MOVING FORWARD: KASTURI SCHOOL OF ACCOUNTANCY

A PURPOSE
My career is strongly interlinked to the students success. Imagine, if one ACCA candidate graduates, it means a productive, profitable 30years of good career/business venture. That candidate may likely have own family to provide for, siblings to support and not to forget enduring parents to care for. Yes, you help one ACCA candidate to graduate, you help many.

My purpose, "Every ACCA Candidate CAN GRADUATE"

A REFLECTION
Having excess of 12 years lecturing experiences which includes mentoring, motivating and encouraging all ACCA candidates in few tuition centres, last being INTI College (Subang), I am more motivated to seek ways to enhance ACCA influence by bringing in more graduates. Constantly innovating, mentoring and motivating ACCA Candidates to nudge them to realise their personal potential.

A FUTURE
Yes, seeking opportunities on how to fulfil my (career) purpose . I decided to join - KASTURI SCHOOL OF ACCOUNTANCY - having seen its suitable strategy of making education affordable and achievable.

"Anyone can complete ACCA" - in view of its
= no-frills/inexpensive pricing. Starting from RM250 per subject, students obtain weekly classes,
= Kaplan Study Text (ACCA Approved),
= basic amenities like library and comfortable classrooms.
= The attraction is of course expert lecturers who trained and produce many graduates.
= SPECIAL GIFT - Scientific Calculator (for the first 200 students), only applicable to Kasturi College in Bandar Sunway.

If you don't believe, invest RM250 and try it out! "Invest" is the word for its no loss since you will learn, practice and sharpen your exam techniques attending classes. (SEE links below LOCATION MAPS for KASTURI (Bandar Sunway) and KASTURI (KUALA LUMPUR)

I believe, its the one-stop centre where all ACCA candidates can obtain best support in terms of very experienced and seasoned lecturers.

A WORD OF APPRECIATION
When in INTI Subang, I have the support of Mr Daniel Lee, Director of ACCA Division, fellow lecturers-colleagues, admin staff and INTI Central Management notably Ms Joyce Yuen, the President, who worked so tirelessly for the program's explosive growth and success. An experience I will cherish.

Not to forget the most important stakeholder, who made the program a SUCCESS, all ACCA & CAT students who believed that they can WIN. I believe all you students are in good hands- the management that will that will make your dream a reality - A BETTER FUTURE.

A NEW CHAPTER
I will begin a new chapter in January 2010 in KASTURI SCHOOL OF ACCOUNTANCY (Kuala Lumpur City Campus) specialising in:
+ F8 (Audit & Assurance),
+ P1 (Professional Accountant),
+ P7 (Advanced Audit and Assurance).
+ Oxford Brookes University Research Mentoring

I will serve and benefit oversea students too, namely China for:
+ P3 (Business Analysis)
+ F8 (Audit and Assurance)

A CONCLUSION
This new location provides exciting opportunity to assist and support more students to achieve success in ACCA - certainly is beautiful, meaningful and wonderful mission to pursue.

USEFUL LINKS:
time table--:-- http://www.ksacitycampus.com/acca_timetable.htm
Fees-------:-- http://www.ksacitycampus.com/acca_fees.htm
Lecturers--:-- http://www.ksacitycampus.com/acca_lecturers.htm

Location Maps:
Kasturi in Bandar Sunway --:-- http://www.ksacitycampus.com/pdf/PJ_Centre_Map.pdf
Kasturi in Kuala Lumpur-:-- http://www.ksacitycampus.com/location.html

CONGRATULATIONS : F8 PRIZE WINNER in JUNE 2009 EXAMS

Heartiest Congratulations to my student, Mr (Jack)Jian Hua Chew for scoring the highest marks for F8 in Malaysia. He beats thousands of other candidates. I am proud to admit he is hardworking, full class attendance and focused on exam techniques paid off.

If he can do it, so can all of you students. I always share the same passion to support and assist EVERYONE of YOU to pass. The fact that F8 has the LOWEST pass rate (shocking 19% only) in Malaysia pose an opportunity for you. The marking standard becomes relatively low compared to international standard. It means (unfortunately) that the majority of F8 candidates don't have a clue on how to manage and tackle the exam paper. But you have attended my classes, with lots and lots of exam techniques, put you all in better advantage.

To Jack, if you are reading this, though I am happy over your achievement, but this is only a battle you won. To win the War ie pass ACCA, you need to continue be strong, determined and

----- as Winston Churchill say, "Never, never, never give up! I say once again 'Never'." -----




PIC 01: Britain's Prime Minister during World War II




PIC02: PROGRESS IS ALWAYS ACTION - MOVING FORWARD!!





The context of Churchill's admonition was the Germans were 7 years ahead in re-arming their military over Britain who was busy tackling a recession in the 1930's by "DIS-arming". When Germans attacked and goose step over to Poland in 1939, war with France and Britain was inevitable! As we know in history, Never Give Up mentality gave Britain an eventual victory.

TO Jack and all my students,

SO CAN YOU!

I BELIEVE IN YOU!

I KNOW YOU CAN!

P3 Target Practice for December 2009 Exam

Pic 01: Are you ready to meet your opponent? Which are you in the picture?



Are you ready for the exams? Really? Confident? Well, try out the questions below and see how much you can generate as many points (ideally 100 points for a 100% exam) in 3 hours and 15 minutes.

Best wishes
Marcus


Question 1 Case study :
• Accounting firm travels frequently to clients’ office for audit, follow ups and deliver reports
• Problems of
 Late deliveries
 Poor communication with client on audit changes
 Outdated software and incompatibility with clients system
 High labour turnover.
 Loss of confidential documents.
Required :
a) Assess the internal weaknesses and external threats that Marks Accounting face. Note: Your answers need NOT include strengths and opportunities. [10 marks]
b) You are approach to evaluate the possibility to merge and Spencer Accounting firm. Write a report to Board evaluating the proposals risks and benefits. [12 marks include 2 professional marks]
c) Business Process Reengineering is radical, fundamental, dramatic and changes process. Your Director is keen to apply the concepts to solve the above mentioned problems. Use appropriate models to recommend improvement process strategy.
[15 marks include 2 professional marks]
d) Based on Harmon process strategy matrix, evaluate the context of Marks Accounting firm processes. [8 marks]
e) Why QMS and attaining ISO 9000 series will bring competitive advantages? [5 marks]
f) Provide four methods and its implications of financing the new project. [10 marks]

Question 2 Case study :
Bucks Rogers Airline company wish to integrate its booking systems online with rivals. To increase its market reach
Required:
a) Explain the usefulness of V Model and SSADM in the airline context. [10 marks]
b) What are the implications of OUTSOURCING software development? Should company consider purchasing off the shelve software. [10 marks]
c) Outline an appropriate job design for IT employees for the above tasks. [5 marks]

Question 3 Case study :
Seminars Training Centre provide management and accounting courses.

Required:
a) Why consider e-commerce strategy? Any good in adopting CRM? [10 marks]
b) Why appropriate leadership is critical to implementation strategy?[5 marks]
c) What are the advantages and disadvantages of adopting a rational programmed strategy process for firm. [10 marks]

Question 4 Case study :
New shopping mall construction in progress. Discover that building materials are toxic if over exposed. Use substitutes materials, will quickly result in losses for project.

