Problems: Balance Sheet and Financial Statements

THE PROBLEM OF THE BEE: PROBLEMS IN FINANCIAL REPORTING OF JOLLIBEE FOODS CORPORATION’S 2005 FINANCIAL STATEMENTS A Paper Submitted In Partial Fulfillment of the Requirements for the Course ACT515M (Problems in Financial Reporting) MC REYNALD SIMBAJON BANDERLIPE II Candidate for the degree of MASTER OF SCIENCE IN ACCOUNTANCY Mr. WILFREDO BALTAZAR Professor De La Salle University – Manila Term 2, SY 2006-2007 THE PROBLEM OF THE BEE: PROBLEMS IN FINANCIAL REPORTING OF JOLLIBEE FOODS CORPORATION’S 2005 FINANCIAL STATEMENTS Mc Reynald S.Banderlipe II College of Business and Economics, De La Salle University Company Background This paper aims to perform an analysis of the 2005 financial statements of Jollibee Foods Corporation. Before such presentation, this chapter intended to present some information about the company, and how Jollibee became the leading company in the Philippine fast food industry. After graduating with a degree in Chemical Engineering, Tony Tan Ca ktiong decided not to compete with fellow new yuppies at his time searching for jobs after graduation.Having gained first-hand experience in managing a family eatery in Davao during his childhood years, he decided to pursue a food business that would be simple to operate. Thus, he borrowed P200,000 from his father to commence a Magnolia ice cream franchise beside Coronet Theater in 1975. With his ingenuity and passion to satisfy the cravings of his customers, the idea of serving American foods such as hamburgers and fries that is quick, tasty and affordable (Acuna, Bernardo, Dy, Malabanan, and Young. , 2004) became his vision that he never thought would be one of the entrepreneurial successes in the Philippines.In 1978, the vision became a reality when Tony and his family decided to incorporate and saw the birth of Jollibee Foods Corporation. One year after, the company posted P2 Million peso sales. It also marked the establishment of a first Jollibee franchise in Sta. Cruz, Manila and its first TV advertisement. Jollibee entered the list of the Top 1000 Corporations in 1981. Since then, the company continues its unprecedented growth as it enters the Top 500 in 1984, the Top 250 in 1986, and Top 100 in 1987. Meanwhile, in 1983, JFC launched flagship motto of JFC, known as the â€Å"Langhap Sarap. The year 1986 signaled the start of branching out in the international market by putting an international outlet in Taiwan and Brunei Darussalam. In 1989, the company posted very remarkable sales of P1. 3 Billion, while expansion efforts continued when they acquired 73% share in the Hamburger segment of the fast food industry in 1991. Jollibee became a public corporation in July 14, 1993 with its initial offering of P9. 00 per share. The expansion of JFC came when they acquired Greenwich Pizza Corporation in 1994 and Delifrance, a popular French patisserie shop, in 1995. This led to the increased variety of food items served by JFC.In 1996, the Far Eastern Economic R eview cited Jollibee as one of the leading companies in Asia. At the end of the year, more and more Filipinos abroad trooped down to their Jollibee stores in Guam, the Middle East, and Hong Kong. In 1997, Jollibee opened another branch in Xiamen, China. A year after, the company marked its 300th store in Balagtas, Bulacan, together with an international branch in Daly City, California. The following years thereafter saw the P20 Billion sales and recognition of Jollibee as the Most Admired Company in the Philippines and third overall in Asia.Jollibee opened its 400th store in Intramuros, Manila, while sales continuously shoot up to the P27 Billion mark. In the same year, Jollibee opened its 500th store in Basilan, Isabela Province. At present, Jollibee continues to expand its network of stores, after acquiring Chowking in 2000, an 85 percent share in Yonghe King in 2004, and Red Ribbon Bakeshop in 2005. Table 1 Timetable of Selected Jollibee Products from the Years 1978 – 2005 Jollibee Foods Corporation Timetable of Selected Products 1978 – 2005YEAR 1978 1979 1980 1982 1985 1986 1988 1990 1991 1992 1994 1995 1996 1999 2000 2001 2004 2005 PRODUCTS Regular Yum, Yum with Cheese Spaghetti Special Chickenjoy, French Fries Palabok Fiesta Breakfast Meals Chunky Chicken Sandwich Jollytwirl soft sundaes Coleslaw, Jolly Hotdog, Peach Mango Pie Pancakes Fruit-flavored ice cream sundaes Greenwich Pizzas and Pastas Delifrance French Pastries, Burger Steak Amazing Aloha, Chili Wings Cheezy Bacon Mushroom Burger Chowking Products, Pepper Crazy Burger, Shanghai Rolls, Pocket Pies, and Swirly Bitz Glazed Chicken Rice, Honey Beef Rice, Chicken Sotanghon Soup, Jolly Meat Pies, Yonghe King Products Super Meals, Jolly Chicken Tocino, Red Ribbon Cakes and Pastries As of 2005, the company’s store count estimated 552 Jollibee stores, 239 for Greenwich, 344 for Chowking, and 37 for Delifrance, 101 for Yonghe King, and 156 for Red Ribbon, the newest in the Jollibee family. Continuous expansion in terms of the number of food items and outlets is still underway. Table 1 below shows the timetable of elected Jollibee Products sold in the Philippine market starting from its inception in 1978. Standards Used by the Company Prior to analyzing the 2005 financial statements of Jollibee Foods Corporation, it is noteworthy to make a comparison of the standards to be adopted by the company as indicated in the 2004 financial statements in contrast with those standards actually applied in its preparation of the 2005 financial statements. Table 2 presents the comparison of accounting standards to be used in 2005 as per 2004 financial statements and the accounting standards actually used in 2005 per examination of the company’s 2005 financial statements.As can be seen, eight standards were not identified by the company in its 2004 financial statements that were actually adopted in 2005. Moreover, by looking at the 2004 financial statements, there has b een noted a difference in the presentation of the financial information. This was noted because although the year 2004 signifies the transition year towards adopting the Philippine Financial Reporting Standards and Philippine Accounting Standards, the 2004 financial statements still has presented the information in accordance with the superseded generally accepted accounting principles (GAAP). Table 2 Comparison of Standards to be used by JFC in 2005 as indicated in its 2004 Financial Statements and Standards actually used in 2005 Standard No. / NamePAS 1 â€Å" Presentation of Financial Statements† PAS 2 â€Å"Inventories† PAS 8 â€Å"Accounting Policies, Changes in Accounting Estimates and Errors† PAS 10 â€Å"Events After the Balance Sheet Date† PAS 14 â€Å"Segment Reporting† PAS 16 â€Å" Property, Plant and Equipment† PAS 17 â€Å"Leases† PAS 18 â€Å"Revenue† PAS 19 â€Å"Employee Benefits† PAS 21 â€Å" The Effe cts of Changes of Foreign Exchange Rates† PAS 24 â€Å"Related Party Disclosures† PAS 27 â€Å"Consolidated and Separate Financial Statements† PAS 31 â€Å"Interests in Joint Ventures† PAS 32 â€Å" Financial Instruments: Disclosure and Presentation† PAS 36 â€Å" Earnings per Share† PAS 36 â€Å" Impairment of Assets† PAS 37 â€Å"Provisions, Contingent Liabilities and Contingent Assets† PAS 39 â€Å"Financial Instruments: Recognition and Measurement† PAS 40 â€Å"Investment Property† PFRS 1 â€Å"First Time Adoption of International Financial Reporting Standards† PFRS 2 â€Å"Share-Based Payments† PFRS 3 â€Å"Business Combination† PFRS 5 â€Å"Noncurrent Assets Held for Sale and Discontinued Operations† PFRS 7 â€Å"Financial Instruments† 2004 * * * * * * * * * * * * 2005 * * * * * * * * * * * * * * * * * * * * * * * * * * * * This paper will elaborate the compliance of Jollibe e Foods Corporation in their adoption of the PFRS and PAS as indicated in their 2005 financial statements. It will also include a discussion of other problems in financial reporting noted in the analysis of the company’s financial statements.Discussion of Compliance with the Standards In analyzing the financial statements of Jollibee Foods Corporation for the year 2005, the researcher delved on the disclosure requirements of the Philippine Accounting Standards PAS and PFRS published by Philippine Institute of Certified Public Accountants (2005). These standards assess whether the company has complied with such requisites in preparing the PFRS financial statements for the year 2005, the year where PFRS formats became applicable in Philippine companies. In this case, the paper used the annual report released by the company in its corporate website in 2004 and in 2005. I. Philippine Financial Reporting Standards (PFRS) PFRS 1: First Time Adoption of Philippine Financial Reportin g Standards Paragraph 36 of PFRS 1 requires the inclusion of at least one year of comparative information under the IFRSs.JFC was able to follow such requirements since the financial statements presented 2005 data and 2004 restated data. The Note 2 of the company’s 2005 financial statements highlights such explanation. Paragraph 36A applies to entities that will choose to present comparative information that does not comply with IAS 32, IAS 39, and IFRS 4, which delves on financial instruments and insurance contracts, under certain conditions presented in the standard. In resolving the issue, Jollibee complied with the accounting policies set forth in IAS 32 and IAS 39. Nevertheless, the company applied for exemption in adopting the standards retroactively as permitted by SEC, applicable for the year ended 2004.Hence, the standards will be applied prospectively beginning January 1, 2005. Paragraph 37 presents the standards on historical summaries of selected data for periods before the first period for which they present full comparative information under the IFRSs. This is not applicable to JFC’s financial statements for the year ended December 31, 2005. Paragraphs 38 – 46 delve on the explanations regarding the transition to previous GAAP to IFRS financial statements. Accordingly, reconciliations of the company’s equity, profit and loss, and impairment losses should have appropriated disclosures. The company’s financial statements have presented supporting schedules for equity and profits and losses.With the adoption of PFRS 3 and PAS 36, JFC presented a disclosure under Section 2. 3. 1 (Reconciliation of Equity). Moreover, the same section also exhibited an expose on the designation of fair values on financial assets or liabilities and valuation of investment properties under paragraphs 43A – 44 of PFRS 1. Required disclosures such as the fair value of financial assets per category and the aggregate fair values and adjustment to carrying amounts under previous GAAP are also shown. The company has therefore complied with such requirements for first time adoption of Philippine Reporting Standards since it complied with its minimum requirements.PFRS 2: Share Based Payments Major provisions regarding disclosures in compliance with PFRS 2 necessitated information that enables users of the financial statements to understand the nature and extent of share-based payment arrangements that existed during the period. This includes disclosures such as description of each type of share-based payment arrangements; the number and weighted average exercises prices of share options and the weighted average share price at the date of exercise for options exercised during the period. Moreover, the range of exercise prices and weighted average remaining contractual life for share options outstanding at the end of the period, more than the option pricing model used.In addition, information should be accessible to enable users of financial statements understand the determination of fair values of goods or services received, and equity instruments granted. This includes disclosures such as weighted average fair value of share options granted and other equity instruments granted during the period and information on how the fair value was measured. Information on share-based payments that were modified during the period should also be disclosed, if any. Lastly, disclosures that enable users of financial statements to understand the effects of share-based payment transactions on the entity’s profit and loss and financial position should be provided.This includes disclosures on the total expenses recognized for the period arising from share-based payment transactions in which goods or services received but did not qualify for recognition as assets, and carrying and intrinsic value of liabilities arising from share-based payment transactions at the end of the period. JFC was able to comply w ith this standard, following the compliance of PFRS 2, including the provisions set forth in paragraphs 25B to 25C of IFRS 1. Required data to understand its effects are also indicated. Such indicators were presented in Note (b) of Section 2. 