Question 1
The advent of specific types of derivative instruments have been used by many financial institutions to hedge against exchange rate risk and as well to limit exposure to fluctuations of fair value based upon market conditions. Please select a current article on the use of derivatives by a company. Define the type of derivative used and the purpose of it use by the company? As well, do you feel the use of derivative instruments contributed to the financial crisis of 2008?
Question 2
A "leadership project," is at the top of the agenda for fast-track action by the newly formed International Accounting Standards Board ("IASB"). This agenda was endorsed by the heads of the accounting standards-setting bodies among so-called G-8 nations meeting together in London on May 24, 2001.
The mission of the IASB is to produce common global accounting standards for important business transactions and to encourage their adoption by member nations. It was formed in January with the appointment of 14 members by a commission headed by Paul A. Volcker, former chairman of the Federal Reserve.
The IASB is headed by Sir David Tweedie, former head of the UK's Accounting Standards Board, and includes two former U.S. FASB members, James J. Leisenring and Anthony T. Cope.
Uniform standards for financial reporting are important to companies wishing to raise funds, list their securities in different countries, and to comply with regulatory filing requirements in a cost-effective manner.
They also prevent problems that would occur if one nation wanted to adopt stricter rules for certain transactions, but was prevented from doing so by the concern that it would place that nation's businesses at a comparative disadvantage in global commerce. All nations would be encouraged to adopt the same global standards, thus preventing anyone from being disadvantaged.
Discuss the pros and cons of this unified standards effort. Explain.
Question 3
Because the cost of hiring and training employees is so high, many managers argue that this cost should be capitalized and amortized over the expected service period. Do you feel this is an acceptable practice? Why or why not?