Solution Manual Auditing Case 8.2 Royal Ahold, N.V

Synopsis

Royal Ahold, N.V., is a large multinational company based in The Netherlands that was founded in 1877 by Albert Heijn. Three generations of the Heijn family oversaw the company’s retail grocery business. In 1989, the company hired a professional management team. The new management team expanded Royal Ahold’s operations by purchasing grocery chains around the globe, resulting in the company becoming the third largest food retailer in the world. In 2000, the company diversified into the wholesaling segment of the huge food industry when it purchased U.S. Foodservice, a large food wholesaler based in Columbia, Maryland.

Royal Ahold’s professional management team established aggressive earnings and revenue goals for the company each year and pressured their subordinates to achieve those goals. An incentive compensation plan awarded large year-end bonuses to managers of operating units that met or surpassed their financial goals. Royal Ahold’s decentralized operations when coupled with the strong incentives to achieve unrealistic earnings and revenue goals created an environment in which fraud often flourishes.

In early 2003, Royal Ahold’s independent auditors suspended their fiscal 2002 audit of the company when they discovered numerous potential irregularities in the company’s accounting records. Subsequent investigations documented that the company had improperly included the operating results of foreign joint ventures in its consolidated financial statements, had accounted improperly for initial acquisition costs related to several of those joint ventures, and had materially overstated “promotional allowances” due from company vendors. The disclosure of the massive accounting fraud resulted in criminal and civil lawsuits being filed against the company and its top executives in both Europe and the United States. Three former Royal Ahold executives, including the company’s former CEO and CFO, were found guilty by a Dutch court. The three executives were fined and given suspended prison sentences. Fraud charges filed against the company were settled by the payment of a fine of 8 million euros. Several lawsuits stemming from the Royal Ahold case are still pending.

This case examines accounting, auditing, and control issues pertinent to multinational companies. In addition, the case examines recent controversies arising between and among international regulatory agencies and rule-making bodies within the accounting and auditing disciplines. Finally, the case illustrates important risk factors commonly associated with financial statement fraud.

Royal Ahold, N.V.—Key Facts

1. Royal Ahold was controlled by members of the Albert Heijn family until 1989 when a professional management team was hired. 
2. The new management team aggressively pursued an international expansion plan that eventually resulted in Royal Ahold owning retail grocery chains in 27 countries and a large food wholesaling operation in the United States.
3. Differences in cultural norms and expectations adversely impacted Royal Ahold’s ability to manage its global business operations.
4. The new management team pressured their subordinates to achieve unrealistic earnings goals and rewarded them with large year-end bonuses if they reached those goals.
5. In early 2003, Royal Ahold’s Deloitte auditors suspended their fiscal 2002 audit after discovering potential irregularities in the company’s accounting records.
6. Deloitte’s suspension of its 2002 audit caused significant financial problems for Royal Ahold, including sharp drops in the prices of its outstanding securities and its credit rating. 
7. Investigations of Royal Ahold’s accounting records revealed that the company’s previous financial statements had been materially misstated.
8. The three principal sources of Royal Ahold’s financial statement misrepresentations were the improper inclusion of financial data for foreign joint ventures in its consolidated financial statements, improper accounting for purchases of foreign joint ventures, and improper accounting for “promotional allowances” by the company’s food wholesaling subsidiary.
9. Among the parties blamed for the Royal Ahold scandal were the company’s top executives, the company’s Deloitte auditors, and international oversight and rule-making bodies in the accounting and auditing disciplines. 
10. The Royal Ahold case refocused attention on the lack of cooperation between international oversight and rule-making bodies in the accounting and auditing disciplines.

Suggested Solutions to Case Questions

1. The equity method is the proper accounting method for U.S. companies to apply to investments representing a 20–50% ownership interest in an investee company. U.S. GAAP generally does not permit full or proportional consolidation of a joint venture company in which the “parent” owns a 50 per cent interest.

In arriving at the U.S. GAAP-based net income figures shown in the reconciliations presented in Exhibit 3, Royal Ahold fully consolidated the operating results of the joint ventures in which it had a 50 per cent ownership interest. Since these entities were operating profitably, the result was to overstate the U.S. GAAP-based net income figures shown in Exhibit 3.


