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September 30, 2005

Not in Kansas anymore, certainly

I appear to have survived this week's ordeal of College of Business Ritual Pain. Yesterday's tax exam was rigorous but not too bad, and inasmuch as I arrived reasonably well prepared, I was at least able to answer all the questions and have some idea how to do the calculations. Flying colors are probably out of the question, but I'm optimistic that I'm somewhere in the middle of the pack. Meanwhile, the results are in for Tuesday night's inquisition in 455, and although I didn't particularly distinguish myself, if the semester ended today, I'd be putting a B on the scorecard (albeit a low B -- if this were bass trombone, we'd be talking both triggers, with the slide pulled out to a long 7th position. Well, that's assuming we had old-fashioned F and E triggers, not the more modern F and D. But I digress). In the senior year of NAU's accounting program, one is "not in Kansas anymore," as a friend of mine put it. He should know -- he's a graduate of the same program I'm going through, and now is a successful CPA who drives an upscale Japanese car and wears finely tailored suits.

Grinding out passing grades and moving on -- "winning ugly," if you will -- is fine with me. But now we're moving on to the next topic: accounting for income taxes. This one is going to be tougher than leases and pensions (which were bad enough as it is). So I'm going to have to put the hammer down even harder, over the next few weeks.

Posted by Urbie at 12:23 PM | Comments (0)

September 28, 2005

2 down, 1 to go

Last night's exam in ACC 455 wasn't easy, but due to good preparation, I think I emerged unscathed. I'm not sure about today's, in 456, however. I wasn't as well prepared -- mostly because I've been spending so much time on 455! I'd say the over-under is around 70 for both, based on my impressions of how well/badly I did. I'd be happy with that, since at this point, my goal is just to survive the semester and move on.

Tomorrow: ACC 375 (tax). I'm not looking forward to that one, but at least I did decently well (76% or so) on last semester's exam, which the instructor makes available. I'd happily take anything in that ballpark tomorrow. I can tell you right now, though, that no way do I have any interest in a career in tax preparation -- probably not in tax planning, either. When you study taxes, you constantly have to keep in mind that there is no rhyme or reason to the rules regarding what you can write off and when -- it's all a matter of what Congress and the courts decide. And at least in the case of Congress, their decisions are based on politics, and any resemblance between political judgment and rationality is purely coincidental.

In any case, I continue to work toward tomorrow's exam by studying business deductions and business/investment losses and limitations. I'll be glad when 24 hours or so have gone by.

Posted by Urbie at 10:24 PM | Comments (1)

September 26, 2005

Winning Ugly -- for now

In my ACC 455 class, we're broken up into three-person teams for in-class quizzes. The professor turns us loose with three copies of the quiz, we scribble furiously for a few minutes, come up with (what we think is) one good answer, then get it graded on the spot, with all three team members receiving the same grade. My teammates are a couple of good sports who work hard and generally have a pretty good understanding of what we've been studying.

So far, my team has managed 100% on every group quiz, sometimes without being an artistic success. We've been winning ugly, sort of like the Milwaukee Brewers during the era of Gorman Thomas, Paul Molitor, Robin Yount, and Charlie Moore.

But today's was the ugliest win yet. It had to do with minimum pension liability, a concept I've wrestled with for some time but have yet to grasp fully. After several minutes of scribbling, head-scratching, muttering, and resigned shrugging, my teammates and I pretty much gave up.... I certainly did, since I had the poorest grasp of minimum liability of any of the three of us. Only when the others had thrown up their hands and capitulated did I haltingly suggest a figure that I'd been toying with on my worksheet but was not at all sure of... As it turned out, although it was a shot in the dark, it turned out to be right -- and with a few more minutes of scribbling, we managed to come up with the correct answers to the quiz questions.

We have one guy who usually bails us out -- he's our Gorman Thomas -- other times, my other teammate comes through; today, I happened to be the one to break the mental logjam and get us going. This is why, on the peer-evaluation form we were given (to let the instructor know what we think of our teammates' performance so far), I evaluated us as follows (the form includes a space for self-eval):

Urb: "I'm pedaling as fast as I can."
Teammate 1: "She's pedaling as fast as she can."
Teammate 2: "He's a sharp guy."

At the end of class, though, our instructor observed that "There's going to have to be some serious studying between now and tomorrow night." Well, obviously, there will be -- but with all due respect, what does she think we've been doing all along?

Posted by Urbie at 12:13 PM | Comments (0)

September 23, 2005

One-two-three!

