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What are two arguments in favor of granting marketerswide latitude to promote their products?

What are two arguments in favor of forcing marketers tostay very close to the pure truth when promoting theirproducts?

Make the case that ads that create desires violate aconsumer’s basic rights.?

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Patrina Schowalter
Patrina SchowalterLv2
28 Sep 2019

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A.) The textbook seems to favor two techniques for two differentreasons Net present value seems to be the most widely usedtechnique because of its ability to predict the expected dollaramount of wealth that a project should produce. The other widelyused technique is the internal rate of return. Both of thesetechniques can be used to make accept or reject decisions andsometimes IRR is used because of its focus on percentage rates ofreturn as it pertains to the cost of capital of the firm. This wayan analyst can identify any problems with the IRR before theirbosses can implement the project. I am fairly new to this but cansee why a combination of these two techniques could be very usefulto decision makers especially IRR which can show if investmentreturns can exceed a company’s requirements. Personally my interestis in small business and I enjoyed learning about the paybackperiod. Baby steps.

What are your thoughts regarding this feedback? Pleaseexplain!!!!

B.)The textbook favors the net present valueinvestment valuation technique. The reasoning is that it goes intodeeper detail about the financial standing of a company, than othervaluation methods. It subtracts the value of the initial investmentfrom the firm's cash flows at a rate comparable to the firm's costof capital, as a percentage. It demonstrates more than just thefact that a company can pay back their debts, but whether a companyis profitable or not. An investment firm would be most interestedin an investment that has a greater cash flow than that of theinitial investment. It may seem obvious that someone would want toinvest in a company that makes money, but our textbook has alsoshown us that investments do not always make money at the samepace. For example an investment could break even the first year,but then have accelerated growth year 2 and 3, or vice versa. Thisis a reason why, to me, NPV is a good way to value an investment.It leaves room for this information if you calculate the yearsseparately (unlike you would an annuity).

What are your thoughts regarding this feedback? Pleaseexplain!!!!

Argue either in favor or against the estate tax. Then, respond to at least two other students' posts in the following manner:

Support one student’s argument with additional information or examples.

Counter one student’s argument with information and/or examples.

Student 1 answer : Samantha

Samantha Caterina 5 posts

Re:Module 7 DQ 2

The estate tax is very tricky, it can be argued both ways, for and against. For arguments sake I would be in favor of the estate tax. Currently for 2017 the federal estate tax threshold is 5.49 million. This is only targeting the wealthiest of people. The estate tax will tax any amount of an estate above this. It makes up for a small portion of the total tax collected by the federal government but it is still a substantial amount. The estate tax can be different in each state therefore being taxed more if the threshold is smaller. It is argued that the successful decedent should not be penalized for being successful I would not agree this is true. They are no longer the owner of the estate and the money would just be passed to a beneficiary. The beneficiary then has the rights to do what they please with the money. This can cause the beneficiaries to become non-productive members of society. If the estate tax was taken out tax would have to be made up somewhere, therefore cause middle class taxpayers to pay more taxes. The estate tax does not target the average person only the wealthiest are affected by it. I do not think the estate tax needs to be taken out of order.

https://www.forbes.com/sites/kellyphillipserb/2014/10/06/guest-post-pros-and-cons-of-the-federal-estate-tax/#6e3c8eb975a6

Student answer Andrea:

Andrea Robinson-Parker 4 posts

Re:Module 7 DQ 2

The estate tax was once known as the death tax, there is a pun in there somewhere. Firstly, it is associated with the inheritance of a dead relative and secondly, it can be the death of small family businesses. I believe that this tax is essential for our country to survive. Bob Rywick, in his article, Pros and Cons of the Federal Estate Tax argues both sides of the coin. I agree with his pro stance and here is why:

Revenue from the estate tax will create around $200 billion revenue in the next several years. There has been a great increase in wealth in the recent past and this number may climb.

The estate tax will help to dilute the concentration of wealth. This concentration can be damaging to our free democratic society.

Many wealthy people donate large sums to charities each year to lower their tax bracket. If there was no estate tax, these donations would most likely drop off significantly.

Small business, (making less than $5,000,000) will not be affected. There are also rules set in place to protect farms regarding the valuation of farm land.

Less than 2/10 of 1% of the descendants dying each year will be affected by this tax, based on the current exemption amount.

