The Ethics Of Enron Scandal - 1017 Words

The Dilemma Often an ethical dilemma does not appear abruptly but can rather be the proverbial slow boiling of a frog as they say. Enron was an economic powerhouse in the early to late 90’s. Its financial success was due to a great understanding of the opportunities available in the energy market due to deregulation across the country. The company was founded on sound financial principles which turned to illegal recklessness over time. Key personnel succumbed to unethical pressures which built up slowly over time. Since the public’s trust of professionals in the accounting industry is paramount to society (Mastracchio et. al. 2015) this paper will discuss the ethics not exhibited in the Enron scandal which came to a head in 2001. History In 1985 Houston Natural Gas merged with Internorth and renamed itself Enron. In 1990 Jeffrey Skilling was hired to focus on trading in commodities. Skilling later becomes the president of Enron in 1997. Andrew S. Fastow is named as Enron’s financial chief in 1998. According to the New York Times Fastow created partnerships which the company claimed were to buy company assets which were not performing very well. We now have come to realize that these partnerships were instituted in order to conceal the company’s debt and give an image of overinflated profits to the public (2006). In 2000 through 2000 there was shuffling around of key leadership. Skilling resigned citing personal reasons only. Six days later Sherron Watkins approaches CEOShow MoreRelatedThe Ethics Of The Enron Scandal1441 Words   |  6 Pages The definition of ethics is living one s life according to right or wrong behavior both towards others and themselves (Ghillyer, 2014). How a person derived to their beliefs of right or wrong is a direct reflection of several factors such as; family upbringing, and religious dynamics. Each of these characteristics plays a major role in the direct choices a person will make in their day to day lives. While some people can stand by their personal beliefs regardless of the situation, there areRead MoreThe Ethics Of The Enron Scandal1902 Words   |  8 Pages Ethical Scrapbook In the three excerpts that will be discussed in this report there is a theme. That theme is ethics or the lack there of. What all three of these cases have in common is that people were willing to trade in their reputations, their livelihood and in some cases their personal freedom to get what they wanted. In two of the examples, the prize they sought was money, pure and simply a case of greed. Importantly, these people already had significant wealth, and they were willing toRead MoreThe Ethics Of The Enron Scandal861 Words   |  4 Pagesfiled for bankruptcy. Enron, a seemingly invulnerable company would eventually provoke sweeping changes in regulation that controls the management and accounting of public companies even to this day. The Enron scandal has come to be known as one of the prime audit failures of all time and serves as a classic example of corporate greed and corruption. However, for the generation that watched in horror as corporations such as Enron fell along with t he stock market, this scandal is slowly becoming justRead MoreBusiness Ethics : Enron Scandal1951 Words   |  8 PagesBusiness ethics have been the central concern of all corporations in operating business. Enron scandal was the highlighted case representing the dramatic violation of business ethics with the involvement of misusing power to conduct unethical missteps to gain self-interest, resulting in a collapse of the whole organization. This report is aimed at assessing Enron case to provide better understanding of its rise and fall through the background of the company’s formation and bankruptcy as well as applyingRead MoreEthics in Accounting1196 Words   |  5 PagesEthics in Accounting By Pace University – New York Accounting for Decision Making, MBA 640 Fall 2011 Required Research Paper Page 1 of 11 Table of Contents Number Content Page Number 1 Introduction 3 2 Ethics in Accounting 4 3 Enron Scandal 6 4 Satyam Scandal 8 5 Conclusion 10 6 References 11 Page 2 of 11 Introduction †¢ What is â€Å"Ethics†? Ethics, also known as moral philosophy, is a branch of philosophy that addresses questionsRead MoreEthics Standards And The Field Of Accounting950 Words   |  4 PagesProfessional ethics are an absolute necessity in the field of accounting. Businesses rely on accountants to accurately report their financial information and give sound advise and consultation in regards to their business. There are standards and rules set in place to ensure that ethics and information is reported accurately. Laws and repercussions are created place to deter unethical and illegal accounting practices, although it still occurs in the business world on many levels. The field ofRead MoreWhat I Learned from Studying the Rise and Fall of Enron693 Words   |  3 Pagesand no need for regulations. But this is not an ideal world and these problems happen every day. The business world is not exempt from this problem. Many businesses rely on ethics to help guide their company successfully. Our textbook Business Ethics: How to Design and Manage Ethical Organizations Denis Collins defines ethics as, â€Å"the set of principles a person uses to determine whether an action is good or bad† (5). All over the world there are businesses that take part in unethical behavior forRead MoreJaclyn Givens. Kathy Osburn. Management 101. 5/8/17. The1400 Words   |  6 PagesJaclyn Givens Kathy Osburn Management 101 5/8/17 The Enron Era â€Å"Just as character matters in people, it matters in organizations,† says Justin Schultz, a corporate psychologist in Denver. The Enron scandal had a big exposure in 2001 confirming the big secret to the increase in billions. In July 1985, Enron formed the merger of Houston Natural Gas and Omaha-based Inter North. The Enron corporation was an American energy company based in Houston Texas. The corporation’s catastrophe in 2001 signifiesRead MoreEnron Essay1433 Words   |  6 Pagesthe Causes and Effects of the Enron Accounting Scandals Name: Do Minh Tam Class: MEP 100 Lecture: Karen Bird Date: December 24, 2010 Introduction Background From the 1980s until now, there have been a lot of accounting scandals which were widely announced on by media. The result of this situation is many companies were bankruptcy protection requests, and closing. One of the most widely reported emulation of accounting scandals is Enron Company. Enron Corporation is one of the largestRead MoreEnron and Worldcom Case Study1225 Words   |  5 PagesEnron and WorldCom Case Study This report is based on the demise of Enron Corporation and WorldCom. Both the firms are demised due to the ethical lapses. These ethical lapses come into existence when managements of the firm, uses unethical practices to accomplish the goals of the firm. Maintaining financial and accounting standards in the business practices are necessary. The profession of accounting has become a mockery due to the accounting scandals that took place all over the world in the

Eating Disorders Eating Disorder - 1205 Words

Eating Disorders in Today’s World Eating disorders are alive and well in today’s world and they are a major problem. An eating disorder can look like a few different things, ranging from a severe reduction of food intake to over eating to feelings of negativity towards your body shape or weight (Lehigh University). While some disorders can only be found in specific age groups, races, etc., eating disorders can be found amongst all and it does not necessarily have to be pointed towards food (Lehigh University). In fact, the four areas primarily affect eating disorders: psychological, interpersonal, social, and biological. I am going to talk about three specific eating disorders: anorexia nervosa (AN), bulimia nervosa (BN) and binge eating disorder (BED). Keep in mind that there could be other eating disorders out there that are not found and classified just yet (Lehigh University). Describe the Problem Anorexia Nervosa Bulimia Nervosa Binge Eating Disorder How Common are Eating Disorders? There are so many statistics regarding eating disorders. In general, there are about 30 million men and women who have some type of eating disorder and only about 1 out of 10 men and women will receive some treatment for their disorder. Because of this, it is no surprise that eating disorders have the highest mortality rate out of all the mental illnesses (National Association of Anorexia Nervosa and Associated Disorders, 2015). The National Association of Anorexia Nervosa andShow MoreRelatedEating Disorders : An Eating Disorder1184 Words   |  5 Pagesas an eating disorder. Weir (2016) goes on to explain the origins behind eating disorders in individuals. This topic is important because, in the United States, many women and men suffer from a clinically significant eating disorder at some point in their life. It is important to know the influences that cause an individual to experience an eating disorder. Genetically, or environmentally, or both genetically and environmentally. Anorexia nervosa, bulimia nervosa, and binge eating disorder are eatingRead MoreEating Disorders And Eating Disorder1573 Words   |  7 Pagesaffects people called an â€Å"eating disorder.† Why did you choose this topic? I chose this topic because it is a very prevalent issue in our society today, and a close friend of mine is suffering from an eating disorder. What question(s) did you want to answer or what was your hypothesis regarding this topic? As mammals, there is no chance of escaping the need to consume food in everyday life. However, when it comes to food there can be a major concern of eating too much or eating too little. Doing eitherRead MoreEating Disorders : An Eating Disorder1906 Words   |  8 Pagesobtain their body goal, thus causing an eating disorder. An eating disorder is a psychological condition that is characterized by abnormal or disturbed eating habits. There are three types of eating disorders; which are Anorexia Nervosa, Bulimia Nervosa, and Binge Eating.These disorders affect all aspects of a person’s life, including their psychological, emotional, and physical health. There are many factors that contribute to individuals developing eating disorders including: genetics, family pressuresRead MoreEating Disorders And Eating Disorder1104 Words   |  5 PagesEating disorder is a serious problem happens in both men and women. Eating disorder is a sort of disease in which a person is having a st range routine of eating like consuming a huge amount of food each time they eat. This can incorporate not eating enough nourishment or indulging. Eating disorder influence many people around the world. The larger part of peoples who are dealing with this issue are ladies. A person with eating disorder issue may focus nonsensically on their weight and shape. EatingRead MoreEating Disorders And Eating Disorder1410 Words   |  6 Pagesâ€Å"An eating disorder is about anxiety and control and healing from trauma and food and weight are just the tools of destruction† (Floyd, Mimms, Yelding, 2008). An eating disorder is defined as a severe disturbance in eating behavior. An eating disorder, as defined by our text book for class, is psychological disturbances that lead to certain physiological changes and serious health complications. The three most common and most easily identifiable forms of eating disorders include anorexia nervosaRead MoreEating Disorders : Eating Disorder 966 Words   |  4 PagesEating Disorders Many people, both women and men of all ages, suffer from the psychological disorder, eating. Up to thirty million people in the world suffer from some kind of an eating disorder. There a two types of eating disorders, anorexia and bulimia, and have several methods of treatment. What is an eating disorder, and what do they cause? Eating disorders are maladaptive and very serious interruptions in eating. They can come in the form of overeating, or not eating enough, they are oftenRead MoreEating Disorders : Eating Disorder1031 Words   |  5 Pagesâ€Å"The eating disorder is a very jealous and abusive partner. It requires a lot of devotion in the extent that you have to devote yourself to tending to the anorexia. There s not a lot of time left over for adult life,† was stated by Dr. Doug Bunnell, a specialist in eating disorders. Eating disorders effect a variety of people. Age, race, and gender aren’t role playing keys in eating disorders. Not everyone gets an eating disorder, but if they do then, it will more than likely destroy their livesRead MoreEating Disorders : Eating Disorder2461 Words   |  10 PagesEating Disorders Even though eating disorders are less prevalent in society today than they have been in the past, they are still one of the most diagnosed mental illnesses today. These three illnesses have short term as well as long term effects that can leave a damaging toll on the patients’ lives and are very hard to overcome. This is shown through not only the characteristics of Anorexia nervosa, Bulimia Nervosa, Binge-eating Disease, but also through the psychological and physical harm theseRead MoreEating Disorders And Eating Disorder1496 Words   |  6 PagesAn eating disorder is an illness that causes serious disturbances to your everyday diet, such as eating extremely small amounts of food or severely overeating. A person with an eating disorder may have started out just eating smaller or larger amount of food, but as some point, the urge to eat less or more has gotten out of control. Severe distress or concern about body weight or shape may also signal an eating disorder. Common eat ing disorders include anorexia nervosa, bulimia nervosa, and a binge-eatingRead MoreEating Disorders : An Eating Disorder Essay771 Words   |  4 Pagesabout you. Benji I suspect you have an eating disorder.in particular, anorexia. An eating disorder is a psychological disorder that interferes with peoples eating habits. Eating disorders falls under the avoidant/restrictive food intake disorder category. Eating disorders are more prevalent in women than in men. Over 10 million women and 10 million men suffer from an eating disorder. But, Anorexia Nervosa is more common among Caucasians. Eating disorders impacts women everyday by inaccurately depicting

