Accounting

Q1
General Electric (GE) is the biggest company by assets and capitalisation worldwide.  It has interests in the finance, construction and media and is at the forefront of innovation. .  It continually shapes the world with ground breaking innovations.  GE is a giant with operations in over 100 countries and a work force in excess of 320,000 people (GE 2010).

In an effort to maintain its market leadership while at the same time ensuring growth in all its different aspects, GE employs an improved form of matrix structure that allows for the matching of both functions and products for success.  This has been designed so as to a support GEs focused strategy of imagination at work.  At the same time its organizational structure is aimed at maintaining coordination among products, functions and geographic area.  Some have called this a multinational design.

In line with GEs complex organizational structure is its organizational strategy.  It desires and strives at all times to encourage and reward imagination at work.  This is best captured in GEs devotion to availing quality and affordable health to all a possibility  Healthymaginanion, and its commitment to economic growth but not at the expense of the environment  Ecomagination (GE 2010).

This is captured in its famous mantra that What we can imagine, we can make happen (GE 2010).  With its huge work force, in an effort to nurture this strategy, it constantly engages in training and career development of its staff and is ever looking for ways to improve its organizational processes.  These have allowed GE to continue maintaining its aggressive commitment to leadership development across the world while providing utmost quality.  Its mission, vision and values are all designed and geared towards attaining this strategy.
Just like any other company operating in the world presently, GE is influenced by diverse external factors which are both environmental and cultural in nature.  Among the key environmental factors is GEs carbon footprint in the world.  This makes GE expend extra effort in developing processes that reduce carbon emission both in production of products and their utilization.  Additionally, in an effort to turn back the clock of environmental degradation, GE in its diverse operations, does take part in initiatives that are designed towards environmental regeneration.

GE is committed in its culture of continues improvement of mans opportunities at enjoying life.  In line with this, it encourages its employees to take time and volunteer in projects within the communities they operate in.  It is GEs considered opinion that it can grow economically even as it takes the lead in environmental conservation.  To further nurture this, GE operates a self financed foundation (GE 2010).  In it, GE strives to connect with people and make a positive difference in the communities it operates in.  Among its employees, GE has designed learning and leadership to be a continuous process of coming together to embrace change, developing skills to change things for better while getting energized about it all (GE 2010).

Q2
Mintzberg looks at an organization from the perspective that it is created by the unique avenues it takes in aligning its labour demands to desired results and gaining synergy from this. (Proven Models 2010). In his view of the organization, he perceives organizational ideology as the traditions, beliefs norms, values and culture that make the organization unique.  The organizational ideology thus cascades to the whole organization and offers guidance and leadership to all.  It thus sits at the top in the organizational structure.

Lean Six Sigma is a method of describing business processes.  It is a combination of the Lean and Six Sigma processes.  In combination, they enable the cost attributed to the complexity of functions to come down.  Lean seeks to maximize process velocity  achieving results in a much faster manner, while Six Sigma seeks to eliminate defects as defined by the consumer of the finished product  raising the level of quality of the final product (Pexton 2009).

Individually, they can not achieve much.  However when blended together  seen as complementary instead of as competitors, they are able to achieve a balance between quality and speed.  The Return of Investment Capital is faster as a result of using boths Lean and Six Sigma simultaneously and in combination.  The organisation adopting them is able to focus its energies on raising the quality of service delivered to the customer and this is measured by customer feedback.  Similarly, the company is able to achieve the enhancement within a set time limit.

In order to achieve a continuous process improvement with GE as envisioned by Lean Six Sigma, information gleaned from customers must be passed on to the relevant departments with speed and accurately.  With this information, the affected aspect of the product must have its quality improved.  With the knowledge of this, the front line GE employees, will confidently, promise to relay the customer feedback to the relevant people and in addition promise the customer to expect an improvement of the product.

This promise will be made in the knowledge that it will be fulfilled.  On their part, the manufacturing will be confident that they do get the right feedback from the customers via the customer service staff.  They will be confident as they act on the feedback that, that is exactly what the consumers want and desire of the particular product.  For both sets of employees, they will each play their part in improving the quality in a timely manner  Lean Six Sigma (Barnes  Walker 2010).

Q3

A
In every organization, information abounds.  Raw information may be useless to an organizational department until it is acted upon by another department then it gains value to the first department.  The Sourcing department will deal with information on vendors, suppliers, material delivery, quality performance, inventory, production schedule and Original Equipment Manufacturers (OEMs).  From this information, they will transmit to finance, information regarding to payments to be effected to suppliers and vendors for deliveries.

Also, any payments due to OEMs for any upgrades or repairs done to any equipment.  As the name suggests  Sourcing, they will be the keepers of all data regarding to any goods or services that has ever been used and where to get.  Additionally, they will from time to time act as the contact point between suppliers and vendors in case of any changes in the pricing and state of materials used in any form by the organization.

The finance department is the main consumer of financial information.  They will daily track engines within the overhaul process, track key business drivers, analyze and evaluate main drivers of engine profitability, report weekly labour issues, reconcile engine profitability performance to total business performance, monthly labour hour analysis and total profitability by month, quarter and year and cost and revenue accruals for engines.

The IT department will mainly require information on database maintenance, information systems design, implementation and documentation, usage of various packages within and without GE for both in-house and external task performance, organizational communication, production of data base reports, determining key business requirement in liaison with other levels of business, intranet development and improvement, hardware and software support and profile security and management of SAP system.

The HR on its part will require information on absence reports in order to better manage it, interns recruitments, contribute to the recruitment fair by amending job description and taking part in the selection process, work experience planning for students, arranging for mentorships and induction, updating employees on company events and news, taking the lead in the companies charity component, dealing with all aspects of the starter inductions, and administrative assistance to all employees leaving and joining the company.

In regards to the specific information required by different departments, the source will be in one of the other departments either as raw data or as processed data.  The finance department will report on the weekly labour figures from data given from HR department.  The sourcing department will source for goods and services once they are informed of the budgetary allocation from the HR department and what is available at a particular time.  The IT will require feedback from all departments communication in-house open and maintain and improve on the intranet.

 Similarly, the HR will require to know the amount available for charity work in order to make decisions on which areas to focus on and how much to give. There HR will require information on division of labour and job design, the finance will require information on cost centres and their consumption, the IT department will require information on the flow of information via the intranet and internet while the sourcing department will require information on consumption of resources.

B.
A Junior Financial analyst key objective will include, taking an active role in dealing with the accounts component in the job.  Ensuring that administrative roles are attended to adequately while making time to contribute in the daily business forecasting.  Contributing actively towards managing the TL expense process, while ensuring the balance sheet account is reconciled every month.  Tracking the profitability and reporting to business team while working with planners to adjust invoices when the need arises (Webber 1998).

Q4
The finance department in organizations is increasingly acquiring a very prominent and integral role in its daily operations.  It is no longer focused primarily on posting of entries in the system and preparing final accounts at the end of a financial period, rather this department contributes immensely to the overall value enhancement of the organisation.  Financial executive increasingly have to provide data that will assist the management make decision that will impact the organisation in a positive manner (Wunder  Mueller 2008).

Where accounts counts money, finance controls the money.  The finance department is in-charge of creating and clearly demarcation avenues the organisation will take in getting and spending funds.  In this it will use and rely on raw data from the accounting department, forecast on future expenses and sales.

Financial executives must expand their horizons and look at the financial information in totality.  Not necessarily relying on the traditional sources of financial information, they must as a point of professional development learn to widen their information source with the main aim of offering to the management operations and ways of arriving informed and strategic choices for organisations operating in complex and dynamic environments like GE.

As the economy has evolved so has the role of the finance function in an organization.  In GE, the management has chosen to reap the benefits that accrue using enterprise resource planning (ERP) in the operations of the company.  Since the system is designed to capture the inputted information and cascade its effect through out the organisation, it is no longer absolutely necessary to have totally dedicated financial department.  Critically, with ERP, it is increasingly easy for any user to undertake the updating function without them necessarily having a financial background and be anywhere in the world to do so.

Financial executives have seen a widening of their roles.  They are increasingly relied upon by other employees to offer guidance and avenues that will assist them produce bottom line enhancing effects in their endeavours (Wunder  Mueller 2008).  It is to be expected that in the long run especially as a result of the increased use of ERP systems, different functions in the organisation will capture their individual financial aspects.  In line with this, information previously captured in the formal fiscal-year reports will find a convergence and greater use in the management of GE.

