...Restating Financial Reports” It is well known that over the past decade the amount of errors being discovered within the financial statements of publicly held companies has risen. One such error was announced by the internet sales company Overstock.com in early 2009. Due to an accounting error, partners of the company were under billed by $1.8 million dollars over the course of 2008. Overstock chose to record this entry incorrectly which falsely ballooned the company’s revenues; in turn, causing them to record an incorrect profit of $1.0 million for the year ended December 31, 2008. Had this entry been booked correctly and within the guidelines of the generally accepted accounting principles (GAAP), Overstock would have recorded its earnings correctly, showing a loss of $0.8 million. This shows us how important restating a financial statement correctly is so important. A financial statement restatement occurs when a company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information that was previously reported. A financial statement also occurs when there needs to be a change in accounting principles or there is an error. The number of financial restatements by public companies has increased in the recent years due to increased scrutiny following the well-known accounting scandals at Enron and WorldCom, amount others. The restatement usually involves a completely new audit and in some cases may affect future financial statements...
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...Another material difference is deferred income tax assets that went from $483,000 to $19,094,000. Totaling a significant difference of $18,611,000. Total current assets changed from $142,266,000 to $106,467,000. The majority of the differences of 35,799,000 came from the above. Under current liabilities, two accounts that were significant were notes payable and income tax payable. Notes payable was restated for a difference of $10,500,000 and income tax payable had a difference of $9,885,000. Under stockholder’s equity, one major account that was restated is additional paid in capital. Addition paid in capital had a difference of $28,236,000 ($35,540,000-$63,776,000) Like the balance sheet, income statement had many adjustments as well. On major change was a net sale of $17,799,000 ($340,075,000-322,276,000). Cost of Good Sold had a difference of $19,667,000 ($245,940,000 - $265,607,000). Both accounts impacted the gross profit by $37,466,000. 2. Under AU Section 316, it gives the auditor a standard to consider what fraud is in the financial statement. The factors that I believe the auditors should of concentrated was internal controls, related-party transaction and pressure that both management and auditors had. 3. The responsibility that auditors have when the client cannot provide the evidence they need to complete one or more audit test or procedures is to first address this to the audit committee and bod. Additional testing will be required in...
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...Restatement Overstock.com restates their financial statements for the last three quarters and their 2008 consolidated financial statements. According to Caleb Newquist, this will be the third restatement for the last three years. Sam Antar, who exposes Overstock.com financial misdeeds, states that Overstock lacked sufficient number of accounting professionals with the essential knowledge, experience and training to effectively account for and perform effective supervisory reviews of significant transactions that resulted in misapplications of GAAP. And that information technology program change and program development controls were inadequately designed to prevent changes in accounting systems which led to the failure to appropriately capture and accurately process data. Sam reported in his blog that Overstock.com violated Generally Accepted Accounting Principles (GAAP) in its accounting for recoveries of amounts due from under billed fulfillment partners. Overstock.com should have restated its financial reports to reflect income when it was actually earned from those fulfillment partners, less a reasonable estimate for uncollectable amounts. Overstock.com took income that should have been reported in prior reporting periods (Q3 2008 and before) and moved it to future reporting periods (Q4 2008 and later) to materially overstate its financial performance in those later reporting periods. Overstock.com increases its future financial performance. Operational errors in the...
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...another. They do not include the initial adoption of an accounting principle as a result of transactions or events that had not occurred (or were immaterial) in previous periods. Changes from principles that are not generally accepted to principles that are, count as error corrections, not changes in accounting principle. The accounting treatment for changes in accounting estimates reflects the effect of the change only in the current and future periods. No retrospective restatement of prior periods’ financial statements is made. The treatment of changes in accounting principle, by contrast, does retrospectively restate the financial statements in accordance with the change in principle for those years included in the current year’s comparative financial statements; moreover, the change in net income for still earlier years is shown as an adjustment to the beginning balance of retained earnings for the earliest year reported. This treatment results from FASB Statement No. 154, which was adopted in May 2005 in order to make the U.S. approach to accounting for accounting changes and error corrections agree with International Accounting Standard 8. See pp. 1175 – 1184. A business combination can drastically change the size and economic...