I, Rigoberta Menchu free essay sample

An examination of the Guatemalan story I, Rigoberta Menchu by anthropologist Elisabeth Burgos-Debray. This paper explores anthropologist Elisabeth Burgos-Debray description of the Guatemalan women, Rigoberta Menchu , who describes her Indian peasant life to the author. The paper exhibits the relationship between life and the larger political struggles taking place across Guatemala and Latin America as a whole. It also describes the Civil war in this country and the persecution of Rigoberta Menchu s family by the national security forces. The Indians constitute the majority in Guatemala, which differentiates their situation from that of most countries in Latin America where the Indians are a minority without even the most elementary rights. Still, a white minority has the power in Guatemala, and it seems likely that the fact that the majority Indians are divided into 22 different ethnic groups may have contributed to their largely powerless position in their society. Rigoberta wishes to change this situation, and this one woman is not fighting for a mythical Indian past but is instead seeking to play a part in the shaping of contemporary history (Burgos-Debray, 1983), xiii). We will write a custom essay sample on I, Rigoberta Menchu or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The world into which this woman was born is a world where the people live in a subsistence economy, working the land for others and moving from place to place as they follow the work through the seasons. This is also a world at war, with Guatemala in the grips of a civil war for more than 30 years. This war affected Rigoberta directly as her father, mother, and younger brother were tortured and killed by the Guatemalan security forces that have been persecuting the peasantry.

Sexual Development and Orientation Paper

Table of Contents Introduction Sexual Development Hormones and Sexuality Environmental and Sexual Orientation Conclusion References Introduction The study of sexual development and orientation has attracted much attention in the field of psychology due to the emergence of aberrant sexual orientations like gay, lesbian, asexual, and bisexual predilections. Psychological study on the forces underlying sexual development and orientations has led to the formulation of diverse theories ranging from biological to the environmental. Advertising We will write a custom research paper sample on Sexual Development and Orientation Paper specifically for you for only $16.05 $11/page Learn More According to Hammack (2005), â€Å"†¦sexual orientation continues to be intellectually fragmented along disciplinary lines, primarily due to the divergent epistemological, methodological, and meta-theoretical perspectives† (p.267). The divergent perspectives to gether with the transformation of society significantly change the sexual orientations of gays, lesbians, and bisexuals because the current society recognizes their rights more than in the past. Many psychological theories regarding sexual development hold that human nature and nurture are the two main factors that determine sexuality in an individual. Therefore, what are the biological and environmental factors that determine sexual development and orientation in human? Sexual Development Sexual development involves organizational and activational stages of differentiation that occur during pregnancy and adolescence respectively. At birth, primary sexual characteristics differentiate gender due to difference in external and internal sex organs. â€Å"All these structural differences result from a system of ducts, which release hormones, which in turn affect internal structures, which are stimulated to differentiate into characteristically male or female organs† (Hall, 1998, p. 1). When a baby is born, the gonads are undifferentiated but after about four months, sexual differentiation begins to occur in the gonads. In males, gonads differentiate into testes while in females gonads differentiate into ovaries. This differentiation completes the development of primary sexual characteristics. The testes and ovaries are the sex organs that are responsible for the productions of hormones that determine the secondary sexual characteristics in adolescence. The differentiation of gonads during early childhood forms the basis of development of the secondary sexual characteristics during adolescence.Advertising Looking for research paper on psychology? Let's see if we can help you! Get your first paper with 15% OFF Learn More During early childhood, the sexual process of sexual development is latent due to lack of hormonal expressions essential for the development of secondary sexual characteristics. The sexual development characteristics become e vident at the ages between 11-13 for girls and 12-14 for boys. This is an activational stage in sexual development since activation of hormones occurs. Hall argues that, â€Å"†¦at adolescence, a series of events takes place referred to as the activational effects of hormones, which result in secondary sex characteristics and process begins in the hypothalamus, which affects the pituitary gland, testes and ovaries† (1998, p.3). Activation of hormones occurs in a cascading manner where stimulation of the hypothalamus leads to the secretion of gonadtropic releasing hormone, which in turn stimulates pituitary gland to release gonadtropic hormone. Gonadotropic hormone then acts on the ovaries and testes simulating them to release estrogen and testosterone respectively. The two hormones, estrogen, and testosterone are responsible for the maturation of the secondary sexual characteristics during adolescence. Hormones and Sexuality Hormonal effects during adolescence are res ponsible for development of sexual orientations such as homosexuals, heterosexuals, asexual and bisexuals. Normal secondary sexual characteristics in male are deepening of voice, broadening of shoulders and experiences of wet dreams. On the other hand, female secondary sexual characteristics involve widening of hips, experiences of menstruation and enlargement of breasts. The different orientations of the secondary sexual characteristics are due differing hormonal levels. The two primary hormones that determine the orientation of secondary sexual characteristics are estrogens and testosterones, which are female and male hormones respectively. â€Å"Sex hormones have direct influence on the physiology and morphology that is why male and female bodies are differently shaped and work somewhat differently at a biological level† (Rogers, 2000, p.25). Advertising We will write a custom research paper sample on Sexual Development and Orientation Paper specifically for you for only $16.05 $11/page Learn More This explains the secondary sexual characteristics that occur differentially at puberty. In addition to estrogen, females have extra hormones like progesterone, follicle stimulating hormone, and luteinizing hormone that are involved in the regulation of the menstrual cycle until menopause. The physiology of the brain seems to have sexual orientation due to the differing hormonal effects. Even though there are other morphological and biological differences between the male brain and the female brain, the hormonal interaction with the brain gives a physiological difference. The ability of the testosterone, which is a male sexual hormone, to enter into the brain and the inability of the estrogen not to enter into the brain provides physiological difference of the brains. Rogers (2000) explains that, â€Å"although estrogen is produced by the females’ ovaries in the development, it never gets into the brain, because it binds with the alpha-fetoprotein and as a result cannot pass into the brain† (p.26). Unlike estrogen in females, testosterone in males cannot bind to the alpha-fetoprotein and it readily enters into the brain and undergoes aromatization process, which converts it into estrogen thus activating the medial preoptic area in the brain. The activation of the medial preoptic area of the brain in males and inactivation in females makes difference in physiological and morphological aspects of the brain. Environmental and Sexual Orientation Evolutionary psychologists supports that environmental factors play a role in sexual development and sexual orientations. Hammack argues that, â€Å"sexual lifestyles are the culturally specific erotic ideas and emotions that constitute the life-course development within a particular sexual culture, which control sexual behavior and conduct† (2005, p. 275). Therefore, cultural environments have the potential to influence sexual development a nd orientations, depending on cultural sexual lifestyles embraced by the society. Advertising Looking for research paper on psychology? Let's see if we can help you! Get your first paper with 15% OFF Learn More For example, recognition of homosexuals’ rights in the United States of America has tremendously increased the number of homosexuals, proving that sexual lifestyles in the cultural environment have significant effect on the sexual orientation of the individual members in the society. In the family level, research studies has shown that children who experience tough parenting times such as divorced parents, separated parents or missed parental love are more likely to become homosexuals in future. Numerous research studies have found out that, â€Å"there is substantive evidence to supporting that the nature of parenting, early childhood experiences, sexual abuse, or other adverse life play significant role in the formation of a person’s fundamental heterosexual or homosexual orientation† (Hammack, 2005, p. 277). There is a strong correlation between intact or stable families with the heterosexual marriages of the kids. Hence, family is a microenvironment that im poses primary influence on the sexual orientation of the kids. Conclusion Sexual development and orientation has puzzled many psychologists and biologists in the light of emerging aberrant sexual orientations such as lesbianism, gay, bisexual, or asexual. Despite the fact that biological studies clearly stipulate sexual orientations, the understanding of the deviant sexual orientations demands psychological studies in order to shed more light concerning psychological aspect of these ‘abnormalities.’ Many research studies have attributed anomalies of sexual orientations to genetic, hormonal, cultural, and social factors, which act together in determination of sexual orientations. References Hall, R. (1998). Sexual Development. Developmental Psychology Journal, 1-10. Hammack, P. (2005). The Life Course Development of Human Sexual Orientation: An Integrated Paradigm. The Human Development, 48. 267-290 Rogers, W. (2000). The Psychology of Gender and Sexuality. Buckingham: Open University Press. This research paper on Sexual Development and Orientation Paper was written and submitted by user Arturo Lara to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Landslides Essays - Landslides, Environmental Soil Science

Landslides Causing $1-2 billion in damages and more than 25 deaths per year, landslides are a major geologic hazard, caused by earthquakes and floods. Although, landslides are generally not as exciting or costly as earthquakes, major floods, tropical storms, and other natural disasters, they occur in more expanded places and may cause more property damage than any other geologic hazards. A wide variety of ground movements, such as rock falls, slope failure, and shallow debris flows can classify landslides. When a portion of a hill slope cannot support its own weight a landslide will occur. When rainfall or some other water source increases the water content of the slope the weakness is irritated, reducing the strength of the materials. Although gravity acting upon an increased slope is the main reason for a landslide, there are other elements that contribute to its cause. Loud sounds that occur during an earthquake also cause landslides. Erosion caused by rivers, glaciers, or ocean waves create oversteepened slopes. Heavy rains and melting snow weaken rock and soil slopes. Furthermore, vibrations from machinery, traffic, and even thunder may trigger failure of weak slopes. Excess water can run through slope material and can cause a debris flow or mud flow. The rock and mud left over after a landslide may pick up anything in its path, such as trees, houses, and cars, causing bridges and tributaries to become blocked which causes flooding throughout its path. Even though, the natural cause of most landslides is unable to be stopped, geologic investigations, good engineering practices and effective enforcement of land-use management regulations can cut back landslide danger. Landslides effect every state in the United States territory. The Appalachian Mountains, the Rocky Mountains and the Pacific Coastal Ranges and few parts of Alaska and Hawaii have intense landslide problems. USGS marine scientists have recently identified over fifteen giant landslides surrounding the Hawaiian Islands. These slides are some of the largest known on Earth, and most have taken place throughout the past four million years. The youngest landslide is estimated to have occurred only one hundred thousand years ago, and there is evidence today that large blocks of the island are starting to slide, causing enormous earthquakes. Each landslide that has happened over the bast four million years has ended with huge land loss and gigantic waves that move rocks and se diments up to 1000ft above sea level. The geologic hazards are important to learn about because, they don't occur as frequently as volcanoes or other disasters, they have potential to destroy lives, property, and natural