Q5
An Accountant working as a Junior Financial Analyst (JFA) for GE is guided by ethical obligations that guide the industry players and workers.  These obligations will include those that guide

Competence
The JFA will have a responsibility to
Continually purse knowledge improvement in line with changes happening in the professional so as to perform duties better.

Follow strictly the rules and regulations as laid down while in the cause of performing the allocated duties.

After analysing the information availed and satisfactorily ascertaining as to its reliability, prepare comprehensive and straight forward reports with recommendations inline with ones mandate. (CFA 2005).

Confidentiality
The JFA will have a responsibility to
Avoid disclosing information that they may have come into contact with in the cause of their work unless on legal grounds or with authority from ones superiors.

When put in a position of responsibility and supervision, ensure those under ones supervision clearly understand the confidentiality concept and strictly adhere to it at all times.

Take great care not to use or be seen to use sensitive and confidential information that they may have come across in the cause of their work to gain financially or otherwise.  This applies to third parties who come into contact with the JFA. (CFA 2005)

Integrity
The JFA has a responsibility to
Declare any or perceived conflict of interest to performing duties well in advance.  Similarly, take extra effort to avoid such situations.

Take great care in their daily activities in and outside the office to keep away from activities that may compromise or be seen as compromising them and impeding them from properly performing their duties.

Decline any gift, favour or hospitality that would influence to would appear to influence their actions.

Go to great lengths to ensure the attainment of the organisations goals and objectives are not impeded by ones activities in any way.

Recognize and communicate professional limitations or other constrains that would preclude responsible judgment or successful performance of an activity.

Communicate unfavourable as well as favourable information and professional judgments or opinions.

Hold in high esteem and fight for the integrity of the profession at all time and by all means possible (CFA 2005).

Objectivity
The JFA has a responsibility to
Communicate information fairly and objectively.

Disclose fully all relevant information that could reasonably be expected to influence an intended users understanding of the reports, comments and recommendations presented (CFA 2005).

Use of benchmarks to demonstrate accountability for the use of taxpayers dollars

The government sources for funds from the citizens through taxation. As a result, most of the revenue and capital expenditure by the government originates from taxes. As a result, it is imperative for the government to channel the funds to the most viable products through setting goals for achievement of development goals from use of taxes. Through laying down policies that foster accountability and conflict resolution, the government is able to reduce the bureaucracy that surrounds use of public funds as outlined by Rabin (2003).

Feedback structures that resemble the best performances enable the government to monitor usage of funds and ensure that funds are applied for the designated purposes. Similarly, strategic budgeting and accurate tacking of expenditure by channeling a large percentage of taxes to funding of capital good is  a good way of setting high goals which ensure that returns achieved from the expenditure(investment) are beneficial to the future generations.Establishment of GAAP for the federal government

The federal government is engaged in ensuring that the current and future generations engage in activities that foster accountability. Thus, the institutions monitor the changing environment in order to set out new rules governing best practices for accounting for federal expenditure. As a rule, any recognized ways of improving efficiency are translated into law after careful lobbying and debate.

Most of principles are based on the already existing Chief Financial Officers Act of 1990, which was signed into law by G. H. Bush. The federal Accounting Standards Advisory Board (FASAB) came up with the Act after summing up the propositions of the federal institutions that deal with accounting matters. Such changes are necessitated by implications of integrity and performance in the accounting fraternity.Performance Budgeting

Performance-based budgeting focuses on the objectives and mission of the entity of a government to explain the rationale behind the allocation of funds. It focuses on the result, the strategy and the activity itself.  Hay (2008) suggested that by use of performance-based budgeting, each functions of the government entities are clearly defined. By so doing, one is able to reduce duplication of duties and resources, thus improving efficiency. As outlined by Meyers (1996), performance targets and indicators are also explicated at an early stage.

With clear goals and performance measures, each department is able to remain motivated since rewards are appended to performance. Similarly, the process of setting out the budget enables sufficient information is sourced relating to the departments involved. Such information is crucial for planning for resource allocation. Such information relates to the human resources and functions of each department among others.

However, this type of budgeting is costly in preparation since the information required takes time to collect and analyze (Hay, 2008). Similarly, the departments require an intricate monitoring process that necessitates availability of resources. As a result, performance-based budgeting is a costly affair to institute and maintain.
Tax exemptions and lobbying
Bonnie (1999) outlined that the exemption from taxes of some organization is necessitated by the nature of the services they provide to the nation. These organizations are mostly engaged in activities that contribute to provision of vital services to the public with a motive other than profit making. However, the activities for which tax-exemption occurs are restricted to specific engagements. In spite of their mandate, if these organizations devote a huge part of their time for lobbying activities, they risk losing the privilege of exemption from taxes.

One of the most prominent criteria for tax exemption of an organization is that it should not participate in or intervene in political campaigns on behalf of any entity. For the organization to retain their privilege as tax-exempt, Hopkins (2007) postulates that, the charitable organization may not participate or intervene in activities relating to political campaign the activity must constitute a political campaignwith respect toa candidate.for a public office, p 678.

However, those organizations wishing to gain a hand in the electioneering process without losing the benefits of tax exemption can be instituted under the Internal revenue Code (IRC Sec 527). As asserted by  Corrado (2005), the organizations will be exempt from taxations concerning income from investments. Most of the organizations that fall into this category are political parties and committees.

A report that outlines the key differences in the point of views of the boards
and determines whose view is sounder

Introduction
Revenue recognition is the most critical of the accounting issues since the policy related to revenue recognition can turn the financial results upside down and it is the greatest tool used by companies engaging in earnings management. Due to the risky nature of revenues, its accounting needs to be tougher. However, it is not the case there is a great deal of inconsistences in the accounting principles set for revenue.

There is a need for reconsideration of principles related to accounting for revenues not only in the US but also globally. This is why the US standard-setting body FASB and the international standard setter IASB have signed to MoU to develop a single set of guidance related to revenues. In 2002 the boards initiated the project. In this report we aim at identifying the point of view of each standard setter, compare them, find out the differences, discuss the relative strengths and weaknesses and come out with a recommendation as to which of the views should be adopted in the new global standard on accounting for revenues.

Main Problems in Revenue Recognition
The main problem in accounting for revenue recognition is the diversity which is hard to capture by a single guidance. The diversity comes from the diverse environment and varying underlying economics of transactions in each industry. Although the basic logic presented by the standard setters regarding revenue is simple recognize revenue when there is a transfer of risks and rewards, the complex nature of transactions has made accounting for revenues complex. In US for example, there are 140 authoritative statements related to revenue recognition (Bragg, 2007) and still we see new questions still arising related to revenues indicating a lack of guidance.

ATT A Case Study
In order to understand the accounting for revenues and related complexities lets consider the ATT note to the financial statements on accounting policy for revenue recognition in its annual report for the financial year 2008. The company has three major categories of revenue each with a different revenue recognition policy

The simplest category as regards accounting complexity is revenue from communications services provided such wireless, landline, data transfer, etc. This type of revenue is recognized either instantly (on the basis of usage of airtime), on the basis of period of time (in case of monthly fees) or on any other suitable schedule.

Another category for revenue recognition is revenue from upfront setup and activation fees. Within this category there are further two types

If the contract for provision of setup and activation doesnt include any other contract for the provision of services, the fees and related expenses are recognized when the service is activated and

If the transaction also involves some related other contract for provision of services besides the activation services, the revenue from additional services is deferred and recognized over the period of the service contract.

Third category of revenue includes revenue from sales of equipment to the customers. In this situation too there are further categories
Situations where ATT is the primary obligor in such cases the revenue is recognized at gross out when there is a contract and the customer accepts the equipment.

Situations where a third party is the primary obligor in such cases revenue is recognized for the net benefit is recognized as revenue not the gross amount.

Besides this the company has revenue from publishing directories too which is amortized over a period typically twelve months.

Some other questions asked by ATT include
What to do with the regulatory duty collected on behalf of the government
How to recognize revenue in case of bundled services For example sale of cell phone with an airtime package, etc.

What to do in case of resale of third party services in which ATT is not the primary obligor
ATT is just one company and it has so many questions related to revenue recognition. Different companies, different industries and different underlying economics have to be sorted out with concise yet comprehensive standards.

FASB Point of View and its Weaknesses
According to the SFAC 5 (CON 5) Recognition and Measurement in Financial Statements of Business Enterprises, revenue should be recognized when the entity has completed the activities entitling it to the benefits represented by the revenues. Further guidance is provided by SAB 104, which states that revenue is recognized where all of the following conditions are met
an arrangement and understanding exists for the transfer of goods or provision of services,
delivery of goods or provision of service has occurred,
the amount of revenue is determinable and
the revenue is realizable i.e. collectible.

