Positive Accounting Theory

Positive Accounting Theory INTRODUCTION Purpose The purpose of this report is to analyse the effect of adopting AASB 2 Share-based Payments. Besides, this report will also provide discussions about the reaction of some parties related to this adoption. Background In July 2004, there is a significant change in the accounting requirements for share-based payments. The previous standard that governs share-based payment was AASB 1046 Director and Executive Disclosures by Disclosing Entities, which then supersede by AASB 2 Share-based Payments. Under AASB 1046, share-based payments only required to be disclosed. However, AASB 2 requires an entity to reflect on its profit or loss and balance sheet the effects of share-based payment transactions at fair value (Accounting Handbook 2008). Scope This analysis is done by applying Positive Accounting Theory (PAT). The report covers three main areas, impact of adoption on companies, on managers, and motivation of regulators in developing standards Limitations Since AASB 2 is still new, research papers used in this reports may not Positive Accounting Theory (PAT) that popularized by Watts and Zimmerman is one of positive theory accounting. PAT is concerned with explaining accounting practices. It is designed to explain and predict which firms will not use a particular method. It does not say something as to which method a firm should use. This is what differentiates positive and normative theories. Normative theories prescribe how a particular practice should be undertaken and this prescription might be a significant departure from existing practice. PAT focuses on the relationship between the various individuals involved in providing resources to an organisation and how accounting is used to assist in functioning of these relationships. PAT is based on the central economics-based assumption that all individuals actions are driven by self-interest and that individuals will always act in an opportunistic manner to the extent that the actions will increase their wealth. From an efficiency perspective, why could the introduction of new rules on share option accounting be costly for an organization? Share-based payments have been widely used by many organizations as an incentive tool attracting and retaining employees, and compensate senior executives. Because there was a significant change in the accounting requirements on share-based payments, this will then affect quite numbers of organizations. The effect on organization can be explained by an efficiency perspective. Efficiency perspective, which also known as ex-ante perspective, is one of perspective under the PAT umbrella. It considers up-front mechanisms in order to minimize future agency and contracting costs (TB p. 274). Theorists of efficiency perspective argued that companies adopt particular accounting methods which best reflect their underlying economic performance. By choosing the best methods, it is being argued that investors and other parties will need not to gather as much additional information from other sources. This will consequently lead to cost saving and reducing the risks of investors, which will then increase the value of the company (TB p. 274). Another effect on the implementation of AASB 2 is that it will reduce the profit of the company, thus the performance of the company will seems to be not so attractive to the potential investors. Unattractive performance of the company may cause the investors to assume that the company has higher risks of default. Thus investors become reluctant to invest in the company or, the investors will require higher return. In other words, the company will be facing a hard time to gain investors confidence or the company will be facing a high cost of capital (TB p. 275). Since PAT theorists believe that companies will choose the methods best reflect the companies performance, this means that there will be no need for regulations to be in place anti regulation perspective. PAT theorists argued that regulation of financial accounting imposes unwarranted costs on reporting entities (TB p. 275). In the case of share-based payments, by superseding AASB 1046 with AASB 2, this provides restrictions to the company as to limited methods available to choose from. This will create inefficiencies the companies may not able to choose the method that best reflect their performance. Besides, by expensing share-based payments, this would harm start-up companies and decrease the entrepreneurial activity of growing companies (Sacho Wingard 2004). The reason behind this is that both new and growing companies usually do not always have enough cash to be used as incentive tool attract and retain skillful employees. Thus, in order to attract and retain talented employees, such companies use share options instead of giving cash incentives. Under the previous standard, whereby share options do not need to be recorded as an expense in the profit and loss statement, this will result in higher profitability which may be assumed as a good performance by investors. Besides, this will result in higher returns from investment (ROI). Thus, this makes the financial position statement of those companies look better (stronger) which then allow them to access greater capital than they would had if they have to expensed share option. Debt covenants, which also known as banking or financial covenants, are agreements between a company and its lenders that the company should operate within certain limits (Pietersz 2009). The limits set by the lenders are usually expressed in accounting numbers (i.e. level of gearing ratios). Besides set the limits, lenders will also impose obligations if the company breaches the agreement. Thus, if the company has to expense-off the share-based payments transactions, this will affect the bottom line of its financial statement which then will affect some accounting ratios. This will create difficulties for the company to operate within the limit written in the debt covenant. Company will need to re-examine the debt covenants and need to consider how to communicate this adverse impact on reported profits and key performance ratios to the market. In a worse case, company may wants to renegotiate the terms and conditions of the agreements (Chalmers Godfrey 2005). Both re-examine and re negotiate are not easy tasks, it takes a lot of efforts, considerable amount of time, and it is costly. Since AASB 2 requires companies to record share-based payments transactions as an expense, which then leads to lower profit, this will discourage companies to use share options as a compensation tool. This may cause managers to lose their motivation to improve the performance of the company, because share option is a method that widely used and most benefiting to the managers. Sacho and Wingard (2004) argued that expensing share-based payments would hurt companies like Apple, Intel and Microsoft (information technology companies) due to earnings pressures caused by share-based payments. Expensing share options will also distort earning per share (EPS). Distortion may occur due to inclusion of expense for employee stock options in the profit and loss statement will result in an inaccurate double