this time i just need to choose the topic and then finish the Paper Approval Form to wait for the professor. if the professor approval this topic, i will need to write 6 pages paper. please help me to choose a good topic to get the professor approval Choosing a Topic Your paper/project can be about any financial accounting topic in which you are interested. Your topic can address a specific accounting standard and how that standard affects business entities. Or, your topic may be about a particular problem which has been addressed by the FASB. For example, you may want to write about how the new lease standard will/has affect/affected business entities. This would be an example of a specific accounting standard. Or, you may want to address how fair value measurement vs. historical cost is affecting financial accounting. This would be an example of a specific accounting issue or problem. You should try to choose something that interests you. Or, a topic about which you want to know more. You should not choose your topic because you think it will be ?easy.? Make your topic as current as possible. A good place to start looking for a topic would be www.fasb.org. You might also look in the accounting section of the SEC (www.sec.gov). Of course the Wall Street Journal and other popular press outlets are good sources for topics of current interest. Choosing a Topic Your paper/project can be about any financial accounting topic in which you are interested. Your topic can address a specific accounting standard and how that standard affects business entities. Or, your topic may be about a particular problem which has been addressed by the FASB. For example, you may want to write about how the new lease standard will/has affect/affected business entities. This would be an example of a specific accounting standard. Or, you may want to address how fair value measurement vs. historical cost is affecting financial accounting. This would be an example of a specific accounting issue or problem. You should try to choose something that interests you. Or, a topic about which you want to know more. You should not choose your topic because you think it will be ?easy.? Make your topic as current as possible. A good place to start looking for a topic would be www.fasb.org. You might also look in the accounting section of the SEC (www.sec.gov). Of course the Wall Street Journal and other popular press outlets are good sources for topics of current interest.

ACT 6652 Financial Accounting Research Paper Approval Form Student Name: _____________________________________________________________________________ Date: _____________________________________________________________________________ Attach a copy of your proposal abstract to this approval form (both hardcopy). Title of Paper: _____________________________________________________________________________ Style Manual: _____________________________________________________________________________ The following items should be included in your abstract. They are included here for convenience. Respond in summarized form. Description of Problem/Issue: _____________________________________________________________________________ Why is this question important/interesting: _____________________________________________________________________________ Summary: _____________________________________________________________________________ Comments: Instructions: Submit two copies of this form with one copy of your abstract. You will sign one form and leave with your Professor. The other form will be given when the topic is approved. You will be expected to address any comments from the Professor when you prepare your paper. ACT 6651 Financial Accounting Research About your paper... Choosing a Topic Your paper/project can be about any financial accounting topic in which you are interested. Your topic can address a specific accounting standard and how that standard affects business entities. Or, your topic may be about a particular problem which has been addressed by the FASB. For example, you may want to write about how the new lease standard will/has affect/affected business entities. This would be an example of a specific accounting standard. Or, you may want to address how fair value measurement vs. historical cost is affecting financial accounting. This would be an example of a specific accounting issue or problem. You should try to choose something that interests you. Or, a topic about which you want to know more. You should not choose your topic because you think it will be \"easy.