Ted's Teas: A Two-Part Accounting and Audit “Crossover Case”*

This fictional case is based on a real specialty tea company in Nova Scotia. Ted's Teas is a two-part crossover case that illustrates the integration of financial accounting and audit learning outcomes applied to real-world scenarios. In Part 1, students assume the role of an internal accountant and apply knowledge of the Chartered Professional Accountants (CPA) of Canada's CPA Way to identify how to treat leases, changes in policy, and estimates as part of accounting knowledge under both Accounting Standards for Private Enterprises and IFRS frameworks. In Part 2, students “cross over” and change roles, so they are now external auditors for Ted's Teas, tasked to provide an analysis of risk of material misstatement, recommend an audit approach, and develop substantive procedures. This two-part case presents opportunities for students to demonstrate technical competence in multiple areas, either separately in two different courses or combined in one “capstone” or case course. The case and teaching notes, including the marking rubrics, were adapted from principles used to train and evaluate CPA Professional Education Program candidates, tailored to an appropriate level for undergraduate and graduate learners.     

Paper and Hill: An In‐Class Corporate Governance Case

Corporate governance is a set of rules and processes that help ensure that firms are effectively run for the benefit of their stakeholders. Good corporate governance is predicated on having directors fulfill their fiduciary duties while acting as stewards of the corporation. The fact that good corporate governance is essential to a well‐functioning and prosperous society is reflected in CPA Canada's Strategy and Governance competency. Unfortunately, there are few in‐class Canadian corporate governance cases that instructors can use to help accounting students improve their understanding of these three fundamental governance concepts: director duty of care, director duty of loyalty, and the business judgment rule. This Canadian corporate governance case is based on the actual events regarding the approval of Steven Hill's employment contract as the Chair of Paper Enterprises Inc. The case is presented using PowerPoint slides, rather than in a traditional narrative format, as it intended to be used as an in‐class case that does not require advance student preparation.     

Activity‐Based Costing in a Challenging Business Environment: An Instructional Case

This cross‐disciplinary case study uses the concept of the Production Sharing Agreement (PSA) in the upstream petroleum industry to demonstrate the application of activity‐based costing in a challenging international business environment. The case is designed and implemented to encourage students to critically address and solve legal, operational, and accounting challenges from a global perspective. This case is intended to be an appropriate hands‐on, experiential tool for undergraduate degree‐level managerial accounting classes. The learning objectives of this case include (i) to develop an understanding of the PSAs and identify their potential related challenges; (ii) to apply activity‐based costing using a multiple‐step approach in a unique, international, realistic, and challenging environment; and (iii) to identify the gaps between the current case activity‐based costing application and IFRS.     

Accounting Students’ Planning,Writing, and Performance on a Time‐Constrained Case Analysis: Effects of Self‐Talk and Prior Achievement

When writing a case analysis, most students first allocate time to plan the content and structure of their response, and then proceed to write with differing degrees of urgency, the outcomes of which are case responses of differing quality. This study examines the extent to which planning time influences writing urgency and, ultimately, the quality of case responses in a time‐constrained setting. It also investigates whether these behaviors and outcomes depend on students’ frame of mind, by experimentally inducing differing types of pre‐examination self‐talk. Analyses show that planning time was negatively associated with writing urgency; students who spent more time planning subsequently wrote with less urgency. Writing urgency was positively associated with case response quality and, after controlling for differences in writing urgency, planning time was positively associated with response quality. Results indicate that different planning and writing behaviors can be induced by different forms of self‐talk prior to the writing task. Relative to interrogative self‐talk (“Will I …?”), exclamatory self‐talk (“I will …!”) caused higher‐achieving students to spend more time planning, but then write with less urgency and subsequently produce lower‐quality case responses. Conversely, after engaging in exclamatory rather than interrogative self‐talk, lower‐achieving students spent less time planning but then wrote with greater urgency and produced higher‐quality responses. These results indicate that (i) planning significantly affects writing and performance, (ii) students can influence their own planning behavior through pre‐task self‐talk, but (iii) pre‐task self‐talk can be beneficial or detrimental depending on students’ prior achievement.     

