NEEDLES POWERS LEADING EDGE TEXTBOOKS. An Author- Produced Newsletter Vol. I, No. 1 TEACHING IDEA

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1 NEEDLES POWERS LEADING EDGE TEXTBOOKS An Author- Produced Newsletter Vol. I, No. 1 Our Textbooks Financial Accounting /Crosson Principles of Accounting /Crosson Financial/Managerial Accounting Principles of Financial Accounting Needles/Crosson Managerial Accounting Gray/Needles Financial Accounting: A Global Approach Our Software /Jarett Fingraph Financial Analyst Introduction to Financial Accounting Bridge CD: Mastering The Accounting Cycle Visit our website at: college.hmco.com/accounting/instructors to order or obtain information call the Houghton Mifflin Faculty Services Center: If you have any suggestions for current events and/or concerns, please send them directly to me using this address. Comments are welcomed. We value your input about our books, other products, and service. Use this address to let us know how we are doing. If you wish to unsubscribe to this service let us know by simply returning this with your request. NEW FOR YOUR ACCOUNTING CLASSROOM We are pleased to introduce you to a new authorproduced service for our friends who teach or have an interest in first-year accounting, including alumni of our conferences and workshops and users of our textbooks. Through this newsletter we will send you Accounting in the News, real-world cases (with solutions), and teaching ideas, as we develop them so that you can put to use in your classroom immediately. The teaching resources described below are contained on the attached pdf file in a form that you can print out for reference and reproduce for your classes. ACCOUNTING IN THE NEWS Topic: dividends, cash flows Microsoft, Awash in Cash, Declares Its First [Cash] Dividend The Wall Street Journal: see pdf file for details and discussion questions. REAL-WORLD CASE Topic: Long-term assets, intangible assets How Valuable Are Brands? Hilton Hotels Corporation, and Marriott International See pdf file for case with solution. TEACHING IDEA Topic: How to get the Most Out of Discussion Questions Involving Real-World Examples See attached files for some hints about leading class discussion.

2 ACCOUNTING IN THE NEWS: A TEACHING POINT BY NEEDLES & POWERS Topics: Dividends, cash flows, stock splits Microsoft, Awash in Cash, Declares Its First [Cash] Dividend The Wall Street Journal (January 17, 2003) reports that Microsoft Corp. will begin paying a regular annual dividend to shareholders. In this surprise move, the software company bowed to mounting pressure to return some of its huge cash balance to investors. The company has more than $40 billion in cash and short-term investments. This is a major change in policy for the nation s largest high-tech company, which for the past seventeen years has advocated reinvesting cash in the growing business and research and development. This change also comes shortly after President s Bush s recent proposal to eliminate the federal tax on dividends. At the same time, the company declared a 2 for 1 stock split. Discussion questions: 1. What circumstances led Microsoft to change its policy of not paying cash dividends? 2. What is the effect on net income and cash flows of spending cash for research and development versus spending it for cash dividends? Is there a tax effect? 3. How is paying cash dividend like buying treasury stock and how is it different? 4. Compare and contrast the effect on stockholders equity and cash flows of cash dividends versus a stock split? 5. How will the proposed change in taxing dividends likely affect companies policies with regard to paying dividends?

3 TEACHING IDEA How to get the Most Out of Discussion Questions Involving Real-World Examples Accounting in the News items and real world cases enliven a class and add relevance to the topics. In our combined more than forty years of teaching the beginning accounting course, we have found that the following techniques have helped us get the most out of the use of discussion questions: 1. Introduce the discussion by making sure the students know the company and its business. Also, make sure the students understand any technical terms that go beyond the class s current knowledge. 2. Ask the question first as an overhead question to the whole class. If there is no response, direct the question to a student. 3. Make sure you understand the point a student is making by repeating what you understand to be their point. This step will also help the rest of the class to understand. 4. Do not acknowledge an answer to be right or wrong. Once the teacher does, the discussion is over. Ask another student in the class what they think of the answer. 5. Engage a student who answers in follow-up questions to probe the depth of their understanding. 6. Many real world situations are rich in their relevance. Don t worry if the discussion veers toward topics in previous chapters or even to future chapters. This reinforces what the students have learned and what they will learn in the future. 7. Be patient. Let the students thoughts and comments develop. Copyright 2003 Needles & Powers, Inc.

4 Topic: Intangible assets, brands How Valuable Are Brands? Hilton Hotels Corporation, and Marriott International Hilton Hotels Corporation and Marriott International are providers of hospitality services. Hilton Hotels has brands such as Hilton, DoubleTree, Hampton Inn, Embassy Suites, Red Lion Hotels and Inns, Homewood Suites. Marriott also has recognizable brand names that it owns or manages such as Marriott Hotels, Resorts and Suites, Ritz-Carlton, Renaissance Hotels, Resorts and Suites, Residence Inn, Courtyard and Fairfield Inn. On it's balance sheet, Hilton includes Brands (net of amortization) of $1,048 million or 11.3% of total assets. On the other hand Marriott does not list brands among its intangible assets. Considering the accounting for intangibles, under what circumstances would Hilton record brands as an asset while Marriott does not? How will these differences in the accounting for brands generally impact the net income and return on assets of these two competitors?

5 Brands are recorded when purchased from other companies; therefore Hilton's asset brands resulted from acquisition. However, if brands are internally developed or if a company only manages a brand for the owner, then no asset would be recorded for brands. For one or both of these reasons, Marriott has no asset on its balance sheet for brands. However, if another company wanted to buy Marriott's internally generated brands, they would certainly have great value. Both Marriott and Hilton benefit from their brands, but because Marriott has no asset for brands, it has no related amortization expense and hence net income and return on assets will be higher. Hilton has both an asset for brands and related amortization expense that lowers both its net income and return on assets. Therefore, a comparison of these two companies would result in Marriott appearing to outperform Hilton.