...Case Study 2: The Bear Minimum 1. Big Bear would not include the $500,000 in legal fees paid to Stipe, Berry, Black, and Mills LLP as apart of its minimum lease payments, but would include the $1,000,000 of legal fees paid to Goliath. This conclusion can be drawn from two separate parts of FASB Codification on Leases. According to ASC-840-10-25-5, “…minimum lease payments comprise the payments that the lessee is obligated to make or can be required to make during in connection with the leased property”. Clearly the $1,000,000 payment is required and in connection with the leased property since this payment is being made directly to Goliath who is the lessor and is needed to complete the arrangement. FASB expands is minimum lease payment requirements in ASC-840-10-25-6 including “…payments made before the beginning of the lease term…” Since the $1,000,000 is paid before the lease term this provision further confirms that the $1,000,000 would have to be included. Since the $500,000 doesn’t follow any of the requirements explained above, it is not included. 2. The penalty payment of $500,000 would be included as a minimum lease payment as proven by FASB Codification in ASC 840-10-25-6 which states that minimum lease payments include: “Any payment that the lessee must make or can be required to make upon failure to renew or extend the lease at the expiration of the lease term, whether or not the payment would constitute a purchase of the leased property. Note that the definition...
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...Background Big Bear Power is a public utility with a strong financial position for the past several years. As a result of having a positive cash flow, Big Bear is in compliance with all of its debt covenants. Big Bear has entered a 10 year non-cancelable lease with Goliath Company for a combustion turbine. The lease is signed on December 15, 2010 and the right to use the turbine begins on January 1, 2011. Relevant Issues and Case Facts The case focuses on whether certain costs and provisions associated with the lease would be included in “minimum lease payments” under ASC 840 under leases. There are three specific provisions under question: legal fees paid in negotiating the lease contract, a possible penalty paid by Big Bear to Goliath in the event that Big Bear a “material adverse change” that leads to a default on its debt covenants, and increasing level rents equal to the increase in consumer price index. Provision 1: In negotiating the lease, Big Bear has paid $500,000 to it outside legal counsel. Big Bear is also required to pay $1 million in legal fees incurred by Goliath. Provision 2: A provision in the lease states that Big Bear must pay a penalty to Goliath if Big Bear’s bank declares a default under its primary credit arrangement. The provision is dependent upon whether or not there is a “material adverse change” in Big Bear’s financial condition. Big Bear believes that the likelihood of default is remote. Goliath and Big Bear’s bank have no relationship...
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...Johnathan Smith Seth Maggio Negotiation Exercise – Player’s Representative As agents of LSU’s football star running back Chris Thomas, we began the negotiation process with the attorneys representing the Indianapolis Colts which is a key component of being an agent along with advocating and marketing as stated in chapter 1. The Colts drafted Thomas in the 2nd pick of the 2nd round; (5th overall running back.) Thomas urged us to close a deal by Friday before he leaves on a hunting trip, but could possibly wait until the following Tuesday. His grandmother who raised him has just been diagnosed with dementia and is looking to put her in a highly exclusive C’est La Vie Assisted Living Facility to care for her while he is away. With that being said, our leverage has weakened a bit due to the importance of coming to an agreement, and he is willing to take anything above $1,200,000 and a two year deal. Which averages out to $600,000 a year. However, as being Chris Thomas fiduciary we had a duty of good faith, loyalty, accounting, and care for him. With this being said we were determined to get Thomas and his grandmother the best situation we possibly could. Prior to the negotiation we researched a lot of past second round picked running backs. Some of these running backs were Stevan Ridley, Willis Mcgahee, Montee Ball, Eddie Lacy, Giovani Bernard, Isiah Peas, and Leveon Bell. All of these second round picks had similar contracts in the ball park of 4 million which was our starting...
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...Case 8-4 The Bear Minimum Provision 1 According to 840-10-25-5 (b) it seems that the legal fees being paid by Big Bear for Goliath Co. would be excluded from the minimum lease payment. Reading further in 840-10-25-6 (e) it says “Fees that are paid by the lessee to the owners of the special-purpose entity for structuring the lease transaction. Such fees shall be included as part of minimum lease payments” so you would include these fees paid by Big Bear for the structuring the lease. In the Intermediate Accounting SIXTH EDITION p.832 under the Executory Costs “These expenditures simply are expensed by the lessee as incurred” So, for the legal fees paid by Big Bear to Stripe, Berry, Mills and Buck LLP they should be expense when incurred and not included in the minimum lease payments. So, the legals fees that were paid for Goliath Co. for the structuring of the lease would be included in the minimum lease payments but the fees paid to Stripe, Berry, Mills and Buck LLP by Big Bear for its own legal fees would not be. ASC 840-10-25-5 For a lessee, minimum lease payments comprise the payments that the lessee is obligated to make or can be required to make in connection with the leased property, excluding both of the following: a. Contingent rentals b. Any guarantee by the lessee of the lessor's debt and the lessee's obligation to pay (apart from the rental payments) executory costs such as insurance, maintenance, and taxes in connection with the leased property...
