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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.comBlogger34125tag:blogger.com,1999:blog-7011211411109244586.post-89988123271454963242014-04-21T10:01:00.000-07:002014-04-25T12:36:31.689-07:00Causes and examples of international differences in accounting<br />
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<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">By </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Chan Hoi Leong,
Researcher</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Topic: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span><br />
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Area of
discussion: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">International Accounting</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span><br />
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Chapter/Keyword(s): </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Causes and examples of
international differences<o:p></o:p></span><br />
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><strong><span style="color: #351c75;">Question<o:p></o:p></span></strong></span></div>
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</span><br />
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-themecolor: text1;">“Accounting is
affected by its environment, including the culture of the country in which it
operates.” (Nobes and Parker (2012), Comparative International Accounting, 12<sup>th</sup>
ed., Pearson, page 28).<o:p></o:p></span></div>
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</span><br />
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-themecolor: text1;">Identify these
factors and evaluate their impact on different accounting systems.<o:p></o:p></span></div>
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<span style="background-color: white;"><span style="color: red;"><span style="color: red; font-family: "Times New Roman","serif"; font-size: 16pt; mso-fareast-font-family: "Times New Roman";"><em><strong>Research Essay</strong></em></span></span></span><br />
<em style="color: red;"><strong><span style="color: red; font-family: "Times New Roman","serif"; font-size: 16pt; mso-fareast-font-family: "Times New Roman";">Inti International College
Subang</span></strong></em><br />
<b style="line-height: 150%; text-align: justify;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;"><br /></span></span></b>
<div style="text-align: left;">
<b style="line-height: 150%; text-align: justify;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">1.0 Introduction</span></span></b></div>
</div>
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<span style="background-color: white;"><span style="font-size: small;"><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span>
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Iqbal (2002, p.2)
defines international accounting as “accounting for international transactions,
comparisons of accounting principles in different countries, and harmonisation
of diverse accounting standards worldwide”. Apparently, accountants from
different countries produce dissimilar financial statements due to the
differences in inventory valuation, assets measurement, computation of income,
disclosure practices, depreciation methods, and et cetera. Eventually, this
creates many problems such as difficulties in preparing group accounts and
financial statements become incomparable. Most importantly, an awareness and
understanding of these differences have led to impressive attempts to reduce
them and hasten the global harmonisation. In addition, it helps us to justify
the reasons for these variations in financial reporting in the past, why they
continue in the present, and will not disappear in the future. Below is a
detailed discussion on the environmental factors and national culture, which
affect a country’s accounting system and contributed to the worldwide
accounting diversity.</span></span></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.1 Legal systems</span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">Basically, common law
and codified Roman law are the two main types of legal systems used globally. Historically,
common law system was originated from England and the countries which are utilising
it usually rely on a limited number of statute law, which is then interpreted
by the courts and formed case law to supplement the statutes. On the other
hand, code law was derived from Roman <i style="mso-bidi-font-style: normal;">jus
civile</i>; it was compiled by Justinian and developed further by European
universities during the Middle Ages (Nobes & Parker 2012, p.31). Frankly, a
country’s legal system has a direct impact on accounting; it determines the
primary source of accounting rules which can be either developed by the
government or a non-governmental organisation and also decides the extent to
which company law governs the regulation of accounting (Radebaugh, Gray &
Black 2006, p.17).</span></div>
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>In code law countries such as
France, Italy and Germany, accounting is regulated largely via an accounting
code which is typically prescriptive, detailed and procedural. The focus is
placed upon the protection of companies’ creditors (Saudagaran 2009, p.5). In
fact, accounting profession can hardly influence on the development of
accounting standards. Thus, accounting law is usually general. It provides inadequate
detail on specific accounting practices whilst certain areas might not have any
guidance at all. For instance, the German accounting law which was passed in
1985, consists of only 47 pages in length and is silent with regard to issues
such as leases, foreign currency translation and cash flow statements (Doupnik
& Perera 2012, p.28).</span></div>
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>By contrast, in common law countries
such as England, United States and Australia, specific accounting rules are
established by the profession. In short, accounting standards are developed by
a non-legislative organisation. Hence, much more detailed rules are developed
(Doupnik & Perara 2012, pp.28-29). For example, in the United States, the
Financial Accounting Standards Board (FASB) provides a huge amount of guidance
in its accounting standards codification and updates until they became
“overloaded”. Saudagaran (2009, p.5) highlights that in common law nations, the
emphasis in financial reporting is to present a true and fair financial
statements to shareholders. Interestingly, researchers reveal that due to the threat
of shareholder litigation, companies in common law countries normally have
higher levels of disclosures, greater incentives to report losses promptly,
timelier financial information as well as being more transparent and efficient
as compared to companies in code law countries (Rappeport 2008, pp.41-42).<span style="mso-spacerun: yes;"> </span></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.2 Providers of finance</span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">In countries where
capital markets are strong such as United Kingdom and United States, the stock
ownership is more widely dispersed; equity finance is raised from many
shareholders who have restricted internal information, via stock exchanges
(Radebaugh, Gray & Black 2006, p.16). So, there will be more pressure as
greater demand exists for public accountability and information disclosures
including unbiased estimate of future prospects as well as forward-looking
information which is useful for investment decision making purposes. In term of
financial statement orientation, greater emphasis is put on the income
statement as shareholders are more interested in profit (Doupnik & Perera
2012, p.30). Consequently, the protection of private shareholders and the
prevention of insider trading will also be the main concern. Thus, there will
be a need for more auditors to enhance credibility.</span></div>
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>Conversely, in credit-based systems
countries such as Germany, France and Japan, company financing is dominated by
banks, governments or families. Clearly, such “lenders” have greater direct
access to any information they need and can easily influence company management
as well as affect company decisions. Hence, extensive public disclosures are
limited (Dhaliwal, Khurana & Pereira 2011, p.293; Adhikari & Tondkar
1992, p.84). More emphasis is given on balance sheet as banks are more
interested in solvency and liquidity (Doupnik & Perera 2012, p.30). Here,
accounting focuses on creditor protection through conservative and prudent
accounting measurements as they wanted to know the likelihood of getting their
money back (Nobes & Parker 2012, p.35). A research conducted by Francis,
Khurana and Pereira (2005, p.1159) suggests that a firm voluntary disclosures
are higher when the need for external financing is greater and vice versa.</span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.3 Taxation</span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">In countries like
Germany, France and Japan which run on <i style="mso-bidi-font-style: normal;">Massgeblichkeitsprinzip</i>
(“authoritative principle” or “congruency principle”), published financial
statements are utilised as a ground for taxation. Their tax rules are the
accounting rules. Accounting and taxation are dependent. At such, they no need
to have two sets of rules (Cuzdriorean & Matis 2012, p.32). The problem of
deferred tax is small and because of that, there are only a little deferred tax
regulations and fiscal influences. Tax regulations set maximum depreciation
rates to be applied for particular assets. In most cases, deductible expenses
and allowances like accelerated depreciation must be charged in the financial
statements, if they are to be claimed for tax purposes (Doupnik & Perera
2012, p.29).<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>On the other side, in countries such
as United States and United Kingdom, published financial statements are
designed chiefly as performance indicators for investment decisions, instead for
taxation usage (Nobes & Parker 2012, p.37). Here, the tax and financial
reporting rules are independent. In other words, they operate separately and
set by different bodies. So, published financial statements need to be adjusted
for taxation purposes and submitted to the government separately from the
reports sent to shareholders (Radebaugh, Gray & Black, p.16). Consequently,
deferred taxation arises and causes a lot of trouble due to the differences
between tax and accounting treatments. These differences affect depreciation
and created certain requirements. For example, the use of LIFO inventory
valuation in United States and the requirements of FRS 15 in determining the
depreciation charges in United Kingdom. </span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.4 The accounting profession</span></span></b></div>
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<b style="color: black;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">The accounting
profession’s size, strength, role and competence in a country are affected by
numerous factors outlined earlier; in turn, the profession influences a
country’s institutions and its accounting system (</span><b><span lang="EN-GB" style="color: #b45f06; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><i>See appendix below</i></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">). The stature of the accounting profession affects
accounting development as well as the quality of financial statements produced.
Radebaugh, Gray and Black (2006, p.16) claim that more developed accounting
profession will lead to more judgementally based public accounting systems
rather than centralised and uniform systems. Saudagaran (2009, p.8) discovers
that in common law countries like United States and Canada, the accounting
profession is largely self-regulating, plays an essential role in setting
accounting and auditing standards, gives trainings, arranges examinations as
well as establishing licensing requirements for entering and staying in the
profession. In contrast, in code law countries such as France, Germany and
Italy, the accounting profession has less stature and power as the government
carries out many of these roles instead of delegating them to an independent
body. Where there is a strong accounting profession, audit reports appear to be
more independent and reliable, whereas in countries with weak accounting
profession, the financial statements’ quality and auditors’ independence are
more likely subject to dispute.<span style="mso-spacerun: yes;"> </span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="color: black; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-cMXWyXcIa94/U1TFE5yk-7I/AAAAAAAABM4/3xSz_UdKXUg/s1600/accounting+diversity+1.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/-cMXWyXcIa94/U1TFE5yk-7I/AAAAAAAABM4/3xSz_UdKXUg/s1600/accounting+diversity+1.PNG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small;">
</span><br />
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<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-themecolor: text1;">Source: Taken from </span><span style="font-family: "Times New Roman","serif"; font-size: 10.5pt; line-height: 115%;"><a href="http://staff.undip.ac.id/akuntansi/anis/files/2012/03/akuntansi-dan-lingkungan.pdf"><span style="color: black; mso-themecolor: text1;">http://staff.undip.ac.id/akuntansi/anis/files/2012/03/akuntansi-dan-lingkungan.pdf</span></a><span style="color: black; mso-themecolor: text1;">, p.160.<o:p></o:p></span></span></div>
<span style="font-size: small;">
</span></td></tr>
</tbody></table>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.5 Religion</span></span></b></div>
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<b style="color: black;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">Accounting<b style="mso-bidi-font-weight: normal;"> </b>concepts<b style="mso-bidi-font-weight: normal;"> </b>are influenced by religion too. For example, any kinds of interest
such as simple interest, compound interest, periodic interest, commercial
interest and so on, are strictly forbidden in Islam as it is considered as an
exploitative practice to earn effortless profit which is free of exchange
(Hossain 2009, pp.241-242). Thus, the principles of Islam are in conflict with
the practices of interest-based modern banking system. This results in a great
variation of accounting practices especially in term of measurement, disclosure
and classification as Islamic financial institutions have to comply with <i style="mso-bidi-font-style: normal;">Shari’ah</i> precepts (Abdel-Karim 2011,
p.240). As a result, Islamic banks cannot charge interest. Instead, they have
established a number of methods to share risks and returns between the borrower
and the lender. Similarly, Islamic banks cannot invest in or lend to
organizations that disobey Quranic injunctions. For instance, companies which
are involving in alcohol, gambling or rearing pigs. As time passes by, Islamic
banking gains popularity and starts to proliferate in number. So, Accounting
and Auditing Organization for Islamic Financial Institutions (AAOIFI) was setup
in 1993 to deal with these problems by issuing standards based on Islamic law </span><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">(<b><i><span style="color: #b45f06;">See appendix below</span></i></b>)</span><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">. Meanwhile, other religious requirements such
as gender separation also influences the way of presenting and communicating accounting
information.</span></div>
<span style="color: black;">
</span><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="color: black; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-dckB4SteJ2Q/U1TI_4hmKII/AAAAAAAABNA/n9jLSd-2t7w/s1600/accounting+diversity+2.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-dckB4SteJ2Q/U1TI_4hmKII/AAAAAAAABNA/n9jLSd-2t7w/s1600/accounting+diversity+2.PNG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 10.5pt; line-height: 150%; mso-ansi-language: EN-GB;">Source: Extracted from Abdel-Karim (2011, p. 241)<o:p></o:p></span><span style="font-size: small;">
</span></td></tr>
</tbody></table>
<br />
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.6 Political and economic ties</span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">Accounting ideas,
systems and technologies are transferred through conquest, commerce and other
such forces. Fischer, Taylor and Cheng (2008, p.506) claim that nations that
previously were colonised by other countries usually have principles similar to
their ruling nation. However, it is noticeable that former colonies have either
stay or replaced the system after independence. For instance, Singapore and
Malaysia have chosen to stay with the British system, but Indonesia has
discarded the Dutch’s accounting system and adopted U.S. model of accounting.
Next, economic ties influence accounting development too. For example, United
States’ accounting affects Canada’s accounting, partly due to geographic
proximity. Besides, United States represents the largest export market for
Canada, plus many Canadian firms are listed on U.S. stock exchanges. Moreover,
the establishment of regional economic alliances like EU, NAFTA and ASEAN have
speed up the harmonisation process by reducing the variation in accounting
regulations to save costs (Saudagaran 2009, pp.7-8).</span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">2.7 Inflation</span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">High inflation rates
render historical cost accounting to become irrelevant and pointless.
Furthermore, it affects the likelihood of a country to incorporate price
changes into accounts. Some examples of countries which have severe inflation
issues are Zimbabwe, Israel, Mexico, Chile and Brazil. Thus, they have to apply
various forms of inflation accounting such as general price level accounting
and current cost accounting. Doupnik and Perera (2012, p.30) state that
adjusting accounting records for inflation results in a write-up of assets and
expenses. Likewise, adjusting income for inflation is vital especially when
financial statements serve as the basis for taxation, to avoid from paying
taxes which are charged based on fictitious profits. <span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">3.0 Culture</span></span></b></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">Hofstede’s Cultural Dimensions</span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">Theoretically,
culture is the values and attitudes commonly shared by a society. Hofstede
(2001, p.9) defines culture as “the collective programming of the mind that
distinguishes the members of one group or category of people from another”.
Based on a survey conducted on IBM workers worldwide, Hofstede has discovered
four cultural dimensions or societal values, which can be briefly described as
follows:</span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="color: black;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;">Firstly, </span><i><b>individualism versus collectivism</b></i><span style="color: black;"> (also
known as “I” versus “We” concept) is the degree to which individuals are
integrated into groups. Individualism refers to the societies in which the ties
between individuals are loose. Therefore, people are expected to take care and
stand up for themselves and their immediate families only. In individualistic
societies, the stress is put on personal achievements and individual rights. On
the other hand, in collectivist societies, individuals are strongly integrated
into cohesive groups, extended families or organisations which continue to
protect them in exchange for undoubted faithfulness. In short, the extent of
interdependence that a society keeps among individuals is the key issue
addressed by this dimension.</span></span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;"> </span><span style="color: black;">Secondly, </span><i><b>large versus small power distance</b> </i><span style="color: black;">is the level to which hierarchy
and unequal power distribution in institutions and organisations are accepted
by the members of a society. People in large power distance societies accept a
hierarchical order where everyone has a place which requires no further
explanation, whereas people in small power distance societies look for power equalisation
and demand reasons for power inequalities. The basic issue highlighted by this
dimension is how societies cope with inequalities among people when they
arise.</span><span style="color: black;"> </span></span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;"> </span><span style="color: black;">Thirdly, </span><i><b>strong versus weak uncertainty avoidance</b></i><span style="color: black;">; it deals with a society’s
tolerance and comfortability towards uncertainty and ambiguity. Societies that
are practising strong uncertainty avoidance culture try to minimise the
likelihood of such situations by having strict laws and rules as well as maintaining
rigid codes of belief and conduct; deviant people and ideas are intolerable.
Conversely, weak uncertainty avoidance societies stay in a more relaxed
atmosphere in which practice counts more than principles and deviance is easier
to be tolerated. This dimension tries to investigate how societies handle
unknown future as time flies, which can be either: attempt to control the
future or let it occurs.</span></span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;"> </span><span style="color: black;">Fourthly, </span><i><b>masculinity versus femininity</b></i><span style="color: black;"> refers to the distribution of
emotional roles between the genders. Examples of masculine cultures’ values are
achievement, assertiveness, heroism and materialism, whereas feminine cultures’
values are modesty, caring for the weak and the quality of life. The way in
which a society allocates social roles to the genders is the fundamental issue
addressed by this dimension. Undoubtedly, Japan is one of the most masculine
societies in the world, while feminine countries are best represented by Sweden
and Norway.</span><span style="color: black;"> </span></span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">Gray’s Accounting Values</span></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="color: black;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">In 1988, Gray
developed four pairs of contrasting accounting values based on Hofstede’s
cultural dimensions. Amazingly, Gray even proposed four hypotheses to link his
four accounting values with Hofstede’s four societal values (</span><b><span lang="EN-GB" style="color: #b45f06; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><i>See appendix below</i></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">). The details of
each accounting values and the relationships are discussed as follows: </span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="color: black; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-TdFNrQSrq9U/U1TKip8HiUI/AAAAAAAABNM/seLafu0pNjQ/s1600/accounting+diversity+3.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-TdFNrQSrq9U/U1TKip8HiUI/AAAAAAAABNM/seLafu0pNjQ/s1600/accounting+diversity+3.PNG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: "Times New Roman","serif"; font-size: 10.5pt; line-height: 150%;">Source:
Extracted from Borker (2013, p.169)<o:p></o:p></span><span style="font-size: small;">
</span></td></tr>
</tbody></table>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="color: black;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;">Firstly, </span><i><b>professionalism versus statutory control</b></i><span style="color: black;">;
it is a preference to utilise individual professional judgement and
professional self-regulation, instead of fulfilling prescriptive legal
requirements. Undeniably, accountants adopt independent attitudes and use their
own professional judgement to a certain extent (Chanchani & MacGregor 1999,
p.6). For instance, in United Kingdom, a true and fair view of a company’s
financial position depends largely on the accountant’s professional judgement,
whereas in France and Germany, the professional accountant’s role is mainly
concerned with the implementation of relatively prescriptive and detailed legal
requirements (Radebaugh, Gray & Black 2006, p.46). Gray (1988, p.9) claims
that professionalism is most closely linked with individualism and uncertainty
avoidance. It is found that consistency exists between the preference for
independent professional judgement and the preference for a loosely ties
between individuals as there is greater emphasis on individual decisions and
respect for individual endeavour. Gray also noticed the correlation between
professionalism and power distance. He points out that small power distance
society has a higher probability to accept professionalism due to higher
concern for equal rights, where people at different power levels feel less
threatened and more readily to trust people, and where there is a belief in the
need to justify the imposition of laws and codes. Consequently, he came out with
the following hypothesis: The higher a country ranks in terms of individualism
and the lower it ranks in terms of uncertainty avoidance and power distance
then the more likely it is to rank highly in terms of professionalism.</span></span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;"> </span><span style="color: black;">Secondly, he proposed </span><i><b>uniformity versus flexibility</b></i><span style="color: black;">: a
preference for uniformity and consistency over flexibility in response to
circumstances, since accounting principles’ basic features include uniformity,
consistency and comparability internationally (Chanchani & MacGregor 1999,
p.7). For example, in Spain and France, a uniform accounting plan along with
the imposition of tax rules for measurement purposes have been operating for a
long time to assist national planning and pursuit macroeconomic objectives
(Radebaugh, Gray & Black 2006, p.46). On the other side, in United Kingdom
and United States, more emphasize is put on </span><strong style="color: black;"><em><span style="color: red;">inter-temporal consistency</span></em></strong><span style="color: black;"> together with some degree of intercompany comparability subject to a perceived
need for flexibility (Borker 2013, p.171). Gray (1988, p.9) argues that
uniformity is most closely related to uncertainty avoidance and individualism.
A preference for uniformity is consistent with a preference for strong
uncertainty avoidance, which leads to: a concern for law, order and rigid codes
of behaviour; a need for written rules and regulations; a respect for
conformity; and the search for ultimate, absolute truths and values. Besides,
this value dimension is also consistent with a preference for collectivism. He
also noticed the connection between uniformity and power distance where
uniformity is simpler to be facilitated in large power distance society where
the impositions of laws and codes of a uniform character have a greater
tendency to be accepted. At last, he formed the following hypothesis: The
higher a country ranks in terms of uncertainty avoidance and power distance and
the lower it ranks in terms of individualism then the more likely it is to rank
highly in terms of uniformity. </span></span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;"> </span><span style="color: black;">Thirdly, </span><i><b>conservatism versus optimism</b></i><span style="color: black;">: a preference for cautious approach to
measurement rather than a more optimistic, risk-taking approach in dealing with
future event’s uncertainty. In fact, conservatism or prudence is perceived to
be part of accountants’ elementary attitude internationally; it is the oldest, most
pervasive and widely used principle of accounting valuation in measuring assets
and profits reporting. Conservatism can perhaps be linked most closely with
uncertainty avoidance and the short-term versus long-term orientations. A
preference for more conservative profits measurement is consistent with strong
uncertainty avoidance due to a concern with security and a perceived need to
adopt a cautious way to handle future event’s uncertainty (Gray 1988, p.10).
Meanwhile, a less conservative approach to measurement is consistent with a
short-term orientation where fast results are expected and hence a more
optimistic approach is adopted relative to conserving resources and investing
for long-term trends (Doupnik & Perera 2012, p.38). There also seems to be
a link, if less strong, between high levels of individualism and masculinity,
on the one hand, and weak uncertainty avoidance on the other, to the extent
that the stress on individual achievement and performance is likely to foster a
less conservative approach to measurement (Radebaugh, Gray & Black 2006,
p.47). After all, Gray (1988, p.10) formulated the following hypothesis: The
higher a country ranks in terms of uncertainty avoidance and the lower it ranks
in terms of individualism and masculinity, the more likely it is to rank highly
in terms of conservatism. </span></span></div>
<div class="MsoNormal" style="color: red; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="color: black;"> </span><span style="color: black;">Fourthly, </span><i><b>secrecy versus transparency</b></i><span style="color: black;">: a preference for confidentiality where
business information disclosure is restricted to certain people only, instead
of disclosing it openly to the public (Borker 2013, p.169). In reality, the
quality and quantity of information disclosed to outsiders can be influenced by
management. Moreover, secrecy (or confidentiality) in business relationships is
a fundamental accounting attitude. It looks like secrecy is strongly connected
to conservatism as both values imply a cautious approach in corporate financial
reporting. Secrecy is related to the disclosure dimension, whereas conservatism
is related to the measurement dimension. Such variations appear to be
reinforced by the differential capital markets development and the public
ownership of shares which give incentives for the voluntary disclosure of
information (Chanchani & MacGregor 1999, pp.8-9). According to Gray (1988,
p.11), secrecy can be linked most closely with uncertainty avoidance, power
distance and individualism. For instance, a preference for secrecy is
consistent with strong uncertainty avoidance due to the need to restrict
information disclosures to preserve security, avoid conflict and competition.
Not only that, high power distance societies normally prefer to restrict
information to maintain power inequalities. Besides, secrecy is also consistent
with a preference for collectivism because its concern is for those involved
with the firm as compared to external parties (Radebaugh, Gray & Black
2006, p.48). Doupnik and Perera (2012, p.38) state that a long-term orientation
suggests a preference for secrecy where there is a need to conserve resources
and ensure that funds are sufficient for investment relative to the demands of
shareholders and workers for higher payments. A significant but perhaps less
crucial link with masculinity suggests that in societies where more emphasis is
put on achievement and material success, there will be a greater tendency to
publicise such achievements and material success as well as be more open to
socially related information. Thus, Gray described the relationship as follows:
The higher a country ranks in terms of uncertainty avoidance and power distance
and the lower it ranks in terms of individualism and masculinity then the more
likely it is to rank highly in terms of secrecy.</span></span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">4.0 Classification</span></span></b></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>Classification groups countries
according to the common elements and distinctive characteristics of their
financial accounting systems. This provides some practical benefits. For
instance, it enables countries that face accounting problems to get some ideas
and solutions by looking at the experiences of other countries in the same
group. Basically, there are two types of classifications in accounting, namely
extrinsic and intrinsic. <span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>Under extrinsic classifications, Muller
(1967) identified four patterns to accounting development in Western
market-oriented economies: macroeconomic pattern, microeconomic pattern,
independent discipline approach and uniform accounting approach. Briefly, under
macroeconomic pattern, business accounting is derived and designed to support
national economic policies. In the microeconomic pattern, accounting is viewed
as a branch of business economics. Meanwhile, in the independent discipline
approach, which can be seen in the United States and the United Kingdom,
accounting is viewed as a service function and is derived from business
practices, whereas under the uniform accounting approach, accounting is
standardised and utilised for administrative control by central government.
Saudagaran (2009, p.20) stresses that Netherlands seems to be the only county
where accounting developed along microeconomic lines. He also discovered that
Mueller’s macroeconomic and uniform approaches have been overlapped. For
example, France, Germany and Sweden have both features. Unlike Gray (1988),
Mueller gave no explicit recognition on cultural factors. <span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><span style="mso-tab-count: 1;"> </span>Conversely, under intrinsic
classifications, accounting patterns are identified by analysing data that are
related to accounting rules and practices. Here, Nair and Frank (1980) have
given a significant contribution by carried out a statistical analysis of
international accounting practices using the 1973 and 1975’s Price Waterhouse
surveys where financial reporting characteristics are divided into measurement
and disclosure practices. They identified four measurement groupings: British
Commonwealth, Latin American, continental European and U.S. models (</span><b><span lang="EN-GB" style="color: #b45f06; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;"><i>See appendix below</i></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%;">).</span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="color: black; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/--9JL72ZuG8E/U1TMWvkyM7I/AAAAAAAABNY/zXY4WKOqPeY/s1600/accounting+diversity+4.PNG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/--9JL72ZuG8E/U1TMWvkyM7I/AAAAAAAABNY/zXY4WKOqPeY/s1600/accounting+diversity+4.PNG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: 'Times New Roman', serif; font-size: 10.5pt; line-height: 150%;">Source: R. D. Nair and W. G. Frank, “The Impact of Disclosure and Measurement Practices on International Accounting Classifications,” Accounting Review (July 1980): 433.</span></td></tr>
</tbody></table>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">5.0 Harmonisation and enforcement effort</span></span></b></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>Harmonisation means minimising the
variations among national accounting standards. Obviously, it offers several
benefits to users and preparers of accounts. For example, it allows investors
to compare different companies’ financial statements internationally;
governments of developing countries can save time and money by adopting
international standards as well as controlling the activities of MNCs; it makes
the computation of tax liability easier for the tax authorities; regional
economic grouping’s trade recordings and transactions would be smoother; MNCs may
have better access to foreign investor funds and consolidation of foreign
subsidiaries and associates would be simpler. However, harmonisation processes
face a lot of challenges such as different purposes of financial reporting,
different legal systems, cultural differences, diverse user group, nationalism,
political lobbying and lack of strong accounting bodies (Nobes & Parker
2012, pp.83-84).</span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span>Chronologically, the IASC was formed
in 1973 to publish and promote the worldwide acceptance of IASs. The IASC has
made notable achievements by issuing forty-one standards, along with a
conceptual framework and other publications. During the 1990s, many countries
like Nigeria, Malaysia and Singapore adopted the IASs with few or no amendments
as their national standards. In 2000, stock market regulators (IOSCO) endorsed
the IASC’s standards. In 2001, the IASC was restructured into the IASB; this
board develops and issues IFRSs. The IASB has revised a number of the IASs;
some of them were superseded. Anyway, compliance with IASB standards is
voluntary and IASB has no power to enforce them. Regional harmonisation could
be achieved through the establishment of trading blocks around the world. For
instance, the Fourth, Seventh and Eighth Directives have played a major role in
harmonising financial reporting in EU countries (Dogariu, Urimumbeshi &
Bonaventure 2008, p.126). Since many countries are adopting IFRSs or converging
their national standards with it, the IASB is en route to become the world’s
prime standard-setter. </span></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="color: #351c75;">6.0 Conclusion</span></span></b></div>
<div class="MsoNormal" style="color: black; line-height: 150%; margin: 0in 0in 10pt; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-GB" style="color: black; font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-GB; mso-themecolor: text1;">All in all,
harmonisation process seems to be fruitful. Clearly, globalisation of capital
markets, proliferation of MNCs worldwide, establishment of free trade zones as
well as having strong support from the World Bank, IOSCO and other
international bodies have eventually accelerated the harmonisation rate.
Undeniably, harmonisation provides more benefits than drawbacks. At such, it
slowly gains global acceptance where IFRSs and IASs have been adopted by many
countries around the world. Ideally, a single set of global standards remains
the IASB’s goal. In other words: “One world, one accounting”. Some of the
notable events are the 2002’s Norwalk Agreement which aimed to remove
differences in US GAAP and IFRS and coordinate their future work programmes as
well as the duo efforts of the IASB and US FASB in running a joint project since
2005, with the objective to adopt one global conceptual framework (Pacter,
2013). Nevertheless, Tysiac (2013) suggests that a more practical goal for the
future is to achieve global comparability, but not necessarily resulting in
having identical reporting standards.<o:p></o:p></span></div>
<div class="MsoNormal" style="color: black; margin: 0in 0in 10pt; text-align: justify;">
<br />
<hr align="left" size="1" width="33%" />
<span style="font-family: "Times New Roman","serif"; font-size: 10.5pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;"><em>‘<strong><span style="color: red;">Intertemporal
consistency</span></strong>’ means that the activities an individual plans now to carry out in
the future are the activities that he or she actually carries out when the
future arrives.</em></span><br />
<b style="background-color: transparent;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span style="color: #351c75;"><br /></span></span></b>
<b style="background-color: transparent;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span style="color: #351c75;"><br /></span></span></b>
<b style="background-color: transparent;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span style="color: #351c75;">7.0 References</span></span></b></div>
</span></span><div class="MsoNormal" style="margin: 0in 0in 0pt;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Abdel-Karim, R.A. (2011) <i style="mso-bidi-font-style: normal;">Accounting and Auditing Standards for Islamic Financial Institutions</i>.
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at: </span></span><span style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%;"><a href="http://web.ebscohost.com.ezproxy.inti.edu.my:2048/ehost/pdfviewer/pdfviewer?sid=d3693b6e-a8ae-444a-a646-1463d352e78e%40sessionmgr15&vid=5&hid=108"><span style="color: black; mso-themecolor: text1;"><span style="color: blue;">http://web.ebscohost.com.ezproxy.inti.edu.my:2048/ehost/pdfviewer/pdfviewer?sid=d3693b6e-a8ae-444a-a646-1463d352e78e%40sessionmgr15&vid=5&hid=108</span></span></a><span style="color: black; mso-themecolor: text1;"> [Accessed: 5 October, 2013].</span></span><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><o:p></o:p></span></div>
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<span style="font-size: small;">
</span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span>
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%; mso-ansi-language: EN-GB;">Nobes, C. & Parker, R. (2012) <i style="mso-bidi-font-style: normal;">Comparative international accounting</i>. 12<sup>th</sup> edn. Harlow:
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<span lang="EN-GB" style="color: black; font-size: 11.5pt; font-weight: normal; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-font-weight: bold; mso-themecolor: text1;"><span style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%;"><br /></span></span>
<span lang="EN-GB" style="color: black; font-size: 11.5pt; font-weight: normal; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-font-weight: bold; mso-themecolor: text1;"><span style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%;">Pacter, P. (2013) ‘What have IASB and FASB
convergence efforts achieved?’. <i style="mso-bidi-font-style: normal;">Journal
of Accountancy</i>. 14 February, 2013. [Online] Available at: <a href="http://www.journalofaccountancy.com/Issues/2013/Feb/20126984.htm"><span style="color: blue;">http://www.journalofaccountancy.com/Issues/2013/Feb/20126984.htm</span></a>
[Accessed: 19 November, 2013].</span></span><br />
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;"><br /></span>
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;">Radebaugh, L.H., Gray, S.J. & Black, E.L. (2006)
</span><i style="font-family: "Times New Roman", serif; font-size: 11.5pt; line-height: 115%;">International accounting and
multinational enterprises</i><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;">. 6</span><sup style="font-family: "Times New Roman", serif; line-height: 115%;">th</sup><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;"> edn. New York: John Wiley &
Sons.</span><br />
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%;"><br /></span>
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%;">Rappeport, A. (2008) ‘One standard, many laws’, <i>CFO</i>. 1 April, 2008. pp.41-42. Available
at: </span><span style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 115%;"><a href="http://ww2.cfo.com/strategy/2008/04/one-standard-many-laws/"><span style="color: blue;">http://ww2.cfo.com/strategy/2008/04/one-standard-many-laws/</span></a>
[Accessed: 13 October, 2013].</span><br />
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;">Saudagaran, S.M. (2009) </span><i style="font-family: "Times New Roman", serif; font-size: 11.5pt; line-height: 115%;">International accounting: a user perspective</i><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;">. 3</span><sup style="font-family: "Times New Roman", serif; line-height: 115%;">rd</sup><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;"> edn.
