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  • Robert E Jensen

    Sustainability Accounting ---  

    A New Assignment for Bob Herz

    From the CFO Journal's Morning Ledger on October 15, 2014

    Sustainability accounting group taps former FASB chairman ---
    Robert Herz, the former chairman of the U.S. Financial Accounting Standards Board, will join the board of the nonprofit Sustainability Accounting Standards Board, which is working to write industry standards for corporate sustainability and environmental reporting, reports CFO Journal’s Emily Chasan. SASB sets voluntary standards for firms to disclose information on material social, governance, energy and environmental issues to investors.

  • Robert E Jensen

    Evernote ---

    "Using Evernote in the Classroom," by Amy Cavender, Chronicle of Higher Education, October 20, 2014 ---

    Bob Jensen's threads on tools and tricks of the trade ---

  • Robert E Jensen

    Committee of Sponsoring Organizations of the Treadway Commission (COSO) ---

    From the CFO Journal's Morning Ledger on September 24, 2014

    Implementing COSO's Internal Control-Integrated Framework ---

    To unlock the value that can be achieved by adopting COSO's 2013 Internal Control-Integrated Framework, management should take a step back and evaluate how it is addressing the risks to its organization in light of its size, complexity, global reach and risk profile. Learn about leading internal control practices that may help address common challenges related to implementing the 2013 Framework, as well as perspectives on applying the framework for operational and regulatory compliance purposes.

    Continue Reading Today's Article ---

    Read More --- Deloitte Insights »

    Bob Jensen's threads on managerial accounting ---

  • Robert E Jensen

    "Universities With the Most Doctorate Recipients From Minority Groups, by Race and Ethnicity, 5-Year Total for 2008-12," Chronicle of Higher Education, August 18, 2014 ---

  • Robert E Jensen

    From the CPA Newsletter on September 3, 2014

    How retirement planning has changed since ERISA was enacted
    The Employee Retirement Income Security Act was enacted in 1974 in response to some much publicized failures of private defined benefit (or pension) plans. Rebecca Miller, CPA, Robert Lavenberg, CPA, J.D., and Ian MacKay, CPA, CGMA, mark ERISA's 40th anniversary with a look back at the challenges ERISA was originally intended to address and the issues facing retirees now and in the future. Journal of Accountancy print issue (9/2014)

    Bob Jensen's threads on personal finance ---

    Bob Jensen's threads on pension accounting ---

  • Robert E Jensen

    Fees = Transactions Costs (when buying or selling shares) plus Fund Management Fees (paid annually to professionals who manage your portfolio like the managers at TIAA/CREF, Fidelity, Vanguard, etc.). manage your retirement funds.

    Taxes = Capital Gains Taxes (that apply even on retirement funds like CREF when you make eventual withdrawals). Note that capital gains taxes must be paid by your estate on the balances left in your retirement funds. Most of us won't get hit with estate taxes (due to high estate tax exemptions), but we all get hit with capital gains taxes on the retirement funds and farms we leave behind for heirs.

    Inflation = Loss in Buying Power of Saving Dear Money That Turns Into Cheap Money (even under your mattress)
    The government is now misleading us about inflation by taking price increases for food and fuel out of its reported  inflation index so you think that your dollars are still dear when they are cheap in terms of things that you buy day-by-day. Economists are whores for politicians. Government deficit spending and obligations for $100 trillion in unfunded entitlements (like Medicare and Medicaid) make inflation the biggest worry of the three diseases on retirement savings --- fees, taxes, and inflation.

    "Here's How Little You Earn On Stocks After You Pay The Man, Uncle Sam, And The Invisible Hand," by Myles Udland, Business Insider, August 29, 2014 ---

    Fees, taxes, and even inflation just kill your investment returns.

    A Thornburg Investment Management study of "real, real returns," which was alerted to us by Cullen Roche at Pragmatic Capitalism, shows how various costs eat into your stock market returns. 

    Real, real returns take into account expenses (the man), taxes (Uncle Sam), and inflation (the invisible hand).

    Thornburg's study notes that "nominal returns are a misleading driver of an investor's investment and asset-allocation planning... because they are significantly eroded by taxes, expenses and inflation." The risk then, as Thornburg sees it, is that a failure to understand real, real returns could lead to investment decisions that miss potential diversification opportunities. 

