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Chapter 2 - resources beyond the Financial Accounting Research System
(fars) TEACHING NOTES FOR INSTRUCTOR TO GUIDE DISCUSSION: Researching Accounting and Business Issues RESOURCES BEYOND FARS outline Page Number INTRODUCTION TN2-1
OVERVIEW TN2-2
IDEAS FOR INITIATING DISCUSSION ON EXERCISES A THROUGH F TN2-3
PERFORM LITERATURE SEARCHES
.Exercise A TN2-3
Compare Search Engines
.Exercise B TN2-15
Use Internet Resources
.Exercise C TN2-23
Access EDGAR & PCAOB Sites
.Exercise D TN2-34
Use Special-Purpose Databases
.Exercise E (Depending on which Databases are Accessible) TN2-48
.Exercise F - Identify the Acronym - Internet Puzzle TN2-91 Introduction THIS DISCUSSION GUIDE IS A RESOURCE FOR INSTRUCTORS, PROVIDING AN OVERVIEW
OF THE MATERIALS IN CHAPTER 2. IDEAS ARE HIGHLIGHTED FOR INITIATING
DISCUSSION RELATED TO EACH OF THE EXERCISES A THROUGH F. AN IMPORTANT
MESSAGE IS THAT MANY RESOURCES ARE ACCESSIBLE ON THE INTERNET AND IN
UNIVERSITY AND PUBLIC LIBRARIES THAT AUGMENT FARS AND CAN BE VALUABLE WHEN
EXPLORING A RESEARCH QUESTION. Note that resources often go by different names over time, since one
company may sell a database to another. For example, COMPUSTAT is a well-
known resource for financial information but has at various times been
associated with Standard & Poor's and a variety of PC versions, including
"Standard & Poor's Research Insight Compustat PC." Universities may
subscribe to such services as ReferenceUSA -- an infoUSA Company with
details on Business (more than 14 million U.S. businesses), Canadian
Business, and International Business. Quick searches can be performed and
customized to focus on SIC codes, certain sizes of business, and various
details on financial health, as examples. Mergent Online has detailed
information on 11,000 U.S. public companies. Thomson One Banker provides
corporate, industry, and market financials. Value Line Investment Survey
and Analyzer describes approximately 1,700 stocks and over 90 industries,
alongside the stock market and the economy. Dun's Regional Business
Directory reflects the composition of local industry. Information is
accessible on both private and public companies. Encourage students to explore the resources to which they have access for
analysis and integrate them into assignments in Chapter 2. Also point out
to the students how valuable these tools will be throughout the business
curriculum. Numerous Internet sources exist for financial information,
including The Annual Reports Library at http://zpub.com/sf/arl/ that has
been on the web since December 1997, but practically speaking, many company
and organization web sites permit their annual reports to be accessed and
downloaded in pdf files. Overview CHAPTER 2 PROVIDES AN OVERVIEW OF KEY RESOURCES THAT ARE RELEVANT WHEN
RESEARCHING ACCOUNTING AND BUSINESS ISSUES. ATTENTION IS ACCORDED TO HARD-
COPY RESOURCES, THE INTERNET, SEARCH ENGINES, VARIOUS WEB SITES, SOFTWARE
TOOLS, KEY REGULATORS' SITES, AND SPECIAL-PURPOSE DATABASES. BLOGS AND
WIKIPEDIA ARE DESCRIBED TO MAKE STUDENTS AWARE OF HOW SUCH RESOURCES DIFFER
FROM TRADITIONAL PUBLISHED MEDIA. (NOTE THAT IN DECEMBER 2006, THE SEC WAS
DESCRIBED AS CONTEMPLATING THE ROLE OF BLOGS AS INFORMATION RESOURCES OF
USE IN THE MARKETPLACE. ACTION WAS TAKEN TO PERMIT CERTAIN DISTRIBUTION OF
INFORMATION BY REGISTRANTS VIA THE INTERNET. THESE ARE DEVELOPMENTS TO
WATCH!) Chapter 2 then sets forth a case involving a small company that had an
initial public offering, and as a public company was the subject of a SEC
matter related to its revenue recognition. Related exercises focus on how
literature searches, search engines, Internet resources, EDGAR, and PCAOB
sites, as well as special-purpose databases including FARS can provide
information relevant to understanding the case setting and analyzing
targeted questions. Exercise F tests students' ability to identify an
acronym. Some of these acronyms are displayed within Chapters 1 and 2, but
many will require that the student use the Internet to solve the crossword
puzzle assignment "backwards." Instructors will want to point out that acronyms change over time as
organizations change their names. As one example, the AIMR represented
Association for Investment Management and Research but in May 2004, the
AIMR was renamed the CFA Institute, where CFA relates to Chartered
Financial Analysts. In December 2006, the NYSE merged with Euronet.