Marine Corps Logistics

Marine Corps Logistics Introduction Technology is advancing and many organizations have realized that it is important to adopt emerging technologies as a way of remaining relevant in various fields. The Marine Corps has been faced with a lot of challenges, especially in managing logistics when the officers are in operation. According to Dombrowski and Gholz (2006), the warfare in the modern world has been rapidly changing. The approach that was used during the nineteenth century cannot be relevant today.Advertising We will write a custom proposal sample on Marine Corps Logistics specifically for you for only $16.05 $11/page Learn More Firms must find new ways of managing their logistics in a manner that would not only be efficient, but also effective and consistent. Marine Corps is operating in an environment where efficiency in logistics is vital in its successful operations. GCSS-MC offers organization opportunity to have an integrated approach when managing information during t he logistical process. This approach allows this organization to have a system that would provide it with real-time information about all logistical activities. This allows the firm to plan its activities effectively. Project Vision The Marine Corp Logistics plays an important role in ensuring that the military has all the equipment it needs to carry out various activities. In order to achieve its objectives, this department should have an effective communication system that would enable it to monitor and coordinate all logistical activities, especially when delivering war equipment to military officers who are in the field. The vision of this project is to provide an integrated information system that would ensure that activities of this department are closely coordinated. The Marine Corps Logistics Modernization strategy will help ensure that all logistics information required by the Marine Air Ground Task Force is readily available as a way of enhancing the speed with which these products are transported from one location to the other. Objectives When defining the objectives of this new project, it would be important to understand the current status of this organization. Currently, the Marine Corps is using a logistics system that is not supported by an integrated communication system. It means that one department may not be aware of the activities taking place in the other department. This is very dangerous in the current society where information itself is considered to be a powerful tool, especially when it involves military operations. The following are some of the objectives that this project seeks to achieve.Advertising Looking for proposal on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More To introduce an integrated information system that will merge Global Combat Support System (GSCC) and Defense Property Accountability System (DPAS). To ensure that the military units in variou s regions can track cargo while it is in transit from one location to the other. To improve decision making process of the military officers by offering them real-time information about various issues on the ground. This will help maintain a force that is lethal and agile while on the battlefield. To improve financial planning and management by making it easy for the accounts department to access all the relevant accounting records. Scope of the project According to Haugan (2002), project scope should be clearly defined before the project kicks off. This makes it easy to understand specific areas where the project intends to create transformation within the firm. In this project, the focus is on developing an integrated information system in the logistics department that would improve logistical operations within the organization. This new system will make it possible for the department to coordinate logistical information to the departments that need them. It will also improve the security of the equipment while they are in transit. Target Group Meredith and Mantel (2012) say that it is important to define the target group when coming up with a new project in an organization. In this organization, the targeted group that will benefit when the project is completed can be categorized into different groups. The policy makers will need this new system to guide their decisions when planning to go to war. The accounts department will benefit from this new system by enabling it access all the relevant information it needs when compiling accounting books. The logistics department will benefit from this new system because it will enable it trace the movement of equipment. This department will be able to estimate the time within which a given consignment will reach the intended destination. The military officers on the ground will also need this information when they are in the field to know when the war equipment will reach them. Key Stakeholders for this Project The re are key stakeholders who are directly responsible in undertaking this new project. The top leadership in the Department of Defense is the first stakeholder. The top commanders, through the Logistics Department, and the senior officers are the owners of this project. They are represented by senior officers in the Logistics department. The military officers in the field who expect to benefit from this project form another stakeholder group. This new service is meant to improve their service delivery. The last category of the stakeholders is the project management team, headed by the project manager, who will be directly involved in developing this project. Role and Responsibilities of Each Project Team Resource According to the research by Meredith and Mantel (2012), it is important to define roles and responsibilities of different stakeholders within the project in order to achieve success. The stakeholders who are directly involved in the project have been identified in the proje ct organization structure.Advertising We will write a custom proposal sample on Marine Corps Logistics specifically for you for only $16.05 $11/page Learn More The top military officers, through the Logistics Department, are the financiers of this project. Besides offering financial help, they are also expected to inspect the progress of the project and evaluate the value that the new system offers when it is finally completed. The contractor that will be awarded this task of installing the new system will act as a supervisor over the employees who will be responsible for various activities. The project members will undertake various roles in this project in its implementation stage. When this new system is fully installed, the logistics department will be responsible for its normal operations and maintenance services. Scheduling Duration In the process of implementing this project, it is important to have a clear schedule of the specific activities that wi ll be undertaken in order to ensure that the project is completed successfully. The following table shows a planned schedule of activities that will be carried out in this project and the time they are allocated. As shown in the above table, it is expected that the project will run from March to December 2014. Based on the advanced technology that the contractor is expected to use, it is estimated that ten months will be enough to carry out all the activities in the project. Project Organizational Structure The project organizational structure helps in defining various levels of management within a given project. It specifies position of various stakeholders in the process of undertaking various activities in the project. According to Haugan (2002), this is necessary to make every member understand specific function that must be undertaken to accomplish various tasks. Every member will be able to understand what is expected of them. Figure 1: Project Organizational StructureAdverti sing Looking for proposal on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This structure helps in defining responsibilities of the stakeholders. Meredith and Mantel (2012) say that some projects fail to meet their objectives because some of the stakeholders avoid their roles. For instance, it is clear that the Board of Directors, through the Logistics Department, has the responsibility of financing all the activities of this firm. If this board fails to provide this needed finance, then it may not be possible to proceed with the activities that are specified in the section below. Work Breakdown Structure When the financiers have done their role of providing the necessary finances needed for this project, it will be the responsibility of the project team members to undertake their duties in ensuring that the new system is successfully installed and is operational. The structure below identifies some of the specific tasks that must be accomplished by various stakeholders. The above diagram shows a complete work breakdown structure from the proposal stag e to its completion. At the proposal stage, the contractor will have the responsibility of making all the stakeholders in the Logistics department to learn about the new changes that this new system will bring. It would state all the requirements that will be needed to make the project be successful. Some of the specific activities at this stage include product investigation, product survey, and assessing product suitability (Haugan, 2002). The second phase is the design. The project team members will need to define concept design and settle on one final design that would be used in this system. The third stage, which is the construction stage, is very important in defining the success of the project. At this stage, the project team members will need to purchase the needed materials from the agreed suppliers. The team will then undertake the construction of this new system. Building of the system may take long, and the team members must ensure that they follow the specifications sti pulated in the design. Finally, the system will be subjected to the stage of testing. The new system will be tested for functionality and efficiency. When the system passes this stage, it will be finally handed over to the Logistics Department to commission its usage in this system. Cost Estimates The proponent deserves to know the exact cost of the project in order to be able to determine the level of investment needed to accomplish the project. The table below is an estimate of the various costs that will be met when undertaking the project. Material Estimated Cost ($) Labor 19200 Transportation 9800 Materials 39800 Legal Fees 380 Total 69180 The above table has a cluster of activities that will be undertaken in the project. Although it may be important to define specific areas where finance will be needed, the table above has clustered these costs into four major categories. They include cost of labor, transportation costs, the cost of the materials, and the legal fees that would be needed by government agencies or other relevant bodies. The costs have been based on the market rates for each of the categories. The above stated amount would be able to implement the first phase of this project. Determine major project milestones and the required delivery dates The work breakdown structure given above has identified project milestones that should be accomplished within a specific period. The first milestone is the specification of the project requirements. This stage is important because it not only enables the project sponsor to know what is expected out of the project, but also enhances specific areas in the organization that this project seeks to improve. This should take one month. The second milestone would be to develop the design that would be appropriate for this firm. The project members, especially the designers, would need to come up with a design that would meet the needs of this firm in the most appropriate way possible. This shoul d also take one month. The third milestone is expected to take the longest period, and it is the most important stage in project development. It is at this stage that the project team members will be implementing what was designed at the initial stages. The process must be conscious of the specific needs of the firm. This is expected to take a period of five months. The last milestone will be testing of the system for its workability. This would take one month or less. Main Dependencies, Risks, Issues, and Assumptions of the Project According to Meredith and Mantel (2012), projects face a number of risks that must always be mitigated in order to achieve the set goals. In this project, inflation may have an adverse effect, especially if it increases costs of materials or labor. This risk should be mitigated at the requirements stage. The sponsor should be informed that inflation may affect the overall cost of the project so that they can be ready to increase funds when necessary. Ano ther risk would be a failed compatibility of the old systems and the new system. This risk should be arrested at the design stage where designers are expected to make an effective change from the old system to the new one. Finally, the employees may be subject to physical harm. This can be addressed at the requirement stage where the project manager is expected to take a comprehensive insurance cover for all the people working on this project. Summary of the project budget approved by the project sponsor This project is expected to change the current approach that is used by the logistics department to carry out various activities. The integrated communication system will help the Logistics Department to ensure that its activities are closely coordinated in order to achieve better results. This department will be able to track movements of military equipment in real-time. The military officers in the field will also be aware of the movement of weapons and other equipments that are b eing transported to them. This close coordination and improved communication system will improve the ability of this department to achieve good results on the battlefield. References Dombrowski, P. J., Gholz, E. (2006). Buying military transformation: Technological innovation and the defense industry. New York: Columbia University Press. Haugan, G. T. (2002). Effective work breakdown structures. Vienna: Management Concepts. Meredith, J. R., Mantel, S. J. (2012). Project management: A managerial approach. Hoboken, NJ: Wiley.

Eastern Massasauga Essay Example | Topics and Well Written Essays - 500 words

Eastern Massasauga - Essay Example Eastern Massasauga is a rattlesnake, tail tipped by grey-yellow horny rattles and with several dark brown rings. An adult Massasauga is 18 to 30 inches in length (US fish and wildlife service web). Eastern Massasaugas inhabit wet areas. During spring, Massasauga use open shallow wetlands or shrub swamps. During summer, they move upward to drier areas where they can be found the sunning in open fields. In the northern part of the US, Eastern Massasauga live in Canada, Ontario, around Georgia bay, Northern Indiana, and Northern and Central Ohio. In addition, they live in Lower Peninsula of Michigan although they are declining due to human activities. Its protection in Michigan as an endangered species is due to destruction of its habitats. Eastern Massasauga is classified in the Eukarya domain, Animalia kingdom, Chordata Phylum, and reptilian class. The botanical name of Eastern Massasauga is Sistrurus Catenatus. The word â€Å"Massasauga† translates to â€Å"great river mouth,† in the Chippewa language describing wet areas surrounding a river where snakes can be found. Other names given to Eastern Massasauga are black Massasauga rattlers, Massasauga rattlers, Michigan rattlers and swamp rattlers (Eastern Massasauga rattlesnake web). An Eastern Massasauga is a slow moving snake that often strikes if disturbed. In New York, it is the smallest of the three venomous snakes. They employ camouflage where they hide in areas that bear the same colour as themselves. Massasaugas take advantage of their different adaptations to survive in the wet areas. For instance they have to detect prey from a distance through its organs. It uses Vomero-nasal organ also known as Jacobson’s organ that is located at the roof of the mouth with nerve endings in to the brain to detect prey. They take their tongue out to pick some air and place it on to the surface of Vomero for detection. In addition, this organ detects mates, geographical regions, and predators (John

Reform and Planning in Dallas Essay Example | Topics and Well Written Essays - 250 words