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...The University of Oregon “The Bear Minimum” Case ACTG 352: Intermediate Accounting III October 9th, 2014 To: Big Bear Power Date: October 7, 2014 Re: The Bear Minimum Summary Big Bear Power, a public utility company, has entered into a 10-year non-cancelable agreement with Goliath Company to lease a turbine. The lease is effective on January 1, 2011. The purpose of this report is to provide Big Bear with insight in evaluating whether the costs or potential costs associated with the lease should be included in the “minimum lease payments” according to US GAAP Accounting Standards Codification. When assessing the minimum lease payments, we reviewed the legal costs incurred to Big Bear’s external legal counsel (Stripe, Berry, Mills, and Buck LLP) pertaining to the negotiation of the lease terms. We also examined the provision requiring Big Bear to pay a penalty if it were to default under its current credit arrangement with its bank, as well as the effect on monthly payments that are subject to an increase in the consumer price index calculation. Provision One First we will review the costs incurred during the negotiating of the lease terms. Big Bear is required to pay its external legal counsel $500,000 in legal costs. This amount should not be included in its minimum monthly payments because per accounting guidance ASC 840-10-25-5: For a lessee, minimum lease payments comprise the payments that the lessee is obligated to make or can be required to...
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...Memorandum To: Big Wig, CFO, Big Bear Power From: James Albert Date: March 24th, 2016 Subject: The Bear Minimum Statement of Relevant Facts: Big Bear Power and Goliath Company entered into a contract in which Big Bear leased a combustion turbine. * The contract was signed on December 15th, 2004, but did not begin until January 1st, 2005. * The contract lasts for 10 years and is non-cancelable * Big Bear pays $500,000 in legal counsel fees, and are required to pay $1,000,000 in legal fees incurred by Goliath Co. * If Big Bear’s bank declares default, Big Bear will have to pay a penalty. * Big Bear is in default if “material adverse change” is proven (not defined in the contract) * The chance of default is remote. * The bank has no relationship with Goliath Co. * The annual lease payments are $1,000,000 and payable over 12 months at the beginning of each month * Big Bear will pay the minimum payment plus the percentage increase in the Consumer Price Index (CPI) (most recent increase is 4%) Identification of Issues and Alternatives: The issue with this case is determining if the stated provisions will be included in the minimum lease payments. Provision one has two issues. The first dilemma is defining the appropriate action of the $500,000 Big Bear Power assumed in legal counseling fees, which will be considered expenditures of the lessee. The next problem is the proper allocation of the fees to be paid on behalf of Goliath...
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...“The Bear Minimum” Case 08-4 Blakely Broom Connor Greco Spencer Craft Big Bear Power, a widely held public utility company, has agreed to a 10-year non-cancelable lease of a combustion turbine from Goliath Co. The lease was signed on December 15, 2010, and begins on January 1, 2011. The lease requires Big Bear to pay $1 million of legal fees incurred by Goliath, and third party legal fees as part of the lease. The lease also states that if a change in control event occurs, Big Bear must purchase the equipment leased from Goliath Co. within 30 days at a price equal to the remaining lease payments. This provision also indicates that a change in control also requires Big Bear to pay a penalty of $500,000. The last provision describes the rental payments, which are directly related to CPI. One of the first issues involved in calculating the present value of the minimal lease payments is figuring out what type of lease this is. This includes figuring out what the present value of the minimum rental payments are, the guaranteed residual value after the lease term ends, penalty for failure to renew or extend, and bargain purchase options, if any. Once we figure this we add the executory costs included in the payments to the minimal lease payments and calculate the present value by using the discount rate. Since this is a non-cancelable lease and it passes the final criterion mentioned in section 840-10-25-1, in that the minimum lease payments exceeds 90% the fair value...
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...2 11.4 10.9 22.5 [16] 15.5 14.2 10.9 10.7 10.5 10.9 13.1 10.7 15.4 16.7 10.6 11.1 11.2 10.5 11.9 summary(softdrink) Min. 1st Qu. Median Mean 3rd Qu. Max. 10.30 10.90 11.65 12.90 14.08 22.50 var(softdrink) [1] 9.152747 sd(softdrink) [1] 3.025351 1.) The data set above shows the following: Mean -> 12.90 Variance -> 9.152747 Standard Deviation -> 3.025351 Median -> 11.65 1st Quartile -> 10.90 3rd Quartile -> 14.08 stem(softdrink, scale=2) The decimal point is at the | 10 | 3556677999 11 | 011249 12 | 112 13 | 127 14 | 2 15 | 245 16 | 17 17 | 18 | 19 | 20 | 6 21 | 22 | 5 2a.) The minimum vale is 10.30 and the maximum is 22.50 for this data set. You can find these on the stem and leaf plot above the minimum value at the top as the first entry; the maximum value at the bottom of the plot, the last entry. b.) The median to this set is 11.65. This answer is obtained by adding the 15th and 16th entry and dividing the answer by 2. This is possible because it has an even number of entries, with no actual middle value. c.) This data is not symmetric. The values less than the mean/medium are close together compared to the values greater than the mean and medium which is spread apart. boxplot(softdrink) 3a.) The medium occurs at the dark black line in the boxplot. The bottom of it is the 1st quartile and the top represents the 3rd quartile. The by approximation, the medium...
