allowances for each year that are classified as intangible assets. Because it anticipates a need for additional emission allowances for the years 2010 – 2014, it purchased $3 million in emissions credits from Clean Air Corp. on April 2, 2010. A complete renovation of its facilities will be completed by 2014, at which point in time Polluter expects to have additional emission allowance that it does not need. Therefore, to offset the cost of having to purchase emissions credits until the renovations are complete, Polluter sold $2 million worth of future emissions credits to Dirty Chemical Corp. The question of how to account for these transactions in the statement of cash flows has been raised. This memo discusses and evaluates the relevant options. Definitions Accounting Standards Codification 230-10 Statement of Cash Flows 230-10-20 Glossary Financing Activities Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investment; receiving restricted resources that by donor stipulation must be used for long-term purposes; borrowing money and repaying amounts borrowed, or otherwise settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit. Investing Activities ...
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...Why commodity markets were started The first recorded instance of futures trading occurred with rice in 17th Century Japan. There is some evidence that there may also have been rice futures traded in China as long as 6,000 years ago. Futures’ trading is a natural outgrowth of the problems of maintaining a year-round supply of seasonal products like agricultural crops. In Japan, merchants stored rice in warehouses for future use. In order to raise cash, warehouse holders sold receipts against the stored rice. These were known as "rice tickets." Eventually, such rice tickets became accepted as a kind of general commercial currency. Rules came into being to standardize the trading in rice tickets. These rules were similar to the current rules of American futures trading. In the United States, futures trading started in the grain markets in the middle of the 19th Century. The Chicago Board of Trade was established in 1848. In the 1870s and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Today there are ten commodity exchanges in the United States. The largest are the Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and the New York Coffee, Sugar and Cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, France, Singapore, Japan, Australia and New Zealand. The products traded range from agricultural staples like Corn and...
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... on average, $88,000 a year to keep a youth locked up — far more than the U.S. spends on a child’s education,” wrote Nell Bernstein who authored Burning Down the House: The End of Juvenile Prison. Even as many states have attempted to alter their adolescent prisons, Bernstein says that incarcerating kids is the wrong strategy to manage most early life wrongdoers. Their detention behind those walls will shape who they are. (c) Reverse Bill Clinton’s cutting funding to 350 college programs in prisons around the country in 1994, as a part of his Violent Crime Control and Law Enforcement Act. (d) Implement Obama’s Second Chance Pell program to reestablish the federal grant to prisoners looking to enroll in college. A 2013 study by the Rand Corp, financed by the U.S. Dept of Justice, showed that detainees who got some broad instruction were 43% more averse to re-carry out criminal acts and go back to jail inside of three years than the individuals who didn’t get any...
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...Clean Air Act Clean Air Act, 42 U.S.C. § 7401 et seq. -- Enforced by US EPA -- By the end of this lecture you should be able to describe: * The race to laxity * What NAAQS means. * The federal government’s role in cooperative federalism * 7 criteria pollutants * A hazardous pollutant under the CAA * Non-attainment area * Emissions trading programs * Noise pollution under the CAA * The four Class I areas designated by the State of Florida * The four emissions regulated by Title II of the Clean Air Act relating to motorized vehicles * How long a waiver is good for and to how much of an auto manufacturer’s production does it apply to. * What city is the Title II pollution numbers based on. * What is a clean fuel vehicle. LOOK for *** as pointers NOTE Most of the narrative on the lectures in this course has been modified from: - Plater et al. Environmental Law and Policy: Nature, Law and Society, 1992. - Findley and Farber. Environmental Law, 2008. Background Air and water are common resources and are sometimes referred to by lay-people as “pollution sinks,” implying that airsheds and water bodies are large vats into which pollutants can be thrown as a large disposal. As we saw with the Clean Water Act, this isn’t true. While both airsheds and water bodies can handle some amount of pollution without significant degradation, airsheds and water...
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...Pollution Prevention in Corporate Strategy NATIONAL POLLUTION PREVENTION CENTER FOR HIGHER EDUCATION Case A: McDonald’s Environmental Strategy Susan Svoboda, manager of the University of Michigan Corporate Environmental Management Program (CEMP), prepared this case under the guidance of Stuart Hart, director of CEMP and assistant professor of Corporate Strategy and Organizational Behavior at the U-M School of Business Administration, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an adminstrative situation. This document may be used by either students or faculty for background information. Introduction Rooted in Ray Kroc’s founding principles of Quality, Service, Cleanliness & Value (Q.S.C.&V.), McDonald’s management has always believed in being a leader in issues that affect their customers. This philosophy is evident in McDonald’s involvement in various community projects regarding education, health care, medical research, and rehabilitation facilities. These activities help the corporation to extend their image beyond fun and entertainment into social responsibility. However, in the late 1980s, McDonald’s began to face criticism for its environmental policies, especially those surrounding polystyrene clamshell containers. In 1987, McDonald’s replaced CFCs, the blowing agent used in clamshell production, with weaker HCFC-22’s after facing public criticism that CFC usage was contributing to ozone depletion. But...
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