    This chart from Thornburg shows how the annualized nominal return of $100 invested in the S&P 500 between 1983 and 2013 is about 11%, making that investment worth $2,346.

    However, on a real, real basis that investment returns 6%, making it worth just $570.

    A pretty stark difference between expectations and reality.

    Jensen Comment
    There are ways of partly beating the tax man by investing a portion of your retirement funds in a tax-exempt mutual fund that holds bonds of school districts, towns, cities, counties, and states. However, I say "partly beats" in the sense that value changes in those funds are subject to capital gains taxes even if the interest on those bonds that builds up your savings are not taxed while your earn that interest or when you withdraw that interest. A second  drawback is that there is relatively more risk in investing in a given tax-free municipal bond versus a taxable high-grade corporate bond. But huge diversified tax-free mutual funds like those of Fidelity and Vanguard. A third drawback in theory is that tax-free bonds should earn less interest than corporate bonds. This is not always the case in this era of stupid quantitative easing by the Federal Reserve that keeps interest rates on CDs and high-grade corporate bonds close to zero. Tax-free interest rates have held up batter in this idiotic era of quantitative easing since the crash of 2007.

    Remember that higher return investments also carry higher financial risks beyond the savings killers of fees, taxes, and inflation. For example land investments have less inflation risks but are subject to many other financial risks. For example, think of paying a million dollars for an Iowa farm that sold ten years ago $500,000 and doubled in value because of the corn ethanol government mandate for gasoline. The added financial risk for your new farm is that one day soon the government will come to its senses and remove the ethanol mandate for fuel, thereby leaving the corn for cows and hogs. Your million dollar farm may plunge in value --- thus the added investment risk beyond the retirement savings killers of fees, taxes, and inflation.

    Bob Jensen's Personal Finance Helpers ---

  • Robert E Jensen

    In the realm electric power, what is a "levelized cost?"

    The Economist:  Wind and solar power are even more expensive than is commonly thought ---

    . . .

    But whereas the cost of a solar panel is easy to calculate, the cost of electricity is harder to assess. It depends not only on the fuel used, but also on the cost of capital (power plants take years to build and last for decades), how much of the time a plant operates, and whether it generates power at times of peak demand. 

    To take account of all this, economists use "levelised costs"--the net present value of all costs (capital and operating) of a generating unit over its life cycle, divided by the number of megawatt-hours of electricity it is expected to supply.

    The trouble, as Paul Joskow of the Massachusetts Institute of Technology has pointed out, is that levelised costs do not take account of the costs of intermittency. Wind power is not generated on a calm day, nor solar power at night, so conventional power plants must be kept on standby--but are not included in the levelised cost of renewables.

    Electricity demand also varies during the day in ways that the supply from wind and solar generation may not match, so even if renewable forms of energy have the same levelised cost as conventional ones, the value of the power they produce may be lower. In short, levelised costs are poor at comparing different forms of power generation.

    To get around that problem Charles Frank of the Brookings Institution, a think-tank, uses a cost-benefit analysis to rank various forms of energy. The costs include those of building and running power plants, and those associated with particular technologies, such as balancing the electricity system when wind or solar plants go offline or disposing of spent nuclear-fuel rods.

    The benefits of renewable energy include the value of the fuel that would have been used if coal- or gas-fired plants had produced the same amount of electricity and the amount of carbon-dioxide emissions that they avoid. 

    Mr Frank took four sorts of zero-carbon energy (solar, wind, hydroelectric and nuclear), plus a low-carbon sort (an especially efficient type of gas-burning plant), and compared them with various sorts of conventional power. Obviously, low- and no-carbon power plants do not avoid emissions when they are not working, though they do incur some costs.

    So nuclear-power plants, which run at about 90% of capacity, avoid almost four times as much CO{-2} per unit of capacity as do wind turbines, which run at about 25%; they avoid six times as much as solar arrays do. If you assume a carbon price of $50 a tonne--way over most actual prices--nuclear energy avoids over $400,000-worth of carbon emissions per megawatt (MW) of capacity, compared with only $69,500 for solar and $107,000 for wind.