Lastly, I personally believe that estate planning can alleviate some of these taxes. Estate taxes should not be confused with gift taxes. This is an option that can protect inheritances.

Student Answer

Lakisha Minniefield 3 posts

Re:Module 7 DQ 2

I am against “estate tax” and feel that when the property value goes up, it will increase my mortgage payment each year. I agree with Justin Haskins article regarding scrapping property taxes because as a property owner, charging fees for a specific service should be allowable. Also, property owners should be able to choose where the property taxes should be allocated especially when it comes down to our public education. I have two children who are autistic and in the past it was very difficult to find a school who had the staff to supply all of their educational special needs. Even though we live in the best neighbors that were very costly, the schools zone in the area had 2 out of 10 rating so I would have to transfer my children our of the district in order to get better services. Currently, my husband is getting ready for retirement out of the military and we have looked at all 50 states within the United States to see which state would give us the most exemptions when purchasing a home. The state we chose to move back to is Texas because of the no state property taxes. Property tax for the state of Texas brings in the most money of all taxes available to local government to pay for schools, roads, police and firemen, emergency response services, libraries, parks and other services provided by local government. The state also has a variety of partial or total (absolute) exemptions from appraised property values used to determine local property taxes. A partial exemption removes a percentage or a fixed dollar amount of a property's value from taxation. A total (absolute) exemption excludes the entire property from taxation. Since we will be on a fixed income, Texas property tax exemptions for disabled veterans was the best out of all 50 states. However, we will still have to look for a county with low property tax rate. Since I am already a disabled veteran, Texas has a property tax exempt chart for qualifying disabled veterans.

The exemption amount that a qualified disabled veteran receives depends on the veteran's disability rating from the branch of the armed service.

Disability Exemption

Disability Rating

Exemption Amount Up To

10% to 29%

$5,000 from the property's value

30% to 49%

$7,500 from the property's value

50% to 69%

$10,000 from the property's value

70% to 100%

$12,000 from the property's value

*The Texas Comptroller website lists all of the benefits for disabled veterans regarding property tax exemptions.

Even as a disabled veteran, I would still have to pay property tax but the exemption will only exempt the amount of the disability rating off the value of property. Disabled veterans who are 100% total and permanently disable will be exempt from paying all property taxes. Financially, my family will still have to find a home affordable in a safe neighborhood, public education is rated above 7 out of 10 and choose a county that property taxes are low.

Reference:

https://www.comptroller.texas.gov/taxes

Help me come up with a discussion to respond back to this feedback below concerning revenue recognition about ths case attachedat the end of the feedback.

Site codification of what your references throughout thecase
Elaborate on the advertising services that the company provide andhow they cumulative revenue such as: ad view & number ofclicks
What factors contribute to miscalculation of revenuerecognition?
Elaborate on the Test of Control ex. Document, Review Procedure,& Separation of duties
Discuss Substantive Test give examples
Discuss Contract agreements