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...EC staff consolidated version as of 21 June 2012, FOR INFORMATION PURPOSES ONLY EN – EU IFRS 8 International Financial Reporting Standard 8 Operating Segments Core principle 1 An entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. Scope 2 This IFRS shall apply to: (a) the separate or individual financial statements of an entity: (i) (ii) (b) whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and the consolidated financial statements of a group with a parent: (i) whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or (ii) that files, or is in the process of filing, the consolidated financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market. 3 If an entity that is not required to apply this IFRS chooses to disclose information...
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...accounting inhibits a user’s ability to use accounting reports to make period-to-period comparisons. Is this true for both the purchase method and the pooling method? Explain. Merger related accounting inhibits the period to period comparisons because with the pooling method financial statements are restated effectively making the acquired company part of the parent before the deal is finalized hindering period to period comparisons. b. Explain why a high price-to-earnings ratio is crucial to Tyco’s acquisitions strategy. With a high price to earnings ratio Tyco can acquire any company for less stock than with a lower P/E ratio and a high P/E ratio will attract investors and stockholders with the promise of large returns in the future. c. How do merger-related charges potentially enable a company to inflate future operating earnings? How can a user of financial statements assess whether this is occurring? Pooling method understates the assets of subsidiary company, decline the amount of depreciation expense, and ignore premium amortization over the book value. As a result pooling accounting can potentially enable a company to inflate future operating earnings. A user of financial statements can assess whether this is happening by looking at the company’s notes and disclosures of merger, restructuring, and non-recurring charges. d. Many short-term gains in acquisition come from cutting costs. What potential long-term harm can cost-cutting create? Cost-cutting...
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...ACTG 493, Accounting Cases, Research and Analysis Group Case 1 Memorandum To: Professor Siyi Li From: Group 4 Date: July 5, 2016 Subject: eVade Pays Up (Deloitte Trueblood Case 14-07) I. Case Description and Key Facts eVade is an online retailer that fulfills its orders by shipping its products directly to customers across all 50 states in the U.S. eVade does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various states, including State X. eVade does not collect or remit sales tax to State X. This practice is consistent with eVade’s practice in all 50 States. In recent court rulings, State X has taken the position that operating a distribution center within the state constitutes nexus and thus would subject any company operating a distribution center to collect and remit sales tax on all sales made within the state. As of December 31, 2011, eVade has operated a distribution center within State X for the past five years. Although the company considers the risk of detection to not be probable, eVade estimates total sales tax payable to State X to be $50 million. In addition, eVade estimates that $6 million in interest and $4 million in penalties are also payable to the state. On March 15, 2012, a tax amnesty program was established by the Governor of State X. The program provides that an unregistered taxpayer who voluntarily registers to collect sales tax prospectively will be forgiven...
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...Executive Summary The report will discuss financial reporting, tax and risk management issues associated with acquisition of Sunny Sky. The issues are raised mainly due to consolidated financial statement preparation, inter-company transactions, and asset valuation after acquisition. According to CGA Code of Ethical Principles and Rules of Conduct (CEPROC) R304, we have to let you know that international tax issues are out of out scope. If ABC wants consulting service for such issues, we can hire an experienced accountant for the engagement, or ABC and seek the service from another firm. Financial reporting issues Financial reporting standards Since ABC Retainer Inc. (ABC) is a Canadian publicly traded retailer, it must adopt International Financial Reporting Standards (IFRS) starting Jan 1, 2011. If Sunny Sky (SS) uses reporting standards other than IFRS, its financial statements must be restated in accordance with IFRS before consolidation, because IFRS requires all reporting entities must use the uniform reporting standards (IAS 27.28). Purchase discrepancy IFRS requires intangible assets, including customer list and the trade name, acquired in business combination being recognized separate from goodwill and book the assets at their FMV. The rest of the purchase discrepancies are allocated to goodwill. Intangible assets with finite life, like customer list, should be amortized over its useful life. Those with indefinite useful life, like goodwill and trade...