3. 1 and Section 2. 24. 2 of the company’s financial statements for the year ended December 31, 2005.A more detailed discussion about share-based payments is presented in Note 23. Here, the company disclosed basic information on each type of share-based payments such as Tandem Stock Purchase and Option Plans I and II, and Management Stock Option and Incentive Plans. It can be said that JFC has complied with the requirements on Share-Based Payments. PFRS 3: Business Combinations Required disclosures for PFRS 3 were information that enables users of financial statements to evaluate the nature and financial effect of business combinations that were effected during the period and after the balance sheet date but before the financial statemen ts are authorized for issue.It should also disclose, as in the case of the acquirer, information that enables users of financial statements to evaluate the financial effects of gains, losses, error corrections, and other adjustments recognized in the current period that relate to business combinations that were effected in the current year or in previous periods. In addition, data that will enable users to evaluate changes in the carrying amount of goodwill, if any, during the period should be disclosed. The company’s financial statements complied with the provisions of PFRS 3 for which the date is on or after March 31, 2004, the agreement date for all business combinations to be considered as stipulated in paragraph 78 of PFRS 3. Under Note (d) of Section 2. 3. 1 of JFC’s financial statements, the notes also depicted information about the financial effects of gains, losses, and other adjustments that were effected in current or previous periods.Moreover, the financial statements presented the changes in reversal of goodwill amortizations and recognition of goodwill in accordance with PAS 21. It included several notes in relation to the commencing testing for impairment losses, and reflected effects of changes of these policies to goodwill account of JFC. This can be best explained in Notes 8 to 10, where information regarding their investments in subsidiaries, interests in a joint venture, and goodwill arising from such transactions were designated. PFRS 5: Non-Current Assets Held for Sale and Discontinued Operations PFRS 5 specifies the accounting for assets held for sale and presentation and disclosure of discontinued operations.It requires assets that meet the criteria to be classified as held for sale to be measured at the lower carrying amount and fair value less costs to sell, and the depreciation on such assets to cease. Furthermore, assets that meet the criteria as held for sale should be presented separately on the face of the balance s heets and the results of discontinued operations to be presented separately in the income statement. Disclosure requirements include information that will enable users to evaluate the financial effects of discontinued operations and disposals of non-current assets (or disposal groups). Since the company believes that this will have no material effect on the company’s financial position and results of operations as indicated in the 2004 financial statements, this has never been an issue in the 2005 financial statements.PFRS 7: Financial Instruments Revised disclosures on financial instruments provided by the standard will be included in consolidated financial statements when the standard is adopted in 2007. II. Philippine Accounting Standards (PAS) PAS 1: Presentation of Financial Statements PAS 1 provides a framework within which an entity assesses how to present fairly the effects of transactions and other events; provides the basic criteria for classifying liabilities as cu rrent or non-current; and prohibits the presentation of income from operating activities and extraordinary items as separate line items in the income statement. Disclosure requirements include the measurement basis (or bases) used in preparing the financial statements and other accounting policies used that are relevant to an understanding of the financial statements.It also requires disclosures of judgments management has made in the process of applying the entity’s accounting policies that have the most significant effect on the amounts recognized in the financial statements. Additionally, it also requires disclosures as to key sources of estimation uncertainty and other disclosures if not disclosed elsewhere in information published with the financial statements. In 2004, JFC’s financial statements noted the probable change in the presentation of minority interest in the balance sheet and income statement will be effected in 2005 in addition of restating prior years ’ financial data to conform to the 2005 presentation.However, in 2005, the company believes that this standard will have no effect on equity on the reporting periods presented. In other aspects of the standard, the company’s financial statements also complied with the inclusion of significant accounting judgments and estimates made by the company’s management, in addition to the disclosure of key estimation uncertainties. The Note 2 of the financial statements indicates such compliance. Corporate information was also included in Note 1 of the Notes to Financial Statements (including the description of the entity’s operations and the name of the parent company), together with the basis of preparation and consolidation of the financial statements.Details of dividends are located in Note 15 and Note 17(b) of the financial statements. In general, the company’s financial statements complied with the requisites of PAS 1. However, the company should also include in Section 2. 3. 5 the additional disclosures regarding capital management that are not yet effected by the company until January 1, 2007. PAS 2: Inventories Disclosure requirements in PAS 2, as shown in paragraphs 36 to 39 are the accounting policies adopted in measuring inventories and cost formula used, the carrying amount of inventories carried at fair value less costs to sell, and the amount of inventories recognized as expense during the period, the amount of any write-downs.In addition, the notes should indicate reversal of inventory write-downs, circumstances that led to the write-downs and the amount of inventories held as security or pledge. In the adoption of PAS 2, the company has no foreseen significant changes in its accounting policies; thereby PAS 2 will not be an issue for JFC. As indicated in section 2. 11 in Note 2, the company disclosed the accounting policies and cost formula used in the inventory items of Jollibee, both food and non-food items. In Note 6 of the financial statements, the presentation of the carrying amount of inventories was in accordance with the lower of cost or net realizable values as indicated in the standard. Hence, the financial statements complied with the requirements of the standard.PAS 7: Cash Flow Statements As can be seen, the financial statements were presented classified by operating investing, and financing activities. While is it encouraged to adopt the direct method in accounting for cash flows from operating activities, JFC used indirect method, which is still acceptable in practice because of its easy application. On the other hand, almost all disclosure policies stated in PAS 7 have complied by Jollibee such as those regarding interest, income taxes, cash flows related to the acquisition of a subsidiary, and components/reconciliation of cash and cash equivalents in the financial statements and in the notes. This means that the company was able to meet the requirements of PAS 7.PAS 8: Accounting Policies, Changes in Accounting Estimates and Errors Under PAS 8, requisite disclosures as to changes in accounting standards or policies include the title of the standard or interpretation, the note that signifies that the change is in accordance with transitional provisions, its descriptions, the amount of adjustments, and certain conditional disclosures and how the standard addressed the disclosure, the nature of the changes in accounting policy, and reasons why this new policy will lead to a more reliable and relevant information. It should also divulge information when a voluntary change in accounting policy has an effect on the current period or any prior period that would have and effect on that period except that it is impracticable to determine the amount of the adjustment, or might affect future periods. Moreover, it should also present information as to the standards issued but not yet effective to the company. In terms of hanges in accounting estimates, the financial st atements must depict the nature and amount of change in accounting estimate and its effect on current and future periods when it is practicable to estimate the effect. If not possible, the fact should be disclosed. With regards to errors, disclosures should include the nature and amount of the errors, and the circumstances that led to the error and how it will be addressed by such correction. The company does not expect any significant changes in the accounting policies when it adopts PAS 8 and accordingly, in the 2005 financial statements, it also exhibited no effect on equity at January 1 and December 31, 2006. With regards to standards issued but not yet effective, section 2. 3. 5 of Note 2 depicted such disclosure.Still, the company should also have included the disclosures regarding capital management in compliance with PAS that will be applicable in 2007 to fully disclose all standards issued but not yet effective. PAS 10: Events after the Balance Sheet Date PAS 10 provides a limited clarification of the accounting for dividends declared after the balance sheet date. Disclosure requirements include the date when the financial statements were authorized for issue and who gave the authorization. It should also disclose the fact that the entity’s owners or others have the power to amend the financial statements after the issue. Moreover, if the entity receives information after the balance heet date about that conditions that existed at the balance sheet date, the entity should update disclosures in the light of new information. The company does expect any significant changes in the accounting policies when it adopts PAS 10 and accordingly, in the 2005 financial statements, it also exhibited no effect on equity at January 1 and December 31, 2004. Compliance with this standard is stated in Note 1 with regards to the date of authorization for issue of the financial statements and section 2. 30 of Note 2 and Note 29 regarding subsequent events. Furtherm ore, disclosure on dividends may not be an issue since the company annually declares and pays dividends to its stockholders, as evidenced by the cash flow statements for the years ended December 31, 2004 and 2005.For this reason, the company was able to comply with the disclosure requirements set forth in PAS 10. PAS 14: Segment Reporting This standard establishes the principles for reporting financial information by segments about the different types of products and services an enterprise produces and the different geographical areas in which they operate. Reportable segments should present the segment’s results of operations, carrying value of total assets and liabilities, contingencies, expenditures, depreciation, share in profits or losses, and other requirements mentioned in the standard. It also provides secondary reporting format requisite disclosures for segment revenues, expenses, results, assets, liabilities, and accounting policies.Accordingly, this standard has no effect on equity at January 1 and December 31, 2004 and as such, is not an issue for the company’s financial statements as of December 31, 2005. As can be seen, the company maintained the same format in segment reporting for the presentation of segment information in Note 3 of both 2004 and 2005 financial statements. Disclosures are generally in compliance with PAS 14. The company focused on using the primary reporting format, since the use of geographical segment reporting is not feasible due to a non-substantial portion of revenues earned by international operations, which are still few in number. In addition, the company disclosed information for inter-segment sales and transfers and the basis of pricing these transactions.PAS 16: Property, Plant, and Equipment Disclosure requirements on property, plant and equipment are the measurement bases to determine gross carrying amounts; depreciation methods and useful lives used; gross carrying amounts and accumulated depreciatio n at the beginning and end of the period; reconciliations of carrying amount of PPE assets pertaining to additions, reclassifications, and other increases or decreases; the recognition of impairment and reversal of impairment losses; restrictions on title of PPE assets, PPE assets pledged as security for liabilities; expenditures related to property, plant and equipment; and changes in accounting estimate as to residual values. Furthermore, the entities should disclose contractual commitments for acquisition of PPE assets; compensation to third parties rising from impairment of PPE items included in profit and loss; information regarding the revaluation of property, plant, and equipment as to effective date of revaluation, involvement of third parties for revaluation, assumptions in estimating fair values, carrying value of assets under cost models, and revaluation surplus; and information on idle properties. The company believes that there is no significant effect on equity upon ad option of PAS 16. Similar formats were presented, with differences in the probable restatements done in the 2005 financial statements. This is evidenced in note (c) of section 2. 