Required:
a) What is the ethical stance that company should adopt? [10 marks]
b) Stakeholders may object to your recommendations. Outline a solution to propose to Board. [10 marks]
c) Explain the usefulness of performance management tool in managing the project. [5marks]

P1 (ACCA) December 2009 Exam Tips

Pic 01: How to balance internal controls, risk management, best practice without neglecting business objectives? Hello? Anybody out there?






ACCA P1: PROFESSIONAL ACCOUNTANT
Lecturer : Marcus Ong




Dear Students,

Take note of David Campbell recent article on internal and external actors. His has tendency to emphasise on ethics and internal 'governance'. Peruse and analyse the questions we have done and not to miss out the past years questions. Certainly useful for getting into P1 Jargon.

Best wishes.

Marcus

Question 1 Case Study:
Utility Services Firm is constructing a new power plant supply located near to forest reserves. Issues are:
 Potential destruction of Flora and Fauna due to construction. Consultants submitted a report on the extensiveness of the damage to government.
 Relocation of nearby villagers
 Government is concerned over political negativity of project
 Investors-clients threaten to pull out if the power plant is not completed in time for the proposed manufacturing plants use
 Media ‘sensationalise’ the environment issue.
 Consultants Project Head is running for political office. Utility firm is invited to a fund raising campaign.

Required :
a) Outline the impact internal and external actors i.e. stakeholders and advise the Board as to how to prioritise the their demands. Include in your comments the CSR approach towards managing stakeholders.
(10 marks)
b) Advise the Board on the usefulness of hiring external auditors to conduct a social and environment audit. (12 marks)
c) On the Consultants involvement in the project:
i. What role does transparency principle play with regard to the dilemma of releasing the Consultants Report? (6 marks)
ii. What professional ethics issues are involve. (4 marks)
iii. Advise Utility Service Firm on how to manage the identified conflicts.
(4 marks)
iv. Evaluate the usefulness of involving NEDs and iNEDs with regard to the consultants’ report. (4 marks)
d) Explain to the Board on setting up an effective internal control system. (6 marks)
e) Professional marks for concise, incisive and organised arguments. (4 marks)

Question 2 Case Study:
Firm is in Furnishing and Design Industry for homes. Board is keen to:
 Enhance employees’ pensions value by using it to buy back company’s share
 Set up special committee to oversee the investment value of Pension Fund. The chairman will head the committee.
 Board opine that Executive Directors’ pay need not be disclosed in Annual Report based on Voluntary codes. A point to note is CEO, CFO pay packages have 65% variable rewards tied to Firm’s share price performance.
Required:
a) From deontological and egoism ethical perspectives, evaluate the implications of using pension fund to support company’s share prices. (7marks)
b) What are the COSO’s based risks you foresee in connection to the fund management?
(8 marks)
c) Recommend an effective Corporate Governance to oversee the fund. (6 marks)
d) What is the implication of adopting the SOX based governance? (4 marks)

Question 3 Case Study:
Poultry industry was recently listed on London Stock Exchange. 85% equity were fully subscribed. Board is grappling and puzzled over the many listing requirements despote being told that Cadbury Report emphasises voluntarism approach.

Required:
a) What are the implications of adopting a Principled based approach in a outside-dominated company? (please see BPP Manual Chapter 2 : Outsider Systems, page 42) (8 marks)
b) Explain a proper Risk Management process relating closely to the industry. (8 Marks)
c) With the recent bird flu scare, advise Board on how to improve internal control systems.
(7 marks)
Question 4 Case Study:
Optical retail chain in England is considering switching spectacle frame supplier to China which offers much lower cost of inputs.
a) Explain the environmental footprint impact and how the firm can report to its stockholders.
(8 marks)
b) Based on AAA model, evaluate the decision to change suppliers. (6 marks)
c) Explain Kohlberg’s moral perspective on the suppliers’ switch. (4 marks)
d) Based on Turnbull’s Report, advise Board on how to set up effective communication system especially with its employees. (7 marks)

FINAL WORD to Students: Need “applications” to reinforce the importance that you do the same! Bear in mind, your opinions from P1 perspectives are tested here, nothing else.

DOs:
 Provide rich varieties of points
 Provide jargons for p1
 Provide sub-headings, short paragraphs
 Provide organised report style format (if required)

DON’Ts:
 Avoid generic statements!
 Avoid blabbering
 Avoid lengthy sentences

Do your utmost best, that is what anyone including yourself could demand from you.

DISCLAIMER OF LIABILITY: while it is good to focus on Hot Topics but to rely on them exclusively is both detrimental to your mental health & performance in exam.

F8 Audit and Assurance December 2009 Exam Tips

I WILL SUCCEED!



F8 : Audit and Assurance

Lecturer : Marcus Ong

Disclaimer of liabilities: While its advantageous to focus on high risk questions i.e. its likelihood that its examined in the coming exam, but a total reliance on them is detrimental to users' mental and emotional health. Discretion is required!

To my students of F8,

We came a long way, with many tutorials, questions and exam techniques discusse. Remember, you have to know the concepts and understand what part of the systems (namely sales/ purchases/ stocks/ cash/ wages) are being tested.

The following target questions are for your further practice and focus on likely exam questions. It prepares you mentally with a ‘draft answer’. In that at least 50% of the exam answer is prepared while you focus on using case study facts to integrate in your answer.

The target questions are actually covered in my questions bank, lecture notes, revision kit with you. Discuss with your class mates if you must.

Do Your Best,
Marcus



TARGET QUESTIONS
Question 1
a) Explain the substantive tests on assets existence and valuation and state the reasons for the audit procedures. (12 marks)
b) The control weaknesses and how the audit procedures be done to ascertain the purchases processes. Recommend improvements to the management. (8 marks)
c) What are the advantages of an audit planning? You may refer to ISA 315 as a guide. (6 marks)
d) How can audit sampling be selected? State 3 methods. (4 marks)

Question 2
a) What are the main changes in ISA330 - The Auditor’s Responses to Assessed Risks. (4 marks)
b) How can analytical procedures be used to enhance audit interpretations in purchases system? (3 marks)
c) What actions incoming auditors can take when to protect their integrity in face of Board’s intention to appoint and replace the outgoing auditors? (3 marks)

Question 3
a) On risk assessment, explain the unusual changes in the Income statement. (6 marks) [refer to June 2008 Question 3 (a)]
b) What are the main duties of internal audit and audit committee roles pertaining to risk assessments? (6 marks)
c) Explain the procedures for debtors circularisation. (4 marks)
d) Discuss the effectiveness of internal control procedures in a small business entity. (4 marks)

Question 4
a) Explain what factors to consider to justify the outsourcing of internal audit department. (6 marks)
b) Evaluate and recommend improvements on current Corporate Governance system. (5 Marks)
c) What are the necessary steps to confirm the valuation of Non Current Assets? (5 marks)
d) Identify and explain the weaknesses perpetual inventory controls system. (4 marks)

Question 5
a) Adjusting and non-adjusting events (6 marks)
b) Auditors responsibilities and audit work needed following the post audit events (5 Marks)
c) Different types of Auditors’ Report and its effectiveness toward shareholders-members modified report (5 marks)
d) What assurances work be done to determine if company is a going concern status? (4 marks)

Other critical topics
 Going concern – audit procedures that involves the future prospects of company
 Audit sampling
 Cut off tests for revenues and purchasing recognition
 Analytical procedures embedded in Substantive tests
 Fraud and negligence – External Auditors’ responsibilities
 Not for profit organizations – completeness, accuracy, cut-off tests on income/donations -and expenditures.
 Adequacy of internal controls
 Small businesses – poor internal controls highlighted

P3 PRACTICE QUESTION

P3: Practice Question


Pictures : Investing in Your Future




Massachusetts University is an old and run down private institution. Though famous for its Business studies program, many students find the place not conducive for studies. The Dean, Alfred, has pushed for an extension annex building with view to increase class capacity. The Board of Directors, was skeptical over the ability to complete on time and if there is sufficient fund. However, with the proposed construction site, nearby villagers object to it since it means in future increased traffic flow through their already congested roads. Investors are keen only if they are convinced that the project is translated to higher tuition fees, hence better returns on investment.

