Both the FASB and the IASB are under pressure to prioritize and streamline accounting disclosures due to perceived disclosure overload. How would you determine which disclosures are absolutely necessary and which ones could be eliminated?
Can you describe why the managers may have wanted to overproduce vehicle inventory? Can you describe some of the negative consequences of doing so? Can you suggest an incentive system that would lead to a more optimal outcome? Should cash flows be “more important” than earnings in this context?
The main argument in favor of a universal set of accounting standards is comparability across countries. A recent study documents that IFRS are not applied consistently across countries that have adopted IFRS. What does this finding suggest about this main argument for IFRS adoption?
President Obama nominated Mary Jo White, a former prosecutor, to be the chair of the SEC. In your opinion, what are the pros and cons of her selection?
Prof. Pachter states, “Adoption is the only way to achieve a single set of global financial reporting standards.” In other words, only outright adoption, not convergence over time, is workable. Do you agree? Why would a country not want to “outsource” standard setting to another entity not under its jurisdiction? Why might having only one standard setting body for the entire world not be a good idea?
Describe Michael Dell’s conflict of interest in the buyout of his firm. What could be done to mitigate this conflict? Separately, is going private a good idea to fix Dell’s problems? Why or why not? If it is a good idea, why don’t all firms go private?
Apple cut the orders for iPhone 5 screens at its suppliers. How was this information determined or obtained? Is it a disclosure that Apple is required to make under accounting standards or under SEC regulations? If you were an investor in Apple, would you find the disclosure relevant? Why?
Should the SEC require corporations to provide details of political donations? Why or why not? If you say yes, what is the downside, if any, of making corporations provide the disclosures?
Tim Cook at Apple was paid $4.2 million for the most recent year. Do you know where to find CEO compensation information? Why do you think it is publicly available? Cook’s pay is characterized as modest. Do you agree? Why or why not?
Is it critical that the FASB and the IASB see eye to eye on the measurement of credit risk? Why or why not? Can you describe in one sentence the main difference between an expected loss and an incurred loss? What does the difference between the FASB and IASB indicate about the political nature of standard setting?
Why does the SEC not allow firms to disseminate financial information and other important disclosures via Facebook? Do you agree with the SEC’s decision? Why or why not?
Can you journalize the following? a) A private equity firm pays $35 to owners of a target firm; b) then, the target firm borrows $65; c) finally, the target firm pays out all $65 to buy out the remaining owners. What are the qualitative effects on current leverage ratios from the above? What are some probable effects on future earnings (net income) from the above? Why is debt a double-edged sword?
Should the amount of disclosure in financial statements be reduced? Can you give an example of superfluous disclosure? What are some criteria you would use to decide which disclosures should be cut, which ones should be maintained, which ones enhanced?
What is your reaction to the statement, “. . . countries that have adopted IFRS are usually looking for some improvement in capital markets or the greater society that can only be achieved by adopting IFRS.”
Oracle has joined the list of firms paying special/early dividends to avoid the expected tax increase. What do you think will happen to future tax inflows to the government based on its decision to increase the tax rate on dividends? Do you agree with this statement: “if you tax it, you get less of it; if you subsidize it, you get more of it”?
Why do so many firms have so much of their cash balance overseas? Is this a problem? Why or why not? If it is a problem, for whom is it one?
What is your opinion about Costco’s borrowing the cash to pay shareholders the dividend before taxes on dividends increase? What are some of the ratios that will be affected by this change in capitalization?
Costco and other firms are declaring special dividends? Why? What does this bode for future dividends? Why? How might stock prices be affected?
Mary Shapiro is resigning at the SEC. What are the personal attributes and qualifications that you think are necessary to be an effective regulator, particularly as the head of the SEC? Do you have those attributes? Would you want the job? Why or why not?
The Best Buy big box business model has been under threat for several years. What ratios indicate a problem? If you were the CEO, what would you do? If you were on the Board of Directors, how would you structure compensation to motivate the CEO to act?