charge in the financial statement (BIO 2004). When the employees exercise their options, it will be recorded as an expense and increase in the number of share issued. Thus, EPS will be diluted. In compliance to AASB 2, companies have to determine the fair value of the stock options. However, it is complicated to determine the fair value of stock options at grant date, due to difficulties in predicting future movement of share prices. Thus, mathematical models, such as lattice model are often used to predict the future movement in the share price and therefore to derive the value of the stock options. However, to apply this model, expertise is required. Thus, companies have to hire external experts. Besides, additional internal compliance costs, costs of external audit will also increases (BIO 2004). Why could the introduction of new rules on share option accounting be costly for manager A new set of regulation regime in the share option accounting will lead to a different treatment of accounting method to adopt in the company. The complex changes in the new treatments will increase administration and reporting requirements. According to Miles, manager will need to employ accounting industry specialist to assist them in order to comply with the latest regulatory changes. The additional administration requirement will burden the managers with extra costs. This is because managers will have to put in a lot of effort, allocate more time and money in order to familiarize and adopt the new set of the regulation which is generally called as bonding cost (Deegan). These extra allocations will go into training the existing staffs to get used to the new regulations. In addition to that, in certain cases, managers will have to employ new staff; specialists will cost even more money, to deal with the new accounting method which will ultimately result in an increase in the opera tional cost of the company. Besides time consuming and increase in operational cost, the new set of share option accounting rules will limit the managers option in applying different accounting methods. The new set of rule forces managers to be more transparent in preparing the financial report. Managers will lose the opportunity to construct a financial report that best indicate the companys performance. This is because, AASB 2 requires manager to recognize expenses that are related to services or goods received or acquired in the share based payment transaction. As a result, by expensing the items mentioned will significantly reduce the profit in the income statement. In the case of companies relying on profit based performance, managers are directly affected by the diminished profit. Low profit indicates low bonuses for the managers. On the other hand, for companies relying on share-price based performance, manager has to bear indirect impact of the huge deduction in the profit. This is because investors are the ones who are influential in regards to the movement of share prices. Investors are acting based on the information provided in the financial statement. Unexpected decline in the profit will lead to a negative sentiment; as a consequence, the investors are not convinced in either purchasing or retaining the companys share (Deegan pg. 262). Instead of increase in the share price, it will drop the share price. Ultimately the value of share options will drop in line with the drop in share prices. What would motivate the regulators to develop the new rules? Big organizations represent large visible blocks of wealth and the government possesses the ultimate authority; through legislation and through court decisions. Politicians, bureaucrats, and special interest groups are interested in expanding their welfare, supporting rules that would work to their own benefit (Jensen, 1976). Generally, the regulators are controlled; if not, influenced by the government in power. Regulators might be motivated in developing new rules; in the scope of self-interest, that would benefit the government. For example, the majority of the public demands the government to solve discrimination and poverty or to be stricter with issues in regards to the environment. In order for the government to stay as the popular choice of the public, the regulators can develop rules that will have these big organizations to serve as a vehicle for social reform (social responsibility); by mitigation of discrimination and poverty, and the establishment of training and polluti on prevention programs (Jensen, 1976). This will work in favor of the governments self-interest by addressing the publics interest. Likewise, the regulators can also develop rules that would benefit big organizations; ultimately the government in ways of getting sponsorship The inefficiency of the ESOs would be a reason for regulators to develop the new rules; because inefficiency of ESOs can lead to abuses and frauds. Frauds that are related to ESOs may crop up from the managerial power doctrine, negotiation and execution of ESO agreements, award and implementation of ESO plans, re-pricing, and disclosure of ESOs; as exampled in the recent corporate crimes at Enron, Tyco and Arthur Anderson (Nwogugu, 2006 pg 9). What happened with the big three companies showed that there was over-reliance on companys internal governance mechanisms for prevention of corporate crime. In order to prevent abuses on ESOs, it is paramount for the regulators to develop new rules; i.e. to enhance transparency and corporate governance, criminalize the misconduct which was formerly regulated by corporate governance mechanisms. Often ESOs in large organizations can result in over-compensation which is substantial to opportunity costs. The costs to cover over-compensation will directly impinge on other areas of a business (opportunity costs) such as capital expenditures and limiting expansion. Establishing proper compensation is difficult; according to Nwogugu (2006 pg 11) the business judgement rule cannot eliminate over-compensation because of the difficulty in determining and applying the reasonableness standard. This is when the regulators come in. There is a potential for regulators to develop an optimal compensation structure to avoid companies from practicing over-compensation, thus encouraging regulators to lay down new rules. Other inefficiencies and abuses of the ESOs that might encourage the regulators to develop new rules include the potential usage of ESOs as a device for taxation avoidance and as device to prevent a takeover (Lenne, Mitchell, and Ramsay, 2004 pg 10). Taxation concessions related to ESO schemes are introduced with the objective of promoting the practice of ESO. But there are concerns of abuse of the concessions given in the form of tax relief for private equity ownership (Lenne, Mitchell, and Ramsay, 2004 pg 19). This will result in people who are not qualified, able to take advantage of the tax incentives. In the scope of takeover prevention, companies might extend their ESO. By doing so, the company is able to redistribute control among its own management which makes a takeover seem unappealing. There is also an issue of companies making trade-offs with their employee by offering ESOs in exchange with wages. It is suggested that ESOs