The business program at Massachusetts does not simply focus on the basic skills a student will need to succeed in business, but also shapes the student's character as a whole. One of Massachusetts’s goals is to develop students into responsible and knowledgeable "global citizens" and the business school takes this aim to heart. Not only are business students required to take necessary courses in accounting, finance, management, etc. but also have to take courses in business writing, speaking, and ethics. The business school also encourages students to meet the challenges and opportunities created by globalization head-on by fostering study-abroad opportunities and travel courses. In addition to the business school's specific requirements, each Massachusetts student receives a liberal arts education covering many subject areas. I really believe that the strength of the business school's curriculum combined with the broad education I received in other areas of study has given me a more well-rounded perspective of the world and the problems I will face in business and in life.

Jack Escrow, senior lecturer, argued that hardware (buildings) should be complemented with software literally. A campus wireless network facility would be just fine and a revamp of administration software to better track students data, compilation of research objective and general accounting administrative purpose.

Required:
A) Focus and advise Massachusetts University Board on implementing the new construction project. [15]
B) Why should the Board be concerned with the objections of stakeholders? Identify them and explain their impact on the project. [10]
C) evaluate the implication that Massachusetts University should consider purchasing a standard software package. [10]
D) justify to management that Massachusetts University need to have its own customized software. Propose an action plan as to how to proceed with it. [15]

PETRONAS' Corporate Governance

Pic 01: The twins that made Malaysia famous


Pic 02: The cash cow for gas station owners



Pic 03: Hassan Merican, Chartered Accountant, the CEO of Malaysia's largest and most globalised company



Pic 04: Ladies, a useful fact for you? Oil & gas industry has smartest,fit-test and good looking engineers than any industry. I know, because my younger brother in ONE! haha!


P1 (ACCA): OPEN BOOK TEST
- Strictly for exam practice in P1 (Professional Accountant). The case study is “sensationalise” to allow scope of corporate governance recommendations.

A DECADE after opening, the Petronas Twin Towers in Kuala Lumpur are no longer the world’s tallest. But Petroliam Nasional, the company that built them, continues to grow. It exports lots of liquefied natural gas (LNG) to booming Asian neighbours and owns the world’s largest fleet of LNG tankers. It is also expanding abroad: last year operations outside Malaysia brought in 42% of its M$264 billion ($77 billion) revenue, up from 35% in 2005. Foreign oil giants are keen to team up with it in risky places like Iraq. In short, Petronas is a successful example of a national oil company, the government-owned entities that collectively hold some three-quarters of the world’s proven reserves but are prone to waste and mismanagement. Yet it still faces a peculiar set of problems tied to its state-owned status.

Like oilmen everywhere, Hassan Marican, Petronas’s boss, is busy trying to pare costs in a global slump. From his perch on the 80th floor of Tower 1, he sees little sign of a sustained recovery in demand. He has asked contractors to cut costs by 30% after profits fell by 14% last year, the first drop in seven years. “Everyone knows how much we’re being squeezed,” he says.
But the squeeze comes not just from falling oil prices. Malaysia’s federal government is a needy owner: last year Petronas paid out 45% of its revenues in dividends, royalties and taxes. A yawning budget deficit this year will require further generosity. The firm also sells cheap gas to local industries and manages to keep petrol prices in Malaysia affordable.

Mr Hassan insists that this is not a drag on investment. Petronas plans capital expenditure of around US$12 billion this year, mostly on exploration and development—a similar level to last year. Investors seem happy to stump up. In August they snapped up US$4.5 billion in Petronas bonds, its first issuance since 2002. Moody’s, a rating agency, considers them more secure than Malaysia’s sovereign debt. However, there was an admittance from certain management quarters, that the there was an underestimation of gas reserves, misaligning the exploration investment which was biased toward oil extraction. The budget figure was allocating 70% of investment in oil and 30% on gas reserves, but as it turns out, this is an underestimation of gas reserves. It should have an additional US$3.6 billion exploration and development. A clear shortfalls in cash call, and Pertronas may have to make another debenture issue. This is unpopular as with the rising interest rates, prove expensive and squeezing the profits further. Media has criticise the management for misleading the public as evidence of weak internal controls especially on reporting to the public.

Mr Hassan says state ownership does Petronas no harm abroad, and its experience as a regulator is a selling point. He describes the firm as a “nationally owned international oil company”. Roughly a fifth of its 39,000 employees are non-Malaysians. As domestic output tapers off, this ratio is bound to rise. But Petronas cannot match the salaries dangled by rivals, since it sticks to Malaysian pay scales.

In part, that is a political decision. Petronas’s sole shareholder is the office of the prime minister, and the firm, says Mr Hassan, is “aligned to nation-building”. Critics say this leads to spending on prestige projects popular with politicians, like the towers, which were slow to fill up, and Putrajaya, Malaysia’s flashy new capital. But Mr Hassan points out that the towers are now fully rented. All investments, he says, are judged on their commercial merits.

Petronas’s board has not even one independent director to bear him out. Mr Hassan, already chief executive, became the acting chairman in 2004 after his predecessor died. His contract expires in February, 2010. That will give the prime minister, Najib Razak, an opportunity to make an appointment that proves that the firm really is run on a completely commercial basis. Dr Merichan a member of Parliament remarked, “I want risk awareness and cost consciousness embedded in Petronas culture, as we should tighten our belts and aggressively seek business expansion to alleviate assist Malaysian economy from the doldrums.”

Required:
(a) Define ‘transparency’ and evaluate its importance as an underlying principle in corporate governance and in relevant and reliable financial reporting. Your answer should refer to the case as appropriate. (10 marks)

(b) Evaluate the relative advantages and disadvantages of strategic risk management committee being non-executive rather than executive in nature. (7 marks)

(c) Explain the meaning of Dr. Merichan comment: “I want risk awareness and cost consciousness embedded in Petronas culture, as we should tighten our belts and aggressively seek business expansion to alleviate Malaysian economy from the doldrums.” (5 marks)

(d) Critically discuss FOUR principal roles of non-executive directors and explain the potential tensions between these roles that Petronas’ non-executive directors may experience in advising on the disclosure of the underestimation of the oil reserve. (12 marks)

(e) Draft a letter for Hassan to send to Malaysian government to include the following:
(i) why you believe robust internal controls to be important; and
(ii) proposals on how internal systems might be improved in the light of the underestimation of oil.

Note: four professional marks are available within the marks allocated to requirement (e) for the structure,content, style and layout of the letter.
(16 marks)


PS: answers will be provided in the Revision Class.

Accountant's Job Prospects

I see everyone of you ACCA candidates as a SUCCESSFUL GRADUATE. I decided to enlighten or share with you on the prospects of being an accountant and related fields that require your [future] expertise.

I am pleased to link up with a useful site called http://www.accountantkey.com/. The creator is my talented friend, Mr Bill Low. I certainly hope you all can get good information on
- what is audit work like?
- what is happening to the audit tax industry?
- useful tips and the going on pertaining to Big 5 Audit firm.
- imagine, an AUDIT Partner charged with fraud. After the fall of Arthur Anderson, anything can happen!!