4. 2, which depicted the management’s estimation uncertainty assumptions regarding PPE assets. In section 2. 9, the policy on accounting for PPE assets was presented, including compliance with general disclosures in accordance with PAS 16; while in Note 11, the financial statements showed the reconciliation of carrying amounts of PPE assets pertaining to additions, retirements, reclassifications, and transfers, including the disclosure regarding a fire that damaged the company’s commissary. It also included compensation from the insurance company for the damage of the property. No disclosure is necessary on revaluation of properties, as the company had not yet hired appraisers to revalue their properties. Disclosures regarding derecognition on PPE assets and idle and fully depreciated property are not of greater importance, since all properties have found its usage in the company.PAS 17: Leases PAS 17 prescribes appropriate accounting policies and disclosures to apply in relation to finance and operating leases. It also prohibits expensing of initial direct costs in the financial statements of the lessors. Under this standard pertaining to operating leases, which the company have adopted (as can be seen in section 2. 3. 1 reconciliation of equity in the company’s financial statements, in letter (c) in note 2. 4. 1, and section 2. 26 in Note 2 of the financial statements), disclosures should include total future minimum lease payments under non- cancellable operating leases for periods within one year, within after one year but not more than five years, and after 5 years (for both lessors and essees); future minimum sublease payments under non-cancellable subleases; lease and sublease payments recognized as expenses (for the point of view of lessees); disclosures r egarding contingent rents recognized as income, general description of leasing arrangements, bargain purchase options or renewal options, and restrictions involving lease arrangements as lessors or lessees (for both lessors and lessees). JFC does not expect any significant changes in accounting policies when it adopts PAS 17. In Note 26, the future minimum rental receivables and payables were presented, including the general details of lease arrangements entered by JFC (both positions are renewal options), and legal issues normal to its operations. The company did not entered into sale and leaseback transactions. The Company complied with the accounting rules in accordance with PAS 17.However, as a lessor, the company did not classified assets subject to operating leases according to the nature of the assets in the balance sheet. This is on the assumption that the firm’s lease transactions involve only commercial properties. Information on such classification was aggregated i n the financial statements, which ensured its compliance. PAS 18: Revenue Disclosure requirements to comply with this standard includes accounting policies adopted for the recognition of revenue; methods used in accounting for stage of completion of service transactions; the amount of significant categories of revenue recognized during the period, which includes sale of goods, rendering of services, nterest, royalties, and dividends; and the amount of revenue arising from exchanges of goods and services included in each significant category of revenue. The policies adopted for revenue recognition is presented in section 2. 23 as to how they recognize revenue from various categories. Its compliance with standards related to revenue recognition from royalty and franchise fees are delineated in Note 18. Though the financial statements do not present the breakdown of revenues according to significant categories, they believe that the use of segment information is already sufficient enou gh to present the revenues of the company. In this case, such segment information suffices compliance with PAS 18.PAS 19: Employee Benefits Disclosure requirements under PAS 19 include the policy for recognizing actuarial gains and losses; general description of the types of plans; reconciliation of assets and liabilities regarding defined benefit obligations; actuarial gains or losses; fair value of plan assets; reconciliation of movements in the next period of net assets or liabilities, total expenses related to employee benefits such as current service costs, interest costs, expected actuarial returns on plan assets, past service costs, effects of curtailment and settlement; actual return on plan assets and actual return on reimbursement right recognized as an asset; and principal actuarial assumptions used at balance sheet date such as discount rates, expected rates of returns, expected rates of salary increases, medical cost trend increases, and other assumptions all expressed in absolute terms. The company was able to comply with the rules set on PAS 19. As can be seen in Note (a) of Section 2. 3. 1 of the Notes to Financial Statements, the policies on actuarial gains, losses, past service costs, plus its effect on the retained earnings and net income were depicted. Moreover, such information was also presented in the reconciliation of equity. In section 2. 4, the company disclosed their policy on employee benefits, both pension and share-based payments. Accordingly, the company uses defined benefit accounting. They also used defined contribution accounting to some extent for employees of Chinese domiciled subsidiaries of the company, as seen in Note 22; only a limited disclosure regarding the use of this plan was indicated. It also provided information as to actuarial gains, actual returns on plan assets, plan liabilities, reconciliation of movements in the present value of obligations and fair value of plan assets, fair value of plan assets, the date o f actuarial valuation, the actuarial assumptions such as salary increase rate, rate of return on assets, and discount rates.Termination benefits and other long-term benefits are not considered issues to the company. Other disclosures such as medical costs, schedules of contributions by employers and employees, and the recognition of actuarial gains and losses not presented in the financial statements will not affect the company’s compliance with the standard. PAS 21: The Effects of Changes in Foreign Exchange Rates Disclosure requirements under PAS 21 referring to functional currency of the parent includes the amount of exchange differences recognized in profit or loss except for those arising on financial instruments measured at fair value through profit or loss in ccordance with PAS 39 and net exchange differences classified in a separate component of equity, in addition to the reconciliation of the amount of such exchange differences at the beginning and end of the period. Moreover, reasons for using presentation currency rather than functional currency should be indicated if such is the case; or if there is a change in the functional currency of either reporting entity or a significant foreign operation, that fact and the reason of change should be disclosed. It will only be deemed complying with the IFRS if all the requirements of each applicable accounting standard and interpretations are followed including the method of translation. The company disclosed its adoption of PAS 21, and they will be applying it prospectively.They also noted that goodwill arising from acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are now treated as assets and liabilities of the foreign operation and are to be translated at a closing rate. However, this new policy will have no significant impact to the company. As seen in letter (d) of note 2. 4. 1, the company has determine d the Philippine peso as the functional currency of the company. Additional information regarding functional currency and translation method is provided in section 2. 5. There is no issue as to the use of functional currency, since both parent and subsidiaries will use the Philippine peso.But as can be noticed, although there is a presented amount of exchange differences resulting from translation as indicated in the Statement of Changes in Equity, there is no reconciliation of the amount of such differences at the beginning and end of the period. PAS 24: Related Party Disclosures Relationships between parents and subsidiaries shall be disclosed irrespective of whether there have been transactions between those related parties. An entity shall disclose the name of the entity’s parent and, if different, the ultimate controlling party. If neither the entity’s parent nor the ultimate controlling party produces financial statements available for public use, the name of the next senior parent that does so shall also be disclosed. Moreover, disclosure requirements include key management personnel ompensation in total and per categories presented in paragraph 16 regarding short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share based payments; the nature of related party relationships and information on the amount of transactions and outstanding balances, provisions for doubtful debts, and expenses recognized during the period in respect of bad and doubtful debts. The parent shall make separate disclosures, in addition to their interests in a joint control or significant influence over the entity, information regarding the parent company’s subsidiaries, associates, joint ventures, key management personnel, and other related parties.JFC finds this standard to have no effect on its equity but they are amenable to adopt the new standard. In note 24, the company noted that the transactions with members of the Jollibee group are eliminated while intercompany advances are major transactions with joint venture. They complied with the presentation of outstanding balance of advances as indicated in the standard. The company was able to justify such presentation in Notes 8 and 9. Yet on the other hand, there is no information regarding key management personnel and their compensation schedule. Accordingly, since JFC, as a parent, runs its business independently of its subsidiaries and other related parties, there is no dependence on the company’s related parties.PAS 27: Consolidated and Separate Financial Statements In this standard, the entity’s compliance of the standards depends on their disclosure of the nature of the relationship between the parent and the subsidiary, reasons that will not constitute control of an investee in the entity, differences in reporting dates, and a listing of information regarding significant investments in subsidiaries, jointly cont rolled entities or associates. In note 8, the company’s financial statements presented its required disclosures of investments in subsidiaries, although information with their compliance to paragraphs 41 and 42 of the standard is not that material for their presentation regarding separate financial statements. Hence, the company managed to comply with the disclosure requirements of PAS 27.PAS 31: Interests in Joint Ventures PAS 31 delineated several disclosure requirements such as the aggregate amount of specified contingent liabilities, unless the probability of loss is remote; the aggregate amounts of capital commitments of the parties with respect to their interest in the joint venture; a listing and description of their interests in joint ventures; and accounting methods in recognizing interests in joint ventures. JFC was able to comply with the disclosure provisions of the standard, having presented its description of their interest in a joint venture and the accounting method for its joint venture, as seen in section 2. 