should be a supplement to the employees income rather than being a substitute for wages instead (Lenne, Mitchell, and Ramsay, 2004 pg 10). New regulations are needed in order to monitor and prevent these issues from taking place in the future. Another factor that should prompt the regulators into developing new rules in regards to ESOs is to achieve consistency and comparability. According to a research by Lenne, Mitchell, and Ramsay (2004 pg 14), 513 annual reports of ASX-listed public companies for the financial year ending 2001 was conducted in regards to ESO disclosures. In the research, theyve identified that the disclosure practices varied significantly between companies. Some annual reports disclosed noteworthy detail on the companys various ESO schemes while some, basic information such as the scope of the scheme of their ESOs are not even provided (Lenne, Mitchell, and Ramsay, 2004 pg 14), making comparability impossible because of the inconsistency of the disclosures. Last and most important factor that will motivate regulators to develop new rules is related to ESOs being expensed. ESO plans did not require any expense recognition in terms of the prevailing accounting standards (Sacho and Wingard, 2004 pg 155). This resulted in investors forecasting the value of companies with misleading information as exampled in the 2001 share market bubble burst. Investors get a false impression in regards to the reality of the value of the related transactions which ended up in billions of dollars lost due to the fall of share prices. Markets can only allocate resources efficiently when prices accurately reflect underlying values; which can only be achieved by expensing ESOs (Sacho and Wingard, 2004 pg 155). By expensing ESOs, investors are able to obtain the true input costs of generating corporate revenues, enabling them to efficiently allocate capital and undertake the best possible investment decisions. In addition to that, expensing ESOs will lead to imp rovements in corporate performance and reduction in abuses of the ESOs (Sacho and Wingard, 2004 pg 158). CONCLUSION REFERENCE LIST http://www.sciencedirect.com.ezlibproxy.unisa.edu.au/science?_ob=MImg_imagekey=B6W58-4H68T8F-2-1_cdi=6564_user=170565_orig=browse_coverDate=12%2F31%2F2005_sk=999859997view=cwchp=dGLzVtz-zSkWzmd5=72a8e05e8f6a0ee2f4bea25809e2b586ie=/sdarticle.pdf Shying, M Ngiam, J (eds) 2008, CPA Australia: Accounting Handbook, 2008 edition, Pearson Australia Group Pty Limited, Australia.

Leadership Style Paper Essay

A leader is one who uses interpersonal skills to influence others to accomplish a specific goal. A manager, leader or supervisor is most of the time used interchangeably but they are all different. The function of a good leader is to achieve a consensus within the group to also provide structure and to empower each team member to achieve their goals and to achieve them successfully (Sullivan & Decker, 2005). Leadership according to the reading can be formal or informal. Informal leadership is demonstrated by staff that does not have an appointed management position; informal leadership solely depends upon someone’s knowledge or on the job training. Formal leadership is someone who is appointment as the manager or supervisor, and this leadership is also based upon personal skills set but maybe reinforced by organizational authority and position (Sullivan & Decker, 2005). To be a successful leader one must be skilled in empowering others to do well and be successful. A successful leader demonstrates effective communication skills, problem solving skills, and decision making skills. A good leader clearly define their purpose and mission, a good leader most often understand people and their needs good leaders also recognizes people differences and use this knowledge in their interaction with each individual. A good leader most importantly must be able to inspire others to commit to their goals and also inspire success (Sullivan & Decker, 2005). Considering the reading, President Barack Obama demonstrates great leadership characteristics. President Barack Obama is what you call an authentic leader, authentic leaders is one that is understands the struggles of the front-line staff, and he is compassionate those people and as well as the American People that depend on him and his leadership team to make major decisions for our country. President Barack Obama not only is compassionate  about the people that he directly work with on a daily basis to run the country, he make the citizens of the United States feel that he cares from his actions. The change that has occurred since he has been in office has impacted most Americans in some aspect of life, whether the American is considered upper, middle, or lower class consumers. President Obama not only displays authentic leadership skill, but he also displays some characteristics of share leadership, he is aware that it takes many great leaders together collaborating to achieve goals or get the job done. He understands that change doesn’t happen overnight and in order to achieve a goal one must maintain consistency and drive. President Barack Obama also displays characteristics of a serving leadership, upon being elected as the President of the United States his desire has been to serve the people of the United States of America. The President has displayed this type of leadership since the beginning of his career as President; he has always prioritized the needs of the people which he serves, in an effort to maintain a healthier and economically successful Nation. Reviewing the result of the Leadership and Team Self-Management assessment, I scored 51 which displayed excellent leadership skills. Considering the results of the assessment in comparison to The President leaderships is accurate, based upon the assessment the results displayed that I have excellent leadership skills. The leadership roles that President Obama displays that i personally don’t have would be the shared leadership trait, in some situations I would rather do the job alone instead of asking for help from others, not really considering that several helpful opinions is better than one opinion on any given day. I don’t consider myself having any traits or any leadership strengths that will supersede ones of President Barack Ob ama; he is a great leader and is very compassionate about the rich as well as the poor in America and this reason alone set his leadership skills apart from the previous President. President Barack Obama has shown several things since he has been in office he is an all-around great leader and family man. He is a leader within his family as well as to the United States of America from his humble spirit to his courageous spirit of getting things done and attempting to make a impacting change for the people of the United States of America. In conclusion, a great leader is someone who cares about the needs of the group as well as the needs of the people that they serve. A great  leader empowers, gives structure, and understand that everyone is different and not everyone can be managed the same. Reference Sullivan, E. J., & Decker, P. J. (2005). Effective Leadership and Management in Nursing (6th ed.). Upper Saddle River, NJ: Pearson.