Please also enjoy and read up on all Business related articles links on the side bar, so crucial to P1, P3 and P5.

Work very hard today for a better tomorrow!!

Enjoy and best wishes.

100th POST: The Failure of Corporate Governance in Banking Sector

Pictures : Fat Cats, nickname to greedy directors that weren't governed effectively




-applicable to P1 (ACCA)
My Blog's 100th POST! Time flies. Experience increases. Expertise sharpens. These bound to happen, as lecturers or students alike when you do research and explain your analysis. I must say, more than 12 years in lecturing profession has been enriching in knowledge and enjoyable in teaching/guiding my students to ACCA SUCCESS.

Let's see the article below extracted from Economists.com. Read it and see what recommendations you can forward to improve the Corporate Governance. The bankers - fat cats have been notorious in taking 50% of accumalated profits past 10 years and leaving 50% for its owners. When the finance sector collapsed, causing the destruction of billions of shareholders' wealth, these fat cats Directors cooly walked away unscathed!

The governmments namely UK & USA scrambled to pump in billions of dollars aid to prop up the banks. As a side note, Dr. Mahathir has been critical of these, as he reasoned that taxpayers money should be used to help the victims namely customers that are too highly geared, and not the very people/bankers who caused the collapse.

This bankers came back and happily declare unashamely exorbitant amount of remuneration. City of London's bonus has increased 50% to £6 billion in 2009!

In other words, shareholders take the risks and if there are profits, we (bankers) take, if Losses then you take it mentality is pervasive. Read the article below and think of the question:

How can the corporate governance on the remuneration system be improved? (8 marks)


It needs more than indignation to put brakes on bankers’ pay

LORD MYNERS, the City minister, is allegedly worth £30m ($47m). He is an unlikely tribune of the people. Yet he has been sounding off, more vociferously than his colleagues, about “unacceptable” pay deals for bankers. Derivatives traders are not footballers with unique talents and “should not be paid as though they are”, he said last month. More recently he has railed against “market failure”, accusing big clients of investment banks of not challenging the fees and margins they are charged. The crisis does not seem to have affected the way bankers are rewarded. Lack of transparency makes them seem the more villainous. “The nation is angry about this. I’m angry,” says Lord Myners.

But such attempts at moral suasion are not working, and those in authority seem reluctant to do more. “We are not an incomes regulator,” says Hector Sants, chief executive of the Financial Services Authority (FSA). The watchdog’s only sanction is to demand more regulatory capital from those banks whose pay policies appear to be putting their firms at greater risk.

The Treasury could influence matters at RBS and Lloyds Banking Group, two big banks in which it has substantial shareholdings, but is reluctant to micromanage. There was not a murmur when RBS hired a head trader for a rumoured £7m in total. The government worries that any attack on bankers’ pay could drive financiers offshore, depriving the exchequer of much revenue. City bonuses, which dropped from £10 billion in 2007 to £4 billion in 2008, could bounce back to £6 billion this year, says the Centre for Economic and Business Research (CEBR), a consultancy.

They mirror the health of a financial-services sector that in the good times brought in up to £67 billion in annual tax revenues, estimates PwC, an accounting firm. This fiscal year the figure could drop to £39 billion, says Douglas McWilliams at the CEBR, although banks’ recently buoyant business may increase it. A windfall tax on profits, discussed by both government and opposition, might put any recovery at risk. So could the slightly softer option of preventing banks from offsetting past losses against future tax bills.

The reluctance to bash bankers’ bonuses stems from recognition that wholesale finance is a global business. Bankers are highly mobile, says Marcus Agius, chairman of Barclays. He argues that banks in Britain must be free to pay as much as those elsewhere, but says he is “agnostic” about what that level should be.

National and international proposals to reform pay at regulated financial firms are similarly agnostic. They mostly do not spell out how much public disclosure there should be of big pay packages, other than those for board members. An exception is the communiqué from the Group of 20 (G20) big countries in September, which requires a detailed breakdown of the remuneration of “employees whose actions have a material impact on the risk exposure of the firm”. Yet that measure is unlikely to be implemented, even though the big British banks and the London-based operations of global investment banks have agreed to it.

The FSA, for its part, is not bothered about public disclosure as long as it has the information itself. Sir David Walker, a former central banker charged with an official review of bank-governance practices, has suggested that bands of remuneration for heavy hitters outside the boardroom be disclosed. It seems that banks, in the absence of much more than appeals to their better nature, will be setting their own benchmarks as and when they please. Barclays began a review of its remuneration policies in 2008. It remains unfinished.

Source: www.economist.com, 2009

Canon may follow Xerox's Acquisition trail –Awaiting Disaster?

- related to P3 (BA)

P3 (Business Analysis, ACCA) Paper in action
Many businesses failed to ask a simple basic but paradoxically difficult question, “What business are we in?” using visions, mission statement and corporate objectives are mere tools to communicate but they fail when Board lacks the commitment and drive. Worse yet, according to Sally Yeung and Andrew Campbell, such statements made are mere ‘lip-service’.

The case study below shows how a distressed company, Canon, tries to re-identify itself. It didn’t want to sell boxes of Information Technology equipment but takes a step further in saying, “Why customers need us?”

In P3 (Business Analysis, ACCA) Paper, there is a real chance of this type of question tested. So familiarise yourself with this topic from the excerpt edited report. Enjoy...

Following the Joneses : Canon’s re-positioning process
Recall Porter’s critique that acquisitions generally destroys shareholders’ value. Well, despite empirical evidence, many firms never learn.

Canon operation in Singapore is "open" to opportunities to acquire suitable business process outsourcing (BPO) companies, as well as to strengthen partnerships to boost its imaging business, according to senior executives based here.

Alan Chng, South and Southeast Asia vice president of Canon's business imaging solutions, noted during a media gathering here Wednesday that the Japanese company "has intentions" to make market moves similar to its rivals in order to gain entry to the BPO market.

Following Xerox’s model
Competitor Xerox announced it would acquire BPO player Affiliate Computer Services for US$6.4 billion. The transaction helps Burns expand into a market Xerox values at about $150 billion and gives her a foothold in managing administrative operations for multiple arms of the U.S. government. The number of workers at the world’s largest maker of high-speed color printers will increase to about 128,000.

“With this combination, our tool box just got a lot bigger,” Affiliated Computer CEO Lynn Blodgett said in an interview. Blodgett, 55, will run the business as a unit of Xerox. Almost 90 percent of Affiliated Computer’s new business contracts last year came from outsourcing, or managing operations for other companies. Total sales rose 5.9 percent to $6.5 billion in the year ended June 30, 2009. Xerox has posted sales declines for three straight quarters, with analysts projecting a fourth, according to the average of estimates compiled by Bloomberg. Global spending on technology products will fall 8 percent this year, Goldman Sachs Group Inc. said this month. Xerox has about 54,000 employees, and Affiliated Computer has 74,000 workers. Xerox said annual cost savings from the deal will increase to as much as $400 million in three years.

Exam Note: The following highlights that must be in your answer script!
But the downsides are it doubles Xerox debts, cause Shareholders uncertain and selling off its shares, took over Affliated Computer much larger employees head count and causing internal integration problem. (please note that Porter’s famous Golden Triangle theories are much applicable here)


Canon’s expansion mode
"Definitely, it's time for us to go into this area," said Chng, adding that candidates suitable for acquisition could be businesses in Asia that have synergies with Canon.Lim Kok Hin, Singapore senior director and general manager of Canon's business imaging solutions and business solutions, added that the company may also strengthen or expand its partnerships to include such services in its portfolio. "At the moment it looks like we're wide open to [both] options," he said.