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...Build-A-Bear Workshop Inc.—Leases EXCERPTED WITH PERMISSION FROM CASES IN FINANCIAL REPORTING SEVENTH EDITION ISBN: 978-1-934319-79-6 ELLEN ENGEL D. ERIC HIRST MARY LEA MCANALLY © Copyright 2012 by Cambridge Business Publishers, LLC. All rights reserved. No part of this publication may be reproduced in any form for any purpose without the written permission of the publisher. This document is authorized for use by Barbara Grein, from 9/19/2011 to 12/10/2011, in the course: ACCT 322: Financial Reporting II - Grein (Fall 2011), Drexel University. Any unauthorized use or reproduction of this document is strictly prohibited. Build-A-Bear Workshop Inc.—Leases Build-A-Bear Workshop Inc., (NYSE: BBW) is the leading and only global company that offers an interactive makeyour-own stuffed animal retail-entertainment experience. Founded in 1997, the company and its franchisees currently operate more than 400 Build-A-Bear Workshop® stores worldwide, including company-owned stores in the United States, Puerto Rico, Canada, the United Kingdom, Ireland, and France, and franchise stores in Europe, Asia, Australia and Africa. In 2007, the interactive experience was enhanced - all the way to CyBEAR™ space with the launch of buildabearville.com®, the company’s virtual world, stuffed with fun. Build-A-Bear Workshop. Source: Company Web site. Learning Objectives • Understand the economic incentives of leasing versus buying assets. • Interpret lease footnotes and...
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...Chapter 6 Supply, Demand, and Government Policies MULTIPLE CHOICE 1. Price controls are a. used to make markets more efficient. b. usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. nearly always effective in eliminating inequities. d. established by firms with monopoly power. ANSWER: b. usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. TYPE: M DIFFICULTY: 2 2. Policymakers choose to enact price controls in a market because a. they believe the market’s outcome to be unfair. b. enacting price controls will directly increase tax revenues. c. they are required by law to improve market conditions. d. they believe that the market system is inefficient and their actions will improve efficiency. ANSWER: a. they believe the market’s outcome to be unfair. TYPE: M SECTION: 1 DIFFICULTY: 2 3. Policymakers are led to control prices because a. they view the market’s outcome as inefficient. b. they view the market’s outcome as unfair. c. all politicians enjoy exercising their power. d. they are required to do so under the Employment Act of 1946. ANSWER: b. they view the market’s outcome as unfair. TYPE: M SECTION: 1 DIFFICULTY: 2 4. Price controls a. always produce an equitable outcome. b. always produce an efficient outcome...
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...UNIQUE BANKING MODEL UNIQUE BANKING MODEL LOGO PUNCHLINE FEATURES SERVICES FOR YOUTH MINIMUM CAPITALREQUIREMENT LOGO PUNCHLINE FEATURES SERVICES FOR YOUTH MINIMUM CAPITALREQUIREMENT FEATURES Youth bank is banking service for children, aged up to 18 years, to help the parents meet the present and future aspirations that they hold for their child. It offers various savings and investment options to the parent along with teaching the child to manage his/her personal finance in a more responsible and independent manner. We offer: * Option of a Savings Bank account, Fixed Deposit or Recurring Deposit. * Minimum average balance to be maintained at (100) per quarter for the Savings Bank account. * Free personalized cheque book * Free International Debit Card for children above the age of 7 years with features as below: * Daily withdrawals limits of Rs. 500 * Daily spend limits of Rs. 500 * The next time you want to withdraw cash from your youth bank Savings account, just walk into any bank's ATM and use your Bank ATM-cum-Debit card for free. The above benefit is available to Youth bank Savings Account holders on maintenance of a quarterly average balance of more than Rs.500 in the savings account in a quarter. The above benefit can be availed in the same quarter. * Free Internet banking. * Separate login ids and transaction password. * Access to special zones and links to related websites for...