Chicago: CCH.<span style="font-size: small;">
</span></span><br />
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;"></span><br />
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;"></span><br />
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 115%;"><span style="color: black; font-size: 11.5pt; font-weight: normal; line-height: 115%; mso-bidi-font-weight: bold; mso-themecolor: text1;">Tysiac, K. (2013) ‘New mechanisms eyed by FASB, IASB
in long march toward global comparability’. <i style="mso-bidi-font-style: normal;">Journal
of Accountancy</i>. 10 January, 2013. [Online] Available at: <a href="http://www.journalofaccountancy.com/News/20137119.htm"><span style="color: blue;">http://www.journalofaccountancy.com/News/20137119.htm</span></a>
[Accessed: 19 November, 2013].<o:p></o:p></span></span><br />
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com30Ss 15, 43000 Subang Jaya, Selangor, Malaysia3.0743785234662697 101.591208777771043.0733875234662698 101.58994827777104 3.0753695234662697 101.59246927777104tag:blogger.com,1999:blog-7011211411109244586.post-12848843204958298592014-01-22T09:57:00.000-08:002014-01-26T03:28:37.353-08:00Malaysian Code on Corporate Governance 2012 (“MCCG 2012”)<div class="MsoNormal" style="background: white; line-height: 13.65pt; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: 13.65pt; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">By </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Chan Hoi Leong,
Researcher</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 13.65pt; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Topic: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 13.65pt; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Area of
discussion: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Corporate Governance</span></div>
<div class="MsoNormal" style="background: white; line-height: 13.65pt; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: #222222; font-family: Arial, sans-serif; font-size: 10pt; line-height: 13.65pt;">Chapter/Keyword(s):
</span><span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 13.65pt;"><span style="color: blue;">Malaysian Code on Corporate Governance 2012 (“MCCG 2012”)</span></span></div>
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<span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt;"><span style="color: blue;"><br /></span></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><b><span style="color: #351c75;">Question</span></b><b><o:p></o:p></b></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><b><br /></b></span></div>
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<span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-MY;">Discuss how the Malaysian Code on Corporate Governance
2012 would help to strengthen governance in listed companies in Malaysia
including the roles and responsibilities of the board and management; reinforce
independence, risk and financial reporting.<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-MY;"><br /></span></div>
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<b><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><span style="color: #351c75;">Introduction</span><u><o:p></o:p></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Essentially,
Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) lists down wide
principles of good governance and detailed recommendations on structures and
processes as well as commentaries to aid understanding by giving out guidelines
and examples. Ideally, companies are advised to follow its best practices which
are flexible, as it will lead to the creation of sound corporate governance
culture, besides promoting ethical and sustainable values. It encourages
companies to put extra efforts on their governance needs instead of merely
fulfilling the minimum requirements or “box ticking”. This is beneficial as
Mallin (2013, p.291) highlights that many listed companies in Malaysia are
still family-controlled; at such shareholders’ rights are often being ignored
while transparency and independence are relatively weak. It is indeed the keys
for efficiency, market confidence and investor protection. Below is the careful
analysis of each principle including their impacts, advantages and
effectiveness:</span></div>
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<span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-MY;"><br /></span></div>
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<b><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><span style="color: #351c75;">Content </span><u><o:p></o:p></u></span></b></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Under
the first principle of establishing clear roles and responsibilities, the board
shall formalise ethical standards through a code of conduct. For example: trade
practices, ethics guidelines and working standards. Organisations should view
codes as a great tool to inculcate its employees with sound principles besides
regulating their behaviour only (Steger & Amann 2013, p.149). At such,
codes can add value to firms by creating an ethical and positive work culture
throughout the entire company. Ideally, well-administered and properly executed
codes can offer numerous benefits such as provide guidelines to assist
employees whenever they face ethical dilemmas in finding the proper course of
action; minimise the risk of having too many subjective and inconsistent
management standards; build public trust and improve business reputation; and
ultimately, promote market efficiency. PricewaterhouseCoopers (PwC) and
Deloitte are some of the industrial examples that are having a strict code of
conduct.</span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Next,
the board should also assure that the organisation’s strategies promote
sustainability especially in the area of environmental, social and governance
(ESG) whereby their respective policies and implementation need to be disclosed
in the company’s annual reports and website. Such disclosures are important for
long-term growth and profitability. For instance: the ways on how an organisation
operates, measurement of progress towards achieving their sustainability
targets, identification of new market opportunities for sustainability-related
products and services, mitigation of sustainability-related risks and so on. It
is apparent that sustainability initiatives can aid in boosting a company’s
competitiveness, employees’ morale and ability in getting more capital (Main
& Konigsburg 2011, p.3). </span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> </span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Then,
the board ought to formalise and make public of its board charter, which point
out the board’s strategic aims, roles and responsibilities. This is vital
especially for the area that concerns with the division and separation of
authorities and responsibilities between the board and the management, the
chairman and the CEO, and all the board sub-committees; all roles should be
clear-cut, non-ambiguous and preferably be split. By doing so, it will give a better
insight to the person in charge whereby they can discharge their duties
delegated to them more effectively in their own area of control as well as
increasing their understanding ability on what needs to be done so that they
can do the right things correctly. Tasks if possible should not be overlapping
to avoid confusion. This is to prevent ‘pointing finger attitude’ when
something went wrong and indirectly, it will boost their seriousness in doing
work too. This is because everyone is held accountable or liable for what he or
she did while the others can know who to refer or blame when they identify work
errors and mistakes. As a consequence, it will promote efficiency in each
individual, team and division. Performance evaluation and assessment can also
be done more accurately and fairly. It is noted that Sime Darby already doing
this.</span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Meanwhile,
it is undoubtedly that the nominating committee’s responsibilities have been
increased tremendously under </span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Principle 2:
Strengthen Composition</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">. Since they are in charge to supervise the
director’s selection and assessment, it is strongly advisable that the
nominating committee should comprise exclusively of NEDs of which majority of
them must be independent. Besides, the nominating committee’s chairman should
also be a senior independent director. The benefits of this move are it gives
additional independence and increase objectivity in the director appointment
process (Azmi 2012, p.13). Thus, avoids the directors from being appointed on
the basis of personal connections or networking (Mallin 2013, p.171).</span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Subsequently,
nominating committee shall develop, maintain and review a set of criteria to be
used in director’s recruitment process and annual assessment. By doing this, it
could help in identifying the best director, preferably who is balance in all
aspects and can add value to the board as a whole (Azmi 2012, p.13). Logical
thinking suggests a person’s performance will vary from time to time, that is
why yearly assessment is essential. When assessing the suitability and quality
of directors, nominating committee shall check, monitor and appraise each
individual whereby considerations should be emphasize on performance,
competencies, commitment (time spent in company and number of meetings
attended), contribution, behaviour and et cetera vigorously and regularly
(Mallin 2013, p.172). If necessary, remove incompetent or unsuitable directors.
Not only that, the board should set a policy related to boardroom diversity and
take proactive steps to ensure that women candidates are included in its
recruitment exercise. Research suggests that mixed-gender teams are superior in
solving complicated problems and examining more aspects of a problem</span><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt;"><span style="line-height: 17.633333206176758px;"> </span><span style="line-height: 150%;">(Gladman & Lamb 2013).</span></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> At
the same time, the board should create a remuneration committee to develop
official and transparent remuneration policies and procedures as well as to
design fair remuneration packages which are align with the company’s long-term
aims and business strategies in order to attract, retain and motivate
directors. This move is critical as it can reduce the possibility of quality
directors from being headhunted easily, encourage directors to strive harder
and avoid companies from paying more than necessary. Remuneration committee
needs to ensure that the design of contracts exclude ‘rewards for failure’, to
prevent rewarding poor performing directors (Mnzava 2012, p.45). In addition,
companies are highly encouraged to disclose board remuneration policies and
procedures in their annual reports. In connection with that, previously Zakaria
(2011) highlights that many company directors in Malaysia were still unwilling
to reveal their remuneration details whereby only 8.3% of directors have
declared their remuneration fees in 2011</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">.
Hopefully, this situation can be improved further in the future.</span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Another
principle would be reinforcing independence. Undeniably, independent directors
could help in mitigating risks arising from conflict of interest or unduly influence
given by interested parties to control board’s decisions. Therefore, assessment
of independent directors needs to be done yearly to evaluate whether they are
still capable to provide independent and objective judgement as well as
unbiased opinion during the board discussion. In this case, it is recommended
that the nominating committee should set out the independence assessment’s
criteria. For example: check whether they got received additional remuneration
(apart from director’s fee) from the company; check whether they have any
family or close relationship with other directors or advisers of the company
(if any), level of commitment (time devoted and meetings’ attendance) and et
cetera (Mallin 2013, p.175).</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> </span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Besides,
companies are discouraged to retain an independent director for more than nine
years</span><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 17.633333206176758px;"> </span><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt;"><span style="line-height: 150%;">(Oh 2012); the reason behind this is long tenure might jeopardise independence
because independent director has been receiving benefits for quite a long
duration and started to feel attached with the company already. Hence, the
danger is they might become biased and side the internal people. Anyway, they
still can opt to serve the company in the capacity of a non-independent
director. Furthermore, shareholders’ approval must be sought and board must give
reasonable justification also before an independent director who has served for
more than nine year can continue to remain independent (Law 2012, p.1). Another
recommendation is the CEO and chairman shall not be the same person, and the
chairman must be a non-executive director. This is extremely important to
promote accountability and also to ensure that the CEO cannot easily influence
the board. Thus, the risk of CEO abuses power to do something that are not
beneficial to the shareholders and company can be potentially be reduced
(Mallin 2013, p.167). If the chairman is non-independent, the board must
consist of a majority of independent directors to “neutralise” the board. This
is truly useful and helpful for corporation that are dominated by families like
Berjaya Corporation. </span></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> As
per the </span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">fourth principle: foster
commitment</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">, the board shall come out with its expectations on its members’
time commitment and set new directorship acceptance protocols. Ideally,
directors should allocate enough time to run their duties. This recommendation
is vital especially for those individuals that hold multiple directorships as
they are more prone to distraction, easily lost focus and usually cannot
provide sound advices as compared to the person that hold only one directorship
(Hashim & Rahman 2011, p.137). This move encourages directors to at least
notify the chairman about how much time that they could spend on the new
appointment, before they accept any new directorships. Moreover, board also
need to ensure that its member will frequently update their knowledge and
refine their skills via suitable continuing education courses and long-term
learning. This is because as time passed by, knowledge and skills will become
irrelevant and obsolete due to globalisation and changing market dynamics. This
move promotes sustainability whereby it enables directors to engage actively in
board deliberations.</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> </span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> </span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> </span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> According
to the fifth principle to uphold integrity, audit committee should ensure that
the preparation of financial statements is in line with applicable financial
reporting standards to promote reliability, besides having policies and
procedures to evaluate the appropriateness and independence of external
auditors. This includes a review of the audit fee and fees paid for non-audit
work (Mallin 2013, p169). The external auditors’ independence would be
threatened if they provide non-audit services to client without adequate
safeguards and control as they might grow closer to the company (ICAEW 2013).
This is even could be worst if the non-audit fees are higher than the audit
fees as it is open to suspicion. That is why it is recommended that the audit
committee shall establish policies to govern those non-audit services issues
and procedures for external auditors to follow. In addition, external auditors’
written assurance should be obtained by the audit committee to confirm that
they have been independent throughout the whole audit engagement.</span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> For
the sixth principle, the board should set up a good risk management framework
and disclose in the annual report the primary features of the company’s risk
management framework and internal controls system. All risks must be clearly
identified, assessed and monitored as they can affect the bottom line, company
and employees. For example: liquidity risk, political risk and reputation risk.
Company ought to take appropriate measures to reduce and minimise risk such as
diversification and transfer of risk; whilst to ensure that internal controls
system is always practicable and robust, periodic testing of the effectiveness
and efficiency of its procedures and processes must be carried out
consistently. Such moves will safeguard shareholders’ investments and the
company’s assets. Besides, an internal audit function that reports directly to
the Audit Committee should also be established. Internal auditors shall have
relevant qualifications and experiences to run their duties smoothly including
review and appraise the governance, risk management and internal controls
processes.</span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Meanwhile,
the new additions under the seventh principle stress drastically on the
importance of well-timed and sound disclosure. Firstly, organisations are
required to have proper corporate disclosure policies and procedures, which
include the reconsideration on the need for non-financial information data’s
disclosure. Basically, it encourages companies to move away from merely
satisfying the minimum reporting requirements to high quality and comprehensive
disclosures. Ideally, more disclosures generally mean that the shareholders can
have a clearer view about the company and indirectly, improve shareholders’
decision making as well as erase doubt. This will surely heighten transparency
and shareholders’ confidence. Secondly, it promotes better and extensive use of
technology; so that timely information can be communicated and circulated to
all the shareholders (Pasricha 2012). For instance: setting up a platform
exclusively for corporate governance in company website to display information
like board charter, shareholders’ right and the annual report. As compared to
traditional snail mail or postal system which is slow, costly and need a lot of
effort, such technology-based dissemination methods are more effective, fast
and convenient. Plus, it promotes higher accessibility, no delay and it is
capable to reach wider audiences including foreign investors. The advantage is
shareholders will not received out-dated information which is irrelevant in
decision making.</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> </span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> Finally,
the eighth principle defends and enhances shareholders’ rights as well as
foster closer ties between company and shareholders. Sensible actions shall be
taken by the board to encourage shareholders to take part in general meetings.
Although the current minimum notice period is 21 days (OECD 2011, p.17),
companies are allowed to give notices earlier than that to show their
commitment. The board needs to think carefully whether they wish to utilise
advanced electronic voting since it can potentially increase shareholder
participation as physical attendance is not needed. Plus, shareholders are able
to vote from remote computer terminals conveniently. Nonetheless, security and
cost issues remain a challenge. Likewise, the board needs to move towards poll
voting too. Shareholders need to be informed about their right to request a
poll vote at the beginning of the general meeting. Pasricha (2012) voice out
that the normal practice of show of hands voting is unfair because it does not
take into account the shareholders’ percentage of shareholding. Since each
shareholder who present physically has one vote, it empowers minority
shareholders unequally. Fortunately, poll voting supports ‘one share one vote’
principle and the display of detailed results regarding the number of votes cast
for and against each resolution will improve transparency significantly. In
addition, electronic poll voting is also recommended as it can eliminate human
error in counting votes and hence, recounts are unnecessary. Besides, the board
needs to promote fine communication and actively engage with their shareholders.
At such, they can consider to carry out regular meet ups, conference meetings,
dialogue sessions and corporate visits to boost mutual understanding.</span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-MY;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><span style="color: #351c75;">Conclusion</span><u><o:p></o:p></u></span></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"> All
in all, as the fulfillment of those principles and recommendations are
voluntary, the adoption will heavily depend on a company’s willingness. Most
importantly, if companies have decided to follow and execute majority of all
those recommendation, it will certainly help them in strengthening their
governance and create a win-win situation which is beneficial to the companies
as well as to the shareholders. Profit aside, at least such code will push the
board and sub-committee to perform their duties efficiently. Hence, companies
should view it as a great opportunity to increase their corporate governance’s
rating. A pleasant rating attracts new investments, gives a good impression to
shareholders and indirectly increases their confidence. The adoption will
improve overall performance, reduce fraud and help to gain better reputation.
Not only that, core values such as transparency, independence, integrity,
accountability, fairness and so on can be further improved too.</span></div>
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<b><span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 11.5pt; line-height: 150%; mso-ansi-language: EN-MY;"><span style="color: #351c75;">References</span><o:p></o:p></span></b></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Azmi, MF 2012, <i>PwC Alert: Malaysian Code on Corporate
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<br /></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Gladman, K & Lamb, M 2013, ‘Board diversity: can voluntary
change succeed?’, <i>The Guardian</i>, 21
May, viewed 17 June 2013, <<a href="http://www.guardian.co.uk/women-in-leadership/2013/may/21/can-voluntary-change-succeed"><span style="color: blue;">http://www.guardian.co.uk/women-in-leadership/2013/may/21/can-voluntary-change-succeed</span></a>><o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Hashim, HA & Rahman, SA 2011, ‘Multiple board appointment: Are
directors effective?’, <i>International
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">ICAEW 2013, <i>The provision of
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Law, A 2012, <i>Malaysian Code on Corporate Governance 2012
– Implication and challenges to the Boards of PLCs</i>, Crowe Horwath, 30
August, viewed 13 June 2013, <</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><a href="http://www.crowehorwath.net/uploadedFiles/MY/insights/insights-assets/MCCG%202012%20article%20Final%20Risk%20Advisory%20-%20Sept%202012(1).pdf"><span style="background-color: white;"><span style="color: blue;">http://www.crowehorwath.net/uploadedFiles/MY/insights/insights-assets/MCCG%202012%20article%20Final%20Risk%20Advisory%20-%20Sept%202012(1).pdf</span></span></a>><o:p></o:p></span></div>
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<br /></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Main, N &
Konigsburg, D 2011, <i>The sustainable board</i>,
Deloitte, viewed 14 June 2013, <</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><a href="http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/USEng/Documents/Board%20Governance/Corporate%20Responsibility%20and%20Sustainability/The%20Sustainable%20Board_Deloitte_011112.pdf"><span style="color: blue;">http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/USEng/Documents/Board%20Governance/Corporate%20Responsibility%20and%20Sustainability/The%20Sustainable%20Board_Deloitte_011112.pdf</span></a>><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Mallin,
CA 2013, <i>Corporate Governance</i>, 4<sup>th</sup>
edn, Oxford University Press, Oxford.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in;">
<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Mnzawa, B 2012,
‘Directors’ remuneration and its determinants: What do we know?, <i>Business and Management Review</i>, vol.2,
no.4, pp.42-59, viewed 19 June 2013, <</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><a href="http://web.ebscohost.com.ezproxy.inti.edu.my:2048/ehost/pdfviewer/pdfviewer?sid=b6859758-ad2c-4b1a-912d-79b4b252c462%40sessionmgr111&vid=5&hid=9"><span style="background-color: white;"><span style="color: blue;">http://web.ebscohost.com.ezproxy.inti.edu.my:2048/ehost/pdfviewer/pdfviewer?sid=b6859758-ad2c-4b1a-912d-79b4b252c462%40sessionmgr111&vid=5&hid=9</span></span></a>><o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">OECD 2011, <i>Corporate
Governance in Asia: Progress and Challenges</i>, Corporate Governance, OECD
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Oh, E 2012,
‘Ready for recommendations?’, <i>The Star</i>,
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<span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Pasricha, N 2012, <i>New
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Chartered Secretaries and Administrators [MAICSA], 30 May, viewed 23 June 2013,
<<a href="http://www.maicsa.org.my/article_coverstory/2012/article_coverstory_1204.aspx"><span style="background-color: white;"><span style="color: blue;">http://www.maicsa.org.my/article_coverstory/2012/article_coverstory_1204.aspx</span></span></a>></span><span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Steger,
U & Amann, W 2012, <i>Corporate Governance:
How to Add Value</i>, John Wiley & Sons Ltd, Chichester. <o:p></o:p></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;">Zakaria, SH
2011, ‘Directors unwilling to reveal remuneration’, <i>The Edge</i>, 8 December, viewed 19 June 2013, <</span><span style="font-family: 'Times New Roman', serif; font-size: 11.5pt; line-height: 150%;"><a href="http://www.theedgemalaysia.com/highlights/197487-directors-unwilling-to-reveal-remuneration.html"><span style="color: blue;">http://www.theedgemalaysia.com/highlights/197487-directors-unwilling-to-reveal-remuneration.html</span></a>><o:p></o:p></span></div>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com155Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.0742713895147 101.590940556869553.0732803895147 101.58968005686955 3.0752623895147 101.59220105686956tag:blogger.com,1999:blog-7011211411109244586.post-24987786949495366912013-12-16T06:01:00.000-08:002013-12-21T00:41:19.939-08:00Internal Control Systems (PAPAMOSS)<div class="MsoNormal" style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 115%;"><br /></span></div>
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<span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 115%;">By </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Chan Hoi Leong,
Researcher</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 115%;">Topic: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 115%;">Area
of discussion: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Auditing</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 115%;">Chapter: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Internal
Control Systems (PAPAMOSS)<o:p></o:p></span></div>
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<i><span lang="EN-GB">The primary objective
of this posting is to critically discuss and explain each element of PAPAMOSS
in detail, with some practical examples given to facilitate a clearer
understanding. I noticed that there are lack of detailed notes available online
nor in books about this topic, so I decided to do some researches and write
about this PAPAMOSS’s concept. By the way, this topic is examinable in ACCA
examinations (e.g. P1 & P8). Seriously, I hope that this posting can help
you to understand the concept better. Kindly share this information with your
friends, if you find that this is useful. In addition, if you have any comments
which can improve the content of this posting, please do leave a message below.</span></i><i><o:p></o:p></i></div>
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<i><span lang="EN-GB"><br /></span></i></div>
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<b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: #351c75;">Internal control systems</span><o:p></o:p></span></b></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"> As defined in Paragraph 4(c) of ISA
315, internal control is “the process designed, implemented and maintained by
those charged with governance, management and other personnel to provide
reasonable assurance about the achievement of an entity’s objectives with
regard to reliability of financial reporting, effectiveness and efficiency of
operations, and compliance with applicable laws and regulations.”</span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"> It includes all the policies and
procedures (internal controls) adopted by the directors and management of an
entity in order to achieve their goals of ensuring, as far as practicable, the
orderly and efficient conduct of its business, including: adherence to
management policies; safeguarding of assets; prevention and detection of fraud
and error; ensuring the accuracy and completeness of the accounting records;
and timely preparation of reliable financial statements (Kan, 2013; Kwok, 2005).
Auditors generally seek to rely on the internal controls within an entity to
reduce the amount of testing on final balances.</span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"> Interestingly, the eight features of
an internal control system are popularly known through these two mnemonics
words, namely “PAPAMOSS” or “SOAPSPAM”. The eight features are:</span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">P</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">hysical control:</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">This
is mainly concerned with the custody and protection of assets such as cash and
inventories. It involves tight security measures and procedures to ensure that
only authorised personnel have access to the records and assets. For examples,
the installation of fences, gates, doors as well as the use of locks and keys. <o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">A</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">uthorisation and approval control:</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">No
transactions should be carried out and no documents should be processed,
without the approval or permission from an appropriate and responsible person.
Approval like signing must be done with consent. Not only that, limits on
authorisation should be clearly specified too.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">P</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">ersonnel control:</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">These
are procedures put in place to ensure that staffs have capabilities
commensurate with their responsibilities. Kan (2013, p.162) highlights that the
hiring of well-motivated competent employees, who have the required integrity
for their tasks, will ensure that the control system operates properly. Most
importantly, the consideration here should stress on the qualification,
selection, training and the worker’s innate personal characteristics. Besides,
big companies usually have their own dress code systems which require personnel
to wear specific attire or uniform in order to indicate a personnel’s rank or
department. <o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">A</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">rithmetical and accounting control:</span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">Persons
in charge should ensure that all transactions have been authorised before they
are sent for recording and processing purposes. After that, the persons in
charge must check whether they got left out anything and make sure that all
transactions are correctly recorded and accurately processed. Such controls may
include checking the arithmetical accuracy of the records like control
accounts, cross totals, reconciliations, trial balance and sequential controls
over documents.<o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">M</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">anagement control:</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">These
are the controls exercised by the management outside the daily routine of the
system. For example, overall supervisory controls, review of management
accounts, budgetary controls, internal audit function and other special review
procedures.<o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">O</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">rganisational control:</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">Kan
(2013, p.162) states that a well-defined organisational structure shall show
clearly how responsibilities and authorities are delegated as well as identify
lines of reporting for all aspects of the enterprise’s operations. A tall
organisational structure usually has a narrow span of control where managers
can manage their subordinates easily but communication might be distorted due
to higher level of hierarchy plus employing many managers is costly. Research
organisations normally have these characteristics. Conversely, a flat organisational
structure has a wider span of control where managers have fewer time to
supervise all their subordinates but there will be lesser distortion in
communication as the hierarchy level is shorter plus subordinates are cheaper
to hire as compared to managers. This is common in manufacturing industries
(Jones and George, 2003, pp.311-312). </span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">S</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">upervision control:</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">Supervision
by responsible officials of the day-to-day transactions and the recording
thereof is an integral part of any control system. For instance, management
accounts are reviewed for reasonableness by a qualified accountant.
Centralisation might facilitate supervision across management. <o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<b><u><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">S</span></span></u></b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: blue;">egregation of duties:</span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
</div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;">Ideally,
responsibilities and duties must be separated to a number of people, so that no
individual can fully record and process a transaction completely. Furthermore,
it reduces the risk of intentional manipulation or mistake and increase the
element of checking. Functions which should be separated include authorisation,
execution, custody, recording and so on. However, if collusion takes place or
if people work together to circumvent the system, then segregation of duties
may be ineffective as this situation often making fraud difficult to detect
(Gray and Manson, 2011, p.282). </span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify; text-justify: inter-ideograph;">
<b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><span style="color: #351c75;">Conclusion</span><o:p></o:p></span></b></div>
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<b><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-GB;"><br /></span></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;"> It
is noted that significant deficiencies in internal controls shall be
communicated in writing to those charged with governance in a report to
management. The written communication should include a description of the
deficiencies and their potential effects. ISA 265 requires auditors to find out
the number of identified deficiencies and their relative significance. Auditors
may also provide suggestions for remedial action.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="line-height: 200%; text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 200%;"><span style="color: #351c75;">References</span></span></b></div>
<div class="MsoNormal" style="line-height: 200%; text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 200%; text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">Gray, I. and Manson,
S., 2011. </span><i style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">The audit process: principles,
practice and cases</i><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">. 5</span><sup style="font-family: 'Times New Roman', serif; line-height: 150%;">th</sup><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"> ed. Australia: South-Western Cengage.</span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;">Jones, G.R. and George,
J.M., 2003. <i>Contemporary management</i>.
3<sup>rd</sup> ed. New York: McGraw-Hill.</span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;">Kan, E., 2013. <i>Audit and assurance – principles and
practices in Singapore</i>. 3<sup>rd</sup> ed. Singapore: CCH.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="line-height: 200%; text-align: justify; text-justify: inter-ideograph;">
</div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;">Kwok, B.K.B., 2005. <i>Accounting irregularities in financial
statements: a definitive guide for litigators, auditors, and fraud
investigators</i>. Aldershot: Gower Publishing Limited.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com16Inti College Subang Jaya, Ss 15, 43000 Subang Jaya, Selangor, Malaysia3.0742558232302253 101.591117978096013.0737603232302253 101.59048747809601 3.0747513232302253 101.59174847809601tag:blogger.com,1999:blog-7011211411109244586.post-46656445665628616012013-10-04T23:05:00.000-07:002013-10-04T23:58:59.353-07:00Just-in-time systems<br />
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">By </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Jackie,
Researcher</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Topic: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Area of
discussion: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Management and Cost Accounting</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Chapter: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Cost
Management – Just-in-time systems</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span class="Apple-style-span" style="font-size: small;"><span lang="EN-MY"><span class="Apple-style-span" style="color: red;">Question:<b> </b>Discuss the
benefits and drawbacks of implementing JIT systems</span><span class="Apple-style-span" style="color: blue;"><o:p></o:p></span></span></span></div>
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<span class="Apple-style-span" style="color: blue; font-family: 'Times New Roman', serif;"><b><b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-MY; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-hansi-theme-font: minor-latin;"><br /></span></b></b></span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;"><span lang="EN-MY" style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"></span></span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;"><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b>Introduction</b></span></span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;"><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b> </b>Just-in-time (JIT) is a popular lean
manufacturing tool especially in supply chain management. Unlike conventional
manufacturing practice which utilises “push approach” of which finished goods
are completed and stored in advance before customer orders are received, JIT
uses “pull approach” whereby the manufacturing of products begins right after
the customer places an order with the company (Weygandt, Kimmel & Kieso
2009, p.174). Fundamentally, JIT aims to produce the required items, at the
required quantities and quality only when they are needed (Drury 2008, p.556). Essentially,
JIT system covers three main areas: purchasing, production and distribution (El
Dabee, Marian & Amer 2013, p.140). Some industrial examples of companies
which have successfully use JIT are Toyota, McDonald's, Harley-Davidson and
Dell. Below are the discussion on the pros and cons of implementing JIT system.</span></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b><br /></b></span>
<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b>Benefits</b><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b><br /></b></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Firstly, JIT keens to eliminate wastes in
time, effort and resources as well as get rid of non-value added activities (El
Dabee, Marian & Amer 2013, p.140). For examples: inspecting, moving items,
reworks, storing, queuing and waiting. Such activities only add cost without
creating additional usefulness to the product; customers will not pay extra for
these. Under JIT, the removal of all non-value added activities can be attained
if raw materials are converted to finished products with lead times equal to
process time (Drury 2008, p.557). For that reason, factory is laid out based on
flow line principles instead of batch production functional layout to maintain
a continuous flow of components with no stoppages and storage. This will minimise
transfer time and shorten the lead time (Bower 2010, p.4). <o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Secondly,
in pursuing “zero inventories” goal, JIT entails keeping a minimum inventory of
raw materials, work-in-progress and finished goods (Scarlett 2010, p.44). As a
consequence, it may reduce the number of warehouses that a company maintains or
even allow them to completely eliminate all warehouses in one-shot.
Subsequently, it layoffs storekeepers as stocks related tasks like counting,
recording, checking and arranging are no longer required. Likewise, the number
of security guards can also be cut down because there will be limited items for
them to safeguard. Besides, it can also reduce direct physical stocks loss and
damage caused by burglary and pilferage activities or perhaps in other extents
like fire and flood. Therefore, inventory insurance seems to be unnecessary as
the risk is at minimal level since companies that are practising JIT will not
keep the stocks for a long duration. In short, this enables companies to enjoy
a greater saving in warehouse rent, warehousing salaries and insurance
payments. Money saved can be used for other better usage like investment.
Ideally, this is perfect for companies that are dealing with stocks that
expired quickly such as daily newspapers, products that spoiled easily like
food as well as electronic items that are quickly outdated.<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> Thirdly,
JIT aims for zero defects. This can be achieved if total quality control
exists. Vincent (2011, p.3192) points out that quality and productivity need to
be refine throughout all manufacturing stages. As per <i style="mso-bidi-font-style: normal;">Kanbans</i> - visible signalling systems: if problems happen at a later
stage, earlier stage will not receive the pull signal; if problems arise at the
earlier stage, the later stage will not have their pull signal answered (Drury
2008, p.558). Total quality control requires workers and supervisors to monitor
continuously at every work station. Hence, if any defects are found in any work
station, operations will shut down immediately (Weygandt, Kimmel & Kieso
2009, p.175). Then, appropriate corrective action could be taken instantly to
rectify the problems at that exact work station. For this reason, the products
that are being produced at the end are of high-quality and defects free. So,
inspection is not needed anymore and there will be no reworks or replacements of
products too. At such, it enables saving in inspection cost and cost of
replacement for defective items (Singh & Singh 2013, p.1582).<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Fourthly, Vercio and Shoemaker (2007)
state that JIT processes stress on reducing batch or lot sizes to one.
Undeniably, production in large batches often causes delays, long waiting time
and creates a higher level of inventories. So, producing in smaller batch size
will eventually shorten the production cycles, reduce finished goods
inventories and enables more customer-specific or customised manufacture (Holl,
Pardo & Rama 2010, p.525). Drury (2008, p.558) supports by stating that JIT
allows works to flow smoothly to the next stage without the need for storage
and to schedule the next machine to accept this item. This facilitates a firm
to adapt more readily to short-term fluctuations in market demand and react
quickly to customer requests. Not only that, JIT helps in reducing and
eliminating set-up times too. For instance, purchase a sophisticates
manufacturing machine that allows settings to be adjusted automatically instead
of manually. When this happens, small batch sizes will be economical and
cost-effective. <span style="mso-spacerun: yes;"> </span></span><span class="Apple-style-span" style="font-size: 16px;"> </span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b>Drawbacks</b><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b><br /></b></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Al-Matarneh (2012, p.63) highlights that
one of the biggest obstacle in implementing sound JIT is lack of integrated
cooperation, direct communication and mutual understanding between suppliers
and management. Meanwhile, variability in demand patterns caused by random
purchases will worsen the situation; sharing accurate, timely and relevant
information about sales forecasts remains a challenge due to trust and
incompatible information systems (Horngren, Datar & Rajan 2012, p.736). Although
significant coordination between them could be improved by having a real time
management information system by using technologically advanced software, it is
very costly to carry out. For this reason, sometimes the cost of implementing
JIT system outweighs the expected benefits derive from its application, making
it not worthwhile to do so. Normally, this happens in small organisation during
initial start ups. As production is heavily reliant and dependent on suppliers
and if stock is not delivered on time, the whole production schedule can be
delayed.<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Next,
worker competencies are imperative as they are the critical success factor of
JIT. Apparently, companies usually will face a lot of employees’ issues. For
instance: attitudes, commitment, punctuality, participation, cooperativeness,
learning ability, resistance to change and et cetera. Horngren, Datar and Rajan
(2012, p.737) state that workers need trainings to be multi-skilled and enable
them to perform a variety of tasks like minor repairs and routine equipment
maintenance. Hence, companies might need to pay high costs for all the
trainings and workshops. It is noted that having a higher proportion of
temporarily workers as compared to permanent workers as well as having a high
labour turnover rate will further jeopardise the implementation of JIT. This is
due to low probability of achieving the peak stage in learning curve to be real
efficient which need a lot of time.<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Furthermore,
JIT does not provide any provision for mistakes, errors and uncertainties as it
aims for perfection. Hence, it could be very dangerous and risky as back-up
plans like safety stock are usually not prepared whilst complexity creates
confusion. Sometimes companies face difficulties in identifying and
categorising which activities are value-added and which are not (Al-Matarneh
2012, p.57). Insufficient precise information leads to inaccurate forecast and
prediction too especially when sales and demand fluctuates during festival
seasons. In addition, JIT does not take into account of external factors such
as weather, congestion and unexpected accidents which can cause serious delay
in JIT manufacturing (Cheng 2011, p.276).<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Moreover,
high costs are required to implement JIT system. Cheng (2011, pp.276-278)
claims that the demand for more frequent long-distance transportation,
small-size and premium shipments will definitely cause high transport cost.