Principles of Safeguarding and Protection in Health and Social Care Essay

Principles of safeguarding and protection in health and social. Ai; Physical Abuse is when somebody causes feelings of physical pain, injury other suffering or bodily harm, such as hitting, kicking, scratching, pinching, shaking. Sexual Abuse is where you are forced to do, say and watch sexual things. Eg; being undressed or having sexual contact when you do not want to or even touching another person, being made to say sexual things and being made to watch porn is also sexual abuse. Emotional Abuse is a form of power that someone has over you to cause depression, anxiety, stress. It is bullying someone by calling them names that hurts their feeling or to scare them and even threaten them. Financial Abuse is when another person steals or takes something that belongs to you. Eg; stealing your money, making you buy things you are not willing to, refusing to allow individuals to manage their finances and tricking individuals to hand over their property. Institutional Abuse is not only confined to large scale physical or sexual abuse, individuals can also be abused in many other ways in settngs where they could exoect to be cared for and protected. Eg; Individuals not given choice over decisions (meals, outings, clothing.) Mistreated to their medication. Privacy and dignity also not respected. Self-neglect is when an individual neglects to attend to their basic needs. Eg; personal hygiene, appearance, feeding not bothering to obtain medical help or an unwillingness to see people or go out. Neglect by others is when the victim is being looked after by somebody else but fails to provide adequate care. For example failure to provide sufficient supervision, food or medical care, or the failure to fulfil other needs that the victim is unable to provide for herself or himself. see more:explain the importance of an accessible complaints procedure for reducing the likelihood of abuse. Signs and symptoms of abuse. Physical abuse Aii; Bruising Fractures Burns Fear Depression Weight loss Assault Cowering Flinching Welch marks Malnutrition Untreated medical problems Bed sores Confusion Over sedation Emotional abuse:. Fear Depression Confusion Loss of sleep Change in behaviour Onset of phobias No communication Sexual Abuse: Loss of sleep Diseases Repeated urinary infections Bruising Soreness around the genitals Torn, stained bloody underwear or bed sheets Preoccupation with anything sexual Excessive washing Reluctance to be alone with an unknown individual Financial Abuse: Unexplained loss of fundsor withdrawels from bank accounts Inability to pay bills Change in lifestyle/standard of living Basic needs not being met Loss of property Unnecessary building work or repairs to property Not trusting anyone around them Self-neglect: Poor hygiene (smell of urine faeces) Dehydration Weight loss Abnormal body temp Inappropriate clothing Not taking medication Infections Illnesses Institutional abuse: No flexibility at bed time Waking up to a routine Dirty beds and clothing Missing clothing, possessions, documents and letters Excessive or lack of medication Lack of consideration of dietary requirement’s Aiii; If you was to suspect an individual was being abused you should report your concerns to the manager. Also ask to write a private account for your records, making sure it doesn’t go in the care plan in case the abuser comes across it. Aiv; If a client was to tell you they are being abused, you should stop what you’re doing and listen carefully to them. All conversations should be treated with confidence and information only passed on to those who need to know. Even if the person speaks in the strictest of confidence, line managers must still be informed and the discussion must be written down. Never agree with the client that you wont tell anyone else. Say that you’ll only tell someone who can do something about it. Av; Make a written record of messages (e.g answer phones) to ensure they are not lost. Include the date and time and sign them. Ensure written records  (notes, letters, bank statements,medication records etc) are kept in a safe place. Do not tidy up, wash clothes, bedding or any other items. Do not try to clear or tidy things up Try not to touch anything un;ess you have to for the immediate wellbeing of the victim- if you have to try make a record of what you have done. If any sexual offence is suspected try to discourage the vicim from washing, drinking, cleaning their teeth or going to the toulet until the police are present. Preserve anything used to warm or comfort the victim (E.g: a blanket). If you can try to ensure that the alleged perpetrator does not have any contact with the victim. Record any physical signs or injuries using a body & map or hand drawing write a description of any physical signs or injuries including size, shape colour etc. Always remember to sign and date your notes and any other records you have made. Avi, Avii: No secrets- set out a code of practice of how commissioners and providers of care services should protect vulnerable adults. Criminal records bureau- DBS will filter certain old and minor cautions and convictions, reprimands and warnings from criminal records certificates. DBS- Disclosure and barring service. In safe hands(wales only)- sets out roles and responsibilities of CCIW in relation to other statutory bodies including local authorities who have the lead role in coordinating the development of local policies and procedures in adult protection. Office of the public guardian -agency with responsibilities then extend across England and wales. If supports the public quardian in the registration of enduring powers of attorney and lasting powers of attorney and the supervision of debuties appointed by the court of protection. The code of practice- sets out the criteria against which a registered providers compliance with the requirements relating to cleanliness and infection control will be assessed by the care quality commission. It also provides guidance on how the provider can interpret and meet the registration requirement and comply with the law. Local Partnership boards- committed to preventing the abuse of adults and responding promptly when abuse is suspected. Safeguarding adults means that local authorities, police and NHS agencies involved with adults who might be at risk of abuse have a duty of care to ensure that procedures  are in place, that encourage reporting of suspected abuse, and take action to stop the abuse. Care Quality Organisations (CQC)- registered over 18,000 care homes and publish all inspection reports, which check on the essential standards of quality and safety. Aviii: Social worker- Protect and support vulnerable people, and place them in a safe environment away from risk of danger. A risk assessment is used to decide what help is needed and the correct actions to take. They also investigate any reports. Police- Protect the community, investigate allegations of abuse, prepare court cases and make case reports. Informal agencies or third sector agencies- Research and raise awareness, campains, charities. Offer support (counselling services) Health care practitioners- Perform examinations and report finding relevant authorities . Serious case review chair person- Review serious investigations and/or failures that have previously been investigated and look at what changed need to be made. Aix: Many local Authorities run free, multi-agency, safeguarding courses for anyone who works with vulnerable children and adults, and so should any decent employer in this field. Ask your workplace training department about this. You can also find more information through their local safeguarding team in the Social Services Department or the Independent Safeguarding Authority. Direct.gov Cqc.org.uk Lancashire county council.

