Discussions Directions
Keep in mind that your discussion forum postings will likely be seen by other members of the course. Care should be taken when determining what to post.
Post a link to an article from Wall Street Journal (published in the last 60 days before this post) on anyone (or combinations) of these topics:
accounting income misrepresentation,
earnings management, or
corporate fraudulent reporting
Financial statement
Book value and market value
Income, cash flow, and forecasting
Costs of capital
The Post
Please summarize the article/events, comment on how it relates to the topics mentioned, and how it applies to the financial analyses of current performance, growth and forecasting future performance.
You will be evaluated on how current the article is, how closely it relates to the respective topics mentioned and the quality of the contribution to the discussion in class. Your post should be 200-250 words.
The Response
Once you have posted your article, visit two (2) of your fellow classmate’s article posts and provide some feedback. “I agree/disagree” or “Great Article” is not acceptable. Provide a response that amounts to substantive discussion on the issues put forward in the original post. To better respond, you may need to review the WSJ article to provide your points of view. Your response posts should be 100-150 words.
Please respond to these following posts. Please also include AI and plagarisim report
1) Fraudkuna
Summary
The article discusses a ruling against Donald Trump and his business for inflating asset values in paperwork submitted to lenders. Judge Arthur Engoron ordered Trump to pay $355 million and banned him from being an officer for any New York corporation for three years. Trump was found to have manipulated Statements of Financial Condition (SFCs), including falsely claiming the size of his triplex in Trump Tower. Testimony from business partners revealed withheld records and reliance on misrepresented valuations by lenders. While Trump’s actions may have affected loan terms, the article questions the severity of the punishment, arguing that no financial loss occurred. The case, brought by New York Attorney General Letitia James, is criticized as politically motivated, with concerns raised about targeted civil prosecution. Trump plans to appeal the verdict, while the article highlights potential implications for business dealings in jurisdictions where politicians influence legal proceedings.
1. How this article relate to accounting income misrepresentation.
This article discusses how Donald Trump and his business were found liable for inflating asset values in paperwork submitted to lenders such as “…claiming that his 11,000-square-foot triplex in Trump Tower was actually 30,000 square feet” (The Editorial Board, 2024). This manipulation of asset values could be seen as misrepresenting the financial health and assets of the business, which is a form of accounting income misrepresentation (Thomson Reuters, 2023). The article also highlights instances where financial documents, such as Statements of Financial Condition, were allegedly manipulated to present a more favorable financial picture to lenders. Additionally, it mentions that certain individuals involved in the process, such as an accountant at Mazars, stated that they would not have issued the financial documents if they had known about the misrepresentation. Overall, the article portrays actions that align with the concept of accounting income misrepresentation.
How does this article apply to the financial analyses of current performance, growth, and forecasting future performance?
The article detailing legal challenges faced by Donald Trump’s business offers crucial insights for financial analyses across various dimensions. Firstly, analysts can assess the immediate impact on the company’s current performance, considering the financial penalties imposed and the restrictions on Trump’s involvement in New York corporations. These factors may influence the company’s financial health and stability. Secondly, the article highlights potential constraints on growth stemming from negative publicity and reputational damage. Analysts must evaluate how these factors may impede investor confidence, financing opportunities, and expansion efforts. Thirdly, forecasting future performance requires careful consideration of ongoing legal battles and associated liabilities. The uncertainty surrounding legal outcomes and the possibility of further legal actions add complexity to future financial projections. Moreover, risk assessments must account for the financial and reputational risks posed by the legal challenges. Finally, the article sheds light on broader market trends related to corporate governance and ethical business practices, which analysts can use to benchmark the company’s performance and competitive positioning. By incorporating these insights, analysts can provide stakeholders with informed recommendations and support strategic decision-making amidst legal uncertainties.
References
The Editorial Board. (2024, February 16). Trump’s $355 Million Civil Fraud Verdict. Retrieved from The Wall Street Journal: https://www.wsj.com/articles/donald-trump-355-million-civil-fraud-verdict-arthur-engoron-trump-organization-dde7e87b?mod=article_inlineLinks to an external site.
Thomson Reuters. (2023, June 16). How to spot accounting fraud. Retrieved from Thomson Reuters Tax & Accounting: https://tax.thomsonreuters.com/blog/how-to-spot-accounting-fraud/Links to an external site.
2. Jimmy buckets
WSJ – ADM misrepresentation of funds
https://www.wsj.com/business/earnings/adm-discloses-justice-department-probe-into-accounting-64336d37?mod=Searchresults_pos5&page=1Links to an external site.
The article for this discussion that I chose was by Patrick Thomas in regards to Archer Daniels Midland which is under investigation by the Department of Justice over the agricultural company accounting practices. ADM is one of the biggest food chain suppliers with about 94 billion dollars in sales in 2023. The company buys crops and sells them to food companies, the government, and other buyers globally while running a processing plant that turns oilseeds and grains into vegetable oil, fuel, livestock feed, and other products.
Current and former employees have received subpoenas from the Justice Department which was prompted by a document from the Securities and Exchange Commission. According to the article, it said the company’s accounting review found that some products sold internationally between business divisions were priced at a discount rate compared to their market rate. The review covered the years 2018 – 2023 where the company lowered some past operating profits from its nutrition business by tens of millions of dollars while slightly raising profits in its other 2 main units.
The article stated that “The accounting investigation at ADM follows an investigation by ChemoursLinks to an external site. last week that found that its top executives shifted cash flowsLinks to an external site. at year-end to hit targets that determined their annual stock and bonus awards. The chemical company had placed its CEO, CFO, and chief accounting officer on administrative leave.” The article stated that pressures and demands of the agricultural industry due to falling crops, and net farm income that is expected to decline by 26% this year that commodity traders like ADM typically get an earning boost from higher commodity prices when shortages, extreme weather or war lead to more volatility in the grain markets.
