Circuit City Essay

1). Which of the three approaches to accounting for extended warranty and service contracts is most consistent with the actual substance of a sales transaction involving equipment and an extended warranty contract? Approach number one, the Full revenue recognition is the most consistent due to the reasons which are demonstrated on exhibit two according to the Financial Accounting concept No.5. As stated in this exhibit, Revenues must be both realized and earned prior to the recognition. In this case, after selling the goods and services Circuit city at that point of sale both revenue and earnings have been realized because goods have exchanged hands. At this point of time, even though the cost services haven’t been used, there is a clear agreement and assurance that the necessary services will be rendered during the period of the warranty Further in exhibit 2 it states four key components which justifies that the Full Revenue Approach is the best match of the sale of product a nd extended warranty because at the time of sale an entity will be considered to have substantially completed the earning process if: 1). It incurs the selling cost 2). It has established service network, which is there for the most part to provide the customers with the service associated with the manufacturer’s warranty. 3). Relatively few customers call for service during the extended period 4). Estimates can be made with relative certainty as to future costs to be incurred under the extended warranty. Under these facts, Circuit city had met all the qualifications to report their revenues as they did. The system was in place and the reporting of revenues didn’t seem to have any discrepancies. The information users (Share holders) seem to be happy with the results. Concurrently the profitability of the company as a whole appears to be fully maximized. 2).Why is this revenue reporting strategy is an issue to Circuit stores Inc? There is couple of reasons why senior vice president Michael Chalifoux is concerned: 1). He is concerned because if the proposed accounting reporting method goes to effect, there will be a delay on full rec ognition of revenue and income until the exhaustion of the warranty which will result lower income reported. Lower revenue reports do not reflect well on businesses especially when they had previously shown signs of growth. The reasons might be understood internally, but not externally. 2). Vice president is also concerned about the negative impact  on shareholder’s equity which would be significant in the merchandising industry. By showing low revenue earnings, some of the big companies who act as suppliers might be hesitant to do business with Circuit City because the chain might not be able to move their product as fast they anticipated. Such a change will cause a major loss of revenue which might cause the chain to gout of business. 3). If the company starts to show low income earnings, that change might cause second thought for the investors. Such suspicions cause investors not to invest in the business with confidence. Such a shift drives the stock market prices which may force the company to sell its shares at a lower cost. 3). What would be the effects on Circuit City stores financial statements if FASB requires them to change accounting for extended warranty and product maintenance contracts? 1). There will be definitely a change on reported revenue which is going to be lower that if the company had continued to report as previously. The change might cause a shake up within the company accounting department and the share holders, however it is my strong feeling that things will level out eventually. Even though sometimes change is difficult, Michael Chalifoux needs to have a very clear communication with the shareholders and the internal associates so they know what impact will the change bring. 4).What would Michael Chalifoux do? If the strategies of reporting are in place and there is no bleach of financial reporting in any way, shape or form, Michael does not have to change and adopt the new proposed reporting strategy. On the other side, if Circuit city is under the direction of FASB as a business entity, it is subject to the rules and regulations thereof. If it comes down to that FASB requires the reporting system to be changes, the vice president should do as proposed. In the long run it will be beneficial for the company public image. If the company goes to approach #2 which is full deferral of revenue, it will take couple years and things will level back again.

Filibuster Rules in the U.S. Senate

Filibuster Rules in the U.S. Senate A filibuster is a tactic used in the U.S. Senate to delay votes on controversial legislation or stifle debate on a topic. Typically, a senator wishing to filibuster will ask to speak on the floor of the chamber and, in an attempt to stall legislation action, hold forth for hours at a time. There are few rules that govern a filibuster because the Senate believes its members have the right to speak as long as they want on any issue.   The filibuster dates to the early 1800s. The record  for the longest filibuster is held by  the late U.S. Sen. Strom Thurmond of South Carolina, who spoke for 24 hours and 18 minutes against the Civil Rights Act of 1957, according to U.S. Senate records. In the modern era,  Republican U.S. Sen. Rand Paul of Kentucky staged a daylong filibuster in 2013 that captivated conservatives and libertarians as well as the national news media. Critics call the filibuster unconstitutional at worst and unfair at best. Others believe it to be a  historical relic. Practitioners of the filibuster insist that it protects the rights of the minority against the tyranny of the majority. By their nature, filibusters are meant to draw attention to a specific issues and have the potential to inspire compromise. According to the U.S. Senate, the word filibuster comes from a Dutch word meaning pirate and was first used more than 150 years ago to describe efforts to hold the Senate floor in order to prevent action on a bill. One Way to Break a Filibuster Filibusters rules allow the delay tactic to go on for hours or even days. The only way to force the end of a filibuster is through parliamentary procedure known as  cloture, or Rule 22, which was adopted in 1917.  Once cloture is used, debate is limited to 30 additional hours of debate on the given topic. Sixty members of the 100-member Senate must vote for cloture to stop a filibuster.  At least 16 members of the Senate must sign a cloture motion or petition that states: We, the undersigned Senators, in accordance with the provisions of Rule XXII of the Standing Rules of the Senate, hereby move to bring to a close the debate upon (the matter in question). Important Dates in the History of the Filibuster ​Heres a look at some of the most important moments in the history of the filibuster and cloture. 1806:  The U.S. Senate amends its rulebook in a way that unwittingly allows a member or members to stall action by speaking for hours on end. The Senate, acting at the request of Vice President Aaron Burr, eliminated a provision called the previous question rule that allowed the chamber to cut off floor debate. Without such a measure in place, a senator was permitted to speak indefinitely, paving the way for the filibuster.1841: Henry Clay  threatens to change the Senates  filibuster rules to allow the majority to close debate when Democrats blocked a bank bill.1872: Vice President Schuyler Colfax rules that under the practice of the Senate the presiding officer could not restrain a Senator in remarks which the Senator considers pertinent to the pending issue.1919: First use of Rule 22 when Senate invoked cloture to end debate against the Treaty of Versailles.1935: Populist U.S. Sen. Huey Long of Louisiana filibusters  for 15 hours and 30 minutes trying, without success, to k eep Senate oversight of National Recovery Administrations senior employees. How was he able to speak so long? He recited  Shakespeare and read recipes for pot-likkers, a Southern term for the  broth created by cooking greens. 1957: U.S. Sen.  Strom Thurmond  of South Carolina filibusters  for a record 24 hours and 18 minutes as part of a move that successfully blocked the Civil Rights Act of 1957.1964: U.S. Sen.  Robert Byrd of West Virginia filibusters  for 14 hours and 13 minutes in an unsuccessful attempt to block the Civil Rights Act of 1964.1968: The Abe Fortas appointment to succeed Earl Warren as Chief Justice of the Supreme Court is  derailed by Republicans through filibuster.2013:  Republican U.S. Sen. Rand Paul of Kentucky filibusters for nearly 13 hours  to question and raise awareness of the U.S. governments use of drones. It is the  ninth-longest filibuster in history.  I will speak until I can no longer speak, he said.  Paul ended his filibuster because he had to go to the bathroom. [This articled was updated in May  2018 by Tom Murse.]