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...Build-A-Bear Workshop, Inc.—Leases EXCERPTED WITH PERMISSION FROM CASES IN FINANCIAL REPORTING EIGHTH EDITION ISBN: 978-1-61853-122-3 MICHAEL DRAKE ELLEN ENGEL D. ERIC HIRST MARY LEA MCANALLY © Copyright 2015 by Cambridge Business Publishers, LLC. All rights reserved. No part of this publication may be reproduced in any form for any purpose without the written permission of the publisher. This document is authorized for use by Hongxia Chai, from 4/29/2015 to 7/31/2015, in the course: AC580: FairfieldMSA - Colvin (Summer 2015), Fairfield University. Any unauthorized use or reproduction of this document is strictly prohibited. Build-A-Bear Workshop, Inc.—Leases Build-A-Bear Workshop, Inc., (NYSE: BBW), is the leading and only global company that offers an interactive make-your-own stuffed animal retail-entertainment experience. Founded in 1997, the company and its franchisees currently operate more than 400 Build-A-Bear Workshop® stores worldwide, including company-owned stores in the United States, Puerto Rico, Canada, the United Kingdom, Ireland, and France, and franchise stores in Europe, Asia, Australia and Africa. In 2007, the interactive experience was enhanced - all the way to CyBEAR™ space with the launch of buildabearville.com®, the company’s virtual world, stuffed with fun. Source: Company website. Learning Objectives • Understand the economic incentives of leasing versus buying assets. • Interpret lease footnotes and discussion...
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...Bear Stearns Forensic Accounting Case 1. Identify key dates concerning financial accounting and/or disclosure issues for Bear Stearns during the critical March 2008 time period before bailout by JP Morgan Chase. * March 10, 2008 The Alt-A residential mortgage-backed securities issued by a Bear Stearns affiliate was downgraded. This increased the risks of mortgage-backed securities. Two Bear Stearns hedge funds now bankrupted and were leveraged up to $60 of debt for each $1 of equity. This increased BS’ financial burden. RaboBank Group informed Bear Stearns that it would not renew a $500 million loan coming due later that week and unlikely to renew a $2 billion loan scheduled to expire the following week. BS will seek short-term debt to meet current liability so it will have more current liabilities and decrease BS’s liquidity. Bear Stearns’ shares dropped as much as 14% in the course of the day, finally closing at $62.30, and a decline of more than 11 percent. It decreased its value and might influence its goodwill. The annual cost of a 5-year Bear Stearns’ CDS ballooned more than 37% to $626,000 per $10 million. This increased BS’s expense and decreased its net income. * March 11, 2008 ING Groep NV was pulling about $500 million in financing. Adage Capital Management pulled some of its money from Bear Stearns’ prime-brokerage division. BS’ capital decreased and solvency. It might not meet its current liability needs. * March 12, 2008 Bear...
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...Deposit Products Islami Bank Bangladesh Limited mobilizes deposits through different types of accounts. Al-Wadeah Accounts Mudaraba AccountsAl-Wadeah Accounts Islami Bank Bangladesh Limited operates Al-wadeah Current Account on the principles of Al-wadeah. The Bank commits to refund money deposited in these Accounts on the demand of customers. On the other hand the Bank takes permission from customers that the Bank may utilize their money. Customers may operate these Accounts as their desires. No profit is disbursed in these Accounts and depositors do not bear any loss Mudaraba Accounts In the perspective of these Accounts the Bank is 'Mudarib' and customers are 'Shahib Al-Mal'. On behalf of depositors, the Bank invests their deposited money and distributes minimum 65% of investment-income earned through deployment of Mudaraba funds among Mudaraba depositors after the closing of the year. * Al-Wadeah Current Account (AWCA) * Mudaraba Savings Account (MSA) * Mudaraba Term Deposit Account (MTDR) * Mudaraba Special Notice Account (MSNA) * Mudaraba Hajj Savings Account (MHSA) * Mudaraba Special Savings (Pension) Account (MSSA) * Mudaraba Savings Bond (MSB) * Mudaraba Monthly Profit Deposit Account (MMPDA) * Mudaraba Muhor Savings Account (MMSA) * Mudaraba Waqf Cash Deposit Account (MWCDA) * Mudaraba NRB Savings Bond (MNSB) Account * Mudaraba Foreign Currency Deposit Account (MFCD) * Students Mudaraba Savings Account (SMSA) * Mudaraba Farmers Savings...
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...Minimum wages can reduce wage inequality by moving low-wage workers up the wage distribution – effectively truncating some part of the low-wage distribution. To the extent that they have positive spillover effects, raising the wages of some low-wage workers who are paid above the minimum wage (so as to restore the former relative wages) this could also raise the wages of other low-wage workers. In a less desirable fashion, the adverse employment effect also means that some low-wage jobs can be eliminated; highlighting that reduction in wage inequality should not be regarded as an end in itself if it means simply the elimination of jobs at the low-end of the wage distribution. As well, in the longer run, wage inequality could be increased,...
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