Unlikely Alliance Memo free essay sample

Florabama is an energy venture classified as a variable interest entity (VIE) of its two investors – Meyer Inc. and Saban Company. Meyer and Saban own 60 percent and 40 percent of Florabama respectively and the profit and losses are split according to ownership percentage. According to the terms of the venture arrangement, Saban is permitted, but not required, to purchase up to 20 percent of the power produced by Florabama at cost plus. The cost-plus arrangement between Saban and Florabama represents a variable interest in that Saban absorbs variability in Florabama through the cost-plus pricing terms. The questions facing us are the following: Because Florabama is a variable interest entity, what are the business activities of Florabama that most significantly impact the entity’s economic performance? And should the cost-plus arrangement between Saban and Florabama be considered in the determination of the consolidating entity? In this memo I will first discuss the issue of consolidation common to all alternatives, and then explain how Meyer Inc. We will write a custom essay sample on Unlikely Alliance Memo or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page r Saban Company could consolidate Florabama according to US GAAP. Finally, I will recommend which entity is the controlling interest, and in effect, should consolidate Florabama to its financial statements. Discussion of Alternatives In either alternative, there is no question that since Florabama is classified as a variable interest entity, it needs to be assessed whether Meyer or Saban is the VIE’s primary beneficiary according to ASC 810-10-25-38A. As defined in ASC 810-10-15, the primary beneficiary is an entity that consolidates the variable interest entity. In the past, the determination of the controlling financial interest was done by simply establishing which entity owned the majority of the subsidiary in question. Now according to ASC 810-10-25-38A, an entity is deemed to have a controlling financial interest in a VIE if it has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could both potentially be significant to the VIE. In the following two alternatives, Meyer and Saban will be analyzed for evidence of meeting the two characteristics to be appointed the primary beneficiary and consolidator of Florabama. US GAAP Alternative A: Meyer Inc. meets both of the characteristics of the primary beneficiary requirements as stated in ASC 810-10-25-38A and thus Florabama’s financials are consolidated up to Meyer Inc’s financial statements. In determining the power to direct the activities of a VIE that most significantly impacts the entity’s economic performance, the purpose and design of a legal entity must be evaluated (ASC 810-10-25-25). Through analysis of the business risks incurred in ASC 810-10-25-24, the most significant risk is the operations risk, commodity price risk, and also environmental risk. These risks are directly related to the strategic decisions regarding the operations of Florabama, such as operating and capital budgets, pricing of the power produced. These are the most significant activities regarding the economic performance of Florabama. According to the case information, these decisions are presented to the board and implemented by a simple majority vote among the ten members of the board of directors. Because Meyer has six board members out of the total ten board members, Meyer has â€Å"the power to direct the activities †¦ that most significantly impact [Florabama]’s performance† through the majority on the board of directors. The second characteristic of losses and benefits that could be potentially be significant to Florabama is simply the fact that Meyer receives 60 percent of the profits and incurs 60 percent of the losses. ASC 810-10-25-38 states that the characteristic is based off absorbing a majority of the losses and receive a majority of the expected residual returns. The important change from majority (paragraph 38) to significant (paragraph 38A) does not change the fact that the characteristic is met because of this 60 percent incurred benefits and losses from Florabama. US GAAP Alternative B: Saban Company meets both of the characteristics of the primary beneficiary requirements as stated in ASC 810-10-25-38A and thus Florabama’s financials are consolidated up to Saban Company’s financial statements. The activities that most significantly impact the economic performance of Florabama can be determined to be the day-to-day operations of the business (revenues, expenses, etc). These decisions are defined as the CEO’s right and responsibility in the terms of governance. The CEO of Florabama continues to be an employee of Saban and as such, Saban is appointed the entity that holds the power to direct the activities that affect the economic performance of Florabama the most. The losses incurred and future expected benefits that could be significant to Florabama are attributable to Saban through a combination of 40 percent variable interest through ownership percentage and the cost-plus arrangement between Saban and Florabama. According to ASC 810-10-25-20, the cost-plus arrangement is a variable interest and as such, expected benefits and losses significant to Florabama are attributed directly to Saban. Recommendations US GAAP: We recommend Alternative A to account for the consolidation of Florabama. Both Meyer and Saban incur future significant losses and receive expected significant returns, so the main issue is the determination of which entity holds the power to direct the activities that most significantly impact the economic performance of Florabama. These activities, as indicated in Alternative A through risk analysis, are the strategic decisions regarding the operations of Florabama, such as capital and operating budgets and the pricing of power produced. These activities are all implemented by the majority vote by the board of directors, so Meyer Inc. holds the power to direct these activities with six board members out of the ten total members. I recommend that Meyer Inc. is the primary beneficiary and controlling interest, and as such, has the obligation according to ASC 810-10 to consolidate its financial statements to include Florabama’s financials.