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...life. This is not a change in accounting principle, but rather a change in an estimate, which requires a prospective treatment. Disclosure in the notes to the financial statements is appropriate, if material. 2. The additional assessment should be shown on the current period's income statement. If material it should be shown separately; if immaterial it could be included with the current year's tax expense. Only if the additional assessment were from the correction of an error should it appear on the statement of retained earnings and any comparative numbers that would appear in the financial statements. If the assessment was due to an error, details should be discussed in the financial statement notes. 3. The effect of the error at December 31, 2010, should be shown as an adjustment of the beginning balance of retained earnings on the retained earnings statement (net of applicable income taxes). The current year's expense should be adjusted (if necessary) for the possible carry forward of the error into the 2011 expense computation. Any comparative figures appearing on the financial statements would also have to be retroactively adjusted, as well as details of the error should be discussed in the notes. 4. The declaration of the cash dividend will be reflected as a reduction in retained earnings in the statement of retained earnings and will be also result in a current liability on the balance sheet at December 31, 2011 as the payment date is February 1, 2012. PROBLEM...
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...FINANCIAL STATEMENT ANALYSIS OF APPLE INC. INTERMAITE ACCOUNTING 312 PROFESSOR BRODERICK MARTINEZ BY: MURTAZA MOIZ TABLE OF CONTENT Cover Page Pg. 1 Table of Contents Pg. 2 Introduction Pg. 3 History Pg. 3 Financial Statement Breakdown Pg. 4 Conclusion Pg. 11 Financial Statements Pg. 12 Work Cited Pg. 16 INTRODUCTION Today this Financial Analysis will serve its purpose as a company which is one of the top leading in making computer manufacturing parts. I chose Apple for my course project mainly based on the fact that they release all their records to the public and they have excellent accounting practices. Apple Inc. is the popular name on almost 1 out of 5 people in the world, whom speak of it. It is by far one of the...
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...ETHICS ACCOUNTING FRAU By Paul Sweeney Learning from the Wrongs S unbeam Corp. will long be remembered as more than a household name for electric appliances and camping equipment. It will also be notable for more than a decade of mismanagement and dubious experiment.s in ruthless cost-cutting and wholesale firings. For years to come, the name "Sunbeam" will bring to mind a company that relied on questionable accounting gimmicks and outright fraLid in sacrificing the company's reputation on the altar of enhanced earnings and a jacked-up stock price. It happened under the direction of disgraced CEO Albert Dunlap — the notorious, take-no-prisoners West Point graduate and veteran corporate downsizer unaffectionateiy known as "Chainsaw Al" — who put company managers under orders to get the stock price up at any cost. One way to do that, as it turned out, was to report robust .sales of electric blankets in the summer and barbecue grills in late autumn. Eventually, earnings woes and Dunlap's bluster prompted his ouster by an aroused board of directors in June 1998. That was followed shortly by the replacement of accounting firm Arthur Andersen and a series of investigations and shareholders lawsuits, most of which are still pending. Sunbeam joins an ignominious cluster of companies — Rite Aid, c u e International (now part of Cendant Corp.), Livent, Oxford Health Plans, Phar-Mor, Miniscribe and, most recently. MicroStrategies — in business's hall of shame. All of these...
