Why Products Suck (And How To Make Them Suck Less)

This was actually a pretty funny read.


"Now, you might think that making a product that isn’t terrible should be so obvious to every company on the planet as to almost be nonsensical. Indeed, who would ever advocate building a product that sucks? But the fact is: many products do suck. How can something so obviously important and universally recognized by so infrequently accomplished?"

Definition of an Asset: Value in Use, goodwill and the missing part of the definition.

Paragraph 49 of the AASB's Framework has the definition of an asset there, and the exchangeability/severability requirement isn't there. 

Basically the exchangeability means that if you can't cut (sever) the "asset" off from the rest of firm and sell it, then the firm can't really use it to it's full potential.  If the firm can't use the "asset", then it's not really an asset of firm, but rather an asset of the shareholders. Specifically, we are talking about goodwill.

I personally believe that the exchangeability isn't a bad criteria because if the firm can't sell it, then it is questionable if the firm can really use it. In this sense, the goodwill is really an asset of the SHAREHOLDERS and not of the Firm itself.  This is a really proprietary view concept, because the entity doesn't really have "control" over the economic benefit of goodwill.  To me, one part of "control" is the right to sell it off.

The counter argument is that goodwill DOES have "value in use", and firms CAN control or influence how it's used. For example, when Coca Cola makes Coke Zero, they carry across all the like branding to the new business venture so the customer goodwill (customers positive feelings towards the brand) is also carried across to the success of the new venture. Surely the Virgin group would not be so heavy into painting everything red, but for the benefit of transferring and "using" the "retained customer goodwill".

Again: I'm not convinced it's an asset because the measurement of "goodwill" is reliable, but doesn't really measurer what it's supposed to measure.  Ultimately, goodwill is accounting talk for "I don't know what the hell that is, but it's a something debit".  In other words, the measurement of goodwill is not direct, nor is it derived, it's just by fiat.  If goodwill was truly "customer loyalty, brand names, business synergies, etc" then goodwill by definition would be equal to the difference between the share market and accounting values.

= Goodwill

= totalFrimMarketValue - netAssets@BookValues

= mktSharePrice * numberOfSharesIssued - totalAssets + lotalLiabilities

Please note that this is JUST MY OWN PERSONAL interpretation. It wasn't part of any examination question that I have set or will set. The important thing is this central idea that if you can't cut it off and sell it for cash, then that is cash that you really don't have. 

Financial accounting: In communicating reality, we construct reality

Obama's debate about financial regulation in the US at the time (about 7 months ago now) was about lending and operating regulation.  It was not about accounting standards.  At least not directly. Financial Accounting is merely reporting what the business has actually done.  But the way you report things will have an impact on people’s decisions. 

So, take for example the use of security cameras in a bar or at a train station.  The cameras are not policemen or security guards, they don’t physically STOP an assault occurring, they just record the assault occurring.  But that said, most people are aware of the cameras and are concerned about future impacts (like going to court and eventually jail).  So by actually observing, recording and reporting the act, this will impact upon people’s behaviour.

So if we decide we are going to mark all our assets at fair value and wash the changes through the profit and loss report, this will change the agent’s (manager’s) decisions as to what sort of risks they take, which project they invest in, and what sort of legal vehicles they house the investments in.  By reporting the “reality” we are changing the reality.  People become accountable to what is reported.  But you have to remember that the accounting standards play a huge role in the construction of that “reality” we are reporting. 

For example, when we moved from old Aussi GAAP to IASB standards, Australian companies were no longer able to recognize internally generated goodwill, mastheads, customer lists, and other non-purchased brand names.  This means that companies like Fairfax (The Age newspaper) had to write off their brand name out of assets.  Nothing changed in the operating reality, but the company’s balance sheet shrunk massively over night.  Because it LOOKED like a smaller company, many investors lost faith in the company, and sold up their shares, shrinking the company even further (by way of draining REAL capital).  

Citation: Ruth D. Hines Financial accounting: In communicating reality, we construct reality; Accounting, Organizations and Society, 1988, vol. 13, issue 3, pages 251-261

Allow graduates to amortize their human capital investments: business v worker parity

These guys got a zero deduction on their
education. That is manifestly unfair. 

The cost of education for work should be no different to a business that purchases depreciating plant. 
I propose that university graduates should be allowed to depreciate or amortize the cost base of their education over some given statutory life - provided that they work in a field that is "sufficiently connected"

Sufficient connection would be defined as the same criteria in the regular s.8-1 ITAA97 general deduction provisions. As in, you would get a deduction if you are working in the field that you are studying. This simply seek to solve the timing miss-match but yet provide an equitable outcome.

It's not fair that wage earners in knowledge jobs are making the economy's biggest investment in depreciating productive assets (in the form of human capital) and get non of the tax breaks available to capital earners (ie: shareholders). 
How about a 50% invesment allowance on my HECS bill Ms Gillard!.

Sinfest: The Webcomic To End all Webcomics

Sinfest is a great daily comic I read.  God, guys trying hard to impress girls, east meets west. All that good stuff.

It's actually amazing that Tatsuya Ishida manages to pumpout out news paper quality comics on a daily basis.  And thank God he has not resulted in the bland sort of rubbish that Garfield and Peanuts had descended into because of their mainstream politically correct and not funny approach to writing "the funnies" (cartoons).

A list of accounting movies

I'm compiling a list of your favorite accounting or business movies. If you have a winner in mind, can you quickly drop me an email?

Phillipjustinwong@gmail.com

UPDATE:

I have started: 

CLICK HERE to go to the list