So, with exams in ACC 455 (Tuesday), 456 (Wed.), and 375 (Thurs.) on next week's agenda, plus one written assignment for each class, there isn't a lot of free time in my schedule. But I'm starting to get a better handle on pensions, at least. My strategy is to do at least one pension worksheet a day, every day until the exam -- the idea being to pound the formula into my head a little at a time, much like a pile-driver pounding a piling into the Earth. A pier with pilings sunk deep into the ground is going to withstand hurricane-force winds and waves a lot better than one that's just sitting there -- my hope is that I'll be able to pass a hurricane-force financial-accounting exam in much the same fashion, having sunk the pension pilings deep into the innermost recesses of my brain.

Posted by Urbie at 01:19 PM | Comments (0)

September 21, 2005

Struggling with pension accounting

I'm trying to get a handle on accounting for pensions -- specifically, defined benefit plans -- for an exam next Tuesday in ACC 455. This is one of those accounting topics that you can't figure out on the fly -- you just have to do enough of them that you memorize how it works. Such unintuitive concepts as the "Corridor Method" of amortization for unrecognized gains and losses... drive me nuts. (With the Corridor Method, you amortize the difference between the gain/loss of plan assets and 10% more or less than the Pension Benefit Obligation or the fair market value of plan assets. That is, you amortize anything outside the 10% "corridor" away from the PBO or plan asset value. The 10% figure is completely arbitrary -- a compromise between FASB, who wanted honest pension accounting, and sneaky corporate executives who wanted to smooth out fluctuations in their pension-plan assets.)

Why, I hear you asking, are they making us spend so much time learning the arcane details of defined-benefit accounting, when very few companies have defined-benefit pensions anymore? (A DB plan is an old-fashioned "company pension," where the employee doesn't have to pay in -- the company puts money aside to pay for the employee's retirement benefits. These days, most companies have "defined contribution" plans -- in the private sector, usually 401(k) plans -- where you put so much of your paycheck away, pre-tax, usually matched in part by company contributions.) Well, I chalk it up to conservatism on the part of the business school and the accounting faculty. Accountants are notoriously resistant to change.

In any case, I recommend buying one-week coffee futures....

Posted by Urbie at 01:14 PM | Comments (0)

September 17, 2005

When is a poor round a good round?

When it's on a beautiful day, on a nice golf course, in the company of some friendly strangers -- as was the case today, when I took a break from studying by going down to Prescott to tee it up at Antelope Hills. I showed up as a single and was sent out on the North Course, an old-style layout of considerable length, by my standards, at 6551 from the gold tees.

I didn't have a great round, but on the 11th hole, a 395-yard par-4 that doglegs slightly to the left and uphill, had one of those moments that make scores seem less important. I hit a solid tee shot (with the titanium driver that's so big, it's almost like cheating), but it faded a bit and crossed a cart path to the right of the fairway, leaving me some 160 yards to the green on a bare patch of hard ground with no grass at all. Having some overhanging trees -- as there are on almost every hole on the North Course -- I had to hit a low cut shot to put the ball on the green. I'm not carrying a 4-iron these days -- an oversight I may rectify, maybe taking the 9-wood out of the bag -- so I took a 3-iron and hit one of the best low cut shots I can remember. Starting it just to the left of the green, I faded the ball almost all the way across into the right greenside bunker, but fortunately not quite that far. It ran onto the green -- and, as it turned out, just off the back edge, from which point, I chipped back, then two-putted.

Nothing spectacular, in the greater scheme of things, but shotmaking is my favorite part of golf -- not just executing a shot, but manufacturing something a little unusual... like a low cut with a 3-iron from 160. That kind of shot, even more than a long tee shot or a birdie putt, makes the game worthwhile.

OK, so I did shoot a rather untidy 95. That's OK -- there was no money at stake.

I have to say, I like Prescott -- and not just because it has at least half a dozen public golf courses (compared with Flagstaff's one), although that's certainly a plus. If things had worked out differently, for Meg & Urb's Excellent Adventure, Career About-Face, and Great Western Land Grab, I would probably rather live in Prescott than Flagstaff. But that's neither here nor there, at this point.

Posted by Urbie at 09:16 PM | Comments (0)

September 15, 2005

Planning ahead -- way ahead!

I'm not used to looking for work a year ahead of the time I expect to start -- but that's what you have to do, as an accounting major. I'm trying to set up an interview with Ernst & Young when they come to NAU in a couple of weeks, and they sent back a note, asking for my top two preferences within the areas they practice, and where I want to go, etc.

I'm starting to think in terms of risk management and internal control reporting -- two areas not normally associated with brand-new accounting grads -- because that type of work would enable me to make use of my tech writing and process/procedure documentation background. With Sarbanes-Oxley and other corporate governance legislation coming to the fore, I'm hoping accounting and other consulting firms might be looking for manpower to document their clients' internal controls.