Thus, it is not economical as carriage inwards will be more expensive (Akbalik
& Penz 2010, p.2567). Yet, implementing JIT is not eligible for trade
discount because bulk purchases are avoided. Besides, initial investment could
be very high as companies need to purchase all those software and equipments such
as global positioning system (GPS) and provide trainings for workers too.<o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b>Conclusion</b><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><b><br /></b></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span></span></b><span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">All in all, evidences have proven that JIT
really helps in improving organisations’ efficiency, productivity, responsiveness,
competitiveness and products quality; at the same time, minimising unnecessary
costs and wastes. However, it is costly to implement. Hence, it appears to be
unfavourable for small business start-ups. Plus, it requires time to inculcate
this philosophy to the existing corporate culture. Although some companies have
tried to execute backward and forward integrations to eliminate the conflicts
with suppliers and distributors, but consideration on further analysis need to
be taken like NPV, CBA and risk assessment to evaluate whether it is worthwhile
to do so. Fruitful results cannot be obtained overnight; it needs quite a long
time to enjoy the success as it is long-term oriented.</span><span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY;"> <o:p></o:p></span><br />
<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><br /></span>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-5kb0kQXTlrQ/Uk-unxSi57I/AAAAAAAABHw/xk6nVAy-zic/s1600/kanban+2.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/-5kb0kQXTlrQ/Uk-unxSi57I/AAAAAAAABHw/xk6nVAy-zic/s1600/kanban+2.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span class="Apple-style-span" style="color: red; font-size: x-small;"><b><i></i></b></span><br />
<div class="MsoNormal" style="line-height: 150%;">
<span class="Apple-style-span" style="color: red; font-size: x-small;"><b><i><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><span class="apple-style-span"><b><i><span style="color: red; line-height: 150%;">Just-in-time: Toyota Motor
Corporation</span></i></b></span><b><i><span style="color: black; line-height: 150%;"><br />
</span></i></b><span class="apple-style-span"><b><i><span style="color: red; line-height: 150%;">Extracted from: </span></i></b></span><span class="apple-style-span"><b><i><span style="color: black; line-height: 150%;"><a href="http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html">http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html</a></span></i></b></span></span><span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY;"><o:p></o:p></span></i></b></span></div>
<span class="Apple-style-span" style="color: red; font-size: x-small;"><b><i>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="color: #351c75; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY;">References</span></b><b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 2.0pt; line-height: 150%; mso-ansi-language: EN-MY;"><o:p></o:p></span></b></div>
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<span lang="EN-MY" style="font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Akbalik, A & Penz, B 2011, ‘Comparison of
just-in-time and time window delivery policies for a single-item capacitated
lot size problem’, <i style="mso-bidi-font-style: normal;">International Journal
of Production Research</i>, vol.49, no.9, pp.2567-2585, viewed 7 July 2013, <<u><span class="Apple-style-span" style="color: blue;">http://dx.doi.org/</span></u></span><span class="apple-style-span"><u><span style="font-size: 12pt; line-height: 150%;"><span class="Apple-style-span" style="color: blue;">10.1080/00207543.2010.532921</span></span></u></span><span class="apple-style-span"><span style="color: black; font-size: 12.0pt; line-height: 150%; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">>.</span></span><span style="color: black; font-size: 2.0pt; line-height: 150%; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
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no.1, pp.55-64, viewed 4 July 2013, <</span><span style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><a href="http://www.usimr.org/IMR-1-2012/v8n112-art8.pdf"><span style="font-size: 12pt; line-height: 150%;"><span class="Apple-style-span" style="color: blue;">http://www.usimr.org/IMR-1-2012/v8n112-art8.pdf</span></span></a></span><span style="color: black; font-size: 12.0pt; line-height: 150%; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">>.<o:p></o:p></span></div>
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T 2011, ‘Multicriteria models for just-in-time scheduling’, </span><span style="mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"><a href="file:///C:/Users/Win7/Documents/Management%20Decision%20Making%20-%20individual%20final%20softcopy.docx" title="Search for International Journal of Production Research"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: black; font-size: 12.0pt; line-height: 150%; mso-border-alt: none windowtext 0cm; padding: 0cm;">International Journal of Production Research</span></i></a></span><span class="apple-style-span"><span style="color: black; font-size: 12.0pt; line-height: 150%; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">, vol.49, no.11,
pp.3191-3209, viewed 3 July 2013, <</span></span><span class="Apple-style-span" style="color: blue;"><u><span lang="EN-MY" style="font-size: 12pt; line-height: 150%;">http://dx.doi.org/</span></u><span class="apple-style-span"><u><span style="font-size: 12pt; line-height: 150%;">10.1080/00207541003733783</span></u></span></span><span class="apple-style-span"><span style="color: black; font-size: 12.0pt; line-height: 150%; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">>.</span></span></div>
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<span lang="EN-MY" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-MY;">Weygandt, JJ, Kimmel, PD & Kieso, DE 2009, <i style="mso-bidi-font-style: normal;">Managerial accounting: tools for business decision making</i>, 5<sup>th</sup>
edn, John Wiley & Sons, United States of America.<o:p></o:p></span></div>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com6Ss 15, 46000 Subang Jaya, Selangor, Malaysia3.074292816305884 101.590940556869553.0733018163058841 101.58968005686955 3.075283816305884 101.59220105686956tag:blogger.com,1999:blog-7011211411109244586.post-70058376302302432312013-04-04T05:56:00.002-07:002013-04-04T10:12:25.309-07:00Calculation of optimum selling price using differential calculus<div class="separator" style="clear: both; text-align: center;">
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">By </span><span lang="EN-GB" style="color: blue; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Jackie,
Researcher</span><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Topic: </span><span lang="EN-GB" style="color: blue; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Area of discussion: </span><span lang="EN-GB" style="color: blue; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Management
and Cost Accounting</span><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Chapter: </span><span lang="EN-GB" style="color: blue; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Pricing
decisions and profitability analysis<o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><i>The primary objective of this
posting is to demonstrate the computation of optimal selling prices using
differential calculus. Ideally, the theoretical solution to pricing decisions
is derived from economic theory, which explains how the optimal selling price
is determined. Interestingly, it is possible to derive simultaneously the
optimum output level and selling price using differential calculus, if the demand
and cost schedules are known. For discussion purpose, I have taken a past year
question from ICAEW Management Accounting; this is an advanced question and it
focuses a lot on “equation”.</i></span></div>
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<a href="http://3.bp.blogspot.com/-F7nm54XREiU/UVPfyQQGFkI/AAAAAAAABEc/DirSxtFlstk/s1600/calculation+of+optimum+selling+price+using+differential+calculus+(1).jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-F7nm54XREiU/UVPfyQQGFkI/AAAAAAAABEc/DirSxtFlstk/s1600/calculation+of+optimum+selling+price+using+differential+calculus+(1).jpg" /></a></div>
<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b>
<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b>
<b><span class="Apple-style-span" style="color: #351c75;">Suggested answers with workings:</span></b><br />
<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b>
<b><span class="Apple-style-span" style="color: blue;">Solution for a:</span></b><br />
<b><span class="Apple-style-span" style="color: blue;"><br /></span></b>
Fundamentally, profit
maximization is achieved when dTC/dx = dTR/dx (or when MC = MR). Therefore, it
is advisable to calculate the marginal cost (MC) and the fixed costs (FC)
first, so that we can use them to form the total cost (TC) function later. On
the other hand, total revenue (TR) function can be found by multiplying selling
price (SP) per unit with the output quantity. To solve ‘question a’, we need to
calculate what is the maximum profit when the new machine is not leased and
when the new machine is leased. Decision on whether to lease or not to lease
the machine will depend on the option that can give a higher profit.<br />
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<span style="mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><span class="Apple-style-span" style="color: red;">Note: The cost of materials per
unit (i.e. £2/unit) could be found by dividing £400,000 with 200,000 units.
However, do not apply this method (i.e. £90,000 ÷ 200,000 units = £0.45/unit) to
compute piecework rate because the computed figure is a sunk cost and hence, it
is irrelevant for decision making purposes as the price of the piecework rate
will increase to £0.50 per unit in the coming quarter.</span><o:p></o:p></span><br />
<span style="mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><span class="Apple-style-span" style="color: red;"><br /></span></span></div>
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<a href="http://2.bp.blogspot.com/-pLP7Hibq8PA/UVrgKYZsvEI/AAAAAAAABEs/QnNelaR9RlY/s1600/if+the+new+machine+is+not+leased.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-pLP7Hibq8PA/UVrgKYZsvEI/AAAAAAAABEs/QnNelaR9RlY/s1600/if+the+new+machine+is+not+leased.JPG" /></a></div>
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<b><i>[Cont'd]</i></b></div>
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<span class="Apple-style-span" style="color: red;">Note: If the new machine is leased, then
the cost of materials will now be £1 (i.e. £2/unit x 50%) as the quality
control problems will be eliminated, resulting in a halving of the usage of
materials. Besides, the cost of leasing the new machine per quarter (i.e. £115,000)
will now be an additional fixed cost element.</span></div>
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<span class="Apple-style-span" style="color: red;"><br /></span></div>
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<a href="http://3.bp.blogspot.com/-xiUKGyfuOeI/UVrlwrbVMAI/AAAAAAAABE8/FqxXLdUGXSI/s1600/lease+the+new+machine.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-xiUKGyfuOeI/UVrlwrbVMAI/AAAAAAAABE8/FqxXLdUGXSI/s1600/lease+the+new+machine.JPG" /></a></div>
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<span class="Apple-style-span" style="color: blue;"><b><br /></b></span></div>
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<span class="Apple-style-span" style="color: blue;"><b><a href="http://3.bp.blogspot.com/-xiUKGyfuOeI/UVrlwrbVMAI/AAAAAAAABE8/FqxXLdUGXSI/s1600/lease+the+new+machine.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"></a><br /></b></span></div>
<b><span class="Apple-style-span" style="color: blue;">Solution for b(i):</span></b><br />
<br />
<b><span class="Apple-style-span" style="color: blue;"></span></b>Again, this is quite similar with ‘question
a’. Profit maximization is achieved when dTC/dx = dTR/dx (or when MR = MC).<br />
<br />
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<a href="http://3.bp.blogspot.com/-K1u7ueM1-kI/UVw_SEAGGuI/AAAAAAAABFM/ESAbz6iUiyg/s1600/profit+maximization+-+differential+calculus.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-K1u7ueM1-kI/UVw_SEAGGuI/AAAAAAAABFM/ESAbz6iUiyg/s1600/profit+maximization+-+differential+calculus.JPG" /></a></div>
<b><span class="Apple-style-span" style="color: blue;"><br /></span></b>
<b><span class="Apple-style-span" style="color: blue;"><br /></span></b>
<b><span class="Apple-style-span" style="color: blue;">Solution of b(ii):</span></b><br />
<br />
<b><span class="Apple-style-span" style="color: blue;"></span></b>Please bear in mind that, profit
maximization <span class="apple-style-span">≠</span> sales maximization.
Total revenue will be maximized when MR=0.<br />
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<a href="http://1.bp.blogspot.com/-H3bhLI7BMsQ/UVxgH0vG2KI/AAAAAAAABFc/i6YXNsOLmNk/s1600/sales+maximization.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-H3bhLI7BMsQ/UVxgH0vG2KI/AAAAAAAABFc/i6YXNsOLmNk/s1600/sales+maximization.JPG" /></a></div>
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<span class="apple-style-span"><b><span class="Apple-style-span" style="color: #351c75;">Additional readings, related links and
references:</span></b><o:p></o:p></span></div>
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<span class="apple-style-span"><span style="color: black;"><br /></span></span></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Tahoma; mso-themecolor: text1;">For more questions on pricing decisions and profitability
analysis, you may go to this link; there are a lot of past year questions taken
directly from CIMA, ACCA and ICAEW.<o:p></o:p></span></span></div>
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<a href="http://www.tlint.com/emea/drury_6e/student/instreviewques/11questions.pdf"><span class="Apple-style-span" style="color: blue;">http://www.tlint.com/emea/drury_6e/student/instreviewques/11questions.pdf</span></a></div>
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Product
costing/Pricing strategy: Emphasize more on economics. Computations of profit
maximization are included and well-explained. Ample graphs and tables are
provided for illustration purposes.</div>
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<a href="http://www2.accaglobal.com/archive/sa_oldarticles/43958"><span class="Apple-style-span" style="color: blue;">http://www2.accaglobal.com/archive/sa_oldarticles/43958</span></a></div>
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For students
who are interested to learn this in a greater level of details, you may
download extra notes, print out, and keep a copy for your own references/studies
purposes.</div>
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<a href="http://download.nos.org/srsec311new/L.No.41.pdf"><span class="Apple-style-span" style="color: blue;">http://download.nos.org/srsec311new/L.No.41.pdf</span></a></div>
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Optimization problems & solutions in calculus. This is a very short article. It explains the formula: f'(x) = a(x^(a-1))</div>
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<a href="http://www.ehow.com/info_8062745_optimization-problems-solutions-calculus.html"><span class="Apple-style-span" style="color: blue;">http://www.ehow.com/info_8062745_optimization-problems-solutions-calculus.html</span></a></div>
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Calculus review and minor short exercises.</div>
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<a href="http://www.sfu.ca/~zhent/files/Calculus%20Review.pdf"><span class="Apple-style-span" style="color: blue;">http://www.sfu.ca/~zhent/files/Calculus%20Review.pdf</span></a></div>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com1INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-15601695659306671802013-03-19T03:21:00.000-07:002013-03-19T07:16:00.326-07:00Product-mix decisions when capacity constraints exist<div class="separator" style="clear: both; text-align: left;">
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<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
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<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">By </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Jackie,
Researcher</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Topic: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Area of
discussion: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Management and Cost Accounting</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 13.5pt; margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span lang="EN-GB" style="color: black; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-fareast-font-family: "Times New Roman";">Chapter: </span><span lang="EN-GB" style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-GB; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Measuring
relevant costs and revenues for decision-making</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<i></i><br />
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<i>The
primary objective of this posting is to critically describe the key concept
that should be applied for presenting information for product-mix decisions when
capacity constraints apply. In this discussion, I have taken a past year
question from CIMA Cost Accounting 2 and prepared sample solutions with
detailed workings to aid illustration purposes. Personally, I like this
question because it is very tricky as ‘duo ranking system’ applies due to the nature
of allotment and the presence of ‘market commitment’ in this question. <span style="mso-spacerun: yes;"> </span></i></div>
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<a href="http://4.bp.blogspot.com/-I38iK2T0feI/UUUwSg3ikUI/AAAAAAAABA0/SZuhc4I53Qs/s1600/CIMA++Cost+Accounting+2+(Limiting+factors+and+optimal+production+programme).JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-I38iK2T0feI/UUUwSg3ikUI/AAAAAAAABA0/SZuhc4I53Qs/s1600/CIMA++Cost+Accounting+2+(Limiting+factors+and+optimal+production+programme).JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Suggested answers with workings:</span></b></div>
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<span class="Apple-style-span" style="color: blue;"><b>Solution for a(i):</b></span></div>
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Note: Variable costs are quoted per acre, but selling prices
are quoted per tonne. Therefore, it is necessary to calculate the planned sales
revenue per acre. </div>
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<a href="http://3.bp.blogspot.com/-cZXSig7CAu4/UUg0zRUUgTI/AAAAAAAABCY/zDYQ1_Er_YY/s1600/profit+statement+-+limiting+factors+analysis.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-cZXSig7CAu4/UUg0zRUUgTI/AAAAAAAABCY/zDYQ1_Er_YY/s1600/profit+statement+-+limiting+factors+analysis.JPG" /></a></div>
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<span class="Apple-style-span" style="color: blue;"><b>Solution for a(ii):</b></span></div>
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Ordinarily, the allocation of scarce resources will
strictly follow the ascending order of rankings (in term of contribution amount);
starting with the product that gives the highest contribution per limiting
factor and then, leaving behind the balance of scarce resources to be taken up
by other products that give lesser contribution per limiting factor. However, ‘market
commitment’ exists in this case. So, the ‘market commitment’ will be the first
one to get allocated. For profit maximization purposes, ‘market commitment’ has
to be filled up with the product that gives the lowest contribution per
limiting factor and the balancing figure to be taken up by other products that
give a higher contribution per limiting factor. Also, due to the ‘market
commitment’, the nature of allocation of scarce resource (i.e. land space) has
been splitted into two.</div>
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<a href="http://2.bp.blogspot.com/-XMcIdh9ualA/UUgwiTmxWOI/AAAAAAAABBc/wSp-GVaMmms/s1600/profit+statement+for+recommended+mix.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-XMcIdh9ualA/UUgwiTmxWOI/AAAAAAAABBc/wSp-GVaMmms/s1600/profit+statement+for+recommended+mix.JPG" /></a></div>
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<span class="Apple-style-span" style="color: blue;"><b>Solution for b(i):</b></span></div>
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<span class="Apple-style-span" style="color: blue;"><b><br /></b></span></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Tahoma; mso-themecolor: text1;">‘No market commitment and the land could be cultivated in
such a way that any of the above crops could be produced’ simply means that the
clause (i.e. </span></span><span lang="EN-GB" style="mso-ansi-language: EN-GB;"><i><span class="Apple-style-span" style="color: red;">the
land that is being used for the production of carrots and parsnips can be used
for either crop, but not for potatoes or turnips. The land being used for
potatoes and turnips can be used for either crop, but not for carrots or parsnips. In order to provide an adequate market service, the gardener must
produce each year at least 40 tonnes each of potatoes and turnips and 36 tonnes
each of parsnips and carrots.</span></i>) was not in effect anymore.<o:p></o:p></span></div>
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<a href="http://3.bp.blogspot.com/-x885EPFnZfA/UUhkfgoE6_I/AAAAAAAABCs/IV5hLaQGbmQ/s1600/solution+for+b+i.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-x885EPFnZfA/UUhkfgoE6_I/AAAAAAAABCs/IV5hLaQGbmQ/s1600/solution+for+b+i.JPG" /></a></div>
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<span class="Apple-style-span" style="color: blue;"><b>Solution for b(ii):</b></span></div>
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<span lang="EN-GB">Note: To get 100 acres, sum up all
the area occupied (i.e. 25 + 20 + 30 +25); while the contribution of £960/acre
is taken from solution for a(i).<b style="color: blue;"><o:p></o:p></b></span></div>
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<span class="Apple-style-span" style="color: blue;"><a href="http://2.bp.blogspot.com/-KlpMGqxyiOs/UUgzvgiUxmI/AAAAAAAABCM/3vYX5ZjHoag/s1600/profit+from+carrots+2.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-KlpMGqxyiOs/UUgzvgiUxmI/AAAAAAAABCM/3vYX5ZjHoag/s1600/profit+from+carrots+2.JPG" /></a></span></div>
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<span class="Apple-style-span" style="color: blue;"><b>Solution for b(iii):</b></span></div>
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<span class="Apple-style-span" style="color: blue;"><span style="color: black;">There are
two ways to calculate this. The first one is to calculate the BEP in acres by
dividing the fixed costs with the contribution per acre, and then used the
computed figure to further multiply with its sales revenue per acre. (i.e
£54,000 ÷ £960/acre = 56.25 acres, then 56.25 acres x £1,620/acre = £91,125).
The second one is shown below by dividing the fixed costs with the
contribution/sales ratio. Both methods are well explained in Cost-Volume-Profit
analysis’ chapter.<b><o:p></o:p></b></span></span></div>
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<span class="Apple-style-span" style="color: blue;"><a href="http://2.bp.blogspot.com/-IcWuJ4Wqao0/UUgzBKkcpsI/AAAAAAAABCE/O7eg7QG_tjA/s1600/bep+in+sales.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-IcWuJ4Wqao0/UUgzBKkcpsI/AAAAAAAABCE/O7eg7QG_tjA/s1600/bep+in+sales.JPG" /></a></span></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional readings, related links and references:</span></b><o:p></o:p></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Tahoma; mso-themecolor: text1;">Throughput
accounting and TOC, one step beyond limiting factor analysis. The time frame is
so short until all operating expenses are treated as fixed including direct
labour; only direct materials are treated as variable.</span> </span><a href="http://www.accaglobal.com/content/dam/acca/global/pdf/sa_nov11_throughput2.pdf"><span class="Apple-style-span" style="color: blue;">http://www.accaglobal.com/content/dam/acca/global/pdf/sa_nov11_throughput2.pdf</span></a></div>
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<span class="apple-style-span">Reframing
the Product Mix Problem using the Theory of Constraints</span><br />
<span class="apple-style-span"><a href="http://www.orsnz.org.nz/conf34/PDFs/Mabin.pdf"><span class="Apple-style-span" style="color: blue;">http://www.orsnz.org.nz/conf34/PDFs/Mabin.pdf</span></a><o:p></o:p></span></div>
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<span class="Apple-style-span" style="color: blue;"><a href="http://aggie-horticulture.tamu.edu/ornamental/economic-fact-sheets/product-mix-determining-my-winners-and-losers/"><span class="Apple-style-span" style="color: blue;">http://aggie-horticulture.tamu.edu/ornamental/economic-fact-sheets/product-mix-determining-my-winners-and-losers/</span></a><o:p></o:p></span></div>
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<span style="color: #500000; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt;">Limiting factors analysis<o:p></o:p></span></div>
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<a href="http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_jan10_coulthurst.pdf"><span class="Apple-style-span" style="color: blue;">http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_jan10_coulthurst.pdf</span></a></div>
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Short-term
Decisions Overview and Product Mix Decisions </div>
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<a href="http://www.youtube.com/watch?v=gUKXLihYxzw"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=gUKXLihYxzw</span></a><br />
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com2INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-62517318233423138102013-03-10T23:02:00.001-07:002013-03-10T23:04:28.713-07:00Fair Value Vs Historical Cost<br />
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">By </span><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Topic: </span><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Education</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Area of
discussion: </span><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Financial Accounting and Reporting</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Chapter: </span><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Accounting
Concepts</span><o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><o:p> </o:p></span> </div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">The objectives of
this posting are: to critically compare and contrast the usefulness of fair
value and historical cost (in different conditions); as well as to identify,
explain, and analyse the benefits and limitations of both fair value and
historical cost. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;"><u>Fair Value</u></span><u><o:p></o:p></u></span></b></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Fair value is also known as “market value” or “current
value”; it is a rational and unbiased estimate of the potential market price of
a good, service, or asset.<o:p></o:p></span></div>
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<b></b></div>
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<b><b style="mso-bidi-font-weight: normal;"><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Arguments in
support of fair value concept</span></span></b></b></div>
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<ol>
<li>It is
recommended to use fair value concept during inflation period or when the
currency is unstable or fluctuate.</li>
<li>It is also
suitable to be used when there is an active and observable market; such market
usually exists in popular and densely-populated area where there will be a lot
of buyers and sellers trading daily.</li>
<li>Depending on
the nature of the assets, this valuation method is suitable for assets that
undergo appreciation (i.e. value goes up) instead of depreciation (i.e. value
goes down). For example: land and buildings, livestock and raw materials. Assets
that follow this concept are required to undergo revaluation process after a
specific time (if needed) and also test for impairment (if any) before the
assets values are to be displayed in the financial statements (inside the annual
reports).</li>
<li>It upholds the
accounting qualitative characteristic: relevance.</li>
<li>Information
about the assets values is updated. Hence, it is useful for decision making
purposes (especially for potential buyers) </li>
</ol>
<div>
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><br /></span></b></div>
<div>
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Arguments against
fair value concept</span></span></b></div>
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<ol>
<li>Valuing assets using current market price is very
subjective. It involves a lot of predictions, assumptions and careful analysis
in order to get an estimated figure. However, not everyone can agree with that
figure as the figure is usually open to dispute or debate as it involves a lot
of judgements, thoughts and opinions which can be either personal or
professional. Furthermore, the amount has not been “realised” yet (i.e. not
incurred yet). Thus, it cannot be fully trusted. </li>
<li>Unlike
historical cost, those estimated figures are usually given in a “range of
values” instead of one clear-cut value for each asset.</li>
<li>In reality, active and observable market is highly
dependent on location. Therefore, if the assets (usually properties) are
situated in an isolated location, it is very hard for the property agents to
estimate the price of the properties because there is insufficient data to be
used as comparison and analysis purposes.</li>
<li>Some experts believe that as compared to historical
cost, fair value concept is easier to be manipulated by unethical corporate
directors and managers.</li>
<li>It will be quite troublesome sometimes, because the
preparers of financial statements are required to make some changes to the
subsequent recording and readjust the depreciation amount. Thus, a lot of
paperwork and additional disclosures are involved.</li>
</ol>
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<span lang="EN-GB"></span></div>
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</div>
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<b><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;"><u>Historical Cost</u></span><u><o:p></o:p></u></span></b></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">According to the historical cost concept, assets are
shown at the original cost price (i.e. the figures shown during the initial
recording of those particular assets at the date of acquisition). <o:p></o:p></span></div>
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<span lang="EN-GB" style="color: black; mso-ansi-language: EN-GB; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><br /></span></div>
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<span lang="EN-GB"></span></div>
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<b><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Arguments in support of historical cost concept</span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span lang="EN-GB"></span></div>
<div class="MsoNormal" style="text-align: justify;">
</div>
<ol style="color: black;">
<li>It is suitable to be used when the
currency is stable.</li>
<li>Depending on the nature of the
assets, historical cost is suitable to be applied to any assets that undergo
depreciation instead of appreciation. For example: plant and machinery, motor
vehicles and office equipment. Assets that follow this type of valuation method
are required to be depreciated accordingly usually per annum by using
appropriate depreciation methods such as straight-line, reducing balance or
sum-of-digits methods. Assets values that are displayed in financial statements
are also known as Net Book Values (NBVs). NBVs are computed by using initial
cost less accumulated depreciation.</li>
<li>Valuing assets at their original
cost is very objective. Everyone can accept and agree on it because it is based
on a factual occurrence. Not only that, it also has a very concrete support in
term of nature of evidence such as printed receipts, legal documents and
purchase agreements.<span style="mso-spacerun: yes;"> </span></li>
<li>It upholds the accounting
qualitative characteristic: reliability.</li>
<li>It gives one clear-cut and precise
value for each asset.</li>
<li>It is convenient and easy to use. It
does not required active and observable market nor additional disclosure simply
because there is no real change. </li>
</ol>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span lang="EN-GB"><span class="Apple-style-span" style="color: blue;">Arguments against historical cost concept</span></span></b></div>
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<span lang="EN-GB"></span></div>
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</div>
<ol style="color: black;">
<li>Information about the assets values
is outdated. Accountants called it as “sunk cost”. Thus, it will not be helpful
in decision making processes anymore.</li>
<li>During the period of rising prices,
using historical cost accounting might poses adverse effects on financial
statements as well as some financial ratios. For example, in the Statement of
Comprehensive Income (i.e. the Income Statement), the understated depreciation
will cause the profit to be overstated. Meanwhile, in the Statement of
Financial Position (i.e. the Balance Sheet), the cost of assets, accumulated
depreciation of the assets and net book values of the assets will be all
understated. On the other hand, financial ratios like ROCE (Return On Capital
Employed) and ROA (Return On Assets) will be overstated. This is because the
numerator tends to be overstated and the denominator tends to be understated.
Ultimately, it makes the figures to be “unpresentable” and “unreflective” to
the current situation. Not only that, it also poses risk and danger to the
users of financial statements (especially for the shareholders and potential
investors) as the information is misleading.</li>
</ol>
<div>
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<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></div>
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<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB" style="color: black;">“Causes and
consequences of choosing historical cost versus fair value”; this journal’s
discussion is mainly on real estate. (IAS 40 – Investment Property)</span><span lang="EN-GB" style="color: black;"> </span></div>
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<span lang="EN-GB" style="color: black;"></span><a href="http://www3.nd.edu/~carecob/May2008Conference/Papers/RiedlMRS03062008.pdf"><span class="Apple-style-span" style="color: blue;">http://www3.nd.edu/~carecob/May2008Conference/Papers/RiedlMRS03062008.pdf</span></a></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
Historical cost vs. market (fair) value. Emphasize more on
theories. <a href="http://commerceducation.blogspot.com/2011/04/historical-cost-vs-market-fair-value.html"><span class="Apple-style-span" style="color: blue;">http://commerceducation.blogspot.com/2011/04/historical-cost-vs-market-fair-value.html</span></a></div>
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<br /></div>
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Does fair value accounting for non-financial assets pass the
market test? <a href="http://faculty.chicagobooth.edu/valeri.nikolaev/PDF/FairvaluePaper_RAST_Conference.pdf"><span class="Apple-style-span" style="color: blue;">http://faculty.chicagobooth.edu/valeri.nikolaev/PDF/FairvaluePaper_RAST_Conference.pdf</span></a></div>
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</div>
<div style="color: black; text-align: left;">
Historical cost vs. fair value. Examples are given with
calculations too.</div>
<div style="text-align: left;">
<span class="Apple-style-span" style="-webkit-text-decorations-in-effect: none;"><a href="http://business-accounting-guides.com/historical-cost/"><span class="Apple-style-span" style="color: blue;">http://business-accounting-guides.com/historical-cost/</span></a></span></div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
<span class="Apple-style-span" style="-webkit-text-decorations-in-effect: none;"><span class="Apple-style-span" style="color: blue;"><a href="http://business-accounting-guides.com/historical-cost/"></a></span></span>The fair move: The trend towards fair value accounting <a href="http://www.usc.edu/org/InsightBusiness/ib/articles/articlescontent/08_4_Nishan%20Perera.html"><span class="Apple-style-span" style="color: blue;">http://www.usc.edu/org/InsightBusiness/ib/articles/articlescontent/08_4_Nishan%20Perera.html</span></a></div>
</div>
<br /></div>
</div>
Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com2INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-40334084655184456742013-03-06T02:05:00.000-08:002013-03-06T02:19:58.913-08:00Conceptual Framework For Financial Reporting<br />
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<span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">By </span><span style="color: blue; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Jackie,
Researcher</span><span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Topic: </span><span style="color: blue; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Area of discussion: </span><span style="color: blue; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Financial Accounting and Reporting</span><span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Chapter: </span><span style="color: blue; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Frameworks</span><span style="color: #222222; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman";"><i>The
objectives of this research are to find out and critically explain: the brief
history of what had happened in the past in financial reporting when the
framework is not developed yet; what is a conceptual framework?; the functions of
conceptual framework and benefits of having it; the limitations and barriers in
establishing a global conceptual framework; and some proposed solutions on how
to set up an international conceptual framework.</i><o:p></o:p></span></div>
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<span style="mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman";"><span class="Apple-style-span" style="color: #351c75;"><span lang="EN-MY">Research question:</span></span></span><br />
<span style="mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman";"><span class="Apple-style-span" style="color: #351c75;"><span lang="EN-MY"></span></span></span><span class="Apple-style-span" style="color: #351c75;">Discuss why there is a need to have an international
conceptual framework and the extent to which an international conceptual
framework can be used to resolve practical accounting issues.</span></div>
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<i><span lang="EN-MY" style="font-family: 'Times New Roman', serif; line-height: 150%;"><span class="Apple-style-span" style="color: red; font-size: x-large;"><b>Research Essay<o:p></o:p></b></span></span></i></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; line-height: 150%;"><span class="Apple-style-span" style="color: red; font-size: x-large;"><b>INTI International College Subang</b></span><span class="Apple-style-span" style="font-size: small;"><o:p></o:p></span></span></div>
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<span lang="EN-MY" style="font-family: 'Times New Roman', serif; line-height: 150%;"><span class="Apple-style-span" style="color: red; font-size: large;"><b><br /></b></span></span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif; font-size: 15px; line-height: 22px;"></span><span class="Apple-style-span" style="font-family: 'Times New Roman', serif; font-size: 15px; line-height: 22px;"> Historically, in the late 1960s, a plenty of negative feedback and
complaints have been lodged by the unsatisfied companies’ stakeholders against
the misleading accounting treatments and approaches which were best described
as being unclear, irregular and confusing. For example, at that particular
time, all the accountants were not using the similar or standardised methods to
compute profits. As a result, the calculated profits tend to vary among each
other and subject to manipulation too (Wood & Sangster 2005, p.106).