\" Make your topic as current as possible. A good place to start looking for a topic would be www.fasb.org. You might also look in the accounting section of the SEC (www.sec.gov). Of course the Wall Street Journal and other popular press outlets are good sources for topics of current interest. Paper Guidelines P aper/project guidelines: Length: o The body of the paper should be between 5 and 10 pages. You will find it very difficult to adequately address most issues in less than 5 pages. You will find that you need \"filler\" material if you attempt to go beyond 10 pages. The objective is to cover background, issue, etc. as clearly and concisely as possible. You do not earn points by the word. On the other hand, you will not earn points if you do not address important issues. o The length above is for the \"body\" of the paper. Appendices, bibliographies, cover-sheets, and other supplemental material are not part of the \"body.\" Format: o You may use any type-style you like (e.g., Times New Roman, Sans Serif), but the style must be 10pt. You will find that 10pt Times New Roman this looks like this while 10pt Arial looks like this. You may choose what you like best. Just be sure it is 10 point. o Double-spacing o Standard margins (1\Memo Date: June 23, 2015 To: Audit Supervisor From: Bochen Li Subject: Recognition and Accounting of Employee Share Options Compensation Costs The paper seeks to analyze the case of OMS to understand, and to analyze the recognition of the employee share options compensation costs. For OMS case, in January 1, 2012, the company granted 1,000 employees to share options, Cliff vest after four year service period, the exercise price of $ 30 per share, the grant-date fair-value-based measure at $15 and grant date stock traded at $ 30. However, in January 1, 2014, there are modification of the non vested share options including the modification of exercise price to $ 20 price, modification date FV at $12 and FV before modification $9. It will also consider the availability of accounting standards codifications for interpretation of the case. ASC -718-10- 25- 9 and 10 defines the treatment of stock options as liability or equity compensation. As a liability, the treatment of stock should meet the criteria that follows; the repurchase risk and rewards are not on the employees, and the employer would prevent employee from bearing risk and rewards for a reasonable period. In terms of the equity compensation, shares do not meet either of the liability conditions. ASC-718-20-55-108 states the cumulative compensation cost related to the modified award and considers the modified award's fair value at the date of the modification. Based on ASC-718-20-55-98, it suggests that the company recognizes remaining unrecognized compensation costs at the date of modification as well as recognizing the additional FV in excess of the grant data FV. The compensation costs can be recognized as follows Total options costs to be recognized Modified Options FV: 12 Original Options FV: 9 Incremental Value of Modified Options 3 Unrecognized options costs 7.5 Total options costs to be recognized 10. 5 per share Compensation Cost per Year Year 1 2 3 4 2012 2013 2014 2015 Shares 1,000 1,000 1,000 1,000 FV 15 15 10.5 10.5 Total Compensation cost $3,750 3,750 5,250 5,250 $18,000 Modification of Vested Share Options According to ASC-718-20-55- 94 -96, the company should recognize the cumulative effect of FV adjustments in the period of the modifications. The awards are subject to modifications including Modified FV 12 Original Options FV 9 Incremental Value of Modified Options 3 per share The accounting of these awards would be as follows after the modification of terms; Year 1 2 3 4 5 6 2012 2013 2014 2015 2016 2017 Shares 1,000 1,000 1,000 1,000 1,000 1,000 FV 15 15 15 15 15 3 Total Compensation Cost $3,750 $3,750 $3,750 $3,750 $3,750 $3,000 $18,000 Based on ASC-718-20- 55-10, any estimate changes shall be accounted for as a change in estimate and its cumulative effect would be recognized in the period of change. For instance, no compensation would be recognized for 2013, and the following accounting entry to reverse 2012 would be recorded. Dr Additional paid in capital Cr $3,750 Compensation cost $3,750 Therefore, the cumulative compensation cost recognized is zero. The modification of performance condition in the case can be explained from Type 111 improbable to probable modification. ASC-718-20-55-116 indicates that immediately before any modification, the total compensation cost is expected to be recognized over the year vesting period as $0. The Compensation Cost after Modification U.S GAAP can be recorded as follows; this resulted from the modification of the awards from the probable of achievement. 