Customers, explained Lim, often do not expect a single company to do able to do everything, and are "comfortable enough" to approach Canon as a "turnkey operator".

The drive toward a "solutions" approach, or packaging software and services along with hardware, has been intensified over the last few years as companies were no longer interested in "buying a box". Instead, Lim said, they want to solve business problems. For instance, Canon recently worked with a large tour operator in Singapore to implement on-demand printing based on personalized customer itineraries. The initiative helped minimize wastage as it eliminates the need to store as well as produce standard travel brochures in bulk.
As part of its shift toward "solutions" rather than device sales, Canon officially unveiled a free audit service, where it provides a "health screen" of a customer's imaging environment, said Chng. The company has so far conducted an audit of its own office premises in Singapore, as well as a few other companies in the island-state. Canon will continue to expand the service to other markets in the region, he added.

Verdict: All the best, Canon. There are much divorces (de-mergers) but that didn’t stop people from marrying (Mergers exercise), did they?

Government's TOP 10 Recovery Strategies

Pic 01 (left) : Hmmm... is it Debit or Credit?
Pic 02 (Right): Boys, oh boy... you have a long way to go



Recession may not be a bad word. Japan, South Korea experienced economic disasters after World War II and Korean War respectively. WIth zilch and only armed with human spirit, both countries grew phenomenally over 3 decades since the 1950's.

TOP 10 Actions
Having seen all of the above, Malaysian Government can do wonders to turn around the economy:

1. At least a 9% budget deficit spending to compensate the weak aggregate demand of consumptions and investments. Note this must continue for at least 3 years, as threats of inflation is low due to liquidity trap situation which is an increase in money supply may not increase threat of interest rate hikes.

2. Keep interest rates low to below 2% ie many local banks offering rates at BLR less 2% with intention to stimulate loan demand.

3. Focus on infrastructure development in lagging states especially Penang, Johor, Kelantan and Trengganu. For eastern coasts states, consider high speed trains to link Johor Bahru to Mallacca and Penang mainland link to Kuala Lumpur. Conduct analysis of volume traffic taking PLUS highways in order to evaluate the feasibility of mammoth tasks.

4. Speed up development of internal cities Monorails or Multi-rails to improve public transport so as to substitute car purchases. Malaysians have the 3rd highest ratio of car per population in the world. Too much discretionary income spent on cars which leads to weak demand for other consumables like shopping, holidays, hairdos, fashion wears. Tap on local 27 million population leads to stronger domestic demand.

5. Offer 100,000 green cards per year to attract foreign talents from Indonesia, India and China. Please note its only 0.3% of population, so bringing in foreign nationalities will not bring political strains amongst races.

6. Liberalise SEVEN (7)states economy. Allow each state to focus on their areas of expertise in their own unique industries such as:

i. Selangor – focus on banking and finance
ii. Penang – focus on high end semi-conductors, fabless chips
iii. Kelantan – focus on Islamic Universities studies, don’t forget this is largely untapped market witn Muslim Population of 1.6billion worldwide
iv. Trengganu – bio-tech agriculture on tobacco, oil palm refineries
v. Johor – focus on Iskandar Project and ancillary industries supporting it
vi. Mallacca – tourism and patient-care tourism
vii. Pahang – resorts leveraging on virgin tropical jungle, have resorts living for high end customers. Open up and liberalise gaming-casinoes. Compete with Macau for Chinese tourists. Offer Air Asia free landbank in middle of Pahang as feeder line into its casinoes resort.

7. Note that Malaysian professionals overseas are reluctant to return. Offer ZERO tax income holiday for 3 years if they return, ZERO tax on car owned and ZERO stamp duties for homes they purchase above RM500,000. Malaysians likely to return for sentimental reasons like coming back because of Bak Kut Teh,Roti Chanai lepak corners, Satay.

8. Re-train and re-position 30% 1.1million civil servants to productive sectors like fisheries, cab driving. We have one of the highest civil servants:private section ratio in the world for a ‘free’ economy. A waste.

9. Offer licenses to foreign institutional funds to invest in Bursa Malaysia. Have in place, links to universities that supply Finance Graduates, Info tech capable of broad band communication worldwide, perks for foreign talents as expatriates.
The amount of economic turnaround is fantastic, but all go to waste with poor implementation! Thus governance is critical by setting up :
i) Economic –committee for each state. That will be 7states in Peninsular and still counting. Members should be from tycoons, university researchers with PhD in related fields – note special emphasis and invitation to foreigners to chair the meeting if no local PhD candidates (likely the case) are available.
ii) Transparencies in providing statistics. Beef up Economics Department and Bank Negara Malaysia to provide analysis. Make available online
iii) Interests rates decision should be based on at least 7 top economists in the country and by vote determine the direction.
iv) Everyday, and i repeat, everyday, share success stories of top entrepreneurs with heavy biased toward successful Bumiputeras. Change populace mindsets that its the people and not the government that make a difference in nation’s future. There are many, many successful Bumiputeras professionals and entrepreneurs, keep on if possible a million times a day to disemminate this news.

10. Stop politicking by making empty promises.

What it means for ACCA graduates?
To all my valued students of INTI College Subang Jaya, you see everything works for you and your future. You can capitalise on immense opportunities ahead when government stimulates the economy creating high value jobs. Its only YOURS when you become an ACCA graduate. The economy needs highly skilled intellectuals and professionals. So, work hard for 3 years and reap the rich rewards for next 30 years!

Invitation
All you ACCA candidates, your comments i.e. constructive comments on:

I) What the government can do?
II) Which industries are key?
III) What would you have done, if you are the CEO i.e. Prime Minister of Malaysia?

Nobel Prize-winning economist – Horrifying Prognosis

From left to right:
Pic 01 - 03 : Great Depression of 1930s. People lining up for food rations from USA government. We don't hope for this in Malaysia, which is only a developing nation. So shouldn't you ration your pocket money? Stretch it further?

Pic 04: Renown Economist, Paul Krugman


Nobel Prize-winning economist Paul Krugman said damage from the U.S. recession may persist “for a very long time,” with no clear engine for renewed growth.

“I’m really quite scared that we could muddle along,” Krugman said in a lecture today at the London School of Economics and Political Science. “I really do see the possibility of a global version of the Japanese ‘lost decade’ without the prospect of an export-led recovery. This could be unpleasant for a very long time.”

U.S. stocks erased a decline yesterday after Krugman said the economy will probably emerge from the recession by September. Recent reports showing smaller declines in housing and manufacturing and fewer job losses have reinforced forecasts that the slump may end this year.

“The ‘oh-my-God-the-world-is-ending’” phase of the economic downturn is over, and financial markets are “stabilizing,” Krugman said today. Still, “the employment situation is continuing to look bad and will probably get worse,” he said.
Krugman said he has “no idea” what will power the U.S. out of recession. The U.S. fiscal stimulus package, while not “trivial,” isn’t large enough to fuel sustained growth. Also, with the global economy in the doldrums, the U.S. can’t rely on a revival from a surge in exports, he said.