Alexander and Nobes (2010, pp.71-79) state that the factors leading to the
variation in international reporting approaches are the manners in which
companies are financed by the providers of finance, the nature of national
legal system in influencing the financial reporting’s regulations, the
correlation between the tax and reporting systems, the competence of the
accountancy profession and the development of accounting theories, as well as
the globalisation of capital markets around the world. In actual fact, explicit
detailed framework is still absent in most of the nations. Hence, financial
statements are hardly comparable internationally as accounting is performed
differently in different place (Alexander & Nobes 2010, p.36). Fortunately,
this has hastened the development of conceptual framework as a solution to handle
this situation. For instance, the establishment of IASB Framework in 1989,
followed by subsequent changes to the requirements of particular IFRSs, and
then recently the collaboration between the IASB and US FASB in running a
project which aims to revise and conform their conceptual framework. Ideally,
conceptual framework is a statement of generally accepted accounting principles
(GAAP) which form the frame for reference for financial reporting; it provides
the basis for evaluation of existing practices and the development of new
accounting standards as well as forming ground for transactions’ treatment,
measuring bases and communication to the respective users (Scott 2011, p.1). It
is considered as the most appropriate treatment for certain transactions under
the supervision of professional bodies and researches (Thomas & Ward 2012,
p.38).</span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;"><span class="Apple-style-span" style="font-size: 15px; line-height: 22px;"> Generally speaking, it is extremely
crucial to have a proper international conceptual framework as it offers
numerous benefits and carries out significant purposes. Firstly, it assists the
IASB and International Financial Reporting Interpretations Committee (IFRIC)
members in the development of future IFRSs and reviews existing standards by
setting out the underlying concepts. This can be seen in Ernst & Young
2012’s publication regarding to the IFRS update of standards and
interpretations. For example, one of the upcoming changes is effectively
starting from 1 January 2013, entities are required to disclose information
about rights of set-off and related arrangements like collateral arrangements
with the aim of evaluating netting effect of arrangements towards an entity’s
financial position under <i style="mso-bidi-font-style: normal;">IFRS 7
Disclosures – Offsetting Financial Assets and Financial liabilities –
Amendments to IFRS 7</i>.</span></span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;"><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span><span class="Apple-style-span" style="font-size: 15px; line-height: 22px;"> Secondly, framework is also utilised
to help the board of the IASB in promoting harmonisation of accounting
regulations, standards and procedures in financial statements’ presentation by
providing a basis in reducing the number of alternative accounting treatments
permitted by IFRSs (Thomas & Ward 2012, p.40). Framework provides a sense
of direction in resolving accounting questions without the necessity for an
increment in specific standards. Similarly, this also means that it can avoid
the preparers, auditors and financial statements’ users from exerting
unnecessary pressure by requesting for more detailed standards. Besides, unpleasant
situation like the need to answer each accounting question at a sudden for a
particular purpose can also be prevented (Alfredson et al. 2007, p.63).
Consequently, the risk of over-regulation will be mitigated and the issue of
‘overloaded standards’ can be potentially reduced (Riahi-Belkaoui & Jones
2000, p.134).</span></span></div>
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<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;"><span class="Apple-style-span" style="font-size: 15px; line-height: 22px;"><br /></span></span></div>
<span class="Apple-style-span" style="font-family: 'Times New Roman', serif;">
<div class="MsoNormal" style="font-size: small; line-height: 150%; margin-bottom: 0.0001pt; text-align: justify;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span><span class="Apple-style-span" style="font-size: 15px; line-height: 22px;"> Thirdly, framework serves as a ‘point
of references’ to the preparers of financial statements by assisting them in
applying IFRSs and IASs, including the handling of accounting transactions that
have yet to form the subject of an accounting standard (Scott 2011, p.2).
Frankly, it is difficult for any accounting standards to give clear-cut and
precise answers to all accounting questions; situation will be worsen if the
standards or interpretations do not even exist, or have not be formed
specifically to deal with those issues yet. Hence, a sound judgement is crucial
in answering such technical problems. Luckily, boundaries to apply sensible
judgement were established in the framework which ever concern with the
preparation of financial statements (Alfredson et al. 2007, p.63). </span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p><br /></o:p></span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span><span class="Apple-style-span" style="font-size: 15px; line-height: 22px;"> Fourthly, framework aids the users of
financial statements in interpreting the content contained in financial reports
prepared in conformity with IFRSs by increasing users’ understandability as presentation
is done in simpler and summarised manner which is suitable for “layman usage”;
technical jargons are minimised plus additional notes and disclosures are
inserted to give extra explanations. Riahi-Belkaoui & Jones (2000, p.134)
claim that this will indirectly lead to a better communication among all the
stakeholders since all parties are using a common set of definition and
criteria. Alfredson et al. (2007, p.64) add that it could even enhances the
public confidence towards the financial report too.</span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"> In addition, sometimes standards
development (especially national standards) is subject to political
interference. Experts believe that a framework can decrease political pressures
in making accounting judgement as well as potentially reduce the activities of
lobbies and interested parties (who may have personal interest’s motivations)
in influencing the standard-setting process (Riahi-Belkaoui & Jones 2000,
p.134). This is because whenever there is a conflict of interest between user
groups in deciding which policies need to be chosen, policies taken from a
conceptual framework will often be less open to criticism as it eliminates
personal biases and external pressure.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span><span class="Apple-style-span" style="font-size: 15px; line-height: 22px;"> Dangerous situations will arise if
there is no conceptual framework.</span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"> In the absence of a conceptual
framework, standards tend to be produced in a ‘fire-fighting’ approach where
serious defects in accounting standards were often produced as an end results.
This means that countries or standard setters will only address or respond to
problems when a catastrophic corporate scandal or failure arises, rather than
being proactive in determining best policy, developing and maintaining a
coherent set of rules (Scott 2011, p.2). For example, during the 1980s it became
fashionable for organisations to value their brand names and incorporate them
into their balance sheets; the ASB’s predecessor body was completely unprepared
for this and struggled hardly to develop a standard. Apparently, it is
enormously difficult task as there was no universal agreement about such fundamental
issues as the reason for preparing financial statements as well as the
definition of what constituted an asset (Ciancanelli et al. 2009, p.37). <o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"> Scott (2011, p.2) argues that the
lack of conceptual framework will cause proliferation of ‘rules-based’ accounting systems whose primary objective is that the treatment of all
accounting transactions are ought to be dealt with by detailed specific rules
or requirements; such a system is very prescriptive and rigid, but has the
attraction of financial statements being more comparable and consistent. Real
life example can be seen in USA where the Financial Accounting Standards Board
(FASB) has produced a huge number of highly detailed standards and indirectly
created a financial reporting environment governed by specific rules rather
than general principles as cohesive set of principles were not in place.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"> Likewise, this also means that
fundamental principles can be dealt more than once in different standards (duplication)
and consequently, provoking problems especially in relevant to contradictions
and inconsistencies in basic concepts. This can be seen in the arguments,
disputes, and conflicts in between relevance and reliability, especially in
property and real estate industry. For instance, there is always a tension in
deciding the most appropriate way to record the value of assets, such as land
and buildings in balance sheet. Some accountants suggest that it is better to
use current valuation method or market-based price approach as it is more
reflective and would gives more relevant information as compared to original
cost due to appreciation (an increase in value of assets over time). However,
some accountants disagree as they believe original cost or historical cost
method could be more reliable, as current valuation method is just an
estimation or prediction only, which might not be completely accurate and
hence, cannot be fully trusted (Alexander & Nobes 2010, pp.40-43).</span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p><br /></o:p></span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"> Nevertheless, the capabilities of
conceptual framework in solving each practical accounting issue will still remain a question; Bullen and Crook (2005, p.1) voice out that the existing
FASB Concepts Statement and IASB <i style="mso-bidi-font-style: normal;">Framework
for the Preparation and Presentation of Financial Statements</i> can solve
part, but not all of the problems. Even though, framework has succeed in
supplying the fundamental principles for making a selection between
alternatives as well as provides definitions which have formed the basis of
accounting standards’ definitions, it would still be unlikely that it can
answers all practical accounting questions. This is because in reality,
financial statements are prepared for a variety of purposes and used by
different kind of users. For example, banks and suppliers are interested in the
company’s liquidity ratio and statement of cash flows to assess whether they
will be paid; potential investors are interested in future growth prospect and
earning ability such as Earnings Per Share (EPS) and Accounting Rate of Return
(ARR); while managers of the firm will use it to measure performance and make
financial decisions. Thus, it is uncertain and doubtful whether a single
conceptual framework can suit all users. In addition, there is no clear indication
or guarantee that conceptual framework will definitely ease the task of
preparing and implementing standards than without having a framework.</span></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"> All in all, the duo efforts of IASB
and US FASB in running a joint project with the intention to adopt one global
conceptual framework is utmost important. Although there is still some minors
flaws, it is undeniable and proven that the conceptual framework can eventually
produce fruitful outcomes in promoting unity, handling controversial issues, and
help decision makers to make a selection. Hopefully, they will consistently
update, improve, and refine the framework from time to time in order to cope
with the frequent changes in business environment, globalisation, and users’
needs. <o:p></o:p></span></div>
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<span class="Apple-style-span" style="color: red;"><span style="font-size: 11.5pt; line-height: 150%;">Extra:<o:p></o:p></span></span></div>
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<span class="Apple-style-span" style="color: red;"><span style="font-size: 11.5pt; line-height: 150%;">For more information and details about the
collaboration between FASB and IASB, you may visit this website:<span style="mso-spacerun: yes;"> </span></span></span></div>
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<span class="Apple-style-span" style="color: red;"><span style="font-size: 11.5pt; line-height: 150%;"><span style="mso-spacerun: yes;"></span><a href="http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175818825710&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs">http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175818825710&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs</a><o:p></o:p></span></span></div>
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<span style="font-size: 11.5pt; line-height: 150%;">Note: The picture below is a screen shot of that particular
website.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><br /></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";">References<o:p></o:p></span></b></div>
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<br /></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">Alexander, D & Nobes, C 2010, <i>Financial Accounting – An International
Introduction</i>, 4<sup>th</sup> edn, Prentice Hall, London.<o:p></o:p></span></div>
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<br /></div>
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<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";">Alfredson, K, Leo, K, Picker, R,
Pacter, P, Radford, J & Wise, V 2007, <i style="mso-bidi-font-style: normal;">Applying
international financial reporting standards</i>, John Wiley & Sons
Australia Ltd, Milton.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">Bullen,
HG & Crook, K 2005, <i style="mso-bidi-font-style: normal;">Revisiting the
Concepts: A New Conceptual Framework Project</i>, viewed 15 November 2012, <</span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;"><a href="http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175818825710&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs"><span class="Apple-style-span" style="color: blue;">http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175818825710&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs</span></a></span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">Ciancanelli,
P, Dunn, J, Koch, B & Stewart, M 2009, <i style="mso-bidi-font-style: normal;">Financial
and Management Accounting</i>, University of Strathclyde, e-book, viewed 15
November 2012, <</span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;"><a href="http://www.scribd.com/doc/54424572/7/The-statement-of-principles-for-%EF%AC%81nancial-reporting"><span class="Apple-style-span" style="color: blue;">http://www.scribd.com/doc/54424572/7/The-statement-of-principles-for-%EF%AC%81nancial-reporting</span></a></span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";">Ernst & Young 2012, <i style="mso-bidi-font-style: normal;">IFRS Update of standards and interpretations
in issue at 31 March 2012</i>, viewed 12 November 2012, <</span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;"><a href="http://www.ey.com/Publication/vwLUAssets/CTools_InterimUpdate_Apr2012/$FILE/CTools_InterimUpdate_Apr2012.pdf"><span class="Apple-style-span" style="color: blue;">http://www.ey.com/Publication/vwLUAssets/CTools_InterimUpdate_Apr2012/$FILE/CTools_InterimUpdate_Apr2012.pdf</span></a></span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">Riahi-Belkaoui,
A & Jones, S 2000, <i style="mso-bidi-font-style: normal;">Accounting Theory</i>,
2<sup>nd</sup> edn, Nelson Thomson Learning, Southbank Victoria.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">Scott,
S 2011, <i style="mso-bidi-font-style: normal;">The need for and an understanding
of a conceptual framework</i>, viewed 14 November 2012, <</span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;"><a href="http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/sa_oct11_framework.pdf"><span class="Apple-style-span" style="color: blue;">http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/sa_oct11_framework.pdf</span></a></span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">></span><span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%; mso-bidi-font-family: "Times New Roman";">Thomas, A &Ward, AM 2012, <i style="mso-bidi-font-style: normal;">Introduction to Financial Accounting</i>, 7<sup>th</sup>
edn, McGraw-Hill, Berkshire.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0.0001pt;">
<span lang="EN-MY" style="font-size: 11.5pt; line-height: 150%;">Wood, F & Sangster, A 2005, <i>Business Accounting 1</i>, 10<sup>th</sup>
edn, Prentice Hall, Harlow.</span></div>
<br />
</span></div>
Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com3INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-27458861730370503802013-01-12T02:04:00.002-08:002013-01-12T23:55:31.584-08:00Business Combinations: Consolidated Financial Statements<div class="separator" style="clear: both; text-align: center;">
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By <span class="Apple-style-span" style="color: blue;">Jackie, Researcher</span></div>
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Topic: <span class="Apple-style-span" style="color: blue;">Education</span></div>
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Area of discussion: <span class="Apple-style-span" style="color: blue;">Financial Accounting and Reporting</span></div>
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Chapter: <span class="Apple-style-span" style="color: blue;">Business Combinations – Consolidated Financial Statements</span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><i>The
objective of this posting is to share a worked accounting question which is
related to business combinations and consolidated accounts. In this example,
clear step-by-step calculations with explanations are provided on: how to
calculate the percentage of shareholding, how to compute goodwill, how to
incorporate fair value adjustments, how to remove unrealised profit in
inventory, how to find group retained earnings, how to compute non-controlling
interest and finally, how to prepare consolidated financial statements. I
believe this illustration will greatly help students to understand this topic
and indirectly provides a solid ground for exam purposes.</i><o:p></o:p></span></div>
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<a href="http://1.bp.blogspot.com/-wD4_GoxQHIw/UOsVKVIvPQI/AAAAAAAAA3g/nXco-08odpw/s1600/consolidated+1.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-wD4_GoxQHIw/UOsVKVIvPQI/AAAAAAAAA3g/nXco-08odpw/s1600/consolidated+1.JPG" /></a></div>
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<a href="http://1.bp.blogspot.com/-42VMYSXOFbU/UOsXIjvv5rI/AAAAAAAAA48/Jeh0xfOQZfw/s1600/consolidated+2d.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-42VMYSXOFbU/UOsXIjvv5rI/AAAAAAAAA48/Jeh0xfOQZfw/s1600/consolidated+2d.jpg" /></a></div>
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<a href="http://2.bp.blogspot.com/-g2JZ2FGD5yk/UOsYmUgzGFI/AAAAAAAAA5U/6fHdimYf8L4/s1600/consolidated+3c.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-g2JZ2FGD5yk/UOsYmUgzGFI/AAAAAAAAA5U/6fHdimYf8L4/s1600/consolidated+3c.jpg" /></a></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Workings
with explanations:</span></b></div>
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<span class="Apple-style-span" style="color: #b45f06;"><b>1).
Percentage of shareholding</b></span></div>
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The
first thing that ought to be done is to find out how much proportion has been
acquired by the holding company, if it is not a wholly owned subsidiary. This
is crucial as the other proportion may be held by many different shareholders
and that kind of ownership is called as non-controlling interest (NCI).</div>
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<a href="http://2.bp.blogspot.com/-HDXc30hLLfo/UO1wLROwu4I/AAAAAAAAA6A/mXM79K0UQ3A/s1600/percentage+of+shareholding.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-HDXc30hLLfo/UO1wLROwu4I/AAAAAAAAA6A/mXM79K0UQ3A/s1600/percentage+of+shareholding.JPG" /></a></div>
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Then,
the NCI will be 20%. Always bear in mind that the number of shares used in the
calculation of percentage shareholding must consists of voting shares only
(i.e. ordinary shares) and not preference shares.</div>
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<span class="Apple-style-span" style="color: #b45f06;"><b>2).
Computation of goodwill</b></span></div>
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Compare
the price paid to acquire Cahaya Bhd (i.e. Investments: Shares in group
company), with the ‘value’ of Cahaya Bhd at the date it was acquired (i.e. the
date of acquisition). Goodwill is the excess of the cost of the investment over
the ‘value’ of the proportion of the net assets acquired. Please note that the
net assets acquired can be measured either as fixed assets plus net current
assets, or as share capital plus reserves.</div>
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It
is also very important to make clear that pre-acquisition profits are used in
the calculation of the goodwill figure (i.e. <span lang="EN-MY" style="mso-ansi-language: EN-MY;">capitalised)</span>, while post-acquisition profits become part of the
group profit. Besides, at the date of acquisition the fair values of Cahaya’s
property, plant & equipment were agreed as RM150,000 greater than their
book values. Thus, a revaluation reserve of RM150,000 will need to be created.
Likewise, since the fair values adjustment occurred at the date of acquisition,
it will be treated as pre-acquisition and so, it will become part of the
goodwill figure. On the other hand, impairment loss has to be deducted from the
goodwill figure and charged in the statement of comprehensive income.<br />
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<b><span class="Apple-style-span" style="color: #b45f06;">3).
Necessary adjustment for property, plant & equipment</span></b></div>
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As
Consolidated Statement of Financial Position was prepared at 30 September 2012, we have to sum up both property, plant & equipment owned by
Surya Bhd and Cahaya Bhd as at that particular date too. In addition to that,
we have to add revaluation surplus of RM150,000 inside that calculation as
well, but additional care must be taken because the revaluation surplus was
made on 1 October 2009 (i.e. 3 years ago). This mean that
additional 3 years of accumulated depreciation has to be taken into account and
since Cahaya Bhd has a 10% straight-line depreciation policy, the additional
accumulated depreciation for the 3 years period will be RM150,000 x 10% x 3
years = RM45,000.<br />
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<a href="http://4.bp.blogspot.com/-MkU7ydc7ffs/UO4pMK9XxAI/AAAAAAAAA7Y/wbCBWMzNqp4/s1600/property,+plant+&+equipment.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-MkU7ydc7ffs/UO4pMK9XxAI/AAAAAAAAA7Y/wbCBWMzNqp4/s1600/property,+plant+&+equipment.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: #b45f06;">4). </span></b><span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #b45f06;">Unrealised profit in inventory</span></b><o:p></o:p></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #b45f06;"><br /></span></b></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;">All of the group profit would only
be realised, if the holding company which bought goods from subsidiary has
subsequently sold all those goods to the third parties (i.e. the outsider).
However, for this case, at the end of the year, the goods are not fully sold by
the holding company as some goods are still remain in the inventory of Surya
Bhd. Then, the amount of unrealised profit must be eliminated.<o:p></o:p></span></div>
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<b><span class="Apple-style-span" style="color: #b45f06;">5). Group retained earnings / Accumulated profits</span></b></div>
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<span lang="EN-MY">The retained earnings of the group
will comprise the profits of Surya Bhd plus Surya Bhd’s share of profit of
Cahaya Bhd which has been earned since acquisition. Adjustments for impairment
loss, depreciation and unrealised profit have to be taken into account, if any.<b style="color: #b45f06;"><o:p></o:p></b></span></div>
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<b><span class="Apple-style-span" style="color: #b45f06;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;">6).
Non-controlling interest to be recorded in Consolidated Statement of
Comprehensive Income<o:p></o:p></span></span></b></div>
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<span lang="EN-MY">The
non-controlling interest is calculated as 20% of the profit for the year after
tax of Cahaya Bhd. This equals: 20% of RM180,000 = RM36,000. We only need to
record additional depreciation for one year instead of three because this is
not Consolidated Statement of Financial Position. So, remember do not take the
accumulated depreciation for 3 years. Meanwhile, unrealised profit needs to be
eliminated according to its proportion (i.e 20%).<b style="color: #b45f06;"><o:p></o:p></b></span></div>
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<b><span class="Apple-style-span" style="color: #b45f06;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;">7).
Non-controlling interest to be recorded in Consolidated Statement of Financial
Position<o:p></o:p></span></span></b></div>
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Non-controlling
interest will be entitled to 20% of the fair value of the company at the date
of acquisition. Note: There is no need to divide reserves into pre- and
post-acquisition as far as the non-controlling interest is concerned.
Non-controlling interest is entitled to share in both pre- and post-acquisition
profits. Unlike Consolidated Statement of Comprehensive Income, additional depreciation
of 3 years needs to be recorded in Consolidated Statement of Financial
Position. Meanwhile, the unrealised profits will have to be deducted according
to its proportion (i.e 20%) as usual.<br />
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #351c75;">Answers:</span></b><o:p></o:p></span></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><a href="http://4.bp.blogspot.com/-vwX_Zjg4yyU/UPD0s41F5iI/AAAAAAAAA-g/M3r2_bKgLi0/s1600/Surya+group+-soci.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-vwX_Zjg4yyU/UPD0s41F5iI/AAAAAAAAA-g/M3r2_bKgLi0/s1600/Surya+group+-soci.JPG" /></a></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY" style="mso-ansi-language: EN-MY;"></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY">Intra-group trading must be eliminated
from the consolidated statement of comprehensive income. Therefore, intra-group
sales of RM50,000 must be eliminated from both consolidated sales revenue and
consolidated cost of sales figure. There are some intra-group goods sold that
are still remain in the closing inventory. That unrealised profit must be
removed, and this is usually done in practice by increasing the cost of sales
figure. Impairment loss of RM8,000 and additional depreciation for one year
have been included in the administrative expenses. Investment income is to be
removed as it was fully came from dividend paid by Cahaya Bhd: 80% of RM50,000
= RM40,000. Any investment income shown in the consolidated statement of
comprehensive income must only be from investments other than in a subsidiary.<b style="color: #351c75;"><o:p></o:p></b></span></span></div>
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<span lang="EN-MY" style="mso-ansi-language: EN-MY;"><span lang="EN-MY"><br /></span></span>
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<span class="apple-style-span"><span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;"><b><span class="Apple-style-span" style="color: #351c75;">Additional readings, related links and
references:</span></b><o:p></o:p></span></span></div>
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<span class="apple-style-span"><span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;"><br /></span></span></div>
<div class="MsoNormal">
<span class="apple-style-span"><span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;">This article explains how to prepare basic
consolidated financial statements for a group with one subsidiary. It’s the
second in a two-part series by the F1 examiner.<o:p></o:p></span></span></div>
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<span class="apple-style-span"><span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;"></span></span></div>
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<a href="http://www.cimaglobal.com/Thought-leadership/Newsletters/Velocity-e-magazine/Velocity-2010/Velocity-August-2010/F1-preparing-consolidated-financial-statements/" style="background-color: white;"><span class="Apple-style-span" style="color: blue;">http://www.cimaglobal.com/Thought-leadership/Newsletters/Velocity-e-magazine/Velocity-2010/Velocity-August-2010/F1-preparing-consolidated-financial-statements/</span></a></div>
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</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;">Basic rules for preparing
a consolidated balance sheet. Good explanations on all treatments and
adjustments. Formulas and which items need to be debited or credited are fully
displayed here.<o:p></o:p></span></div>
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<a href="http://www.angelfire.com/ab7/ankanbanerjee/CB.pdf"><span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;"><span class="Apple-style-span" style="color: blue;">http://www.angelfire.com/ab7/ankanbanerjee/CB.pdf</span></span></a><span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;"><o:p></o:p></span></div>
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<br /></div>
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<span style="mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;">Another good exercise
with detailed workings and clear explanations done by CIMA, which is good to be
viewed by accounting students who are currently studying on this particular
chapter.<o:p></o:p></span></div>
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<a href="http://www.cimaglobal.com/Documents/Thought_leadership_docs/Velocity/December%202009/modelanswerF2Baker.pdf"><span class="Apple-style-span" style="color: blue;">http://www.cimaglobal.com/Documents/Thought_leadership_docs/Velocity/December%202009/modelanswerF2Baker.pdf</span></a></div>
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Preparing
simple consolidated financial statements</div>
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<a href="http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_apr12_f3ffa_finstats.pdf"><span class="Apple-style-span" style="color: blue;">http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_apr12_f3ffa_finstats.pdf</span></a></div>
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Preparation
of group financial statements – ACCA </div>
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<span class="Apple-style-span" style="background-color: white; color: blue;"><a href="http://www2.accaglobal.com/archive/2888864/31273" style="background-color: white;">http://www2.accaglobal.com/archive/2888864/31273</a></span><br />
<br /></div>
</div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com5Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-46402266184098918032013-01-02T11:51:00.000-08:002013-01-03T10:24:02.994-08:00Harvard Referencing Guide<div class="separator" style="clear: both; text-align: center;">
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<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
By <span class="Apple-style-span" style="color: blue;">Admin</span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Uploaded
content: <span class="Apple-style-span" style="color: blue;">Four pages of brief guide on how to apply Harvard referencing</span></div>
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<br /></div>
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<div style="text-align: justify;">
<i>This quick
guide on referencing is very useful to tertiary students especially for those
who have just stepped into college or university (for writing reports or doing
assignments and researches purposes). Full in-text and end-text referencing
formats were demonstrated in detail with relevant examples from different
sources. It is highly recommended that
if you are using this style of referencing, please download it and adjust the
pictures until they can be fitted into A4 papers before you print them. Also,
please keep it nicely for future usage purpose.</i></div>
</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
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<tr><td class="tr-caption" style="text-align: center;"><b><span class="Apple-style-span" style="color: red;">Page 1 of 4</span></b></td></tr>
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<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-BKN6UQAT-CM/UORn--7IWxI/AAAAAAAAAyc/Rbg5tV2Vov0/s1600/Harvard+referencing+p.2.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-BKN6UQAT-CM/UORn--7IWxI/AAAAAAAAAyc/Rbg5tV2Vov0/s1600/Harvard+referencing+p.2.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span class="Apple-style-span" style="color: red;"><b>Page 2 of 4</b></span></td></tr>
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<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-rTMaeXxk9R4/UORqY-Wf90I/AAAAAAAAAz0/bM0XGpO3c70/s1600/Harvard+referencing+p.3.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/-rTMaeXxk9R4/UORqY-Wf90I/AAAAAAAAAz0/bM0XGpO3c70/s1600/Harvard+referencing+p.3.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span class="Apple-style-span" style="color: red;">Page 3 of 4</span></b></td></tr>
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<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-_mR0jOJ0wMI/UORuU1qu5eI/AAAAAAAAA1c/Kt7F684aKJw/s1600/Harvard+referencing+p.4.edt.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-_mR0jOJ0wMI/UORuU1qu5eI/AAAAAAAAA1c/Kt7F684aKJw/s1600/Harvard+referencing+p.4.edt.JPG" /></a></td></tr>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com1Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-22470256869723788512012-12-30T00:22:00.002-08:002013-01-01T09:23:25.411-08:00Standard Costing: Material variances (Price, Usage, Mix & Yield)<div class="separator" style="clear: both; text-align: center;">
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><br /></span>
<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">By </span><span style="color: blue; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Jackie, Researcher</span><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Topic: </span><span style="color: blue; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Area of discussion: </span><span style="color: blue; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Cost & Management
Accounting</span><span style="color: #222222; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Chapter: </span><span style="color: blue; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Standard Costing – Material variances
(Price, Usage, Mix & Yield)<o:p></o:p></span></div>
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<i>The
objectives of this posting are to guide students in the computation of all
material variances, to share a random picked ACCA Paper 8 Managerial Finance’s
question with clear step-by-step workings and explanation, and finally show you
how to double check your answers. Ideally, professional exams like ACCA and
LCCI require students to compute advanced variances (i.e. direct materials mix
and yield variances). Normally, students will not face any problems in handling
direct materials price and usage variances, but struggling in solving those
advanced variances (students often confuse when normal loss exists). Hopefully,
this sharing will help students to understand this topic clearer and better.</i></div>
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<i><br /></i></div>
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<i><br /></i></div>
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<span style="color: #3005e5;"><b>The breakdown of the materials variances</b></span></div>
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<span style="color: #3005e5;"><b><br /></b></span></div>
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<span style="color: #3005e5;"><b></b></span><span class="Apple-style-span" style="line-height: normal;"><a href="http://4.bp.blogspot.com/-og6Qy6gy7qE/UNvZFesDcWI/AAAAAAAAAsU/YVXBLpHpANc/s1600/Material+variances+-+the+breakdown+chart.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-og6Qy6gy7qE/UNvZFesDcWI/AAAAAAAAAsU/YVXBLpHpANc/s1600/Material+variances+-+the+breakdown+chart.JPG" /></a></span></div>
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<span class="Apple-style-span" style="line-height: normal;"><br /></span></div>
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<span class="Apple-style-span" style="line-height: normal;"><b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></span></div>
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<span class="Apple-style-span" style="line-height: normal;"><b><span class="Apple-style-span" style="color: #351c75;">Formulas
and descriptions:</span></b></span></div>
<div style="line-height: 18px;">
</div>
<div style="line-height: 18px;">
</div>
<div style="line-height: 18px;">
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<span lang="EN-GB" style="color: #bf9000;"><b>Total
direct materials variance</b></span></div>
<div class="MsoNormal" style="text-align: left;">
<div style="text-align: justify;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;">The total direct materials variance
is the difference between the standard materials cost for the actual production
and the actual materials cost. Alternatively, it can also be computed by
summing up direct materials price variance and direct materials usage variance.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="text-align: left;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: red; font-size: 8.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-font-family: "Times New Roman";">Total direct materials variance = standard materials
cost – actual materials cost<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: left;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-size: 8.5pt; line-height: 115%; mso-ansi-language: EN-GB; mso-bidi-font-family: "Times New Roman";"><span class="Apple-style-span" style="color: red;">Total direct materials variance = direct materials
price variance + direct materials usage variance</span><o:p></o:p></span></b></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #bf9000;">Material
price variance</span></b><u><o:p></o:p></u></span></div>
<div class="MsoNormal" style="text-align: left;">
<div style="text-align: justify;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;">The material price variance is equal
to the difference between the standard price and the actual price per unit of
materials multiplied by the quantity of material purchased:<o:p></o:p></span></div>
</div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-size: 8.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span class="Apple-style-span" style="color: red;">Material price
variance = (standard price per unit of material – actual price) x quantity of
material purchased</span><o:p></o:p></span></b></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #bf9000;">Material
usage variance</span></b><u><o:p></o:p></u></span></div>
<div class="MsoNormal" style="text-align: left;">
<div style="text-align: justify;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;">The material usage variance is equal
to the difference between the standard quantity required for actual production
and the actual quantity used multiplied by the standard material price:<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="text-align: left;">
<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-size: 8.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span class="Apple-style-span" style="color: red;">Material usage
variance = (standard quantity of materials for actual production – actual
quantity used) x standard price per unit</span><o:p></o:p></span></b></div>
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<br /></div>
<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #bf9000;">Materials
mix variance</span></b><u><o:p></o:p></u></span></div>
<div class="MsoNormal" style="text-align: left;">
<div style="text-align: justify;">
<span lang="EN-GB" style="mso-ansi-language: EN-GB;">The materials mix variance arises
when the mix of materials used differs from the predetermined mix included in
the calculation of the standard cost of an operation. If the mixture is varied
so that a larger than standard proportion of more expensive materials is used,
there will be an unfavourable variance. When a larger proportion of cheaper
materials are included in the mixture, there will be a favourable variance. <o:p></o:p></span></div>
</div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-size: 8.5pt; line-height: 115%; mso-ansi-language: EN-GB;"><span class="Apple-style-span" style="color: red;">Materials mix
variance = (actual quantity in standard mix proportions – actual quantity used)
x standard price</span><o:p></o:p></span></b></div>
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<div class="MsoNormal" style="text-align: left;">
<span lang="EN-GB"><b><span class="Apple-style-span" style="color: #bf9000;">Materials
yield variance</span></b><u><o:p></o:p></u></span></div>
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<div style="text-align: justify;">
The
materials yield variance arises because there is a difference between the
standard output for a given level of inputs and the actual output attained.</div>
</div>
<div class="MsoNormal" style="text-align: left;">
<b style="mso-bidi-font-weight: normal;"><span style="font-size: 9.0pt; line-height: 115%;"><span class="Apple-style-span" style="font-size: small; font-weight: normal; line-height: normal;"><b style="mso-bidi-font-weight: normal;"><span style="color: red; font-size: 8.5pt; line-height: 115%;">Materials yield variance = (actual
yield – standard yield from actual input of material) x standard cost per unit
of output</span></b></span> </span></b></div>
<br />
<br />
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<a href="http://1.bp.blogspot.com/-ddruiHYSvq8/UNvX_VTaZcI/AAAAAAAAAsI/IaodbqFN9i0/s1600/ACCA+Paper+8+Managerial+Finance.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-ddruiHYSvq8/UNvX_VTaZcI/AAAAAAAAAsI/IaodbqFN9i0/s1600/ACCA+Paper+8+Managerial+Finance.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Answers and comments:</span></b><br />
<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b>
<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;"></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional readings, related links and references:</span></b></div>
<br />
<div class="MsoNormal">
This link
provides an extremely good and detailed step-by-step calculation and there are
a lot of worked examples. Full formulas are provided and alternative methods
for computation are shown clearly.</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.futureaccountant.com/standard-costing-variance-analysis/study-notes/material-cost-variance.php"><span class="Apple-style-span" style="color: blue;">http://www.futureaccountant.com/standard-costing-variance-analysis/study-notes/material-cost-variance.php</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Materials
mix and yield: Relevant to ACCA qualification paper F5. An extremely good
discussion on variance analysis with excellent illustration, worked examples
and clear explanation.</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.chinaacc.com/upload/html/2012/12/4/liuxim1542020121204164534135519.pdf"><span class="Apple-style-span" style="color: blue;">http://www.chinaacc.com/upload/html/2012/12/4/liuxim1542020121204164534135519.pdf</span></a></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm; mso-outline-level: 1;">
<span style="border: none windowtext 1.0pt; color: black; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0cm; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1; padding: 0cm;">Standard Costing 2 Material Variances: “</span><span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Arial; mso-themecolor: text1;">Managerial Accounting SFCC Fall 2007 Chapter 9 Videos</span>”</span><span style="color: black; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1;"><o:p></o:p></span></div>
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<a href="http://www.youtube.com/watch?v=EnKCt68FvQI"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=EnKCt68FvQI</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
This link
provides a number of standard costing examples. There are a total of 6 parts in
it. Good site to look at in order to master variance analysis.</div>
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<a href="http://www.accountingcoach.com/online-accounting-course/30Xpg02.html"><span class="Apple-style-span" style="color: blue;">http://www.accountingcoach.com/online-accounting-course/30Xpg02.html</span></a></div>
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Material mix
and yield variances: Grahame Steven explains why understanding material mix and
yield variance is a recipe for success. </div>
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<a href="http://www.cimaglobal.com/Documents/ImportedDocuments/ci_apr_01_p26-27.pdf"><span class="Apple-style-span" style="color: blue;">http://www.cimaglobal.com/Documents/ImportedDocuments/ci_apr_01_p26-27.pdf</span></a></div>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com3Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-75953250915071707862012-12-20T05:50:00.000-08:002012-12-22T20:41:26.088-08:00Comparison of Net Present Value and Internal Rate of Return Methods<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">By </span><span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span><o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Topic: </span><span class="Apple-style-span" style="color: blue;">Education</span><o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Area
of discussion: </span><span class="Apple-style-span" style="color: blue;">Cost & Management Accounting</span><o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;">Chapter: </span><span class="Apple-style-span" style="color: blue;">Capital
Budgeting & Cost Analysis</span><o:p></o:p></div>
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><br /></span></div>
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><i>The
objective of this posting is to discuss, explain, and justify the superiority
of NPV over the IRR. We will look into the conditions which make IRR method
becomes inappropriate for usage purpose (i.e. the IRR’s technical shortcoming).</i><o:p></o:p></span></div>
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<span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-themecolor: text1;"><o:p><br /></o:p></span></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Introduction</span></b><o:p></o:p></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<b><span class="Apple-style-span" style="color: blue;">Net Present Value Method</span></b><o:p></o:p></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<span style="color: black; mso-themecolor: text1;">It calculates the expected monetary gain or loss from a
project by discounting all expected future cash inflows and outflows back to
the present point in time using the required rate of return. In other words, it
is the present value of the net cash inflows less the present value of the net
cash outflows (if any), and then minus the project’s initial investment outlay.