2012 Year 1 Shares 1,000 FV 15 Compensation Cost $ 3,750 2013 2014 2015 2 3 4 0 1,000 1,000 15 12 12 Total ($3,750) $6,000 $6,000 $12,000 U.S GAAP recognizes the forfeiture of original award and grant of new award. In terms of IFRS, modifications are accounted as a change in the number of options expected to vest. FV cannot be lower than date FV. IFRS -2-20 indicate, based on the best available estimate of the number of equity instruments expected to vest and shall vest revise that estimate if necessary. IFRS-2-27 states the shares are measured at the grant data fair value irrespective of any modifications. Compensation Cost After Modification IFRS 2012 2013 2014 2015 Year 1 2 3 4 Shares 1,000 0 1,000 1,000 FV 15 15 12 12 Total Compensation Cost $ 3,750 ($3,750) $7,500 $7,500 $15,000 Considering that the awards continued to be improbable of achievement after modification, the compensation cost would be recorded through December 31, 2015 and 2016 will be $ 12,000 each year. The cumulative costs are expected to remain the same for the years. Conclusion In my opinion, it is clear that the employee share options are recognized in compensation expense. The formula of calculating the annual compensation expense = (((Number of Options Expected to Vest * Fair Value of Each Option)/ Vesting Period)* Number of years since Grant Date) - Compensation Expense Previously Recognized). ASC 718-10-50-2 indicates that the description of the arrangements includes the service period, the maximum number of options vested, and the number of options authorized to obtain the employee compensation cost. Memo Date: To: From: Bochen Li Subject: Revenue Recognition Policy and Guidelines at Social Konnections Inc Background: Social Konnections Inc is a company involved in providing social media and internet services. The company started in 2005, and so far, it has gained more than 500 million active users. SKI obtains its revenues from advertisers who market their products and services to SKI's active users through advertisements placed on the web site or its various mobile platforms. It also receives revenues from the sale of virtual goods and services by third party application developers using SKI's various platforms. However, the company faces concerns on its revenue recognition policy and guidelines. Therefore, the discussion will provide reliable information and recommendations on how to recognize the revenues. Problem: The question of the appropriate revenue recognition practices and guidelines places most companies in a dilemma regarding the timing and realization of its revenues. Thus, the main issues in this discussion are to expose the major revenue recognition concerns as to well as record measures to improve revenue recognition. Relevant Guidance: ASC 605, Revenue Recognition offers guidance for transaction-specific revenue recognition and specific matters relating to revenue-generating activities such as the rendering of the services as in the case of SKI, sale of products, and the gain or loss on conversions of non- monetary assets to monetary assets. ASC Topic 605 also provides guidelines for entities operating in the software industry. It states that the companies dealing with software should consider the arrangements under the vendors, reports of the revenue gross, explanation consideration given to the vendors and the application of the milestone method in arrangements that incorporate research and development services. Application: Firstly, the recognition of the advertising revenues faced several concerns as indicated in the case. The amount of revenues was obtained from payments from the advertisers depending on the number of views the ad received or the number of clicks. However, this was dependent of the contractual agreement between the company and the advertisers. Thus, the company recorded revenues in the period in which the views or clicks are made. Some of the potential revenue recognition issues related to the advertising revenues include the realization of the revenues, timing considerations, and the pressures exerted to make sales and other forecasts. The company might be facing a dilemma on when to realize the revenues. For example, they should recognize the revenue when the revenues are earned or when the sales process is completed. The company realized revenues prior to the delivery of the products and services. In the case of the corporate social network development and hosting revenue, the company usually earned revenues through providing corporate social network development and hosting services. Under this revenue, the company obtained revenues in two fronts: the upfront fee after entering into a contract and the hosting revenues recognized automatically through the invoicing cycle. The potential revenue recognition issues include the identification of the events of substance for the recognition of revenues in order to record the revenues properly. Thus, the nature of delivering the revenues was questionable. It follows the alternative industry revenue recognition available. These include contract accounting, bill and hold transactions, and installment fees. Additionally, there were concerns on the need to establish internal controls for the revenue recognition environment. Based on the information offered by Ms. Drew, she should consider discussing several fraud risk factors at the next fraud meeting. These factors can be classified into the control environment and pressure risks. The control fraud factors include safeguards, documentations, related party