Even the end of a recession “doesn’t mean the same thing as it did in the old days,” said Krugman, a Princeton University economist. Unemployment may remain high longer than after the end of prior economic contractions, he said.
The National Bureau of Economic Research, based in Cambridge, Massachusetts, is the official arbiter of U.S. recessions and expansions. Robert Hall, the head of the NBER’s business-cycle-dating committee, said last week that it’s “way too early” to say the contraction is over.

What can and is Malaysian Government doing about it?
What is in store for upcoming ACCA graduates?

Coming soon...

Recession- What it means? Part II

(left to right)
Pic 01: You think this is tough, boy, wait until you reach ACCA level
Pic 02: Arrgghhh...This kids drive me up the wall.
Pic 03: To our happiness...Pic 04: Beautiful, Wonderful and Meaningful evening
Pic 05: President Obama's deficit spending is too little, too late

Recession Explained
Why do factories close down despite that high quality products are churned out? Why hardworking people are laid off from work, a waste of human talents that go unemployed? Why good location properties have few tenants? Puzzling as these questions are, but the economist will say it’s due to recession. Inspired and horrified by Economist Nobel Laureate Paul Krugman’s book – The Return of Depression Economics, allow me explain it in simple terms:

Romantic Couples and Babysitter Couples
Say in Singapore, there is this exclusive club where couples are of the upper middle income earners. These couples have children and they don’t trust hiring babysitters. This is inconvenient if couples want to spend romantic evenings out, we call them romantic couples. Since members are long friends and trust each other, they devise a system to help each other out. Each couple will be given fixed number of coupons. Romantic couples will use their allotted coupons to ‘pay’ babysitter couples. If romantic couples ran out of coupons, then they will have to offer other couples to babysit for them to earn their coupons. This system works fine if couples are regularly taking evenings out. One would expect it, if its Valentine Day, Anniversary Celebration, Engagement parties (normally wives have many ideas and occasions to celebrate).

What if couples decide that they need to accumulate the coupon by offering to babysit for others? The number is more than romantic couples? You will have more savings of coupons as fewer couples are taking romantic evenings. Since active romantic couples would quickly finish their coupons, then they need to stay home to offer to babysit. But since other couples in general are staying at home too, the coupons are not circulating. The frequency of evening out for romantic couples will fall as they are short of coupons. So they have to offer to babysit. Couples with surplus savings of coupons, seeing that there are fewer couples go out, may want to ‘conserve’ their precious savings and they too prefer to stay home.

We have most couples then staying home, causing a fall in frequency of romantic outings. There is a marked drop in demand for babysitting coupons even though couples are offering to babysit. This fall in demand compared to previous period is an output level receding, thus a recession.

Paradox of Savings
Here is the paradox, the more couples ‘save’ coupons the less the coupons are circulated, the lower the demand for babysitting services. However, the opposite is true, say each couple on average takes 4 times romantic outings to 9 times a month, then the coupons will circulate around from 4 to 9 times, creating more opportunities for couples to take evenings out.

The exclusive club may issue new coupons to ‘stimulate’ demand but the figure may be deemed too small to match babysitting couples.

Recession hits an economy, when spenders i.e. consumers, investors and government decide to spend less which translates to aggregate fall in demand. Even if McDonalds, Coca Cola and Steven Spielberg movies offer fantastic products or services, they will still have deteriorating business. Worst scenarios are once healthy firms face shut down risks. The speed of spending as dropped significantly causing less demand for goods and services.

In other words, we have healthy factories, hardworking people and good infrastructures, but a slow down in spending could not justify the use of these resources, causing unemployment and suplus resources.

Point to note is governments worldwide like America is issuing new ‘coupons’, by increasing money supply to boost demand. How? Allowing banks more fund to extend loans, credit and hire purchase. But there are few borrowers and spenders to use the new funds. Not giving up, President Obama led the spending by committing USA Government to projects worth US$797billion. This large in itself but is paltry compared to the trillions of dollars lost due to reduced spending from consumers and investors.

Malaysian Government pledged to spend RM1bilion (US$1=RM3.50) a month but compared to the size of loss output due to fall in demand or speed in spending, again its insignificant. Already Multi Nationals firms are announcing job cuts, investment postponements and cutting costs all of which worsen the already weakened demand.

Bright light at end of tunnel?
Like all recessions, they recover to healthy growth. Why not consider investing in upgrading?your qualifications? Buy good robust properties? Invest in businesses? all in anticipation of returning days where couples go out for romantic evenings.

In my next article, i will post analysis by renown economists who predicted darkening economic days ahead.

Recession- What it means? Part I

Pic 01: Late USA President on recession definition. (By the way, his previous occupation is an actor!)

“Recession is when your neighbour loses his job, depression is when you lose yours.” (Ronald Reagan, 1985)

Youths favourite hangouts -From Left to right:

Pic 02: Starbucks cafes

Pic 03: Papa Rich cafes

I observed many youths ever so frequently patronise Starbucks, McD, Kopitiam in Subang SS15 areas. I can’ help it but think, do these people know the concept of recession? Perhaps their pocket money is unaffected. Ignorance may not be bliss, as for the Law often use “Ignorantia (juris) non excusat” which translates from Latin “Ignorance is no excuse”. Recession is bad and scary, indeed!

Year 2008, you have undoubtedly heard the term "recession" mentioned on media (unless you are too busy indulging in Female, Cosmo, Male Fitness Magazines). You've probably heard of global recession starting in United States with sub-prime property crisis to financial meltdown that spread like an economic H1N1 virus across globe.

How destructive is the recession?
North America’s economy has loss US$750 billion in output of goods and services. The Stock market was badly hit with loss capitalisation of US$1.2 trillion. To add to the pain, property prices and financial crisis in the banking finance sector cost the largest economy another US$2.1 trillion and over US$1 trillion. President Obama tried to stemmed the losses by injecting a paltry US$797billion, all of which is too little and too late.

On home front, Malaysia’s economy shrunk by RM37.6billion (US$1=RM3.5) for year 2009 thusfar. That is equivalent of providing free electricity, telephone and Astro for the entire population for the whole year!

What exactly is a recession?

First off, to understand what a recession is, you need to understand that economies go through periods of growth and contraction.By textbook definition a recession is two consecutive quarters of negative GDP growth. GDP is "gross domestic product", which is defined as "the total market value of all final goods and services produced within the country in a given period of time." So say in one quarter of year, the economy sells 1,000 movie tickets, but the next 2 quarters it fell to say 900 and 750, then it is a contraction which is recession. GDP growth is measured, as well as real personal income, employment, industrial production and wholesale-retail sales.Second - based on that strict definition, in North America the 2001-02 recession technically wouldn't have been a recession, as there weren't two consecutive quarters of negative GDP growth. But it was difficult year where contraction happened in non-consecutive quarters

To be honest, there is no real rock-solid formula in terms of determining whether or not we are in a recession and for how long it has lasted. If there was a rock-solid formula, we wouldn't need the Malaysia Industrial Economic Research, Malaysia or National Bureau of Economic Research, USA to tell us that we are in a recession.

"A recession is a period of reduced economic activity. It is a contraction of the business cycle which is marked by a significant decline in economic activity which lasts more than a few months."Malaysia has suffered through a number of recessions since the beginning of 1980, 1985, 1997-98 and now the present recession in 2009.

Opportunities amidst threats
The Mandarin word ‘wei ji’ means there is opportunities amidst threats or bad news. This is something that youths should exploit, for that matter all of us. To the man on the street, recession is a time where jobs are scarce, money is tight and future is uncertain. To my horrified observation, then why are youths spending behaviour is so wild as if treating recession as nothing more than a road signboard? Youths should seek opportunities now by investing in say Stock Market or Properties when the interest rate on loans are low and prices are depressed.

