Search results

A debt defeasance arrangement is an arrangement whereby a debtor’s obligation to pay a creditor is nullified. The debtor and other parties perform a variety of legal and other actions in order to effect a valid debt defeasance arrangement. One of the actions that should be taken by the debtor is to pay an amount to a third party who takes over the obligation to pay the debt. The money received by the third party is referred to as a debt defeasance receipt. Debt defeasance arrangements are used in countries such as the United States of America and Australia. The financial community in South Africa is becoming increasingly interested in the debt defeasance arrangement. As South Africa is becoming part of the global community, more foreign companies are doing business in South Africa. Because it is a relatively unfamiliar arrangement, that has not yet been addressed by the South African taxation authorities, there are probably a number of unanswered tax questions regarding the arrangement. One issue that is not yet clear is what the source of a debt defeasance receipt would be if it were to be received by a non‐resident in South Africa. A survey was done among South African banks, auditing firms and taxation senior counsel to determine the majority opinion of South African respondents regarding the source of a debt defeasance receipt. Although a variety of alternatives are identified as possible sources, the majority view is that the source is the debt defeasance business activities that are conducted by the recipient. It therefore follows that if the recipient of a debt defeasance receipt conducted his or her debt defeasance business activities in South Africa, the receipt will be of a South African source.

Many managers have taken advantage of the benefits associated with engaging in in‐substance defeasance of debt. For example, defeasance can generatea ccounting gains that result in higher reported income and earnings per share without a corresponding change in cash flows. Since the inception of this transaction in 1982, controversy over the accounting treatment of defeasance resulted in the issuance of Statement of Accounting Standards No. 76, Extinguishment of Debt. However, unsettled issues remain. This article describes the evolution of the defeasance transaction, the related controversial points, and explores the unsettled issues that remain so that due consideration can be given to a contemplated defeasance transaction.

This study aims to critically analyze the fundamentals of the current major Islamic Finance (IF) instruments and contracts in light of both the foundations of IF and the concept of substance over form in the accounting conceptual framework. Such analysis is believed to be necessarily for the IF institutions to provide better and more genuine service to their customers.

To achieve the study purpose, the methodology is based on theoretical analysis and analytical review of the major IF contracts.

The IF industry needs to focus on the economic substance of the products offered to their clients. In developing and promoting their products, IF institutions need to focus on the ultimate and substantial goals of Islamic Sharia rather than re-packaging existing conventional products under different arrangements and formats to make them appear as Sharia-compliant to their clients. Both religious scholars and IF professionals need to engage in much deeper analysis and understanding of the substantial design of IF instruments and the concept of usury in modern economy.

This paper does not intend to develop a comprehensive framework for the design of IF instruments to meet the economic substance and ultimate goals of IF principles or measure such economic substance. However, that is definitely a subject for further research.

By applying concepts like substance over form from other business fields such as the accounting theoretical framework to the IF instruments and contracts, we should gain better understanding and practical implications of these instruments and figure out ways to improve their design to be more consistent with and better serve the ultimate goals of the Islamic Sharia.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued from April to June 2009 and a sample of disciplinary actions during that period.

The paper provides excerpts from Regulatory Notice 09‐22, Personal Securities Transactions; 09‐25, Suitability and “Know Your Customer”; 09‐27, Member Public Offerings; 09‐30, Credit Default Swaps; 09‐34, Investment Company Securities; 09‐35, Municipal Securities.

Notice 09‐22: Sound supervisory practices require that a member firm monitor personal securities transactions outside of the firm by or for its associated persons. Notice 09‐25: Suitability obligations and know‐your customer obligations are critical to protecting investors. Notice 09‐27: The offering of securities by a member firm or a control entity of the firm in a private placement raises conflicts of interest and has been an area of regulatory concern in recent years. Notice 09‐30: Regulatory authorities are adopting measures to address system risk arising from credit default swaps (CDS), including risks to the financial system arising from the lack of a central clearing counterparty to clear and settle CDS; the SEC has approved a rule establishing an interim pilot program on margin requirements for CDS transactions. Notice 09‐34: As part of the process to develop a new consolidated rulebook, FINRA is requesting comment on a proposed rule regarding the distribution and sale of investment company securities. Notice 09‐35: FINRA recommends that firms engaged in municipal securities business review and, if necessary, modify their policies and procedures in light of changes to the Municipal Securities Rulemaking Board's (MSRB) Electronic Municipal Market Access system (EMMA) that take effect July 1, 2009, and changes to MSRB rules that went into effect June 1, 2009. FINRA also encourages firms to review the overall adequacy and effectiveness of their current policies and procedures for municipal securities activities generally, particularly those relating to the disclosure of material information, the suitability of recommendations to retail customers, and the general supervision of their municipal securities activities.

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends. The FINRA staff is aware of this summary but has neither reviewed nor edited it. For further detail as well as other useful information, the reader should visit www.finra.org

The purpose of this paper is to study the concept and procedure of creative accounting as how is it worked around and how it can lead to financial crimes. The procedure which are followed and which are the people who are involved and who are the victims of such crimes. The methods which are used to perform the action and how is it done. What are the findings of different researchers who have studied the same concept and how can it be curbed is the main purpose of the paper.

This paper is designed to find out the working of accounting policies and how the loopholes in the same can actually be taken into account, resulting in a certain number games which can be played around it, and to get the desired outcome in the preparation of financial statements.

Creative accounting, though legal and acceptable around the world, gives in the way to loopholes provided by the acts and rules governing the preparation of financial statements and eventually leading to financial crimes and hampering the economy as a whole.

The limitations of this study remain to the fact that it is an empirical study, as a lot of papers and articles were studied before giving it a shape and reaching a conclusion.

Creative accounting though not illegal but the excess use of the same has given daunting effects on the financial statements and as a result have resulted into financial frauds and looting of peoples money throughout the world.

Hard-earned money of the investors is looted and no action can be taken against as the mechanism and the legal bodies are still struggling to curb the problem, and thus it is very important to learn about creative accounting.

This study leads to the understanding of the growth of creative accounting and how it has resulted in accounting frauds leading to financial crimes in an economy.