18 in Note 2 and the entire Note 9 of the financial statements. The first two items are not applicable in the company at the moment. In this case, the company was able to comply with the requirements of PAS 31.PAS 32: Financial Instruments: Disclosure and Presentation To enhance the understanding and significance of financial instruments of the entity, the firm should describe its financial risk management objectives and policies, including hedging policies for each main type of forecast transaction for which hedge accounting is used. The firm should also disclose a description of the hedge; financial instruments designated as hedging instruments including their fair values, nature of risks being hedged, and for cash flow hedges, the period in which cash flows are expected to occur. Information about the nature of financial instruments and basis for accounting recognition must also be divulged.The firm should disclose the amount of gain or loss on a hedging instrument recognized in equity, removed from equity, and the amount removed from equity and was included in the initial measurement of acquisition cost or carrying amount of non-financial assets or liabilities. Information about their exposures to credit risk and interest rate risk are also mandated. Furthermore, the standard requires information regarding fair valuation of financial instruments, de-recognition of financial instruments, financial assets held as collateral, compound financial instruments with multiple embedded derivatives, reclassification and presentation of income, expenses, gains, and losses resulting from financial assets and financial liability transactions, and impairment and defaults/breaches. Under Note (c) of section 2. 3. of the notes, JFC has embedded information on how the company identified its financial assets, and how they valued those financial assets. These pertain to their investment in stocks, refundable deposits on leas es and noninterest bearing car loans. These financial assets were explained in full detail in section 2. 6 of Note 2. In section 2. 16, information on de-recognition of financial assets and liabilities in accordance with PAS 32 were presented. Under Note 27, the company expressed its compliance with PAS 32, showing their risk management objectives and policies, and information on how JFC addresses the financial risks discussed in the standard.In Note 29, the financial statements presented the valuation of financial assets and liabilities, in accordance with the valuation set by PAS 32, together with the information of multiple embedded derivatives. However, detailed information about the maximum degree of risk exposure must be presented. PAS 39: Financial Instruments: Recognition and Measurement PAS 39 has no disclosure requirements since they were moved to PAS 32. However, to comply with IAS 39, information about the decrease in retained earnings and carrying amounts of financial a ssets was disclosed. In note (c) of Section 2. 3. 1, they also disclosed unrealized loss in the company’s AFS financial assets as part of compliance with the standards. Section 2. 6 provided a description of financial instruments held by JFC.In Section 2. 10 the company disclosed information on the impairment of financial assets in accordance with the requirements of PAS 39. Section 2. 22 presents information on the impairment of non-financial assets. Information on Notes 27 and 28 are still applicable in compliance with PAS 39 regarding measurement of financial assets and liabilities. PAS 33: Earnings per Share In presenting the financial statements in accordance with PAS 33, the standard requires the presentation of amounts used as numerators in calculating basic and diluted earnings per share and its reconciliations to profit or loss attributable to the parent entity for the period.It should also disclose the average number of ordinary shares used to calculate basic and di luted EPS, instruments that could dilute basic EPS in the future, and a description of ordinary share transactions that occur after balance sheet date. Jollibee’s compliance with the standard was indicated in section 2. 27 of Note 2 and Note 25, which presented the Earnings per share computations. As indicted in section 2. 3. 4, comparative information and disclosures have been presented as required. However, the adoption of PAS 33 has no effect on equity of JFC. The presentation of Earnings per Share of Equity Holders of the Parent was indicated in the Income Statement of JFC.PAS 36: Impairment of Assets Disclosure requirements in accordance with PAS 36 include the amount of impairment losses recognized in profit or loss during the period in each class of assets and revalued assets, the reversals of impairment losses in each class of assets and revalued assets. For material impairment losses, disclosures as to the events that led to the recognition or reversal of impairments losses in assets, cash generating units and information on aggregate losses should be indicated. Such compliance by JFC’s 2005 financial statements is indicated in letter (b) of section 2. 4. 2, section 2. 22 of Note 2, Note 3 regarding segment information on impairment losses, Notes 10 and 11. The company provided disclosures of their assessment of impairment losses on non-financial assetsPAS 37: Provisions, Contingent Liabilities, and Contingent Assets PAS 37 requires disclosures regarding contingent assets, liabilities, and provision. Contingencies are disclosed except when the possibility of an inflow or outflow of resources is remote. Information regarding the nature and estimated amount of such contingency, its financial effects, the uncertainties relating to the outflow and amount of reimbursements are also noted. Obligatory disclosures for provisions include carrying amounts, additions of provisions, provisions used, and unused amounts reversed during the period. Mor eover, brief descriptions on each class of provisions are due for presentation in the financial statements.The company was able to provide information regarding the company’s provisions, as stated in Note 14. While information on contingencies is not substantial, still, the assumptions are still presented in Note 2 of the financial statements. PAS 40: Investment Property PAS 40 identified the presentation requirements for investment properties. Disclosures under this standard are and extension of the requirements presented in IAS 17 (or PAS 17, â€Å"Leases†). Entities shall disclose whether they apply the fair value model or cost model in valuing investment properties. Should they apply fair value model, firms should indicate the circumstances property interests held under operating leases are classified and accounted for as investment property.If the classification is difficult, they should distinguish investment property from owner-occupied property and from propert y held for sale in the ordinary course of business. In addition, entities have to identify the methods and significant assumptions in valuation of investment properties. Amounts recognized in profit or loss such as rental income, operating expenses incurred from properties that are income and non-income generating, existence of restrictions on realizable characteristic of investment properties upon disposal, and contractual obligations regarding investment properties should be disclosed. Because JFC elected to use cost model in the valuation of investment properties as shown in note (e) of Section 2. 3. of Note 2, disclosures require the depreciation methods used, useful lives or depreciation rates used, gross carrying amount and accumulated depreciation, a reconciliation of the beginning and ending balances showing additions, assets classified as held for sale, depreciation, transfers, impairment losses, and fair value of investment properties. In the same notation, JFC presented t he effects of adopting the policy in the financial statements, as evidenced by the reconciliation found in the same note. Here, the changes in retained earnings and net income were presented, in addition to the expressed carrying value of the property. In Section 2. 20, the company presented their significant accounting judgments and policies regarding the adoption of the new standard. In Note 10, since they are using the cost method of valuing investment properties, reconciliation was presented showing the cost and accumulated depreciation of investment properties.Moreover, it also showed information regarding any transfers; retirements; impairment losses; and depreciation were depicted. Yet, they did not disclose the accounting methods used and the estimated useful lives of investment properties subject to depreciation. Table 3 Financial Reporting Issues Presented in the Analysis of Jollibee’s Financial Statements for the Year 2005 Standard No Financial Reporting Issues Pre sented The non-inclusion under Notes 2. 3. 5 regarding disclosure standards regarding capital management that should be indicated even though the provisions are not yet effective The classification of Judgments a-c in Notes 2. 4. 1. Is that considered a judgment, or an estimation uncertainty? PAS 1 PAS 8 PAS 24 PAS 40 ADDITIONAL NOTESSame as the problem of application in PAS 1 regarding disclosure standards on capital management Information about key management personnel was not indicated in the notes to financial statements. Information about the persons, their salaries, etc. is found in the 2005 SEC Form 17A. Only the disclosure regarding accounting methods used and estimated lives of investment properties subject to depreciation were not described. The release of the financial statements in the annual report has produced several encoding errors in the production of the financial statements. In summarizing the entire discussion, Table 3 highlights all financial reporting issues no ted in the analysis of Jollibee Foods Corporation’s 2005 financial statements. As can be seen, there has been an issue regarding the adoption of ten Philippine Accounting Standards.In addition, there was noted some encoding errors in the financial statements per examination of the annual report. Referencing regarding the reconciliation of equity upon adoption of the new standards is one example. Such errors, if noticed, may lead to some confusion in understanding the financial statement information. Other Problems in Financial Reporting This section tackles the problems that might have encountered by Jollibee in their preparation and presentation of the financial statements other than disclosure requirements. In addition, this paper will address how the company may have resolved such setbacks to achieve a fair presentation of the financial information.Functional Currency and Translation This problem arose for the reason that Jollibee has been maintaining international operati ons in the United States, Hong Kong, Vietnam, Brunei, Guam, and Saipan. In addition, its Chowking stores are located in Dubai, while their Yonghe King restaurants situated in China. Red Ribbon had also expanded in the US even before it was acquired by Jollibee. Because these countries uses different currencies in their daily operations and in the preparation of financial data, it is wondered how Jollibee will address such problem in their consolidated financial statements, whose parent company is situated in the Philippines.The problem was resolved in Note 2. 