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Cover
Story
HealthSouth:
New kid on the scandal block --Amit Singh Sisodiya
The `accounting hall of shame' has a new entrant: HealthSouth,
the largest chain of rehabilitation hospitals in the US. The
US Securities and Exchange Commission has charged the company
and its chief executive Richard M Scrushy with a massive accounting
fraud, which went on for almost over a decade-and-a-half!
.
©
IUP . All Rights Reserved.
Financial
Reporting
Yes,
Employee Stock Options CAN Be Valued --William M Sinnett
Employee
stock options have long been alleged to be the most abused
perk paid by corporates. With regulators and standard-setters
gearing towards expensing stock options, concerns are being
expressed over the issue of valuing these stock options. Many
corporate experts feel that employee stock options cannot
be valued as the traditional Black and Scholes model fails
to capture the true value of stock options. But now the problem
appears to be solved. The financial executives research foundation
Inc. and Analysis Group/Economics have proposed two new valuation
modelsthe enhanced Black and Scholes and Merton model and
binomial model.
©
Financial Executive International (www.fei.org). March/April
2003. Reprinted with permission. Let
there be light on contingency --P S Kumar
Good
corporate governance is a prerequisite for a company to command
respect from its shareholders. The relation between auditor
and company management gains prominence in this regard. The
Department of Company Affairs (DCA) has appointed the Naresh
Chandra Committee to recommend a defined role of auditor-company
relationship. the committee has also touched upon accounting
aspects like contingencies for the benefit of the small shareholders.
©
Business Line, January 30, 2003. Reprinted with permission. Management
Options
for stock compensation --Nadine
Winter
Stock options have long been considered to be a long-term
financial reward that ties together shareholder and management
interests. But the recent history suggests that top executives
at many companies (Enron, WorldCom etc.) have violated this
basic premise behind stock options. With the obvious misuse
of stock options, now companies are forced to prepare executive
compensation programs that go beyond attracting and retaining
top talent and reinforce executive accountability for both
short and long-term results. These programs are designed to
reflect performance against company success.
©
CA Magazine, March 2003. Reprinted with permission from
CA magazine, published by the Canadian Institute of
Chartered Accountant, Toronto, Canada.
Intellectual
Property: Partnering for profit
-- Jeffrey J Elton, Baiju R Shah and John N Voyzey
Intellectual property has been a subject
of discussion for long. As companies are moving towards services
sector, intellectual property carries substantial weightage
among other intangible assets and it can become the reason
for the success and failure of any business today. A proper
use of the intellectual property can enable companies to boost
their operating income by sale of patents and proprietary
processes.
© 2002. McKinsey & Company. All Rights Reserved.
This article was originally published in The McKinsey Quarterly,
2002 Number 4 Technology, and can be found on the publication's
website, www.mckinseyquarterly.com. Reprinted with permission.
Corporate
Finance
Off-Balance
Sheet Financing:The Road Ahead -- Randy Myers
The Financial Accounting Standards
Board has recently passed new rules on off-balance sheet financing
that are expected to increase the cost of capital for companies.
The new rules, coupled with closer scrutiny, raise doubts
that such financing will continue to serve the purpose as
such. Companies that have to consolidate off-balance sheet
entities are forced to report higher leverage than before,
which may increase the cost of new public-debt offerings for
them. Other companies could find such financing more expensive
because of the extra legal and banking work involved.
© CFO Publishing Corporation 2003. All rights reserved.
CFO Magazine, March 2003. Reprinted with permission.
Originally published as `Anxiety's Price'.
Financial
Accounting
Intellectual
Property and its Significance for Business
-- Swagota Kotoky and Sudhir Raja Ravindran
In today's dynamic and competitive business environment Intellectual
Property (IP) rights are key elements needed to maintain a
competitive edge in the market. IP is a business asset and
an integral part of the business process. Effective acquisition,
management, and protection of intellectual property can make
a difference between success and failure in businesses.
© Swagota Kotoky and Sudhir Raja Ravindran, Intellectual
Property Division, Surana & Surana International Attorneys,
224, NSC BOSE Road, National Insurance Building, Chennai -
600 001, iplaw@lawindia.com. Reprinted with permission.
Valuation Brand
Valuation - an Applied Finance Perspective --Santanu Ray
Companies of late have realized the importance of a brand
and started investing huge amounts in promotional activities
in an attempt to get their brand noticed by the customers.
This goes to show that brands carry value. But how does one
evaluate a brand? There is a dearth of appropriate brand valuation
models and with the ever rising awareness of the importance
of brands among companies, efforts to come up with effective
brand valuation models have increased.
©
IUP . All Rights Reserved.
Forensic
Accounting
Action
and ethics --Glen Moulton
To combat fraud, companies need to have a fraud ethics policy
that shows the company's desire to prevent frauds. The company
should send a clear message that it values integrity and effort,
not merely financial performance, in all its dealings with
staff, customers and suppliers. The fraud ethics policy must
state that all suspicions and reports of fraud will be treated
seriously and investigated. The article deals with the implementation
of a fraud and ethics program in companies.
©
www.accountancysa.org. Reprinted with permission.
Speech
SEC
Speaks on its twofold Mission --William H Donaldson
The
new Chairman of the SEC, William H Donaldson is faced with
a daunting task of restoring the confidence of stakeholders
in the regulatory body, after the commission got into troubles
largely due to the former chairman Harvey Pitt. In his remarks
at the Practising Law Institute, the new chairman unveiled
his mission, which consists of two partsthe internal that
deals with the affairs of the SEC and the external that of
restoring the trust of shareholders on corporates through
adequate means.
©
www.sec.gov. Reprinted with permission
Governance
and Ethics
How
to Find Directors for the Audit Committee -- Rob
Norton
The recently passed Sarbanes-Oxley Act has made it mandatory
for companies to have financial experts as independent directors
and members of audit committee. As a result, corporate boards
are on hunt to recruit people who qualify as financial experts
under the Sarbanes-oxley Act. The rush to add financial expertise
will consolidate the trend towards adding experts of greater
diversity on boards. The responsibilities and risks are big
under the Sarbanes-oxley Act, the spotlight bright, and the
seats are tough to fill. But there are many candidates out
there, if one looks at the right place.
©
Corporate Board Member, (www.boardmember.com), March-April
2003. Reprinted with permission.
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