Theories Within the Classroom Environment Essay - 1477 Words

The foundation of a classroom setting is based on theories that enhance student learning, have a positive impact on the classroom environment and may â€Å"provide valuable guidance for teachers† (Cooper, 2006, cited in Eggen and Kauchak, 2010). Even though teaching is about what a student is taught, there are certain practises that are used to get the most out of students without the student realising. Experts in the field have developed different theories that aim to provide an answer as to how and why children learn. These theories aim to help teachers understand why children think the way they do and why different children respond better to different teaching techniques. There are many differing theories but this paper will focus on three –†¦show more content†¦The theory behind extrinsic motivation is that it will eventually lead to intrinsic motivation and that students will be able to develop self-motivation (Marsh, 2008). Not all students will always be intrinsically motivated, there will be students who would normally be self-motivated, but may at times need extrinsic motivation to keep on task. If a person knows they are doing a good job then they are likely to push on to succeed with positive reinforcement (Eggen and Kauchak 2010). Motivation needs to be used properly within the classroom so there is no discrimination. The theory behind motivation is what is driving it and is it going to be used effectively. Information-based theory of motivation is what is behind the student’s motivation. What will the student get out of it for themselves? An intrinsic motivation will be operational in their work and the student will want to produce work of a high standard, whether or not they will succeed with good grade. Self-motivated students will however usually produce work of a high standard (Brewer et al, 1988). It can be argued, that if a student is reaching a set learning target that is either intrinsically or extrinsically motivated, then there is not harm in which motivation is being used (Brewer et al, 1988). This being said, the negative connotations of continuous extrinsic motivation can be that as the student gets older and reaches high schoolShow MoreRelatedLearning Is Viewed As One Of The Most Important Interactive Activities1643 Words   |  7 Pages Learning Theory Paper Kimberlyn Boddie EDUC 2130: Teaching Learning Professor: George Darden November 1, 2015 Learning is viewed as one of the most important interactive activities in which children engage. Although most learning occurs outside of the school setting, it is the heart of the educational process. 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Alcohol Is A Dangerous Drug - 1411 Words

In our modern society the constant abuse of drugs and alcohol has become a major issue. Dependence on substances such as alcohol is a common phenomenon in our world. Many individuals who constantly drink changing their ways are the hardest and biggest obstacles. Often these individuals are looking to feel the positive effects that alcohol provides for them. Such as gaining more confidence and forgetting about any problems they may have in their life, past present or future. Alcohol is a drug that slows down an individual’s brain, providing the drinker with a feeling of relaxation. According to the Centre for Mental Health â€Å"about 6,700 Canadians die each year as a result of drinking alcohol—due to car crashes, other accidents, suicides and murders, and health problems related to alcohol use†(http://www.camh.ca). Most people don’t even recognize alcohol as a drug but the reality is alcohol is a very dangerous drug and is the most abused substance in Ca nada. 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A Brave New World By Aldous Huxley - 929 Words

A Brave New World published in 1932 by Aldous Huxley was about a utopian society in which people were placed in castes because of how their embryos were modified. Little did the author know less than a century later the idea of â€Å"designer babies† might be a reality. Designer babies are very similar to Huxley’s idea; a person could be genetically altered before they were born. Unlike Huxley’s book, in which embryos were genetically modified due to government industrial control, designer babies’ destinies are determined by parental control. Although, gene alteration can prevent genetic diseases, predetermining genetic outcomes should be illegal because of its negative effects on society; the effect genes have on each other, and the underwhelming success rate. One reason designer babies should be illegal is because of its negative effects on society. Many believe designer babies â€Å" [will cause] a greater gap in society between the ‘haves’ and ‘have-nots,’ or rather the ‘ideal’ and ‘non-ideal’ humans† (Catalano). Those who want their unborn child to be genetically adjusted would have to have enough money to have this procedure done. This could result in more drastic differences in wealth and socio-economic standing. Another gap in society that would come from designer babies is the unfair advantage someone with modified genetics could have. One person would have to work on a certain skill to get very good at it, whereas a genetically modified person would be programmed to be goodShow MoreRelatedA Brave New World by Aldous Huxley668 Words   |  3 PagesIn Brave New World, there are similarities that have a deeper meaning that we can understand. There are perso nal effects in Aldous Huxley life that contribute to what he has written in the book. 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Analysis of Gross Domestic Product - Free sample Assignment