A positive NPV indicates that an investment should be accepted, while a
negative value indicates that it should be rejected. A zero NPV calculation
indicates that the firm should be indifferent to whether the project is
accepted or rejected.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<span class="Apple-style-span" style="color: blue;"><b>Internal Rate of Return Method</b></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
It is the rate of return promised
by an investment project over its useful life. It is sometimes referred to
simply as the yield on a project. The internal rate of return is computed by
finding the discount rate that equates the present value of a project’s cash
outflows with the present value of its cash inflows. In other words, the
internal rate of return is the discount rate that results in a net present
value of zero. The decision rule is that if the IRR is greater than the opportunity
cost of capital, the investment is acceptable as it is profitable and will
yield a positive NPV. Alternatively, if the IRR is less than the cost of
capital, the investment should be rejected as it is unprofitable and will
result in a negative NPV. When the IRR is equal to the opportunity cost of
capital, the firm should be indifferent to whether the project is acceptable or
rejected.<span style="mso-spacerun: yes;"> </span></div>
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<span style="mso-spacerun: yes;"><br /></span></div>
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<div class="MsoNormal" style="margin-top: 12pt; text-align: center;">
<b><u><span class="Apple-style-span" style="color: red;">Comparison of Net Present Value
and Internal Rate of Return Methods</span></u></b></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
In many situations the internal rate of return
method will result in the same decision as the net present value method. In the
case of conventional projects (in which an initial cash outflow is followed by
a series of cash inflows) that are independent of each other (i.e. where the
selection of a particular projects does not preclude the choice of the other),
both NPV and IRR rules will lead to the same accept/reject decisions. However,
there are also situations where the IRR method may lead to different decisions
being made from those that would follow the adoption of the NPV procedure. </div>
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</div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<b><span class="Apple-style-span" style="color: #bf9000;">Mutually exclusive projects </span></b></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
If
projects are mutually exclusive (i.e. the acceptance of one project excludes
the acceptance of another project), it is possible for the NPV and the IRR
methods to suggest different rankings as to which project should be given
priority. For example, choosing one out of three possible factory locations.
When evaluating mutually exclusive projects, the IRR method is prone to
indicate wrong decisions (i.e. incorrectly rank projects) due to its
reinvestment assumptions especially when dealing with unequal lives or unequal
levels of initial investment outlay. For instance, compare an investment of £
10,000 that yields a return of 50 per cent with an investment of £15,000 that
yields a return of 40 per cent. If only one of the investments can be
undertaken, normally managers will choose the project which has the highest
IRR, but bear in mind that in actual fact, the first investment will only yield
£5,000 but the second investment will yield £6,000. Thus, if the objective is
to maximize the shareholders’ wealth the NPV provides the correct measure.</div>
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<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<b><span class="Apple-style-span" style="color: #bf9000;">Percentage returns </span></b></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
We can sum NPVs
of individual projects to calculate a NPV of a combination or portfolio of
projects as NPV method is expressed in monetary terms, not in percentages. For
example, Project Alpha consists of two smaller projects: South (NPV = £12,500)
and West (NPV = £7,500). Then, the NPV of Project Alpha will be £20,000. In
contrast, IRRs of individual projects cannot be added or averaged to represent
the IRR of a combination of projects.</div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<b><span class="Apple-style-span" style="color: #bf9000;">Volatile cost of capital </span></b></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
NPV
method can also be used when the cost of capital varies over the life of a
project. For instance, Vortex Plc has made an initial investment of £10,000 and
expected to receive cash inflow as much as £25,000 in year 1 when the cost of
capital is 12%, followed by another cash inflow of £18,000 when the cost of
capital is 10% in year 2 and finally, £5,000 cash inflow in year 3 when the
cost of capital is 8%. Then, the NPV can be calculated as £31,163 <b><span class="Apple-style-span" style="color: red;"><i>(see below)</i></span></b>.
It is not possible to use IRR method in this case. This is because different cost
of capital in different years means that there is no single cost of capital
that the IRR (a single figure) can be compared against to decide whether the project
should be accepted or rejected. </div>
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<span class="Apple-style-span" style="color: #bf9000;"><b>Reinvestment assumptions </b></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
The
assumption concerning the reinvestment of interim cash flows from the
acceptance of projects provides another reason for supporting the superiority
of the NPV method. The implicit assumption if the NPV method is adopted is that
the cash flows generated from an investment will be reinvested immediately at
the cost of capital (i.e. the returns available from equal risk securities
traded in financial markets). However, the IRR method makes a different
implicit assumption about the reinvestment of the cash flows. It assumes that
all the proceeds from a project can be reinvested immediately to earn a return
equal to the IRR of the original project. This assumption is likely to be
unrealistic because a firm should have accepted all projects which offer a
return in excess of the cost of capital, and any other funds that become
available can only be reinvested at the cost of capital.</div>
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</div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
<b><span class="Apple-style-span" style="color: #bf9000;">Unconventional cash flows </span></b></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: justify;">
When the
signs of the cash flows switch overtime (i.e. when there are outflows, followed
by inflows, followed by additional outflows and so forth), it is possible that
more than one IRR may exist for a given project. In other words, there may be
multiple discount rates that equate the NPV of a set of cash flows to zero <b><i><span class="Apple-style-span" style="color: red;">(see below)</span></i></b>. In
such cases, it is difficult to know which of the IRR estimates should be
compared to the firm’s required rate of return.</div>
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<a href="http://2.bp.blogspot.com/-0maraH2RNGs/UNMQ8zfm4lI/AAAAAAAAAq4/8O4DBpLvimc/s1600/unconventional+cash+flows.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-0maraH2RNGs/UNMQ8zfm4lI/AAAAAAAAAq4/8O4DBpLvimc/s1600/unconventional+cash+flows.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
<div class="MsoNormal" style="margin-top: 12.0pt; text-align: justify; text-justify: inter-ideograph;">
<b><span class="Apple-style-span" style="color: #351c75;">Additional readings, related links and references:</span></b></div>
<div class="MsoNormal" style="margin-top: 12.0pt; text-align: justify; text-justify: inter-ideograph;">
</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: left;">
<span style="color: black; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1;">“Perils of the Internal Rate of Return”: This is an
extremely good link. It heavily focuses on discussion with clear and detailed
examples. Calculations and graphs are all provided. This is highly recommended
for those who are doing a research project on this issue or doing revision for
coming exams.<o:p></o:p></span></div>
<div class="MsoNormal" style="mso-outline-level: 1;">
<a href="http://www.sambaker.com/econ/invest/invest.html"><span class="Apple-style-span" style="color: blue;">http://www.sambaker.com/econ/invest/invest.html</span></a><br />
<br /></div>
<div class="MsoNormal" style="mso-outline-level: 1;">
“Which is a better measure for capital budgeting, IRR or NPV?”:
This site is suitable for beginner. It provides a brief explanation, examples
and concepts. It can give you a quick understanding.<br />
<a href="http://www.investopedia.com/ask/answers/05/irrvsnpvcapitalbudgeting.asp#axzz2Favl7l6v"><span class="Apple-style-span" style="color: blue;">http://www.investopedia.com/ask/answers/05/irrvsnpvcapitalbudgeting.asp#axzz2Favl7l6v</span></a><br />
<br /></div>
<div style="text-align: left;">
<a href="http://www.blogger.com/blogger.g?blogID=7011211411109244586" name="chapter_6___investment_decisions___capit"><span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: SimSun; mso-fareast-theme-font: major-fareast; mso-themecolor: text1;">“Chapter 6 - Investment decisions - Capital
budgeting</span></a><span style="color: black; mso-bidi-font-family: Arial; mso-fareast-font-family: SimSun; mso-fareast-theme-font: major-fareast; mso-themecolor: text1;">”:
Well, this site looks like an e-book to me. The good thing about this link is
it offers more detailed calculations instead of theories. Complete formulas are
given too. </span></div>
<div class="MsoNormal" style="text-align: left;">
<a href="http://www.fao.org/docrep/W4343E/w4343e07.htm"><span class="Apple-style-span" style="color: blue;">http://www.fao.org/docrep/W4343E/w4343e07.htm</span></a><span style="mso-fareast-font-family: SimSun; mso-fareast-theme-font: major-fareast;"><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: left;">
<u><br /></u></div>
<div class="MsoNormal" style="mso-outline-level: 1;">
</div>
<div class="MsoNormal" style="text-align: left;">
“Net
Present Value Vs Internal Rate Of Return (NPV & IRR) & Excel
Calculations For DCF”: If you prefer to learn via hearing instead of reading,
then this might suit you. </div>
<div class="MsoNormal" style="text-align: left;">
<a href="http://www.youtube.com/watch?v=aziR2zNtPHk"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=aziR2zNtPHk</span></a><u style="text-decoration: underline;"><o:p></o:p></u></div>
<div class="MsoNormal" style="text-align: left;">
<br /></div>
<div class="MsoNormal">
</div>
<div class="MsoNormal" style="text-align: left;">
<span style="mso-fareast-font-family: SimSun; mso-fareast-theme-font: major-fareast;">“How
to calculate NPV and IRR in Excel”: The voice is clear, good explanation and
most importantly, it is a step-by-step tutorial approach.</span></div>
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<span style="mso-fareast-font-family: SimSun; mso-fareast-theme-font: major-fareast;"><a href="http://www.youtube.com/watch?v=kCnwCplibAk"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=kCnwCplibAk</span></a></span></div>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com2Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.591112000000073.073264 101.58985150000007 3.075246 101.59237250000007tag:blogger.com,1999:blog-7011211411109244586.post-54729944338951786082012-12-14T19:56:00.000-08:002012-12-16T12:19:04.430-08:00Leadership <br />
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<span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";">Topic:</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Education</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";">Area of discussion:</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Management </span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";">Chapter:</span><span style="color: #222222; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="color: blue; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Leadership: Transformational Leadership<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 10pt;"><i>The objective of this
posting is to share a real-life example of transformational leadership. This
example is based on Siemens (German multinational heavy engineering and
electronics conglomerate) and its previous leader, Von Pierer (CEO of the
company from 1992-2005). This posting emphasizes more on practical application as
compared to theoretical concept. Ideally, leadership is extremely important in
determining a company’s survival ability nowadays. It is a process by which a
person exerts influence over other people and inspires, motivates, and directs
their activities to help achieve group or organizational goals.</i><span class="Apple-style-span" style="color: blue;"><o:p></o:p></span></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;"> Siemens
was in a hard time during 1992 because of rising worldwide competition, having
an inflexible hierarchy as well as practising conservative culture which
greatly reduced decision making speed, stifled creativity and innovation (Jones
& George 2003, p.459). Fortunately, Siemens’ Chairman, Von Pierer has taken
a ‘shift-in-style’ approach by utilising transformational leadership. He
removed two layers of middle management, downsized workforce by 7.5% through
early retirement and sold slow-growing businesses at $2 billion (Miller 1995,
p.53). Decision making processes were also speed up through the creation of new
management boards (Boddy 2005, p.385). At the new Siemens, subordinates were
given chances to critique their managers, who were in return receiving training
to be more democratic and participative while employees were given ample
‘speaking freedom’ to express their thoughts.</span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;"> Jones
and George (2003, p.460) highlight that Von Pierer has successfully transformed
his subordinates in three essential ways. Firstly, he has ‘brainwashed’ his
employees’ passive mindset and increased their awareness about the importance
of their jobs as well as high performance to attain Siemens’ goals. For
instance, upon realising that microprocessor sales managers were not acting on
their best as they thought that their job are unimportant, he called Siemens’
top customers like Opel, Ford and Sony to critic and express their
dissatisfaction for receiving lousy service and unreliable delivery schedule.
Secondly, his subordinates are aware of their own needs for growth,
development, and accomplishment. For example, Von Pierer has organised numerous
workshop and training session as well as developing fast track career programs
like TOP (Time-optimized processes) and launched a high-profile educational
campaign for all level of employees. Thirdly, he also motivated his workers to
work for the good of the company, not just for their personal gain or benefit.
This can be seen when he tried to make all employees to think in the similar
manner by inserting self-addressed postcards in the company magazine, urging
them to send their ideas for improvement purposes directly to him.<o:p></o:p></span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;"> He
also engaged in development consideration such as providing counselling
sessions with a psychologist for managers who face difficulties in adapting to
Siemens’ changes and sponsoring hiking trips to stimulate employees’ thinking
and work in new ways (Miller 1995, p.52). One of the greatest outcome is a team
of Siemens’ engineers working in jeans in a rented house has developed a
machine-tool control system by just using one-third of the time and cost as
compared to previous system. The effectiveness of Von Pierer has been portrayed
in GLOBE research related to German leaders, where “tough on the issue, soft on
the person” strategy seems to be the ultimate recipe for success in Siemens
(Brodbeck, Frese & Javidan 2002, pp.21-24).</span></div>
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<b style="mso-bidi-font-weight: normal;"><span style="color: #351c75; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-fareast-theme-font: minor-fareast;">Appendix</span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="color: #351c75; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;">References</span></b><b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 1.0pt; line-height: 115%; mso-ansi-language: EN-GB;"><o:p></o:p></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;"><br /></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 1.0pt; line-height: 115%; mso-ansi-language: EN-GB;"><o:p> </o:p></span></b><span class="Apple-style-span" style="font-family: 'Times New Roman', serif; font-size: 16px; line-height: 18px;">Boddy, D 2005, <i style="mso-bidi-font-style: normal;">Management: An Introduction</i>, 3<sup>rd</sup>
edn, Prentice Hall, Harlow, p.385.</span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 5.0pt; line-height: 115%; mso-ansi-language: EN-GB;"><o:p> </o:p></span><span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;">Brodbeck, FC,
Frese, M & Javidan, M 2002, ‘Leadership made in Germany: Low on compassion,
high on performance’, <i style="mso-bidi-font-style: normal;">Academy of
Management Executive</i>, vol.16, no.1, pp.21-24, viewed 24 September 2012, </span><a href="http://bschool.nus.edu/Departments/ManagementNOrganization/publication/MichaelFreseJournal/brodbeck%20frese%20javidan%20ame02%20germany%20globe.pdf"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;">http://bschool.nus.edu/Departments/ManagementNOrganization/publication/MichaelFreseJournal/brodbeck%20frese%20javidan%20ame02%20germany%20globe.pdf</span></span></a></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;">Jones, GR &
George, JM 2003, <i style="mso-bidi-font-style: normal;">Contemporary Management</i>,
3<sup>rd</sup> edn, McGraw-Hill, New York, pp.459-462.</span></div>
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<span lang="EN-GB" style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-GB;">Miller, KL 1995,
‘Siemens Shapes Up’, <i style="mso-bidi-font-style: normal;">Business Week</i>,
30 April, pp.52-53, viewed 12 October 2012, </span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><a href="http://www.businessweek.com/stories/1995-04-30/siemens-shapes-up"><span class="Apple-style-span" style="color: blue;">http://www.businessweek.com/stories/1995-04-30/siemens-shapes-up</span></a></span></div>
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<br />Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com2Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-53707069285517521772012-11-01T03:01:00.000-07:002012-11-01T03:01:21.571-07:00Mathematical Tables<div class="separator" style="clear: both; text-align: center;">
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By <span class="Apple-style-span" style="color: blue;">Admin</span></div>
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Uploaded content: <span class="Apple-style-span" style="color: blue;">Mathematical Tables (Present Value and Future Value Tables)</span></div>
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<span class="Apple-style-span" style="color: blue;"><br /></span><i>
The tables below are extremely useful especially for finance and accounting
students. They are often used to find either the present value or the future
value of money. Some academic topics like time value of money and capital
budgeting will frequently use these tables to ease calculation purposes. It is
highly recommended if you are using all or any one of these, please download it
and adjust the picture until it fits into an A4 sized paper before you print it.
Also, please keep it nicely for future usage purpose.</i></div>
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<b><span class="Apple-style-span" style="color: blue;">Future Value Interest Factors (FVIF) Table </span></b></div>
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<b><span class="Apple-style-span" style="color: blue;">Future Value Interest Factors Annuity (FVIFA) Table</span></b></div>
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<span class="Apple-style-span" style="color: blue;"><b>Present Value Interest Factors (PVIF) Table</b></span></div>
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<span class="Apple-style-span" style="color: blue;"><b>Present Value </b></span><span class="Apple-style-span" style="color: blue;"><b>Interest Factors Annuity (PVIFA) Table</b></span></div>
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Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com174Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-14055450720284914182012-10-07T11:03:00.000-07:002012-10-09T23:47:07.170-07:00Capital Investment Decisions: Appraisal Methods<div class="separator" style="clear: both; text-align: left;">
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By <span class="Apple-style-span" style="color: blue;">Jackie, Researcher</span></div>
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Topic: <span class="Apple-style-span" style="color: blue;">Education</span></div>
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Area of discussion: <span class="Apple-style-span" style="color: blue;">Management & Cost
Accounting</span></div>
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Chapter: <span class="Apple-style-span" style="color: blue;">Capital investment decisions –
appraisal methods</span></div>
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<i>The objective of this posting is to share
a ‘question & answer’ related to capital investment decision. A real past
year question was taken from AAT Stage 3 Cost Accounting and Budgeting. I hope
this posting will help more students to understand payback, accounting rate of
return and net present value calculations better. Some parts of it might be
tricky where it tries to confuse students. Besides, normally professional exams
questions will ask a bit on its theoretical concepts or other qualitative
measures. Hopefully, this posting will help students to eliminate the fear in
exams and to score with flying colours.</i></div>
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Payback is defined as the length of time
that is required for a stream of cash proceeds from an investment to recover
the original cash outlay required by the investment. If the stream of cash
flows from the investment is constant each year, the payback period can be
calculated by dividing the total initial cash outlay by the amount of the
expected annual cash proceeds. However, if the stream of expected proceeds is
not constant from year to year, the payback period is determined by adding up
the cash inflows expected in successive years until the total is equal to the original
outlay (see below).</div>
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Accounting rate of return uses profits rather than cash
flows. Therefore, to find out the profits, we have to take cash flows minus
depreciation. Do not add the scrap value back to the final year’s cash flow.
This is because scrap value is not profit. Remember, if all things are run
accordingly, there will be no ‘gain or loss on disposal’, thus it will not
affect the profits. The average investment under this assumption is one-half of
the amount of the initial investment plus one-half of the scrap value at the
end of the project’s life.</div>
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Net present
value (NPV) is computed using net cash inflows less the project’s initial
investment outlay. A positive NPV indicates that an investment should be accepted,
while a negative value indicates that it should be rejected. A zero NPV
calculation indicates that the firm should be indifferent to whether the
project is accepted or rejected. </div>
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Normally,
for the last sub-question of the investment appraisal decisions, the examiners
will frequently ask the students on which is the most favorable investment
project. Sometimes, when there is a conflict in ranking between the few
investment appraisal methods, NPV method will be the key decision factor.</div>
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Not all
investment projects can be described completely in terms of monetary costs and
benefits. There is also a danger that those aspects of a new investment that
are difficult to quantify may be omitted from the financial appraisal.</div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b></div>
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<span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-font-kerning: 18.0pt; mso-themecolor: text1;">Payback Period: Meaning, Calculation, Example,
Usage and Consideration.<o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://www.business-case-analysis.com/payback-period.html"><span class="Apple-style-span" style="color: blue;">http://www.business-case-analysis.com/payback-period.html</span></a><span style="color: black; mso-bidi-font-weight: bold; mso-font-kerning: 18.0pt; mso-themecolor: text1;"><o:p></o:p></span></span></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">Investment Appraisals: A guide to
calculating ARR, the accounting rate of return.</span></span><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"><o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://suite101.com/article/investment-appraisals-how-to-calculate-arr-a297194"><span class="Apple-style-span" style="color: blue;">http://suite101.com/article/investment-appraisals-how-to-calculate-arr-a297194</span></a><o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Net
Present Value (NPV): <span class="apple-style-span"><span style="color: black; mso-themecolor: text1;">Tutorials, Calculators, Android Apps, Excel Solutions
& Tables for Finance</span></span></span><span style="color: black; mso-themecolor: text1;"><o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://finance.thinkanddone.com/npv.html"><span class="Apple-style-span" style="color: blue;">http://finance.thinkanddone.com/npv.html</span></a><o:p></o:p></span></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">Watch a short introduction video
to Investment Appraisal Methods</span><o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: blue;"><a href="http://www.youtube.com/watch?v=4arxW7nO8zc"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=4arxW7nO8zc</span></a><o:p></o:p></span></span></div>
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<h1 style="line-height: 13.65pt; margin-bottom: .0001pt; margin: 0cm;">
<span style="border: none windowtext 1.0pt; color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; font-weight: normal; mso-ascii-theme-font: minor-latin; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0cm; mso-fareast-font-family: SimSun; mso-fareast-theme-font: minor-fareast; mso-hansi-theme-font: minor-latin; mso-themecolor: text1; padding: 0cm;">Investment Appraisal
Masterclass by Kaplan</span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; font-weight: normal; mso-ascii-theme-font: minor-latin; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: SimSun; mso-fareast-theme-font: minor-fareast; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><o:p></o:p></span></h1>
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<span class="Apple-style-span" style="color: blue;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://www.youtube.com/watch?v=DGXxr1aZl84"></a></span><a href="http://www.youtube.com/watch?v=DGXxr1aZl84">http://www.youtube.com/watch?v=DGXxr1aZl84</a></span><o:p></o:p></div>
<br />Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com5Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-56272240502505806622012-09-07T07:30:00.000-07:002012-09-09T22:28:41.233-07:00The Differences Between Financial Accounting And Management Accounting<br />
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By <span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span></div>
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Topic: <span class="Apple-style-span" style="color: blue;">Types
of Accounting (Terminology & Concepts)</span></div>
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<i>The
objectives of this research are to find out what are the major differences
between financial accounting and management accounting. </i></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-EcOa5TQrVbU/UEn_cmNu8qI/AAAAAAAAAjI/2wu5DwfL7J4/s1600/FA+vs+MA.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="213" src="http://2.bp.blogspot.com/-EcOa5TQrVbU/UEn_cmNu8qI/AAAAAAAAAjI/2wu5DwfL7J4/s400/FA+vs+MA.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i><b><span class="Apple-style-span" style="color: red;">Management Accounting sometimes is also known as 'Managerial Accounting'.</span></b></i><br />
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First and foremost, management accounting
is concerned with the provision of information to people within the
organization or ‘internal parties’ (i.e. managers inside the organization) to
help them to make better decisions and improve the efficiency and effectiveness
of existing operations, whereas financial accounting is concerned with the
provision of information to ‘external parties’ outside the organization (e.g.
shareholders, creditors, tax authorities, regulators, potential investors, and
etc). Thus, management accounting could be called ‘internal reporting’ and
financial accounting could be called ‘external reporting’.</div>
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Secondly, there is a statutory
requirement for public limited companies to produce annual financial accounts
regardless of whether or not management regards this information as useful. It
must be done as it is ‘mandatory’. Management accounting, by contrast, is
entirely optional and information should be produced only if it is considered
that benefits from the use of the information by management exceed the cost of
collecting it. Thus, it is not ‘mandatory’. A company is completely free to do
as much or as little as it wishes.</div>
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Thirdly, financial accounting reports
describe the whole of the business whereas management accounting focuses on
small parts of the organization such as the cost and profitability of products,
services, customers and activities. In addition, management accounting
information measures the economic performance of decentralized operating units,
such as parts, segments, divisions or departments. </div>
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Besides, financial accounting statements
must be prepared to conform with the legal requirements and the generally
accepted accounting principles established by the regulatory bodies such as the
Financial Accounting Standards Board (FASB) in the USA, the Accounting
Standards Board (ASB) in the UK and the International Accounting Standards
Board (IASB) to ensure the uniformity and consistency that is required for
external financial statements are achieved so that the inter-company and
historical comparisons are possible. Thus, financial accounting data should be
objective and verifiable. In contrast, management accountants are not required
to adhere to generally accepted accounting principles when providing managerial
information for internal purposes. Instead, the focus is on the serving
management’s needs and providing information that is useful to managers
relating to their decision-making, planning and control functions.</div>
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Furthermore, financial accounting reports
what has happened in the past in an organization, whereas management accounting
is concerned with future information as well as past information. Decisions are
concerned with future events and management therefore requires details of
expected future costs and revenues. In other words, financial accounting is
past-oriented (eg. Reports on 2010 performance were prepared in 2011) and
management accounting is future-oriented (eg. Budget for 2011 was prepared in
2010). </div>
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In addition, a detailed set of financial
accounts is published annually and less detailed accounts are published
semi-annually. Management requires information quickly if it is to act on it.
Consequently, management accounting reports on various activities may be
prepared at daily, weekly or monthly intervals.</div>
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<b><span class="Apple-style-span" style="color: blue;"><u>Summary</u></span></b></div>
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<b><span class="Apple-style-span" style="color: blue;"><u><br /></u></span></b></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-gH7bf56x-F4/UEoDypbmukI/AAAAAAAAAjs/KIW59EMPYOk/s1600/FA+VS+MA.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-gH7bf56x-F4/UEoDypbmukI/AAAAAAAAAjs/KIW59EMPYOk/s1600/FA+VS+MA.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: blue;"><u><br /></u></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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Differences
between financial and managerial accounting</div>
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<a href="http://www.accounting4management.com/financial_accounting_vs_managerial_accounting.htm"><span class="Apple-style-span" style="color: blue;">http://www.accounting4management.com/financial_accounting_vs_managerial_accounting.htm</span></a></div>
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The Differences between Financial Accounting & Management Accounting<o:p></o:p></div>
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<a href="http://smallbusiness.chron.com/differences-between-financial-accounting-management-accounting-3985.html"><span class="Apple-style-span" style="color: blue;">http://smallbusiness.chron.com/differences-between-financial-accounting-management-accounting-3985.html</span></a></div>
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Financial
and Managerial Accounting Information</div>
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<a href="http://www.youtube.com/watch?v=ZlvzdxhjfXw"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=ZlvzdxhjfXw</span></a></div>
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Financial
Accounting Vs Managerial Accounting (Cute cartoon illustration)</div>
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<a href="http://www.youtube.com/watch?v=aVcs5CgsnfI"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=aVcs5CgsnfI</span></a></div>
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<br /></div>
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<span class="apple-style-span">Dennis Ensing, CA of
WiseMentorCapital, discusses the differences between financial and managerial
accounting. Visit StartMeUpRyerson.com for more resources to help turn your
ideas into reality.<o:p></o:p></span></div>
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<a href="http://www.youtube.com/watch?v=qmVlPmjbs7Q"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=qmVlPmjbs7Q</span></a></div>
<br />Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com60Inti College, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-61936721853114535312012-09-01T11:44:00.001-07:002012-09-01T11:54:36.476-07:00Job Interview Tips, Preparation And Advice<div class="separator" style="clear: both; text-align: left;">
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By <span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span></div>
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Topic:
<span class="Apple-style-span" style="color: blue;">Employment skills (Interview)</span></div>
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<o:p><br /></o:p></div>
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<i>The
objectives of this research are to highlight what and how a fresh graduate
should prepares for a job interview. This preparation is basically divided into
three stages: before the interview, during the interview, and after the
interview. Hopefully, the tips below will increase a job seeker’s confident and
aid them to excel better in an interview session. </i></div>
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<span class="Apple-style-span" style="color: #351c75;"><b>Introduction</b></span></div>
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Ideally,
making all the right moves at the interview is crucial to leave a positive and
lasting impression on potential employers. Besides, securing a job interview
means you are now having the chance to show a potential employer why you are
the best candidate for the job. However, the interview itself could be a
daunting experience for the underprepared. Here are some tips and guides on how
to maintain your composure and impress your prospective employers.</div>
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<h3 style="text-align: center;">
<b><span class="Apple-style-span" style="color: blue;"><u><i>Before
the interview</i></u></span></b></h3>
<div>
<b><span class="Apple-style-span" style="color: blue;"><u><i><br /></i></u></span></b></div>
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When you get
call for the interview, make sure you obtain the correct date and time of your
appointment, as well as the exact location (including building, floor and
room). It is also good to know the name of your interviewer and his or her
designation.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-Q_kr9tTmfnw/UEJMwt30gTI/AAAAAAAAAh4/GtotdgkeKp4/s1600/reading+newspaper.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="265" src="http://3.bp.blogspot.com/-Q_kr9tTmfnw/UEJMwt30gTI/AAAAAAAAAh4/GtotdgkeKp4/s400/reading+newspaper.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span class="Apple-style-span" style="color: red;"><b>Doing some "homework" before actually going to the interview like researching the company and understand what are the company objectives, short-term and long-term goals will definitely help a candidate in his or her interview session later. </b></span></td></tr>
</tbody></table>
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<b><i><span class="Apple-style-span" style="color: #bf9000;">Research the
company</span></i></b></div>
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Find out as
much as you can about the company in terms of products or services, market
position, competitors and challenges so that you can speak knowledgeably during
the interview. Find out also if the company has been in the news recently and
if it runs any community projects. If you are unfamiliar with the location, do
a trial run to avoid getting lost on the actual day. It will also help you gauge
how long it takes to get there.</div>
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<b><i><span class="Apple-style-span" style="color: #bf9000;">Research the
position</span></i></b></div>
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Research the
daily activities or tasks of the job on offer so that you know what you are
really getting yourself into. Then try to match your own qualifications,
experience and personal traits to those activities or tasks. It is also a good
idea to think of questions to ask the employers to reiterate your interest.</div>
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<b><i><span class="Apple-style-span" style="color: #bf9000;">Role-play
rehearse</span></i></b></div>
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As silly as
you may feel, rehearsing an interview with a friend or family member can help
to overcome a bad case of the nerves. While rehearsing, think of difficult
questions you may get asked and prepared suitable responses. If you are still
in university, check with the career placement centre to find out if they
conduct mock interview training. Career counselors are more than happy to help
students practice interview skills.</div>
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</div>
<h3 style="text-align: center;">
<span class="Apple-style-span" style="color: blue;"><i><u>On the
interview day</u></i></span></h3>
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Make sure
you have all the necessary documents with you before you leave home. This
includes all degree certificates and letters of references (and their
photocopies), passport-size photos, and a portfolio of your previous work or
projects (if any). Also don’t forget to bring at least two copies of your
resume.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-CRZSiKRCAlM/UEIQUaj_PyI/AAAAAAAAAg8/aPUgIiuR1_0/s1600/The+Academic+Job+Interview.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="290" src="http://4.bp.blogspot.com/-CRZSiKRCAlM/UEIQUaj_PyI/AAAAAAAAAg8/aPUgIiuR1_0/s400/The+Academic+Job+Interview.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span class="Apple-style-span" style="color: red;"><b>Sometimes an interview session might be a little bit "uneasy" for a candidate, especially when there are more than one interviewers in the interview session. It could be quite "uncomfortable" when people staring right in your eyes and hear carefully what are you going to say. Anyway, constant practice can overcome this problem.</b></span></td></tr>
</tbody></table>
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<i><span class="Apple-style-span" style="color: #bf9000;"><b><br /></b></span></i></div>
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<i><span class="Apple-style-span" style="color: #bf9000;"><b>Dress to
impress</b></span></i></div>
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Statistics
by recruitment specialists Sarina Russo Group indicate that more than 90% of
the impact we make comes from how we dress, walk and talk, and not from what we
actually say. Dress appropriately for the job you are applying for. Jobs in
banking and financial services sector usually require formal wear. Here are
some ground rules to dress for interviews:<br />
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</div>
<ol>
<li>Solid, muted
colours such as black, white, dark blue, brown, grey are generally accepted.</li>
<li>Business
attire: long pants, shirt, tie and jacket for men; long pants or skirt (at
least knee-length), blouse and jacket for women.</li>
<li>Clothes
should be clean and neatly ironed. Jewellery and accessories should be minimal
and not flashy. </li>
<li>Shoes should
be formal-looking yet comfortable to wear, and also well polished. Flip-flops
and sneakers are a definitely no-no, along with extremely high heels. </li>
<li>Hair should
be neatly combed and styled. Avoid dying hair in shocking colours. Men should
preferably be cleanly shaved but if they have a moustache or beard, it should be
neatly trimmed and groomed.</li>
</ol>
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</div>
<b>
</b>
<div style="text-align: justify;">
<b><span class="Apple-style-span" style="font-weight: normal;"><b><i><span class="Apple-style-span" style="color: #bf9000;">Punctuality
matters</span></i></b></span></b></div>
<b>
<div style="text-align: justify;">
<span class="Apple-style-span" style="font-weight: normal;"><b><i><span class="Apple-style-span" style="color: #bf9000;"></span></i></b></span><span class="Apple-style-span" style="font-weight: normal;">You should
never be late for an interview. If you are running late, call the interviewer
before the schedule time to let him or her know. Try to get there at least 15
minutes ahead of the appointment to freshen up and mentally prepare. Arriving
early also helps if you need to fill up any forms.</span></div>
</b><br />
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<b><i><span class="Apple-style-span" style="color: #bf9000;">Courtesy and
composure</span></i></b></div>
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You are
being assessed the minutes you walk into the interview room. Remember to be
courteous at all times. Introduce yourself to all the interviewers, shaking
their hands gently yet firmly. Your posture and body language are equally
important in making a good first impression, along with regular eye contact.