La Chevrotière,Coopérative agro‐alimentaire*

L'histoire de La Chevrotière est celle du développement d'une coopérative agricole en milieu rural québécois. Fondée en 1925, la coopérative La Chevrotière a connu une croissance contrôlée en étant à l'affût d'occasions d'affaires correspondant à son orientation de développement, pour et par le milieu agricole régional. Ses principaux secteurs d'activité étaient ceux de la machinerie agricole et de l'approvisionnement de la ferme. Par la suite, La Chevrotière a étendu ses activités aux secteurs de la production porcine, du fromage et de la transformation du lait (beurre et crème glacée). La coopérative emploie aujourd'hui 738 personnes. Le cas se déroule le 9 janvier 2006, lors d'une réunion du conseil d'administration ayant pour objet l'analyse des résultats financiers de l'exercice terminé le 31 décembre 2005, la révision du plan stratégique triennal et l'approbation du budget de fonctionnement pour le prochain exercice. C'est la première fois en dix ans que la coopérative n'a pas atteint ses objectifs financiers. De plus, les membres du conseil d'administration doivent choisir, parmi trois projets d'investissement majeurs, lequel s'arrime le mieux à leur plan stratégique triennal. Nota: Une version anglaise de ce cas ainsi que les notes d'enseignement en français et en anglais sont également disponibles. Les notes d'enseignement relatives aux cas didactiques ne sont pas publiées dans la revue mais sont mises à la disposition des abonnés qui sont membres à part entière de l'ACPC, dans une zone du site Web de l'ACPC protégée par un mot de passe. Rendez‐vous à l'adresse https://www.caaa.ca/fr/publications-et-recherche/perspectives-comptables-pc/notes-p%C3%A9dagogiques/ pour pouvoir consulter ces notes. The “La Chevrotière” case tells the story of the development of a food co‐operative ("Co‐op") located in rural Quebec. Founded in 1925, the La Chevrotière Co‐operative has enjoyed regular growth by pursuing business opportunities aligned with the Co‐op's path of development ‐ for and by means of regional agriculture. Initially, its two main sectors of activities were farm machinery and agricultural supplies. With time, La Chevrotière has extended its activities to include pork production, cheese making, and milk processing (butter and ice cream). Today, the Co‐op has a staff of 738. The case unfolds on January 9, 2006, during a board of directors meeting whose purpose is to analyze the financial results of the period ended December 31, 2005; to review the three‐year strategic plan; and to approve the operating budget for the next period. This is the first time in 10 years that the Co‐op has not attained its financial objectives. Moreover, the members of the board of directors must take a hard look at three major investment projects and choose the one which fits in best with their three‐year strategic plan.     

A knowledge‐based framework for incorporating investor's preference into portfolio decision‐making

This paper describes a framework for the integration of a rule‐based system capable of identifying an investor's risk preference into a quantitative portfolio model based on risk and expected return. By inferring rules consisting of an investor's objective and subjective risk preferences, the integrated methodology provides the assets suitable for the preferences. Through investment in the portfolio composed of the assets, the investor is able to obtain the following bene?ts: reduction of costs and time spent to determine target assets, and alleviation of anxiety from ‘out‐of‐favor’ assets. The framework is applied to the development of a knowledge‐based portfolio system for constructing an investor's preference‐oriented portfolio. In the procedure of the system for ?nding an optimal portfolio, the system uses an arti?cial intelligence method of a case‐based reasoning to obtain preference thresholds for an investor when the investor's past investment records are available. Experimental results show that the framework contributes signi?cantly to the construction of a better portfolio from the perspective of an investor's bene?t/cost ratio than that produced by the existing portfolio models. Copyright © 2004 John Wiley & Sons, Ltd.     