    Nuclear power plants, however, are vastly expensive. A new plant at Hinkley Point, in south-west England, for example, is likely to cost at least $27 billion. They are also uninsurable commercially. Yet the fact that they run around the clock makes them only 75% more expensive to build and run per MW of capacity than a solar-power plant, Mr Frank reckons.

    To determine the overall cost or benefit, though, the cost of the fossil-fuel plants that have to be kept hanging around for the times when solar and wind plants stand idle must also be factored in. Mr Frank calls these "avoided capacity costs"--costs that would not have been incurred had the green-energy plants not been built.

    Thus a 1MW wind farm running at about 25% of capacity can replace only about 0.23MW of a coal plant running at 90% of capacity. Solar farms run at only about 15% of capacity, so they can replace even less. Seven solar plants or four wind farms would thus be needed to produce the same amount of electricity over time as a similar-sized coal-fired plant. And all that extra solar and wind capacity is expensive.

    A levelised playing field

    If all the costs and benefits are totted up using Mr Frank's calculation, solar power is by far the most expensive way of reducing carbon emissions. It costs $189,000 to replace 1MW per year of power from coal. Wind is the next most expensive. Hydropower provides a modest net benefit.

    But the most cost-effective zero-emission technology is nuclear power. The pattern is similar if 1MW of gas-fired capacity is displaced instead of coal. And all this assumes a carbon price of $50 a tonne. Using actual carbon prices (below $10 in Europe) makes solar and wind look even worse. The carbon price would have to rise to $185 a tonne before solar power shows a net benefit.

    There are, of course, all sorts of reasons to choose one form of energy over another, including emissions of pollutants other than CO{-2} and fear of nuclear accidents. Mr Frank does not look at these. Still, his findings have profound policy implications. At the moment, most rich countries and China subsidise solar and wind power to help stem climate change.

    Yet this is the most expensive way of reducing greenhouse-gas emissions. Meanwhile Germany and Japan, among others, are mothballing nuclear plants, which (in terms of carbon abatement) are cheaper. The implication of Mr Frank's research is clear: governments should target emissions reductions from any source rather than focus on boosting certain kinds of renewable energy.

    Bob Jensen's threads on cost and managerial accounting ---

  • Robert E Jensen

    From the CPA Newsletter on July 10, 2014

    American 15-year-olds rank below average in global financial-literacy survey
    The U.S. scored slightly below average, at 492, for financial literacy among 15-year-old students, according to a study by the Organization for Economic Cooperation and Development. Students in Shanghai, China, scored the highest with 603, followed by Belgium and Estonia. The U.S. came in at No. 9. The average score was 500. The AICPA's 360 Degrees of Financial Literacy program helps Americans understand their personal finances through every stage of life. USA Today (7/9)

    Financial literacy should be a required skill for all high school and college graduates ---

    Bob Jensen's financial literacy helpers ---

  • Robert E Jensen

    "Un-Fathom-able: The Hidden History of Ed-Tech #CETIS14," by Audrey Watters, Hacked Education, June 18, 2014 ---

    Jensen and Sandlin Book entitled Electronic Teaching and Learning: Trends in Adapting to Hypertext, Hypermedia, and Networks in Higher Education
    (both the 1994 and 1997 Updated Versions)

  • Robert E Jensen

    Teaching Case
    From The Wall Street Journal Weekly Accounting Review on May 16, 2014

    Studying Philosophy is Good for Business
    by: Marcelo Bucheli and R. Daniel Wadhwani
    May 12, 2014
    Click here to view the full article on

    TOPICS: Accounting Education

    SUMMARY: The article is written by two professors, one at the University of Illinoi, Urbana-Champaign and one at the University of the Pacific. The related article is the original report on changes in MBA programs to which these two professors have responded in this letter to the WSJ editors. The professors focus on market-related benefits of broad thinking capabilities. The related article describes employers' concerns about current teaching methods and focus in business programs.

    CLASSROOM APPLICATION: While the articles focus on MBA programs, questions ask students to consider whether these issues apply in accounting programs. The article may be used in any accounting class.

    1. (Advanced) What do you understand is the meaning of critical thinking?

    2. (Introductory) What concerns are raised in the main and related articles about development of students' critical thinking skills in business programs?