Free Essays on Chiropractors

Using basic herbs for medicinal purposes? Never! Most general practitioners would balk. Dating back to the times of the Neanderthal man, living off the land also meant healing off of it. â€Å"Chiropractors use natural medicines to promote general well being and to increase immunities† (Klein). Through the neurological system, parts of the body are connected that wouldn’t be expected. By using this information, Chiropractors can heal a multitude of problems and illnesses. Once very rare in the United States, there are now over 50,000 practicing Chiropractors. Despite being considered an alternative approach to health care, a license is still required to practice in the United States, or anywhere else for that matter. To achieve this, at least two years of college classes (an associates degree) is a prerequisite, but a full four years (a bachelor’s degree) allows a head start. After the undergraduate work is completed, the prospective Chiropractor would apply to and attend Chiropractic school, which can last anywhere from three to six years. During Chiropractic school, anatomy is studied intensely, along with other pertinent subjects. Once licensed and thrown into the working field, Chiropractors can earn anywhere from $20,000 to $200,000, depending on location and clientele base (Workers, 442-443). Chiropractic care, as we know it today, wasn’t established until 1895 by Daniel D. Palmer. He was said to believe that â€Å"deviations of the spinal column, or subluxations, were the cause of practically all diseases and that Chiropractic adjustments was the cure† (Workers, 441). He wasn’t the first to think this way. Dating as far back as 2700 BC, Chinese healers used a method very similar to the ones used to day. Hippocrates, known as the father of medicine, is recorded around 400 BC having used spinal manipulation to heal ailments in other areas of the body. Some other lesser known people are Galen, a renowned G... Free Essays on Chiropractors Free Essays on Chiropractors Using basic herbs for medicinal purposes? Never! Most general practitioners would balk. Dating back to the times of the Neanderthal man, living off the land also meant healing off of it. â€Å"Chiropractors use natural medicines to promote general well being and to increase immunities† (Klein). Through the neurological system, parts of the body are connected that wouldn’t be expected. By using this information, Chiropractors can heal a multitude of problems and illnesses. Once very rare in the United States, there are now over 50,000 practicing Chiropractors. Despite being considered an alternative approach to health care, a license is still required to practice in the United States, or anywhere else for that matter. To achieve this, at least two years of college classes (an associates degree) is a prerequisite, but a full four years (a bachelor’s degree) allows a head start. After the undergraduate work is completed, the prospective Chiropractor would apply to and attend Chiropractic school, which can last anywhere from three to six years. During Chiropractic school, anatomy is studied intensely, along with other pertinent subjects. Once licensed and thrown into the working field, Chiropractors can earn anywhere from $20,000 to $200,000, depending on location and clientele base (Workers, 442-443). Chiropractic care, as we know it today, wasn’t established until 1895 by Daniel D. Palmer. He was said to believe that â€Å"deviations of the spinal column, or subluxations, were the cause of practically all diseases and that Chiropractic adjustments was the cure† (Workers, 441). He wasn’t the first to think this way. Dating as far back as 2700 BC, Chinese healers used a method very similar to the ones used to day. Hippocrates, known as the father of medicine, is recorded around 400 BC having used spinal manipulation to heal ailments in other areas of the body. Some other lesser known people are Galen, a renowned G...

Changes in Leadership and CEO Succession slp Assignment

Changes in Leadership and CEO Succession slp - Assignment Example It had all worked out very well and everybody was used to the way things were being run for the last twenty years. This was also possible because the company had been only manufacturing one product. With time, however, the company branched into other products and the company grew bigger putting a strain on the finance department to perform both roles of human resource and finance as it had always done. Tensions started between departments and the finance office due to delays in processing as the department was understaffed. There were delays in supply procurement, staff requests and other general work requirements. In hindsight, these issues could have been solved very amicably through adding more staff to the department and assigning the different responsibilities to individual persons in the department. Unfortunately, the finance department as a unit took the many complaints against it as an all out war set out to discredit the department when the matter was raised at a general sta ff meeting. The finance department developed very fierce hostility towards all the other departments in the company. The senior management of the company put the finance director on a six-month compulsory leave pending investigations. He refused to comply with the decision and reported as usual to the office refusing to hand over anything. His contract was terminated and, the department was divided into two departments. This was the human resource and finance departments with two new mangers to led them. Nearly everybody was happy with the management’s decision to remove the finance director. However, there was a lot of confusion and quite a number of crises that surrounded that action. It would have worked out better for the management if they had worked out the changes needed in the company after the Lewin’s model of organizational change and transition (Lippitt, 1958). The company would have had time to weigh the pros and