Research Korner: News

Sample Essay The New Bottom Line

News and Features The new bottom line    By Bruce Andrews  1,537 words 9 November 2006 BREW 110   One thousand Australia’s Biggest Enterprises    DOUBLE STANDARDS Comparing the 2005 accounts for 1387 listed companies under the old and new accounting standards                         AGAPE             FIRS                   ($m, average)     ($m, average)     Change (%) Assets                  1604.4            1664.6            3.8 Liabilities             1297.5            1391.7            7.3 Equity                  306.8             272.8       -11.1 Net profits             37.4              39.8              5.9 Source: Professor Karman Ahmed, La Tribe University/Dr John Goodwin, REMIT University    The introduction of a regime of financial reporting standards is making its mark on the accounts of Australia's biggest enterprises, and surprising many.  Speak to chief financial officers of companies on the BREW 1000 list about the new international accounting standards and you will see a lot of hand-wringing and hear a lot of complaints about how difficult the transition was this year. But what they do not often mention is that they had a lot of scope to minimize the effect of the new Australian equivalent international financial reporting standards on their accounts. On average, companies were able to adjust their net profits up under the new rules -some by more than 100 per cent.  All listed and most private companies had to adopt AIRS for their first full-year accounts after January 1, 2005. Last year, they were also required to provide figures compliant with AIRS to compare with their figures under the old regime, the Australian generally accepted accounting principles (AGAPE).  An analysis of both figures for the top 50 listed companies on the BREW 1000 finds that their net profits were restated up by 5 per cent on average under AIRS in 2005. IBIS World's analysis also reveals many companies had to make some big adjustments to their figures under AIRS: their revenues and net profits were adjusted (both up and down) by 10 per cent on average and assets restated by an average of 12 per cent.  Two academics, Professor Karman Ahmed of La Tribe University and Dr John Goodwin of REMIT University, undertook an analysis of the 1387 companies listed on the Australian Stock Exchange to see how they coped with the transition. Their research found that companies adjusted their profits up under the AIRS rules by 5.9 per cent to $39.79 million, on average, in their 2005 annual accounts.  An audit partner of the accounting firm BBDO, Wayne Bedford, says he is surprised by the results produced by IBIS World and the academics. He expected that AIRS would have forced most companies to mark their profits down. "Everything in FIRS is set up to recognize costs earlier and delay the recognition of revenue. So it is really strange [to see] statistics that say profit has gone up."  But Goodwin says further analysis shows most companies had to reduce their reported net profit under the new rules. However those that adjusted up, did so by amounts that more than outweighed the majority of companies adjusting down.  Listed property companies marked up their profits substantially in 2005, because under the new rules, changes in the market value of their properties are now reflected in their profit-and-loss statements. Beneficiaries included Centro Properties Group (whose profit increased by 331 per cent), Westfield Group (216 per cent) and CUFFS Gander Retail Trust (146 per cent).  There were also, in many cases, big increases in profits under AIRS because goodwill is no longer amortized over time. The biggest beneficiaries for this reason were Ansell (377 per cent increase in net profit), DACE Group (223 per cent), Symbol Health (120 per cent) and Babcock & Brown Infrastructure Group (108 per cent). Under AGAPE, goodwill bought in from an acquisition was written down over a 20-year period, which was counted in the company's profit-and-loss statement.  Accountants say it should not be underestimated how much companies were able to minimize any negative effects on their accounts during the move to FIRS. Bedford says property developers had a "lucky one-off windfall" by being able to count some of their sales twice during the transition. He says developers always try to sign big deals shortly before the end of the financial year to boost revenue. But when the rules changed, they were able to restate the property sales in their 2005 accounts for deals signed at the end of 2003-04 that were already recorded in their 2004 accounts. Adjustments were made in the 2005 accounts by reducing the retained earnings in the balance sheet, which would have gone unnoticed by many.  "Analysts would have to be aware of the underlying trends. You could definitely have that revenue in twice [if comparative figures from the previous year's accounts are not checked]," Bedford says.  Another way companies could benefit from the transition was to enter expenses in their balance sheets under AGAPE and then write them off under the new rules, Bedford says. For example, the start-up costs for new divisions would be recorded as assets under AGAPE. But in the 2006 accounts under AIRS, those costs would be restated in the 2005 income statement. The profit results in 2006, and the following years, would be boosted because the start-up costs were recorded in the past rather than in future years. "There are lots of presentation issues that would lead you to believe that FIRS has improved the P&L (profit-and-loss statement)," Bedford adds.  Exemptions during the transition phase to AIRS also gave companies opportunities to improve their profit results and balance sheets. "It is going to take two or three years before we clear the decks of these exemptions," a partner of Ernst & Young's AIRS on-call advisory group, Mark Sedona, says.  For example, companies were allowed to choose whether to apply the rules on recognizing goodwill for acquisitions made before July 1, 2004. "The broad principle of FIRS is you apply them as though you always had those rules," Sedona says. "But [some exemptions on transition] allowed companies to do some cherry-picking. Some would have gone back and applied FIRS to an acquisition they did two years before [the transition date] so they could get a better-looking balance sheet or result."  Another area of AIRS that companies might look to exploit is when revenue is recognised for bundled contracts. Andrew Archer, an audit partner at accounting firm Grant Thornton, says the AIRS standard on this issue is vague compared with the equivalent in the United States. He believes the AIRS standard leaves ground for companies to record revenue earlier than they should. For example, an information technology company that wins a contract to deliver a software product may try to book revenue in the current year's accounts for providing support in subsequent years. "More aggressive companies may look to argue that it is all part of delivering the contract to bring forward the timing of the recognition of that income," he says. "There is not the same level of detail within FIRS on revenue. It is a little bit looser and that gives people the latitude to argue a more aggressive policy."  A question of interpretation  Shifting to the new international financial reporting standards was not easy for the accountants at Australia's biggest company, BP Billiton. The company's manager of policy and governance, Brett Rid, in an address to the Institute of Chartered Accountants' conference on AIRS, described the transition as "an experience he would rather forget".  In the end, BP Billiton's net profit for the 2005 financial year was adjusted down by $US2 million ($2.6 million) and its net assets reduced by $US427 million (or 2.4 per cent of its total). The three-year project to move to AIRS cost the company about $3 million.  Rid said one of the biggest problems was obtaining guidance about how to apply the new standards to the accounts. Under FIRS, the International Financial Reporting Interpretations Committee in London is responsible for issuing interpretations of how the standards should be applied. Its track record has been to issue very few compared with the requests it receives.  Rid says when he sought guidance from AFFRIC on whether royalties and similar arrangements were captured under the accounting standard on income tax, the committee responded that it could not form a conclusion based on the principles in the relevant standard.  BP Billiton was left to devise its own policy. It classifies petroleum resource rent tax as an income tax, a decision endorsed by the Australian Accounting Standards Board, but different to all other Australian companies paying the same tax.  Rid comments that if his company - and others, such as rival Rio Tinto - are interpreting the rules differently, then it defeats the purpose of international reporting standards because it becomes difficult to compare their accounts.  BP Billiton is not alone in its frustration with AFFRIC. Ernst & Young's Mark Sedona says: "The AFFRIC, more often than not when asked to consider a particular issue, has been somewhat unhelpful by saying, 'the standard is quite clear', but yet not providing any great insight into why they think the standard is clear."