Reform and Planning in Dallas - Essay Example Fairbanks places more emphasis in the need to eliminate slums. According to him, the city administrators Prepared for the twentieth century by adopting measures aimed at handling the soaring population. The city also made major improvements in its urban planning as well as economic development. This significantly helped in eliminating slums and ensuring that public housing is provided for the needy. Moreover, Fairbank argues that Dallas prepared for the twentieth century by integrating its urban policy into the federal as well as state-based housing policies. In the essay, he also analyzes the past and contemporary profile of Dallas. These include the cultural and social issues that characterize the city. According to him, the city prepared for the twentieth century by ensuring that its urban change is relevant to its future, as well as the future of its metropolitan regions. He argues that effective urban and regional planning is necessary. Fairbanks also argues that Dallas implemented a wide range of environmental provisions in its urban planning. According to him, this significantly helped in ensuring that environmental conservation is enhanced and pollution is mitigated. Finally, he believes that technology plays a significant role in the development of any city. He therefore argues that Dallas prepared for the twentieth century by integrating technological advancements when planning the

Appropriation of The Department of Defense From The Federal Budget Essay

Appropriation of The Department of Defense From The Federal Budget - Essay Example According to the Department of Defense, the Bush administration in the US has fought the war on terror on the offensive to counter any proposed, planned terror attacks and to uproot terror camps in places such as Afghanistan and Iraq. The Defense department has claimed that the US military has been able to remove threats to US security in Afghanistan and Iraq and has liberated 50 million people of these countries. The Defense department has also claimed that it has raised pay levels for US service men and women and the rise in pay levels has been 21% with expanded targeted pays and bonuses. The military personnel and their families are also provided with better services and housing through new constructions and privatization. The defense budget has also shown an increased spending by 26% and this has been able to transform the Nation's defenses with the largest increase in military spending recorded since the Reagan administration. To improve readiness rates, transformational and joi nt training program has also been launched in the defense department with increased research and development funding by 56%. The Defense department has also claimed that there has been doubled investments in missile defense systems and the first ever land and sea based systems have been deployed (provided by the Department of Defense statement, 2005). The US defense agenda thus seems to be based on a war on terror, improving housing quality of military personnel, increased research and development in defense sectors, and increased pay for military personnel. The Department of defense gives further arguments in favour of an increased defense budget since the time of Reagan's presidential administration. According to the Department of Defense, the following reasons of Defense spending have been advanced. According to the Department of Defense, the Bush administration's agenda and defense spending - advances and promotes US' ongoing efforts in the Global War on Terror; provides for $401.7 billion of Defense Department's base budget, and this indicates an annual increase of seven percent, for a total increase in defense spending of 35 percent since 2001; makes considerable progress in transforming the Department to meet new threats and prepared to face new challenges; and continues improvements in the quality of life for US military personnel and their families by providing them with higher pay and better homes. (Department of Defense, 2005) Global war on terror and the need to meet new threats seem to have shaped the defense budget and increased defense spending to a whopping $401.7 billion with an annual increase of 7% and a total increase of as high as 35% since 2001. In comparison, China's Defense budget has also increased from $22 billion to nearly $30 billion in 2005. Thus although US defense spending seems to have shown a steady rise since the September 11 attacks in 2001, China's defense budget has shown drastic increases after 2002. China's defense spending may have been attempting to keep pace with other countries and defense budget has increased by 12.6%. China's defense spending is higher than that of Taiwan, India or South Korea. Although China's defense s

Scheduler Choice in Cluster Environment

Scheduler Choice in Cluster Environment Clusters have become more popular and ubiquitous and the number of processors in cluster have also increased considerably. They consist of collection of a homogeneous machines or a host of diverse computational devices which collaborate via a high speed network to execute high-performance applications. Computer industry has widely accepted that future performance increases must largely come from increasing the number of processing cores on a die. This has led to NoC processors. Efficient scheduling of high performance applications on these parallel computing systems is critical to enhance their performance and to improve system throughput. It has been proved that the problem of scheduling tasks with precedence constraints is NP-Complete [Papad, 1994]. The data flow model is gaining popularity as a programming paradigm for parallel computers. Many high-performance applications are a collection of modules which have control/data dependences among them. When the characteristics of an application is fully deterministic, including tasks execution time, size of data communicated between tasks, and task dependencies, the application can be represented by a Directed Acyclic Graph (DAG). With an increase in the number of processing units, expressing parallelism of an application has become a major challenge. Many studies have proved that designing parallel applications using both task and data parallelism is an effective approach than pure data or pure task parallel models. This mixed parallelism achieves both higher scalability and performance. Mixed parallel applications are represented as Parallel Task Graph (PTG), a graph of data parallel tasks. Understanding the importance of task scheduling on a parallel system, an attempt is made to address issues in scheduling multiple applications with the objectives of enhancing the performance of individual applications and also increasing the throughput the parallel computing system. In this thesis, we introduce two new algorithms Level Based Scheduler (LBS) and Improved Level Based Scheduler (ILBS) to schedule parallel applications represented as parallel task graph onto a cluster of multi-core processors with the objective of reducing their completion time. Both algorithms can be used both as static or hybrid schedulers. We argue that hybrid scheduler is a good scheduler choice in a cluster environment to optimize the utilization of its resources. We state that a better way to deal with multiple applications on a cluster is through adoptive space-sharing approach with a promise to benefit both the user and the cluster administrator. In a space-sharing approach, each application is given a set of processors and it is executed on these processors only. A parallel application can be run on a varied number of processors i.e. a moldable job. Hence we argue that it is good to change processor allotment for executing applications depending on the workload on cluster. To perform initial processor allotment and subsequent adaptations if required, methods to find the optimal and maximal number of processors that an application can utilize are developed. Also a novel method to share available processors among multiple competing task graphs is proposed. A framework is developed to bring together the proposed hybrid schedulers, methods to find processor requirement of each application, the scheme to share processors among multiple applicat ions and a new policy to decide processor allotment for each submitted application. Approaches to improve scheduling on a NoC processor is attempted. An approach to make any list scheduling method more time efficient to schedule a task graph on NoC is proposed and experimented. To schedule multiple applications on NoC, the number of cores and which cores to be assigned for each application must be decided. Our belief is that this job of deciding number of cores can be better performed by the joint collaboration of the user and system instead of any one doing it alone. Hence we have developed methods to find the optimal and maximal block of cores that an application can utilize which is later used to decide the actual core allotment for each application. Policies to decide how many and which cores to be assigned for each application are suggested. All the experiments in this thesis are carried out using a discrete event simulator. Benchmark task graphs are taken from different sources, from where other researchers have taken to compare their scheduler performance. The metrics makespan and efficiency of the schedule are used. The developed LBS is compared with MCPA the most widely accepted good scheduler and EMTS the recent PTG scheduler are chosen for performance comparison. The benchmark suite includes regular task graph, random task graph and few real applications task graph. For regular task graphs LBS shows in improvement in makespan by 2-9% in comparison to MCPA. But for irregular PTGs, LBS shows 4-12% performance improvement over MCPA, which is significantly higher than for regular PTGs. Since EMTS uses evolutionary methods, it generates better schedule but at the expense of more computing time. The proposed LBS performance is inferior to EMTS by around 2-7% and 2-4% for regular and random PTGs respectively. Another metric used is the efficiency which is a measure of effective utilization of resources. The efficiency of LBS is more than MCPA, but the improvement is less than that for makespan. This is attributed to the fact task allocation in MCPA leads to better utilization of processors than in L BS. Efficiency of LBS is more than MCPA by 1-3% and less than EMTS by 1-2%. Another scheduler ILBS is compared with LBS and TwoL[rauber 1998], a good method to schedule set of independent tasks. ILBS exhibits performance improvement of 2-7% over LBS and 2-10% over TwoL for regular PTGs. For random PTGs improvement is 6-12% over LBS and 4-8% over TwoL. The increased performance of ILBS for regular PTGs is attributed to the method of finding of the best possible schedule at each level. The performance of the proposed novel method of sharing processors among multiple task graphs is compared with the most recent methods suggested by Tapke et al. The new method exhibited a performance improvement of 6-9% for all categories of task graph and is maximum when the demand for the processors is relatively more than available processors. A complete framework is developed to tailor together the pieces of work carried out. The new policies suggested to decide processor allotment for each task graph show 4-7% performance improvement in average completion time of a task graph. The proposed policy also exhibits better performance for the time required to complete a set of task graphs by 4-7%. Thus the new policy is good from both user and system perspectives. The approach to make list scheduling method more time efficient to generate a schedule for a NoC processor is implemented in DLS[] method and it recorded around 20-45% improvement in execution time. The time is recorded by executing the application on the cycle accurate multi2sim simulator. The new policy proposed to decide the cores allotment for each application performs better than the best methods found in the literature by 4-20%. The issues in scheduling multiple applications on a cluster of multi-core processors and a NoC processor is addressed in this thesis. The observed performance improvement indicate the usefulness of proposed methods.

The Effects of Tobbaco Use

The Effects of Tobacco Use Many people are addicted to the use of tobacco and do not realize the effect that it has on their body. Tobacco contains many harmful chemicals that can damage your heart, lungs, and nervous system. Tobacco companies deliberately put these chemicals in cigarette’s to get us addicted to their products; never less this has been an ongoing controversy for many years. Therefore smoking cigarettes is very addictive and a habit that is very hard to brake.Smoking can cause lung disease, cancer, emphysema, and death. Smoking cigarettes can even cause our skin to look prematurely old and cause wrinkles. People do not realize what harm they are doing to their bodies by inhaling tobacco, therefore should visit with a health professional regarding their options. One very harmful chemical that is in tobacco is carbon monoxide. First carbon monoxide when mixed with other harmful chemicals like tar and inhaled thru the lungs is very dangerous; and as a result can h ave adverse reaction.Consequently researchers have even found in recent years that due to inhaling carbon monoxide thru cigarettes into the lungs can cause carbon monoxide poisoning, as result can lead to stroke or death. Second, harmful effects of carbon monoxide poisoning thru smoking cigarettes is also irreversible. Therefore the damage is permanent and the body will not naturally heal itself. Most Physicians will agree that carbon monoxide poisoning does damage to the entire body and will encourage patients to quit.There are many program’s available today for our youth and for people that are addicted to tobacco. Our schools have program’s informing our kids about the harmful effects of tobacco use. There are many products on the market to help people get over the addiction and to help quit smoking; such as gum, nicotine patches, and another alternative is Chantix, a prescription available thru the Doctor. There are prescription medications available today that wil l work with the receptors in your brain to reject the urge to smoke or the desire for nicotine.Another option is counseling and, sometimes talking to a professional can help with addiction. Many people will not quit until they have made up their mind to; or witness someone that they love suffer from a disease such as lung cancer. A person can even visit with their Doctor about trying to quit. Lung cancer and lung disease are the top two illnesses that are the direct effect from smoking cigarettes. Lung cancer is not curable and the mortality rate is higher than those that survive that are diagnosed.It is estimated that more people die from smoking a cigarette than drug and alcohol use combined. Lung disease is a terrible illness to have to endure; some people even have to have their lungs drained to release the fluid that is built up enabling them to breath. More and more people today have to live with the use of oxygen, a device that pumps air into the lungs and helps the lung to f unction normally. Tobacco use is very harmful; we not only put our own bodies in danger but others around us. Second hand smoke is dangerous and can affect those that do not even smoke at all.If an individual is going to smoke they need to be informed of all of the harmful effects that it can cause to their body, the environment, and those around them. Therefore the public needs to be educated about tobacco and society needs to be aware of all the harmful effects as well. Making the decision to quit is the first step in the process to better health, second visiting with your Doctor or healthcare provider will set the path to being happier and living a much more productive and healthier life.