Pic 04: Virgin Founder - Billionaire Sir Richard Branson

Pic 05: Virgin's latest succesful venture into Airline Industry.

Yes, now is the time to invest and pick up choiciest opportunities. Richard Branson, founder of Virgin Group said, “If I ever going to invest, I will only do so only during recessions.”

Conclusion
On another note, how can factories producing high quality products which normally enjoy high demand could shut down? Isn’t it logical that consumers reward the strong producers by voting i.e. buying their products that translates to ongoing demand? In other words, why would perfectly healthy companies not survive in recession? Based on above excerpt, is depression worse than recession? Can the government do something about it?

This I will discuss in my next article.

NEW VIGOUR, RENEWED CULTURE- I AM A BUMIPUTERA!

- Practice Question for P1 (ACCA) and sociological analysis

Pic 01: If I can do it (Succeed), so can anybody!

New generation of Bumiputera risk-takers (in a good way) as entrepreneurs are emerging in Malaysian Corporate scene. Read on to know an outstanding businessman. Also a question on Risk Assessment is included to pique and pick your mind- to test your knowledge and especially application which is so crucial to P1 (ACCA) Professional Accountant subject.

Empire Builder (Chandler)
IF WHAT has been said and reported about Tan Sri Syed Mokhtar Albukhary (Picture 01) is true, then he is worth RM971 million - on paper at least. Touted as the new `Bumiputera' corporate player in town, Syed Mokhtar rose to prominence last year. The 50-year-old tycoon is more heard than seen. He is said to be behind three public listed companies and the RM2.4- billion Port of Tanjung Pelepas (PTP) in Johor. Syed Mokhtar's interest is masked under myriad private companies with Seaport Terminal Holdings Sdn Bhd and Impian Teladan Sdn Bhd being the main ones. The latter owns a 19.9-per cent stake in Malaysian Mining Corporation Bhd (MMC). Seaport Terminal controls 52 per cent of Johor Port Bhd and 70 per cent of PTP. Recently, MMC acquired a 50.1-per cent stake in PTP from Seaport Terminal with combination in shares and cash.

With the deal, then Seaport Terminal will control 28.8 per cent of MMC. This will lead to Syed Mokhtar controlling 49 per cent of MMC directly and indirectly. Besides MMC and Johor Port, Syed Mokhtar is also said to own a substantial stake in second boarder Amtek Holdings Bhd. Syed Mokhtar's direct and indirect stake translates into RM733 million on MMC. Add this figure to Seaport Terminal's interest in Johor Port and his holdings, through nominees, in Amtek Holdings, and Syed Mokhtar is worth nearly RM1 billion. And these are only his listed assets. He has some valuable private projects on hand like the proposed RM7-billion power plant in Pulau Bunting, Langkawi. Nobody can ever tell conclusively the true worth of the self-made tycoon as his name is not found in the shareholdings of any of these companies.

Humble History
Syed Mokhtar rose from humble beginnings in Kedah. He had to venture into small businesses to sustain his education which went no further than secondary school. He was transacting almost anything in his early days to pay his school fees. After school, he found a niche in the rice milling business, which paved the way for his rise. He was peddling rice all over the country when he got to know Tan Sri Muhyiddin Yassin, then a high ranking civil servant in the Johor State Government. Syed Mokhtar's fortunes rose when Muhyiddin became the Menteri Besar of Johor.

A late bloomer, Syed Mokhtar only got married a few years ago to the daughter of Datuk Syed Kechik Syed Mohamed, who at one time was said to be one of the richest Malays. Based on the list of richest Malaysians, Syed Mokhtar may not be far from emulating the feat of his father-in- law.

Horrible prospects to Singapore’s logistics industry

Pic 02 (left) :Maersk switch port location to Tanjung Pelepas. Major impact on Keppel Port

Pic 03 (right) : Ever busy 24/7 Keppel Port, Singapore

Singapore’s Port – a hub is primarily dominated by Keppel Port Limited. It’s the main driver to Singapore’s port making it the 3rd busiest port in the world, using hub-&-spoke system where feeder ships come to Keppel Port and the ocean liners [huge ships] takes inter-continental routes. Dr. Mahathir, then Prime Minister of Malaysia, was never too pleased to see the neighbouring port’s success as he viewed that it’s nothing more than a middle-man specialising in trade. He opines that Malaysian companies should not take the full risks of investing and manufacturing only to let Singapore port benefit from importing from them and re-export to the rest of the world particularly 2 richest continents - America and European Union.

In response to reduce dependence on Singapore, three rival ports were built in Malaysia namely Johor Port, Bintulu Port and Tanjung Pelepas Port. Specifically to reduce Keppel Port’s dominance. Tanjung Pelapas, Syed Mokhtar’s cash cow have had a strategic alliance with Freight Forwarders Maersk. Shipping rates have increased 80% over 2 years and there is no sign of abating in early 2008.

Pic 04: Collaborative Opportunity with Chinese Government (Beijing)

Singapore government is considering developing a new port in China in alliance with the Chinese government (Picture 04) . It will rival the size of Shanghai port but it targets the northern part of China. Recent trends have indicated more investment up north and inner west are picking up, thus the need to justify port infrastructure.

Pic 05: Dr M - always in Action! Most powerful Bumiputera Leader

Required:
a) Prepare a Risk Map and classify the various risks that the company is facing giving reasons for your classifications. (8)
b) State the level of Board’s considerations for managing these risks. (4)
c) State the risk exposure, risk appetite, risk strategy, risk capacity and finally risk residual of the Keppel Limited considering its expansion into China. [13]

P1 answers: AAA Ethics Model

- relevant to P1 candidates.



From left to right:
Pic 01: Disneyland, the happiest place on earth
Pic 02: Most memorable ladies
Pic 03: Your reward for graduating, be there!



Dear Intensive Practice Sessions P1 candidates,
As promised, the answer to the case study involving Disney Limited.

Remember, work very hard.

Marcus

ANSWER TO CASE STUDY: Ethics model AAA (AMERICAN ACCOUNTING ASSC.)
1. WHAT ARE THE FACTS?
The plant is in financial distress, closure is inevitable. Disney wants the contract completed or HS will face lawsuits as per contract.

2. WHAT ETHICAL ISSUES INVOLVED?
Whether the employees have the right to know about their future, albeit bleak since it involves their employment security. Naturally, if they have been told, key staff will find employment elsewhere, resulting in joepardising the Disney contract.

If employees are told, shareholders risked losing more with the contract unfulfilled. The ethical issue here is to what degree is the Board responsible to ‘both’ shareholders and employees.

3. WHAT RULES/POLICIES IN FORCE?
There is no rules requiring management to inform ‘high-level’ decisions and sensitive information to employees. Thus Board is not ‘obligated’ to communicate with staff. After staff completed the project, there is no further use of them, thus if made redundant Board merely have to comply with the redundancy laws of the land which likely involve paying compensation.

4. WHAT OPTIONS AVAILABLE?
(i) Outsource contract and inform staff. This way HS can still complete the contract and safeguard the employees interests in that they can look for other alternatives.
(ii) Keep information confidential by giving vague answers or even outright denial of rumour that plant is shutting down.
(iii) Re-negotiate with Disney to rescind the contract with amicable settlement.

