June 2012

Journey through a peer review – reviewing firm approved

Leave a Comment / Peer Review /

Part 3 of my journey through the peer review process.

Previously I mentioned there’s a 30 day deadline from when my scheduling form was approved until I needed to advise CalCPA which firm I would like to perform my review.

Well, I didn’t hit the 30 day deadline. So two days after the deadline I received a reminder saying I have an extra 15 days.

It’s almost like the administering entities have figured out that CPAs don’t do things until they have a deadline staring them in the face. Imagine that!

I’ve now made arrangements with the firm that will do my review. I filled out Exhibit 1, which only took a few minutes.

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Journey through a peer review – reviewing firm approvedRead More »

Journey through a peer review – reviewing firm approved Read More »

How do you overpay for an acquisition but keep the announced sales price? More journal entries to describe the Olympus fiasco.

2 Comments / Accounting, Fraud /

Here are some more journal entries that describe how Olympus moved money in their accounting fiasco.

‘Michael’ asked a great question at re: The Auditors about my guest post on the Olympus accounting fraud. 

The full article with my reply can be found at How Do You Hide A Multibillion Dollar Loss? Accounting For The Olympus Fraud.

Here is his question, with slight editing:

If they actually bought the tiny companies for way more than they were worth, this would not fix their problem, they would just have the original losses plus the new losses on the companies that they overpaid for.

The only way this works is if they claimed to pay $1,000,000 for the companies but in reality only paid $100,000. Is this the case?

For example if they paid $1,000,000 for the subsidiary you would.

  • Dr. investment 100,000
  • Dr. goodwill 900,000
  •      cr. cash $1,000,000

There would be no cash in the subsidiary, just goodwill. So how could the subsidiary purchase the financial assets that were seriously underwater? The subsidiary would have to actually pay the inflated fair value for this to work?

A very good question, Michael. 

I’ll go into more detail on how the money was moved and my read on what summarized entries would be.  I posted my reply at re: The Auditors. Francine McKenna has allowed me to reprint my response. Here is my explanation:

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How do you overpay for an acquisition but keep the announced sales price? More journal entries to describe the Olympus fiasco.Read More »

How do you overpay for an acquisition but keep the announced sales price? More journal entries to describe the Olympus fiasco. Read More »

Another reason IFRS are a really bad idea

2 Comments / Accounting /

All economies, cultures, and societies operate the same way, right?

I just realized that’s a fundamental underlying concept of IFRS. One set of accounting rules can be applied consistently in all nations regardless of the divergence of legal systems, regulatory structures, ethical frameworks, and general worldviews.

I realized that is yet one more severe conceptual failure in IFRS after reading Global Accounting Rules – An Unfeasible Aim by professors Stella Fearnley and Shyam Sunder. David Albrecht has reprinted their op-ed in his blog post, UK Prof and USA Prof Against Global Accounting Rules.

Here is the key aha! sentence for me: …

Another reason IFRS are a really bad ideaRead More »

Another reason IFRS are a really bad idea Read More »

Outline of “small gaap” visible in the distance and it is not a mirage

Leave a Comment / Accounting /

The general shape of the Financial Reporting Framework for Small-and Medium-sized Entities appears in a FAQ from the AICPA: AICPA’s Other Comprehensive Basis of Accounting (“OCBOA”) Project – 2012.

The Financial Reporting Framework will be referred to as FRF. The AICPA describes it as

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Outline of “small gaap” visible in the distance and it is not a mirageRead More »

Outline of “small gaap” visible in the distance and it is not a mirage Read More »