However, the problems with US GAAP are
Numerous standards that define an earnings process inconsistently. It is difficult to handle so many standards on a same topic. Further there are inherent conflicts within those standards.

The accounting for revenue recognition conflicts with the asset and liability definitions in the framework. A receivable, an asset arises as a result of the contract coupled by a corresponding liability for provision of goods or services, but no revenue, asset and liability is recognized until we have not recognized until we have delivered the goods or provided the service
IASB Point of View and its Weaknesses

The IASB portfolio of standards has two standards IAS 11 Construction Contracts and IAS 18 Revenue Recognition dealing with the issue of revenues. While US GAAP stresses for point of delivery IASB looks for the point of transfer of risks and reward to be the trigger point for recognition of revenue. But here again similar to US GAAP, the revenue recognition principles dont sit well with the conceptual framework. According to the IFRS revenue is recognized when the risks and rewards incidental to ownership transfers. Due to this rule a company may keep a sold item in an inventory because the risks and rewards were not transferred even where the control has passed on. According to the framework, since control is an element of asset and it is lacking here so keeping inventory as an asset is not precisely in accordance with the framework.

Whose View is Appropriate
Although both the views have some limitation, the view adopted under US GAAP seems more appropriate since it also emphasizes on control besides existence of arrangement and delivery. But since focus is shifting against towards a balance sheet driven accounting, standard setters are likely to explain things with this approach. The same is the case with accounting for revenues. FASB and IASB intend to issue a common standard for revenue recognition which also considers the legal status of a transaction besides the underlying substance. The approach is contract driven whereby entities will be required to record revenue when the entity has a legally enforceable right to receive the consideration for the transfer of goods or provision of services and a corresponding obligation to deliver the goods or perform the service. Revenue will be recognized as the movement in the assets and liabilities. This approach will be helpful in making it difficult to engage in earnings management by manipulation of revenues.

Current Situation
The final product of IASB-FASB revenue recognition project is expected in 2011. The boards have issued proposed a contract-centered balance sheet approach for revenue recognition.

The tax system in United Kingdom is considered to be very complex. The sources income in UK is mainly composed of the amount of taxes that is been collected from the public. Both the residents and domicile are equally liable to pay tax based on their world wide income and gains they have. For the individual resident the foreign income and gains will be taxed historically on the basis of the gain and income remittance. Total UK government receipts are forecast to be 545.5 billion in 200809, or 37.3 of UK GDP. This is equivalent to roughly 10,900 for every adult in the UK, or 8,900 per person. (Adam  Browne 2009, p.3).

The process of double taxation of income and gains are termed as double tax treaty in which UK serves as one among the largest network of treaties across the globe. There are many factors that affect the taxation system and policy of the country. Various financial acts, restructuring of the tax court, rapid changes in the economy and the rewriting of the tax law are some of the factors that affect the taxation policy in UK. The payment of tax is common to all the people in UK whether he is a resident or not.

Tax System Introduced by the UK Government
Taxation is the process by which taxes are levied on the percentage of income and gain that is earned by an individual member or by an enterprise. The tax year in UK is on April 6th one year till the next April 5. The tax year is also referred as fiscal year in UK. It includes both income taxes and other personal taxes also. The financial year is April 1st to March 31. In each and every budget, government imposes new taxation policies by which the tax will be paid by all the people in the country. The tax system in UK is composed of income tax, national insurance contributions and value added taxes. Income tax is forecast to raise 156.7 billion in 200809, but not all income is subject to tax. (Adam  Browne 2009, p.5).

The various forms of income taxes are income generated through self employment, allowance of job seekers, retirement pensions, and income from the properties such as banks, buildings and dividends from share. Some contributions (21 of the total in 2008095) are allocated to the National Health Service the remainder are paid into the National Insurance (NI) Fund and used to finance contributory benefits. (Adam  Browne 2009, p.11).

In the financial year 2008-2009, the amount forecasted was raised to 97.7 billion. The other tax system in UK is VAT. It is the proportion of the taxes which is paid on each sale. The revenues from the business the before passing it to the HM Revenue and Customs (HMRC), a particular percentage will be deducted from what they have paid to produce the product. The standard rate of VAT is 17.5, but this has been reduced to 15 from 1 December 2008 until 31 December 2009 as part of an economic stimulus package. (Adam  Browne 2009, p.14).

There are many other taxes such as excise duty, Vehicle excise duty, Insurance premium tax, Air passenger duty, Landfill tax, Climate change levy and aggregate levy.

The capital taxes are the other form of taxation in UK. They are also referred as corporation taxes. About 4.9 billion is estimated to be the capital gain in the year 2008-09. It represents only a small proportion of total government receipts, capital gains tax is potentially important as an anti-avoidance measure, as it discourages wealthier individuals from converting a large part of their income into capital gains in order to reduce their tax liability. (Adam  Browne 2009, p.21).

Tax Progressivity Theory in UK
It seems to be readily conceded by everyone that all taxation must be an attack on property, in the sense that the government (if democratic) is entitled to take without giving anything in return. (Some modern principles of taxation  Adam smith revisited, 1992). The middling and superior ranks of people, if they understood their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all direct taxes upon the wages of labor. (Adam Smith and the search for an Ideal Tax System, n.d, p.27).

In the tax progressivity theory of Adam Smith are four canons and they are as follows

a) Equity
It is one among the most important principle in taxation. Taxation should be equal to all the public in a country. The concept of equality should be the central of the taxation policy. It indicates that whatever taxes may be imposed on the public, no persons should gain any advantage or should not put any disadvantage on them. For example if a man wants to build a house and he hade made the land to be a desirable place. But, instead of taxing improvements, to tax these land values is to leave the natural inducement to further improvement in full force, and at the same time to keep down an obstacle to further improvement, which, under the present system, improvement itself tends to raise. (Enquiry in taxation, n.d.).

b) Certainty
This principle indicates that value of the tax cannot be misstated. Certain aspects such as tyranny, corruption, fraud, favoritism, and evasions that are so common in connection with the taxation of imports, manufactures, incomes, personal property, and buildings  the values of which, even when the object itself cannot be hidden (Tax certainty, n.d.) and these are recognized by the experts in the process of the evaluation. It should clearly specify the amount to be paid as tax and must also specify the time and how it must be paid.

c) Convenience
A tax should be due at a time or in a manner that is most likely to be convenient for the taxpayer. (Tax policy concept statement Guiding principles of good tax policy A framework for evaluating tax proposals, 2001, p.10). It must be a favorable time for the payers to pay the taxes. For example a tax on goods must be analyzed at the time of its purchase. At that particular time the purchaser can decide whether to buy or not or to go for other option. Convenience in the payment of the taxes will be helpful the people to ensure compliance with the existing taxation system.

d) Efficiency
The tax system should not impede or reduce the productive capacity of the economy. (Tax policy concept statement Guiding principles of good tax policy A framework for evaluating tax proposals, 2001, p.10). The existing tax system should not obstruct the goals of the nation. The objective of the economic growth is achieved by the efficiency in the tax maintained by the government of the respective country. By implementing these principles in the taxation system it enables to carry out a perfect taxation system that facilitates in accurate payment and well established growth of the economy.

Impact of the four canons
Adam Smiths four canons or norms have been rendered obsolete or rather outdated when it is to be set against the modern day tax regime. This is because the economic scenario and conditions since then have undergone sea changes in the administration and distribution of the burden of taxation. (Man, economy and state, n.d.).

Not only have the quantum of tax in volume terms increased over time, but also the very rationale and justification of the present tax regime has been different from that of previous regimes in its enforcement and deployment. Adam Smiths canons have sought to strike a just and equitable measure between benefits that are being received from the State by such tax payer and the need for them to pay fair amounts for gaining such benefits in a free state. The axiom of Adam Smith that there needs to be a just and equitable distribution of the burden of taxation between tax payers needs to be examined in the light of the fact that in todays world the distinction between tax planning and tax evasion is fairly blurred. Through tax planning it is possible for individuals to take legal advantage of taxation loopholes and deficiencies in order to lower his tax burden, or even turn liabilities into assets with the aid of expert taxation advices. This is permissible and within the ambit of law, provided the relevant tax authorities are confirmed and convinced that the taxpayer has used legal means to lower his tax liability and has not resorted to taxation frauds, misrepresentations and duplicity. However, the fact that the correct amount of tax which is due to the Exchequer has not been paid, is itself concomitant to tax evasion, since a lower tax has been resorted to, though apparent use of loopholes and mismatches in the present tax system. Were the assessee not aware of these facts, perhaps she would have has to pay a higher rate of tax, and could not, in effect, claim any kind of relief or recompense. Thus the distribution of an equitable tax regime and burden among assesses is seen as a paper tiger, which ceases to hold any material or realistic significance. Empirically, it is seen that each assessee wishes to reduce total tax liability as could be possibly done, and therefore, perhaps the dimwitted persons and assessee having lowered wisdom about individual tax laws and its implications would be at the receiving end of heavier dozes of taxes, albeit they could reduce it through strategic tax decisions and even by using illegitimate means to arrive at a legitimate solutions by offering bribes and inducements to tax administrative officials and servants.