5. As can be said, the company’s management determined its functional currency to be the Philippine peso. In this case, the company measured these international transactions in Philippine peso at the transaction dates. Monetary assets and liabilities were measured using the exchange rate at balance sheet date. Non-monetary assets and liabilities wee measured at historical cost using the exchange rate at the date of initi al transaction. Its foreign subsidiaries’ financial statements were translated into the presentation currency of the company. Exchange rate differences were presented in the financial statements, though in aggregate form.Receivables Although the company’s main business is the development, operation, and franchising of Quick Service Restaurants (QSR), the company also maintains other operations in support of their QSR restaurants like franchising and leasing of facilities to other companies, it can be inferred that the company does not only depend on cash sales brought about by their restaurant operations. Receivables arose because franchising and real estate are also revenue-generating areas of the organization which also forms part of their trade receivables. Moreover, they also have dues from the joint venture and other related parties, which were aggregated as loan receivables. To prevent confusion, the company presented in its segment information the operations of such segments and as such, users can find out those transactions under franchising and real estate operations may primarily cause such receivables recognition.Inventory Valuation Because the primary operation of Jollibee is the operation of QSRs, it is noteworthy that the major bulk of their investments are food supplies, novelties, packaging, store supplies, and processed inventories. The perishable nature of food supplies and processed inventories, and the obsolescence of other supplies due to the release of new packaging designs, the lapse of periods where Jolly Kiddy meals come with novelties, and other time-based factors are the problems that Jollibee encounter in the valuation of its inventories. As such, the company maintained the policy of the First-In, First-Out (FIFO) basis of inventory system and in their valuation of inventories as of the balance sheet date.This is to prevent the deterioration of goods that may be harmful if not used within a certain amount of time, and to maximize the usability of these items. Though designs change, its utility value is the same for packaging all Jollibee products. Cost valuation using FIFO allows the firm to value its unsold or unused inventories at more recent dates of acquisition, which is acceptable under the new standard. Revenue Recognition Jollibee recognizes revenue from various sources such as from sale of goods, royalty fees, franchise fees, dividend income, rental income, and interest income. While the policy of revenue recognition was presented in the notes to financial statements, certain question on how they recognize revenues from franchise fees.Accordingly, such revenues are recognized when all services or conditions relating to the transaction have been substantially performed. Substantial may not be the total performance demanded to the company in providing such services. The question lies regarding new franchisee transactions that the company’s services commence at one period and terminat es on the other period. How will the company assess their substantial performance on such franchise services to its new franchisees on the first period? Segment Reporting As can be seen, Jollibee has presented its segments on the basis of the nature of operations. Specifically, the company presented the food service, franchising, and real estate segments of its business.Knowing that Jollibee has international operations in the USA, East and Southeast Asia, and even in the Middle East, it is of question why did the company did not presented information related to geographical segments. Be it noted that of the more than 1,000 outlets of the Jollibee Group, less than 140 of them were located outside the Philippines, including the 101 Yonghe King restaurants in China. Based on the combined performance of these stores, the international operations has yet to contribute more in the total operations of Jollibee, as approximately 90% of their stores are located in the Philippines. Again, it should also boil down on the notation that Jollibee has other major operations.That could be the reason for segment information to be reported that way. Admission of Red Ribbon into the Jollibee Group In 2005, the company bought Red Ribbon, a company that sells cake products to Philippine consumers. Red Ribbon’s financial statements prior to acquisition are prepared for the fiscal year ending June 30. Since Jollibee and Red Ribbon have time differences in financial reporting, the stockholders and the Board of Directors agreed that the reporting period of the company should follow the calendar year presentation of Jollibee. Hence, the notes presented the summative position and performance of Red Ribbon for the fiscal year endedJune 30, 2005 and for the six months ended December 31, 2005, following the calendar year. Financial Instruments Due to the applicability of PAS 32 and 39, the company classified certain investments in shares of stocks as available-for-sale financial as sets and valued at fair value, though these has been measured at lower of aggregate cost or market value in the previous GAAP. Refundable deposits on leases and non-interest bearing car loans were re-measured at fair value at initial recognition and subsequently at amortized value under the effective interest method. Prior to such adoption, these are carried at cost, less impairment in value under previous GAAP.Such adoption resulted in a decrease in retained earnings for the company, which may have brought adverse effects to the company from the point of view of layman financial statement reader. Realizations After analyzing the financial statements of Jollibee Foods Corporation’s 2005 financial statements to identify the issues and problems in their financial reporting in accordance with the PFRS and PAS, this paper presents some realizations about the state of the company struggling to ensure compliance with the Philippine accounting standards under issue in the preparatio n of the financial statements. In addition, an insight regarding problems in financial reporting is presented. 1. Some judgments may not be considered judgments at all.While the company may have a point in identifying several issues to be as accounting judgments, it may be preferable if such judgments like impairment, leases, and asset retirement be presented under estimation uncertainties. This is because this transactions or events normally require estimations rather than judgments. 2. Keep abreast with the release of new standards. It can be assumed that the newest release of PAS 1 standards relating to capital management may not yet noted by the company. Jollibee must continuously upgrade its awareness of these new standards since it might have a significant bearing on how they will present the information to comply with such new standards. Such can be achieved through attendance to seminars on PAS and PFRS, and continuous training and research. 3. Redundancy can lead to fair pr esentation.Standards have the say. Sometimes, the notes have to be redundant in stressing out the emergence of applications, measurement, and valuation of items that are covered by a particular accounting standard (e. g. PAS 14, â€Å"Segment Reporting† and PAS 18, â€Å"Revenue,† where both standards require the presentation of similar information related to reportable and non-reportable segments). In such case, preparers of financial information have no option but to present the information more than once, as per accord with the standards. 4. Show reconciliations, when necessary. The use of such reconciliations may lead to a better understanding of the financial statements.Showing the movements in the beginning and ending balances may already be an important tool to understand the information related to such reconciliation. 5. Encode information with accuracy and with precision. Preparers of financial statements must exercise due care in encoding of information in th e soon-to-be published financial statements. Errors resulting from such carelessness may mislead users of financial information in making economic decisions for the company. 6. Problems are immortal. New policies, new standards, new conventions. These lead to problems especially in dealing with the preparation of the company’s financial statements. Instant compliance maybe difficult. Sometimes, resolving these problems might have adverse effects.It really depends on the company on how they are motivated to face these situations and eventually gear itself to imminent financial reporting problems in the future. References Acuna, C. , Bernaldo, R. , Dy, L. , Malabanan, R. , & Young, L. (2004). A comparative study on the performance and financial position of Jollibee and McDonald’s for the years 1999 – 2006. Unpublished undergraduate thesis. Manila, Philippines: De La Salle University. Jollibee Foods Corporation (2004). Jollibee Foods Corporation Annual Report 2004. Pasig City, Philippines. Jollibee Foods Corporation (2005). Jollibee Foods Corporation Annual Report 2005. Pasig City, Philippines Philippine Institute of Certified Public Accountants (2005). Philippine Accounting Standards Vol. 1-5. Mandaluyong City, Philippines.

Mark Sexton and Todd Story

FIN 6130: Individual Assignment (case study) Case Study: Mark Sexton and Todd Story, the owners of a manufacturing company have decided to expand their operations. They instructed you as their newly hired financial analyst to enlist an underwriter to help sell $35 million in new 10-year bonds to finance construction. You have entered into discussion with Kim McKenzie, an underwriter from the firm of Raines and Warren about which bond features your company should consider and what coupon rate the issue will likely have.Although your Bosses are aware of the bond features, they are not sure about the costs and benefits of some features especially how they will affect the coupon rate of the bond issues. This is more so that your firm is not a publicly traded company. You have been asked to prepare a memo on the effect of each of the following bond features on the coupon rate of the bond. It is expected that you will emphasis on their perceived benefits. The bond issuer/the borrower/the b osses: Mark Sexton and Todd Story Bond value: $35 million Bond maturity: 10 years Financing purpose: constructionHired underwriter: Kim McKenzie (Raines and Warren) .Case Studied Memos: 1. The security of the bond- that is, whether the bond has a collateral. Secured bond is with collateral, whereby the issuer pledged specific assets in case of bankruptcy or unable to pay debt. A bond with collateral will have a lower coupon rate (interest/return) and lower the security’s risk but with higher credit ratings, which less likely it is to default. But the issuer need to ensure that the collateral is in good working order and cannot be sold until the bond is matured.Considering bond with collateral is secured investment to investors, during default, the investors may receive all or part of the collateral in the value of debt unpaid. Collateralized bond is also marketable to the secondary market especially if it is a non-publicly traded or listed company recognized among investors. In term of outlining the specific security of collateral attached to a bond, it’s best to put clear guideline of what sort of asset eligible to be put as collateral and define certain rule of how the asset’s value can be sum up to secure the bond maturity period. 2.The seniority of the bond In case of liquidation or bankruptcy, senior bond has higher priority to be paid first compared to another bond that is considered junior or the subordinated bonds. Senior bond gets full payment in bankruptcy which its covenant may restrict the borrower from issuing any future bonds senior to the current bonds. A junior bond’s security ranks lower than other bond securities in regard to the owner's claims on assets and income if the issuer becomes insolvent. Bondholders of secured debt (with collateral) must be paid before the holders of unsecured debt.Bondholders of unsecured debt must be paid before preferred shareholders, and finally, preferred shareholders must be satisfi ed before common shareholders. In general, a junior security entails greater risk but offers higher potential yields than securities with greater seniority. To be more appealing to investors, the bondholders should propose senior bond in able to offer lower coupon. 3. The presence of a sinking fund Bond sinking fund is a restricted asset where the issuer is required to set aside money for redeeming back or buying back some of its bond payable by deposited money with an independent trustee.Sinking fund is a partial guarantee to bondholders that will reduce the coupon rate. By having sinking fund, it allows the issuer to repay specific bond’s value at a certain period or retire a portion of the bond every year until it’s matured. It’s a great program but the issuer must be able to generate cash flows to make the interim payments into a sinking fund or else, face default. By having the presence of a sinking fund as collateral support of a bond, it promotes financia l security which will attract investors to accept bond with lower interest rates.With the sinking fund, it will also gain benefits through taxation and enjoy capital gain. It also secured a good management of long-term debt in advance. 