The Information of Different Needs of Different User Groups

1 Introduction to accounting Introduction n this opening chapter we begin by considering the role of accounting. We shall see that it can be a valuable tool for decision-making. We shall identify the main users of accounting and financial information and discuss the ways in which this information can improve the quality of decisions that those users make. We shall then go on to consider the particular role of financial accounting and the differences between financial and management accounting.Since this book is concerned with accounting and financial decision making for private-sector businesses, we shall also examine the main forms of business enterprise and consider what are likely to be the key objectives of a business. I Learning outcomes When you have completed this chapter, you should be able to: ? explain the nature and roles of accounting; ? identify the main users of financial information and discuss their needs; ? distinguish between financial and management accounting; ? e xplain the purpose of a business and describe how businesses are organised and structured. 2 CHAPTER 1INTRODUCTION TO ACCOUNTING What is accounting? ? Accounting is concerned with collecting, analysing and communicating ? nancial information. The purpose is to help people who use this information to make more informed decisions. If the ? nancial information that is communicated is not capable of improving the quality of decisions made, there would be no point in producing it. Sometimes the impression is given that the purpose of accounting is simply to prepare ? nancial reports on a regular basis. While it is true that accountants undertake this kind of work, it does not represent an end in itself.The ultimate purpose of the accountant’s work is to give people better ? nancial information on which to base their decisions. This decision-making perspective of accounting ? ts in with the theme of this book and shapes the way in which we deal with each topic. Who are the users of accounting information? For accounting information to be useful, the accountant must be clear for whom the information is being prepared and for what purpose the information will be used. There are likely to be various groups of people (known as ‘user groups’) with an interest in a particular organisation, in the sense of needing to make decisions about it.For the typical private-sector business, the more important of these groups are shown in Figure 1. 1. Take a look at this ? gure and then try Activity 1. 1. Figure 1. 1 Main users of financial information relating to a business Several user groups have an interest in accounting information relating to a business. The majority of these are outside the business but, nevertheless, have a stake in it. This is not meant to be an exhaustive list of potential users; however, the groups identified are normally the most important. W HO ARE THE USERS OF ACCOUNTING INFORMATION?Activity 1. 1 Ptarmigan Insurance plc (PI) is a lar ge motor insurance business. Taking the user groups identified in Figure 1. 1, suggest, for each group, the sorts of decisions likely to be made about PI and the factors to be taken into account when making these decisions. Your answer may be along the following lines: User group Decision Customers Whether to take further motor policies with PI. This might involve an assessment of PI’s ability to continue in business and to meet their needs, particularly in respect of any insurance claims made. CompetitorsHow best to compete against PI or, perhaps, whether to leave the market on the grounds that it is not possible to compete profitably with PI. This might involve competitors using PI’s performance in various aspects as a ‘benchmark’ when evaluating their own performance. They might also try to assess PI’s financial strength and to identify significant changes that may signal PI’s future actions (for example, raising funds as a prelude to mark et expansion). Employees Whether to continue working for PI and, if so, whether to demand higher rewards for doing so.The future plans, profits and financial strength of the business are likely to be of particular interest when making these decisions. Government Whether PI should pay tax and, if so, how much, whether it complies with agreed pricing policies, whether financial support is needed and so on. In making these decisions an assessment of its profits, sales revenues and financial strength would be made. Community Whether to allow PI to expand its premises and/or whether to provide representatives economic support for the business.PI’s ability to continue to provide employment for the community, the extent to which it is likely to use community resources and its likely willingness to help fund environmental improvements are likely to be considered when arriving at such decisions. Investment Whether to advise clients to invest in PI. This would involve an analysts asses sment of the likely risks and future returns associated with PI. Suppliers Whether to continue to supply PI and, if so, whether to supply on credit. This would involve an assessment of PI’s ability to pay for any goods and services supplied.Lenders Whether to lend money to PI and/or whether to require repayment of any existing loans. PI’s ability to pay the interest and to repay the principal sum would be important factors in such decisions. Managers Whether the performance of the business needs to be improved. Performance to date would be compared with earlier plans or some other ‘benchmark’ to decide whether action needs to be taken. Managers may also wish to decide whether there should be a change in PI’s future direction. This would involve looking at PI’s ability to perform and at the opportunities available to it.Owners Whether to invest more in PI or to sell all, or part, of the investment currently held. This would involve an assessme nt of the likely risks and returns associated with PI. Owners may also be involved with decisions on rewarding senior managers. The financial performance of the business would normally be considered when making such a decision. Although this answer covers many of the key points, you may have identified other decisions and/or other factors to be taken into account by each group. 3 4 CHAPTER 1 INTRODUCTION TO ACCOUNTING The conflicting interests of usersWe have seen above that each user group looks at a business from a different perspective and has its own particular interests. This means that there is always the risk that the interests of one group will collide with those of another group. Con? ict between user groups is most likely to occur over the way in which the wealth of the business is generated and/or distributed. A good example is the con? ict that may arise between the managers and the owners of the business. Although managers are appointed to act in the best interests of t he owners, there is always a danger that they will not do so.Instead, managers may use the wealth of the business to award themselves large pay rises, to furnish large of? ces or to buy expensive cars for their own use. Accounting information has an important role to play in reporting the extent to which various groups have bene? ted from the business. Thus, owners may rely on accounting information to check whether the pay and bene? ts of managers are in line with agreed policy. A further example is the potential con? ict of interest between lenders and owners. There is a risk that the funds loaned to a business will not be used for purposes that have been agreed.Lenders may, therefore, rely on accounting information to check that the funds have been applied in an appropriate manner and that the terms of the loan agreement are not being broken. Activity 1. 2 Can you think of other examples where accounting information may be used to monitor potential conflicts of interest between t he various user groups identified? Two possible examples that spring to mind are: ? ? employees (or their representatives) wishing to check that they are receiving a ‘fair share’ of the wealth created by the business and that agreed profit-sharing schemes are being adhered to; overnment wishing to check that the profits made from a contract that it has given to a business are not excessive. You may have thought of other examples. How useful is accounting information? No one would seriously claim that accounting information fully meets all of the needs of each of the various user groups. Accounting is still a developing subject and we still have much to learn about user needs and the ways in which these needs should be met. Nevertheless, the information contained in accounting reports should help users make decisions relating to the business.The information should reduce uncertainty about the ? nancial position and performance of the business. It should help to answer qu estions concerning the availability of funds to pay owners a return, to repay loans, to reward employees and so on. Typically, there is no close substitute for the information provided by the ? nancial statements. Thus, if users cannot glean the required information from the ? nancial statements, it is often unavailable to them. Other sources of information concerning the ? nancial health of a business are normally uch less useful. HOW USEFUL IS ACCOUNTING INFORMATION? Activity 1. 3 What other sources of information might, say, an investment analayst use in an attempt to gain an impression of the financial position and performance of a business? What kind of information might be gleaned from these sources? Other sources of information available include: ? ? ? ? ? ? ? ? meetings with managers of the business; public announcements made by the business; newspaper and magazine articles; websites, including the website of the business; adio and TV reports; information-gathering agencies (for example, agencies that assess businesses’ creditworthiness or credit ratings); industry reports; economy-wide reports. These sources can provide information on various aspects of the business, such as new products or services being offered, management changes, new contracts offered or awarded, the competitive environment within which the business operates, the impact of new technology, changes in legislation, changes in interest rates and future levels of inflation.However, the various sources of information identified are not really substitutes for accounting reports. Rather, they are best used in conjunction with the reports in order to obtain a clearer picture of the financial health of a business. Evidence on the usefulness of accounting ? There are arguments and convincing evidence that accounting information is at least perceived as being useful to users. Numerous research surveys have asked users to rank the importance of accounting information, in relation to oth er sources of information, for decision-making purposes.Generally, these studies have found that users rank accounting information very highly. There is also considerable evidence that businesses choose to produce accounting information that exceeds the minimum requirements imposed by accounting regulations. (For example, businesses often produce a considerable amount of accounting information for managers, which is not required by any regulations. ) Presumably, the cost of producing this additional accounting information is justi? ed on the grounds that users ? nd it useful.Such arguments and evidence, however, leave unanswered the question of whether the information produced is actually used for decision-making purposes, that is: does it affect people’s behaviour? It is normally very dif? cult to assess the impact of accounting on decision making. One situation arises, however, where the impact of accounting information can be observed and measured. This is where the shares (portions of ownership of a business) are traded on a stock exchange. The evidence reveals that, when a business makes an announcement concerning its accounting pro? s, the prices at which shares are traded and the volume of shares traded often change signi? cantly. This suggests that investors are changing their views about the future prospects of the business as a result of this new information becoming available to them and that this, in turn, leads them to make a decision either to buy or to sell shares in the business. Although there is evidence that accounting reports are perceived as being useful and are used for decision-making purposes, it is impossible to measure just how useful 5 6 CHAPTER 1 INTRODUCTION TO ACCOUNTING ccounting reports are to users. As a result we cannot say with certainty whether the cost of producing those reports represents value for money. Accounting information will usually represent only one input to a particular decision and so the precise weight attached to the accounting information by the decision maker and the bene? ts which ? ow as a result cannot be accurately assessed. We shall now go on to see, however, that it is at least possible to identify the kinds of qualities which accounting information must possess in order to be useful.Where these qualities are lacking, the usefulness of the information will be diminished. Providing a service One way of viewing accounting is as a form of service. Accountants provide economic information to their ‘clients’, who are the various users identi? ed in Figure 1. 1. The quality of the service provided is determined by the extent to which the needs of the various user groups have been met. To meet these users’ needs, it can be argued that accounting information should possess certain key qualities, or characteristics: relevance, reliability, comparability and understandability. ? ? Relevance. Accounting information must have the ability to in? uence decisions. Un less this characteristic is present, there is really no point in producing the information. The information may be relevant to the prediction of future events (for example, in predicting how much pro? t is likely to be earned next year) or relevant in helping to con? rm past events (for example, in establishing how much pro? t was earned last year). The role of accounting in con? rming past events is important because users often wish to check the accuracy of earlier predictions that they have made.The accuracy (or inaccuracy) of earlier predictions may help users to judge the accuracy of current predictions. To in? uence a decision, the information must, of course, be available when the decision is being made. Thus, relevant information must be timely. ? Reliability. Accounting should be free from signi? cant error or bias. It should be capable of being relied upon by managers to represent what it is supposed to represent. Though both relevance and reliability are very important, t he problem that we often face in accounting is that information that is highly relevant may not be very reliable.Similarly, that which is reliable may not be very relevant. Activity 1. 