Questions: (1). Table 1: GDP Data for Countries A and B Country A Country B $billions $billions Household Consumption 150 150 Government Purchases 250 250 Transfer payments 50 60 Total Gross Fixed Capital Expenditures 50 150 Change in Inventories 50 -50 Exports 40 40 Imports 20 20 Consider the data in table 1 for two countries: A and B. a. Calculate the GDP for both countries. b. Discuss the usefulness of these data in deciding which, if any, of these two countries is likely to be experiencing an economic recession. (2). Obtain Australia's real GDP and CPI data from 1980 to 2015. Calculate the annual growth rates of real GDP and inflation and graph both series together. Is/are there some interesting or salient relationship(s) between those two series? Provide and discuss plausible economic explanation(s), including change in economic events and change in government policy, for the relationship(s) you identified. (3).Obtain Australia's real GDP and unemployment data from 1980 to 2015. Calculate the growth rates of real GDP and unemployment and graph both series together. Is/are there some interesting or salient relationship(s) between those two series? Provide and discuss plausible economic explanation(s), including change in economic events and change in government policy, for the relationship(s) you identified. Answers: Introduction Gross domestic product is the investment that is incurred on the final products and services produced by the economy and the imports are excluded. The formula for GDP is expenditures plus the gross capital formation plus the exports and subtracting imports. The term Gross implies that no subtraction has been done on the basis of depreciation of machines, buildings and different capital goods used during the process of production. The word domestic refers to the production undertaken by the resident of the country. And the term product signifies the end services and products (Kubiszewski et al. 2013). (1). a. Given the following data: GDP data for country A and B: Country A $billions Country B $billions Household consumption 150 150 Government purchase 250 250 Transfer payments 50 60 Total gross fixed capital expenditure 50 150 Change in inventories 50 -50 Exports 40 40 Imports 20 20 Now we will calculate the GDP for both the countries: GDP of country A= (Household consumption + government purchase + total gross fixed capital expenditure + change in inventories + exports imports) ("Domestic product - Gross domestic product (GDP) - OECD Data", 2016). = (150+250+50+50+40-20) billion dollars = 520 billion dollars. So, the GDP of the country is 520 billion dollars. GDP of country B= (Household consumption + government purchase + total gross fixed capital expenditure + change in inventories + exports imports) = (150+250+150-50+40-20) = 520 billion dollars. So, the GDP for country B is also 250 billion dollars. b. The above-provided data plays an important role in deciding, which country may probably face recession. Because the above-provided data helps in calculating the GDP of a country and as discussed in the introduction Gross domestic product is the investment that is incurred on the final products and services produced by the economy and the imports are excluded. The formula for GDP is expenditures plus the gross capital formation plus the exports and subtracting imports. Household consumption is the expenditure incurred by the household for durable and non-durable goods. Household consumption is used in calculating the GDP of a country. We also include government expenditure in calculating GDP and exports of a country is also an important component in calculation GDP using the expenditure method. Gross fixed capital formation is originally the total investment. It is also an important component in calculating the GDP using expenditure method. It includes expenditure on the improvement of land, machinery, plant, equipment etc. the decrease in the Gross fixed capital formation was significant factor that fosters the recession in the United Kingdom and the financial depression of 1991 and 2008 witnessed a steep fall in the gross fixed capital formation (Egerer et al, 2016). Inventories are also included in the calculation of GDP. If there is fall in the inventories in a particular year than the difference between the previous year and the recent year is subtracted from the investment. However, the level of inventory is not a component of GDP but it affects the GDP by affecting the investment. Inventories increased when the firm produces more than the amount they sell (Egerer et al, 2016). From the above data the GDP of both the countries are same but country A may face recession because the Total Gross Fixed Capital expenditures for country A is less than country B. And the inventories of country A are more than country B, the inventories for country B is in negative (Egerer et al, 2016). (2). Table 1 includes the real GDP, the CPI, the GDP growth rate and inflation rate of Australia for a period 1980-2015. The data for the GDP and CPI was obtained from Quandl. After obtaining the data, the GDP growth rate and the inflation rate of Australia were calculated for a period 1980-2015. GDP growth rate is an indicator to highlight how fast an economy is flourishing. This is done by comparing the GDP of one-quarter with the previous quarter of the country. The growth rate of the GDP is directed by four important ingredients of the GDP, of which personal consumption is the most vital director of the GDP. Retail Sales are included in personal consumption. Business investment, government spending, and imports are also the important driver of the GDP growth rate (Amadeo Amadeo, 2016). The GDP growth rate in table 1, is calculated using the formula: GDP growth rate= (GDP2 GDP1 /GDP1) * 100 Where GDP1 is the GDP for the current year and GDP2 is the GDP of the preceding year. The inflation rate is an instrument that measures the rate at which a currency is losing its value. Inflation rate also measures the rate at which the prices of products and services are increasing over a period, or how less a currency's one unit can buy at the present time, in compared to the past. One reason that may foster a rise in the inflation rate is excessive printing of money, which result in excessive supply of money and reduction in demand for money. Inflation may also occur when a certain commodity becomes scared and become costlier. Central banks increase and decrease the supply of money in the economy to control inflation. It is important for the inflation rate to fix the income securities, because the returns that are obtained from those securities may not comply with the rate of inflation, resulting in a loss for the investors (Jayaraman et al, 2013). The inflation rate in table 1 is calculated using the formula: Inflation rate = {(CPI1 /CPI0) 1} * 100 Where, CPI1 IS the consumer price index for the current year and CPI0 is the consumer price index of the previous year. Table 1: Date CPI GDP in billions of current dollars GDP growth rate inflation rate 1980-12-31 26.35 2862.5 12.17467249 1981-12-31 28.85 3211 4.17315478 9.487666034 1982-12-31 32.125 3345 8.762331839 11.35181976 1983-12-31 35.35 3638.1 11.06621588 10.03891051 1984-12-31 36.75 4040.7 7.572945282 3.96039604 1985-12-31 39.225 4346.7 5.601950905 6.734693878 1986-12-31 42.775 4590.2 6.099952072 9.050350542 1987-12-31 46.425 4870.2 7.8518336 8.533021625 1988-12-31 49.8 5252.6 7.712371016 7.269789984 1989-12-31 53.575 5657.7 5.689591177 7.580321285 1990-12-31 57.45 5979.6 3.251053582 7.232851143 1991-12-31 59.35 6174 5.916747651 3.307223673 1992-12-31 59.925 6539.3 5.190157968 0.968828981 1993-12-31 60.975 6878.7 6.252634946 1.752190238 1994-12-31 62.15 7308.8 4.861263135 1.92701927 1995-12-31 65.025 7664.1 5.690165838 4.625905068 1996-12-31 66.75 8100.2 6.2751537 2.652825836 1997-12-31 66.9 8608.5 5.584015798 0.224719101 1998-12-31 67.475 9089.2 6.286581877 0.859491779 1999-12-31 68.425 9660.6 6.4612964 1.407928863 2000-12-31 71.475 10284.8 3.276680149 4.457435148 2001-12-31 74.625 10621.8 3.348773278 4.407135362 2002-12-31 76.9 10977.5 4.857207925 3.048576214 2003-12-31 79.025 11510.7 6.639040197 2.763328999 2004-12-31 80.85 12274.9 6.670522774 2.309395761 2005-12-31 83 13093.7 5.821120081 2.659245516 2006-12-31 85.95 13855.9 4.486897278 3.554216867 2007-12-31 87.975 14477.6 1.664640548 2.356020942 2008-12-31 91.8 14718.6 -2.03755792 4.347826087 2009-12-31 93.425 14418.7 3.784668521 1.770152505 2010-12-31 96.1 14964.4 3.698778434 2.863259299 2011-12-31 99.3 15517.9 4.107514548 3.329864724 2012-12-31 101 16155.3 3.14385991 1.711983887 2013-12-31 103.5 16663.2 4.110254933 2.475247525 2014-12-31 106.05 17348.1 3.452251255 2.463768116 2015-12-31 107.675 17947 -100 1.532296087 Next, we have plotted the graph of the inflation rate and the growth rate of the GDP, in excel. Graph 1: In the above graph, the blue line highlights the GDP growth rate and the orange line highlights the rate of inflation. The time period is highlighted on the X-axis and the GDP growth rate and the rate of inflation are highlighted on the Y-axis. From the graph, it is evident that the GDP growth rate started increasing from the year 1982 and it continued increasing till the year 1984 and the inflation rate also increased in the year 1982. In fact, both the components were displaying similar trend till 1985. Again in the year 1984 there was a fall in the GDP growth rate. If the economy of a country is growing due to rising Aggregate Demand and if the AD is increasing faster than the production capacity, then such economic growth can give rise to inflation because due to the increasing demand the price of the products will also increase resulting inflation. Also in the period of rapid growth, the firms employ more numbers of labors, which will increase the job opportunities and the unemployment will fall. As a result, it will become tough for the company to fill up their vacancies thus increasing the wages. And when there is an increase in the wage rate then the company try to dodge the cost by passing it to the consumers ("Conflict between economic growth and inflation | Economics Help", 2015). It is also possible to achieve economic growth without creating inflation. If the economic growth is due to increase investment and productivity, then it will result in increasing the productivity of the economy at the same pace as Aggregate demand. This helps in achieving economic growth without inflation ("Conflict between economic growth and inflation | Economics Help", 2015). It is highlighted in the graph that during the period of global meltdown, that is the period after 2008 that the inflation rate went up sharply and the growth rate of the GDP shifted downward, in fact, it was in negative. During this period, both the inflation rate and the GDP growth rate displayed negative relationship. Then during 2009 when the GDP growth rate started shifting up, then the inflation rate started shifting downward. From 2010 both the inflation rate and the GDP growth rate started showing the same trend, till 2012 both the components were rising upward. Which means both the GDP growth rate and the inflation rate was increasing, indicating that there is growth in the economy. And this economic growth is due to the increasing aggregate demand, and the increasing demand is more than the capacity of the economy to produce. Due to which the goods and services become rare and result in increasing the price, thus giving rise inflation (Graph 1). Even during the period 2000 to 2008 both the components were showing a negative relationship. During this period, the GDP growth rate was increasing and the rate of inflation was declining. During this period, the growth in the economy is due to the increasing productivity and investment, so there is no rise in the inflation rate and there is an increase in the growth rate of GDP (Graph 1). (3). Table 2 includes the unemployment, the real GDP, GDP growth rate and the rate of unemployment in Australia for a period 1980-2015. The data for unemployment was collected from the online site Quandl. And the value of the GDP growth rate and the unemployment rate was calculated. GDP growth rate is an indicator to highlight how fast an economy is flourishing. This is done by comparing the GDP of one-quarter with the previous quarter of the country. The growth rate of the GDP is directed by four important ingredients of the GDP, of which personal consumption is the most vital director of the GDP. Retail Sales are included in personal consumption. Business investment, government spending, and imports are also important drivers of the GDP growth rate. The GDP growth rate in table 1, is calculated using the formula: GDP growth rate= (GDP2 GDP1 /GDP1) * 100 Where GDP1 is the GDP for the current year and GDP2 is the GDP of the preceding year. Unemployment is a situation when an individual belonging to the working population do not have a job but are willing to work and are desperately searching for a job. For example, if an employee leaves her job to bring her child up or if an individual