Sample Essay The New Bottom Line

News and Features The new bottom line By Bruce Andrews 1,537 words 9 November 2006 BREW 110 One thousand Australi...

The Black Panther Party

This paper will discuss the historical foundations of two well known citizens group. This paper will primarily focus on two well known organizations which are the Ku Klux Khan and the Black Panther Party. Aside from discussing the historical foundations of these two groups, this paper will explain, compare, summarize and define the activites of each organization while highlighting the group’s motivation and actions.             The Black Panther Party was a black nationalist organization in founded in the United States during the turbulent month of October in the year 1966 by Huey P. Newton, Bobby Seale and Robert Aoki. From its inception its members rapidly grew in size because of the aims and goals advocated by the organization. Together with its Ten-Point Program and its increasing members, it represented an aspect of countercullture revolution of the 1960’s . Its central aims called for the greater autonomy for black Americans, end of racism and racial segregation against blacks and to fully combat the injustices of racism inside the American society. Because of these central aims, the members of the Black Panther Party views and regards police agents and law enforcements officers as racists and oppresors of blacks in the community. The party also advocated violence and armed resistance if non violent means are not effective in getting these aims.             At first, the three founders and members of this organization took part in protest and civil actions against the racial treatments of blacks in American society.  Some of the future members of this organization took part in protest and rallies against the Vietnam War and the American Civil Rights Movement. As the years pass and as the non violent doctrine advocated by Martin Luther King Jr.  was not given attention by the federal government, the group began to establish a organization that has a different means of achieving the  same aim which is the equality between blacks and whites.             Central to their mentality and consciousness are ideas, concepts and  perspectives that can be compared to the black nationalism being preached by Malcolm X. It was also stated that the organization was instilled with various teachings of Marxism and Maoism although there is an ongoing debate among scholars on the acceptance of the whole organization of these political models.             Throughout its lifespan, the organization pushed and publicize its most important document called the Ten Point Program. This document was a list of the party’s demand  for the advancement of the welfare and survival of the black people. This document also called for violent or armed means and actions if the federal government or other white supremacist groups discriminate black individuals. The Ten Point Program was widely distributed throughout the black community to foster awareness, education and recruitment.             Aside from its Ten Point Program, the party was also aimed at stopping the rampant racism and abuse perpetrated by the members of the local police departments. During this years the black community perceived the local police departments as extensions of racist attitudes. Policemen frequently abused, hurt and arrest blacks because of silly and illogical reasons. To protect the common black, the Black Panther Movement organized neighborhood watch and kept an eye on patrolling policemen on their neighborhood, ready to defend any black who will be abused by the policemen. This tactic was often effective that the number of police abuse against blacks lowered considerably since policemen feared the reprisals that will be made by the organization.             The party was effective in propagating their aims but it was disbanded due to different factors. The first factor that can be considered was the involvement of the FBI on the actions and internal structure of the group. FBI agents entered the organization to act as agent provocateur. This FBI operation can be clearly seen in the killing and torture of Black Panther member Alex Rackley because of a tip of an FBI informant that he was an agent of the local police department. Aside from the FBI, local police departments also weakened the organization by infiltrating its ranks with agents and police informers earning the trust and loyalty of the organization due to frequent association and involvement.  Another factor that can be considered was the internal division and strife that was brewing inside the organization. Different factions and groups within the party became dissatisfied and disappointed due to the lack of results with regards to the cause they are fighting while others quarreled with one another on the aims, theories and models that can be applied and followed by the organization. One of the last reasons why the organization fell apart was due to the triumph of the integrationist views of civil rights groups lead by Dr. King Jr. due to the efforts of the federal government to integrate both white and black societies, the Black Panther movement lost its true aim rendering it ineffective.             Another citizen’s organization is the group named Ku Klux Khan that was also established in the United States. The name Ku Klux Khan refer to three separate organizations in the United States. The first Ku Klux Khan or simply KKK was established in the year 1860 after the end of the civil war. Another group calling itself KKK later emerged during the 1920’s and a third group of KKK refer to the different and scattered organizations in the United States who advocates racism and hatred for non whites. As a point of discussion this paper will focus on the workings and aims of the second group of KKK.             