Chapter 2 - Business Transaction Analysis and Financial Statement Effects

http://www.financialpost.com/Will+that+cash+cash/3287730/story.html

Summary:

To summarize the above article, it informs us that since the harmonize sales tax is now in effect since July 1, more people have been participating in the underground economy to dodge the increased tax of 12% to 13% than what they used to be paying: 5% of government sales and services tax. Now the underground economy has been flourishing and keeps increasing the amount of people who participate in it has been getting larger as the tax gets higher. As soon as tax surpass the level of 29% there will be no doubt as to how many people who start looking for ways to cheat the system.

Connection:

The connection made from the article and textbook mostly has to do with transactions, or rather lack there of. This is because the article explains that people have now been participating in the underground economy since the increase in tax via harmonized sales tax. The objective of the underground economy is to put down hard, cold cash in exchange for goods or services. It is especially effective and beneficial for people in this business (or so they would think) because there will be no way to track the exchange as there will not be any transactions or accounting activity to show any proof.

Reflection:

In my opinion and as I have learned from taking a class called Money Management 12 previous to Financial Accounting 12, when people try to cheat their way out of paying their taxes or by trying to outsmart the government they will soon have to end up paying more later on. This is because the government will need to generate more money for their expenses and if they are not receiving what they expect with the new taxes, then they will have to increase the tax again. It’s kind of like a cycle of adding on tax every now and then per se, yet some people don’t realize that their ignorance is what’s putting up the tax in the first place. And if this underground economy gets larger, I have a feeling the government will be more strict on regulating such behaviour.

Chapter 1 - Overview of Corporate Financial Reporting

http://www.nytimes.com/2010/06/23/realestate/commercial/23fasb.html?_r=2&ref=financial_accounting_standards_board

Summary:

In summary, the article talks about the Financial Accounting Standards Board and the International Accounting Standards Board on their collaboration of generally accepted accounting principles (GAAP) to the international standards. Two boards have already issued a new standard that requires companies to book leases as assets and liabilities on their balance sheets. This new standard may result in weakening companies in the view of investors, activating debt covenants with lenders and it could also affect credit ratings. Although the change is meant to stop “significant off-balance-sheet activity for leases” looks more like it will ripple effects in the leasing market instead of what the two boards initially expected it to achieve.

Connections:

Three major connections I made between the article and the textbook are: the Financial Accounting Standards Board, International Accounting Standards Board and generally accepted accounting principles (GAAP). The Financial Accounting Standards Board sets accounting standards for US while the International Accounting Standards, an independent, successful, private-sector body who is funded by donations to merge their GAAP standards. All of which was also mentioned in the textbook, to develop a single set of financial reporting standards and to bring a better understanding among countries. Generally accepted accounting principles basically are a set of accounting recommendations and guidelines for financial accounting information, of what both the standards board are getting to accomplish one set to work from.

Reflection:

I disagree that the FASB is correct on trying to resolve the “significant off-balance-sheet activity for leases” by changing the GAAP accounting. This change will not only affect already struggling companies under heavy debt load but also the whole leasing market will be at a grand downfall as well. Analysts are even contributing to the many complicating factors of changing the GAAP accounting. From what I understand the change will just add on to the mounts of debt that companies already have and it’ll just give more complications to those dealing with leases. Although there is kind of a bright side to the new accounting standard of being considered the right to use the space being leased for a certain amount of time and to eventually reduce the debt over the term of the lease.. How long will eventually be? Other businesses might not afford the wait for an eventual reduction, especially with everyone trying to recover from the recession nowadays.

Chapter 10 - Industrial Organization in Canada

http://www.vancouversun.com/news/Ottawa+consult+foreign+telecom+investment/3145148/story.html

Summary:

In summary of this article by CanWestNewsService, Industry Canada announced consultations to reducing foreign ownership restrictions in the Canadian telecommunications industry. The Industry Minister Tony Clement said that their goal is to “encourage investment, innovation and competition in the telecommunications sector for the benefit of both businesses and consumers”. The three options the department wants to be considered: “increasing the limit for direct foreign investment in broadcasting and telecommunications carriers to 49%, lifting restrictions on common carriers with a 10% market share or less by revenue and or removing telecommunications restrictions completely. Only 3 countries have these restrictions and Canada is the most severe.

Connections:

The main connection from the article that’s been made with the textbook is obviously foreign ownership. Foreign ownership is when foreign residents invest in Canadian assets and financial securities. In the article, Industry Canada wants to reduce the foreign ownership restrictions in the telecommunications industry with the goal of increasing investments. If all goes through, then their goals will surely be met especially with the help or input of Canadians. Foreign ownership is important to help the economy going and to attract diverse investments overall.

Reflection:

In accordance to the article and what I’ve read from the textbook I’ve come to the conclusion of voting more for the option of increasing the limit for direct foreign investment in broadcasting and telecommunications carriers to 49% because it would only make sense to take a bigger leap to increasing the carriers. This gives their goal more of a chance to reach in a smaller time frame. And it’s also, an easier way for everyone else in foreign ownership to participate willingly.

Chapter 8 - Stabilization Policy

http://www.vancouversun.com/technology/Beyond+Boomercentrism/2927373/story.html

Summary:

To summarize this article, it was about the baby boomers wanting a better life for their children but even though they have always stated that it hasn’t always been the case. This is because the baby boomers inherited little public debt and they’ll all be retiring all at once, it makes federal and provincial debt both raise to occupying 30% of GDP. And in the future debt and global climate will be the future generation’s problems to solve. Baby boomers consume more than what they can afford and at a pace where the Earth cannot produce resources fast enough to restock those needs.