Coming to the next aspect, which are taxes need to be levied, so that payment could be made convenient. In other words, during that time, it was quite possible that the convenience and the tax paying ability, to a very large extent, impacted upon their liability for tax. What Smith was driving at, was the fact that earning and disbursing ability, to a very large extent, determined the tax liability of individuals. However, in the present situation it is seen that such theories would not hold water, since it is real income generation, and not any other determinants that control the tax liability. Higher tax liabilities would arise should the assessee be in a position to earn more revenues and thus be subject to higher dozes of taxes. Tax laws follows its own standardized laws and all assesses would be bound by it, which is governed by laws that spell out the uniformity of treatment, which shall be the next aspect to be considered in this work. Uniformity of treatment actually means that no one is above the tax laws and has to be subjected to the same kind of tax treatment that is being enforced to the other assesses. However, there are instances, when individual assesses could use their tax acumen and wisdom to seek legal redress of wrongs committed by the Tax departments and also use legitimate ways of reducing ones tax burden without misbalancing, or overstretching the present individual tax structure. As long as his actions are within legal tax restraints, there are no questions asked

Coming to the next aspect, it is seen that taxes need to be certain, and not arbitrary, or capricious. The fact that certainty is a sine-qua-non does not however make it advantageous for the assessee. It is certain that he needs to be bracketed among high tax assesses if need be. Fundamentally, it is the application of the rules or principles of taxation in individual context that makes it either liable to lower or higher tax demands. The various principles of taxation laws with regard to incomes from various sources like capital gains taxes, profits earned through selling of assets, incomes from professional sources, incomes from other sources, including gambling gains, dividends and interests receipts, each of these are taxed under separate rules under laws. By applying distinct principles, the tax demands are made, which, after rebates and deductions as applicable under each case, help in deriving the total tax liabilities of individuals. It was seen as imperative that taxpayers expenditure and administrative load were kept to the least, in as much as the operations of the HM Revenue and Customs are concerned. It could be seen in terms of the fact that the HMRC needs to be seen as a responsible and non corrupt agency whose main functions shall be to monitor fiscal discipline in the collection of taxes and safeguarding the rights and privileges of the individual assesses. It is often possible that due to highhandedness, even corrupt attitudes of HMRC officials, it is possible that assesses may be subject to humiliation and harassments of different sorts at the hands of diverse power-wielding officials, but this is not what is intended by the laws, who wish that the relations between the tax payers and the various concerned authorities are sustainable, continuous and long standing. There are different kinds of government machinery and forums in which individual tax harassment could be taken up, at different levels of the administrative set up. Besides there are also prescribed authorities within the government who could attend individual grievances and seek justice to the aggrieved. All these aspects have to be kept in mind, including the fact that arbitrary enforcement of laws could do more harm than good, not only to individual tax payers but also to the system itself.

Conclusions
By and large it is believed that the UK individual tax laws have evolved over time and it would be also necessary for it to subject itself to more dramatic changes in the future, not only to adapt itself to the current scenario but also in order to render better service to the community in future years. While tax is a formidable tool in the hands of the government, it needs to be put into constructive use and not to seek punitive and retributive justice.

Maltbee Lawn Service Income StatementFor the Month Ended May 31, 2009
Sales                  4,250.00
ExpensesSalaries Expense 2,100.00
Supplies Expense    350.00
Rent Expense    100.00
Amortization - Leasehold Improvements      50.00
Depreciation Exp. - Eqpt. Trailer    100.00                   2,700.00
NET INCOME                  1,550.00

Maltbee Lawn Service Balance SheetMay 31, 2010
ASSETS
Cash on Hand                             690.00
Cash in Bank                             600.00
Prepaid Rent                             500.00
Advances to Employees                             460.00
Supplies                              50.00
Leasehold Improvements                             250.00
Equipment - Trailer                             200.00
TOTAL ASSETS                          2,750.00

LIABILITIES AND EQUITY
Salaries Payable                             200.00
Loans Payable                             600.00
Doug Maltbee, Capital                          1,950.00
TOTAL LIABILITIES AND EQUITY                          2,750.00

Maltbee Lawn Service Income StatementFor the Month Ended June 30, 2009
Sales                            -   ExpensesRent Expense    100.00
Amortization - Leasehold Improvements      50.00
Depreciation Exp. - Eqpt. Trailer    100.00                      250.00
NET LOSS                    (250.00)

Maltbee Lawn Service Balance SheetJune 30, 2009
ASSETS
Cash on Hand                             690.00
Cash in Bank                             600.00
Prepaid Rent                             400.00
Advances to Employees                             460.00
Supplies                              50.00
Leasehold Improvements                             200.00
Equipment - Trailer                             100.00
TOTAL ASSETS                          2,500.00

LIABILITIES AND EQUITY
Salaries Payable                             200.00
Loans Payable                             600.00
Doug Maltbee, Capital                          1,700.00
TOTAL LIABILITIES AND EQUITY                          2,500.00

Maltbee Lawn Service Income StatementFor the Month Ended July 31, 2009
Sales                            -   ExpensesRent Expense    100.00
Amortization - Leasehold Improvements      50.00
Depreciation Exp. - Eqpt. Trailer    100.00                      250.00
NET LOSS                    (250.00)

Maltbee Lawn Service Balance SheetJuly 31, 2009
ASSETS
Cash on Hand                             690.00
Cash in Bank                             600.00
Prepaid Rent                             300.00
Advances to Employees                             460.00
Supplies                              50.00
Leasehold Improvements                             150.00
TOTAL ASSETS                          2,250.00

LIABILITIES AND EQUITY
Salaries Payable                             200.00
Loans Payable                             600.00
Doug Maltbee, Capital                          1,450.00
TOTAL LIABILITIES AND EQUITY                          2,250.00

Maltbee Lawn Service Income StatementFor the Month Ended August 31, 2009
Sales                     500.00
ExpensesRent Expense    100.00
Amortization - Leasehold Improvements      50.00                      150.00
NET INCOME                     350.00

Maltbee Lawn Service Balance SheetAugust 31, 2009
ASSETS
Cash on Hand                              90.00
Cash in Bank                             690.00
Accounts Receivable                             500.00
Prepaid Rent                             200.00
Advances to Employees                             460.00
Supplies                              50.00
Leasehold Improvements                             100.00
TOTAL ASSETS                          2,090.00

LIABILITIES AND EQUITY
Salaries Payable                             200.00
Doug Maltbee, Capital                          1,890.00
TOTAL LIABILITIES AND EQUITY                          2,090.00
Was Maltbees summer work successful Give the reason for your answer.

The work was successful. Though Maltbee had 2 months losses, hes still able to make the total of the 4 months Income Statement positive. (See the income for every month. May  1,550.00 June  (250.00) July  (250.00) August  350.00. The net total of this four is 800.00  a positive amount. That is the net income for the four summer work period.)

What are the steps in the accounting cycle

The following are the steps in the accounting cycle
Journalization  recording of transactions on the General Journal.
Posting  Post the transactions to the General Ledgers.
Summarization on Trial Balance
Posting Adjusting Entries
Preparation of the Adjusted Trial Balance
Making Financial Statements

Activity based costing approach to designing a cost system tries to accumulate the total overhead costs for every singly activity being carried on in an organization, and then attempts in assigning the costs of these identified activities to the services or products caused by those activities.

It is a system of managerial accounting that attempts to determine the costs of the activities in an organization, without distortion. It provides a method of looking at the costs by providing methods for dissecting the activities which cause such costs.
The main goal of this cost approach is to trace the cots to the identified services and products rather than allocating then these costs being allocated randomly to such products or services. In activity based costing approach most of the manufacturing overheads can be individually related to individual products.