4. A call provision with specified call dates and call prices Adding provision to a bond with specific call date and prices will benefit the bond issuer more than the bondholder but it will definitely increase the coupon rate. Able to repurchase bonds before maturity (or at a specified date according to provision) is called callable bond (or redeemable bond) at a special price (not obligated).Any future payment to the bondholder is immediately and indefinitely cancelled once the bond is called. Recalling a bond with lower the debt and is hence liberated from paying interest on the called bond. Normally, the bond is called because the issuer no longer needs to borrow the money, or because interest rates have fallen and the issuer want to issue new bond s at a lower interest rate. In security purpose of long-term benefit with uncertain financial forecast, it is not applicable to issue call provision. 5. A deferred call accompanying the call provisionA bond with call provision accompanied by a deferred call will actually prohibited from calling the bond before a certain date. It is call protected or Period of Call Protection during the period of time which the bond may not be prematurely redeemed. During the call protected period (the cushion period), coupon rate payments are guaranteed but not later. After the call date, the bond may be redeemed by returning principal to the bondholder and ceased the coupon rate. The call provision accompanied by deferred call in a bond is to protect the bondholder from the falling of interest rates before the call date.A deferred callable bond may demand a slightly higher coupon rate compared to a normal bond due to its callable feature as investors are exposed to the reinvestment risk assuming th at the prevailing interest rates then is lower than the coupon paid by our bond on the callable date. 6. A make-whole call provision A bond with a make whole call (provision) allowing the issuer to pay off remaining debt early by making lump sump payment based on NPV (net present value) of future interest payments that will not be paid in cause of the call.This type of call should lower the coupon rate than the normal call provision with specific dates. Bondholders will receive the market value of the bond if it is a make whole provision which then they can reinvest in another bond with same criteria. The make whole call will be defined in the indenture. Normally, an issuer doesn't expect to have to use this type of provision, but if the issuer does, investors will be compensated, or â€Å"made whole†. Because the cost can often be significant, such provisions are rarely invoked.Hence, it is recommended that the bond issuance should not have a make-whole call provision. 7. An y positive covenants. Discuss any overall positive covenants that your firm may consider. The presences of positive covenants (also called as affirmative covenant) protect bondholders by forcing the company to undertake actions that benefit bondholders. A positive covenant would reduce the coupon rate but will increase the trust of bondholders. For instance, it requires the issuer to cover the principal of the bond; enough liquid assets must be maintained.More commonly, a positive covenant requires the issuer to have a certain amount of insurance or submit to periodic audits. 8. Any negative covenants. Discuss any overall negative covenants that your firm may consider. A negative covenant would reduce the coupon rate. Remember, the goal of a corporation is to maximize shareholder wealth. The presence of negative covenants protects bondholders from actions by the company that would harm the bondholders. This says nothing about bondholders. In example, the issuer cannot increase divid ends, or at least increase dividends beyond a specified level.The downside of negative covenants is the restriction of the issuer’s actions. 9. A conversion feature The conversion feature is a financial derivative instrument that is valued separately from the underlying security. Therefore, an embedded conversion feature adds to the overall value of the security. The conversion feature would permit bondholders to benefit if the company does well and also goes public. Even though the company is not public, a conversion feature would likely lower the coupon rate.The downside is that the company may be selling equity at a discounted price. Convertible bond is an example of an asset that can undergo conversion. It gives the bondholder the option to exchange the bond for an amount (predetermined) of the bond issuer’s equity. Typically, the bondholder will exercise the option when the total value of the shares received from conversion exceeds the bond's worth. 10. A floating rate coupon Floating rate coupon is a bond with floating coupon payments that are adjusted at specific intervals.It is all known as a variable rate bond which has a floating or variable rate interest, or coupon rate. The bond is payable to the bondholder upon demand following an interest rate change. The rate adjusts according to a predetermined formula outlined in the bond’s prospectus or official statement. Generally, the current money market rate is what is used to set the interest rate (plus or minus a set percentage). As a result of this, the coupon payments can change over time. A floating rate coupon or variable rate bonds' market values fluctuate less than other bonds.

The Vampire Diaries: Dark Reunion Chapter Five

Monday, June 8, 11:15 p.m. Dear Diary, I don't seem to be sleeping very well tonight, so I might as well write you. All day today I've been waiting for something to happen. You don't do a spell like that and have it work like that and then have nothing happen. But nothing has. I stayed home from school because Mom thought I should. She was upset about Matt and Meredith staying so late Sunday night, and she said I needed to get some rest. But every time I lie down I see Sue's face. Sue's dad did the eulogy at Elena's funeral. I wonder who's going to do it for Sue on Wednesday? I've got to stop thinking about things like this. Maybe I'll try to go to sleep again. Maybe if I lie down with my headphones on, I won't see Sue. Bonnie put the diary back in her nightstand drawer and took out her Walkman. She flipped through the channels as she stared at the ceiling with heavy eyes. Through the crackle and sputter of static a D.J.'s voice sounded in her ear. â€Å"And here's a golden oldie for all you fabulous fifties fans. ‘Goodnight Sweetheart' on the Vee Jay label by The Spaniels†¦Ã¢â‚¬  Bonnie drifted away on the music. The ice cream soda was strawberry, Bonnie's favorite. The jukebox was playing ‘Goodnight Sweetheart' and the counter was squeaky clean. But Elena, Bonnie decided, would never have really worn a poodle skirt. â€Å"No poodles,† she said, gesturing at it. Elena looked up from her hot fudge sundae. Her blond hair was pulled back in a ponytail. â€Å"Who thinks of these things anyway?† Bonnie asked. â€Å"You do, silly. I'm only visiting.† â€Å"Oh.† Bonnie took a pull at the soda. Dreams. There was a reason to be afraid of dreams, but she couldn't think of it just now. â€Å"I can't stay long,† Elena said. â€Å"I think he already knows I'm here. I just came to tell you†¦Ã¢â‚¬  She frowned. Bonnie looked at her sympathetically. â€Å"Can't you remember either?† She drank more soda. It tasted odd. â€Å"I died too young, Bonnie. There was so much I was supposed to do, to accomplish. And now I have to help you.† â€Å"This isn't easy, you know. I don't have that much power. It's hard getting through, and it's hard keeping everything together.† â€Å"Gotta keep it together,† Bonnie agreed, nodding. She was feeling strangely lightheaded. What was in this soda? â€Å"I don't have much control, and things turn out strange somehow. He's doing it, I guess. He's always fighting me. He watches you. And every time we try to communicate, he comes.† â€Å"Okay.† The room was floating. â€Å"Bonnie, are you listening to me? He can use your fear against you. It's the way he gets in.† â€Å"Okay†¦Ã¢â‚¬  â€Å"But don't let him in. Tell everyone that. And tell Stefan†¦Ã¢â‚¬  Elena stopped and put a hand to her mouth. Something fell onto the hot fudge sundae. It was a tooth. â€Å"He's here.† Elena's voice was strange, indistinct. Bonnie stared at the tooth in mesmerized horror. It was lying in the middle of the whipped cream, among the slivered almonds. â€Å"Bonnie, tell Stefan†¦Ã¢â‚¬  Another tooth plunked down, and another. Elena sobbed, both her hands at her mouth now. Her eyes were terrified, helpless. â€Å"Bonnie, don't go†¦Ã¢â‚¬  But Bonnie was stumbling back. Everything was whirling around. The soda was bubbling out of the glass, but it wasn't soda; it was blood. Bright red and frothy, like something you coughed up when you died. Bonnie's stomach convulsed. â€Å"Tell Stefan I love him!† It was the voice of a toothless old woman, and it ended in hysterical sobs. Bonnie was glad to fall into darkness and forget everything. Bonnie nibbled at the end of her felt pen, her eyes on the clock, her mind on the calendar. Eight and a half more days of school to survive. And it looked as if every minute was going to be misery. Some guy had said it outright, backing away from her on the stairs. â€Å"No offense, but your friends keep turning up dead.† Bonnie had gone into the bathroom and cried. But now all she wanted was to be out of school, away from the tragic faces and accusing eyes-or worse, the pitying eyes. The principal had given a speech over the P.A. about â€Å"this new misfortune† and â€Å"this terrible loss,† and Bonnie had felt the eyes on her back as if they were boring holes there. When the bell rang, she was the first person out the door. But instead of going to her next class she went to the bathroom again, where she waited for the next bell. Then, once the halls were empty, she hurried toward the foreign language wing. She passed bulletins and banners for end-of-the-year events without glancing at them. What did SATs matter, what did graduation matter, what did anything matter anymore? They might all be dead by the end of the month. Oh, my God, I forgot how gorgeous he is, she thought. Elena, forgive me; I'm going to grab him. â€Å"Stefan!† she said. Then her mind wrenched her back into reality again and she cast a hunted look around. No one was in eyeshot. She grabbed his arm. â€Å"Are you crazy, showing up here? Are you nuts?† â€Å"I had to find you. I thought it was urgent.† â€Å"It is, but-† He looked so incongruous, standing there in the high school hallway. So exotic. Like a zebra in a flock of sheep. She started pushing him toward a broom closet. He wasn't going. And he was stronger than she was. â€Å"Bonnie, you said you'd talked to-â€Å" â€Å"You have to hide! I'll go get Matt and Meredith and bring them back here and then we can talk. But if anybody sees you, you're probably going to get lynched. There's been another murder.† Stefan's face changed, and he let her push him toward the closet. He started to say something, then clearly decided not to. â€Å"I'll wait,† he said simply. It took only a few minutes to find Matt in auto tech and Meredith in economics class. They hurried back to the broom closet and bustled Stefan out of school as inconspicuously as possible, which wasn't very. Someone's bound to have seen us, Bonnie thought. It all depends on who, and how much of a blab they are. â€Å"We have to get him someplace safe-not to any of our houses,† Meredith was saying. They were all walking as fast as they could through the high school parking lot. â€Å"Fine, but where? Wait a minute, what about the boarding house†¦ ?† Bonnie's voice trailed off. There was a little black car in the parking slot in front of her. An Italian car, sleek, svelte, and sexy looking. All the windows were tinted illegally dark; you couldn't even see inside. Then Bonnie made out the stallion emblem on the back. â€Å"Oh, my God† Three sets of eyes turned to him in shock. â€Å"Damon's?† Bonnie said, hearing the squeak in her own voice. She hoped Stefan meant Damon had just loaned it to him. But the car window was rolling down to reveal black hair as sleek and liquidy as the car's paint job, mirrored glasses, and a very white smile. â€Å"Buon giorno,† said Damon smoothly. â€Å"Anybody need a ride?† â€Å"Oh, my God,† Bonnie said again, faintly. But she didn't back away. Stefan was visibly impatient. â€Å"We'll head for the boarding house. You follow. Park behind the barn so nobody sees your car.† Meredith had to lead Bonnie away from the Ferrari. It wasn't that Bonnie liked Damon or that she was ever going to let him kiss her again as he had at Alaric's party. She knew he was dangerous; not as bad as Katherine had been, maybe, but bad. He'd killed wantonly, just for the fun of it. He'd killed Mr. Tanner, the history teacher, at the Haunted House fund-raiser last Halloween. He might kill again at any time. Maybe that was why Bonnie felt like a mouse staring at a shining black snake when she looked at him. In the privacy of Meredith's car Bonnie and Meredith exchanged glances. â€Å"Stefan shouldn't have brought him,† said Meredith. â€Å"Maybe he just came,† Bonnie offered. She didn't think Damon was the sort of person who got brought anywhere. â€Å"Why should he? Not to help us, that's for sure.