    3. (Advanced) While the two articles are focused on MBA programs, do you feel that your accounting curriculum helps to develop your critical thinking skills? Support your answer.

    4. (Introductory) Refer to the related article. What do employers cite as a problem with the thinking skills of business school graduates?

    5. (Advanced) Could this issue being raised by employers apply to accounting graduates as well as MBAs? Explain.

    Reviewed By: Judy Beckman, University of Rhode Island

    Why Some M.B.A.s Are Reading Plato, Kant
    by Melissa Korn
    May 01, 2014
    Page: B6

    "Studying Philosophy is Good for Business," Marcelo Bucheli and R. Daniel Wadhwani, The Wall Street Journal, May 12, 2014 ---

    Most business-school students are gunning for jobs in banking, consulting or technology. So what are they doing reading Plato?

    The philosophy department is invading the M.B.A. program—at least at a handful of schools where the legacy of the global financial crisis has sparked efforts to train business students to think beyond the bottom line. Courses like "Why Capitalism?" and "Thinking about Thinking," and readings by Marx and Kant, give students a break from Excel spreadsheets and push them to ponder business in a broader context, schools say.

    The courses also address a common complaint of employers, who say recent graduates are trained to solve single problems but often miss the big picture.

    "Nobel Thinking," a new elective at London Business School, explores the origins and influence of economic theories on topics like market efficiency and decision-making by some Nobel Prize winners. The 10-week course—taught by faculty from the school's economics, finance and organizational behavior departments—might not make students the next James Watson or Francis Crick, but it aims to give them a sense of how revolutionary ideas arise.

    "It's important to know why we're doing what we're doing," says Ingrid Marchal-Gérez, a second-year M.B.A. who enrolled in Nobel Thinking to balance her finance and marketing classes. "You can start to understand what idea can have an impact, and how to communicate an idea."

    Students write narrative essays to explain how ideas—such as adverse selection, or what happens when buyers and sellers have access to different information—gain currency. Joao Montez, the economics professor leading Nobel Thinking, says he wants students to reflect, if only for a short while, on world-changing thought.

    Career advancement and salary outrank ideas about world peace and humanity's future for many M.B.A.s, but Dr. Montez says LBS students have requested more opportunities to step back and consider big-picture ideas.

    "You can leave the classroom with these ideas in the back of your mind, and then maybe one day it will be useful," he says.

    That's true to a point: Ms. Marchal-Gérez, 38 years old, says she is somewhat concerned she'll "have a good time, but then what?"

    Abstract ideas remain a hard sell for many M.B.A.s.

    Patricia Márquez, an associate professor of management at the University of San Diego's School of Business Administration and an anthropologist by training, has struggled for nearly 20 years to teach M.B.A.s to dream up business solutions for poverty, her area of scholarly focus. Students, she found, needed a great deal of coaching to apply theories from anthropology and ethnography to the business world.

    She eventually replaced theory-based readings with traditional case studies, though she still tries to conduct discussions on abstract topics, such as how cultural stereotypes stymie innovation.

    "I spent six years thinking about the definition of culture. At a business school, culture can be measured through a survey," she says. "It's so solution-oriented. We don't ask, and we don't let them have space to ask better questions."

    To give students room for questions, Bentley University in Waltham, Mass., introduced "Thinking about Thinking" as a unit in its one-year M.B.A. program last year. Students spend two weeks studying art, reading fiction and even meditating.

    "There's too much emphasis in leadership work on understanding followers," says Duncan Spelman, management department chair and co-instructor. "We're really trying to emphasize understanding the self" to make students effective leaders.

    Mariia Potapkina, a 29-year-old Russia native who plans to work in consulting or strategy after graduation, says the class was "a nonstop, 14-day discovery of yourself." For example, she learned that she became more organized in the face of ambiguity.

    But ambiguity can be unsettling for some. Esteban Hunt, an M.B.A. student who hails from Buenos Aires, recalled a class when an artist presented a piece of artwork and asked students to describe what they saw.

    The variety of interpretations, and the realization that there was no single right answer, left him frustrated, Mr. Hunt says, and produced palpable anxiety among his classmates.

    That's the point, says Dr. Spelman, adding that uncertainty is a reality in life and business.