Designing of a ABC accounting system involves four steps, namely
Identification at organizational level of all the activities carried.
Assigning cost centers to activities
Determination of relevant cost drivers for each of the activities identified above
Allocating the cost of the activities to the products or services based on the consumption of such activities by different productsactivities.

Overhead absorption rate (OAR) under the current system
OARBudgeted overheadsBudgeted level of activity
OAR 990,000 9 millionOAR11  of list priceOverhead charge for order A  11  of  1,400   154
Overhead charge for order B  11  of  1,000   110

Rate per cost driver under activity-based costing (ABC) approach
Invoice processing
Cost per invoice20  x  290,0009,000 invoicesCost per invoice 6.44 per invoice
Cost per invoice line80  x  290,00025,000 invoice lines
Cost per invoice line 9.28 per invoice
Packing
 34 for the large package,  27 for the small package.
Delivery
Loading cost per journey 50,0001,000 journeys
Loading cost per journey 50 per journeyThe total number of small packages that a lorry can carry are 12, so the loading costs are  5012   4.17 per small package.
The total number of large packages that a lorry can carry are 6, so the loading costs are  506   8.33 per large package.
 Mileage
Mileage costs 200,000 -  50,000350,000 miles
Mileage costs 0.43per journey
Other overheads
Cost per order 240,0009,000 orders
Cost per order 26.67 per order
Order A
Order B
Invoice processing cost6.446.44 6.44 x 319.32- 6.44 x 9-57.96Packing costs2734Delivery costs4.178.33 0.43 x 104.3- 0.43 x 48-20.64Other overhead costs26.6726.67Total over head charge for the order87.9154.04
 c)
i) The existing system of allocation of overheads is very simple but the existing method does not make any attempt at all to link the overhead costs to the cost drivers that cause those costs. The present system of allocation of overheads spreads the overhead costs at a single rate of 11 of the total list price.

The strengths of the Activity Based Costing (ABC) system can be summarised as follows
ABC recognises the complexity of the manufacturing processes.

It enables the companies to asses the profitability of its products in a competitive environment more effectively, it enables the managers to assess and control what drives overhead costs.
ABC can be said to have taken the management accounting way ahead than its traditional style of allocation of costs.

However the ABC system does have some serious flaws, such as
It is sometimes difficult to identify costs and link them to a particular activity.

The costs of switching to and implementing ABC can exceed the benefits the management of a company expect to derive from it.

Single cost drivers can not be reasonable expected to explain the behaviours of all items in the total cost pool.

It fails to allocate some of the costs for which it is rather impossible to identify a particular cost driver, for example depreciation costs.

ii) ABC approach may help the management in answering few critical questions relating to the analysis of costs by activities performed in an organization, including
How much time is being spent in the activities performed
How many resources are deployed to perform these activities

What value does the activity under consideration create for the company as a whole
The ABC system of accounting is as simple as the current overhead allocation system being in use by the company however unlike the existing system the ABC method allocates the overheads costs on the basis of cost drivers (factors that result in the incurring of costs).

Charging overhead costs on the basis of cost drivers, will provide the company with more accurate results and provide more useful information about the cost structure of the orders, this will help the company in effective monitoring of costs and costs drivers that will help the company in improving its cost control. Once the company gets full information about its cost structure, the management of the company can make efforts to control the activity of the cost drivers in order to reduce their costs associated with the orders.

d) The conditions under which activity based costing can be most effective depends on the accurate identification of the costs allocated to the different service or products f the company and appropriate identification of the costs drivers. In activity based costing systems the costs of direct material and direct labour can be directly associated to the products or services in the company.

It is of prime importance that the costs that vary depending on the production volumes in the company should be traced to the products by using appropriate cost drivers that are volume linked, whereas, overheads that do not vary depending on the production volumes, but vary depending on other activities must be linked to the products by using by using cost drivers that are activity linked.

The information that is usually provided by an Activity Based Cost accounting approach can support the management in planning, controlling and making right decisions about its products. It is however important that before implementation of Activity Based Cost accounting approach, the management of a company analyzes the activities in the organization to help it determine the extent to which such activities occur and the relationships between such activities and their related costs.

The Information collection procedure can also be used as a basis by the company for its future planning and budgeting. Once the budgeted production level is set by an organization, the information database can help the management to determine the number of times the identified activities will be carried out by the company during its operations. The management of the company can also establish budgets by multiplying the cost per activity with the budgeted activity levels of the organization.

The information technology database may also be helpful in providing the management with an insight to the ways in which costs were structured and incurred by the products or services. ABC approach makes it possible to some extent to control and manage costs by controlling and managing the activities that are linked to such costs by providing a measure to monitor the performance measures.

Under these conditions, how much should you offer OHenry Give your reason.

This paper needs to compute the possible price to offer to OHenry which should not exceed 20 times the monthly net income of OHenry while the lowest possible price that OHenry will take is the computed ending capital  of  the latter.    As computed, the monthly net income after making the necessary adjustment for the unadjusted monthly balance is  16,050.00 .  Multiplying the amount with 20 will give the maximum possible price of  321,000.00. However, since a manager will be hired with a monthly salary of 3,000, in lieu of the service of Mr. Benjamin OHenry,  this will reduce the salary of OHenry as posted at 3,400 by  400. Thus after considering the adjustment, the corrected monthly income would be  15,650.00  and multiplying it by 20 would give a total amount of  313,000.00 as new maximum amount.  The latter amount could not be offered to OHenry since the same is too big in comparison to ending capital as computed at  135,400.000.  Thus the first offer should be lower than the computed lowest possible amount of 135,400.00, which is equivalent to the ending capital and assuming Mr. OHenry does not know to correctly compute his monthly income.

If he knows how to compute, the first offer should be 135,400. Subsequent offer could be increased by a certain amount until the offer is accepted but the maximum amount should not exceed the amount of 313,000.00 since the  case  facts say  that  the most amount that could be paid is 20 times the monthly income. See Appendix A.  Thus it could be assumed that if the amount of amount offered will exceed the maximum estimated amount, there would just loss in buying and operating the business of OHenry. Starting from the lowest offer would maximize the profit of the buyer (Meigs, Meigs and Meigs, 1995).

1. Envisaged Monthly Income Statement

Service Revenue (14,300  2,100) 16,400
Less Operating expenses
Salary Expense 3,400
Utilities Expense 900
Adjusting Expenses 2,750
Manager Remuneration 3,000 10,050
Expected Net Income 6,350
Maximum Purchase Price (6,350 x 20) 127,000

2. Income Statement for November 2009

Service Revenue 16,400
Less Operating expenses
Salary Expense 3,400
Utilities Expense 900
Adjusting Expenses 2,750 7,050
Net Income 9,350

Statement of Retained Earnings
Benjamin OHenry, Capital at 1 Nov. 137,400
Net Income for November 9,350
Benjamin OHenry, Withdrawals (2,000)
Benjamin OHenry, Capital at 30 Nov. 144,750
Minimum Selling Price for Henry 144,750

Optimal Price to be Offered to Henry
The maximum price that the buyer is willing to offer to the seller is 17,750 lower than the minimum price acceptable for the seller.  Hence, if both parties abide with such figures, the transaction will not take place.  From the envisaged income statement, a very good profitability level of 76,200 per year is expected.  If such trend continues, the seller will be able to cover the initial purchase price of 144,750 in 1 year 10 months (76,200-68,550)76,200.  This is a very quick payback period, which further highlights the desirability for the investment.  Thus the buyer may consider increasing the maximum purchase price to combine with that of Henry so that the transaction takes place.

An important element that ought to be included in this examination is the sources of finance available for the additional 17,750 that the buyer needs to meet OHenrys minimum selling price.  The buyer may be limited for cash and not able to meet such additional cash outflow.  In instances of capital rationing other sources of finance can be relied upon.  For instance the buyer may attain a loan from a bank to cover such additional capital expenditure.  Another solution may be the involvement of Benjamin as a sleeping partner in the organization, where a share of profits is given.  Therefore, it is advisable that the buyer tries to meet the sellers minimum selling price in light that the business looks financially prosperous.  In case of finance problems solutions like the aforesaid should be relied upon.

This article takes into view denominational agencies which are tax-exempt that publish religious books which lead to substantial profit. The question that the article carefully articulates is whether the denomination should use these earnings to further its religious purposes or it should be held liable to pay the federal unrelated business income tax for these earnings.