transactions, complexity, and auditing. The company should create a relevant internal audit function to evaluate the correctness of the transactions. The recognition of revenues of the hosting programs involves complex transactions that place increased fraud risk concerns. Related party transactions causes fraud risk by the numerous transactions to particular parties opening grounds for manipulation and fraud. The absence of adequate safeguards and documentation also increases the fraud risk concerns. In terms of the pressures, the expectations and dissatisfaction of the employees could lead to fraud risk concerns. Based on the company's information, the potential audit procedures available to the team in the evaluation of the management's revenue recognition policies include the use of inspection, observation, external confirmation, recalculation, reperformance, inquiry and analytical procedures. The audit procedures ensure that all the revenues from the two classification is well calculated as well as making sure it aligns with the present revenue recognition requirements. The management and audit team could use the procedures to obtain accurate and complete records on the revenues. Largely, I think the revenue recognition policies have been applied appropriately, as the management is able to consider the timing and the realization of the revenues appropriately. However, there are concerns on the complexity of the revenue recognition guidelines. Conclusion: In my opinion, SKI has made strong efforts to comply with the requirements and guidelines set in the ASC Topic 605, Revenue Recognition. However, it should deal with the various concerns on the timing and realization of the revenues in the company. Ms. Drew should address the pressures and control environment concerns that lead to fraud risks concerns in the company. It is recommendable for the management to consider polishing the revenue recognition policies based on the IFRS guidelines and ASC topic 605, Revenue Recognition. The accounting standards offer the recommended guidelines on revenue recognition among all entities to promote comparability and integrity of the financial statements and revenues. Memo Form Date: June 18, 2015 To: Audit supervisor From: Bochen Li Subject: Impacts of changes in accounting of Share Repurchases or Retirements at Trojan Financial Accounting and reporting Policy. Background: Recently, Trojan has had concerns on the impacts of changes in share repurchase and retirements in the overall accounting and financial reporting in the company. ASC 505 has summarized relevant issues related to the accounting for share repurchases and retirements in the company. Improved changes in the accounting of share repurchases is important in the retirement of stocks, reissuance of the stocks at a higher price, and the reduction of the total number of shares outstanding as well as issuing the stocks to the employees. The nature of conforming to the inherent IFRS requires Trojan to adjust its accounting share retirements. Therefore, this case study will analyze the impacts of changes in accounting of share repurchases towards supporting improved accounting processes at Trojan. Problem: In this report, I will seek to determine the impacts of changes in accounting for share repurchases in representing the changes in accounting principle at Trojan. Relevant Guidance: ASC topic 505 30 discusses the nature and impacts of changes in the accounting of the treasury stock. It explains the nature of the entity's own outstanding shares that could be 1 repurchased by the entity. The change in accounting for share repurchases has both gained and loss implications on the paid in capital and retained earnings respectively. Application: Based on the Accounting Standards Codification (ASC 505), the changes in the accounting for Trojan's share repurchases could lead to gains in additional paid in capital or loss in the retained earnings. ASC 505-30-45-1 states that when a company's stock is acquired for any reason other than retirement, the cost of acquired stock could be shown separately as reduction of capital stock, capital surplus or impacts to the retained earnings. According to IFRS 2, if Trojan were required to issue the financial statements in compliance with the IFRS requirements, Trojan's accounting for its share retirements would have significant impact on its accounting for share retirements. IFRS 2 requires that all shared based transactions should be measured at fair value, more so based on market prices. Fair value prices are useful in accurately measuring the share value in the company. Conclusion: In my opinion, Trojan's changes in accounting for share repurchases presents a change in the accounting principle. Share repurchases are necessary in providing support for the existing stock prices in order to offer the shareholders maximum profits. The changes in accounting of the share repurchases indicate the intention of the company to realign the stock. This is appropriate in keeping the repurchased share available for reissuance. This motivates the firm's shareholders and employees investing in the company. The share repurchases reduce Trojan's outstanding shares that translate to improved profitability and cash flow measured through the earnings per share (EPS) and the cash flow per share. Additionally, I discovered that the 2 subsequent issuance of Trojan's financial statements would have a significant impact on its accounting for its share retirements. 