2. There isn’t a universally-accepted definition of “earnings quality,” but, generally, that phrase refers to the degree of correlation between a company’s reported earnings and its “true” earnings. The term “earnings quality” is also often used when referring to the degree to which a given entity’s reported earnings can be used to predict its future earnings. Because of the pervasive conservatism principle within the U.S. accounting profession, reported earnings figures that are conservative, that is, that tend to be understated, are often considered to be of high quality. However, consistently understated or overstated earnings are of low quality given the general definition of earnings quality just presented. So, in comparing the earnings produced by two competing sets of accounting principles, such as IFRS and U.S. GAAP, the key issue is which set of accounting principles produces net income figures that are more highly correlated with the given entity’s stream of actual earnings. Granted, determining “actual earnings” for purposes of this comparison is a difficult assignment.

In addressing this question, your students will likely focus on the large differences between the Dutch GAAP-based and U.S. GAAP-based net earnings figures shown in Exhibit 3. Notice that easily the most significant factor accounting for the difference in Royal Ahold’s Dutch GAAP-based

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Solution Manual Case 2.6 Kansayaku

This case focuses on Japan’s accounting profession and independent audit function. As this case documents, the accounting profession and independent audit function within the United States and Japan are very similar in many respects but very dissimilar in others. Similar to the United States, Japan’s accounting profession has historically been dominated by a small number of large accounting firms. In fact, each of Japan’s four largest accounting firms is affiliated with one of the Big Four accounting firms that are principally domiciled in the United States. The overall role and nature of the independent audit function in the two major industrialized countries are also very similar. One of the major differences between the accounting profession in Japan and the United States is the relatively small number of Japanese CPAs. On a per capita basis, the United States has more than ten times as many CPAs as Japan. Likewise, there is a large disparity in audit fees between the two countries. The annual audit fee for a U.S. company is typically ten times the size of the audit fee for a comparable Japanese company. Finally, the nature and structure of the regulatory function for the accounting profession and financial reporting system have historically been very different between the two countries.

Similar to the United States, Japanese auditors have faced mounting criticism in recent years as a result of a series of high profile accounting and auditing failures. Much of this criticism stemmed from revelations that several of the large “mega banks” that have dominated Japan’s post-World War II economy were technically insolvent despite the fact that those banks had received unqualified audit opinions each year on their financial statements. As a result of the major financial crises within Japan’s banking industry, pervasive changes were made in the country’s regulatory infrastructure for its financial reporting system. Many of these changes directly impacted Japan’s accounting profession and independent audit function. The first major test of this new regulatory framework was posed by an accounting and auditing scandal involving a large cosmetics and apparel company, Kanebo Ltd. In fact, the Kanebo affair is often referred to by the Japanese press as “Japan’s Enron.”

Kansayaku—Key Facts

1. Similar to the United States, the public accounting profession and independent audit function in Japan are dominated by a small number of large accounting firms.

2. On a per capita basis, Japan has significantly fewer CPAs than any other industrialized country, including the United States; likewise, independent audit fees in Japan have historically been a small fraction of those in the United States.

3. A severe financial crisis that struck Japan’s banking industry during the late 1990s triggered a major credibility crisis for Japan’s accounting profession and independent audit function.

4. The criticism of Japan’s independent audit function focused on allegations that the close relationship between auditors and client management undermined the independence and objectivity of auditors.

5. Allegedly, independent auditors in Japan routinely subordinated their professional judgment to the wishes and demands of client executives.

6. In response to the widespread criticism of independent auditors, Japan’s federal government overhauled the regulatory structure for the nation’s financial reporting system.

7. The first major test of this new regulatory framework was posed by an accounting and auditing scandal involving Kanebo, Ltd., a large cosmetics and apparel company.

8. Kanebo’s top executives goaded the company’s accounting staff to misrepresent Kanebo’s financial statements throughout the late 1990s and beyond.

9. Kanebo’s independent auditors not only ignored the material misrepresentations in Kanebo’s financial statements but also suggested additional methods for improving the company’s apparent financial condition and operating results.