Goode Food Trucks Inc.*

This fictional case centers around a young Dutch couple who emigrated to Canmore, Alberta. Upon arriving, Saul and Rens opened two successful food trucks and are now looking to promote each truck's main chef to truck manager. They plan to offer a performance bonus based on the net income of each truck and have requested a local accounting student to advise them on the new bonus structure. Goode Food Trucks Inc. presents an opportunity for students to demonstrate technical competence in managerial accounting (rate methods, period cost allocation, and data visualization); strategy and governance (employee performance incentives); and financial reporting (reporting needs) while incorporating enabling competencies (communicating and adding value). The case and teaching notes were adapted from principles used to train and evaluate Chartered Professional Accountant (CPA) candidates and tailored to an appropriate level for undergraduate learners. MBA instructors may also use this case to apply multiple concepts in a defined context, thus enhancing a course's “real-life” applicability.     

Homewonder Ltd: Shareholders Versus Other Stakeholders

Corporate social responsibility involves various economic and social issues. This case presents a dilemma of the trade‐off between economic benefits to shareholders and social benefits to other stakeholders. To respond to recent flat sales growth, as well as serious needs for cost reduction and meeting analysts' expectations, Homewonder Manufacturing Ltd. is considering a strategic plan to expand into Asia. To facilitate this plan, the CEO of the company proposed offshoring and outsourcing some business operations, as well as downsizing the company's current social programs. Various stakeholders will be affected by this plan. This case analysis requires an integration of the shareholder and stakeholder theories of the firm. It provides opportunities for students to consider whether relationships with other stakeholders are a salient corporate strategic concern, and perform costs and benefits analyses arising from this dilemma.     

An Experimental Investigation of Alternative Going‐Concern Reporting Formats: A Canadian Experience*

This study questions whether the current or proposed Canadian standard of disclosing a going‐concern contingency is viewed as equivalent to the standard adopted in the United States by financial statement users. We examined loan officers' perceptions across three different formats ‐ namely, an integrated note with a clean auditor's report (the current Canadian standard), a stand‐alone note with referencing on the face of the balance sheet and income statement (the proposed and now rescinded standard), and a modified auditor's report with an explanatory paragraph in addition to a stand‐alone going concern note (the standard adopted in the United States and other countries). Bank loan officers were selected as the appropriate financial statement users for this study. The results of the test of the hypothesis suggest that once the going‐concern note is fully disclosed in the notes, the style of presentation within the notes (a stand‐alone note versus an integrated note) does not significantly influence the reactions and perceptions of risk if the auditor's report is unmodified (i.e., if no reference is made to a going‐concern contingency). However, when the auditor's report is modified with an explanatory paragraph detailing the uncertainty and referencing the going‐concern note in the footnotes, the format appeared to convey a stronger signal of financial distress to loan officers. These results appear to differ from prior research, which holds that once the information is released in the financial statements, the format has no additional effect. The finding of this study is that the proposed and withdrawn Canadian standard was not perceived differently by the bankers from the present Canadian standard, but the standard adopted in the United States and most other countries was. This makes a strong argument for moving all the way to that standard as opposed to the “halfway” approach of the now rescinded CICA exposure draft. Thus, the public interest in Canada may not be served by adopting a halfway approach.     

A Conceptual Framework for Learning Management Accounting

This paper demonstrates how Schoenfeld's ( 1985 ) conceptual framework for mathematics can provide an alternate framework for learning and thereby teaching management accounting. The four‐part framework—heuristics, resources, beliefs, and controls—is a refinement to problem‐based learning with three attributes in regard to management accounting. First, all aspects for teaching management accounting are integrated into a single framework or theory. Consistency among all parts of management accounting clarifies student and instructor roles in the learning process. Second, the framework's problem‐solving focus with linkages to explanatory materials or resources allows students to be rigorously informed about the functionality of management accounting heuristics. Third, transition or extension of relatively simple, standard problems to more complex nonstandard problems or cases is facilitated by introducing appropriate beliefs and controls. In effect, this approach enables management accounting, and particularly case analysis, to be taught with more structure.     