3 Memo Date: June 16, 2015 To: Audit supervisor From: Bochen Li Subject: Step Zero Analysis at Eastmond Waste Company Recently, companies have increased their application of the step zero analysis that guides in performing qualitative assessment on the goodwill impairment. The inability for the companies to calculate the actual impairment of goodwill affects the acquisition process. EW Company should develop appropriate managerial strategies to enhance the effective performance of the step zero analysis for its reporting units. The controls include continuous monitoring, effective communication, and coordination between the processes involved in the step zero method. Therefore, report will discuss the nature and application of the ASC Topic 350 towards resolving the goodwill impairment evaluation and calculation concerns. The Financial Accounting Standards Board (FASB) first developed the standards update on the testing and examination for goodwill impairment to assess the qualitative aspects in determining when necessary to conduct the traditional two-step approach. The Codification ASC Topic 350 provides the step zero as an alternative qualitative assessment that guides the overall reporting cycle including audits and other regulatory reviews. The step zero analysis is important in simplifying how the company should test goodwill for impairment in terms of the expressed concerns about the cost and complexity of performing the two-step good will impairment method. Based on ASC Topic 350, I think step zero analysis is significant in offering a positive determination of whether it is likely that the fair value of the reporting unit lessens goodwill. Therefore, the ASC Topic 350 would be a relevant accounting guideline for EW in the application of step zero analysis for calculation of the good will impairment. According to ASC 350- 25-35, Goodwill Subsequent Measurement offers detailed explanation of the effectiveness of the step zero. I think that step zero tests allow the companies to determine whether it is likely that the fair value of the reporting elements is not greater than the carrying value of the reporting entities. The management can apply a step zero analysis to both reporting units as indicated in ASC topic 350 to assess the goodwill before the acquisition process. This helps to ensure the efficiency and effectiveness of the overall measurement. In order to promote step zero analysis, the ASC Topic 350 outlines some of the items EW should consider, including general macroeconomic conditions, industry and market conditions, changes in cost factors, overall financial performance, and the entity and reporting unit specific event including strategy and litigation. An appropriate measure of the fair value for the goodwill impairment is the reporting unit in terms of ASC 350-20-35. The measure of the fair value helps to compare the carrying amount of reporting unit to its fair value. The newly acquired reporting unit will certainly support the use of the qualitative assessment. In my opinion, I would recommend that EW Company apply the step zero analysis in analyse the overall performance of the company. Step zero tests provide increased flexibility that simplifies the annual impairment testing approach. Arguably, the step zero model is important in bridging the gap between fair value and carrying value in future impairments tests that have increased scrutiny in the review process. Some of the audit procedures that could be performed to evaluate the step zero analysis includes the cut off procedures, classification and the completeness process to relevant evaluation. Considering the model measures the fair value, its application helps in identifying and evaluating the most significant assumptions in the current environment. Memo Date: June 16, 2015 To: Audit supervisor From: Bochen Li Subject: Accounting for the cumulative revenue recognized and deferred revenue balance related to the Buffett arrangement Coconut Telegraph Corporation (Coconut) is a developer and provider of specialized customer billings and management software systems. On February 1, 2012, Coconut entered into an arrangement with Buffett Worldwide Inc. (Buffett) to deliver the Volcano System and provide one year of postcontract customer support (PCS) beginning March 1, 2012. Buffett paid $12,000 on February 1, 2012, for the Volcano System and the related PCS. On May 1, 2012, and in a separate contract, Coconut agreed to provide Buffett with (1) training services on the customer management system and (2) an additional year of PCS. Buffett immediately paid consideration of $4,500 for the additional services. Coconut's February 1, 2012, arrangement with Buffett is not within the scope of ASC 985-605. ASC 985-605-15-4 states that the guidance in this subtopic does not apply to \"Software components of tangible products that are sold, licensed, or leased with tangible products when the software components and nonsoftware components of the tangible product function together to deliver the tangible product's essential functionality.