Meanwhile, the mighty NAU Trombone Choir is up and running again. We're going to have a good group this year, having added a couple of strong players. I may have to find more practice time!

Posted by Urbie at 10:14 AM | Comments (0)

September 14, 2005

Liquidating a partnership

This week's installment of Accounting 456 is dealing with partnerships, and specifically, with what happens when one goes out of business: liquidation.

When Meg and I set up Kafalas.com as an LLC organized as a partnership, our lawyer told us to spell out who puts in how much capital (at least on paper -- on the company's books, if not in reality) and who gets how much of the profits. We've never really paid much attention to that, in practice -- when the company draws revenue, we take it out based on who did the work (of which there hasn't been much lately). But for an active business, it's important to spell out exactly what each partner's portion of the capital -- how much he or she invests -- is, and how much of the profits each is entitled to.

This can be especially important when the business reaches the end of its useful life -- especially if it goes bankrupt. The chapter we've been reading on liquidation spells out how you turn the company's assets (if they're worth anything) into cash, pay off the creditors, and distribute what's left over among the partners. Or, if there's nothing left over, how you hit up the partners for additional investment to cover the company's debts.

With Kafalas.com, this isn't much of an issue -- the only asset on the books is a Mac G3, which we got in 1998 and which is now (a) fully depreciated and (b) essentially a boat anchor, since it won't boot. But if you have a partnership where the partners have invested a lot of their own money and equipment in the business, you need to have everything spelled out in the papers you draw up when you form the business in the first place.

Which brings me back to some wisdom I got from my high-school business-ed teacher, Mr. Pawelski: "Never go to work for a friend. Never hire a friend. Never go into business with a friend. And if you do, GET EVERYTHING IN WRITING!"

Posted by Urbie at 08:09 AM | Comments (0)

September 11, 2005

Caller ID and privacy issues

(Taking a short break from financial accounting homework)

I'm basically a privacy hawk -- I think corporations and the government have far too much access to our personal information, and that we should enact privacy legislation more like what they have in Europe.

But in another case of things not always being what they seem, I remember when Caller ID first came out as a public telephone service -- if I recall, this was in around 1988 or '89 or so. At my office, we used to have a VAX Notes bulletin board, and the discussions we had, when Caller ID was announced as an upcoming product, all centered around how intrusive and Orwellian we thought it was. Imagine the horror -- people being able to tell who you were, and where you were calling from, before they picked up the phone! Shocking!

But once Caller ID came into general use, I have to admit, any "privacy" concerns I'd had went completely out the window. With Caller ID, it was no longer necessary to let the answering machine pick up a call, then listen to the first part of the caller's message and decide whether or not to pick it up. If the caller was someone you knew, you could just pick up the phone immediately -- or, if not, you could just ignore it.

A few years ago, I wrote a couple of columns on telemarketing, including this one, which generated as many letters as any column I've written. Not long afterwards, Meg and I got a talking Caller ID unit, which proved to be one of the best products we've ever bought, because it allowed us to hear who the caller was before we even got up off the couch.

Since then, two developments have occurred that rendered the talking Caller ID unnecessary: (1) the National Do Not Call List, and (2) the fact that we don't use the land line for voice calls anymore, and telemarketing to cell phones is illegal.

Still, I never answer a call if I look at the ID and don't recognize the number. It now seems strange that when Caller ID was first announced, it seemed like a privacy nightmare!

Posted by Urbie at 10:51 AM | Comments (0)

September 09, 2005

Not what they seem

When I considered studying accounting, I was expecting that it would be a straightforward, cut-and-dried discipline that would dovetail nicely with my background in technical writing. As it turns out, I think the latter will prove true -- but not the former.

In accounting, there is hardly ever one "correct" answer -- in my tax class, the first thing Dr. Kilpatrick inculcated us with, on Day 1, was that the correct answer to any tax question is, "It depends."

Beyond that, in financial accounting, there are many tasks for which there are multiple, perfectly acceptable, ways to proceed. And in areas like revenue recognition, there are all kinds of ways to massage the numbers -- without doing anything illegal -- depending on what kind of spin you want to put on them.

This is frustrating at times, because as a technical writer and editor, I'm always looking for the best way to do whatever it is I'm doing. Accounting, however, allows for many "best" ways to do things -- this can get you into trouble, as we've seen with all the accounting scandals of recent years (Enron, Parmalat, etc.). Because when greedy executives put pressure on accountants to make the numbers turn out a certain way, it's tough to say no.