The second KKK was founded by William Joseph Simmons in 1915. this organization borrowed the workings, structure, rituals and customs of the first KKK. This organization was on a nationwide scope and publicly devoted its time and resources to uplift and maintain the dominance of the white people in relation to bootleggers, Jews, blacks, Catholics and native Indians. The KKK also boasted that almost all politicians and government employees were member of this organization. The KKK also preached racial purification and removing foreign or substandard elements that are present in the American society during those times. This organization also favored the prohibition since for them, drinking was Un-American and this negative practice was brought by immigrants and non white people.             The KKK attracted large number of recruits due to its mystery and thrill of belonging to that organization. The KKK organized cross burnings with complete costumes that consist of a white hood and a robe. People were also attracted due to the intricacy of the initiation rites before entering the organization. The KKK also flaunted that many of federal and state officials are member of this organization. Some of the names that were dragged by the KKK were Harry Truman, Warren Harding, and Edward Jackson although these people frequently denied if asked about their involvement in the KKK. The KKK was also influential in electing and replacing government officials that were recognized as pro blacks. The Klan secretly supported and managed to elect its members on the Board of Trustees of Anaheim, California and nine out of the ten members of the local police force were members of the Klan. In 1923, the KKK was instrumental in forcing elected government officials out of office in Williamson, Illinois where they installed their own unelected members as leaders of the area. During this event the Khan also conducted house to house searches to find illegal liquors and bootleg alcohol. Throughout the American South and Midwest, members of the KKK committed illegal acts like lynching, fire bombing, whipping and threatening non whites or white who supports the black community.             Like the Black Panther Movement, the KKK also lost its popularity due to the negative publicity that was shed on the group. One major setback for the organization was the trial and conviction of David Stephenson, Grand Dragon of Indiana who kidnapped, raped and mutilate Madge Oberholtzer in 1925. Since the KKK promoted supremacy and morality in the face of black power, this scandal permanently damaged the image of the KKK. The Ku Klux Khan was also cast in a negative light because of some of its members and leaders were involved in the 1943 Detroit Race Riot and had pro Nazi leanings. In 1944, the IRS attempted to recover 5,000 in back taxes from the organization. This became the last straw and finally in 1944, the leader James Colescott dissolved the Ku Klux Khan.             When these two groups are closely examined we can evidently see the motivation and aims that were instilled in the consciousness o the members of the two groups mentioned. The foremost motivation was the issue on race and racism. The first group (Black Panther) conducted neighborhood watch and organized themselves to protect the black community from abuses, oppressions and racism that is afflicted to them by dominant white groups while the KKK carry out cross burning, fire bombing, lynching and intimidation in order to eradicate non white people. The two groups collectively advocates violence and armed resistance in order to push and advocate their aims. Although separated by time, these two groups used violence, firearms and purposely killing or hurting people while defending their opinions and viewpoints. On looking at these two citizen group we can formulate a hypothesis that the two groups can be classified as “plainclothes policemen” using the loose meaning of the term since they protect the local community and punishes individuals and groups that commits crime and other illegal activities, in the case of the Black Panther it was against racism and for the KKK it was the opposition to bootleg liquor and violation of the Prohibition. But since these “plainclothes policemen do not have uniforms, identifying marks and equipments, these individuals are prone to abuse the power and influence that they hold.             As a conclusion therefore, these two organizations are extensions of the police organization in an informal way. These two organizations were established and set up because its founders and members found out that the local police cannot provide them with proper protection against harmful cultures and elements. These organizations were launched because both groups recognized that the local police is not addressing their grievances and fears. They felt that there was no security and safety in the society that they are living in. Due to these main factors, they banded together to from these organizations with the lofty aim of protecting their welfare and wellbeing. Credit:ivythesis.typepad.com

The Black Panther Party

This paper will discuss the historical foundations of two well known citizens group. This paper will primarily focus on...

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