† Matt said nothing. He didn't even seem to notice the tension in the car. He just stared through the windshield, lost in himself. The sky was clouding up. â€Å"Matt?† â€Å"Just leave it alone, Bonnie,† said Meredith. Wonderful, thought Bonnie, depression settling like a dark blanket over her. Matt and Stefan and Damon, all together, all thinking about Elena. They parked behind the old barn, next to the low black car. When they went inside, Stefan was standing alone. He turned and Bonnie saw that he'd taken off his sunglasses. The faintest chill went through her, just the lightest prickling of the hairs on her arms and neck. Stefan wasn't like any other guy she'd ever met. His eyes were so green; green as oak leaves in the spring. But just now they had shadows underneath. There was a moment of awkwardness; the three of them standing on one side and looking at Stefan without a word. No one seemed to know what to say. Then Meredith went over to him and took his hand. â€Å"You look tired,† she said. â€Å"I came as soon as I could.† He put an arm around her in a brief, almost hesitant hug. He never would have done that in the old days, Bonnie thought. He used to be so reserved. â€Å"I came as soon as I could.† He put an arm around her in a brief, almost hesitant hug. He never would have done that in the old days, Bonnie thought. He used to be so reserved. Stefan and Matt were looking at each other. Here we go, thought Bonnie. It was almost funny; the same expression was on both their faces. Hurt and tired, and trying not to show it. No matter what, Elena would always be between them. At last, Matt stuck out his hand and Stefan shook it. They both stepped back, looking glad to have it over with. â€Å"Where's Damon?† said Meredith. â€Å"Poking around. I thought we might want a few minutes without him.† â€Å"We want a few decades without him,† Bonnie said before she could stop herself, and Meredith said, â€Å"He can't be trusted, Stefan.† â€Å"I think you're wrong,† Stefan said quietly. â€Å"He can be a big help if he puts his mind to it.† â€Å"In between killing a few of the locals every other night?† Meredith said, her eyebrows up. â€Å"You shouldn't have brought him, Stefan.† â€Å"But he didn't.† The voice came from behind Bonnie, behind and frighteningly close. Bonnie jumped and made an instinctive lunge for Matt, who gripped her shoulder. Damon smiled briefly, just one corner of his mouth up. He'd taken off his sunglasses, but his eyes weren't green. They were black as the spaces between the stars. He's almost better looking than Stefan, Bonnie thought wildly, finding Matt's fingers and hanging on to them. â€Å"So she's yours now, is she?† Damon said to Matt casually. â€Å"No,† Matt said, but his grip on Bonnie didn't loosen. â€Å"Stefan didn't bring you?† prompted Meredith from the other side. Of all of them, she seemed least affected by Damon, least afraid of him, least susceptible to him. â€Å"No,† Damon said, still looking at Bonnie. He doesn't turn like other people, she thought. He goes on looking at whatever he wants no matter who's talking. â€Å"You did,† he said. â€Å"Me?† Bonnie shrank a little, uncertain who he meant. â€Å"You. You did the spell, didn't you?† â€Å"The†¦Ã¢â‚¬  Oh, hell. A picture blossomed in Bonnie's mind, of black hair on a white napkin. Her eyes went to Damon's hair, finer and straighter than Stefan's but just as dark. Obviously Matt had made a mistake in the sorting. They took seats on the decaying bales of hay, all except Damon, who remained standing. Stefan was leaning forward, hands on knees, looking at Bonnie. â€Å"You told me-you said that Elena spoke to you.† There was a perceptible pause before he got the name out. His face was tense with control. â€Å"Yes.† She managed a smile for him. â€Å"I had this dream, Stefan, this very strange dream†¦Ã¢â‚¬  She told him about it, and about what had happened after. It took a long time. Stefan listened intently, his green eyes flaring every time she mentioned Elena. When she told about the end of Caroline's party and how they had found Sue's body in the backyard, the blood drained from his face, but he said nothing. â€Å"The police came and said she was dead, but we knew that already,† Bonnie finished. â€Å"And they took Vickie away-poor Vickie was just raving. They wouldn't let us talk to her, and her mother hangs up if we call. Some people are even saying Vickie did it, which is insane. But they won't believe that Elena talked to us, so they won't believe anything she said.† â€Å"And what she said was ‘he,' † Meredith interrupted. â€Å"Several times. It's a man; someone with a lot of psychic power.† â€Å"And it was a man who grabbed my hand in the hallway,† said Bonnie. She told Stefan about her suspicion of Tyler, but as Meredith pointed out, Tyler didn't fit the rest of the description. He had neither the brains nor the psychic power to be the one Elena was warning them about. â€Å"What about Caroline?† Stefan asked. â€Å"Could she have seen anything?† â€Å"She was out front,† Meredith said. â€Å"She found the door and got out while we were all running. She heard the screams, but she was too frightened to go back in the house. And to be honest, I don't blame her.† â€Å"So nobody actually saw what happened except Vickie.† â€Å"No. And Vickie's not telling.† Bonnie picked up the story where she had left off. â€Å"Once we realized nobody would believe us, we remembered Elena's message about the summoning spell. We figured it must have been you she wanted to summon, because she thought you could do something to help. So†¦ can you?† â€Å"I can try,† Stefan said. He got up and walked a little distance away, turning his back on them. He stood like that in silence a while, unmoving. At last he turned back and looked Bonnie in the eyes. â€Å"Bonnie,† he said, quiet but intense, â€Å"in your dreams you actually spoke to Elena face to face. Do you think if you went into a trance you could do it again?† Bonnie was a little frightened by what she saw in his eyes. They were blazing emerald green in his pale face. All at once it was as if she could see behind the mask of control he wore. Underneath was so much pain, so much longing-so much of that intensity that she could hardly bear to look at it. â€Å"Then we'll do it. Right here, right now. And we'll see if you can take me with you.† Those eyes were mesmerizing, not with any hidden Power, but with the sheer force of his will. Bonnie wanted to do it for him-he made her want to do anything for him. But the memory of that last dream was too much. She couldn't face that horror again; she couldn't. â€Å"Stefan, it's too dangerous. I could be opening myself up to anything-and I'm scared. If that thing gets hold of my mind, I don't know what might happen. I can't, Stefan. Please. Even with a Ouija board, it's just inviting him to come.† For a moment she thought he was going to try to make her do it. His mouth tightened in an obstinate line, and his eyes blazed even brighter. But then, slowly, the fire died out of them. Bonnie felt her heart tear. â€Å"Stefan, I'm sorry,† she whispered. â€Å"We'll just have to do it on our own,† he said. The mask was back on, but his smile looked stiff, as if it hurt him. Then he spoke more briskly. â€Å"First we have to find out who this killer is, what he wants here. All we know now is that something evil has come to Fell's Church again.† â€Å"But why?† said Bonnie. â€Å"Why would anything evil just happen to pick here? Haven't we been through enough?† â€Å"It does seem a bit of a strange coincidence,† Meredith said drolly. â€Å"Why should we be so singularly blessed?† â€Å"It's not coincidence,† said Stefan. He got up and lifted his hands as if unsure how to start. â€Å"There are some places on this earth that are†¦ different,† he said. â€Å"That are full of psychic energy, either positive or negative, good or evil. Some of them have always been that way, like the Bermuda Triangle and Salisbury Plain, the place where they built Stonehenge. Others become that way, especially where a lot of blood has been shed.† He looked at Bonnie. â€Å"Unquiet spirits,† she whispered. â€Å"Yes. There was a battle here, wasn't there?† â€Å"In the Civil War,† Matt said. â€Å"That's how the church in the cemetery got ruined. It was a slaughter on both sides. Nobody won, but almost everyone who fought got killed. The woods are full of their graves.† â€Å"And the ground was soaked with blood. A place like that draws the supernatural to it. It draws evil to it. That's why Katherine was attracted to Fell's Church in the first place. I felt it too, when I first came here.† â€Å"And now something else has come,† Meredith said, perfectly serious for once. â€Å"But how are we supposed to fight it?† â€Å"We have to know what we're fighting first. I think†¦Ã¢â‚¬  But before he could finish, there was a creak and pale, dusty sunlight fell across the bales of hay. The barn door had opened. Mrs. Flowers, who owned the boarding house, smiled at them, her little black eyes crinkling into wrinkles. She was carrying a tray. â€Å"I thought you children might like something to drink while you're talking,† she said comfortably. Everyone exchanged disconcerted glances. How had she known they were out here? And how could she be so calm about it? â€Å"Here you go,† Mrs. Flowers continued. â€Å"This is grape juice, made from my own Concord grapes.† She put a paper cup beside Meredith, then Matt, then Bonnie. â€Å"And here are some gingersnap cookies. Fresh.† She held the plate around. Bonnie noticed she didn't offer any to Stefan or Damon. â€Å"You two can come round to the cellar if you like and try some of my blackberry wine,† she said to them, with what Bonnie would swear was a wink. Stefan took a deep, wary breath. â€Å"Uh, look, Mrs. Flowers†¦Ã¢â‚¬  â€Å"And your old room's just like you left it. Nobody's been up there since you went. You can use it when you want; it won't put me out a bit.† Stefan seemed at a loss for words. â€Å"Well-thank you. Thank you very much. But -â€Å" â€Å"If you're worried I'll say something to somebody, you can set your mind at ease. I don't tend to run off at the mouth. Never have, never will. How's that grape juice?† -turning suddenly on Bonnie. Bonnie hastily took a gulp. â€Å"Good,† she said truthfully. â€Å"When you finish, throw the cups in the trash. I like things kept tidy.† Mrs. Flowers cast a look about the barn, shaking her head and sighing. â€Å"Such a shame. Such a pretty girl.† She looked at Stefan piercingly with eyes like onyx beads. â€Å"You've got your work cut out for you this time, boy,† she said, and left, still shaking her head. â€Å"Well!† said Bonnie, staring after her, amazed. Everyone else just looked at each other blankly. † ‘Such a pretty girl'-but which?† said Mere-dith at last. â€Å"Sue or Elena?† Elena had actually spent a week or so in this very barn last winter-but Mrs. Flowers wasn't supposed to know that. â€Å"Did you say something to her about us?† Meredith asked Damon. â€Å"Not a word.† Damon seemed amused. â€Å"She's an old lady. She's batty.† â€Å"She's sharper than any of us gave her credit for,† Matt said. â€Å"When I think of the days we spent watching her potter around that basement-do you think she knew we were watching?† days we spent watching her potter around that basement-do you think she knew we were watching?† â€Å"And grape juice, don't forget that.† Matt grinned at Stefan. â€Å"Want some?† He proffered the leaky cup. â€Å"Yeah, you can take your grape juice and†¦Ã¢â‚¬  But Stefan was almost smiling himself. For an instant Bonnie saw the two of them the way they used to be, before Elena had died. Friendly, warm, as comfortable together as she and Meredith were. A pang went through her. But Elena isn't dead, she thought. She's more here than ever. She's directing everything we say and do. Stefan had sobered again. â€Å"When Mrs. Flowers came in, I was about to say that we'd better get started. And I think we should start with Vickie.† â€Å"She won't see us,† Meredith replied instantly. â€Å"Her parents are keeping everyone away.† â€Å"Then we'll just have to bypass her parents,† Stefan said. â€Å"Are you coming with us, Damon?† â€Å"A visit to yet another pretty girl? I wouldn't miss it.† Bonnie turned to Stefan in alarm, but he spoke reassuringly as he guided her out of the barn. â€Å"It'll be all right. I'll keep an eye on him.† Bonnie hoped so.