In my opinion, whether the earned income is above or below 1000 dollars, related or unrelated to the religious purpose, it should pay the due income tax. Although denomination agencies, are working for a social and religion reason but if they are involved in any commercial trade or business, they should pay like any other corporation. For instance, thousands of large and small companies are involved in social causes and corporate social responsibility. This, by no means, lessens their burden of taxes.

On the other hands, schools and colleges, disseminate information, play an integral role in bringing up generations and prepare them for the future. However, with this great cause in mind, many of these schools and colleges make substantial profits. Does this mean, they should not pay taxes at all

Before the unrelated business income tax law, many people were taking advantage of the governments stance by making large profits with their businesses without paying taxes and covering up their trade with a charitable purpose. Many of these denomination agencies making huge profits with their publishing pose unfair competition to the publishing companies which are paying their due share of profits.In addition, many denomination agencies may claim that they are not profitable. Whereas, they could very well be under reporting their profits.

Therefore, unrelated business income tax is in the favour of the general public and the government as well.

Balfour Beatty and Vinci are both globally leading construction companies with their net worth in billions of dollars. This paper is a detailed analysis of both the companies.

Balfour Beatty

Company profile
It is a top UK construction company which was founded in 1909 by George Balfour and Andrew Beatty. The company is listed on the London Stock Exchange and has an impressive global workforce of an estimated 30,000 employees. Although, the company initially started out as a construction concern but with the passage of time has diversified into many wider areas which were relevant to the construction industry and as of today has four major business streams which are building management services, civil and specialized engineering services, rail engineering and services along with an investments function. (Balfour Beatty, n.d)

Objective
Our goal is to deliver consistent, long term growth to our shareholders (as cited in the CEOs review in Annual Report 2008).

Balfour Beatty has a legacy which stretches to more than a century. The company has performed consistently well over the years to ensure stable profits for its investors and vows to continue this in future as well. (Balfour Beatty, n.d)

Strategy
The company has been following a medium to long term growth strategy and intends to take growth measure in the following areas

The company intends to further increase its UK infrastructure and has made necessary acquisitions over the years to do so.

The company also intends to tap the demand for high-level and sophisticated services in both the UK and the US through expansion of its professional services division in the UK and through collaboration with Heery International in the US.

Similarly, Balfour Beatty further intends to increase its stake in the public-private partnership (PPP) market. The company has already acquired GMH Military Housing which has fostered domestic growth. Similarly it will shortly launch its PPP project in Singapore which will increase its market share in the Central Asian PPP market. (Balfour Beatty, n.d)

Board Structure
The companys board comprises of 12 directors of which seven including Steve Marshall (Chairman) are non-executive directors. The board is primarily responsible for the strategic direction of the company along with management of risks, allocation of resources, annual budgeting and capital expenditure among numerous other tasks.

The board further comprises of the following committees

Audit committee
This committee is responsible for correct presentation of the companys financial statements, assisting both external and internal auditors, reviewing risk management processes. It comprises of non-executive directors and is chaired by Graham Roberts who is also the Finance Director of The British Land Company.  At the end of the period, this committee provides an oral report to the Board outlining their performance, achievements and any significant changes made during the period.

Nomination committee
This committee also comprises of non-executive directors and is chaired by Chairman of the Board Steve Marshall. It is responsible for the appointment of executive directors.

Remuneration committee
Similarly, this committee is also chaired by another non-executive director Robert Walvis. The function of this committee is to determine appropriate remuneration for the executive directors of the company.

Business Practices committee
The provision of this committee is not required by corporate governance and is aimed at streamlining business practices. In 2008, this committee was chaired by Stephen Howard.

Group Tender and Investment committee
This committee comprises of executive directors and is chaired by the company CEO Ian Tyler. The usual agenda items of this committee are to analyze strategic level matters for instance capital expenditure.  Another function of this committee is to authorize any significant investments and divestments.

Finance and General purposes committee
Similar to Group tender and investments committee, this committee also comprises of executive directors and is aimed at dealing with financial matters for instance approval of routine banking matters. Share option grants etc.

Brief biographies of key personnel

Steve Marshall, Chairman Balfour Beatty
He is an FCMA and joined Balfour in 2005 as a company director. However in 2008 he was made the Chairman of the company.

Ian Tyler, CEO Balfour Beatty
He is a qualified chartered accountant and he joined Balfour Beatty in 1996. Prior to joining Balfour he had served as a finance director of ARC. Tyler has been consistently promoted at Balfour. He was made a director in 1999 which led to his appointment as Chief Operating Officer and which eventually led to his selection as companys CEO. (Balfour Beatty, n.d)

Accounting policies

Asset valuation and depreciation model
Balfour Beatty values it non-current assets at original cost less accumulated depreciation and any impairment losses. However, due to the transition from UK GAAP to IFRS some land and buildings were revalued which were therefore carried at their revalued amounts.

As for asset depreciation, the company uses a straight line method. Buildings which have been leased are depreciated at 2.5 over their lease term, whereas plant and equipment are depreciated at rates ranging from 4 to 33. (Balfour Beatty, n.d)
Inventory valuation
Inventories are recorded at the lower of original cost and net realizable value (NRV). The company uses the first in first out (FIFO) method for determining the cost of closing inventories. (Balfour Beatty, n.d)

Breakdown of Turnover
Business segment20072008YoY changeFigures in millions of  s
Building management and services 3,527     4,498    27.5
Civil and specialist engineering services 2,112     2,587    22.5
Rail engineering services    775     1,016    31.1
Investments      51        160    213.7
Total 6,465     8,261    27.8(Balfour Beatty, n.d)

Corporate responsibility
In the wake of global warming and numerous other environmental concerns, manufacturing concerns have been subject to increased regulation. For instance, regulatory authorities in UK require industrial concerns to observe lower CO2 emissions and provide adequate facilities for both industrial waste management and maintaining employees well being.

CO2 emissions have gone down by 30 in 2008. Similarly, Balfour Beatty introduced the Zero-Harm policy which is to be observed by all its concerns in an absolute manner by the end of 2012. Furthermore the accident frequency rate (AFR) also dropped by 5 to 0.2 in 2008. (Balfour Beatty, n.d)

Vinci

Company profile
Vinci is a French construction company which is considered to be the global leader of the construction industry. It was founded in 1899 and is listed on Euronext DG. It has an enormous global workforce of over 150,000.

The company is the largest revenue generating construction concern in the world and offers a wide range of construction and civil engineering related services. (Vinci.com, n.d)

Objective
The company aims to ensure both growth and resilience along with value creation for its shareholders. (Vinci.com, n.d)

Vinci is the market leader in the construction industry and as can be seen from its objective it intends to further expand and sustain its existing market positions.

Strategy
Vincis long-term strategy is to expand on its existing business model which will assist in striking a balance between developments of both short term and long term cycles. In order
to achieve growth of short term cycles Vinci intends to do the following

Further strengthen the local market position with capture of segments which display growth potential.

Obtain the expertise and technology to gain access to niche markets across the globe.

It further intends to strengthen the companys ability for management of potentially complex projects.

The company also intends to focus more on organic growth in order to improve its financial condition. (Vinci.com, n.d)

Board structure
The board comprises of 14 directors including the chairman. Furthermore, the board also comprises of the following committees which are required as part of corporate governance

Audit committee
This committee assists the board in true and fair presentation of consolidated accounts. It comprises of three non-executive directors and is chaired by Henri Saint-Olive.

Strategy and investments committee
This committee helps the board in developing the companys strategy. It also analyses material impact of proposed investments and divestments. It comprises of six directors which are headed by Chairman of the Board namely Yves-Thibault de Silguy.

Remuneration committee
The remuneration committee is responsible in proposing and in determining remuneration of the board of directors. The committee comprises of three non-executive directors.

Appointments committee
This committee is responsible for examining of any new appointments for the board
and hence reserve the right to make any recommendations. This committee is also chaired by the Chairman of the Board.

Vinci also has two separate committee namely Executive committee and Management co-ordination committee.

Executive committee
This committee is responsible for the appropriate functioning of the VINCI and comprise of Vincis executive personnel.

Management and co-ordination committee
This committee is aimed at bringing together the board of directors and executive committee members in order to facilitate better co-ordination between them. (Vinci.com, n.d)

Brief biographies of key personnel

Yves-Thibault de Silguy, Chairman VINCI
He has had several key positions in many key government organizations in the 1970s and 80s for instance Ministry of Foreign Affairs, European Commission etc. He has extensive and diversified experience of governance in many distinct organizations and before becoming the Chairman of Vinci he served as the CEO of Suez Lyonnaise des Eaux.