    Expect more abstract ideas in business schools soon.

    To meet student demand, Copenhagen Business School is expanding its 15-year-old master of science in business administration and philosophy program this year, shifting to English-language instruction from Danish and taking in more international students.

    "The tension between the two words business [and] philosophy appeals to quite a lot of young students," says Kurt Jacobsen, program director and a professor of business history. He says students want to better understand market and business dynamics after the extreme economic upheaval of recent years.

    Continued in article

    Critical Thinking:  Why's It So Hard to Teach
    Go to

  • Robert E Jensen

    The Average American Can't Answer These Three Simple Finance Questions ---

    Here’s a frightening fact via The Atlantic’s Moises Naim.  Roughly half of the world can’t answer these three questions correctly:

    1.  Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow? A) more than $102; B) exactly $102; C) less than $102; D) do not know; refuse to answer.

    2.  Imagine that the interest rate on your savings account is 1 percent per year and inflation is 2 percent per year. After one year, would you be able to buy A) more than, B) exactly the same as, or C) less than today with the money in this account?; D) do not know; refuse to answer.

    3.  Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.” A) true; B) false; C) do not know; refuse to answer.

    Even worse – 70% of Americans can’t answer all three questions correctly.  And we wonder why the world seems to have so many persistent financial problems.  We don’t even come close to understanding the construct of money or how it should be used.  The world desperately needs to become better educated on the topic of money, finance and economics.  It certainly won’t solve all of our financial problems, but information really is power when it comes to money.   Unfortunately, we don’t even teach basic finance in most schools and economists can’t even agree on what “money” is in the first place.  We have a long road ahead of us but it’s not too late to get started….

    Continued in article

    Jensen Comment
    People who cannot answer the above questions cannot answer the question of why the Feds low interest strategy (Quantitative Easing) has wiped out savings of tens of millions of people young and old. This is especially troublesome for the elderly. My parents, for example, used to draw off upwards of 6% interest on certificates of deposit (CDs while leaving the investment amount intact. Today they would have to cut into the savings with CDs earning less than 1%. That's what is happening to senior citizens today. They are eating their seed corn and when the savings are gone they have little left to live on except for their meager Social Security checks.

    My question would be how long it would have taken my parents to double the value of a 6% investment compounded annually if all interest payments are plowed back into savings at the same 6% (ignore inflation and taxes)? This is a question raised years ago in the popular economics textbook by Paul Samuelson. My parents had sufficient income from their pensions and farm to enable them to leave some CDs untouched for 12 or more years. Of course they faced the realities of inflation (higher than today's inflation rate) and taxes (higher than today's taxation of the middle class).

    My guess is that 90% of the adults in the USA could not answer the above question, especially if complications of taxes and inflation were thrown into the problem.

    Financial troubles are a bigger cause of divorce and sexual troubles. It's especially dangerous for couples to pile on debt for such things as student loan repayments, mortgage loans. car loans, and ever deepening credit card debt reflecting spending sell beyond income. This creates tension in individuals and families. Fights ensue over money and debt. Many couples declare bankruptcy but there are some debts that carry on after bankruptcy declarations.

    What person wants to marry a spouse carrying $65,000 student that cannot be eliminated by declaring bankruptcy?

    My opinion is that financial literacy should be a part of college core skills requirements for the sake of financial sanity in the USA ---

    Khan Academy provides some great financial literacy free learning videos ---

    Bob Jensen's personal finance helpers ---

  • Robert E Jensen

    The 5 Worst Mistakes To Make When Buying A New Car ---
    Or go to

    Jensen Comment
    I think the worst mistake is not pretending to be a cash buyer. My advice is to always pretend that you want to pay cash for the car or truck or tractor. Then after you negotiate the dealer's rock bottom cash price you can inquire about financing deals.

    You should be able to compute or have a knowledgeable friend be able to compute the financing interest rate based upon the rock bottom cash price that you negotiated. Dealers have a way of making finance rates look lower by using some price higher than the rock bottom cash price that you negotiated ---
    I provide a free Excel workbook on how to compute financing rates ---

    If you don't put a lot of miles on a car each year I would also look into negotiating a leasing deal with an option to buy the car at the end of the lease. Because interest rates are so low for dealers and banks, leasing has become a much better option than in the old days of higher interest rates.