Buddhism Essay Example | Topics and Well Written Essays - 1000 words - 2

Buddhism - Essay Example This is achieved as a profound peace after a long process of liberation. In other words, Nirvana is the ultimate union with the Supreme Being (Hughes 38). Therefore, there will be tremendous ultimate joy in this experience, allowing an individual to be free from suffering and other related negative consequences of life. Unlike any other religions that have special time or day for their worship, Buddhism only considers its followers to go to the temples when they only have time or technically when they can (Brannen 30). However, in most of the time, Buddhists go to the temple on a full moon day (Guruge 60). In a temple, Buddhists find the best education for life. They call their temple a Vihara where there is a shrine room with large statues of Buddha and his disciples. A temple shows a complete manifestation of what Buddhism is all about. For instance, there are relics and available manuscripts about Buddhism found in the temple. Not only that. Considering the point that this place c ould be the best place for education, therefore there are remarkable rooms for lecture, meditation and library, respectively. Indeed, the temple itself showcases what Buddhism is all about and it is clear that it is in line with educating the people who primarily believe in the teachings of Buddha. There are many symbolism associated with practices and relevant beliefs in line with Buddhism. For example, Buddhists believe that placing flowers on the front of the Buddhist Statue would remind them of the thought that people will not live forever (Poor and Poirrier 204). Therefore, it is always an important principle among Buddhists to always act well in life. Here are some of the essential things they need to do in order to remarkably do the right thing in life. First, Buddhists believe that they should not hurt living things. This explains the point why it is forbidden for them to kill a cow or any other related living creatures. For them, the spirit or the spirits of gods live in th em they are so sacred that killing them is strongly opposed by the entire belief system linked to Buddhism. In addition, Buddhists are always reminded of the ultimate principle in life to not to take advantage of what is unseen. This means that this religion just like Christianity for instance believes that what is essential is invisible to the human naked eye. Therefore, Buddhists are encouraged to use not only their eyes, but every part of the senses that a normal human being possessed. The very point of this is to do the right thing in life which eventually helps them pave the way to achieving their ultimate joy in life. Buddhists are therefore encouraged to always speak kind words with their neighbours. This goes with the reason that they have to act the right way in order to generate harmony among others and therefore peace will prevail. Furthermore, for them to be able to use their senses correctly, they are discouraged to engage in drinking alcohol. Thus, one of the ultimate forbidden things that every follower of Buddha should practice is to never be involved in drinking alcohol. Buddhists believe that one essential reason why there are evil practices in the humanity is due to the influence of alcohol. When somebody is intoxicated with wine or any alcoholic beverages, a man might be out of control of his senses, and as stated earlier, these should be used properly. A highly intoxicated person with wine for

Information Technology Assignment Example | Topics and Well Written Essays - 1000 words

Information Technology - Assignment Example This mode of operation allows nodes on the wireless network to communicate directly to each other. Infrastructure mode in better compared to the alternative ad-hoc wireless networks because it offers scalability, security management at a central point and improves the reach. While AP devices are seem as the only shortcoming of this infrastructure mode of operation. Question 2 The node does not need to be mobile because the internet through the access point has only one IP address. The node becomes mobile if the IP address and the name changes and this happens in new locations. If the laptop user accesses the internet through the same AP then he/she is still within the same location. Dynamic Host Configuration (DHCP) could be used to solve the mobility of a node where new IP address is acquired in new location. Question 3 a. X(t) will continue to come in order to fill the client buffer, the received TCP buffer will be drained at a rate of d by the client application after the client b uffer has been filled by the incoming buffer from the server buffer. The client will therefore store the received data without playing it back immediately as it receives it this provides a playout delay. The data is played from the buffer allowing the received data to fill the back up of the buffer. The playout delay is increase by accumulating more data in the buffer before playing it. Unusual delay of the playout results to data in the buffer dipping more than usual than the refilled data. Therefore the client buffer evolves with the buffering and playout delays in addition to delays by the network. When considering switching from TCP to UDP sound quality should be a factor because TCP gives better sound quality than UDP. Question 4 a. When a high priority packet arrives during the transmission of a low priority packet, preemptive scheduling occurs. There is an interruption of lower priority packet while higher priority packet is transmitted in full. Preemptive scheduling does not make sense in networks since it wastes a lot of bandwidth given that the lower packet is partially received which does not make sense. In the figure assume that packets 1, 3, and 4 are of higher priority while 2 and 5 are of lower priority the transmission of packets will be interrupted if the higher priority packets arrive before the completion of lower priority packets. In a preemptive priority queuing the packets of higher-priority will be send first before the transmission of lower priority packets hence packets 1,3,4,2 then 5 sequence will be followed. b. Delay play-out is used to compensate delays in the network and the jitters delay in the transmission of the packets. References Alvarez-Cuevas F, Bertran M, Oller F, Selga JM (1993) Voice synchronization in packet switching networks. IEEE Networks Mag 7(5):20–25 Yajnik M, Kurose J, Towsley D: Packet loss correlation in the Mbone multicast network. In: Proceedings of IEEE Global Internet Mini-Conference, Part of GLOBECO M ’96, London, England, pp 94–99 E. Shim and R. Gitlin, â€Å"NeighborCasting: A fast handoff mechanism in wireless IP using neighboring foreign agent information,† presented at the New York Metro Area Networking Workshop, New York,

Pamphlet- physiology doc Essay Example | Topics and Well Written Essays - 500 words

Pamphlet- physiology doc - Essay Example h as cocaine or heroin, measurable changes in brain chemistry and physiology perpetuate the cycle of addiction.† 1 Addictive behavior may be the result of genetic factors even through there may be no contact between the generations through which it is perpetuated. â€Å"Genetic susceptibility to addiction is the result of the interaction of many genes.† 2 Again environmental factors like level of income, education, family status, crime record etc are also relevant factors in the matter. But the significant point that emerges from the research studies is that brain physiology can significantly be altered due to ingestion of drugs. Drug addiction interferes with the natural cycle and brain circuits and ‘neural functions in such a way as to render brain circuits mediating various behavioural effects of these drugs more or less, responsive to those effects.† 3 Serotonin and norepinephrine are considered to be drugs which elevate moods and alters the brain pattern to produce pleasurable sensations. Serotonin is considered to be major mood enhancer and is one of the main constituent in addictive drug groups. The effects of drugs are particularly marked in adolescent years. It is during these teenage years that the frontal cortex of the brain develops during this time, â€Å"a neural network that malfunctions as a consequence of chronic drug-taking, including the prefrontal cortex,† 4 which develops reasoning powers, mental personality development and confidence. The usage of mood enhancing drugs interferes with the natural development of the brain and the prolonged use could cause maldevelopment and stunted growth of this significant part of the brain. Drug addiction could be termed as a â€Å"chronically relapsing disorder† in which the drug addict has an uncontrollable frenzy to consume drugs. 5 It has been found that addict ion interferes with the addicts mental and physical health, impairs his judgment and decision making abilities and could be major cause for