George W Bush is a controversial figure. Two years after leaving office, his policies during his presidency of the United States still stir controversy, both within the USA and around the world.
He has just published his autobiography. Perhaps surprisingly, he appears to be rather frank in his admission that he personally authorised the use of “water boarding” techniques, in which the subject believes themselves to be drowning.
Although no permanent physical damage occurs in this process, it’s designed to be traumatic. The current US president, Barak Obama has banned its use.
The justification given by the former president for authorising the use of torture was that he believed that the information extracted from the subjects of this process saved lives elsewhere.
We’re not commenting on whether we agree with this or not as an ethical standpoint.
For people taking an ethics exam, such as ACCA paper P1, this could be an interesting example of ethical stances and especially the difference between deontological and teleological (consequentialist ethics).
President Bush’s viewpoint is an example of utilitarian teleological ethics.
In teleological ethics, the rightness or wrongness of the action is assessed by investigating its consequences. Utilitarianism looks at the greatest benefit to the greatest number of people. So if great, but non-lethal, suffering of one person saves the life of another, it’s justifiable, even if the act itself may be repugnant to some people.
Compare that with deontological ethics and particularly the three maxims of Emmanuel Kant.
In deontological ethics, water boarding is probably never justifiable.
Deontology looks at the rightness or wrongness of the action itself, regardless of its consequences. It would be possible to express a duty (“imperative”) if it passes the three maxims of Kant:
Consistency: Would it be possible for everybody to follow the rule of “no waterboarding”? The answer here seems to be yes.
Respect for human dignity: Does the rule respect the dignity of others. A no torture rule easily passes this test.
Universality: Would it be possible for somebody to understand that breaking the rule would bring the disapproval of society as a whole? Again, the answer here is yes. If torture were universally accepted as wrong, it would be possible for a violator of that rule to anticipate society’s disapproval.
There are no conclusions to this article. It’s just pointing out an example of the two different ethical approaches and how we are each prone to prefer one over the other in different circumstances.
It could be a good example for people taking the P1 exam to use if asked to explain the differences in the deontological and teleological approaches to ethics.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-11-12 11:39:552010-11-12 11:39:55What's the link between George Bush and the ACCA exams next month?
When small businesses choose their business name, the reasons are often personal. Business names are often a homage to somebody or something special to the business owner.
A fish restaurant, for example, could well be named after a boat that the owner is sentimentally attached to.
This all seems reasonable, but it’s best to choose a boat that isn’t called something like “TGI Friday”, or “McDonald”.
Scott Matthews, aged 24 and from the south coast of England, recently learned this. His restaurant is called “Relentless”, apparently after his father’s sturdy fishing boat.
He says that the logo was simply made up by typing “Relentless” into his word processing software, using an old English script. He chose a black background because he likes black backgrounds.
Recently, he heard from the Coca-Cola company, who have an energy drink with a similar brand name and similar logo.
Mr Matthews claims that his first contact from Coca-Cola came in the less than cosy form of a seventeen page legal document demanding that he change the name and signage of his business.
His reaction appears to have been rather assertive and rather shorter than 17 pages. He’s not saying entirely what he said, but we’re guessing it could pithily be summarised in two words.
This is an example of the civil wrong of “passing off”. If a product has a similar name to another product and is likely to imply endorsement or some other form of customer confusion, then it’s possible to petition a court for an order to mandate the party who got the name second to change their name.
Of course, the court does not necessarily grant such an order. There has to be some evidence of customers being likely to be confused by the similarity.
It’s hard to imagine somebody opening a can of energy drink and being crestfallen at the non-emergence therefrom of a steak and lobster dinner, for example.
However, it’s possible to imagine somebody being attracted to a restaurant because of an apparent association with a better known product, such as an energy drink.
It seems that both Mr Matthews and the Coca-Cola company intend being somewhat relentless in this case. We will let you know what happens if we’re able to find out.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-11-08 05:25:412010-11-08 05:25:41It's a Relentless exercise to choose the name of your business...
Classic Russian novels are famous for being somewhat large.
My copy of Tolstoy’s “War and Peace” weighs in at 1,024 pages. That is a big book.
Some day, I will get beyond page 20.
Dostoyevski’s “Crime and Punishment” is 448 pages. I’m up to page 25 on that one.
According to a recent survey by Deloitte of UK listed companies, the size of IFRS accounts grew from an average size of 44 pages in 1996 to 101 pages in 2010. That’s an annual growth rate of 6%, with a 7% rate of growth in the years from 2005. The rate of growth itself appears to be growing.