Artisan Flowers Inc.: A Framework‐Based Approach to IFRS Leasing Standards

Artisan Flowers Inc.'s (AFI) business is centered on importing and selling cut flowers. The company has entered into a number of lease transactions that have the president of AFI perplexed with their accounting treatment and implications. Now, the audit firm needs to explain to AFI's president the appropriate treatment and implications of these lease transactions using current IFRS (IAS 17) and (optionally) the 2013 Lease Exposure Draft. The purpose of this case is for students to gain an understanding and appreciation of the intricacies of IAS 17 as well as the proposed Lease Exposure Draft and the implication of these standards on debt covenants. Students are asked for an explanation of the conceptual basis for the standards and for an analysis of the impact of the standards on AFI's statement of financial position.     

CVS/Caremark: The Costs and Strategy of a Tobacco‐Free Pharmacy

This instructional case presents CVS/Caremark's decision to discontinue tobacco sales at its U.S. pharmacies effective October 1, 2014. The case provides data on the strategic issues underlying the decision and examples of the nonfinancial factors that affect product‐line decisions. The case illustrates the use of the broad array of costs in management decision making, including hidden costs, contingent costs, reputational costs, and social costs. It also provides data to explore the decision from the perspective of customer profitability analysis and the differential costs of serving tobacco customers compared with general retail customers.     

Assembly FG: An Educational Case on MRP II Integrated within ERP

This case teaches students how discrete (job order) manufacturing companies use Manufacturing Resource Planning (MRP II) within Enterprise Resource Planning (ERP) systems to plan purchase orders for direct materials and shop orders for work‐in‐process and finished goods. Students simulate MRP II integrated within ERP, using Microsoft Excel to learn MRP II's bill‐of‐materials (BOM) Explosion that plans order quantities and MRP II's scheduling logic that uses lead‐times to determine start dates for planned orders. Students explain why MRP II is most practical and effective when executed within ERP and how MRP II can reduce excess inventories, prevent inventory shortages, and help companies deliver quality products to customers on schedule. Also, students explain why BOM, inventory, and lead‐time inaccuracies can adversely affect the accuracy of MRP II‐planned replenishments and identify controls that reduce the risks of these inaccuracies.     

China's Enterprise Bankruptcy Law (EBL 2006): cross‐border perspectives

With China's new Enterprise Bankruptcy Law (‘EBL 2006’) having come into effect on 1 June 2007, a critical issue arises as to the extent to which Article 5, as a cross‐border provision, will strengthen creditors' rights across jurisdictions. In this paper attention will be paid in particular to how the Chinese People's Court is likely to exercise its discretion to grant recognition to a foreign court ruling, and vice versa. The paper will start with a brief introduction to the circumstances under which Article 5 came into being. The evolution of China's cross‐border insolvency practices will be examined through an analysis of an inbound case of B&T (2002) as well as an outbound one of GITIC (2005). In spite of the fact that China has not adopted the UNCITRAL Model Law, essential factors deemed necessary to be considered by China's court and its counterparts in US and UK are to be highlighted throughout the paper. Although the effect of Article 5 remains to be seen, it will be critically analysed focusing on some controversial issues. Copyright © 2009 John Wiley & Sons, Ltd.     

The Australian asset‐pricing debate

Utilising a comprehensive data set for Australian firms, we examine a range of competing asset‐pricing models, including the four‐ and five‐factor models where the equity‐risk premium is augmented by size, value, momentum and liquidity premia, and find that none of the models tested appears to adequately explain the cross section of Australian returns. A model accounting for Australia's integration with the US equity market appears to be the best of the competing models we study. Our argument that a model recognising Australia's integration with the USA is supported when we apply the portfolio and factor construction methodology suggested by Brailsford et al. (2012a,b).     