Social Konnections Inc. (SKI or the “Company”) is a globalInternet company that
runs Social Konnections, a large social media networking Web site.SKI has experienced
steep growth since its launch in 2005, and the Company went publicin 2010. SKI
currently has over 500 million active users who visit the site toconnect with others,
express themselves, and play games.
Last year, substantially all of SKI’s revenue came from advertiserswho market their
products and services to SKI’s active users through advertisementsplaced on the Web
site or its various mobile platforms. The Company’s remainingimmaterial revenue was
received from fees associated with the sale of virtual goods andservices by third-party
application developers using SKI’s various platforms.
In Q1 of the current fiscal year, SKI acquired CorporateCollaborations (CC), an entity
that manages private and public social media networks forcorporations. CC’s customers
are primarily national and global companies whose employees connectover its platform.
In addition to hosting private social media networks forcorporations, CC provides
services to develop the networks it manages. CC’s revenues areearned through the
performance of multiyear revenue contracts with its customers. Inthe current year, CC is
expected to produce approximately 20 percent of SKI’s consolidatedrevenue.
SKI’s investors are focused on the growth prospects of theCompany’s legacy open social
media platform operations and its new corporate revenue unit. TheCompany’s MD&A
disclosures include (1) various user and revenue metrics to helpfinancial statement users
assess its traditional operations and (2) backlog information tohelp users assess CC’s
operations.
Audit
Because of SKI’s continued growth, the audit committee hasrequested that the Company
choose a new audit firm with experience in auditing publictechnology companies. A new
firm was selected and has performed each of the interim reviews inthe current year.
Kristine Drew, a senior auditor, is the in-charge accountant on theSKI audit. In addition
to her supervisory and administrative responsibilities, Ms. Drew isresponsible for
auditing revenue. Ms. Drew has read the Company’s disclosedaccounting policies and is
interviewing the revenue controller, Bill Cook, and various salespersonnel to develop indepth
process flow documentation that will serve as the basis for theteam’s risk
assessment.
Advertising Revenue
SKI creates advertising space on its Web site and mobileapplications and sells the space
to advertisers either directly or through advertising agencies.According to Mr. Cook, the
amount an advertiser pays is dependent on the number of views thead receives or on the
Case 14-6c: Making Connections Page 2
Copyright 2013 Deloitte Development LLC
All Rights Reserved.
number of user clicks (depending on the type of advertisementdefined in the underlying
contract) and the revenue is recorded in the period in which theviews or clicks are made.
Ms. Drew has learned that simple advertising can be purchaseddirectly from SKI through
SKI’s advertising Web site at standard rates, with theadvertisements and terms input
directly into the Company’s ad delivery platform. However, mostadvertising revenue is
generated directly through the advertising sales team, which hasthe ability to help
advertisers develop more sophisticated advertising campaigns.Management has
established minimum pricing and volume thresholds for theseadvertisements; however,
the sales staff is given significant latitude in securing contractswith customers. Extra
commissions are paid to sales individuals who sign longer-termcontracts that meet
minimum revenue targets.
Once a contract is signed, the ad development department createsthe ad content and
obtains the customer’s approval. The approved ad and the contractare electronically sent
to the ad scheduling department, and the advertisement is uploadedinto the Company’s
ad delivery platform. The ad delivery platform is a robust systemand is designed to
capture all the nuances associated with the contract. For example,an advertiser may wish
to have its ads displayed only to users whose IP addresses are froma specific geographic
location, or the contract may be structured to provide theadvertiser with variable pricing
or incentives (such as a set of free advertisements) once a certainlevel has been paid for.
In summary, the delivery platform captures all the relevant pricinginformation associated
with the contract to allow for real-time revenue recognitionaccording to the terms of the
contract. After the contract is entered into the system, a summaryof the contract setup is
provided to the sales manager that worked with the customer. Thesales manager then
reviews the contract setup for accuracy.
The Company’s ad delivery platform automatically tracks theadvertising activity each
day and reports the activity to its customers, who are then billedweekly for the aggregate
ad activity.
Corporate Social Network Development and Hosting Revenue
As part of its new corporate services program from the acquisitionof CC, the Company
earns revenues by providing corporate social network developmentand hosting services.
For new customers, a contract will typically require an up-frontfee to SKI for the
development of the customer’s specific social media network; thecontract will also
include a separate multiyear hosting agreement. The customizedsocial media networks
only operate on the Company’s hosting platform, and customers donot have the option to
take possession of the software used to run the networks. Revenuesfor the up-front fee
associated with the development are recognized as the developmentis completed and the
system is available to the customer. Hosting revenues areautomatically recognized by the
system based on the invoicing cycle outlined within the customer’scontract. According
to Mr. Cook, this invoicing cycle is fairly uniform throughout thehosting period;
therefore, from a materiality perspective, the Company willdisclose that hosting fees are
recognized ratably throughout the hosting contract period.
Case 14-6c: Making Connections Page 3
Copyright 2013 Deloitte Development LLC
All Rights Reserved.
In Q4, during an interview with one of the new members of thecorporate sales team,
Ms. Drew was told that the corporate sales director had establisheda goal of increasing
the length of the average hosting contract. Before SKI acquired CC,most of the multiyear
hosting agreements were for three-year terms. In Q4, the corporatesales director
implemented a strategy shift that would increase the contractedhosting period to five
years. To accomplish this goal, the sales team was able to offerits customers three
months of free service, to be added at the end of any new five-yearagreement signed. In
addition, the sales director offered an additional commission forconverting existing
contracts to five-year agreements. To accelerate the implementationof this plan, the sales
commission is doubled if the contract modification occurs beforethe end of the fiscal
year.
Ms. Drew’s Concern
Ms. Drew is concerned about several things she has learnedregarding the appropriateness
of management’s revenue recognition policies.

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