So, just for fun, if you’re of a mathematical bent, and assuming that the rate of growth in volume in IFRS accounts continues at its current pace, answer this question:
How many years will it be before the page count in a set of IFRS accounts exceeds the page count for “War and Peace” and for “Crime and Punishment”? The answer is at the bottom of this item.
Within all this bulk (which Deloitte criticises as being “swimming in words”), there is some notably useful information, such as 90% of companies clearly identified an average of 7 key performance indicators, up from 84% in 2009.
4% of companies (2009: 7%) received a modified audit opinion relating to going concern.
Surprisingly, only 35% of companies fully complied with the UK’s Combined Code on corporate governance. That leaves a fair bit of explaining to do, on the “comply or explain” approach.
If you’re interested in the answer to the question of how many years will it be before the page count in a set of IFRS accounts exceeds the page count for “War and Peace” and for “Crime and Punishment” then IFRS accounts, at their current rate of paper busting growth, will be longer than “War and Peace” in 35 years and “Crime and Punishment” in a mere 22 years.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-11-03 08:48:572010-11-03 08:48:57Is it a historical drama? Is it a romantic novel? No, it's a never ending story of...
When you speak with your lawyer, you can say almost anything and be confident in the knowledge that the lawyer will be able to preserve the confidentiality of your discussion.
Most people probably assume the same thing when having discussions with their accountant, especially in the context of discussing tax planning opportunities with a tax advisor.
Unfortunately, English readers should pay careful attention to the decision in a recent case, R (on the application of Prudential PLC) v HMRC, EWCA Civ 1094 if you would like the full legal citation.
This Court of Appeal decision stated that client privilege only extends between a lawyer and a client. This means that any discussion between a client and an accountant cannot be guaranteed to be confidential.
This is an English legal case, which is binding in England and Wales only, but the judgment is based on common law, so is likely to be highly influential in jurisdictions based on the English system globally.
As the accountancy and legal professions increasingly compete, especially in the area of tax advice, this gives a significant advantage to the legal profession over the accountancy profession.
Who would you rather seek advice from: a lawyer who you are confident cannot be compelled to reveal the content of your discussion, or an expert accountant who is unable to promise confidentiality?
If you talk to a lawyer about this then they may well say they were pleased that they had this advantage over accountants.
Note of course though that if they felt like it they wouldn’t have to disclose what was said in your conversation…
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-11-01 01:54:192010-11-01 01:54:19Who can really be trusted to keep a secret? Accountants or lawyers?
Paul Bowtell, the CFO of Europe’s largest travel company TUI Travel will soon be able to go on a very long holiday.
TUI recently announced that Mr Bowtell will leave the company at the end of the year.
Why is this I hear you ask?
Put bluntly, the reason is that he messed things up in a big way when he was in charge of the finances of the company.
TUI stated that they would be writing off £117 million of “irrecoverable balances” and restating their prior year financial results.
£117 million is a significant write off in anyone’s books. The share price of TUI fell by over 10% as a result.
It also highlights one of the challenges faced by organisations that merge.
The write down originates from “failures to reconcile balances adequately in legacy systems in the retail and tour operator businesses in TUI UK”. In other words, back in 2007 when TUI merged with First Choice Holidays they had to integrate different systems and simply didn’t manage it.
Questions have got to be asked as to why they couldn’t reconcile the systems. After all, given there’s been a recession on for a few years there must have been a few IT consultants available to work on the reconciliation of the systems and who would have charged a lot less than £117 million.
Mergers often have problems with integrating areas such as the culture of the companies but it’s clear now that the integration of these IT systems has also been far from easy. Being unable to reconcile £117 million makes for a spectacular suspense account.
Publicity around mergers tend to focus on their advantages, real or perceived, but the behind-the-scenes work that has to be done can be substantial.
It no doubt proved to be a real headache for Mr Bowtell. For his sake we hope that this will prove to be the biggest write off he has to oversee in his career.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-10-29 03:39:202010-10-29 03:39:20Don't worry about the £117 million you can't find. Instead, just go on a nice long holiday...
Although people have been gambling for a long time, the profile of the betting industry has changed dramatically over recent years.
The bookmakers that were seen on many a high street seem to be gradually disappearing.
People are still gambling though but the delivery method of the industry is switching to internet based gambling rather than placing bets at a physical bookmakers.
Ten years ago former professional gambler Andrew Black and former JP Morgan trader Edward Wray started up a betting business that addressed matters in a new novel way.
For years the typical approach to gambling had been where a bookmaker set the odds and it was up to the individual gambler whether or not he or she accepted these odds and placed the bet.