Xavier Huillard, Director and CEO VINCI
He has worked as a civil servant earlier on in his career and then moved to the construction sector where he has made the rest of career. Mr. Xavier is considered to be a veteran of the construction industry with decades of experience. Prior to joining Vinci in 2000, he served as both the Chairman and CEO of SOGEA.

Richard Francioli, Executive Vice President (EVP), VINCI Construction
He has been associated with the VINCI Group for over two decades now. Francioli has also served as a civil servant earlier on in his career which led to his appointment as a director at SOGEA.  He joined Vinci in 1983 and since then has held various positions in the construction function of the company which led to his appointment as Chairman of Vinci Construction in 2006 and as Executive Vice-President (EVP) in January, 2010. (Vinci.com, n.d)

Accounting policies
Asset valuation and depreciation model
Vinci values its non-current assets at production cost less depreciation and impairment losses. The company follows the cost model and therefore assets are not revalued.
Non-current assets are depreciated using the straight line method according to which the asset is depreciated over its useful life. However, in some cases the company also employs the accelerated depreciation method pertaining to the type of asset for instance components of buildings which have an estimated life of their own which is different to that of the whole building. Similarly, quarries whose estimated life is dependant on the materials extracted from it. (Vinci.com, n.d)

Inventory valuation
Inventories are valued at their cost of acquisition or production.  However they are recorded at the lower of original cost or net realizable value (NRV) at each balance sheet date. (Vinci.com, n.d)

Breakdown of Turnover
Following is a breakdown of Vincis revenue as per its different business lines
Business line20072008YoY changeFigures in millions of  s
Revenue from toll and other services      4,574          4,781    4.5
New infrastructure construction under concessions       1,119          1,013    -9.5
Concessions      5,693          5,794    1.8
Energy      4,300          4,614    7.3
Roads      7,706          8,183    6.2
Construction    13,653        15,772    15.5
Contracting    25,659        28,569    11.3
Eliminations and misc.-        479    -        383    -20.0
Total    30,873        33,980    10.1(Vinci.com, n.d)

Corporate responsibility
Vinci has faced similar environmental issues to Balfour Beatty since both operate in Europe and are collectively regulated by the EU to observe measures for protection of the environment. Vinci has taken concrete measures over the last year to counter the adverse effects of the environment upon the company and the society in general. CO2 emissions have dropped only slightly by 3 in 2008. Vinci has adopted the zero accidents policy similar to Balfour Beattys policy which is focused at complete elimination of workplace accidents. In the last five years, not only the AFR has dropped by 35 but the severity rate has also slumped by 40. (Vinci, n.d)

Comparison of financial performance
Ratio Analysis
Profitability
Profitability for both the companies has been quite depressed particularly, net margin which is very low. However gross profit margin of Vinci is better Balfours and has remained constant with last year. Balfour on the other hand has managed to achieve an impressive ROCE at 23 in 2007 which slightly decreased in 2008 at 22.

Return on equity (ROE) saw a sharp decline of approximately 35 from 31 in 2007 to 23 in 2008 whereas in the case of Vinci the situation was otherwise and ROE increased from 36 in 2007 to 37 in 2008.

Liquidity
Liquidity position of both companies is not good since both current and quick ratios have been found to be below 1 for the two years in question. When comparing, the liquidity position of Vinci was much better than Balfour and in fact it saw a little improvement over the last year. In the case of Balfour the liquidity position further deteriorated in 2008 although not significantly. (Vinci.com, n.d)

Marketability
The stock market position for both the companies saw a significant slump in 2008. This was largely due to the global recession which resulted in a considerable drop in the share price of both the companies. As can be seen below, the PE ratio for both the companies dropped by almost 50. Both dividend yield and dividend cover on the other saw an increase for instance dividend yield almost doubled in 2008 for Balfour and increased by 67 for Vinci from 3 in 2007 to 5.04 in 2008. Similarly, dividend cover for Balfour saw an improvement of 6 from 3.02 in 2007 to 3.21 in 2008 as can be seen below.

Gearing
Balfours leverage position is well managed when compared with that of Vinci which is extraordinarily high. Interest cover has increased by an impressive 44 from 8.5 in 2007 to 12.25 in 2008. Similarly, the gearing has also declined and is now within acceptable limits. Vinci on the other hand is highly leveraged, not only is the interest cover quite low but the gearing ratio (i.e. debt-to-equity ratio) is unacceptably high at 2.36 meaning that the companys long term liabilities are twice as much as its equity. (Balfour Beatty, n.d)

This sends a signal that the company is under heavy influence of debt holders, similarly its growth prospects are potentially abysmal. This also shows that neither the company is in a position to borrow further since existing bondholders might not permit further borrowing nor it is earning sufficient profits to discharge its long term obligations. Hence this raises questions over the sustainability of the company in the long run.

Efficiency
The working capital management at both Balfour and Vinci seem to be a mirror image of one another. For instance Days receivables outstanding (DSO) are lower for Balfour whereas its days payables outstanding (DPO) are quite high, this scenario is completely opposite in the case of Vinci. Both DPO and DSO have remained somewhat the same in 2008 for Balfour. Vinci on the other hand has seen a reduction of 5 and 6 in receivables days and payables days respectively.

Stockholding period on the other hand has increased for both Vinci and Balfour by 10 and 36 respectively. However, even with the increase in 2008 the stockholding period is low for both companies.

1. How could Guillermo use budgets and performance reports in his decision make process

In my point of view, Guillermo uses the technique of flexible budget (Horngren et al., 2008, chapter 01, p. 05). This technique helps Guillermo in order to provide different scenarios like changes in unit sales, changes in variable cost (due to the Direct Material, Direct Labor and FOH) (Horngren et al., 2008, chapter 5, p. 7). Moreover, Guillermo also keeps a watchful eye on the macro factors like competitors strategy etc. In the eye light of the competitors reaction Guillermo is able to make appropriate decision. If the Guillermo is willing to take the new robot into its business operation it brings curse for the Guillermo business and also on his family. Moreover, in my point of view Guillermo chooses the option of distribution channel of the Norwegian furniture into North America. It brings greed to the Guillermo business because this strategy not hit the values of its current business. According to all keep things into consideration Guillermo makes the budgets and evaluate variances and take corrective, measures where required in order to runs its business smoothly and efficiently.  

2. How might ethics influence his accounting decisions

Every single businessman wants that its business runs smoothly with out any hindrance in the Guillermos scenario he manipulated his business figures in order to make the business attractive which is unethical (Horngren et al., 2008, chapter 1, p. 09). From the Guillermos accounting decision perspective he manipulated its sales its variable cost per unit, unit sales in order to attract the outside company like makes the figure attractive for the Norwegian company. So it is very important for Guillermo not to take and adopt unethical values in his decision making because it is very good in the long run but disastrous for the company in the long run. Guillermo uses the big bath accounting which is not a good accounting practice and in the future this unethical accounting practice creates a hurdle for Guillermos business.      

3. What accounting information is most relevant for Guillermo to consider when making decisions

The most significant and meaningful accounting information that Guillermo will take into consideration is Earning before taxes. Because if Guillermo chooses the option of controlled lathe then he will certainly made an additional investment which means that lower deprecation is imposed on his investment and in the end he will pay lower tax. This initiative will increase the net profit of the Guillermo store. Moreover, if Guillermo chooses the option of Norways manufacturer then he has to make additional investment which results in the shape of higher depreciation and lower tax rate. As a result, earning before tax is more appropriate for decision making rather than on the basis of net profit. The Guillermo should consider the other accounting information. The information is
Companys current sales figure both in terms of unit and in volume.

If Guillermo chooses the robot option it increases its capital expenditure.

Impact on direct labor and FOH cost in both scenario (Robot or distribution).

Companys current financing position like they are capable to take either more debt or more equity.

Net income or additional income should more than WACC which is important for the companys business and its future prospects.

Management accounting
This is an internal management tool that is used to identify, measure, accumulate, analyze, prepare, interpret and communicate information required by the managers for planning, evaluating and controlling the resources within an organization. Management accounting ensures appropriate use of resources and accountability of the management in their duties. According to Chartered Institute of Management (CIMA), management accounting enables non-managerial groups within the organization to prepare their financial reports. Such groups are shareholders, creditors, tax authorities and regulatory agencies. The American Institute of Certified Public Accountants (AICPA) divides management accounting into three strategic management, performance management and risk management. Strategic management increases the knowledge of laying down strategies within the organization. Performance management is a tool for developing decisions and managing performance of the organization. Risk management helps the managers identify measure, manage and report risks (Bhimani, 2003).