leaves a job for higher studies than such situations are not considered as unemployment because in this situation they are no searching for a job ("Definition of Unemployment | Economics Help", 2010). There are different types of unemployment: Unemployment due to deficient demand: such unemployment occurs when there is a lack of aggregate demand in the society. Structural unemployment: such unemployment occurs when the present workforce lacks the required skills and knowledge. Unemployment due to real wage: such unemployment occurs when the wages are above the equilibrium level. Frictional unemployment: such unemployment occurs when there are workers in between jobs. For example, it takes time for a school leaver to find a job. There always prevails frictional unemployment in an economy because every individual take sometimes finds a job that complements him. Voluntary unemployment: and such unemployment occurs when an individual is willing unemployed or they are not ready to work at the prevailing wage rate. Unemployment rate is an important tool that measures the occurrence of unemployment and is calculated using the formula: Unemployment rate= unemployment / total labour force * 100 Table 2: Date unemployment GDP in billions of current dollars GDP growth rate unemployment rate 1980-12-31 408.6106 2862.5 12.17467249 6.040514173 1981-12-31 393.8846 3211 4.17315478 5.722572011 1982-12-31 494.925 3345 8.762331839 7.087485274 1983-12-31 697.0384 3638.1 11.06621588 9.866659848 1984-12-31 641.2146 4040.7 7.572945282 8.900710573 1985-12-31 602.8681 4346.7 5.601950905 8.179751468 1986-12-31 613.1224 4590.2 6.099952072 8.006934771 1987-12-31 628.8614 4870.2 7.8518336 8.033761197 1988-12-31 576.2193 5252.6 7.712371016 7.162711935 1989-12-31 508.068 5657.7 5.689591177 6.122776171 1990-12-31 584.802 5979.6 3.251053582 6.870526237 1991-12-31 812.6211 6174 5.916747651 9.515920284 1992-12-31 917.517 6539.3 5.190157968 10.7209192 1993-12-31 933.7462 6878.7 6.252634946 10.81752748 1994-12-31 850.3487 7308.8 4.861263135 9.682852987 1995-12-31 757.7033 7664.1 5.690165838 8.438762705 1996-12-31 771.5511 8100.2 6.2751537 8.48667283 1997-12-31 763.4834 8608.5 5.584015798 8.385908788 1998-12-31 708.1152 9089.2 6.286581877 7.668925424 1999-12-31 639.9935 9660.6 6.4612964 6.888375373 2000-12-31 596.7537 10284.8 3.276680149 6.237930504 2001-12-31 651.7646 10621.8 3.348773278 6.714997589 2002-12-31 624.9985 10977.5 4.857207925 6.325681024 2003-12-31 592.2021 11510.7 6.639040197 5.909836792 2004-12-31 545.0514 12274.9 6.670522774 5.366156367 2005-12-31 523.5905 13093.7 5.821120081 5.017153014 2006-12-31 508.4875 13855.9 4.486897278 4.763715322 2007-12-31 477.6078 14477.6 1.664640548 4.356801924 2008-12-31 474.4643 14718.6 -2.03755792 4.227501217 2009-12-31 636.2413 14418.7 3.784668521 5.56440853 2010-12-31 605.9849 14964.4 3.698778434 5.205221283 2011-12-31 600.3173 15517.9 4.107514548 5.074995466 2012-12-31 625.0701 16155.3 3.14385991 5.37519481 2013-12-31 686.455 16663.2 4.110254933 5.721716226 2014-12-31 745.5787 17348.1 3.452251255 2015-12-31 17947 Graph 2: After calculating the real GDP growth rate and the unemployment, the graph of the unemployment rate and the GDP growth rate was plotted using excel. In the above graph, the blue line highlights the GDP growth rate and the orange line indicates the unemployment rate. In short-run it is very difficult to highlight the relation between the economic growth and the unemployment rate. It is not uncommon for the unemployment rate to show a declining rate if the other important measures of economic are showing positive growth. The unemployment rate does start falling as soon as the economy of a country start growing after a period of recession because many companies have employees that are underutilized according to the salary they are offered and more over laying off employees during the period of recession or falling aggregate demand and again hiring new employees after the period of recession of when the aggregate demand increases (Graph 2). As visible from the graph during the period between 1982 and 1983 both the unemployment rate and the GDP growth rate was increasing and during the period 1983 to 1985 both the unemployment rate and the GDP growth rate were declining (Graph 2). Even during the period of great depression both the components were displaying similar trend, GDP growth rate, and unemployment rate both started falling but the GDP growth rate was falling at a higher rate, which shows that even during the period of recession the employment rate was increasing in Australia (Graph 2). References Amadeo, K. Amadeo, K. (2016). How to Calculate the GDP Growth Rate. About.com Money. Retrieved 24 May 2016 Christiano, L. J., Eichenbaum, M. S., Trabandt, M. (2013). Unemployment and business cycles (No. w19265). National Bureau of Economic Research. Conflict between economic growth and inflation | Economics Help. (2015). Economicshelp.org. Retrieved 24 May 2016, Coyle, D. (2015). GDP: A brief but affectionate history. Princeton University Press. Definition of Unemployment | Economics Help. (2010). Economicshelp.org. Retrieved 24 May 2016, Domestic product - Gross domestic product (GDP) - OECD Data. (2016). Data.oecd.org. Retrieved 24 May 2016, Egerer, M., Langmantel, E., Zimmer, M. (2016). Gross Domestic Product. In Regional Assessment of Global Change Impacts (pp. 147-152). Springer International Publishing. Gregg, P., Machin, S., Fernndez Salgado, M. (2014). Real wages and unemployment in the big squeeze. The Economic Journal, 124(576), 408-432. Hobson, J. A. (2013). The Economics of Unemployment (Routledge Revivals). Routledge. Jayaraman, T. K., Chen, H., Bhatt, M. (2013). Inflation and Growth in Fiji: A Study on Threshold Inflation Rate. The Empirical Economics Letters, 2(12), 163-171. Kendrick, J. W. (Ed.). (2012). The new system of national accounts (Vol. 47). Springer Science Business Media. Konchitchki, Y., Patatoukas, P. N. (2014). Accounting earnings and gross domestic product. Journal of Accounting and Economics, 57(1), 76-88. Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T., Aylmer, C. (2013). Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics, 93, 57-68. MWORTH | Australia the real GDP. (2016). Quandl.com. Retrieved 24 May 2016.