Betfair pioneered the concept of person to person betting whereby individuals bet against each other rather than the bookmaker. Betfair provide the platform for the betting and take a commission on each transaction.
A gambler will say that they want to bet on a certain event happening (or not happening) and if another gambler wants to accept the bet then the transaction goes ahead. Betfair provide the mechanism for this to happen.
This is known as a betting exchange and is a great example of where first mover advantage really counts.
In order for the business model to work there has to be a critical mass of gamblers that are willing to offer and accept bets. Without this critical mass the business simply would not work.
Another example of where first mover advantage has been critical to business success is in online auctions. After all, who are the main competitors to eBay?
Back to Betfair though and it certainly is a good business model. Risk for example, is nicely reduced as the company is not standing to lose on the bet but instead takes a nice commission on each transaction.
So how well has it done over the last 10 years?
The answer to this can be found last Friday when 15% of the company was floated on the London stock market and the company was valued at £1.4bn.
Betfair’s advisors were some of the biggest names in the business and included Goldman Sachs, Morgan Stanley and Barclays Capital to name a few.
Amongst other things their job was to identify the price range of the proposed offer. Initial indications were that it would be between £11 to £14. The final initial public offering (IPO) price was set at £13.
With some of the top investment bankers involved and Betfair being in the gambling industry (which is not necessarily renowned for being generous to gamblers) it was something of a surprise to some people to see the share price rise by nearly 20% in the first day of initial trading after the IPO. After all, this could imply that the IPO was undervalued if there was such an initial jump in price.
I wonder what odds you would have got from Betfair that the IPO share price would rise by 20% on the first day of trading?
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-10-27 09:48:242010-10-27 09:48:24Was it a good bet or not? 10 years and £1.4 billion later and the answer seems to be...
BSkyB is the largest broadcaster in the UK, reporting a profit of £11.7 million on revenues of £5.9 billion in its most recent financial statements.
Its ownership structure is dominated by News Corporation, the transnational media conglomerate owned by Rupert Murdoch, whose other ventures include numerous newspapers and Fox studios in the USA.
It’s fair to say that Rupert Murdoch is a controversial figure.
A review of the most recent financial statements shows that News Corporation presently owns approximately 39.1% of the shares of BSkyB. The next two largest shareholders own 5.02% and 3.01% of the votes in the company.
In other words, resisting the might of News Corporation to impose its will on BSkyB would require something more akin to a peasants’ revolt than a more standard company vote in the AGM.
IFRS 3 defines a subsidiary as an entity that is controlled by another entity.
Looking at the evidence, it would appear that the 39.1% ownership would be enough to give control of BSkyB to News Corporation, on grounds that it would be almost impossible to resist decisions favoured by such a dominant investor.
One such decision was appointing James Murdoch, son of Rupert Murdoch as chairman of BSkyB. Lots of investors didn’t like this, but Murdoch took the helm of the company.
News Corporation produces its financial statements under US GAAP and has always consolidated BSkyB using the equity method, as an associate.
Under IFRS, it would have been arguable that full consolidation as a subsidiary would have presented a more true and fair view, as IFRS uses more principles based recognition of control than US GAAP.
However, a shock recently came to News Corporation, when it tried to increase its holding from 39.1% to a clearly controlling 61%.
The board of BSkyB refused to agree with the chairman that an offer of 700p per share should be accepted. The board defied its biggest investor and said that they would recommend refusal of any offer less than 800p. This appears to have come rather as a surprise to the dominant Murdoch family, who show signs of thinking of BSkyB as their fiefdom.
It’s just a nice example of when apparent control is not control and thus how to be cautious in deciding when to consolidate a company as a subsidiary, even if it generally does everything you tell it to. If there appears to be a chance of the other investors saying “enough” and refusing to give into your will, it’s not a subsidiary.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-10-25 03:48:472010-10-25 03:48:47Forget who's in charge of the TV remote control, who's in control of the TV channels?
For the first time their quarterly sales exceeded $20 billion. In my opinion though the really impressive thing about the published figures was their cash balance.
They have total cash and marketable securities (stocks and shares, etc that can be readily converted to cash) amounting to a staggering $51 billion.
To put this amount of money in perspective, if they took their cash and put it in an empty company and then listed this “cash only company” on the London Stock Exchange, it would not only make it into the FTSE 100 but the “Apple cash company” would in fact be the 18th largest company quoted on the London Stock Exchange!
The blog entry here provides some thoughts on what else Apple could do with their cash if they decided to go on a shopping trip.