Always wait until the interviewer finishes asking a question before responding.
Listen attentively and look for opportunities to point out how your capabilities
match the employer’s requirements.</div>
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</div>
<h3 style="text-align: center;">
<span class="Apple-style-span" style="color: blue;"><i><u>After the interview</u></i></span></h3>
<div>
<span class="Apple-style-span" style="color: blue;"><i><u><br /></u></i></span></div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-rOPUeP4qAgM/UEJU294h63I/AAAAAAAAAik/le_P5aDnJJA/s1600/fresh+graduate+and+potential+employer+shaking+hands.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="337" src="http://4.bp.blogspot.com/-rOPUeP4qAgM/UEJU294h63I/AAAAAAAAAik/le_P5aDnJJA/s400/fresh+graduate+and+potential+employer+shaking+hands.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span class="Apple-style-span" style="color: red;">Remember to shake hand after interview. It symbolizes 'respect'.</span></b><span class="Apple-style-span" style="color: red;"><b><br /></b></span><br />
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: red;"><b><span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"><br /></span></b></span></div>
<span class="Apple-style-span" style="color: red;"><b>
</b></span>
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: red;"><b><span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"><br /></span></b></span></div>
<span class="Apple-style-span" style="color: red;"><b>
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;">Don’t forget
to shake the interviewers’ hands and thank them for their time once the session
is over. It is also a good idea to send a thank-you note or email to reiterate
your interest in the job. You may follow up with a phone call a week later if
you have not heard from them, but avoid flooding them with calls or emails or
you will be perceived as pushy or desperate.</span></div>
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"><b><span class="Apple-style-span" style="color: #351c75;"><u><br /></u></span></b></span></div>
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"><b><span class="Apple-style-span" style="color: #351c75;"><u><br /></u></span></b></span></div>
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"></span><span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"><b><span class="Apple-style-span" style="color: #351c75;"><u>Conclusion</u></span></b></span></div>
<div style="text-align: justify;">
<span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;"><b><span class="Apple-style-span" style="color: #351c75;"><u></u></span></b></span><span class="Apple-style-span" style="color: black; font-size: small; font-weight: normal;">All in all,
getting to the interview stage of the recruitment process is akin to having one
foot in the door to the hiring company. Make sure you go fully prepared, put
your best foot forward and do your best.</span></div>
</b></span></td></tr>
</tbody></table>
<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-mc1ol96SZB0/UEIQW0-QXlI/AAAAAAAAAhU/NEwxlK_4QIg/s1600/interview+cartoon.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="308" src="http://1.bp.blogspot.com/-mc1ol96SZB0/UEIQW0-QXlI/AAAAAAAAAhU/NEwxlK_4QIg/s320/interview+cartoon.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i><b><span class="Apple-style-span" style="color: red;">Funny interview cartoon</span></b></i></td></tr>
</tbody></table>
<br />
<div>
<br />
<div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Job
interview tips and advices</div>
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<a href="http://jobsearch.about.com/cs/interviews/a/jobinterviewtip.htm"><span class="Apple-style-span" style="color: blue;">http://jobsearch.about.com/cs/interviews/a/jobinterviewtip.htm</span></a></div>
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<br /></div>
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Interview
attire: How to dress for an interview</div>
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<a href="http://jobsearch.about.com/od/interviewsnetworking/tp/interviewattire.htm"><span class="Apple-style-span" style="color: blue;">http://jobsearch.about.com/od/interviewsnetworking/tp/interviewattire.htm</span></a></div>
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Top 10
interview tips</div>
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<a href="http://jobs.asiabot.com/resources/top10interviewtips.shtml"><span class="Apple-style-span" style="color: blue;">http://jobs.asiabot.com/resources/top10interviewtips.shtml</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Success in
personal interview: Top 20 interview questions and answers</div>
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<a href="http://www.bmconsultantsindia.com/interview-tips.html"><span class="Apple-style-span" style="color: blue;">http://www.bmconsultantsindia.com/interview-tips.html</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Tips on what
to do during an interview for a job</div>
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<a href="http://biz.thestar.com.my/news/story.asp?file=/2012/5/22/business/11330681&sec=business"><span class="Apple-style-span" style="color: blue;">http://biz.thestar.com.my/news/story.asp?file=/2012/5/22/business/11330681&sec=business</span></a></div>
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<br /></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com22Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.066327 101.58124149999999 3.082183 101.6009825tag:blogger.com,1999:blog-7011211411109244586.post-75462369526637462092012-08-23T21:48:00.000-07:002012-08-23T21:50:46.321-07:00Guidelines on how to write a good resume<div class="separator" style="clear: both; text-align: center;">
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<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
By <span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Topic:
<span class="Apple-style-span" style="color: blue;">Employment skills (Resume writing)</span></div>
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<br /></div>
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<o:p><br /></o:p></div>
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The
objectives of this research are to find out how a good resume can be prepared
in order to secure a job, what should be and should not be included in a resume
content, how to give a good impression to the interviewers, and how to stand
out from the crowd. Complete guides are given below for both CV and cover
letter including a sample for illustration purposes.</div>
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<o:p><br /></o:p></div>
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<span class="Apple-style-span" style="color: #351c75;"><b>Introduction</b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Ideally, a
solid CV and cover letter are the first-step to secure a dream job. A good job
seeker knows that a good resume is the key to an interview invite and
ultimately, to employment. Aside from a summary of your abilities, work
experience and education, a resume should reveal your unique selling point to
entice a potential employer to hire you.</div>
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<br /></div>
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<o:p><br /></o:p></div>
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<b style="background-color: white;"><span class="Apple-style-span" style="color: blue;"><u>The cover
letter</u></span></b></div>
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A successful
and effective cover letter should basically answer this question: “Why should I
hire you, and not the others? That’s why you should always personalize each and
every cover letter that you write. However, there are some basic rules and
guidelines on how to prepare a good cover letter:</div>
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<ol>
<li style="text-align: left;">Quote
the job or position you are applying for and where you heard or read about the
job.</li>
<li style="text-align: left;">Keep
your self-introduction brief as the employer can get more details about you
from your accompanying CV.</li>
<li style="text-align: left;">Ensure
you highlight all your key achievements, experience, skills or personality
traits in relation to the job advertised.</li>
<li style="text-align: left;">Keep
the length of the cover letter to one page. Use easy-to-read fonts such as
Times New Roman (12pt) or Arial (11pt) in black ink.</li>
<li style="text-align: left;">Ask
a trusted friend, family member, career advisor or mentor to read through your
draft letter to check for spelling or grammatical errors and to suggest
improvements where possible.</li>
<li style="text-align: left;">Use
good quality white paper to print your cover letter and CV. Ensure that they
are smudge-free as you want to give the best impression possible.</li>
<li style="text-align: left;">If
you are sending the application by snail mail, don’t forget to sign the letter
before sending it out.</li>
</ol>
<br />
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</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span class="Apple-style-span" style="color: blue;">Covering all
bases</span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span class="Apple-style-span" style="color: blue;">Here is a
10-step guide on how to write an effective cover letter:</span></i></div>
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</div>
<ol>
<li>Always address the hiring manager by name. If
you don’t know the person’s name, find out the name and designation by checking
the company website or calling up the department.</li>
<li>Ensure you state the position you are applying
for. The company may be advertising more than one position – don’t force the
person reviewing your application to guess what you are applying for.</li>
<li>Start by introducing yourself briefly and where
you found out about the job vacancy. State also if you would like to be
considered for similar positions in the company.</li>
<li>Elaborate on why you are interested in the field
or industry. Make it formal yet personable.</li>
<li>Briefly explain how your education and any work
experience make you suitable for the job.</li>
<li>Mention any internships or other working
experience, if any.</li>
<li><span class="Apple-style-span" style="font-size: 9px;"> </span>Explain briefly how these experiences and
qualifications have helped in developing the skills or personality traits
required to perform the job being advertised.</li>
<li>Lead the hiring manager to your CV and make a
formal request for an interview.</li>
<li>Maintain the polite tone of your message by
thanking the hiring manager in advance for his or her time.</li>
<li>End the letter with your name printed at the
bottom and a signature if you are preparing a hard copy application.</li>
</ol>
<br />
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</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span class="Apple-style-span" style="color: blue;"><i>For email
applications:</i></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
A cover
letter is still essential. However, it should be sent as the body of the email
with your CV enclosed as an attachment. State the job you are applying for in
the ‘subject’ of the email. Also, save your CV with your name as the filename
and don’t forget to attach it to the email. It is also highly recommended that
you use an email account with your full name to appear more professional.</div>
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<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span class="Apple-style-span" style="color: blue;"><u><b>Sample cover letter</b></u></span></div>
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<span class="Apple-style-span" style="color: blue;"><u><b><br /></b></u></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span class="Apple-style-span" style="color: blue;"><u><b></b></u></span><a href="http://1.bp.blogspot.com/-euxgGL3ERj8/UDUVFsrY1gI/AAAAAAAAAfo/CbRPtNbU980/s1600/cover+letter+4.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-euxgGL3ERj8/UDUVFsrY1gI/AAAAAAAAAfo/CbRPtNbU980/s1600/cover+letter+4.JPG" /></a></div>
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</div>
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<u><b><span class="Apple-style-span" style="color: blue;">The CV</span></b></u></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Your CV is
an overview or summary of your qualifications and life experiences. It is
essentially your personal marketing tool to make a good first impression on
your potential employer. Since employers may receive hundreds of CVs a day, it
is very important to ensure that your CV stands out from the rest.</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<o:p><br /></o:p></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span class="Apple-style-span" style="color: blue;">Covering all
bases</span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span class="Apple-style-span" style="color: blue;">Here is a
10-step guide on how to write a proper CV:</span></i></div>
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</div>
<ol>
<li><span class="Apple-style-span" style="color: blue;"><i><div class="MsoListParagraph" style="display: inline !important; margin-bottom: 0.0001pt; text-indent: -18pt;">
<span class="Apple-style-span" style="color: black; font-style: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span></span><span class="Apple-style-span" style="color: black; font-style: normal;">Write your name at the top of each page in bold
font so it is easily recognizable.</span></div>
</i></span></li>
<li>Provide your full name and correspondence
address so that the potential employers will know how to address you.</li>
<li>Include other important contact information so
that you can be easily reachable. Ensure that the phone numbers are correct as
employers tend to call instead of email to make interview appointments.</li>
<li>Your education and qualification should come
next. Always start with the highest qualification obtained and work your way
backwards. It is also good to include your secondary school results if you are
a fresh graduate.</li>
<li>Be sure to include any academic achievements in
your CV. They serve as reinforcements of your aptitude and ability.</li>
<li>Emphasize the most valuable skills for the job
you are applying for. Use tables and rating scales for things like computer
skills and language literacy.</li>
<li>Detail your work experience. Again, start with
the most recent and then work your way backwards chronologically. Emphasize the
achievements in addition to listing the tasks you were involved in. This
improves your employability.</li>
<li>List down all notable interests and activities,
especially those that you are passionate about. Highlight any leadership roles
you have previously held.</li>
<li>It is also good to add any additional skills
which are not directly related to the job requirements, but are just as
important, such as language proficiency and type of driving license.</li>
<li>Ideally, you should have one work-related
referee and one academic referee. However, ensure that you have their
permission to include them as your referees and that you are on the lookout for
a job so you don’t spring any surprises on them.</li>
</ol>
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<b><u style="background-color: white;"><span class="Apple-style-span" style="color: blue;"><br /></span></u></b></div>
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<span class="Apple-style-span" style="color: blue;"><b><u><br /></u></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><u><span class="Apple-style-span" style="color: blue;">Sample CV</span></u></b></div>
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<b><u><span class="Apple-style-span" style="color: blue;"><br /></span></u></b></div>
<div class="separator" style="clear: both; text-align: center;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-8-Xb55Ps6co/UDZj-4_3StI/AAAAAAAAAgI/qSxgmn2F1xg/s1600/CV+page+1.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-8-Xb55Ps6co/UDZj-4_3StI/AAAAAAAAAgI/qSxgmn2F1xg/s1600/CV+page+1.JPG" /></a></td></tr>
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<span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%;"><b><span class="Apple-style-span" style="color: red;">Page 1
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<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-XaSDu6un-FA/UDZkBTlGt5I/AAAAAAAAAgQ/-79Q7BwRcAg/s1600/CV+page+2.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-XaSDu6un-FA/UDZkBTlGt5I/AAAAAAAAAgQ/-79Q7BwRcAg/s1600/CV+page+2.JPG" /></a></td></tr>
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<span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%;"><b><span class="Apple-style-span" style="color: red;">Page 2
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<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-MdMkiKaNKII/UDZkD_SzYkI/AAAAAAAAAgY/FNkaUlW0jE4/s1600/CV+page+3.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-MdMkiKaNKII/UDZkD_SzYkI/AAAAAAAAAgY/FNkaUlW0jE4/s1600/CV+page+3.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%;"><b><span class="Apple-style-span" style="color: red;">Page 3
of 3</span></b><o:p></o:p></span></div>
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</div>
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<b><span style="background-color: white;"><u><span class="Apple-style-span" style="color: blue;"><br /></span></u></span></b></div>
<div class="MsoNormal" style="font-weight: normal; margin-bottom: 0.0001pt; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<b><span style="background-color: white;"><u><span class="Apple-style-span" style="color: blue;">Conclusion</span></u></span></b></div>
<div class="MsoNormal" style="color: black; margin-bottom: 0.0001pt; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
A well written CV and cover letter that addresses every point made in the job advertisement or position description is what you should strive for if you are serious about getting the job that you want.</div>
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<br /></div>
<br />
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Resume
writing, cover letter, interview tips, job search tips, at the work place, and
career advancement.</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://careers.jobstreet.com.my/resume"><span class="Apple-style-span" style="color: blue;">http://careers.jobstreet.com.my/resume</span></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
How to write
a masterpiece of a resume?</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.rockportinstitute.com/resumes"><span class="Apple-style-span" style="color: blue;">http://www.rockportinstitute.com/resumes</span></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
How to write
a successful CV?</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.kent.ac.uk/careers/cv.htm"><span class="Apple-style-span" style="color: blue;">http://www.kent.ac.uk/careers/cv.htm</span></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
How to write
a resume?</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.youthcentral.vic.gov.au/Jobs+&+Careers/Applying+for+jobs/How+to+write+a+resume/"><span class="Apple-style-span" style="color: blue;">http://www.youthcentral.vic.gov.au/Jobs+&+Careers/Applying+for+jobs/How+to+write+a+resume/</span></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
How to
create a great resume?</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://internships.about.com/od/resumetipssamples/ht/ResumeTips.htm"><span class="Apple-style-span" style="color: blue;">http://internships.about.com/od/resumetipssamples/ht/ResumeTips.htm</span></a></div>
</div>
<br />Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com17INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-66097680816205728562012-08-20T10:38:00.001-07:002012-08-22T10:24:07.410-07:00Advantages And Disadvantages Of Franchising (Updated, August 2012)<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
By <span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Topic:
<span class="Apple-style-span" style="color: blue;">Business (Franchising)</span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
The
objectives of this research are to find out what are the major advantages and
disadvantages of buying a franchise from the franchisee’s perspective. Basically,
franchise is the practice of using another firm’s successful business model.</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<o:p><br /></o:p></div>
<div align="center" class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span class="Apple-style-span" style="color: blue;"><b><u>The benefits and drawbacks of buying a franchise</u></b></span></div>
<div align="center" class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span class="Apple-style-span" style="color: blue;"><b><u><br /></u></b></span></div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-Pu4QcgwacAY/UC_SyZYqXpI/AAAAAAAAAc8/pNGwNYHkFrU/s1600/Franchising.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="http://3.bp.blogspot.com/-Pu4QcgwacAY/UC_SyZYqXpI/AAAAAAAAAc8/pNGwNYHkFrU/s400/Franchising.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif;"><span class="Apple-style-span" style="color: red;"><b>Franchise is a method of
marketing and distributing based on a two parties relationship; </b></span></span></div>
<div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif;"><span class="Apple-style-span" style="color: red;"><b>that is the
franchisor (the owner and granter of right) and the franchisee (recipient of
right) relationship.</b></span></span></div>
</td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="mso-tab-count: 1;"> </span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="mso-tab-count: 1;"></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="mso-tab-count: 1;"> </span>Franchise or ‘business cloning’
is becoming more popular currently and it looks like a rapid growing trend of
setting up a business nowadays as well as a strategic method for
entrepreneurship as it usually carries lesser risks compared to conventional
business start ups. Friendly speaking, franchising maybe a particularly good
choice for ‘uncreative people’ who wants to start a business but has no prior
business experience. It is advised that potential franchise owners should be
aware and <span lang="EN-GB" style="mso-ansi-language: EN-GB;">analyse</span> all
its benefits and drawbacks in detail before they decide to purchase a
franchise.</div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-bAxIw5ecU7o/UDJpaYrBNFI/AAAAAAAAAds/jc0awQUia64/s1600/bigmac.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="216" src="http://4.bp.blogspot.com/-bAxIw5ecU7o/UDJpaYrBNFI/AAAAAAAAAds/jc0awQUia64/s320/bigmac.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Big Mac is a proven product of
McDonald’s.</span></b><o:p></o:p></span></div>
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<span style="mso-tab-count: 1;"> </span>Firstly,
the most compelling advantage is the franchise offers a proven idea, product or
service within an established market. This will definitely cut down research,
experiment and survey costs as the potential franchise owners need not have to
worry about the acceptability of a particular product or service by the general
public. They also can save a lot of money, time and effort as they do not need to
do market analysis like PESTEL analysis (Political, Economic, Social,
Technology, Environment and Legal) nor SWOT analysis (Strengths, Weaknesses,
Opportunities and Threats) as these types of analyses have already been done by
the franchisor. </div>
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<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-hND1ytxMaYI/UDJqV5X819I/AAAAAAAAAd0/LMgQGOSyhto/s1600/starbuck+trademark.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-hND1ytxMaYI/UDJqV5X819I/AAAAAAAAAd0/LMgQGOSyhto/s1600/starbuck+trademark.jpg" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Starbucks’ logo is an image of a
"twin-tailed mermaid, or siren as she's known in Greek mythology.</span></b></span></div>
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<span style="mso-spacerun: yes;"> </span><span style="mso-tab-count: 1;"> </span>Secondly, the purchase of a
franchise with an established trademark or recognized brand name provides
franchisees with considerable market power and reputation. For instance, the
purchaser of a Starbucks’ franchise has a trademark with proven market power.
The good thing about this is the owners no need to struggle for years in order
to build up a good brand name or image which we commonly see in new
entrepreneurs who have just stepped into the business world and wished to form
their own products and company. Seriously, it is not easy to build a new brand
name by our own efforts nowadays as there are too many brands out there whereby
the competition is extremely high. </div>
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<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-JzQd__iKfkM/UDJrCyZSZVI/AAAAAAAAAd8/p0IaZBYfEUI/s1600/mcdonald's+training.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-JzQd__iKfkM/UDJrCyZSZVI/AAAAAAAAAd8/p0IaZBYfEUI/s1600/mcdonald's+training.jpg" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Full training is provided for
each step by the McDonald’s training team.</span></b><o:p></o:p></span></div>
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<span style="mso-tab-count: 1;"> </span>Thirdly,
another attractive benefit of purchasing a franchise rather than owning a store
outright is the notion that the franchisor provides the franchisee ongoing
support in terms of training, technical expertise, product updates and
management assistance. These benefits are not available if a person plan to run
a business on his or her own, thus making the process of operating a business
other than franchise seems to be more difficult as the owners have to be more
independent. A popular slogan in franchising is that people buying franchises
to “be in business for themselves but not by themselves”. In short, the beauty
of franchising is the availability of guide or “mentoring”.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-Iy_cK_20HIA/UDJrohwM31I/AAAAAAAAAeE/G52kfGKKk-o/s1600/chef+wan+kfc+advertising.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://1.bp.blogspot.com/-Iy_cK_20HIA/UDJrohwM31I/AAAAAAAAAeE/G52kfGKKk-o/s320/chef+wan+kfc+advertising.jpg" width="276" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Campaign allows KFC to communicate its message and brand to wider audience<o:p></o:p></span></b></span></div>
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<span style="mso-tab-count: 1;"> </span>Fourthly, an established
marketing network is usually provided. In other words, the franchisees do not
need to do marketing on their own as the franchisor will do it as a whole. Just
imagine if a person venture into a business which is not franchise, he or she
has to struggle to attract customers by advertising. The point is if a person
runs a business on his or her own rather than franchising, then most likely the
advertising will be ineffective and not as successful as franchise. This is
because franchise has its own marketing network plus the summation of all
collectable advertising fees from all the franchisees creates a large pool of
money where they can use a more expensive modern approach of advertising such
as advertise in television, radio and billboards.</div>
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<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-CfgtOzrlXQs/UDJtN0zBg_I/AAAAAAAAAeM/Nkqtcse0NLE/s1600/Pizza+Hut+Truck+.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="204" src="http://2.bp.blogspot.com/-CfgtOzrlXQs/UDJtN0zBg_I/AAAAAAAAAeM/Nkqtcse0NLE/s320/Pizza+Hut+Truck+.jpg" width="320" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Pizza Hut’s truck.</span></b></span></div>
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<span style="mso-tab-count: 1;"> </span>Fifthly, relationship with
suppliers has already been established once a franchise is bought. The owners
do not have to worry about getting reliable, trustable and good suppliers on
their own. Besides, the prices of goods are usually cheaper due to economy of
scale too. Even if the inflation sets in, the franchisee will be less affected
as compared to other form of business because goods are ordered in a very large
amount by the franchisor before distributing it to the franchisee and this
enables the trade discount to take place too.</div>
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<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-GnIhrLSgSks/UDJuBsfWFZI/AAAAAAAAAeU/kcBaS6tdUWY/s1600/franchise+fee.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="451" src="http://3.bp.blogspot.com/-GnIhrLSgSks/UDJuBsfWFZI/AAAAAAAAAeU/kcBaS6tdUWY/s640/franchise+fee.JPG" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span class="Apple-style-span" style="color: red;"><b><span class="Apple-style-span" style="font-family: Cambria, serif;"><span class="Apple-style-span" style="font-family: 'Times New Roman';"><span style="font-family: Cambria, serif;">Total estimated
initial investment for </span><span style="font-family: Cambria, serif;">Freddy’s Frozen
Custard & Steakburgers</span></span>.</span></b></span></td></tr>
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<span style="mso-spacerun: yes;"> </span><span style="mso-tab-count: 1;"> </span>This is however, there are
certain major drawbacks of which the potential franchise owners must take into
consideration before they make up their mind especially the initial cost of
purchasing and setting up a franchise operation as they could be quite high.
Therefore, usually franchise owners will suffer a huge amount of cash outflows
at the beginning before they can enjoy profits. This is because, a large sum of
money has to be paid for the trademark, necessary renovation to make the franchise
looks identical with the others, purchase of furniture, stocks, machinery,
payment of salaries and so on.</div>
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<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-5JwkShDkCeM/UDJw2Axsy7I/AAAAAAAAAeg/SagNV7A9zs0/s1600/Royalties.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/-5JwkShDkCeM/UDJw2Axsy7I/AAAAAAAAAeg/SagNV7A9zs0/s1600/Royalties.jpg" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Royalty fee reduces profits</span></b><o:p></o:p></span></div>
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<span style="mso-tab-count: 1;"> </span>Besides, the distribution of
profit will be smaller as the franchisee is required to pay ongoing royalty fee
usually monthly and is typically calculated as a percentage of gross sales, not
net profit. This is to avoid franchisee from manipulating his or her franchise
expenses in order to reduce net profit and this will directly reduce the
royalty payment. The point is when royalty is computed based on sales, as long
as there is a revenue even the franchise is making losses in a particular
period, the franchise owner is still required to pay the royalty fee. When this
situation arise, it is like “add salt to the wound”.</div>
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<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-X1i3BT9wXrA/UDJxarSyg5I/AAAAAAAAAeo/eTqWTcznVBo/s1600/Creativity1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-X1i3BT9wXrA/UDJxarSyg5I/AAAAAAAAAeo/eTqWTcznVBo/s1600/Creativity1.jpg" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Restrictions on creativity</span></b><o:p></o:p></span></div>
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<span style="mso-tab-count: 1;"> </span>Furthermore, there is a
restriction on creativity. Many franchise systems are very rigid and leave
little opportunity for individual franchisees to exercise their creativity.
This is an often-cited frustration of franchisees. This is because most
franchisors impose appearance and design standards, thus limiting the ways a
franchisee can operates his or her franchise. Although, these standards can
help in promoting uniformity, they can also limit franchisees’ new ideas and
ability to cater to local tastes or needs.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-4VFJ67NaYzQ/UDJxtwpyI1I/AAAAAAAAAew/39InhoV4NF4/s1600/i-city-KFC-fight-case.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="285" src="http://1.bp.blogspot.com/-4VFJ67NaYzQ/UDJxtwpyI1I/AAAAAAAAAew/39InhoV4NF4/s400/i-city-KFC-fight-case.jpg" width="400" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">KFC apologises to i-City outlet assault victim</span></b><span class="Apple-style-span" style="color: rgba(0, 0, 0, 0.0);"><o:p></o:p></span></span></div>
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<span style="mso-tab-count: 1;"> </span>In addition, if some of the
franchisees in a franchise system starts performing poorly and makes an
ineffective impression to the public, this can somehow affect the reputation
and eventually the sales of a well-run franchise in the same system. In short,
although all the franchises operate independently, but they are still
inter-related and connected. For example, there is a recent case in Malaysia
where a man was assaulted by a KFC’s kitchen crew member at its i-city branch
in Shah Alam. A video recording of the assault went viral on YouTube. KFC’s
reputation was damaged because of this incident and the fast food chain’s
deputy president had met and apologized to the victim.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-hGJ9NNX18pE/UDJzA8LuMtI/AAAAAAAAAe4/ZIkrVNS0Dfg/s1600/agreement.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-hGJ9NNX18pE/UDJzA8LuMtI/AAAAAAAAAe4/ZIkrVNS0Dfg/s1600/agreement.jpg" /></a></td></tr>
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<span style="font-family: Cambria, serif;"><b><span class="Apple-style-span" style="color: red;">Sometimes a franchise agreement can
be too strict and seems to be unfavourable <o:p></o:p></span></b></span></div>
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<span style="mso-tab-count: 1;"><br /></span></div>
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<span style="mso-tab-count: 1;"> </span>Moreover, there are also some
issues relating to the duration, nature of the commitment and problems of
termination or transfer. For a variety of reasons, many franchise agreements
are difficult and expensive to terminate or transfer. Furthermore, virtually
every franchise agreement contains a non-compete clause. These clauses vary in
term of severity, but a typical clause prevents a former franchisee from
competing with the franchisor for a period of two years or more. Often, a
franchise cannot terminate a franchise agreement without paying the franchisor
substantial monetary damages.</div>
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</div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span><span style="color: black; mso-themecolor: text1;">In conclusion, the future of franchising is still bright.