4 To illustrate this last point, let us assume that a manager has to sell a custom-built machine owned by their business and has recently received a bid for it. This machine is very unusual and there is no ready market for it. What information would be relevant to the manager when deciding whether to accept the bid? How reliable would that information be? The manager would probably like to know the current market value of the machine before deciding whether or not to accept the bid.The current market value would be highly relevant to the final decision, but it might not be very reliable because the machine is unique and there is likely to be little information concerning market values. BUT †¦ IS IT MATERIAL? When seeking to strike the right balance between relevance and reliability, the needs of users should be the overriding consideration. ? ? ? Comparability. This quality will enable users to identify changes in the business over time (for example, the trend in sales revenue over the past ? ve years).It will also help them to evaluate the performance of the business in relation to similar businesses. Comparability is achieved by treating items that are basically the same in the same manner for accounting purposes. Comparability may also be enhanced by making clear the policies that have been adopted in measuring and presenting the information. ? Understandability. Accounting reports should be expressed as clearly as possible and should be understood by those at whom the information is aimed. Activity 1. 5 Do you think that accounting reports should be understandable to those who have not studied accounting?It would be very useful if accounting reports could be understood by everyone. This, however, is unrealistic as complex financial events and transactions cannot normall y be expressed in simple terms. It is probably best that we regard accounting reports in the same way that we regard a report written in a foreign language. To understand either of these, we need to have had some preparation. Generally speaking, accounting reports assume that the user not only has a reasonable knowledge of business and accounting but is also prepared to invest some time in studying the reports.Despite the answer to Activity 1. 5, the onus is clearly on accountants to provide information in a way that makes it as understandable as possible to non-accountants. But . . . is it material? ? The qualities, or characteristics, that have just been described will help us to decide whether accounting information is potentially useful. If a particular piece of information has these qualities then it may be useful. However, this does not automatically mean that it should be reported to users. We also have to consider whether the information is material, or signi? cant.This mean s that we should ask whether its omission or misrepresentation in the accounting reports would really alter the decisions that users make. Thus, in addition to possessing the characteristics mentioned above, accounting information must also cross the threshold of materiality. If the information is not regarded as material, it should not be included within the reports as it will merely clutter them up and, perhaps, interfere with the users’ ability to interpret the ? nancial results. The type of information and amounts involved will normally determine whether it is material. 8 CHAPTER 1 INTRODUCTION TO ACCOUNTING Weighing up the costs and benefits Having read the previous sections you may feel that, when considering a piece of accounting information, provided the four main qualities identi? ed are present and it is material it should be gathered and made available to users. Unfortunately, there is one more hurdle to jump. Something may still exclude a piece of accounting infor mation from the reports even when it is considered to be useful. Consider Activity 1. 6. Activity 1. 6 Suppose an item of information is capable of being provided. It is relevant o a particular decision; it is also reliable, comparable, can be understood by the decision maker concerned and is material. Can you think of a reason why, in practice, you might choose not to produce the information? The reason that you may decide not to produce, or discover, the information is that you judge the cost of doing so to be greater than the potential benefit of having the information. This cost–benefit issue will limit the extent to which accounting information is provided. In theory, a particular item of accounting information should only be produced if the costs of providing it are less than the bene? s, or value, to be derived from its use. Figure 1. 2 shows the relationship between the costs and value of providing additional accounting information. Figure 1. 2 Relationship between co sts and the value of providing additional accounting information The benefits of accounting information eventually decline. The cost of providing information, however, will rise with each additional piece of information. The optimal level of information provision is where the gap between the value of the information and the cost of providing it is at its greatest. WEIGHING UP THE COSTS AND BENEFITS The ? ure shows how the value of information received by the decision maker eventually begins to decline. This is, perhaps, because additional information becomes less relevant, or because of the problems that a decision maker may have in processing the sheer quantity of information provided. The costs of providing the information, however, will increase with each additional piece of information. The broken line indicates the point at which the gap between the value of information and the cost of providing that information is at its greatest. This represents the optimal amount of informat ion that can be provided.This theoretical model, however, poses a number of problems in practice. We shall now go on to discuss these. To illustrate the practical problems of establishing the value of information, let us assume that someone has collided with our car in a car park and dented and scraped the paint from one of the doors. We wish to have the dent taken out and the door resprayed at a local garage. We know that the nearest garage would charge ? 250 but believe that other local garages may offer to do the job for a lower price. The only way of ? nding out the prices at other garages is to visit them, so that they can see the extent of the damage.Visiting the garages will involve using some petrol and will take up some of our time. Is it worth the cost of ? nding out the price for the job at the various local garages? The answer, as we have seen, is that if the cost of discovering the price is less than the potential bene? t, it is worth having that information. To identif y the various prices for the job, there are several points to be considered, including: ? How many garages shall we visit? ? What is the cost of petrol to visit each garage? ? How long will it take to make all the garage visits? ? At what price do we value our time? The economic bene? of having the information on the price of the job is probably even harder to assess. The following points need to be considered: ? What is the cheapest price that we might be quoted for the job? ? How likely is it that we shall be quoted a price cheaper than ? 250? As we can imagine, the answers to these questions may be far from clear – remember that we have only contacted the local garage so far. When assessing the value of accounting information we are confronted with similar problems. The provision of accounting information can be very costly; however, the costs are often dif? cult to quantify.The direct, out-of-pocket, costs such as salaries of accounting staff are not really a problem to i dentify, but these are only part of the total costs involved. There are also less direct costs such as the cost of the user’s time spent on analysing and interpreting the information contained in reports. The economic bene? t of having accounting information is even harder to assess. It is possible to apply some ‘science’ to the problem of weighing the costs and bene? ts, but a lot of subjective judgement is likely to be involved. No one would seriously advocate that the typical business should produce no accounting information.At the same time, no one would advocate that every item of information that could be seen as possessing one or more of the key characteristics should be produced, irrespective of the cost of producing it. The characteristics that in? uence the usefulness of accounting information and which have been discussed in this section and the preceding section are set out in Figure 1. 3. 9 10 CHAPTER 1 INTRODUCTION TO ACCOUNTING Figure 1. 3 The char acteristics that influence the usefulness of accounting information There are four main qualitative characteristics that influence the usefulness of accounting information.In addition, however, accounting information should be material and the benefits of providing the information should outweigh the costs. Accounting as an information system ? We have already seen that accounting can be seen as the provision of a service to ‘clients’. Another way of viewing accounting is as a part of the business’s total information system. Users, both inside and outside the business, have to make decisions concerning the allocation of scarce economic resources. To ensure that these resources are ef? ciently allocated, users need economic information on which to base decisions.It is the role of the accounting system to provide that information and this will involve information gathering and communication. The accounting information system should have certain features that are co mmon to all valid information systems within a business. These are: ? identifying and capturing relevant information (in this case ? nancial information); ? recording the information collected in a systematic manner; ? analysing and interpreting the information collected; ? reporting the information in a manner that suits the needs of users. The relationship between these features is set out in Figure 1. . ACCOUNTING AS AN INFORMATION SYSTEM Figure 1. 4 The accounting information system There are four sequential stages of an accounting information system. The first two stages are concerned with preparation, whereas the last two stages are concerned with using the information collected. Given the decision-making emphasis of this book, we shall be concerned primarily with the ? nal two elements of the process: the analysis and reporting of accounting information. We shall consider the way in which information is used by, and is useful to, users rather than the way in which it is ident i? ed and recorded. Ef? ient accounting systems are an essential ingredient of an ef? cient business. When the accounting systems fail, the results can be disastrous. Real World 1. 1 provides an example of a systems failure when two businesses combined and then attempted to integrate their respective systems. Real World 1. 1 Blaming the system FT When Sir Ken Morrison bought Safeway for ? 3. 35bn in March 2004, he almost doubled the size of his supermarket chain overnight and went from being a regional operator to a national force. His plan was simple enough. He had to sell off some Safeway stores – Morrison has to date sold off 184 stores for an estimated ? . 3bn – and convert the remaining 230 Safeway stores into Morrison’s. Sir Ken has about another 50 to sell. But, nearly fifteen months on, and the integration process is proving harder in practice than it looked on paper. Morrison, once known for its robust performance, has issued four profit warnings in the past ten months. Each time the retailer has blamed Safeway. Last July, it was because of a faster-thanexpected sales decline in Safeway stores. In March – there were two warnings that month – it was the fault of Safeway’s accounting systems, which left Morrison with lower supplier incomes.This month’s warning was put down to higher-than-expected costs from running parallel store systems. At the time of the first warning last July, Simon Procter, of the stockbrokers Charles Stanley, noted that the news ‘has blown all profit forecasts out of the water and visibility is very poor from here on out’. But if it was difficult then to predict where Morrison’s profits were heading, it is impossible now. Morrison itself cannot give guidance. ‘No one envisaged this,’ says Mr Procter. ‘When I made that comment about visibility last July, I was thinking on a twelve-month time frame, not a two-year one. Morrison says the complexi ty of the Safeway deal has put a ‘significant strain’ on its ability to cope with managing internal accounts. ‘This is impacting the ability of the board to forecast likely trends in profitability and the directors are therefore not currently in a position to provide reliable guidance on the level of profitability as a whole,’ admits the retailer. Source: ‘Morrison in uphill battle to integrate Safeway’, Elizabeth Rigby, Financial Times, 26 May 2005. As a footnote to Real World 1. 1, though Morrison had its problems, these were quickly overcome and the Safeway takeover has proved to be a success. 1 12 CHAPTER 1 INTRODUCTION TO ACCOUNTING Management accounting and financial accounting Accounting is usually seen as having two distinct strands. These are: ? ? ? management accounting, which seeks to meet the accounting needs of managers; and ? financial accounting, which seeks to meet the accounting needs of all of the other users identi? ed earlie r in the chapter (see Figure 1. 1). The difference in their targeted user groups has led to each strand of accounting developing along different lines. The main areas of difference are as follows. ? Nature of the reports produced.Financial accounting reports tend to be general- ? ? ? ? ? purpose, that is, they contain ? nancial information that will be useful for a broad range of users and decisions rather than being speci? cally designed for the needs of a particular group or set of decisions. Management accounting reports, on the other hand, are often speci? c-purpose reports. They are designed with a particular decision in mind and/or for a particular manager. Level of detail. Financial accounting reports provide users with a broad overview of the performance and position of the business for a period.As a result, information is aggregated and detail is often lost. Management accounting reports, however, often provide managers with considerable detail to help them with a particula r operational decision. Regulations. Financial accounting reports, for many businesses, are subject to accounting regulations that try to ensure they are produced with standard content and in a standard format. The law and accounting rule makers impose these regulations. As management accounting reports are for internal use only, there are no regulations from external sources concerning the form and content of the reports.They can be designed to meet the needs of particular managers. Reporting interval. For most businesses, ? nancial accounting reports are produced on an annual basis, though some large businesses produce half-yearly reports and a few produce quarterly ones. Management accounting reports may be produced as frequently as required by managers. In many businesses, managers are provided with certain reports on a daily, weekly or monthly basis, which allows them to check progress frequently. In addition, special-purpose reports will be prepared when required (for example, to evaluate a proposal to purchase a piece of equipment).Time orientation. Financial accounting reports re? ect the performance and position of the business for the past period. In essence, they are backward looking. Management accounting reports, on the other hand, often provide information concerning future performance as well as past performance. It is an oversimpli? cation, however, to suggest that ? nancial accounting reports never incorporate expectations concerning the future. Occasionally, businesses will release projected information to other users in an attempt to raise capital or to ? ght off unwanted takeover bids. Even preparation of the routine ? ancial accounting reports typically requires making some judgements about the future, as we shall see in Chapter 3. Range and quality of information. Financial accounting reports concentrate on information that can be quanti? ed in monetary terms. Management accounting also produces such reports, but is also more likely to pr oduce reports that contain information of a non-? nancial nature, such as physical volume of inventories, number of sales orders received, number of new products launched, physical output per employee and so on. Financial accounting places greater emphasis on the use of objective, veri? ble evidence when preparing reports. Management accounting reports may use information that is less objective and veri? able, but nevertheless provide managers with the information they need. SCOPE OF THIS BOOK We can see from this that management accounting is less constrained than ? nancial accounting. It may draw from a variety of sources and use information that has varying degrees of reliability. The only real test to be applied when assessing the value of the information produced for managers is whether or not it improves the quality of the decisions made.The distinctions between management and ? nancial accounting suggest that there are differences between the information needs of managers and those of other users. While differences undoubtedly exist, there is also a good deal of overlap between these needs. Activity 1. 