10. Despite the fact that Kanebo’s top executives and the company’s independent auditors either pled guilty or were convicted of various fraud charges, none of the individuals served any time in prison since each received suspended sentences.

11. Among the most significant results of the Kanebo scandal was the two-month suspension imposed on the company’s independent audit firm, ChuoAoyama.

12. The unprecedented suspension of ChuoAoyama signaled that Japan’s regulatory authorities were seriously committed to reforming the nation’s financial reporting system, including its independent audit function.
Question

Question and Answer

1. Research online news services to identify recent developments impacting the accounting and auditing profession in Japan. Briefly summarize these developments in a bullet format.

There have been recent developments in Japan that have impacted the accounting and auditing profession. Two of these developments are the Kanebo scandal of 2004 and the 2011 fraud scandal at Olympus Corp.
The Kanebo scandal of 2004 involved ChuoAoyama PricewaterhouseCoopers, a leading auditor in Japan. It was discovered that ChuoAoyama's monitoring systems failed to show that its employees had been cooking the books for Kanebo for five years. After this scandal was uncovered, the Japanese Financial Service Agency revised auditing standards, the CPA Law and the Financial Instruments and Exchange Law. The FSA also introduced the Internal Control Report and Audit and quarterly financial statement reviews. In addition, the CPAAOB was formed and was to become an independent regulator under the FSA. Further reforms include requiring auditors to rotate client teams every seven years, with a two year interval before they return.

Another development was the Olympus Corp. fraud of 2011. Olympus Corp. admitted to hiding large securities losses by using payments to merger advisers and venture capital funds. The two auditing firms that were under investigation were KPMG ASZA and Ernst & Young ShinNihon. With each firm, there was a failure to obtain sufficient, competent evidence to support the auditors' opinion on the financial statements. Based on this scandal, the PCAOB was given more international freedom. The PCAOB and Japanese regulators reached an agreement that allows the two countries to carry out joint inspections of auditing firms in Japan and the US. As a result, the PCAOB conducts inspections of international firms that audit public companies whose shares trade on US exchanges, which includes on-site visits and sharing of confidential information under certain circumstances.


2. As noted in this case, Japanese companies typically rely more heavily on debt capital than US Companies. Explain how this fact may cause the independent audit functions in the two countries to differ.

In any economy, the parties that are the principal source of capital for business organizations will obviously be among the principal stakeholders in that economy’s financial reporting process. Not surprisingly, individual audit firms, rule-making authorities, and professional organizations will likely feel some pressure or need to cater (or kowtow) to the information needs of those principal stakeholders. No doubt, this pressure will influence decisions made on individual audit engagements, influence the nature of accounting and auditing pronouncements, and influence the agendas and policy initiatives pursued by professional accounting and auditing organizations.

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Solution Manual Financial Accounting 3e IFRS Edition

Good morning all. Here I provide a solution manual (answer key) financial accounting, 3e IFRS edition.

Financial Accounting, 3e 

IFRS Edition

You can download directly By Clik the Botton  Bellow

1. Chapter 1 Accounting in Action
2. Chapter 2 The Recording Process
3. Chapter 3 Adjusting the Accounts
4. Chapter 4 Completing the Accounting Cycle
5. Chapter 5 Accounting for Merchandising Operations
6. Chapter 6 Inventories
7. Chapter 7 Fraud, Internal Control, and Cash
8. Chapter 8 Accounting for Receivables
9. Chapter 9 Plant Assets, Natural Resources, and Intangible Assets
10. Chapter 10 Liabilities
11. Chapter 11 Corporations: Organization, Share Transactions, Dividends, and Retained Earnings
12. Chapter 12 Investments
13. Chapter 13 Statement of Cash Flows
14. Chapter 14 Financial Statement Analysis

Solution Manual Financial Accounting, 3e IFRS Edition by Weygandt

ass.
Selamat pagi agan-agan semuanya. disini saya menyediakan solution manual (kunci jawaban)  financial accounting, 3e IFRS Edition