As franchising continues to become a more pervasive form of business,
regulators and franchise associations are likely to intervene in ways that
strengthen the viability of the franchise concept.</span><o:p></o:p></span></div>
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<br /></div>
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</div>
<div style="line-height: 115%; margin-bottom: .0001pt; margin: 0cm;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><b><span class="Apple-style-span" style="color: #351c75;">Additional readings, related links and references:</span></b><o:p></o:p></span></div>
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<br /></div>
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<span style="border: none windowtext 1.0pt; color: black; mso-bidi-font-family: Calibri; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0cm; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1; padding: 0cm;">The Benefits of Franchising</span><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1;"><o:p></o:p></span></div>
<div style="line-height: 115%; margin-bottom: .0001pt; margin: 0cm;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><a href="http://www.youtube.com/watch?v=KCObP7-5dwE">http://www.youtube.com/watch?v=KCObP7-5dwE</a><o:p></o:p></span></div>
<div style="line-height: 115%; margin-bottom: .0001pt; margin: 0cm;">
<br /></div>
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<span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1;">Should You Buy A Franchise?<o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://sbinfocanada.about.com/od/franchiseinfo/a/buyfranchise.htm">http://sbinfocanada.about.com/od/franchiseinfo/a/buyfranchise.htm</a><o:p></o:p></span></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">The
Advantages and Disadvantages of Franchising<o:p></o:p></span></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://emievil.hubpages.com/hub/The-Advantages-and-Disadvantages-of-Franchising">http://emievil.hubpages.com/hub/The-Advantages-and-Disadvantages-of-Franchising</a><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-outline-level: 1;">
<span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt; mso-themecolor: text1;">Purchasing a Start-Up
Franchise? Here are some Advantages and Disadvantages<o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://www.franchiseknowhow.com/buying_franchise/prosandcons.htm">http://www.franchiseknowhow.com/buying_franchise/prosandcons.htm</a><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-outline-level: 1;">
<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">What Are the Benefits &
Drawbacks of a Franchise?</span></span><span style="border: none windowtext 1.0pt; color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0cm; padding: 0cm;"><br />
</span><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><a href="http://www.ehow.com/list_6811866_benefits-drawbacks-franchise_.html">http://www.ehow.com/list_6811866_benefits-drawbacks-franchise_.html</a></span></div>
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<br /></div>
Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com29INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-73477129061748898392012-08-13T02:49:00.001-07:002012-08-13T07:25:42.722-07:00How to calculate Internal Rate of Return (IRR)? (Critical Review)<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
By <span class="Apple-style-span" style="color: blue;">Jackie, Researcher</span></div>
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Topic: <span class="Apple-style-span" style="color: blue;">Education</span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
Area of discussion: <span class="Apple-style-span" style="color: blue;">Finance; Management
& Cost Accounting</span></div>
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Chapter: <span class="Apple-style-span" style="color: blue;">Investment appraisal methods –
Internal Rate of Return (IRR)</span></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<o:p><br /></o:p></div>
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The objectives of this research are to
analyze few different methods which are available to calculate Internal Rate of
Return. There are some advantages and disadvantages of using each method as
none of them are perfect. Basically, there are three types of methods which I
saw students often use in examinations and these methods are usually
recommended in any relevant academic text books too. They are trial and error
method, reverse calculation method, and linear interpolation method. For this
discussion, I have randomly taken one question from previous college’s
Management Accounting exam and I will apply all these three methods into the
same question and we shall see which method is more preferable, faster or
perhaps easier to use.</div>
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<br /></div>
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<o:p><br /></o:p></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Introduction</span></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
Ideally, the Internal Rate of Return
(IRR) of an investment project is the cost of capital or required rate of
return which, when used to discount the cash flows of a project, it will
produce a net present value of zero.</div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
<o:p><br /></o:p></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: justify; text-justify: inter-ideograph;">
Let’s take a look at this question:</div>
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<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-Xi_BqK69zhc/UCjHY0nmdZI/AAAAAAAAAbI/QMb8hNG4vxs/s1600/IRR+QUESTION+2.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-Xi_BqK69zhc/UCjHY0nmdZI/AAAAAAAAAbI/QMb8hNG4vxs/s1600/IRR+QUESTION+2.JPG" /></a></div>
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</div>
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<span class="Apple-style-span" style="color: blue;"><b><u><br /></u></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span class="Apple-style-span" style="color: blue;"><u>Trial and
error method</u></span></b></div>
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<b><span class="Apple-style-span" style="color: blue;"><u><br /></u></span></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Only use
this method if there is no other better method available. It is very time
consuming and thus, not recommended in exams.<br />
<br /></div>
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<a href="http://4.bp.blogspot.com/-AvIk7UOSzd0/UCkOE7Lc7CI/AAAAAAAAAcY/280VrKDx0Gs/s1600/trial+and+error+method+last.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-AvIk7UOSzd0/UCkOE7Lc7CI/AAAAAAAAAcY/280VrKDx0Gs/s1600/trial+and+error+method+last.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: blue;"><u><br /></u></span></b></div>
<div class="MsoNormal" style="text-align: center;">
<b><span class="Apple-style-span" style="color: blue;"><u>Reverse calculation method</u></span></b></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
Highly recommended (simplest and most direct approach) especially
when the discount factor is a whole number and the net cash inflow is the same
for every year. Not suitable for discount factor that comes along with decimals
as well as different annual net cash inflow. </div>
<br />
<br />
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<a href="http://1.bp.blogspot.com/-JyAxDDUiYO4/UCjILsxfOJI/AAAAAAAAAbY/J32lLK9jkAY/s1600/reverse+calculation+2+-+irr.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-JyAxDDUiYO4/UCjILsxfOJI/AAAAAAAAAbY/J32lLK9jkAY/s1600/reverse+calculation+2+-+irr.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: blue;"><u><br /></u></span></b></div>
<div class="MsoNormal" style="text-align: center;">
<b><span class="Apple-style-span" style="color: blue;"><u>Linear interpolation method</u></span></b></div>
<div class="MsoNormal" style="text-align: center;">
<b><span class="Apple-style-span" style="color: blue;"><u><br /></u></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
It is appropriate to use when two NPV points are known. It
is suitable for condition where the discount factor comes along with decimal
place or when the annual cash inflow is different. However, the main weakness
is “the further the two NPV points located from each other, the less accurate
and reliable the computed rate will be”. Thus, the computed figure can only
serve as approximation as it was not accurate.</div>
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<br /></div>
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<a href="http://2.bp.blogspot.com/-WWt7vjVuadA/UCjIj40OwHI/AAAAAAAAAbg/btOtFWry5Kg/s1600/linear+interpolation+method.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-WWt7vjVuadA/UCjIj40OwHI/AAAAAAAAAbg/btOtFWry5Kg/s1600/linear+interpolation+method.JPG" /></a></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><br /></span></div>
<div class="MsoNormal">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">We say ‘approximately’ since, in using linear interpolation we
have drawn a straight line between two points on a project NPV line that is in
fact a curve. The straight line will not cut the x-axis at the same place as
the project NPV curve, so the value we obtained by interpolation is not the
actual value of the IRR, but only an estimated value.<o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-pR9Mmo9JkIo/UCjJ5tSAcMI/AAAAAAAAAbw/ZJ1Q2yybFDw/s1600/why+irr+is+not+accurate+edited.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-pR9Mmo9JkIo/UCjJ5tSAcMI/AAAAAAAAAbw/ZJ1Q2yybFDw/s1600/why+irr+is+not+accurate+edited.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div class="MsoNormal" style="text-align: center;">
<span style="font-family: "Cambria Math","serif"; font-size: 9.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><b><span class="Apple-style-span" style="color: red;">Illustration
of why the IRR estimated by a single linear interpolation is only an approximation
of the </span></b></span></div>
<div class="MsoNormal" style="text-align: center;">
<span class="Apple-style-span" style="font-family: 'Cambria Math', serif; font-size: 12px; line-height: 13px;"><b><span class="Apple-style-span" style="color: red;">actual IRR of an investment project. </span></b></span></div>
</td></tr>
</tbody></table>
<br />
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</div>
<div class="MsoNormal" style="text-align: center;">
<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><b><span class="Apple-style-span" style="color: blue;"><u>Additional support material: PVIFA’s table</u></span></b><o:p></o:p></span></div>
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<span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><b><u><span class="Apple-style-span" style="color: blue;"><br /></span></u></b></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-ukftSITaz9M/UCjKmGy1eWI/AAAAAAAAAb4/8OiPiQoWr_k/s1600/pvifa+table+2.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-ukftSITaz9M/UCjKmGy1eWI/AAAAAAAAAb4/8OiPiQoWr_k/s1600/pvifa+table+2.PNG" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
</div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Calculating
Internal Rate of Return Using Excel or a Financial Calculator</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.investinganswers.com/education/time-value-money/calculating-internal-rate-return-using-excel-or-financial-calculator-2129"><span class="Apple-style-span" style="color: blue;">http://www.investinganswers.com/education/time-value-money/calculating-internal-rate-return-using-excel-or-financial-calculator-2129</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
How to
calculate Internal Rate of Return (IRR), and when is the time and in what
situation IRR is not recommended to use?</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.experiglot.com/2006/08/09/how-to-calculate-an-internal-rate-of-return-irr-and-when-not-to-use-it/"><span class="Apple-style-span" style="color: blue;">http://www.experiglot.com/2006/08/09/how-to-calculate-an-internal-rate-of-return-irr-and-when-not-to-use-it/</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Advantages
and disadvantages of Internal Rate of Return (IRR)</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.svtuition.org/2010/05/advantages-and-disadvantages-of.html"><span class="Apple-style-span" style="color: blue;">http://www.svtuition.org/2010/05/advantages-and-disadvantages-of.html</span></a></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Finding
Internal Rate of Return (IRR) using Excel</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<a href="http://www.youtube.com/watch?v=jeGa9JF8pzs"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=jeGa9JF8pzs</span></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Calculating
Internal Rate of Return (IRR) and Net Present Value (NPV) using Excel</div>
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-fareast-theme-font: minor-fareast; mso-hansi-theme-font: minor-latin;"><a href="http://www.youtube.com/watch?v=xzqpfpq6vSk&feature=related"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=xzqpfpq6vSk&feature=related</span></a></span><br />
<br />
<br />Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com6INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-16066815099121262482012-08-10T05:54:00.001-07:002012-08-10T06:01:36.584-07:00Advantages And Disadvantages Of Using Social Networking For Business Purposes (Updated, August 2012)<span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 15px; line-height: 17px;"><br /></span>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 15px; line-height: 17px;">By </span><span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 15px; line-height: 17px;"><span class="Apple-style-span" style="color: blue;">Jackie, Researcher</span></span><br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Topic: <span class="Apple-style-span" style="color: blue;">Business (Social Networking Websites)</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Information technology has taken the world by storm. However, its
potential is often debated. There are many pros and cons of using social networking
websites, such as the Facebook for business purposes. However, the
successfulness is still depending on how a company able to exploit them.<o:p></o:p></span></div>
<br />
<div>
<br /></div>
<div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b style="mso-bidi-font-weight: normal;"><u><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">The strengths and limitations of using social networking websites<o:p></o:p></span></u></b></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b style="mso-bidi-font-weight: normal;"><u><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></u></b></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-7R6BCOk_Mns/UCTWwOikU3I/AAAAAAAAAZI/r81HkpOSPEc/s1600/nat+geo+screen+shot.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="343" src="http://3.bp.blogspot.com/-7R6BCOk_Mns/UCTWwOikU3I/AAAAAAAAAZI/r81HkpOSPEc/s400/nat+geo+screen+shot.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span class="apple-style-span"><b style="mso-bidi-font-weight: normal;"><span style="font-family: Cambria, serif; font-size: 9pt; line-height: 115%;"><span class="Apple-style-span" style="color: red;">Facebook fan gate
pages are a great way to encourage people to become fans of your brand on
Facebook.</span></span></b></span></td></tr>
</tbody></table>
<div align="center" class="MsoNormal" style="text-align: justify;">
</div>
<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span></span></div>
<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%; text-align: justify;">
</div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>The
advancement of information technology has opened up a broad world of contact,
made the world looks smaller and inspired majority of the businesses nor
individuals to utilize social networking websites such as Facebook, Twitter,
Linkedin, Youtube, Friendster and Myspace as an useful communication tool to
develop effective marketing strategies, save cost and budget, gain global
awareness, encourage brand-building, share information and build public
relationship, irrespective of geographic barrier and cultural differences.
However, its potential and capability contain both strengths and weaknesses
which will greatly affect the user.</span></div>
<br />
<div class="MsoNormal" style="text-align: justify;">
</div>
<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%; text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: blue;">Advantages
(1): Marketing purpose</span><o:p></o:p></span></b></div>
<div class="MsoNormal" style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%; text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></b></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-JqvILe1BvmM/UCTXL_GvwSI/AAAAAAAAAZQ/xxgyhDehgn0/s1600/gm+fb+fan+page.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="247" src="http://1.bp.blogspot.com/-JqvILe1BvmM/UCTXL_GvwSI/AAAAAAAAAZQ/xxgyhDehgn0/s400/gm+fb+fan+page.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div class="MsoNormal">
<span class="Apple-style-span" style="font-family: Cambria, serif; line-height: 14px;"><b><i><span class="Apple-style-span" style="font-family: 'Times New Roman'; font-style: normal; font-weight: normal; line-height: normal;"><b><span style="font-family: Cambria, serif; font-size: 9pt; line-height: 115%;"><span class="Apple-style-span" style="color: red;">The fan page of
General Motors Co on the Facebook Inc website. </span></span></b></span></i></b></span><br />
<span class="Apple-style-span" style="font-family: Cambria, serif; line-height: 14px;"><b><i><span class="Apple-style-span" style="font-family: 'Times New Roman'; font-style: normal; font-weight: normal; line-height: normal;"><b><span style="font-family: Cambria, serif; font-size: 9pt; line-height: 115%;"><span class="Apple-style-span" style="color: red;">Many companies have started to
advertise their product in social networking nowadays</span></span></b></span><span class="Apple-style-span" style="color: red;">.</span></i></b></span></div>
</td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: justify;">
<span class="Apple-style-span" style="color: red; font-family: Cambria, serif; font-size: x-small;"><span class="Apple-style-span" style="font-weight: 800;"><i><br /></i></span></span></div>
<div class="separator" style="clear: both; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%; text-align: left;">
</div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Firstly,
companies can communicate and receive feedback through interaction with the
public and thus, create indirect advertising and improve overall marketing
strategies. According to Beard (2009), social networking allows web users to
socialize, gives an opportunity for the public to express their view regarding
the quality of products and services provided by a particular company, improve
or build customer relationship and enable customers to gain awareness of a
brand via online publicizing. For instance, The National Geographic Society has
created a fan page on Facebook to notify its members about its daily
activities, researches and issues. Chruscinski (2011) states that social
networks will be viewed by mass audiences which had proven to be true by The
Nelson Company of which 22.7 percent of the world internet time in July 2010
was spent on social networking website. Besides, the creation of an online
community and forum will draw interested parties’ attention, increased exposure
with a little effort, at the same time identify and attracts potential
customers. Beard (2009) highlights that the feedback and respond received from
customers are essential for doing business analysis in order to understand
customer behavior and current trend to make sure that a company is not
outdated. Information received through online survey can provide a true and
fair key market research for future planning and decision making. Therefore, in
my opinion, it will be a convenient platform to host events and gatherings
plus, if customers like our ‘updates’, they will have a tendency to share and
spread it to their family and friends.<o:p></o:p></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span></div>
<div class="MsoNormal" style="text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: blue;">Advantages
(2): Cost-saving</span></span></b><br />
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: blue;"><br /></span></span></b>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-s_07MxPWiXc/UCT_gmAlgzI/AAAAAAAAAaA/-FODoy34Dz0/s1600/social+media+fro+business.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="299" src="http://2.bp.blogspot.com/-s_07MxPWiXc/UCT_gmAlgzI/AAAAAAAAAaA/-FODoy34Dz0/s400/social+media+fro+business.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div class="MsoNormal">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: red;">Social networking
is a “modern marketing tool” which is believed can </span></span></b></div>
<div class="MsoNormal">
<span class="Apple-style-span" style="color: red;"><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">offer </span></b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">far </span></b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">more advantages as
compared to “traditional strategies”.</span></b></span></div>
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<span class="Apple-style-span" style="font-size: x-small;"><br /></span></div>
</div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Secondly,
companies can save marketing, advertising, publicity and recruitment expenses
as most of the social networking websites are usually free. If not, it is still
considered relatively cheap as compared to other traditional media like
television, radio, or newspaper. Besides, it is far reach where companies can
access to global market with immediate effect. Moreover, it is usually easy to
use, do not require legal procedures, and long-lasting as posted information
can stay online for a long period of time unless someone removes it (Grunert,
2009). Brooger (2010) explains that interested parties or clients can search a
product or service offered by a company easily by surfing the related websites.
In addition, if a company is facing any challenge or problem, the company can
easily seek advice from experts via social networking websites and most
beneficially, the advice is normally free. On the other hand, Beard (2009)
suggests that it could also be an excellent recruitment tool where company can
advertise job positions to a wider audience. This allows them to discover more
about candidates’ background before deciding whether to pursue their
application. Moreover, online advertising campaign can maintain a controlled
budget, raise a company visibility and popularity, attracts attention of
potential customers.<o:p></o:p></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></div>
<div class="MsoNormal" style="text-align: center;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span></div>
<div class="MsoNormal" style="text-align: center;">
<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: blue;">Disadvantage:
Put company’s image, reputation and business opportunity at risk</span><o:p></o:p></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></b></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-I-Jp2Vf2RQI/UCTXxumRlxI/AAAAAAAAAZg/0MQvF9xjbeo/s1600/addicted+to+facebook.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="288" src="http://3.bp.blogspot.com/-I-Jp2Vf2RQI/UCTXxumRlxI/AAAAAAAAAZg/0MQvF9xjbeo/s400/addicted+to+facebook.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red; font-family: Cambria, serif;"><b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Calibri; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-fareast-theme-font: minor-fareast;">Besides deteriorating physical health, the
security of using social </span></b></b></span></div>
<div class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red; font-family: Cambria, serif;"><b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Calibri; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-fareast-theme-font: minor-fareast;">networking to do business is also questionable.</span></b></b></span></div>
<div class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red; font-family: Cambria, serif;"><b><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Cambria","serif"; font-size: 9.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Calibri; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-fareast-theme-font: minor-fareast;"><br /></span></b></b></span></div>
</td></tr>
</tbody></table>
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<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"> There are
certain drawbacks of using social networking websites. For instance, lack of
control, directly affects company’s reputation, requires deep information
technology knowledge, consumes a lot of time, could be risky, side effects
might occur and needs high commitment for the person in charge. According to
Brooger (2010), every message, comment and feedback that are being posted online
are not fully controlled or regulated by the company. In addition, it might be
hard to attract targeted audiences because they may use different social
websites. Karimi (2009) warns that negative comments and complaints received
from customers or clients as well as posting controversial opinions can tarnish
a company’s reputation as many web users can view and spread it globally.
Therefore, the companies have to carry heavy responsibility as all online
activities should be handled cautiously and have to be monitored regularly to
avoid problems. Besides, creating groups or event pages are not easy as it
requires good computer skills, information technology experiences and deep
knowledge and understanding on social networking. Brooger (2010) explains that
using social networking websites might consumes much time as companies have to
remain active to keep in touch with its regular customers. Next, internet
fraudsters will have the opportunity to run illegal activities by using company
details. Meanwhile, information posted online can be abused or misused by
competitors. Consequently, individuals’ contact numbers and e-mail addresses
that are being put online might lead to stalking and online harassment
(Niharikas, 2010). Niharikas (2010) also warns that social networking can be
absolutely addictive to employees which can cause serious errors in work and
also reduce efficiency and productivity in term of time spent. Lastly, as large
effort and resource investment are required, the person in charge of social
networking must be highly committed and responsible. Social networks have to be
updated consistently and frequently to keep the interest of the targeted
audiences, but at the same time, always bear in mind that irrelevant posts
could also turn off followers and clients as it is very annoying and disturbing
(Grunert, 2009).<o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>All in all,
companies should make full use of the extensive range of benefits of which can
be acquired by using social networking websites, but they must remain prudent
and cautious all the time especially in selecting the things to be posted as a
tiny mistake in posting can lead to a significant downfall of a company. I
believe social networking websites can provide far more functions as compared
to conventional types of media like billboards, in term of prolong the usage
duration, save cost and increase profitability. In short, users must think
clearly, use it wisely and carefully.<o:p></o:p></span></div>
<br />
<span class="Apple-style-span" style="color: #351c75; font-family: Calibri, sans-serif; font-size: 15px; line-height: 17px;"><b>References</b></span><br />
<span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 15px; line-height: 17px;"><b><span class="Apple-style-span" style="color: blue;"><br /></span></b></span>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 15px; line-height: 17px;"><b><span class="Apple-style-span" style="color: blue;"></span></b></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">‘Advantages And Disadvantages of Social Networking Sites’
2010, <i style="mso-bidi-font-style: normal;">The Tech Edition</i> 18 March,
viewed 5 July 2012, </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://www.thetechedition.com/advantages-and-disadvantages-of-social-networking-sites/"><span class="Apple-style-span" style="color: blue;">http://www.thetechedition.com/advantages-and-disadvantages-of-social-networking-sites/</span></a></span><br />
<span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span>
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;"><a href="http://www.thetechedition.com/advantages-and-disadvantages-of-social-networking-sites/"></a></span></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">Beard, </span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">A 2009, ‘The Pros & Cons of Social Networking
as a business’, <i style="mso-bidi-font-style: normal;">Gooruze</i> 7 October,
viewed 4 July 2012, </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://www.gooruze.com/articles/1682/The-Pros--Con-of-Social-Networking-as-a-business/"><span class="Apple-style-span" style="color: blue;">http://www.gooruze.com/articles/1682/The-Pros--Con-of-Social-Networking-as-a-business/</span></a></span><br />
<span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span>
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;"><a href="http://www.gooruze.com/articles/1682/The-Pros--Con-of-Social-Networking-as-a-business/"></a></span></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">Brooger 2009, ‘Using social networking sites for business
marketing: Advantages and disadvantages, <i style="mso-bidi-font-style: normal;">Brooger</i>
9 July, viewed 5 July 2012, </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://brooger.com/business-finance-money.php/using-social-networking-sites-for-business-marketing-advantages-and%20disadvantages"><span class="Apple-style-span" style="color: blue;">http://brooger.com/business-finance-money.php/using-social-networking-sites-for-business-marketing-advantages-and
disadvantages</span></a></span><br />
<span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span>
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;"><a href="http://brooger.com/business-finance-money.php/using-social-networking-sites-for-business-marketing-advantages-and%20disadvantages"></a></span></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">Chruscinski, D 2011, ‘The Pros & Cons of Social
Networking in Business’, <i style="mso-bidi-font-style: normal;">ehow</i> 11
January, viewed 4 July 2012, </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://www.ehow.com/info_7756235_pros-con-social-networking-websites"><span class="Apple-style-span" style="color: blue;">http://www.ehow.com/info_7756235_pros-con-social-networking-websites</span></a></span><br />
<span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span>
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;"><a href="http://www.ehow.com/info_7756235_pros-con-social-networking-websites"></a></span></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">Grunert, J 2009, ‘Effective Social Networking Marketing
Strategies’, <i style="mso-bidi-font-style: normal;">Suite101</i> 1 June, viewed
5 July 2012, </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://www.suite101.com/content/effective-social-networking-marketing-strategies_a121975"><span class="Apple-style-span" style="color: blue;">http://www.suite101.com/content/effective-social-networking-marketing-strategies_a121975</span></a></span><br />
<span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span>
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;"><a href="http://www.suite101.com/content/effective-social-networking-marketing-strategies_a121975"></a></span></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">Karimi, S 2009, ‘Pros and Cons of Using Facebook to
Promote Your Business Online’, <i style="mso-bidi-font-style: normal;">Hubpages</i>
29 April, viewed 5 July 2012, </span><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://hubpages.com/hub/Pros-and-Cons-of-Using-Facebook-to-Promote-Your-Business-Online"><span class="Apple-style-span" style="color: blue;">http://hubpages.com/hub/Pros-and-Cons-of-Using-Facebook-to-Promote-Your-Business-Online</span></a></span><br />
<span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span>
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;"><a href="http://hubpages.com/hub/Pros-and-Cons-of-Using-Facebook-to-Promote-Your-Business-Online"></a></span></span><span style="color: black; font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-themecolor: text1;">Niharikas 2010, ‘Pros and Cons of Social Networking
Websites’, <i style="mso-bidi-font-style: normal;">Bukisa</i> 15 November, viewed
4 July 2012, </span><a href="http://www.bukisa.com/articles/%20396327_pros-and%20cons-of-social-networking-sites-for-business-marketing-advantages-and-disadvantages"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;">http://www.bukisa.com/articles/
396327_pros-and cons-of-social-networking-sites-for-business-marketing-advantages-and-disadvantages</span></span></a><br />
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span class="Apple-style-span" style="font-size: 15px; line-height: 17px;"><b><br /></b></span></span></div>
</div>Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com96INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-29947563774253563572012-08-09T03:01:00.001-07:002012-08-09T03:08:25.194-07:00Negative Effects Of Gambling (Updated, August 2012)<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">By <span class="Apple-style-span" style="color: blue;">Jackie, Researcher</span><o:p></o:p></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Topic: <span class="Apple-style-span" style="color: blue;">Society (Gambling)</span><o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">The objectives of this research are to find out what are the most
common adverse effects of gambling. There are mainly five effects under this
discussion: change in behavior; mental and physical health issues; disrupt school
or work activities; financial problems; and family and marital disturbance.
Each effect is analyzed clearly with practical real-life examples.</span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 19px; line-height: 21px;"><br /></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: red;"><b><i>Research Essay<o:p></o:p></i></b></span></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span class="Apple-style-span" style="color: red;"><b><i>INTI International College Subang</i></b></span><o:p></o:p></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><span class="Apple-style-span" style="font-family: Calibri, sans-serif; font-size: 19px; line-height: 21px;"> </span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"></span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif;"></span></span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><b><u><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: #351c75;">Negative Effects Of Gambling</span><span class="Apple-style-span" style="color: red;"><o:p></o:p></span></span></u></b></span></div>
<div align="center" class="MsoNormal" style="font-weight: bold; line-height: 115%; text-align: center;">
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><b><u><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: #351c75;"><br /></span></span></u></b></span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><b><u><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><br /></span></u></b></span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="font-weight: 800;"> </span> Adam, a
typical middle-aged American, works as an engineer at a construction site in
New York. He was married and has two lovely kids. His monthly income is barely
sufficient to support his family of four in a moderate way. One day, he heard
about the news that his friends had won thousands of dollars by betting in a
nearby illegal gambling center. He was so attracted and influenced by the news.
After a careful consideration, he had decided to give a try in gambling because
if he wins, he can release the financial burden as well as to improve the
standard of living of his family. So, he started to gamble. Unfortunately, he
became addicted to gambling and his attitudes have changed gradually. He starts
to smoke cigarette, drink alcohol and return home lately. His health begins to
deteriorate. He suffers from migraine and gastric pain as he did not consumes
his meals on time. Due to excess loss of money in gambling, he had borrowed a
sum of money from unlicensed loan sharks to settle his gambling debts. The
loan’s interest rate was so high until he has to sell off his cars and houses.
At work, he was unable to concentrate on his job, often do errors and sometimes
absent to work without a valid reason. As a result, he was fired. At home, he always
argues and quarrels with his wife over a small matter. Sometimes, his wife gets
beaten by him too. Few months later, his wife cannot tolerate with him anymore.
As a result, his wife together with his two kids has left him alone. Adam is
now jobless and homeless. More and more, addiction to gambling can lead to a
change in behaviour, cause serious mental and physical health problems, disrupt
school and work activities, increase financial problems, and create disharmony
in the family.</span></span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><br /></span></span></div>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><br /></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="font-size: 15px; line-height: 17px; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-a-aIi-tZVMg/UCNbcpOLUoI/AAAAAAAAAYM/5MpT606alNw/s1600/casino+pic+snipped.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-a-aIi-tZVMg/UCNbcpOLUoI/AAAAAAAAAYM/5MpT606alNw/s1600/casino+pic+snipped.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red;"><b><span style="font-family: Cambria, serif; font-size: 8pt;">Although </span><span class="apple-style-span"><span style="font-family: Cambria, serif; font-size: 8pt;">genetics play an important role in the
development of problem gambling in both women and men, </span></span></b></span></div>
<div align="center" class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red;"><span class="apple-style-span"><span style="font-family: Cambria, serif; font-size: 8pt;"><b>but the researchers
found no evidence of gender differences in the causes of problem gambling.</b></span></span></span><span style="color: black; font-family: "Cambria","serif"; font-size: 8.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: major-latin; mso-themecolor: text1;"><o:p></o:p></span></div>
<div align="center" class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red;"><span class="apple-style-span"><span style="font-family: Cambria, serif; font-size: 8pt;"><b><br /></b></span></span></span></div>
</td></tr>
</tbody></table>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
</div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Addiction to
gambling can lead to a change in mindset, behaviour and attitude. In <i style="mso-bidi-font-style: normal;">The Star</i> (‘The adverse effects of
gambling’ 2006, p. 23), Malaysia Crime Prevention Foundation (MCPF) states that
one could become a dishonest person who has to constantly worry about debts.
According to MCPF (2006), whenever a gambler becomes obsessed with gambling,
the gambler will do anything including criminal activities like robbing and
stealing as long as he or she can gamble. According to the article, gambling
addiction can cause negative changes on one attitude such as bad-tempered,
withdrawn, neglectful, irrational and irresponsible plus adverse changes in
habit like tendency to return home lately and increase in alcohol consumption.
Meanwhile, lying, making excuses and becoming more secretive are some of the
common ways for gamblers to cover up their gambling act and financial problems.
A research done by MCPF had shown that gambling can also encourage one to start
smoking and taking alcoholic drinks because it can lower down their stress
level and pressure. Besides, gamblers also might tend to isolate themselves
from their friends and family as a way to hide or carry out their act. However,
this will weaken gambler interpersonal interaction and communication with
family members and friends, thus creating more misunderstanding and arguments.
All in all, gambling is proven to have a tendency to alter one’s thinking and
personality.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin-bottom: 10.0pt; margin-left: 72.0pt; margin-right: 72.0pt; margin-top: 0cm; text-align: justify; text-justify: inter-ideograph;">
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">It is noted that as gambling escalates, other activities become
constricted. Social activities, family interactions and leisure pursuits
diminish in frequency, quality and satisfaction as the gambler becomes
increasingly detached from interpersonal interaction, isolated and encapsulated
in her/his own preoccupation with thoughts of the next session of
betting/gaming and where to obtain funds to fuel her/his habits (Lesieur, 1979)<o:p></o:p></span></span></div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-vYVVCoh_phU/UCNdlgZLKTI/AAAAAAAAAYU/50VLQ5W9GOI/s1600/mental+health.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/-vYVVCoh_phU/UCNdlgZLKTI/AAAAAAAAAYU/50VLQ5W9GOI/s1600/mental+health.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif; font-size: 8pt;"><b><span class="Apple-style-span" style="color: red;">Researchers
have found out that highly-addicted gamblers usually isolates themselves and
like to be alone. </span></b></span></div>
</td></tr>
</tbody></table>
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<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif; line-height: 115%;"></span></span></div>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;">
</span>
<br />
<div class="MsoNormal" style="text-align: justify;">
</div>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;">
</span>
<br />
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
</div>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;">
</span>
<div class="MsoNormal" style="text-align: justify;">
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="font-weight: 800;"> </span> Secondly,
gambling can cause mental health issues and physical health problems. According
to a study conducted by Centre for Addiction and Mental Health (CAMH), mental
health issues include stress, anxiety and depression which will actually cause
a gambler to have more difficulty to sleep, think and solve problems. So,
gamblers will tend to smoke more as well as to increase in alcohol consumption
and possible drug usage to solve these problems. The study also shows severe
problem gamblers will have a possible risk of self-harming behaviour such as
suicide attempt. Petry (2006) states that addicted gamblers will have the
possibility to get insomnia, headaches, back or neck pain, high blood pressure,
digestive problems and gastric. She says physical health problems of a gamble
is normally disrupted by inappropriate eating time, insufficient exercises and
unbalanced sleeping hours. <span style="color: black;">Pathological gamblers were
more than twice as likely as people without gambling problems to have angina
and nearly three times more likely to have liver disease. They were also almost
twice as likely to suffer from tachycardia, an excessively rapid heartbeat (US
Federal Survey on Psychiatric Disorders 2006). <o:p></o:p></span></span></span></div>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;">
<br />
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span style="color: black;"><span class="Apple-style-span" style="font-weight: 800;"><br /></span></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="font-size: 11pt; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-lL1vJbabzUQ/UCNetVGx9UI/AAAAAAAAAYc/ZuluUmSexv0/s1600/drink+&+smoke.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-lL1vJbabzUQ/UCNetVGx9UI/AAAAAAAAAYc/ZuluUmSexv0/s1600/drink+&+smoke.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="font-family: Cambria, serif; font-size: 8pt;"><b><span class="Apple-style-span" style="color: red;">One of the reasons why gambler tends to smoke more and
increase in <o:p></o:p></span></b></span></div>
<div align="center" class="MsoCaption" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<span style="font-family: Cambria, serif; font-size: 8pt;"><b><span class="Apple-style-span" style="color: red;">alcohol consumption is to reduce pressure and stress.</span></b><o:p></o:p></span></div>
<div align="center" class="MsoCaption" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-align: center;">
<br /></div>
</td></tr>
</tbody></table>
<div class="MsoNormal" style="font-size: 11pt; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span>Besides, for students or
workers, gambling can also disrupt both school and work activities. The Council
on Compulsive Gambling of Pennsylvania (CCGP 2003) reported that students who
are addicted to gambling will tend to increase unexplained absences from
school, use school lunch money for gambling, drop in academic performance,
unable to pay attention in class, and interrupt their educational goals.