5. DECISION THAT SUITS CURRENT POLICIES
Board will be compelled to protect shareholders interests by completing the contract and collect the contracted sum. This enhances both shareholders’ wellbeing by minimising losses and also Board’s performance is enhanced.

Thus, unlikely to adopt option to outsource or negotiate to rescind the contract as this works against shareholders' interests and Board as not performing their fiduciary duty to stockholders.

6. WHAT POSSIBLE CONSEQUENCES?
Consequences are minimal in view that firm is shutting down. Reputation dies with the firm.
Consequences are negative impact on employees in view that they are caught unprepared, with the sudden termination after the contract completion.

7. WHAT IS DECISION? (APPLYING KOHLBERG’S CONVENTIONAL STANDARDS)
From Deontological perspective: unfair and unjust to employees as they are seen being exploited by management only to be dismissed thereafter.
From a Teleological perspective: utilitarian perspective is at least, all employees ‘still’ have job until the plant closes. Egoist perspective shows that Board and shareholders protect their own economic interests.

Decision: by keeping information confidential, the weakest and poorest stakeholders, namely the employees, still have their jobs. Otherwise informing them pre-maturely will result in jeopardising the employment earlier when key staff leaves.

Ethical to keep information confidential, even if management is pressed for an answer.

ANTIDOTE TO STRESS = HUMOUR

Dear all,

Exams are around the corner i.e. your mock exams and of course the real exam. Stress is high. A good antidote is exercise and at times humour.

So here is some serious humour, in which I think many of you guys may agree with me that there is an angle of truth to it. Ha Ha. Women is the universe most mysterious, intriguing and potentially igniting being. It takes eternity for the (dumb) men to understand this wonderful, beautiful and meaningful being.

SERIOUS HUMOUR I : MALE AND FEMALE BRAINS
What goes through your mind when someone says "Lets go for a drink"?‏




Beer Commercial, "Thank God you are a Man."







SERIOUS HUMOUR II : MALE AND FEMALE FLIES
A woman walked into the kitchen to find her husband stalking a round with a fly swatter."What are you doing?" she asked.

"Hunting flies," He responded.

"Oh, killing any?" She asked.

"Yep, three males, two females," he replied.

Intrigued, she asked, How can you tell?

He responded, "Three were on a beer can, two were on the phone."

SERIOUS HUMOUR III : MALE AND FEMALE PROCEDURES
A sign in the Bank Lobby reads: "Please note that this Bank is installing new "Drive-through" teller machines enabling customers to withdraw cash without leaving their vehicles. Customers using this new facility are requested to use the procedures outlined below when accessing their accounts. After months of careful research, MALE & FEMALE procedures have been developed. Please follow the appropriate steps for your gender.

"MALE PROCEDURE"
‘1. Drive up to the cash machine.

‘2. Put down your car window.

‘3. Insert card into machine and enter PIN.

‘4. Enter amount of cash required and withdraw.

‘5. Retrieve card, cash and receipt.

‘6. Put window up.

‘7. Drive off.

FEMALE PROCEDURE
‘1. Drive up to cash machine.

‘2. Reverse and back up the required amount to align car window with the machine.

‘3. Set parking brake, put the window down.

‘4. Find handbag, remove all contents on to passenger seat to locate card.

‘5. Tell person on cell phone you will call them back and hang up.

‘6. Attempt to insert card into machine.

‘7. Open car door to allow easier access to machine due to its excessive distance from the car.

‘8. Insert card.

‘9. Re-insert card the right way.

‘10. Dig through handbag to find diary with your PIN written on the inside back page.

‘11. Enter PIN.

‘12. Press cancel and re-enter correct PIN.

‘13. Enter amount of cash required.

‘14. Check makeup in rear view mirror.

‘15. Retrieve cash and receipt.

‘16. Empty handbag again to locate wallet and place cash inside.

‘17. Write deposit amount in check register and place receipt in back of checkbook.

‘18. Re-check makeup.

‘19. Drive forward 2 feet.

‘20. Reverse back to cash machine.

‘21. Retrieve card.

‘22. Re-empty hand bag, locate card holder, and place card into the slot provided.

‘23. Give appropriate one-fingered hand signal to irate male driver waiting behind you.

‘24. Restart stalled engine and pull off.

‘25. Redial person on cell phone.

‘26. Drive for 2 to 3 miles.

‘27. (AND the final part) Release Parking Brake.


Other Fun Links:
http://marcusong88.blogspot.com/2008/10/humourously-serious.html
http://marcusong88.blogspot.com/2008/10/world-is-fair-isnt-it-egg-heads-also.html

MALAYSIA STOCK EXHANGE: BEAR MARKET RALLY

-related to P3, P5 and Uncles & Aunties in Malaysia whose favourite investment motto is "Buy High, Sell Low".

1. The Bursa Malaysia Stock Market has risen by 100 points past 2 weeks to 963 Composite Index. It usually is a precursor to future economic performance of 6 months. However, is it really a sign of recovery? I have my reservations. Its simply too early to cry out, "All's well."

2. But the current reality is all those who invested, say 4 months ago, would profit handsomely. Assuming they buy blue chip stocks. For instance, Topglove Berhad rose from RM3.50 to RM5.50 per share since December 30, 2008. An 57% rise.

3. As a general rule of thumb, the stock market looks to the future for its current performance. The past is well past. Still it tells us what kind of future it should bring. In this case, one should see in the past say the 2008, how much damaged the economic global recession has caused.

4. A simple logic, is if a patient is in out-patient treatment ward, one expects a speedy recovery.
Here, the USA economy is in the Intensive Care Unit, though I doubt the undertakers will have their day to see this giant economy dies.

5. 2nd quarter of 2009 may yet bring more upside for investors, but they should be mindful of the fact that when many countries (G-20 & G-7), all try to de-lever from the USA economic crisis. This is by no means an easy feat even if with all the coordinated governments stimulus package initiatives. For Malaysia's case, its hardly a stimulus: http://marcusong88.blogspot.com/2009/03/rm60-billion-stimulus-package-how-man.html .

6. History repeats itself. After the 1929 crash, the President Hoover's administration spied similarly hopeful signs in the U.S. economy. “Recovery is just around the corner”, is first attributed to economist, Irving Fisher (Noble Prize winner), but Team Hoover repeated this phrase and variations of it right up until he was crushed by the landslide election of FDR in 1932.

7. It is true the U.S. economy in 2009 has yet to see the massive reversals suffered during the Great Depression, but the root causes of each period — easy monetary policy and an over-reliance on debt — are the same.

Have a look at the Fortune 500 Annual List is out for 2008. It is Not Pretty:
▪ 2008 was the worst year in the history of the Fortune 500 for America’s largest companies;
▪ Profits fell from $645 billion in profits in 2007, to just $98.9 billion - an 84.7% decline;
▪ Eleven of the top 25 largest corporate losses in list history took place last year;
▪ Insurance giant AIG posted a $99.3 billion loss — the biggest corporate loss of all time. Dwarfs the Corporate Enron losses by a large margin;
▪ Thirty-eight companies disappeared from the list altogether;
▪ Newcomers to the Fortune 500 list: Polo Ralph Lauren, Visa and Mastercard;
▪ 17% working Americans — 25.6 million people — work for the nation’s largest companies;

Glimmer of good news on equality of the sexes:
▪ 15 women ran Fortune 500 companies in 2008 — an all-time high

Verdict
Economic recovery? Don't count on it until you see a real economic recovery turnaround. So, hold on to your purse strings.

"Caveat de Emptor" : Let the Buyer (investor) beware.