Intermittently you will see a subhead label "IDEA:" within these Teaching
Notes. These subheads are uniform, to facilitate your use of "find"
capabilities in your word-processing software, for easily reviewing
additional ideas of approaches to discussing issues that tie to recent
events affecting the area on which the assignments are focusing or
suggestions for effective approaches to elaborating on a particular topic. Ideas for Initiating Discussion on Exercises A through F
.EXERCISE A - PERFORM LITERATURE SEARCHES 1. Locate any media coverage concerning TenFold Corporation and, in
particular, the enforcement proceedings to which the December 2005
announcement relates. Based on your reading of the articles, explain the
nature of the allegations that TenFold Corporation and its officers
faced.
At the sec.gov site, the enforcement release can be accessed. This
resource describes the various allegations.
"U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 17852 / November 20, 2002
Accounting and Auditing Enforcement Release No. 1669 / November 20,
2002
Securities and Exchange Commission v. TenFold Corporation, Gary D.
Kennedy, Robert P. Hughes, Stanley G. Hanks, and Wynn K. Clayton, Case
No. 02-2284 JDB (D.D.C.)
The Securities and Ex[c]hange Commission (the "Commission")
announced today that it filed a civil action in the United States
District Court for the District of Columbia against TenFold
Corporation ("TenFold"), a software development company based in
Draper, Utah, and four of TenFold's former officers or employees. In
its complaint, the Commission alleges that TenFold, Gary D. Kennedy
(TenFold's former president and CEO), Robert P. Hughes (TenFold's
former CFO), Stanley G. Hanks (TenFold's former controller), and Wynn
K. Clayton (the former controller of TenFold's insurance subsidiary)
fraudulently misrepresented or failed to disclose important
information about TenFold's contracts, operations, and earnings in
certain of TenFold's 1999 and 2000 filings with the Commission.
According to the complaint, each of the individual defendants also
sold TenFold stock in February 2000, collectively reaping significant
unjust profits. TenFold has consented to the entry of an injunction
against it.
Specifically, the Commission alleges that TenFold, Kennedy, and
Hughes fraudulently failed to disclose the nature of two unusual
transactions in TenFold's registration statement for its May 1999
initial public offering ("IPO"). For one of these transactions,
TenFold allegedly manipulated the terms of a contract to recognize a
significant portion of revenue earlier than it otherwise would have.
Because of this acceleration of revenue, TenFold showed a profit
rather than a loss in 1998, the year preceding its IPO. For the second
transaction, TenFold agreed to allot an unusually large number of
shares in its IPO to a significant customer in return for the
customer's agreement to delete contractual language that restricted
TenFold's ability to recognize revenue. As a result, TenFold was again
able to accelerate its revenue recognition and show a profit rather
than a loss, this time for the first quarter of 1999, the period
immediately preceding its IPO.
The Commission also alleges that TenFold, Kennedy, Hughes, and
Hanks fraudulently failed to disclose in TenFold's 1999 annual report
and first quarter 2000 quarterly report the ongoing and pervasive
problems TenFold was experiencing with completing its large software
development contracts. Among other things, TenFold allegedly misled
investors by listing in these filings numerous risks as possible
outcomes, rather than disclosing that many of these outcomes were
actually occurring at the time of the filing. The Commission further
claims that TenFold, Kennedy, and Hughes made false or misleading
statements in a February 2000 telephone conference with analysts when
they discussed TenFold's operations and financial results for the
fourth quarter of 1999 and the 1999 fiscal year.
According to the complaint, TenFold, through Kennedy, Hughes,
Hanks, and Clayton, also materially overstated TenFold's earnings in
press releases and filings related to TenFold's fourth quarter of
1999, 1999 fiscal year, and first quarter of 2000. These
overstatements resulted from TenFold's use of incorrect data to
calculate revenue recognized on three large projects. The Commission
alleges that each of the individual defendants knew that this data was
wrong and is responsible for the fraudulent financial reporting. The
Commission further alleges that Hughes provided misleading information
to TenFold's independent auditor whe