Meanwhile, for gambling-addicted workers, Colorado Lottery (CL 2007) warns that
they can disrupt working activities through lost in time, lost in productivity,
and in desperate situations, the gambler may resort to theft. Working hours are
wasted as gamblers use them for gambling purposes like calling bookies for
betting and searching gambling results using company’s computer while
productivity is lessen as the gambler becomes unreliable, misses project
deadlines and important meeting and produces poor working quality. In addition,
the inability and inefficiency in working caused by gambling addiction can lead
to dismissal. Meanwhile, severe gambling-addicted workers might resort to
theft.<o:p></o:p></span></div>
<div class="MsoNormal" style="font-size: 11pt; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></div>
<div class="MsoNormal" style="font-size: 11pt; margin-bottom: 10pt; margin-left: 72pt; margin-right: 72pt; margin-top: 0cm; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Employees with severe problems may commit theft, fraud or
embezzlement. Money is the gambler’s key to action. Once all legitimate avenues
to obtain cash are exhausted, the gambler, in desperation, may resort to
illegal acts to acquire case. The workplace becomes a primary avenue for the
gambler to illegally finance their gambling. Gamblers do not see this activity
as stealing. They see it as “borrowing money” and plan to replace it when they
win (Oregon Department of Human Services 2007).</span></div>
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="mso-tab-count: 1;"> </span><span style="color: black;">Another common adverse effect of addiction on gambling is
financial problems. Oak (2009) claims that if a gambling-addicted worker is
fired from his or her job, then he or she will lose his or her main source of
income due to job loss. Consequently, this will lead to an inability to pay
bills, expenses and loans. On the other hand, banks might blacklist poor payment
gamblers account but this does not stopped them to borrow money from loan
sharks or illegal moneylenders to cover losses and continue betting. For
instance, many loan shark cases have been reported in Malaysia during recent
FIFA World Cup matches where some gamblers have to sell off their assets like
houses and cars to settle off their debts. Severe loss of money in gambling can
results in bankruptcy.<o:p></o:p></span></span></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="color: black;"><br /></span></span></div>
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="color: black;"><br /></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="font-size: 11pt; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-UHh2eAppss8/UCNfbE3Il5I/AAAAAAAAAYk/9u0eBxeAUQI/s1600/no+money.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-UHh2eAppss8/UCNfbE3Il5I/AAAAAAAAAYk/9u0eBxeAUQI/s1600/no+money.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif; font-size: 8pt;"><b><span class="Apple-style-span" style="color: red;">Financial
problems are the most common effect of gambling.</span></b> <o:p></o:p></span></div>
<div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif; font-size: 8pt;"><br /></span></div>
</td></tr>
</tbody></table>
<div class="MsoNormal" style="font-size: 11pt; text-align: justify; text-indent: 36pt;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Family and marital disturbances
are a common end result of a seriously addicted gambler. Lorenz and
Shuttleworth (1993) highlighted that fluctuation in mood states, lying and
failure to meet obligation lead to marital friction and family disharmony. They
found out that unchanged bad attitudes, repeated deceit and broken promises
will undermine the sense of trust of a spouse towards the gambler. Meanwhile,
they also point out that lack of funds to support children and the home,
potential loss of assets and savings, frequent absences at home and neglecting
family members can lead to frequent arguments and separation.</span></div>
<div class="MsoNormal" style="font-size: 11pt; text-align: justify; text-indent: 36pt;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="font-size: 11pt; margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-x3u6-SIW5yw/UCNgwN-Jv-I/AAAAAAAAAYs/5URUhxYcZkc/s1600/family+quarrel.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-x3u6-SIW5yw/UCNgwN-Jv-I/AAAAAAAAAYs/5URUhxYcZkc/s1600/family+quarrel.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div align="center" class="MsoCaption" style="text-align: center;">
<span style="font-family: Cambria, serif; font-size: 8pt;"><span class="Apple-style-span" style="color: red;"><b>Family quarrel usually will happen where the
gamblers used to be blamed for causing family and </b></span></span></div>
<div align="center" class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red;"><b><span style="font-family: Cambria, serif; font-size: 8pt;"></span><span class="Apple-style-span" style="font-family: Cambria, serif; font-size: 11px;">marital disturbances, </span><span class="Apple-style-span" style="font-family: Cambria, serif; font-size: 11px;">and the
most innocent party in this kind of situation is their kids.</span></b></span></div>
<div align="center" class="MsoCaption" style="text-align: center;">
<span class="Apple-style-span" style="color: red;"><b><span class="Apple-style-span" style="font-family: Cambria, serif; font-size: 11px;"><br /></span></b></span></div>
</td></tr>
</tbody></table>
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="color: black;"></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: 36.0pt; text-justify: inter-ideograph;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">In conclusion, these are the five
major consequences that can happen frequently in highly-addicted gamblers. As
we can see it, the degree of severity depends on how addicted a gambler is
which could be found through a change in character as well as other adverse
effects caused by them. Many people agree that gambling will not only affect
the gambler alone but also creates a lot of trouble to his or her friends and
family as well as to the society and community. However, the consequences
caused by gambling can be avoided via personal awareness or by getting involved
in other more beneficial and meaningful activities. Among the suggestions is to
focus on spiritual development, take up sports or a hobby, or do some charity
work. Therefore, it is important for us to limit or control, but the best is to
avoid gambling activities.<o:p></o:p></span></div>
<div>
<span class="Apple-style-span" style="font-family: Calibri, sans-serif;"><br /></span></div>
<br />
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
<span class="Apple-style-span" style="background-color: white; color: #351c75;"><span class="Apple-style-span" style="line-height: 17px;"><b>References</b></span></span></div>
<div class="MsoNormal" style="font-size: 11pt; text-align: justify;">
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">
</span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: left;">
<span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Centre for
Addiction and Mental Health (CAMH) 2010, <i style="mso-bidi-font-style: normal;">The
effects of gambling on family</i>, viewed 24 July 2012, </span><a href="http://www.problemgambling.ca/EN/GettingHelp/Pages/TheEffectsOfGambling.aspx"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;">http://www.problemgambling.ca/EN/GettingHelp/Pages/TheEffectsOfGambling.aspx</span></span></a><span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: left;">
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Colorado
Lottery (CL) 2007, <i style="color: black;">Problem gambling and
the workplace</i>, viewed 24 July 2012, <span class="Apple-style-span" style="color: blue;">http://www.coloradolottery.com/documents/ProblemGambling/Workplace%20Gambling.pdf</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: left;">
<span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Council on
Compulsive Gambling of Pennsylvania (CCGP 2003), <i style="mso-bidi-font-style: normal;">Talking to students about gambling</i>, viewed 24 July 2012, </span><a href="http://www.pgcb.state.pa.us/files/compulsive/ccgp_docs/CCGP_Talking_to_Students_About_Gambling.pdf"><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;">http://www.pgcb.state.pa.us/files/compulsive/ccgp_docs/CCGP_Talking_to_Students_About_Gambling.pdf</span></span></a><span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="color: black; margin-top: 12pt; text-align: left;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Lesieur, H
1979, <i style="mso-bidi-font-style: normal;">Psychiatry: The compulsive
gambler’s spiral of option and involvement</i>, pp.79-87.<o:p></o:p></span></div>
<div class="MsoNormal" style="color: black; margin-top: 12pt; text-align: left;">
<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Lorenz, V
& Shuttleworth, D 1983, The impact of pathological gambling on the spouse
of the gambler, <i style="mso-bidi-font-style: normal;">Journal of Community
Psychology</i>, vol.11, pp.67-76.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: left;">
<span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Malaysia
Crime Prevention Foundation (MCPF) 2006, <i style="mso-bidi-font-style: normal;">The
adverse effects of gambling</i>, viewed 7 July 2012, </span><a href="http://thestar.com.my/fightcrime/resources/story.asp?file=/2006/3/11/resources/20060316165242&sec=resources"><span style="background-color: white; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><span class="Apple-style-span" style="color: blue;">http://thestar.com.my/fightcrime/resources/story.asp?file=/2006/3/11/resources/20060316165242&sec=resources</span></span></a><span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: left;">
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Oak, M 2009, <i style="color: black;">Negative effects of gambling</i>, viewed 25
July 2012, <span class="Apple-style-span" style="color: blue;">http://www.buzzle.com/articles/negative-effects-of-gambling.html</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt; text-align: left;">
</div>
<div class="MsoNormal" style="margin-top: 12pt;">
</div>
<div class="MsoNormal" style="margin-top: 12pt;">
<span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Oregon
Department of Human Services (ODHS) 2007, <i style="color: black;">Problem
gambling on the job. How you can help your work force</i>, p.2, viewed 24 July
2012, <span class="Apple-style-span" style="color: blue;">http://www.oregon.gov/DHS/addiction/gambling/workplace-brochure.pdf?ga=t</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-top: 12pt;">
<span style="color: black; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;">Petry, N
2006, <i style="mso-bidi-font-style: normal;"><span style="color: black; mso-bidi-font-weight: bold;">Problem gamblers may have poorer health</span></i><span style="color: black; mso-bidi-font-weight: bold;">, viewed 25 July 2012, </span></span><span style="color: blue; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 115%;"><a href="http://www.iol.co.za/index.php?set_id=1&click_id=31&art_id=qw116507160221B243">http://www.iol.co.za/index.php?set_id=1&click_id=31&art_id=qw116507160221B243</a></span></div>
</span>Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com130INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.072273 101.5886445 3.076237 101.59357949999999tag:blogger.com,1999:blog-7011211411109244586.post-46339091249792840232012-07-31T05:40:00.000-07:002012-08-08T05:43:56.600-07:00Foreign Exchange: Arbitrage Opportunity (Critical Review)<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
By <span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Topic:
<span class="Apple-style-span" style="color: blue;">Education</span><br />
Area of discussion: <span class="Apple-style-span" style="color: blue;">Finance</span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
Chapter:
<span class="Apple-style-span" style="color: blue;">Foreign exchange – Arbitrage opportunity</span></div>
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<br /></div>
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<div style="text-align: justify;">
<i>The
objectives of this research are to find out how people actually earn money via
foreign exchange, how they do that (the steps like what currencies they need to
buy and sell), how to make a good use of arbitrage opportunity to earn
unlimited profit, how to calculate arbitrage profit (sample questions,
examples, and calculations are provided to ease understanding) and the
limitation and assumption of arbitrage opportunity in foreign exchange (what
conditions must be fulfilled in order for this ‘arbitrage opportunity’ to
hold).</i></div>
</div>
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<br /></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b>
<b><span class="Apple-style-span" style="color: #351c75;">Introduction</span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Well, in
finance, I always heard about “high risk, high return” concept, but this arbitrage
concept is totally different. I was really amazed by its concept: No risk,
unlimited return (profit is infinity). Ideally,
‘arbitrage’ involving a simultaneous transaction to be entered at the same
time, that is, the purchase and sale of currencies at the same time in order to
earn ‘arbitrage profit’ due to differences in currencies price quoted in
different places (markets). It is a trade where profits are made by exploiting
price differences of identical or similar financial instruments, on different
markets or in different forms. Arbitrage exists as a result of market
inefficiencies. The reason why no risk is involved is because transactions are
entered simultaneously. There is no delay in time, as time resembles risk and
uncertainly in finance. Unlimited profits
are possible for an astute (alert and smart) trader by re-entering or repeating
those transactions again and again, until the market become efficient or
equilibrium.</div>
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<br /></div>
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<span class="Apple-style-span" style="color: #b45f06;"><b><br /></b></span>
<span class="Apple-style-span" style="color: #b45f06;"><b>Triangular
arbitrage</b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Triangular
arbitrage (also referred to as ‘cross currency arbitrage’ or ‘three-point
arbitrage’) is the act of exploiting an arbitrage opportunity resulting from a
pricing discrepancy among three different currencies in the foreign exchange
market. A triangular arbitrage strategy involves three trades, exchanging the initial
currency for a second, the second currency for a third, and the third currency
for the initial. During the second trade, the arbitrageur locks in a zero-risk
profit from the discrepancy that exists when the market cross exchange rate is
not aligned with the implicit cross exchange rate.<br />
<br />
<br />
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</div>
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Let’s look
at this example:</div>
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<br /></div>
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Suppose we
observe these banks posting these exchange rates:</div>
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</div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "Wingdings 2"; mso-bidi-font-family: "Wingdings 2"; mso-fareast-font-family: "Wingdings 2";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span>Westpac
quote - A$/€<span style="mso-spacerun: yes;"> </span>A$1.2223/€</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "Wingdings 2"; mso-bidi-font-family: "Wingdings 2"; mso-fareast-font-family: "Wingdings 2";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span>Barclays
quote - A$/£<span style="mso-spacerun: yes;"> </span>A$1.8410/£</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "Wingdings 2"; mso-bidi-font-family: "Wingdings 2"; mso-fareast-font-family: "Wingdings 2";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span>Deutsche
quote - €/£<span style="mso-spacerun: yes;"> </span>€1.5100/£</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<br /></div>
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<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-A36_1wcMNOU/UCIBSO1jBOI/AAAAAAAAAW8/7OzZwZ7J09Y/s1600/triangular+arbitrage+own+do+one.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-A36_1wcMNOU/UCIBSO1jBOI/AAAAAAAAAW8/7OzZwZ7J09Y/s1600/triangular+arbitrage+own+do+one.JPG" /></a></div>
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<br /></div>
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<br /></div>
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
[One round
trip]</div>
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<br /></div>
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</div>
<div style="text-align: justify;">
Westpac Bank
uses A$1,000,000 to exchange to pound at Barclays Bank at A$1.8410/£. This will
give Westpac Bank £543,183. This amount is then, exchanged to euro at €1.5100/£
at Deutsche Bank. This will give Westpac Bank €820,206. Finally, this amount is
converted back to Australian dollar at A$1.2223/€ in Westpac Bank itself. This
will give Westpac Back A$1,002,538.</div>
<br />
Arbitrage profit for one round trip: A$2,538.<br />
<br />
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><span class="Apple-style-span" style="color: #351c75;">Condition
for arbitrage opportunity:</span></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
It is assumed
that Interest Rate Parity (IRP) did not hold. If IRP holds, then there will be
no more arbitrage opportunity. Besides, transaction costs are normally ignored
during calculation. In reality, transaction costs will lower down the arbitrage
profit. In addition, it is assumed that no capital controls are involved.
Governments sometimes restrict import and export of money through taxes and
outright bans.</div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<o:p><br /></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: left;">
<span class="Apple-style-span" style="color: #351c75;"><b>Interest
Rate Parity (IRP)</b></span></div>
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<br /></div>
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<a href="http://2.bp.blogspot.com/-aEOeZogYWQo/UCJYOfyJprI/AAAAAAAAAXY/rWP3_6JSC_8/s1600/IRP.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-aEOeZogYWQo/UCJYOfyJprI/AAAAAAAAAXY/rWP3_6JSC_8/s1600/IRP.JPG" /></a></div>
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<br /></div>
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</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
The ratio
between the risk free interest rates in two different countries is equal to the
ratio between the forward and spot exchange rates. <span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-font-weight: bold; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">Ideally,
Interest Rate Parity (IRP)</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> </span></span><span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">is a non-arbitrage</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> </span></span><span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">condition representing an</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> equilibrium</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> </span></span><span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">state under which investors will be
indifferent to</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> interest rates</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> </span></span><span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">available on</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> bank deposits</span></span><span class="apple-converted-space"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"> </span></span><span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">in two countries.<o:p></o:p></span></span></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"><br /></span></span></div>
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<span class="apple-style-span"></span></div>
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<span class="apple-style-span"><b><span class="Apple-style-span" style="color: #cc0000;">An illustration when Interest
Rate Parity (IRP) holds:</span></b><o:p></o:p></span></div>
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<a href="http://4.bp.blogspot.com/-rCsf5N4RItg/UCJaJpc3VQI/AAAAAAAAAXg/xgQfG0jIgSM/s1600/IRP+holds+2.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-rCsf5N4RItg/UCJaJpc3VQI/AAAAAAAAAXg/xgQfG0jIgSM/s1600/IRP+holds+2.JPG" /></a></div>
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<span class="apple-style-span"><span class="Apple-style-span" style="color: #cc0000;">An illustration when Interest
Rate Parity (IRP) failed to hold:</span></span></div>
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<span class="apple-style-span"><span class="Apple-style-span" style="color: #cc0000;"><br /></span></span></div>
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<span class="apple-style-span"><span class="Apple-style-span" style="color: #cc0000;"></span></span><span class="Apple-style-span" style="font-weight: normal;"><a href="http://1.bp.blogspot.com/-eeH1OF7XHCM/UCJaSMBXW7I/AAAAAAAAAXo/hh7z3WWpYN8/s1600/IRP+did+not+hold.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-eeH1OF7XHCM/UCJaSMBXW7I/AAAAAAAAAXo/hh7z3WWpYN8/s1600/IRP+did+not+hold.JPG" /></a></span></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references: </span></b></div>
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This link
provides a simple definition and few good examples of arbitrage as well as
certain underlying assumptions for arbitrage theory to hold. Good link to view
at for new learners or beginners.</div>
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<a href="http://www.investopedia.com/ask/answers/04/041504.asp#axzz22rpEWn44">http://www.investopedia.com/ask/answers/04/041504.asp#axzz22rpEWn44</a></div>
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<br /></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">An explanation of what is
arbitrage and how to use it in the forex market to generate quick, safe,
profits.<o:p></o:p></span></span></div>
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<a href="http://www.youtube.com/watch?v=4dwFQNPnC8I">http://www.youtube.com/watch?v=4dwFQNPnC8I</a></div>
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<br /></div>
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<span class="apple-style-span"><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;">Step-by-step video tutorial and
guides related to the ‘triangular arbitrage concept’ in currency markets.<o:p></o:p></span></span></div>
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<a href="http://www.youtube.com/watch?v=lKu2LAgEcpU&feature=related">http://www.youtube.com/watch?v=lKu2LAgEcpU&feature=related</a></div>
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Triangular
arbitrage’s definition and calculation is available in this link. Extremely
brief article, but I believe beginners can have a basic understanding about
this concept by viewing this (at a glance). </div>
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<a href="http://www.investopedia.com/terms/t/triangulararbitrage.asp#axzz22spZeBHK">http://www.investopedia.com/terms/t/triangulararbitrage.asp#axzz22spZeBHK</a><span style="color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-themecolor: text1;"><o:p></o:p></span></div>
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How to
calculate currency cross rate and triangular arbitrage calculation to find
arbitrage profit is shown in this link.</div>
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<a href="http://thismatter.com/money/forex/currency-cross-rates.htm">http://thismatter.com/money/forex/currency-cross-rates.htm</a></div>
<br /></div>Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com32INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.070291 101.5861765 3.078219 101.5960475tag:blogger.com,1999:blog-7011211411109244586.post-32754798377491692142012-07-22T12:31:00.000-07:002012-07-31T02:04:38.916-07:00Absorption Vs Variable Costing (Critical Review)<div class="separator" style="clear: both; text-align: center;">
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By <span class="Apple-style-span" style="color: blue;">Jackie, Researcher</span></div>
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Topic: <span class="Apple-style-span" style="color: blue;">Education</span></div>
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Area of discussion: <span class="Apple-style-span" style="color: blue;">Cost & Management Accounting</span></div>
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Chapter: <span class="Apple-style-span" style="color: blue;">Income effects of alternative cost accumulation systems</span></div>
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<i>The objectives of this research are to explain the differences between an
absorption costing and a variable costing system, prepare profit statements
based on variable costing and absorption costing system, explain the difference
in profits between variable and absorption costing profit calculations, explain
the arguments for and against variable and absorption costing, and a clear
example was taken from college exam to be used in this discussion followed by
step-by-step guide and answer.</i></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Introduction</span></b></div>
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Basically, absorption costing
treats all manufacturing costs as product costs, regardless whether they are
variable or fixed. On the other hand, variable costing only treats those
manufacturing costs that vary with output as product costs. Fixed manufacturing
overhead is not treated as production cost under this method, but rather
treated as period cost. Thus, the cost of a unit of product in inventory or
cost of goods sold under the variable costing method does not contain any fixed
manufacturing overhead cost and therefore, the product cost per unit computed
using variable costing is always lower than the product cost per unit computed
using absorption costing. Their similarity is both of them are in complete
agreement regarding the treatment of non-manufacturing costs as period costs. Please
note that, variable costing is also sometimes referred to as ‘direct costing’
or ‘marginal costing’.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/--BKBxQzyvWI/UAt6-l6bHHI/AAAAAAAAAU0/dh4b1wfMbD0/s1600/absorption+vs+marginal+costing.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="173" src="http://3.bp.blogspot.com/--BKBxQzyvWI/UAt6-l6bHHI/AAAAAAAAAU0/dh4b1wfMbD0/s400/absorption+vs+marginal+costing.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><i><span class="Apple-style-span" style="color: red;">The differences between absorption costing and variable costing</span></i></b></td></tr>
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Let’s take a look at this sample question:</div>
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<a href="http://1.bp.blogspot.com/-n8apIvdbYe0/UAuhzzoUozI/AAAAAAAAAVY/ZNkUgTGq-9c/s1600/effect+on+profits+(absoprtion+vs+marginal+costing)+table.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-n8apIvdbYe0/UAuhzzoUozI/AAAAAAAAAVY/ZNkUgTGq-9c/s1600/effect+on+profits+(absoprtion+vs+marginal+costing)+table.JPG" /></a></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Some arguments in support of variable costing</span></b></div>
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<b><i><span class="Apple-style-span" style="color: #b45f06;">Variable costing provides more useful information for decision making</span></i></b></div>
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Data required by CVP (cost-volume-profit) analysis can be taken directly
from contribution format in income statement which is only available in
variable costing. Those data are extremely useful in calculating expected sales
level to break-even, or expected sales level to earn a specific profit, margin
of safety and contribution per unit. Besides, those relevant costs data are
also required for a variety of short-term decisions making. For examples, make
or buy decision as well as product mix decision.</div>
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<b><i><span class="Apple-style-span" style="color: #b45f06;">Variable costing avoids fixed overheads being capitalized in unsaleable
stocks</span></i></b></div>
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When a company produced a large amount of stocks but did not sold all of
them, the fixed production overheads incurred during that particular period
will be included in stock valuation. The stocks will therefore be over-valued.
Profit calculation for that particular period will be misleading, where by
current period’s profits will be over-stated.</div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Some arguments in support of absorption costing</span></b></div>
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<br /></div>
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<b><i><span class="Apple-style-span" style="color: #b45f06;">Fixed overheads are essential for production</span></i></b></div>
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Production of goods is not possible if fixed manufacturing overhead costs
are not incurred. Thus, fixed manufacturing overhead costs should be allocated
to units produced and included in inventory valuation.</div>
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<b><i><span class="Apple-style-span" style="color: #b45f06;">Consistency with external reporting</span></i></b></div>
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External reporting requires all manufacturing costs (including fixed
production overhead) to be included as part of product cost. That is why
external reporting did not recognize variable costing method as they failed to
include fixed manufacturing overhead costs inside their cost of production.</div>
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<span class="Apple-style-span" style="color: #351c75;"><b><br /></b></span><br />
<b><span class="Apple-style-span" style="color: #351c75;">Addition readings, related links and references:</span></b></div>
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Variable Costing Vs Absorption Costing: Definition, explanation &
unit cost computation.</div>
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<a href="http://www.accounting4management.com/variable_and_absorption_costing.htm">http://www.accounting4management.com/variable_and_absorption_costing.htm</a></div>
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Income
Comparison of Variable and Absorption Costing</div>
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<a href="http://www.accounting4management.com/income_comparison_of_variable_and_absorption_costing.htm">http://www.accounting4management.com/income_comparison_of_variable_and_absorption_costing.htm</a></div>
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Advantages
and Disadvantages of Absorption Costing System</div>
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<a href="http://www.accounting4management.com/advantages_and_disadvantages_of_absorption_costing.htm">http://www.accounting4management.com/advantages_and_disadvantages_of_absorption_costing.htm</a></div>
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Management
Accounting: Variable Vs Absorption Costing</div>
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<a href="http://www.youtube.com/watch?v=MCnLP3mMmOc">http://www.youtube.com/watch?v=MCnLP3mMmOc</a></div>
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Marginal
Costing Vs Absorption Costing Homework Help, Tutoring</div>
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<a href="http://www.tutorsonnet.com/homework_help/cost_accounting/marginal_costing/marginal_costing_vs_absorption_costing_assignment_help_online_tutoring.htm">http://www.tutorsonnet.com/homework_help/cost_accounting/marginal_costing/marginal_costing_vs_absorption_costing_assignment_help_online_tutoring.htm</a></div>Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com0INTI International University & Colleges Subang, Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.074255 101.5911123.058399 101.571371 3.090111 101.61085299999999tag:blogger.com,1999:blog-7011211411109244586.post-17997224715545583272012-07-09T06:21:00.000-07:002012-07-10T05:20:46.981-07:00Stock Dividend Vs Stock Split (Critical Review)<div class="separator" style="clear: both; text-align: center;">
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<span lang="EN-MY">By <span class="Apple-style-span" style="color: blue;">Jackie,
Researcher</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span lang="EN-MY">Topic: <span class="Apple-style-span" style="color: blue;">Education</span><o:p></o:p></span></div>
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<span lang="EN-MY">Area of
discussion: <span class="Apple-style-span" style="color: blue;">Finance</span><o:p></o:p></span></div>
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<span lang="EN-MY">Chapter: <span class="Apple-style-span" style="color: blue;">Dividend
policy</span><o:p></o:p></span></div>
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<span lang="EN-MY">Subchapter:
<span class="Apple-style-span" style="color: blue;">Alternatives to cash dividends – Stock dividend & Stock split</span></span></div>
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<span lang="EN-MY"><span class="Apple-style-span" style="color: blue;"><br /></span></span></div>
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<span lang="EN-MY"><span class="Apple-style-span" style="color: blue;"></span></span><i>The objectives of this research are to find out what are the major
differences and similarities between stock dividend and stock split, what are
the effects on financial statements when a company issues a stock dividend or a
stock split, how to enter those transaction into the appropriate accounts and the
required adjustment that ought to be made to the financial statements. By the
way, this topic is very popular as questions are often set out from this
chapter in finance examination. Therefore, it is good to actually understand
and gain some knowledge about the basic concept of stock dividend and stock
split although we might not be playing shares in real-life.</i></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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<b><span class="Apple-style-span" style="color: #351c75;">Introduction</span></b><br />
<span class="Apple-style-span" style="color: #351c75;"><b><i></i></b></span></div>
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<b><span class="Apple-style-span" style="color: #351c75;"></span></b>In term of definition, stock dividend (also known as ‘scrip dividend’)
is a dividend payment made in the form of additional shares, rather than a cash
payout. Ideally, company may decide to distribute stock to shareholders instead
of cash dividend if the company’s cash availability is in unfavourable
condition. These distributions are generally acknowledged in the form of
fractions paid per existing share. An example would be a company issuing a 5%
stock dividend for each single share held. On the other hand, stock split (also
known as ‘scrip issue’, ’bonus issue’ and ‘free issue’) is a corporate action
in which a company existing shares are divided into multiple shares. Although
the number of shares outstanding increases by a specific multiple, the total
dollar value of the shares remains the same compared to pre-split amounts,
because no real value has been added as a result of the split.</div>
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Let’s take a look at this example: </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-VxyIdMzNohk/T_qwJMgjjEI/AAAAAAAAAT8/Q58Gr0otOEY/s1600/stock+dividend+v+stock+split+zoom+90%25+(2).jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-VxyIdMzNohk/T_qwJMgjjEI/AAAAAAAAAT8/Q58Gr0otOEY/s1600/stock+dividend+v+stock+split+zoom+90%25+(2).jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b>Question taken from IICS past year examination, also special thanks to Mr.Lim for his kind teachings. </b></td></tr>
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<b><u>Solution for (i):</u></b></div>
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<b><br /></b></div>
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When 10% stock is declared, then the number of shares
outstanding will also be increased by 10%, that is from 10,000 shares to
10,000(1.1)=11,000 shares.</div>
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<span style="color: black;">This indirectly indicates that the new share issued is
equal to 1,000 shares.<o:p></o:p></span></div>
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<span style="color: black;">The overall effects on the owner’s equity accounts
are:</span><br />
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<i><b><span class="Apple-style-span" style="color: #cc0000;">C</span><span class="Apple-style-span" style="color: red;">ommon stock</span></b></i> (£1 par value) will increase by £1,000
(£1 par value per share x 1,000 newly issued shares due to 10% stock dividend).<br />
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<i><b><span class="Apple-style-span" style="color: red;">Capital surplus</span></b></i><span style="color: black;"> (also known as ‘share premium’) will
be also increase by £24,000. Please note that share premium is equal to market
price minus the par value. Thus, share premium per share is £25 per share - £1
per share = £24 per share. After that, this share premium per share needs to be
multiplied by 1,000 shares in order to get £24,000 which is the total share
premium due to 10% stock dividend. <o:p></o:p></span><br />
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<b><i><span class="Apple-style-span" style="color: red;">Retained earnings</span></i></b><span style="color: black;"> will be decreased by £25,000. This
is derived from the market price which is £25 per share, then multiply with
1,000 shares in order to get £25,000.<b><o:p></o:p></b></span><br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-X5yuwvpLw_A/T_n_4IZFuGI/AAAAAAAAATU/Wuw3IChATj8/s1600/ss+2.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-X5yuwvpLw_A/T_n_4IZFuGI/AAAAAAAAATU/Wuw3IChATj8/s1600/ss+2.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b>Alteration in owner's equity accounts after 10 percent stock dividend is declared</b></td></tr>
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<u>Solution for (ii):</u><o:p></o:p><br />
<u><br /></u></div>
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<b><i><span class="Apple-style-span" style="color: #bf9000;">(This is actually more or less, quite similar with question (i))</span></i></b><o:p></o:p></div>
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<span style="color: black;">When 25% stock is declared, then the number of shares
outstanding will also be increased by 25%, that is from 10,000 shares to
10,000(1.25)=12,500 shares.<o:p></o:p></span></div>
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<span style="color: black;">This indirectly indicates that the new share issued is
equal to 2,500 shares.<o:p></o:p></span></div>
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<span style="color: black;">The overall effects on the owner’s equity accounts
are:<o:p></o:p></span><br />
<span style="color: black;"><br /></span></div>
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<b><span class="Apple-style-span" style="color: red;">Common stock</span></b> (£1 par value) will increase by £2,500
(£1 par value per share x 2,500 newly issued shares due to 25% stock dividends).<o:p></o:p><br />
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<b><span class="Apple-style-span" style="color: red;">Capital surplus</span></b> (also known as ‘share premium’) will
be also increase by £60,000. Please note that share premium is equal to market
price minus the par value. Thus, share premium per share is £25 per share - £1
per share = £24 per share. After that, this share premium per share needs to be
multiplied by 2,500 shares in order to get £60,000 which is the total share
premium due to 25% stock dividend. <o:p></o:p><br />
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<span class="Apple-style-span" style="color: red;"><b>Retained earnings</b></span><span style="color: black;"> will be decreased by £62,500. This
is derived from the market price which is £25 per share, and then multiplies
with 2,500 shares in order to get £62,500.<b><o:p></o:p></b></span><br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-SsbS01CPKVE/T_oASnqdi2I/AAAAAAAAATc/2f82MT3XwGU/s1600/ss+3.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-SsbS01CPKVE/T_oASnqdi2I/AAAAAAAAATc/2f82MT3XwGU/s1600/ss+3.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b>Alteration in owner's equity accounts after 25 percent stock dividend is declared</b></td></tr>
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<u>Solution for (iii):</u><o:p></o:p><br />
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In this case, ‘<i><span class="Apple-style-span" style="color: #bf9000;">three-for-one stock
split</span></i>’ means each existing share is divided into three. Therefore, the shares outstanding after the
stock split will be 30,000 shares (10,000 shares x 3). When this happen the par
value per share will also divided by the split ratio of three, i.e. £1 ÷ 3 =
£0.3333 per share. Hence, these are the only effects of the split.<o:p></o:p></div>
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Please note that the equity accounts
are unchanged except that the par value of the stock is changed by the ratio of
new shares to old shares.<b><o:p></o:p></b><br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/--U_SHF13lNA/T_oAsSUw6lI/AAAAAAAAATk/v4Eiq12VZh0/s1600/ss+4.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://2.bp.blogspot.com/--U_SHF13lNA/T_oAsSUw6lI/AAAAAAAAATk/v4Eiq12VZh0/s1600/ss+4.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span class="Apple-style-span" style="font-size: x-small;">Alteration in owner's equity accounts after a 'three-for-one stock split' is declared</span></b></td></tr>
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<u>Solution for (iv):</u></div>
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For this question, it is a bit special because it is deal with
‘<i style="background-color: white;"><span class="Apple-style-span" style="color: #bf9000;">reverse stock split</span></i>’, a condition where the shares are combined instead of
splitting according to its ratio. For ‘<i><span class="Apple-style-span" style="color: #bf9000;">one-to-five reverse stock split</span></i>’, it
simply means that for every five existing shares, they are combined into one
share. Thus, 10,000 existing shares will become 2,000 shares after the reverse
stock split (10,000 shares ÷ 5). The par value will change to £5 per share (£1
x 5).<b style="text-decoration: underline;"><o:p></o:p></b></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-_w_9ANR_YlY/T_oBBAp6bYI/AAAAAAAAATw/1AstmNkWDc4/s1600/ss+5.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://3.bp.blogspot.com/-_w_9ANR_YlY/T_oBBAp6bYI/AAAAAAAAATw/1AstmNkWDc4/s1600/ss+5.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b>Alteration in owner's equity accounts after a 'one-for-five reverse stock split' is declared</b></td></tr>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b><br />
<b><span class="Apple-style-span" style="color: #351c75;">Extra sharing:</span></b><br />
Additional
question and answer of which I took from my college past year question, it is solely focus on essay part (the differences). Thus, very theoretical and need deep analytical skills.<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-v0a1z8MbMkI/T_rPh1Nks0I/AAAAAAAAAUg/mUspkM85Pgw/s1600/stock+dividend+v+stock+split+-+differences+2.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-v0a1z8MbMkI/T_rPh1Nks0I/AAAAAAAAAUg/mUspkM85Pgw/s1600/stock+dividend+v+stock+split+-+differences+2.JPG" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b>This Q&A explains the differences between stock dividend and stock split, their effects on equity accounts<br /> and their respective accounting treatment with examples to aid explanation.</b></td></tr>
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<b><span class="Apple-style-span" style="color: #351c75;">Additional
readings, related links and references:</span></b><o:p></o:p></div>
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<b><span class="Apple-style-span" style="color: #351c75;"><br /></span></b></div>
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Part 5:
Stock Splits and Stock Dividends<o:p></o:p></div>
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<u><a href="http://www.accountingcoach.com/online-accounting-course/17Xpg05.html"><span class="Apple-style-span" style="color: blue;">http://www.accountingcoach.com/online-accounting-course/17Xpg05.html</span></a></u></div>
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Chapter
14: Stock Splits and Stock Dividends<o:p></o:p></div>
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<u><a href="http://www.youtube.com/watch?v=gdJfysUxlWc"><span class="Apple-style-span" style="color: blue;">http://www.youtube.com/watch?v=gdJfysUxlWc</span></a></u></div>
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Stock
Dividends and How They Are Different From Stock Splits<o:p></o:p></div>
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<u><a href="http://beginnersinvest.about.com/od/dividendsdrips1/ss/dividends-and-dividend-investing-101_4.htm"><span class="Apple-style-span" style="color: blue;">http://beginnersinvest.about.com/od/dividendsdrips1/ss/dividends-and-dividend-investing-101_4.htm</span></a></u></div>
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Chapter
18: Shareholders’ Equity (Stock Dividends and Splits)<o:p></o:p></div>
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<u><a href="http://connect.mcgraw-hill.com/sites/0077328787/student_view0/ebook/chapter18/chbody1/stock_dividends_and_splits.htm"><span class="Apple-style-span" style="color: blue;">http://connect.mcgraw-hill.com/sites/0077328787/student_view0/ebook/chapter18/chbody1/stock_dividends_and_splits.htm</span></a></u></div>
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The Effect
Of Stock Splits & Stock Dividends On The Market Share Price<o:p></o:p></div>
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<u><a href="http://www.boscia.com/a260pages/Group07/dividends.htm"><span class="Apple-style-span" style="color: blue;">http://www.boscia.com/a260pages/Group07/dividends.htm</span></a></u></div>
<br /></div>Anonymoushttp://www.blogger.com/profile/16818225371220419787noreply@blogger.com6Jalan SS 15/8, Ss 15, 47500 Subang Jaya, Selangor, Malaysia3.0746307920191054 101.590812206268313.0726487920191055 101.58834470626832 3.0766127920191053 101.59327970626831