Financial Accounting, 3e IFRS EDITION

Langsung klik aja gan chapter berapa yang mau di download

1. Chapter 1 Accounting in Action
2. Chapter 2 The Recording Process
3. Chapter 3 Adjusting the Accounts
4. Chapter 4 Completing the Accounting Cycle
5. Chapter 5 Accounting for Merchandising Operations
6. Chapter 6 Inventories
7. Chapter 7 Fraud, Internal Control, and Cash
8. Chapter 8 Accounting for Receivables
9. Chapter 9 Plant Assets, Natural Resources, and Intangible Assets
10. Chapter 10 Liabilities
11. Chapter 11 Corporations: Organization, Share Transactions, Dividends, and Retained Earnings
12. Chapter 12 Investments
13. Chapter 13 Statement of Cash Flows
14. Chapter 14 Financial Statement Analysis

MEMBERSHIP OF COOPERATION

Membership Cooperation
A group of people who have the same economic interests as the owner and also the service users and participate actively to developing cooperative ventures.

Requirement be member of the cooperateon

• A citizen of Indonesia
• Capable of performing legal actions
• Willing to abide by the articles of Association and bylaws
• Willing to comply with the rules applicable
• Desirous of furthering the cooperative
• No coercion of another party 
• Have same economic interest 

Special requirement

Special requirement are additional requirements that must be met by each of the members of the cooperative before they were accepted into the cooperative members in full.
Examples of special conditions:

1. Agricultural cooperatives
2. Fisherman Cooperative
3. Cooperative Rubber

• Its members comprised of farmers, workers and owners, the rubber tappers, who took control of the production results and sebagainyai.
• Special conditions of membership of this cooperative is the distinction between cooperative movement with business entity-business entities, such as limited liability company, CV and so on.

How to become a Member

• Learn more historically intents and purposes of such cooperatives, especially regarding the terms of membership and the rights and obligations as a member. 
• Complete the requirements to become a Member
• If the terms are acceptable, then the candidate completing the registration form in that cooperation.
• If the Board approves the request, then the next prospective members must be notified to the relevant start date can be accepted to be members of the cooperative.
• When a person becomes a member of a cooperative plea rejected, then his candidacy as a member can be re-submitted in RA, and his decision will be binding on the Board to fulfill them.

Obligations of members:

• Abide by the articles of Association and bylaws
• Participate in the program of cooperative venture
• Pay the main payment and obligation payment 
• Maintain and develop the principle of togetherness
• Adhere to and carry out the decisions of the Governing Board meetings and Member meeting

Right of member

• attend a vote opinion, stated in the RAT
• Select and elected officers and Trustees
• put forward opinions and suggestions to the Executive Board
• Utilizing the same services and cooperation between members
• Get information on development cooperative basis within budget

THE NATURE OF COOPERATIVE MEMBERSHIP

The nature of cooperative membership is voluntary and open.

• Voluntary membership is each member is voluntarily register to be cooperative members of their own accord, and could submit his resignation.
• Open Membership is that membership of the cooperative knows no discrimination in any form. Everyone who is able to meet the terms of a cooperative membership can be accepted to be members of the cooperative.

PROOF OF MEMBERSHIP IN THE COOPERATIVE

Book member list is one that is defined by the ACT on cooperatives, The book contains :

• member list 
• full name, 
• age, 
• livelihood, 
• place of residence, 
• date of entry be a member, 
• left thumb stamp or signature of the Member 
• Chairman's signature and date the signature

Type of Membership in Cooperation

• Full members 
• Candidate members 
• Served members 
• Extraordinary Member
• Founding members 

1. Full members

Members who have voting rights , meaning that it has to meet the requirements specified in the appropriate membership AD / ART and regulations applicable legislation , and has signed his name in the register of members .

2. Candidate members

• People who have not settled main payment , formally not fully complete the administrative requirements as specified in the AD / ART , so it has not been accepted as a full member of bias .
• Has the right to speak but did not have the right to elect and be elected to be the caretaker or supervisor .
• Obtain the same service .