One of the growth areas of Apple can be found within their Apps business. Apps are “applications” (in effect software to use on their devices). 3 billion apps were downloaded in the first 18 months after their launch.
Apple has a very slick and professional marketing strategy.
Apple’s iPhone adverts such as the one below famously state “There’s an app for that” and finish with “There’s an app for just about anything”.
As well as having a very creative approach to their advertising Apple has also taken a very commercial and sensible approach to matters.
Last week the phrase “There’s an app for that” was officially classified as a trademark of Apple.
This means they will be able to prevent competitors benefiting from the phrase.
It will probably result in adverts such as the one below by US network carrier Verizon being prohibited. Verizon parodied it’s competitor A&T (a carrier for the iPhone in the US) with this “There’s a map for that” advert.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-10-22 04:19:582010-10-22 04:19:58According to Apple there’s an App for...something that I shouldn't say...
After a long wait and a fair bit of speculation, rumour and expectation, we accountants now know who the next chairman of the International Accounting Standards Board is going to be.
Now, this might not sound quite as exciting as we’d like to make it sound, but this really is very significant. When a new pope is elected, crowds throng the Vatican, there is black smoke, followed by white smoke and a general excitement and drama. Our own global leader was announced by a modest press release from Cannon Street in London (home to the IASB) with a type of modesty that may be typical of our profession.
The successor to Sir David Tweedie will be Hans Hoogervorst, with effect from 1 July 2011.
Mr Hoogervost is a Dutch national, with an interesting background in both academia, politics and business.
Between 1998 and 2007, he held a number of positions in the Dutch Government, including minister of finance, minister of health, welfare and sport, and secretary for social affairs. Prior to this, he served both as a member and senior policy advisor to the Dutch parliament and the ministry of finance. He also spent three years as a banking officer for the National Bank of Washington in Washington, DC.
Mr Hoogervorst holds a Masters degree in modern history (University of Amsterdam, 1981) and a Master of Arts degree in international relations (Johns Hopkins University school of advanced international relations, majoring in international economics and Latin American studies).
This is a varied profile of experience and one that is probably very suited to the man that will take IFRS to the next level of development with the (hopeful) convergence of IFRS and US GAAP. We think that considerable assertiveness and diplomacy will be required in that task!
Whoever takes over from David Tweedie has a considerable job on his hands. Under Tweedie’s leadership, IFRS has moved from peripheral relevance to near global domination. Standards, on the whole, have become much better. David Tweedie is a tough act to follow.
We wish Mr Hoogervorst every success. We are pleased that we have the best part of a year to learn how to pronounce his name properly.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-10-18 01:20:262010-10-18 01:20:26The waiting is over. Say goodbye to David Tweedie and hello to Hans Hoogervorst.
On Tuesday, Microsoft were due to launch their much anticipated Windows 7 phone system. The launch event was scheduled to take place in New York with a start time of 3.30pm.
“Joe O” works for the electronics firm LG who were one of a number of phone companies that were expected to launch Windows 7 phones to coincide with the Microsoft event.
The phone companies however were under strict instructions not to announce anything until after Microsoft’s big launch.
Alas, poor Joe who is based in the UK made a slight mistake when he thought the launch time was 3.30pm UK time rather than 3.30pm New York time. The end result was that LG’s official UK blog revealed details of the phone and what it was capable of doing under the new Microsoft system some 5 hours before Microsoft started the official event.
The error was spotted by LG pretty quickly and the post was withdrawn but it was too late as it had already been picked up by a number of other websites.
Now, picture the scene. You’re part of a project team that has been working on a major project for some time. The “partner” to your company on this project is none other than the mighty Microsoft. The world’s press are anxiously awaiting the launch event and then you press a button which releases the news to the world some 5 hours early.
What would you do?
No, honestly, what would you do?
Deny it? Blame it on somebody else? Say it was a technical error?
Joe did the honourable thing and posted the following on the LG blog:
Yes, that early slip may have been my fault, I may have failed to notice the time zone was EDT, not BST, but let’s not kick a man when he’s down. And I was down, literally hiding under my desk ignoring my constantly ringing phone.
Please consider this my public confession… And remember “to err is human; to forgive divine”.
Showing that Joe has a good sense of humour he also posted the following animated GIF on the blog.
In today’s ever increasing global business environment this is a useful reminder that it’s important to remember the more simple areas of international business.
We all make mistakes though and well done to Joe for his excellent recovery!
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Steve Crossmanhttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve Crossman2010-10-15 01:50:382010-10-15 01:50:38We all make mistakes at work and I know you shouldn't laugh but...
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