\" From this case, the software of the Volcano System is bonded with its hardware for selling. Also, the hardware is a tangible product. Additionally, the 1 hardware needs the software components and non-software components in order to function properly. Therefore, it is not within the scope of exceptions in ASC 985-605. ASC 985-605-25-8 states that \"if a discount is offered in a multiple-element arrangement, a proportionate amount of that discount shall be applied to each element included in the arrangement based on each element's fair value without regard to the discount.\" However, as discussed in paragraph 985-605-25-45, no portion of the discount shall be allocated to any upgrade rights. Moreover, to the extent that a discount exists, the residual method described in paragraphs 985-605-25-10 through 2511 attributes that discount entirely to the delivered elements.\" Coconut's February 1, 2012, arrangement is a multiple elements arrangement. Both the Volcano System and PCS have relative selling prices of $12,000 and $2,000. The company gave the discount on the multiple element arrangement and allocated the fair value of it. February 1, 2012 fv System PCS TATAL % $12,000 $2,000 $14,000 85.71% 14.29% 100% Allocated discount (1,714) (286) (2,000) Allocated Arrangement consideration $10,286 $1,714 $12,000 April 30, 2012 The cumulative revenue recognized 10,286 + 1,714 x 2/12 = $10,572 Deferred revenue 1,714 - 286 = $1,428 According to ASC 605-25 revenue recognition to multiple elements agreements, the February 1, 2012, agreement and the May 1, 2012, agreement is 2 accounted for together. ASC 605-25-25-3 states if the vendor and the buyer separate contracts for the same entity at relatively close times, it will be negotiated together and treated as a single arrangement. They happen at the same time, therefore, they should be accounted for together. May 1, 2012 fv Training fee PCS TATAL % $3,000 $2,000 $5,000 60.00% 40.00% 100% Allocated discount $300 $200 $500 Allocated Arrangement consideration $2,700 $1,800 $4,500 May 1, 2012 The cumulative revenue recognized 10,286 + 1,714 x 2/12 = $10,572 Deferred revenue 1,428 + 2,700 + 1,800 = $5,928 3 Memo Date: June 16, 2015 To: Audit supervisor From: Bochen Li Subject: Step Zero Analysis at Eastmond Waste Company Recently, companies have increased their application of the step zero analysis that guides in performing qualitative assessment on the goodwill impairment. The inability for the companies to calculate the actual impairment of goodwill affects the acquisition process. EW Company should develop appropriate managerial strategies to enhance the effective performance of the step zero analysis for its reporting units. The controls include continuous monitoring, effective communication, and coordination between the processes involved in the step zero method. Therefore, report will discuss the nature and application of the ASC Topic 350 towards resolving the goodwill impairment evaluation and calculation concerns. The Financial Accounting Standards Board (FASB) first developed the standards update on the testing and examination for goodwill impairment to assess the it is qualitative aspects in determining when necessary to conduct the traditional two-step approach. The Codification ASC Topic 350 provides the step zero as an alternative qualitative assessment that guides the overall reporting cycle including audits and other regulatory reviews. The step zero analysis is important in simplifying how the company should test goodwill for impairment in terms of the expressed concerns about the cost and complexity of performing the two-step good will impairment method. Based on 4 ASC Topic 350, I think step zero analysis is significant in offering a positive determination of whether it is likely that the fair value of the reporting unit lessens goodwill. Therefore, the ASC Topic 350 would be a relevant accounting guideline for EW in the application of step zero analysis for calculation of the good will impairment. According to ASC 350- 25-35, Goodwill Subsequent Measurement offers detailed explanation of the effectiveness of the step zero. I think that step zero tests allow the companies to determine whether it is likely that the fair value of the reporting elements is not greater than the carrying value of the reporting