Independent directors and the propensity to pay dividends

Using data from 944 public companies in 2006, I examine how a firm's propensity to pay dividends is related to (i) board independence and (ii) independent directors' tenure, number of board seats (busy) and equity incentive compensation. After controlling for the effects of traditional economic, CEO entrenchment and ownership determinants of the propensity to pay dividends, I find evidence of a positive association between the propensity to pay and (i) board independence and (ii) director tenure, and a negative association between the propensity to pay and (i) busy directors and (ii) greater equity incentive compensation in the director pay structure. I find consistent results when the decision is to pay cash dividends or repurchase shares. In further tests, I find that equity incentive compensation in the independent director pay structure is the most pervasive determinant across other dividend measures such as dividend payout, total payout and repurchases. Overall, the findings suggest that the characteristics of independent directors are important determinants of the payout policy. The results also suggest that future corporate governance research could benefit from incorporating characteristics of independent directors rather than limiting governance measures to board independence especially when recent empirical evidence (Linck et al., 2008, 2009) shows convergence, and therefore, narrowing variation in the proportion of outsiders and insiders on a board.     

Fine‐Tuning a Corporate Hedging Portfolio: The Case of an Airline

Industrial companies typically face a multitude of risks that could cause significant fluctuations in their cash flow. This is a case study of the hedging strategy adopted by an international air carrier to manage its jet‐fuel price exposure. The airline's hedging approach uses “strips” of monthly collars constructed with Asian options whose payoffs are based on average of “within‐prompt‐month” oil prices. Using the carrier's own implicit objective function based on an annual granularity, the authors show how the air carrier could fine‐tune its current hedge portfolio by adding tailored exotic options. The article describes annual average‐price options, provides an explicit valuation of them, and considers how such instruments may affect corporate liquidity. Consistent with its annual objective function, the airline made this exotic derivative the central tool to hedge across all potential realized values of annual jet‐fuel spot prices. The authors believe this modified portfolio is better suited to address the firm's hedging cost and its overall exposure to jet‐fuel price fluctuations.     

Designing and Implementing an Information System for the Dental Office of Branckowitz & Young

This case provides students with the opportunity to create a functional information system (IS) for a service company. The case facilitates a guided hands‐on experience where students learn to analyze a business entity in the context of its environment; recognize what business processes comprise an entity's value chain; and develop, document, and implement a tailor‐made IS to support the entity's operation. In order to keep the amount of development realistic and the system transparent for students, the case focuses on a small service company: a dental office. The case uses a resource—events—agents (REA) analytical framework for modeling and Microsoft Access for IS implementation. The case is structured modularly, enabling instructors to either explain material or demonstrate analysis/development of a segment of an IS in class and then challenge the students to complete the module's development following the instructor's example. Instructors have the flexibility to give students fewer (or additional) directions in developing the information system, depending on the students' backgrounds and abilities. Instructors also have a choice to limit the scope of the development and implementation to any number of four business processes.     

Labor‐Technology Substitution: Implications for Asset Pricing

This paper studies the asset pricing implications of a firm's opportunities to replace routine‐task labor with automation. I develop a model in which firms optimally undertake such replacement when their productivity is low. Hence, firms with routine‐task labor maintain a replacement option that hedges their value against unfavorable macroeconomic shocks and lowers their expected returns. Using establishment‐level occupational data, I construct a measure of firms' share of routine‐task labor. Compared to their industry peers, firms with a higher share of routine‐task labor (i) invest more in machines and reduce more routine‐task labor during economic downturns, and (ii) have lower expected stock returns.     

Web‐Based Disclosure About Value Creation Processes: A Monitoring Perspective

Adopting a monitoring perspective, this study aims to explain how and why firms provide web‐based disclosure about their value creation and its underlying processes. We rely on the balanced scoreboard approach to measure disclosure. Our results suggest that costs incurred by capital markets' participants as well as monitoring by the board and the media drive disclosure. Moreover, we argue and document that a firm's disclosure is actually a part of its governance configuration and influences some board processes.