Candidate Members have an obligation

• Pay obligation payment decisions taken in accordance with members' meeting ;
• Participate in cooperative efforts ;
• Abiding by AD / ART , decisions and meeting members of other provisions in force ;
• Maintain the good name and togetherness Cooperative 

3. Served members

Citizens who receive services on a regular basis of the cooperative , but have not applied to be members of the cooperative . Members served the said order directed to members of the cooperative .

4. Extraordinary Member

• A person can become extraordinary members , when concerned citizens who are capable of taking legal action , but has not been fully able to meet the requirements defined in the AD / ART cooperative . Besides the foreign citizen who has had a Residential Permit Card ( KIM ) who want to receive services in a cooperative , but has no requirement to be a member of the cooperative 
• Extraordinary members have the right to speak , but did not have the right to elect and be elected to be the caretaker or supervisor cooperatives ;
• Member is entitled of net income ( SHU ) in accordance with the decision of the meeting of members .

5. Founding members

The people who founded the cooperative , who attended the meeting establishment / incorporation and has met the membership requirements as well as claiming to be a member

WHAT IS THE LIABILITY AS A MEMBER ?

Members dependents is something the duty of every Member to bear the losses suffered by the cooperative in implementing programs that have been decided in a meeting of members. It can be fulfilled obligations in fiscal year runs or after it was decided in the meeting of members or accomplished within the framework of settlement of the dissolution of the Cooperative .

kinds of members dependents :

1. Dependents is limited , the maximum amount that is charged or required on every Member to offset / pay losses which amount is specified in the AD / ART ;
2. Dependents are not limited to , an infinite number assigned to each Member separately cover the loss / debt until paid off .

• At the time of the dissolution of the cooperative , members who have come out are not free from the obligation to bear the loss , all the losses incurred as a result of one incident in which he is still a member , provided that the exit of the members have not been through 12 months .

• In the event of any of its members as a cooperative insurer losses , referred to in Article 29 and Article 31 of the Articles of Association was not able to pay , the other members are required to bear the obligations they are not capable of it , each of equal magnitude .

End of membership

membership in the Cooperation will end when the Member concern :

• Request a stop at his own request 
• Dismissed by the Board for violating regulations 
• Died
• Contrary to the purposes of the cooperative
• Always detrimental to cooperatives

WHAT IF COOPERATIVE breakup?

If the Cooperative disbanded , the person's membership in the cooperative ends . In terms of the Cooperative is still a bona fide debt to third parties , then each member is obliged to bear the corresponding provisions in the AD / ART . If the cooperative still has a wealth of after finished the paying debts , then the member may receive distribution in accordance with the requirements of AD / ART .

The Cooperation as Business Institution

What is Cooperation?

Organization of a group of people who have the same interests with the goal of welfare for its members.

What is Business Institution?

Organizations that combine and coordinate resources for the purpose of manufacturing and producing goods or services.

Cooperative is an economic movement that is based on a family basis. Cooperatives in Indonesia has grown rapidly due to the members comprised of the general public have to know the benefits of the establishment of cooperatives, which can help the economy and develop the creativity of each member. In addition, the cooperative also can be said as a business organization for cooperative activities that occur in nature generate a profit or profits in general be a goal of a business organization.

Business organization is an organization that combines and coordinates the resources for the purpose of manufacture and produce goods or services. Conceptually, the Cooperative as a Business Organization entrepreneurs who hold a weak economy, have some potential advantages to participate solve social problems - the economy.

To build a business organization, the business environment is also required. The business environment is one of the activities that will be undertaken in the form perbisnisan someone in a business, where in the business we are in demand to run or manage a business with his best of every person must have the desire and establishing the right of a business and one that must be willing to live her business to success.

Cooperative as a business organization so that:

• Subject to the rules and principles of economics that apply
• Able to generate profits and to develop the organization and its business
• Members as the owner and user of services
• Requires a business management system (financial, technical, organizational and information)

Role of Cooperatives in the National Economy

Cooperatives as an economic institution formed of, by and for its members is expected to provide business development opportunities and in particular the members of the surrounding community at large in order to improve the economic and social welfare. A cooperative economic organization that is distinct (has distinctive characteristics), with the corporate philosophy, corporate culture (cooperative business practices must be able to present the values ​​that were able to grow and thrive in a competitive market environment).