entities. The management can apply a step zero analysis to both reporting units as indicated in ASC topic 350 to assess the goodwill before the acquisition process. This helps to ensure the efficiency and effectiveness of the overall measurement. In order to promote step zero analysis, the ASC Topic 350 outlines some of the items EW should consider, including general macroeconomic conditions, industry and market conditions, changes in cost factors, overall financial performance, and the entity and reporting unit specific event including strategy and litigation. An appropriate measure of the fair value for the goodwill impairment is the reporting unit in terms of ASC 350-20-35. The measure of the fair value helps to compare the carrying amount of reporting unit to its fair value. The newly acquired reporting unit will certainly support the use of the qualitative assessment. In my opinion, I would recommend that EW Company apply the step zero analysis in analyse the overall performance of the company. Step zero tests provide increased flexibility that simplifies the annual impairment testing approach. Arguably, 5 the step zero model is important in bridging the gap between fair value and carrying value in future impairments tests that have increased scrutiny in the review process. Some of the audit procedures that could be performed to evaluate the step zero analysis includes the cut off procedures, classification and the completeness process to relevant evaluation. Considering the model measures the fair value, its application helps in identifying and evaluating the most significant assumptions in the current environment. 6 Memo Form Date: June 18, 2015 To: Audit supervisor From: Bochen Li Subject: Impacts of changes in accounting of Share Repurchases or Retirements at Trojan Financial Accounting and reporting Policy. Background: Recently, Trojan has had concerns on the impacts of changes in share repurchase and retirements in the overall accounting and financial reporting in the company. ASC 505 has summarized relevant issues related to the accounting for share repurchases and retirements in the company. Improved changes in the accounting of share repurchases is important in the retirement of stocks, reissuance of the stocks at a higher price, and the reduction of the total number of shares outstanding as well as issuing the stocks to the employees. The nature of conforming to the inherent IFRS requires Trojan to adjust its accounting share retirements. Therefore, this case study will analyze the impacts of changes in accounting of share repurchases towards supporting improved accounting processes at Trojan. Problem: In this report, I will seek to determine the impacts of changes in accounting for share repurchases in representing the changes in accounting principle at Trojan. Relevant Guidance: ASC topic 505 30 discusses the nature and impacts of changes in the accounting of the treasury stock. It explains the nature of the entity's own outstanding shares that could be 1 repurchased by the entity. The change in accounting for share repurchases has both gained and loss implications on the paid in capital and retained earnings respectively. Application: Based on the Accounting Standards Codification (ASC 505), the changes in the accounting for Trojan's share repurchases could lead to gains in additional paid in capital or loss in the retained earnings. ASC 505-30-45-1 states that when a company's stock is acquired for any reason other than retirement, the cost of acquired stock could be shown separately as reduction of capital stock, capital surplus or impacts to the retained earnings. According to IFRS 2, if Trojan were required to issue the financial statements in compliance with the IFRS requirements, Trojan's accounting for its share retirements would have significant impact on its accounting for share retirements. IFRS 2 requires that all shared based transactions should be measured at fair value, more so based on market prices. Fair value prices are useful in accurately measuring the share value in the company. Conclusion: In my opinion, Trojan's changes in accounting for share repurchases presents a change in the accounting principle. Share repurchases are necessary in providing support for the existing stock prices in order to offer the shareholders maximum profits. The changes in accounting of the share repurchases indicate the intention of the company to realign the stock. This is appropriate in keeping the repurchased share available for reissuance. This motivates the firm's shareholders and employees investing in the company. The share repurchases reduce Trojan's outstanding shares that translate to improved profitability and cash flow measured through the earnings per share (EPS) and the cash flow per share. Additionally, I discovered that the 2 subsequent issuance of Trojan's financial statements would have a significant impact on its accounting for its share retirements. 3