At my age, I like to think I'll be able to stand up to any superior who wants me to bend my sense of ethics to achieve a financial goal on paper. But it is not at all hard to see how some people have fallen short, when there are multiple "right" or "almost right" ways to account for business transactions.

Posted by Urbie at 02:32 PM | Comments (0)

September 05, 2005

Holiday weekend: 72 hours to study!

Well, not quite -- but I've been hitting the books, this Labor Day weekend, laboring over leases (ACC 455), partnerships (456), and taxes (375).

One issue that starts to come into focus, when you study accounting, is how taxes are structured -- and you start to wonder why they're set up the way they are. Several years ago, I wrote a column expressing my puzzlement that when I work as a technical writer in a W-2 capacity, I get taxed essentially on revenue, while if I do the same work as a 1099 consultant, I get taxed only on profit. I'm talking about doing exactly the same work here -- just doing it on someone else's payroll vs. doing it independently and getting a check from them as a contractor instead. (I'm well aware of the IRS's 20-questions test that they use to determine whether a contractor is really a contractor or an employee in disguise -- but I'm assuming that I pass the test to qualify as truly independent.) Why can't an employee deduct mileage to and from work, for instance? Does gas cost less because he's driving to a W-2 employer rather than a client?

Another issue -- one that liberals and conservatives are always fighting over -- is whether dividends should be taxed. The accounting community is unanimous that this constitutes "double taxation," since dividends come out of after-tax income, and that they therefore shouldn't be taxed. Capital gains are another one -- when I buy some shares of stock, I've already been taxed on that money, when I earned it. Why should I be taxed again, simply because I know where to put my money?

Less clear is whether or not corporations should be taxed. If you polled the students and faculty at the NAU business school, I'm sure they'd come out heavily against any corporate taxation, because after all, if you don't tax corporations, the money's not going away -- it's going to "flow through" to the corporation's owners and employees anyway, and they pay taxes. So although it may seem "obvious" that corporations should be taxed, maybe they shouldn't. On the other hand, you could argue that corporations should be taxed -- perhaps even taxed more than at present -- because that gives them an incentive to pay their employees more than would be the case with no corporate taxes.

These are the types of things an accounting student starts to spend a lot more time thinking about.

Posted by Urbie at 04:23 PM | Comments (0)

September 01, 2005

Attempts to control nature = futile

The tremendous flooding and destruction (not to mention looting and crime) in New Orleans and other parts of the Gulf Coast have been well documented in print, TV, blogs, and other media. But what isn't really being discussed -- perhaps now is not the time, but it's going to have to happen eventually -- is that we need to think more carefully about where it is and is not suitable to live.

People who build housing on flood plains, barrier islands, sand dunes, scenic cliffs on the West Coast, and such places need to understand the geography involved and the forces of nature. There is a good reason why insurance companies won't insure properties in a lot of these places -- they know that their destruction is inevitable.

A 1989 book called The Control of Nature, by John McPhee, described the elaborate efforts by the Army Corps of Engineers to control the Atchafalaya River in Louisiana -- it's a distributary of the Mississippi (a distributary is the opposite of a tributary -- it's one river that splits off from another). Millions of dollars have been spent, and millions of tons of earth moved, to prevent the river from doing what it naturally wants to do -- change course from time to time, as sediments are carried downstream.

The Mississippi itself is a larger version of this. The whole levee system that stretches along the river, artificially constraining it, is a maintenance nightmare, and it's a disaster waiting to happen -- as evidenced in the huge floods of 1993.

As any geography major can tell you, building an entire city below sea level does not make sense -- any more than building on a flood plain or coastal dune makes sense. Sooner or later, disaster is going to strike -- it's a matter of when, not if.

Predictably, some elements of the Green movement have claimed that Hurricane Katrina was the result of global warming. If you're a regular reader of my column, you know that I'm a skeptic on the subject. I don't go so far as to dismiss the idea that human activity may be affecting global climate -- but I argue that the evidence is much less clear than is commonly believed, and that there are many factors other than what we do to the air that affect climate. As far as the hurricane is concerned, well, it was a big one -- but it was by no means unique or the biggest hurricane we've ever seen. And again contrary to popular belief, hurricane activity is not significantly higher in recent years than in the past -- last year's total number of tropical storms in the Atlantic was almost exactly the 30-year average. It just looked like we had a bad hurricane season, because there happened to be four in a row that hit Florida. Unfortunate, but not significant in terms of climate trends.

What's the lesson? Nature is not under our control, and we'd do well to pay more attention to that when we make decisions on where we should live.

Posted by Urbie at 09:24 PM | Comments (0)