Case Analysis : Polluter Corporation

To control and decrease the release of pollutants, the government issue EAs to individuals to send out a particular stage of pollutions. Each entity EA has a period year label. Each individual can freely anticipate in choosing who they want to sell the EAs or from whom they want to buy them.

It is necessary to determine when L was removed as director of SPG and SET to ascertain the validity of the plaintiffs’ appointment as administrators. To establish L’s time of removal, one must first conclude whether the decision at the meeting took effect immediately, or if the subsequent messages exchanged between M and L, and belated lodging with ASIC, suggest a later removal date.

First and foremost, we established that EAs are to be treated as intangible assets, as specifically stated by Polluter Corp, and supported by the Accounting Standards Codification. In the SAB Topic 10.F, under section S99-1 - Summary of Decisions Reached to Date (As of November 18, 2010), it states that the Boards decided "purchased and allocated allowances should be recognized as assets.” This specific decision was in reference to emission trading schemes and tradable rights. Furthermore, the same section of the codification referred to above states that, "some entities follow an intangible asset model for emission allowances.” In December 2004, the International Financial Reporting Interpretations Committee (IFRIC) released IFRIC 3, Emission Rights, which stated that allowances are intangible assets and should be measured at fair value when received from the government.

The case that I have chosen to discuss is Case 85 Cal.Rptr.2d 844 (1999) 978 P.2d 2 20 Cal.4th 785 Peter Ramirez, Plaintiff and Appellant, v. YOSEMITE WATER COMPANY, INC., Defendant am Respondent, No. S070114, Supreme Court of California, June 17, 1999.

Refer to the above table. Suppose the government commands each firm to reduce its emissions by 1 ton each and allows these two firms to trade pollution permits. If a 1-ton credit is sold for $175, the total cost for both companies combined to reduce emissions by a total of 2 tons could be as low as:

Polluter Corp is an SEC registrant granted emission allowances (EA’s) by the U.S. government. EA’s allow us to emit specified levels of pollutants. These EA’s are to be used between the years 2010 and 2030 and vary in their vintage year designation. Vintage years are the appropriated years that each EA will be used. The EA’s must be allocated over the three manufacturing facilities that we own in the U.S. to cover greenhouse gases emitted by these facilities. EA’s can be fungible, which means they are mutually interchangeable, if they have the same vintage year designation. We have chosen to record EA’s as intangible assets with a cost basis of zero. Intangible assets are described as “assets (not including financial assets) that lack physical substance. (The term intangible assets is used to refer to intangible assets other than goodwill)” (Accounting Standards Codification 350-10-20, Glossary). We are required to offset our emissions by turning in adequate EA’s or paying a fine at the end of each compliance period. Currently, our greenhouse gas emissions are significantly higher than we would like them to be. To diminish our emission levels, we have decided to upgrade our facilities in 2014. We believe that we will need extra EA’s for the fiscal years prior to the upgrade of our facilities, which is 2010 – 2014. The forecasted cost of the facilities upgrade is $15 million. We entered into two separate transactions, which will impact our statement of cash

Morris Mining Corporation owns and operates mining facilities that are located in the United States, and Canada. This company primarily distributes extracted ores and minerals to their customers. Recently, in January 2015, Morris Mining acquired the mining company King Co. Once the company has been acquired, Mining Morris plans to record the difference of the purchase price and identifiable net assets as goodwill. The identifiable assets and liabilities of King Co. are going to be recorded at fair value on Morris Mining 's books. There has been discussion as to how the company is going to report the fair value for the patent that is part of the assets they acquired from King Co. Rob, an audit manager on the Morris Mining engagement, and Gabriela, the audit senior, are trying to evaluate if the method of the fair value estimate it reasonable.

The cap on the market is set on carbon emissions, creating scarcity within the market. At the end of each year businesses within the scheme are required to ensure they have enough allowances to account for their installation’s actual emissions. Those firms that do not comply and pollute without sufficient permits are hit with heavy fines. (Euro 100 per ton). The aim of carbon trading is to create a market in pollution permits and put a price on carbon. In this way, policy can help internalise external costs of firms’ production and encourage lower emissions to tackle climate change. In a cap and trade system, the volume permits would gradually decline and total emissions, in theory, will diminish. The model of such can be shown as

Cap and trade is a system aimed at diminishing the rate at which carbon is emitted into the atmosphere by creating an economic system based on meeting a certain minimal threshold or paying low-emitting companies for the right to emit in their place. For example, if company A only emits half of the emissions cap, that company can sell (or trade) the remaining credits to company B, should company B choose to emit one-and-a-half times the cap. A main objection to the cap and trade system is that it is not a strong enough means by which to curb emissions of fossil fuels and is inferior to specifically stronger carbon taxes. While initially appealing, the notion of simply strengthening carbon taxes fails to properly stifle carbon emissions and to adequately incentivize “green” development in comparison to the cap and trade system, preventing carbon taxes from occupying a central role to mitigate carbon emissions.

Cap-and-trade is a program which uses a market-based mechanism to control greenhouse gas emissions, the primary driver of global warming. The “cap” sets a limit on emissions, which is lowered over time to reduce the amount of pollutants released into the atmosphere. It limits emissions in electric power generation, natural gas, transportation, and large manufacturers. The “trade” creates a market for carbon allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology. The less they emit, the less they pay, so it is in their economic incentive to pollute less. Each allowance (typically equivalent to one metric ton of carbon dioxide) are auctioned or allocated to regulated emitters on a regular basis.

This amendment allowed the government to enforce the cap and trade on specific companies and established the allowances market to commodify emissions. By treating emissions as a commodity, businesses are able to trade and sell allowances to either stay within regulations or gain revenue by being more efficient than others. The EPA’s first phase began in 1995 with the enforcement of 110 companies to reduce emissions, and the second phase was to include coal burning power plants. Overall, this led to a decrease by 41% of emissions compared to the 1980s. The ability of the government to enforce these cap and trade policies as well provide the public with a clear understanding of the ramifications of acid rain is a clear projection of the credibility of the science being put forth.

Ethical Case Study The case study involves the Avco Environmental Services Company dumping some of the medical wastes in a local municipal landfill, which is against the environment laws of the land. The company, which is a small toxic-waste disposal firm, resorted to doing so with a number of reasons among them being to compete with the other giant competitors effectively. In this particular case, there are a number of stakeholders who will be affected by this scenario.

In this, they will be generating excess of allowed emission level in Phase 1 (1995-1999) and would have to buy those allowances. Starting Phase 2 (year 2000), they would be in a state to sell the allowances.

Honicker Corporation is a USA based, successful dashboard manufacturer. It has opportunities for international expansion, but due to the ultraconservative culture it did not happened until they faced a change in management in 2009. Honicker was a rich company, and to expand, they took the short road and acquired four companies around the world: Alpha, Beta, Gamma, and Delta. There were two commonalities among these companies: they serviced mainly in their own geographical area, and senior management knew their geographical culture and hold good reputation with their stakeholders.

Hanover-Bates Chemical Corporation produces chemicals for the chemical plating industry. It has plants in Los Angeles, Houston, Chicago, and Newark. The production process involves taking chemicals purchased from other suppliers and mixing them into user-based formulas. The Hanover-Bates has a strong balance sheet and trades on the over-the-counter market. There are seven sales districts within the organization with a total of forty sales representatives. Each receives a salary, fringe benefits, and commissions of 0.5 percent of their dollar sales volume up to their sales quota. Field sales efforts are extremely important and quality control is critical with supplying the plater with the