$1 trillion has been added to defined benefit pension plan assets since 2009 (for the Russell 3000) yet the underfunded status still worsened over this time. What are the main reasons?
HP’s net income fell 16% (and revenue fell 6%) for the most recent year. So, why did its stock rise? What do you think Ms. Lesjak (the CFO) said in her 45 minute speech to managers about the importance of cash flow?
Apple has $137 billion in cash (or cash equivalents and short term investments). A major shareholder sued to try to force Apple to pay a bigger dividend. Why do you think Cook (the CEO) won’t return more cash to shareholders willingly? If you were the CEO of Apple, what would you do with so much cash? What is a sign that Apple is no longer a growth stock?
Are the the information needs for private company stakeholders different from those of public companies, such that the accounting standards should be different?
Google’s Schmidt is selling 42% of his shares. Do you think it matters for investors whether he sells or not? Why do you think it might matter more if the current CEO or CFO were to sell such a large stake?
What is the purpose of the P/E ratio? Critique the ratio. When would you use trailing earnings in the ratio? Forecasted earnings? Normalized earnings?
The Financial Accounting Foundation (FAF) is the parent to the FASB. FAF has decided to conduct a post-implementation review of a few standards that were implemented many years ago. How do you think they decide which standards to review? How do you think they determine whether the standards need to be changed?
Can you describe briefly the goodwill impairment test? Can you describe the economic reasons for a goodwill impairment? Why would a firm’s stock price be affected by a goodwill impairment?
Why are firms having to pour cash into their defined benefit (DB) pension funds? Why are firms switching new employees to defined contribution (DC) pension funds? What are the possible incentive effects on employees if some are under DC plans, whereas others are under DB plans?
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?