7 Can you think of any areas of overlap between the information needs of managers and those of other users? We thought of two points: ? ? Managers will, at times, be interested in receiving a historical overview of business operations of the sort provided to other users.Other users would be interested in receiving information relating to the future, such as the planned level of profits and non-financial information such as the state of the sales order book and the extent of product innovations. The distinction between the two areas of accounting re? ects, to some extent, the differences in access to ? nancial information. Managers have much more control over the form and content of information they receive. Other users have to rely on what managers are prepared to provide or what the ? nancial reporting regulations require to be provided. Though the scope of ? ancial accounting reports has increased over time, fears concerning loss of competitive advantage and user ignorance concerning the reliability of forecast data have led businesses to resist providing other users with the same detailed and wide-ranging information available to managers. In the past, it has been argued that accounting systems are far too geared to meeting the regulatory requirements of ? nancial accounting to be able to provide the information most helpful to managers. This is to say that ? nancial accounting requirements have been the main priority and management accounting has suffered as a result.Recent survey evidence suggests, however, that this argument has lost its force. Modern management accounting systems tend to provide managers with information that is relevant to their needs rather than what is determined by external reporting requirements. Financial reporting cycles, however, retain some in? uence over management accounting and managers are aware of expectations of external users (see the reference at the end of the chapter). Scope of this book This book is concerned with ? nancial accounting rather than management accounting. In Chapter 2 we begin by introducing the three principal ? ancial statements: ? the statement of ? nancial position (sometimes known as the balance sheet); ? the income statement (also called the pro? t and loss account); and ? the statement of cash ? ows. 13 14 CHAPTER 1 ? INTRODUCTION TO ACCOUNTING These statements are brie? y reviewed before we go on to consider the statement of ? nancial position in more detail. We shall see that the statement of ? nancial position provides information concerning the wealth held by a business at a particular point in time and the claims against this wealth. Included in our consideration of the statement of ? ancial position will be an introduction to the conventions of accounting. Conventions are the generally accepted rules that accountants tend to follow when pre paring ? nancial statements. Chapter 3 introduces the second of the major ? nancial statements, the income statement. This provides information concerning the wealth created by a business during a period. In this chapter we shall be looking at such issues as how pro? t is measured, the point in time at which we recognise that a pro? t has been made and the accounting conventions that apply to this particular statement.In the UK and throughout much of the industrialised world, the limited company is the major form of business unit. In Chapter 4 we consider the accounting aspects of limited companies. Although there is nothing of essence that makes the accounting aspects of companies different from other types of private-sector business, there are some points of detail that we need to consider. In Chapter 5 we continue our examination of limited companies and, in particular, consider the framework of rules that must be adhered to when presenting accounting reports to owners and extern al users.Chapter 6 deals with the last of the three principal ? nancial statements, the statement of cash ? ows. This ? nancial statement is important in identifying the ? nancing and investing activities of the business over a period. It sets out how cash was generated and how cash was used during a period. Reading the three statements will provide information about the performance and position of a business. It is possible, however, to gain even more helpful insights about the business by analysing the statements using ? nancial ratios and other techniques. Combining two ? ures in the ? nancial statements in a ratio and comparing this with a similar ratio for, say, another business, can often tell us much more than just reading the ? gures themselves. Chapters 7 and 8 are concerned with techniques for analysing ? nancial statements. The typical large business in the UK is a group of companies rather than just a single company. A group of companies will exist where one company cont rols one or more other companies. In Chapter 9 we shall see why groups exist and consider the accounting issues raised by the combination of companies into groups.The scope of ? nancial reporting has tended to alter over the years. In Chapter 10 we shall consider where ? nancial reporting has come from and how it seems to be developing. Finally, in Chapter 11, we shall consider the way in which larger businesses are managed and how directors and other senior managers are accountable to the owners and to other groups with an interest in the business. Has accounting become too interesting? In recent years, accounting has become front-page news and has been a major talking point among those connected with the world of business.Unfortunately, the attention that accounting has attracted has been for all the wrong reasons. We have seen that investors rely on ? nancial reports to help to keep an eye both on their investment and on the performance of the managers. What, though, if the manag ers provide misleading ? nancial reports to investors? Recent revelations suggest that the managers of some large businesses have been doing just this. HAS ACCOUNTING BECOME TOO INTERESTING? Two of the most notorious cases have been those of: ? Enron, an energy-trading business based in Texas, which was accused of entering into complicated ? ancial arrangements in an attempt to obscure losses and to in? ate pro? ts; and ? WorldCom, a major long-distance telephone operator in the US, which was accused of reclassifying $3. 9 billion of expenses so as to falsely in? ate the pro? t ? gures that the business reported to its owners (shareholders) and to others. In the wake of these scandals, there was much closer scrutiny by investment analysts and investors of the ? nancial reports that businesses produce. This led to further businesses, in both the US and Europe, being accused of using dubious accounting practices to bolster reported pro? ts.Accounting scandals can have a profound effec t on all those connected with the business. The Enron scandal, for example, ultimately led to the collapse of the company, which, in turn, resulted in lost jobs and large ? nancial losses for lenders, suppliers and investors. Con? dence in the world of business can be badly shaken by such events and this can pose problems for society as a whole. Not surprisingly, therefore, the relevant authorities tend to be severe on those who perpetrate such scandals. In the US, Bernie Ebbers, the former chief executive of WorldCom, received 25 years in prison for his part in the fraud.Various reasons have been put forward to explain this spate of scandals. Some may have been caused by the pressures on managers to meet unrealistic expectations of investors for continually rising pro? ts, others by the greed of unscrupulous executives whose pay is linked to ? nancial performance. However, they may all re? ect a particular economic environment. Real World 1. 2 gives some comments suggesting that wh en all appears to be going well with a business, people can be quite gullible and over-trusting. Real World 1. 2 The thoughts of Warren BuffettWarren Buffett is one of the world’s shrewdest and most successful investors. He believes that the accounting scandals mentioned above were perpetrated during the ‘new economy boom’ of the late 1990s when confidence was high and exaggerated predictions were being made concerning the future. He states that during that period You had an erosion of accounting standards. You had an erosion, to some extent, of executive behaviour. But during a period when everybody ‘believes’, people who are inclined to take advantage of other people can get away with a lot.He believes that the worst is now over and that the ‘dirty laundry’ created during this heady period is being washed away and that the washing machine is now in the ‘rinse cycle’. Source: The Times, Business Section, 26 September 2002, p. 25. nisyndication. com. Whatever the causes, the result of these accounting scandals has been to undermine the credibility of ? nancial statements and to introduce much stricter regulations concerning the quality of ? nancial information. We shall return to this issue in later chapters when we consider the ? nancial statements. 15 16 CHAPTER 1INTRODUCTION TO ACCOUNTING The changing face of accounting Over the past 25 years, the environment within which businesses operate has become increasingly turbulent and competitive. Various reasons have been identi? ed to explain these changes, including: ? the increasing sophistication of customers; ? the development of a global economy where national frontiers become less important; ? rapid changes in technology; ? the deregulation of domestic markets (for example, electricity, water and gas); ? increasing pressure from owners (shareholders) for competitive economic returns; ? he increasing volatility of ? nancial markets. This new, more c omplex, environment has brought new challenges for managers and other users of accounting information. Their needs have changed and both ? nancial accounting and management accounting have had to respond. To meet the changing needs of users there has been a radical review of the kind of information to be reported. The changing business environment has given added impetus to the search for a clear framework and principles upon which to base ? nancial accounting reports. Various attempts have been made to clarify the purpose of ? ancial accounting reports and to provide a more solid foundation for the development of accounting rules. The frameworks and principles that have been developed try to address fundamental questions such as: ? Who are the users of ? nancial accounting information? ? What kinds of ? nancial accounting reports should be prepared and what should they contain? ? How should items (such as pro? t and asset values) be measured? In response to criticisms that the ? na ncial reports of some businesses are not clear enough to users, accounting rule makers have tried to improve reporting rules to ensure that the accounting policies of businesses are ore comparable and more transparent, and that they portray economic reality more faithfully. While this has had a generally bene? cial effect, the recent accounting scandals have highlighted the limitations of accounting rules in protecting investors and others. The internationalisation of businesses has created a need for accounting rules to have an international reach. It can no longer be assumed that users of accounting information relating to a particular business are based in the country in which the business operates or are familiar with the accounting rules of that country.Thus, there has been increasing harmonisation of accounting rules across national frontiers. A more detailed review of these developments is included in Chapter 5. Management accounting has also changed by becoming more outward looking in its focus. In the past, information provided to managers has been largely restricted to that collected within the business. However, the attitude and behaviour of customers and rival businesses have now become the object of much information gathering. Increasingly, successful businesses are those that are able to secure and maintain competitive advantage over their rivals.To obtain this advantage, businesses have become more ‘customer driven’ (that is, concerned with satisfying customer needs). This has led to management accounting information that provides details of customers and the market, such as customer evaluation of services provided and market share. In addition, information about the costs and pro? ts of rival businesses, which can be used as ‘benchmarks’ by which to gauge competitiveness, is gathered and reported. WHAT KINDS OF BUSINESS OWNERSHIP EXIST? To compete successfully, businesses must also ? d ways of managing costs. The cost base of modern businesses is under continual review and this, in turn, has led to the development of more sophisticated methods of measuring and controlling costs. What kinds of business ownership exist? The particular form of business ownership has important implications for accounting purposes and so it is useful to be clear about the main forms of ownership that can arise. There are basically three arrangements: ? sole proprietorship; ? partnership; and ? limited company. Each of these is considered below. Sole proprietorship ?Sole proprietorship, as the name suggests, is where an individual is the sole owner of a business. This type of business is often quite small in terms of size (as measured, for example, by sales revenue generated or number of staff employed); however, the number of such businesses is very large indeed. Examples of sole-proprietor businesses can be found in most industrial sectors but particularly within the service sector. Hence, services such as electrical repairs, picture framing, photography, driving instruction, retail shops and hotels have a large proportion of sole-proprietor businesses.The sole-proprietor business is easy to set up. No formal procedures are required and operations can often commence immediately (unless special permission is required because of the nature of the trade or service, such as running licensed premises). The owner can decide the way in which the business is to be conducted and has the ? exibility to restructure or dissolve the business whenever it suits. The law does not recognise the sole-proprietor business as being separate from the owner, so the business will cease on the death of the owner.Although the owner must produce accounting information to satisfy the taxation authorities, there is no legal requirement to produce accounting information relating to the business for other user groups. However, some user groups may demand accounting information about the business and may be in a position to h ave their demands met (for example, a bank requiring accounting information on a regular basis as a condition of a loan). The sole proprietor will have unlimited liability which means that no distinction will be made between the proprietor’s personal wealth and that of the business if there are business debts that must be paid.Partnership ? A partnership exists where at least two individuals carry on a business together with the intention of making a pro? t. Partnerships have much in common with sole-proprietor businesses. They are usually quite small in size (although some, such as partnerships of accountants and solicitors, can be large). Partnerships are also easy to set up as no formal procedures are required (and it is not even necessary to have a written agreement between the partners). The partners can agree whatever arrangements suit them concerning the ? nancial and management aspects of the business.Similarly, the partnership can be restructured or dissolved by agre ement between the partners. 