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...The City of Seattle, Washington Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2013 Co ompre ehens sive Annual l Finan ncial R Repor rt For the F iscal Yea F ar Ended Decem mber 31, 2013 The City Seatt y of S tle De epartment t of Financ ce and Adm ministrativ ve Services s Introduction Table of Contents Comprehensive Annual Financial Report For the Year Ended December 31, 2013 TABLE OF CONTENTS Page INTRODUCTION Table of Contents ....................................................................................................................................................... V Organizational Chart – City ..................................................................................................................................... XI Elected Officials ...................................................................................................................................................... XII Letter of Transmittal .............................................................................................................................................. XIII Certificate of Achievement for Excellence in Financial Reporting ...................................................................... XIX Organizational Chart – Department of Finance and Administrative Services ........................................................ XX FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT State of Washington...
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...unbaked, par-baked and fully-baked bread products. Our U.K. bakery business is a leading specialty bakery producing bagels and croissants. Key brands include California Goldminer® frozen bakery products, Tenderflake® ready-to-bake pastry products, and New York Bakery Co.® in the U.K. Through our Fresh Bakery and Frozen Bakery segments, we serve retail stores, in-store bakery departments and foodservice customers across North America and the U.K. Canada Bread employs approximately 5,400 people and operates 25 facilities across Canada, the U.S. and the U.K. The Company is 90% owned by Maple Leaf Foods Inc. Contents Message to Shareholders i Management’s Discussion and Analysis 1 Audited Consolidated Financial Statements 28 Notes to the Audited Consolidated Financial Statements 34 Corporate Information 67 2013 was an inflection point in the history of Canada Bread. Our significant efforts in recent years to reduce costs and deliver innovative products to meet evolving consumer demands paid off in a very strong earnings year. We increased both our Adjusted Operating Earnings for the year by 8%, and our Adjusted Earnings per Share by 9%, driven largely by strong gains in our North American frozen and U.K. bakery businesses. We also...
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...Explains how the impairment of the patent would be reflected on the financial statements in the event of losing a lawsuit - page 377 Response to Client Request II Week 4 Team A Names ACC/541 Date: MEMORANDUM TO: FROM: DATE: SUBJECT: Financial Implications of Pending Litigation ____________________________________________________________ __________________ Financial Implications The pending litigation has several implications for accurate financial reporting as established in the Generally Accepted Accounting Principles (GAAP). The immediate impact is the requirement for contingencies in the financial statements to report the potential that these statements will be restated to account for the outcome of the lawsuit. Pending the outcome of the lawsuit, the company may be required to reorganize their debts under a chapter 11 bankruptcy. The lawsuit also challenges the validity of a patent, which is a revenue generating asset of the client’s. Pending the outcome of the lawsuit, the patent will need to be tested for impairment. Reporting Requirements for Lawsuit Contingencies The implications for the lawsuit on the company financials depend upon the anticipated outcome of the lawsuit. If the anticipated outcome of the lawsuit is likely to result in a loss to the company, and that loss can be reasonably estimated, the loss should be accrued as estimated into the company financials, and noted as such, as detailed in the FASB Codification section 450-20-25-2...
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...rationale behind establishing XYZ Corporation as a subsidiary. Also included in this memo, as requested, is a discussion of the responsibilities of a CPA, and the differences between a financial review report and a financial audit report. Methodology used to Determine Deferred Taxes Deferred taxes can be one of two different types of deferred tax entries, permanent or temporary. Permanent deferred tax liabilities are income generating events that do not incur tax liabilities, and thus a permanent adjustment to the financial reports is made to adjust for the discrepancy between income for tax purposes, and income for reporting purposes. A temporary deferred tax liability is a liability where taxable income is different from reportable income, but at some future point, the taxable income will reconcile to the reportable income (Kieso, Weygandt, & Warfield, 2007). Temporary deferred tax liabilities can result in either an excessive or insufficient amount of tax withheld in the current period, which will be reconciled at a later period. An example is the depreciation of a capital asset. If the book depreciation of a capital asset is at a greater rate than the tax rate depreciation of the same asset, then a discrepancy between the financial income statement and the taxable income statement will exist. This can result in either future tax deductions or tax liabilities depending on the nature of the difference. Temporary deferred tax liabilities are only reported if they...
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