  • Robert E Jensen

    Sustainability Accounting Standards Board ---

    Notice from the SEC to the Sustainability Accounting Standards Board (SASB) and Other Unauthorized Accounting Standard Setters
    Only the FASB is Authorized by the SEC to Set Accounting Standards

    "SEC's Gallagher Rails on Third-Party Rule Makers," by Tammy Whitehouse, Compliance Week, April 16, 2014 ---

    Third parties trying to set disclosure standards for public company financial reports are ruffling some feathers at the Securities and Exchange Commission.

    EC Commissioner Daniel Gallagher recently singled out the Sustainability Accounting Standards Board as a group not authorized by the SEC to tell companies what they should disclose in their financial statements, even though SASB issues standards that it says tell companies what they should disclose related to various sustainability topics. Aside from the Financial Accounting Standards Board, which writes financial accounting rules, the SEC has not given any other body the responsibility or authority to establish disclosure requirements, he said.

    Gallagher was speaking at a law conference when he used SASB as an example of an outside entity trying to influence corporate disclosures, especially as the SEC undertakes an effort to re-examine corporate disclosure requirements. “We must take exception to efforts by third parties that attempt to prescribe what should be in corporate filings,” he said. “It is the commission's responsibility to set the parameters of required disclosure.”

    SASB is an independent, nonprofit group that writes industry-specific standards for disclosing material sustainability issues that the SEC requires companies to address in their mandatory filings. In a letter to Gallagher, SASB pleads it is only trying to help. SASB "is a market-driven response to the problem of disclosure overload and immaterial information," says Jean Rogers, founder and CEO of the board. "SASB develops standards that assist companies in fulfilling their disclosure obligations. The standards help companies to identify those factors that are material to the company's short- and long-term sustainability and to provide a model for reporting on those factors in a decision-useful way for investors in the MD&A section of the Form 10-K."

    Rogers has said the board isn't seeking to supplant SEC requirements, but to give companies some guidance around how to determine materiality of sustainability issues and fulfill the disclosure requirements that exist. She has said SASB seeks to provide an infrastructure for how to comply with disclosure requirements related to sustainability areas, much the way FASB provides the infrastructure for how to comply with financial accounting requirements.

    Gallagher, one of five commissioners, is having none of it. “The SASB argues that its disclosure standards elicit material information that management should assess for inclusion in companies' periodic filings with the commission,” he said. Except for FASB, however, the SEC has given no outside group such authority, he said. “So while companies are free to make whatever disclosures they choose on their own time, so to speak, it is important to remember that groups like SASB have no role in the establishment of mandated disclosure requirements.”

    Jensen Comment
    There are ways to be misleading in standard setting. One is an act of commission --- to lie about being authorized in the law as a standard setter. The other is an act of omission --- to never lie about being authorized in the law but also by never pointing out that your board is not authorized in the law. I seriously doubt that the SASB is misleading by either commission or omission.

    I think the following statement at the SASB Website suffers some from omission ---

    What others write might be even less clear with respect to omission. For example, the first paragraph in Wikipedia does not, in my opinion, make this entirely clear at

    Both of the above Web pages should be rewritten to make it entirely clear that the SASB standards are in no way recognized in the law, and that the SASB is not authorized by the SEC or any other government agency to set accounting standards.

    Having said this I applaud the efforts of the SASB to set voluntary standards with respected experts who have some reporting goals that are, in my viewpoint, worthwhile. Compliance, however, with SASB standards probably will be totally voluntary for quite a long time to come.

    Bob Jensen's threads on standard setting controversies are at

  • Robert E Jensen

    Is the Lecture Hall Obsolete?: Thought Leaders Debate the Question ---

    For Motivated Students Studies Show Pedagogy Alternatives Don't Differ Significantly
    The No-Significant-Differences Phenominon ---

    Bob Jensen's threads on Tools and Tricks of the Trade (including classroom flipping) ---

  • Robert E Jensen

    "What Should Mathematics Majors Know About Computing, and When Should They Know It?" by Robert Talbert, Chronicle of Higher Education, March 18, 2014 ---