17 18 CHAPTER 1 INTRODUCTION TO ACCOUNTING Partnerships are not recognised in law as separate entities and so contracts with third parties must be entered into in the name of individual partners. The partners of a business usually have unlimited liability. Activity 1. 8 What are the main advantages and disadvantages that should be considered when deciding between a sole proprietorship and a partnership? The main advantages of a partnership over a sole-proprietor business are: ? ? ? sharing the burden of ownership; he opportunity to specialise rather than cover the whole range of services (for example, in a solicitors’ practice each partner may specialise in a different aspect of the law); the ability to raise capital where this is beyond the capacity of a single individual. The main disadvantages of a partnership compared with a sole proprietorship are: ? ? the risks of sharing ownership of a business with unsuitable individuals; the limits placed on individual decision making that a partnership will impose. Limited company ? Limited companies can range in size from quite small to very large.The number of individuals who subscribe capital and become the owners may be unlimited, which provides the opportunity to create a very large-scale business. The liability of owners, however, is limited (hence ‘limited’ company), which means that those individuals subscribing capital to the company are liable only for debts incurred by the company up to the amount that they have agreed to invest. This cap on the liability of the owners is designed to limit risk and to produce greater con? dence to invest. Without such limits on owner liability, it is dif? cult to see how a modern capitalist economy could operate.In many cases, the owners of a limited company are not involved in the day-to-day running of the business and will, therefore, invest in a business only if there is a clear limit set on the level of investment risk. T he bene? t of limited liability, however, imposes certain obligations on such companies. To start up a limited company, documents of incorporation must be prepared that set out, among other things, the objectives of the business. Furthermore, a framework of regulations exists that places obligations on limited companies concerning the way in which they conduct their affairs. Part of this regulatory framework requires annual ? ancial reports to be made available to owners and lenders and usually an annual general meeting of the owners has to be held to approve the reports. In addition, a copy of the annual ? nancial reports must be lodged with the Registrar of Companies for public inspection. In this way, the ? nancial affairs of a limited company enter the public domain. With the exception of small companies, there is also a requirement for the annual ? nancial reports to be subject to an audit. This involves an independent ? rm of accountants examining the annual reports and underl ying records to see whether the reports provide a true and fair view of the ? ancial health of the company and whether they comply with the relevant accounting rules established by law and by accounting rule makers. All of the large household-name UK businesses (Marks and Spencer, Tesco, Shell, BSkyB, BA, BT, easyJet and so on) are limited companies. Limited companies are considered in more detail in Chapters 4 and 5. HOW ARE BUSINESSES ORGANISED? Activity 1. 9 What are the main advantages and disadvantages that should be considered when deciding between a partnership business and a limited liability company?The main advantages of a partnership over a limited company are: ? ? ? ? the ease of setting up the business; the degree of flexibility concerning the way in which the business is conducted; the degree of flexibility concerning restructuring and dissolution of the business; freedom from administrative burdens imposed by law (for example, the annual general meeting and the need f or an independent audit). The main disadvantage of a partnership compared with a limited company is the fact that it is not possible to limit the liability of all of the partners.This book concentrates on the accounting aspects of limited liability companies because this type of business is by far the most important in economic terms. The early chapters will introduce accounting concepts through examples that do not draw a distinction between the different types of business. Once we have dealt with the basic accounting principles, which are the same for all three types of business, we can then go on to see how they are applied to limited companies. It must be emphasised that there are no differences in the way that these three forms of business keep their day-to-day accounting records.In preparing their periodic ? nancial statements, there are certain differences that need to be considered. These differences are not ones of principle, however, but of detail. How are businesses organ ised? As we have just seen, nearly all businesses that involve more than a few owners and/or employees are set up as limited companies. This means that the ? nance will come from the owners (shareholders) both in the form of a direct cash investment to buy shares (in the ownership of the business) and through the owners allowing past pro? s, which belong to them, to be reinvested in the business. Finance will also come from lenders (banks, for example), who earn interest on their loans and from suppliers of goods and services being prepared to supply on credit, with payment occurring a month or so after the date of supply, usually on an interest-free basis. In larger limited companies, the owners (shareholders) are not involved in the daily running of the business; instead they appoint a board of directors to manage the business on their behalf. The board is charged with three major tasks: ? etting the overall direction and strategy for the business; ? monitoring and controlling its activities; and ? communicating with owners and others connected with the business. Each board has a chairman, elected by the directors, who is responsible for running the board in an ef? cient manner. In addition, each board has a chief executive of? cer (CEO), or managing director, who is responsible for running the business on a dayto-day basis. Occasionally, the roles of chairman and CEO are combined, although it is usually considered to be a good idea to eparate them in order to prevent a single individual having excessive power. We shall come back to consider the relationship between directors and shareholders in more detail in Chapter 4. 19 20 CHAPTER 1 INTRODUCTION TO ACCOUNTING The board of directors represents the most senior level of management. Below this level, managers are employed, with each manager given responsibility for a particular part of the business’s operations. What is the financial objective of a business? A business is created to enhance the wealth of its owners.Throughout this book we shall assume that this is its main objective. This may come as a surprise, as there are other objectives that a business may pursue that are related to the needs of others associated with the business. For example, a business may seek to provide good working conditions for its employees, or it may seek to conserve the environment for the local community. While a business may pursue these objectives, it is normally set up with a view to increasing the wealth of its owners. In practice, the behaviour of businesses over time appears to be consistent with this objective.Real World 1. 3 reveals how one well-known business has changed its focus in order to improve pro? tability. Real World 1. 3 Profiting from change It speaks volumes for the work done by Kate Swann in turning around W H Smith that when she became chief executive five years ago, the company was being spoken of in similar tems to Woolworths. Comments such as ‘You wouldn’t invent it if you were starting out today’ and ‘What is it actually for these days? ’ were typical among analysts, as they were with Woolies.Indeed, many thought that W H Smith was beyond help and argued that the supermarkets were eating away at sales. Ms Swann has defied the sceptics, achieving an impressive turnaround. The company’s magazine and newspaper distribution division was hived off as a separate entity and new outlets were opened at airports and railway stations – so much so that sales by W H Smith’s travel unit now threaten to overtake those of its traditional high street stores. Lower-[profit-]margin lines, such as CDs and DVDs, have been cleared from the shelves to make way for higher-margin items, such as stationery.The last plank of the strategy was in evidence again in yesterday’s update, in which Ms Swann reported that sales in the nine weeks to January 17 were down by 7 per cent in the high street stores and by 2 per cent in the travel stores, partly because W H Smith is continuing to reduce its exposure to the entertainment category. That was the bad news. The good news was that, although sales overall were down, the reduced focus on entertainment was good for profits. W H Smith made an extra 2p of profit in every ? 1 of sales, compared with the same period a year earlier, a stunning achievement given the deflation hitting the high street.Source: ‘Business big shot’, Ian King, The Times, 27 January 2009, p. 39. nisyndication. com. Within a market economy there are strong competitive forces at work that ensure that failure to enhance owners’ wealth will not be tolerated for long. Competition for the funds provided by the owners and competition for managers’ jobs will normally mean that the owners’ interests will prevail. If the managers do not provide the expected increase in ownership wealth, the owners have the power to replace the existing management team wit h a new team that is more responsive to owners’ needs. WHAT IS THE FINANCIAL OBJECTIVE OF A BUSINESS?Does this mean that the needs of other groups associated with the business (employees, customers, suppliers, the community and so on) are not really important? The answer to this question is certainly no, if the business wishes to survive and prosper over the longer term. Satisfying the needs of other groups will normally be consistent with increasing the wealth of the owners over the longer term. The importance of customers to a business cannot be overstated. Dissatis? ed customers will take their business to another supplier and this will, in turn, lead to a loss of wealth for the owners of the business losing the customers.Real World 1. 4 provides an illustration of the way in which one business acknowledges the link between customer satisfaction and creating wealth for its owners. Real World 1. 4 Checking out Sainsbury’s objectives J Sainsbury plc is a leading food retailer that recognises the importance of customers to increasing the wealth of the owners (shareholders) as follows: Our objective is to serve customers well and thereby provide shareholders with good, sustainable financial returns. Source: Investor FAQs, www. j-sainsbury. co. uk, 8 January 2009, p. 1. A dissatis? d workforce may result in low productivity, strikes and so forth, which will in turn have an adverse effect on owners’ wealth. Similarly, a business that upsets the local community by unacceptable behaviour, such as polluting the environment, may attract bad publicity, resulting in a loss of customers and heavy ? nes. Real World 1. 5 provides an example of how two businesses responded to potentially damaging allegations. Real World 1. 5 The price of clothes FT US clothing and sportswear manufacturers Gap and Nike have many of their clothes produced in Asia where labour tends to be cheap.However, some of the contractors that produce clothes on behalf of the two com panies have been accused of unacceptable practices. Campaigners visited the factories and came up with damaging allegations. The factories were employing minors, they said, and managers were harassing female employees. Nike and Gap reacted by allowing independent inspectors into the factories. They promised to ensure their contractors obeyed minimum standards of employment. Earlier this year, Nike took the extraordinary step of publishing the names and addresses of all its contractors’ factories on the internet.The company said it could not be sure all the abuse had stopped. It said that if campaigners visited its contractors’ factories and found examples of continued malpractice, it would take action. Nike and Gap said the approach made business sense. They needed society’s approval if they were to prosper. Nike said it was concerned about the reaction of potential US recruits to the campaigners’ allegations. They would not want to work for a company tha t was constantly in the news because of the allegedly cruel treatment of those who made its products. Source: ‘Fair shares? , Michael Skapinker, Financial Times, 11 June 2005. 21 22 CHAPTER 1 INTRODUCTION TO ACCOUNTING It is important to recognise that generating wealth for the owners is not the same as seeking to maximise the current year’s pro? t. Wealth creation is a longer-term concept, which relates not only to this year’s pro? t but to that of future years as well. In the short term, corners can be cut and risks taken that improve current pro? t at the expense of future pro? t. Real World 1. 6 gives some examples of how emphasis on short-term pro? t can be damaging. Real World 1. 6 Short-term gains, long-term problemsFT Human beings are bad at learning and changing. It takes a good crisis to drive home what may have been staring us in the face. So what in particular are the lessons for all those concerned with saving, investment, borrowing and lending? For many years, under the guise of defending capitalism, we have been allowing ourselves to degrade it. We have been poisoning the well from which we have drawn wealth. We have misunderstood the importance of values to capitalism. We have surrendered to the idea that success is pursued by making as much money as the law allowed without regard to how it was made.Thirty years ago, retailers would b