Connections:

The main connection from the article and text is public debt. The point being from the article of the burden baby boomers are going to leave behind on future generations. This is because when the government borrows money it’ll take quite awhile for it to be paid off and it leads to the debt being left for the baby boomers children to pay off. Although, if spending would benefit future generations then it would be fair for them to help pay for the expenses but if it doesn’t help them then why should they take on the responsibility for other people’s debt?

Reflection:

If you ask me what I think about this situation then I’d say that if baby boomers really do want the best for their children then they’d better start consuming more smartly. They need to keep how much they consume at a level where it’s possible for the Earth to restock its natural resources. Although it isn’t their intention, if this doesn’t happen now by then there’ll be more things for their children to pay for and deal with. But not only do baby boomers need to change consumer habits, so do the government because their priority of spending on pensions will drain out their assets and gain more debt; which will then again lead to future generations to struggle with paying it off and not having any benefits that they will at least gain from all of the spending going on now.

Ch. 5 - Economic Indicators

http://www.bankofcanada.ca/en/speeches/2010/sp290310.html

Summary:

This speech by Paul Jenkins was about repositioning the current Canadian economy to benefit Canadians in the long run which will be done with the support of monetary and fiscal stimulus. Having stated that, the main topic discussed was the “economic environment beyond repair”. For example, the economic landscape, public policy, and some challenges and opportunities that will pose for Canadian business. He went into great detail about the rotation of global demand as the solution to the imbalances of the financial crisis. Although, these estimates are uncertain looking ten years from now the economic landscape will be significantly different than it is today. So the government directs the public policy to shape the outcome to benefit everyone.

Connections:

The main connections I made with this article and from the text is that of gross domestic product, investment and of course macroeconomics. The speech was based on the overall economic landscape of Canada but because of the GDP increasing there’ll be a need for fiscal consolidation to take place; especially, the need for good timing for fiscal consolidation. And investment has weakened in the last ten years to the insufficient “capital deepening” and having capital investment not always integrated into the workplace anyways. Because if they really think about it, are investments being put to their full advantage use?

Reflection:

If you ask me, I really do think that Paul Jenkins is making the right decisions here because he’s looking ahead in the years to come and foreseeing what can become of what we have going on now. His analogy is logical and straightforward which benefits. Within, all the mess ups in the economy you do have to take the time to think about what is really going on in and read between the lines to figure an explanation and solution to the ongoing problems. And that’s exactly what he did. Also, putting in the role of public policy is not such a bad idea either. It keeps things together and consistent.

Chapter 7 - Monetary Policy

http://www.vancouversun.com/opinion/Monetary+policy+should+based+inflation+trends+blips/2601037/story.html

Summary:

In summary, the article linked above talks about the consumer price index rising, how pundits were wondering if the Bank of Canada were going to keep key overnight rates because of the inflation, and if Mark Carney, Bank of Canada’s governor forced to move interest rates before the US (and if done will most likely stiffen Canada’s economic recovery overall). Interest rates do need to rise although inflation pressures down the road of a year or two can be questionable. But actually, the inflation of prices might’ve come from last year’s price drop because gas prices were surely lower last year than it is this year. So the inflation prices had more to do with the past than with the future. In the meantime, the central bank waits for the interest rates as current agreement with the federal government expires next year and for recovery in the economy.

Connections:

The main connection between the article and the text is the monetary policy and the bank rate. The monetary policy is referred to “action taken by the Bank of Canada to alter the money supply, and ultimately economic conditions”. So in the article it’s stating that Canada’s money supply has been growing very much larger than expected because of the inflation in prices overall. People have to spend money more on the increase of gas and even the increase in new car prices leading them to borrow more money from the Bank of Canada. So they think that the only way to control the money being borrowed is to put interest rates up so the spending would be changed more into saving.

Reflection:

I think that the monetary policy shouldn’t be changed suddenly and significantly because it will be a shock to consumers. Especially since the inflations have been sudden as well, the Bank of Canada should take precaution in the changes they do want to make. I’m going to go with the title of the new article and say that the “monetary policy should be based on inflation trends and not blips” because if the inflations happen this time where is it to say that it’ll happen again? And if it does happen again then it might be a better time to change to monetary policy then and not now since they’d know which possible change would be the best for the economy.

Chapter 4 - Government in Canada

http://news.bbc.co.uk/2/hi/europe/8321967.stm

Summary:

This article is about rich Germans and how they’re having a petition for the government to make wealthy German people pay higher taxes. The rich Germans don’t mind the extra expense because they say they have “more money than they really need”. They also want to help out Germany’s economy and the financial crisis that is leading to an increase in unemployment, poverty and social equality. Dieter Lehmkuhl is the main man behind the petition. Signatory Peter Vollmer supports the proposal because he also inherited “a lot of money I do not need” and he also says and agrees that the tax is “a viable and socially acceptable way out of the flagrant budget crisis”.

Connections:

A connection between the article and text is the ability-to-pay approach. Even though the government isn’t the ones who are promoting the higher tax demands the rich Germans themselves see the opportunity from themselves for having the ability-to-pay the extra tax expenses. And they’d like to help Germany’s economic recovery in the meantime anyways. The wealthy Germans might even have benefits-received for the generosity they are bringing to the table from the government but at the same time it might even be a win-win situation for both parties. This is because if the rich Germans are to help out then they would help Germany’s economy and help themselves not have to pay for the governments needs in the long run.

Reflection:

I honestly think that this might not be such a bad idea. Even if it might be from a “made a fortune through inheritance, hard work, hard-working, successful entrepreneurship, or investment” person’s point of view then I wouldn’t mind too much. Especially if it’s just a temporary expense or payment to help boost the economy back up with a result of having a better country overall and to maybe even boost up my own income from the new business I’d be attracting. It can be possible but then again it also depends on how everyone else is going to react to the changes and if everyone else is going to be on the same page of thoughtfulness.