In 2012, a couple from Cyprus, Andreas and Elena Ioannou, faced the challenge of recovering their investment in the capital securities of Laiki Bank, the second largest bank in Cyprus. They had purchased the securities in 2009–2010, tempted by their high return. They believed the bank securities were safe investments. On May 22, the couple was shocked to receive a tender offer from Laiki Bank for voluntary exchange of their capital securities into either the Bank’s ordinary shares or a new type of capital securities. As it turned out, Laiki Bank was in serious financial trouble. How should they proceed? Should they wait or should they act fast? This critical incident provides an illustration of the irrational reluctance to exit investment at a loss, known as the disposition effect. Students are also challenged to formulate lessons learned by individual investors in the current volatile markets disrupted by the European debt crisis.
Sarah had a variety of options for college. She could save money by attending a community college close to home for the first two years and then transferring and commuting to San José State University (SJSU). Returning to the University of California, Santa Barbara (UCSB) was her other choice, though she would probably accumulate debt of around $65,000. She wanted the college experience of living on campus away from home at a good school like UCSB. She planned on majoring in environmental studies; environmental jobs could pay around $68,910. The rule of thumb used for debt limits was that debt should not exceed the first year’s income. This critical incident deals with making a choice regarding student debt. For college students, questions such as the following should be considered: 1. How much debt is reasonable? 2. If education is prolonged by working, what is the opportunity cost? 3. How much could parents realistically provide? 4. How frugal can you be at school? The decision involves Sarah’s immediate choice between the low-cost option or returning to UCSB.
This critical incident was about a major dilemma facing a Certified Management Accountant (CMA) and member of the Institute of Management Accountants (IMA) with majority ownership of a recreational marijuana business in Colorado. Ownership of this type of business, that involves marijuana possession, production, and sales, was legal in specific states. At the same time, the business remains illegal under federal law; yet, federal prosecutors have stated a hands-off approach to certain state-level legal enterprises. Is the accountant violating ethical principles of the IMA Statement of Ethical Professional Practice? This incident provides students opportunities to dig into the IMA Statement of Ethical Professional Practice (the IMA Statement). Discussion questions lead students to compare federal and state law concerning recreational marijuana possession and sales. Also, students are put into the position of providing a resolution to the dilemma as if it was their dilemma. There is no right answer. It provides critical thinking and reasoning opportunities because students cannot simply provide textbook answers to their instructors.
Wal-Mart was becoming a key provider of financial services to millions of US low-income consumers at the fringes of the traditional banking industry. It offered check cashing, bill payment, money transfers, credit cards, prepaid cards, small-business loans and an innovative checking account. Although Wal-Mart offered all these products, the firm was not a bank in the US. In fact, regulators rejected several attempts to acquire a US depository institution charter. Nevertheless, through strategic partnerships the retailer made significant inroads into the U.S. financial services sector. In contrast, Mexican and Canadian regulators allowed Wal-Mart to become a chartered banking institution and offer traditional financial products through a network of banking branches and Wal-Mart retail centers. The case asks students to analyze Wal-Mart’s strategy to offer financial services and assess its impact on consumers and competitors
This descriptive case provided an exercise for students to argue, under the applicable legal framework, whether the taxpayer’s purported business travel expenses using a recreational vehicle should be deductible in whole, in part, or disallowed. The case also required students to put themselves in the place of a judge with the flexibility to reconcile and strike a balance between the competing arguments in coming to an equitable ruling. The case involved the interplay of multiple Internal Revenue Code sections and other tax authorities and required some integrative application of tax law. The case provided a presentation of evidence and competing arguments and an appendix explaining the controlling legal principles of the case issues.
A top accounting student was struggling with the concept of capital leases versus operating leases. After looking at the financial statements and notes to the financial statements of two airline companies, she realized that operating leases result in large commitments by companies that are not reported as liabilities on the balance sheet. The student decided to restate the financial information as if all lease commitments were reported as liabilities.
Patrick Kelly’s receipt of the Explanation of Benefits for his colonoscopy served as the catalyst for recollections of his interactions with providers and staff members in preparation for and after his procedure. Some of these recollections raised legitimate concerns about informed consent and price transparency. A review of the Explanation of Benefits reminded the Patrick that even an attempt to explain prices for procedures and services after they have been billed may be difficult to understand. Determining the true cost was further complicated when coordination of benefits was necessary because of coverage by a second insurer.
The Tacoma Art Museum was a regional, mid-sized museum in Western Washington dedicated to collecting and exhibiting Northwest art. The Museum’s leadership had worked hard toward achieving its vision as a national model for regional museums. Elements of the vision included engaging, inspiring, and building community through art. Recently, the Director and the Deputy Director of Finance discussed whether to offer free admission to all visitors all the time. The Director supported the idea of free admission, as she believed it would increase the number of visitors in total and from targeted underrepresented groups. However, the Deputy Director expressed concern over the financial impact of free admission. The decision would require using money from the endowment to cover the lost revenue. The Director and Deputy Director had less than one week to sort through the issues, reach agreement, and to prepare their case for presentation to the Board of Trustees.
Harrison and Joan were working on their income tax return and suddenly Harrison remembered free” ticket vouchers that he and Joan had received as compensation for giving up their airline seats on one of their trips. He had not been notified that the airline had reported these to the IRS, and he wondered if they were taxable income. Did they have to include them in their tax return?
“The Tax-exempt Status of AARP” is a descriptive case study. It covers the aftermath of the issuance of Behind the Veil: The AARP America Doesn’t Know, a 40-page Investigative Report released by Wally Herger (Representative, California) and Dave Reichert (Representative, Washington). This report voiced concerns about AARP’s lobbying practices, royalty income, transparency, CEO compensation structure, and a variety of similar concerns. As a result, the press, American public, and rival political parties engaged in an intense debate over whether AARP was a legitimate tax-exempt organization or a colossal for-profit enterprise. Students are provided an opportunity to analyze the merits of arguments made by each side.