Management accounting focuses on the future of the business. It is used to add value to the business by forecasting future trends within the organization which may create opportunities to the organization. The data required for management accounting is collected from various sources, for example, marketing information, pricing, logistics and many more (Cheatham  Cheatham, 1993).

Financial accounting
Financial accounting refers to the process of preparing financial statements for use by the various stakeholders within the organization. The stakeholders concerned with financial statements are shareholders, suppliers, bankers, workers, partners, the government, and others. The function of financial accounting is to report the performance of the organization. The management team serves as an agent to various stakeholders of the organization. The financial statements monitor the progress of the organization and report to the interested users. Financial accounting has the function of preparing financial statements, providing managers with information required to plan and manage the business, and they ensure that the legal regulations are adhered to. Countries have their own Generally Accepted Accounting Principles (GAAP) which regulates all the organizations within the jurisdiction of the country. There are international regulatory standards which focus on the global business activities. The GAAP should follow the guidelines established by the international accounting standards (Hopwood, Pfaff  Leuz, 2004).

The accounting equation equates the assets of the organization to the sum of liabilities and owners equity. Financial statements are prepared on this knowledge. Double entry system of accounting is used to prepare the trial balance. Profit and loss statements and the balance sheet are prepared from the trial balance. The preparation of the financial statements follows certain formats which have been stipulated by the standards of accounting. Financial statements show the income and expenditure of the company over a given duration of period. A summary of the total value of assets, liabilities and shareholders is presented on the balance sheet. Debit balances on the financial statements result from the assets, expenses and withdrawals. Credit balances are caused by liabilities, revenue and capital (Riper, 1994).

Financial accounting is used to report about the past (Solomons, 1986). The need of the financial statements is to reflect the past performance of the organization. The roadmap to success can only be made through clear analysis of the past to predict the future. Managers use the financial accounting results to prepare management accounting mechanisms. Financial accounting is a stepping stone to the preparation of management accounting systems (Hopwood, Pfaff  Leuz, 2004).

Analysis
Innovative management accounting practices have been established to improve the management of resources within the organization. Cost accounting is used to control the cost of production. The costs of any business entity should not exceed the sales. Cost accounting provides the managers with methods of regulating the costs to avoid losses. Variance analysis is a traditional tool in management accounting that compares the actual and budgeted results. Raw materials, labour and overheads can be regulated through the variance analysis. Life-cycle cost analysis is used to regulate modern problems experienced in management accounting. Activity-based costing is used to control the costs of various activities within the organization. Life-cycle costing regulates the costs of products at the design stage (Riahi-Belkaoui, 1992).

Management accounting ensures the continuous flow of production activities within the organization. The activity-based costing helps regulate the number of activities in a production process. This is a control measure which reduces the costs involved in the production of commodities. The profitability of a company depends on minimization of costs and maximization of sales. Management accounting increases the ability of the managers to reduce the cost of production. There are various tools that managers have to use to regulate the costs of production and to ensure the future success of the company (Bhimani, 2003).

Management accountants manage the business teams and report the financial matters of the organization. They provide decisions concerning the financial and operational activities of the organization. The internal activities of the business are properly regulated using management accounting tools (Cheatham  Cheatham, 1993).

Management accounting enables the managers forecast and plan about the future of the organization. Variance analysis creates awareness about deviations from the planned activities. This helps control the strategies that the organization has established and to direct the resources towards the achievement of a common goal. Costs are reviewed and monitored to ensure that profitability of the organization is achieved (Hopwood, Pfaff  Leuz, 2004).

Management accounting has enhanced the development of operations research about the activities of the organization. Operations research increases efficiency in resource allocation. It ensures optimum allocation of resources and the regulation of the business activities.

Profitability of the organization is well monitored using the mechanisms of operations research. Costs are minimized and all other relevant factors contributing to the success of the business is integrated in an effective manner (Garner  Tsuji, 1995).

Sales management is an aspect of management accounting that creates ability of the management to regulate sales in the market. Sales are the determinant factors about the profitability of the organization. The management of the clients and customers is possible by use of a good sales management system (Holzer  Riahi-Belkaoui, 1986).

Financial accounting is essential to the people outside the organization who may be affected by the activities of the organization (Barsky  Jablonsky, 2001). The internal activities of the organization are regulated by use of the management accounting while the external affairs are regulated by the financial accounting. The activities of the management team need to be assessed by both the internal and external factors so that any loopholes can be avoided. The success of the organization depends on the cooperation of internal and external environment. Managers should integrate both management accounting and financial accounting systems to monitor the success of the organization (Solomons, 1986).

Local and international regulations about financial accounting standards have been established to control the planning, presentation and use of financial accounting data. The management should ensure appropriate measures have been put in place to avoid misuse of the financial accounting standards. Any irregularities in the application of the standards attract penalties from the legal systems within the country and the international bodies. These measures create success in business by ensuring the proper utilization of resources. Financial accounting gives a report about the profit trends of the organization. These reports are scrutinized by external bodies to ensure no irregularities in the preparation of the accounts (Garner  Tsuji, 1995).

There are several professional qualifications that have been established to regulate the activities of accountants. For example, Chartered Certified Accountant (ACCA), Chartered Accountant (CA), Certified Public Accountant (CPA) and others. The American Academy of Financial Management offers Chartered Cost Accountant (CCA) which regulates costs within an organization. These bodies regulate the professional activities of accountants and prevent malpractices in accountancy. The success of the business will exclusively depend on the ability to apply the guidelines provided by the professional bodies (Mckee, Garner,  Mckee, 2002).

It is mandatory to prepare the financial accounts of a business (Riper, 1994). To regulate the activities of the managers, the legal systems have established a mandatory rule in the preparation of financial accounts on annual basis. This creates accountability in the performance of business activities. Management accounts are prepared according to the discretion of the managers. There are no legal requirements to prepare these accounts. Regular preparation of the financial and management accounts is important to create a vision that the business targets to achieve. They also show the efficiency of the management. Decision making within the organization requires the analysis of the business activities by the use of management and financial accounts. All the departments should be represented in decision making. The accounts indicate the performance of all sectors of the organization and are essential in analyzing departmental performance (Holzer  Riahi-Belkaoui, 1986).

The management accounts analysis indicates the profit centers and the costs centers. The information about each department is summarized. The profitable departments are maintained while the unprofitable ones are improved. The decision about creating new investments is assessed using management accounts and this avoids blind investment. The processes that increase costs are cut down and better ones introduced. Successful business activities are facilitated by effective control about all the departments costs (Riahi-Belkaoui, 1992).

Risk management increases the security of business activities. Management accounting evaluates the risks that are attached to certain investment plans and gives the managers a clear path to follow in their business venture. Entrepreneurship is possible only through proper mechanisms of risk evaluation and management. Modern business is based on entrepreneurship and the management should establish systems that encourage employees to be innovative.  Innovation involves creativity and implementation of new ideas. The use of management and financial accounting measures the increase in knowledge about production.

Managers should apply leadership skills in the workplace. Leadership will enable the employees contribute to the goals and objectives of the organization. The managers should use the management and financial accounting systems as tools to measure their ability to create an innovative environment as well as ability to use leadership in management (Mckee, Garner,  Mckee, 2002).

Conclusion
The role of managers is to combine the internal and external business environment to create successful ventures. Management accounting and cost accounting tools should be effectively used to create professional business practices which lead to the success of the organization. The management should provide all the resources required in the preparation of the management and financial accounts. These resources may be manpower, funds, legal protection, and other support materials and services. The process of preparing these accounts should be monitored by responsible individuals to avoid misuse of resources and misplacement of information. Auditing of the financial reports should be done on a regular basis to ensure all the information is properly used. The auditors also ensure the assets of the organization are safeguarded. The managers should give all the necessary support to internal and external auditors and create a good environment for verification of all accounts. The auditors should check that the proper accounting guidelines are followed by the accountants.

The government has a role to ensure all the legal requirements are adhered to by the accountants to maintain professionalism. The stakeholders to an organization should focus on the quality of accounting practices done by the management to ensure the business does not create losses. Investors to a business should access the financial accounts of a business to know the viability of their investment. Decision making within the organization should focus on how successful and profitable the various departments are. Information about the performance of each department are well analyzed in the accounts and should guide the managers in their decision making process. Department heads should be responsible for the performance of their departments. The overall management team has the duty to integrate the activities of the organization and to ensure profitability of each department.