Values ​​inherent in the organization and management of cooperatives is the ability to self-help, democratic management, justice and solidarity, with values ​​above suggests that the cooperative as an organization is capable of self-help (selfhelp organization) must have a clear economic objectives and togetherness management (Joint management) are professional, so that cooperatives can put functions and its role as a strategic economic institutions in developing the economic potential of the people, because the cooperative is a business entity related to the life and economy of most of the people were scattered throughout the county, town and village in Indonesia, which covers almost all types of existing business fields.

Cooperative potential in the market system requires and in any business plan or utilize the maximum benefit so that companies can make a profit or of net income that is able to hold reserves in order to further business development. In order for companies to compete companies must conduct market orientation to be able to excel in the competitive market competition.

Cooperative has two markets:

• Internal Market, in which the direction of the distribution of goods addressed to the cooperative members.
• External market, is a market demonstrated outside the members or to the public. Cooperative acts as a supplier or call the marginal cost and supply Coorperative equal to the revenue. Cooperative will choose determines the price based on the price at cost with no more shortage.Koperasi have a great opportunity in terms of pricing than the market because it does not hold on to the position of maximum profit.

Purpose Cooperative Company

The main purpose of cooperatives focused on improving the welfare of its members and the public, it is clearly seen in Article 3 of Law No. 25 of 1992 on
Cooperatives, said that the cooperative aims to promote the welfare of members in particular and the society in general and to help build the national economy in order to realize an advanced society, just and prosperous based on Pancasila and the Constitution of 1945.

To achieve this, although not as an organization cooperative associations profit-oriented capital, but capital is an important factor to achieve this goal in addition to factors other resources. Not that did not attempt to achieve cooperative maximum profit, as a business entity, the cooperative aims to make a profit that can serve as a tool to achieve the ultimate goal.

Cooperative goals as a company or business entity is not solely only on the orientation of earnings (profit-oriented), but also on the orientation of the benefits (benefit oriented). Therefore, in many cases co-operatives, co-operative management of non-profit as the company's goals as they work based on the service (service at cost)....

Cooperative is an institution that should be managed as befits the institution. Businesses. In a business organization required an effective management Known and efficient management.

Likewise in cooperative enterprises, management is a right that must exist in order to realize the desired objectives.

Cooperatives are people based and not based capital as a conventional business organization or company. Cooperative organizations often turn out to be a bunch of capital even openly cooperative play often proceeds from fees or deposits cooperative members, but it is running or distributing third-party capital (bank)

In addition to the cooperative institutions that have been known, at this time also developed institutions Baitul Maal wat Tamwil (BMT) is an agency supporting small economic activities under (low income) with an economic system based on Islamic Sharia. Legal Entity of BMT BMT can be cooperative for those who have had a wealth of more than USD 40 million and has been prepared by the administration to be a healthy cooperative in terms of cooperative and good management, analyzed in terms of worship, practice shalihan officials who have managed BMT Islam.Sebelum Sharia legal status of cooperatives, BMT can be shaped as SHGs (Self Help Groups) that can serve as a pre cooperative.

The Conclusion:

Cooperatives can be regarded as a business organization because of the cooperative nature yangterjadi activities generate a profit or profits in general be a goal of a business organization. But in fact the potential of cooperatives in the market system requires effort and planning into each gain or exploit the maximum so that companies can make a profit or of net income that is able to hold reserves in order to further business development....

Understanding, co-operative is not a business organization, although the implementation expects profit. But the profit is distributed to members of the SHU (Business Profits). Running now, the cooperative has forgotten what its primary purpose. Many of the cooperatives in Indonesia indirectly to business organizations by certain elements. So we see in terms of implementation, cooperatives and business organizations actually almost the same.

COOPERATIVE (Principle, Types, Superiority, Entrepreneurship, Admiistrator of cooperative)

1. Cooperative

Cooperative is a business organization owned and operated by people - a mutual interest . Bases cooperative activities based on the principles of economic movement is based on the principle of kinship .

2. Principle cooperative

Cooperative principle is a system of abstract ideas that are clues to build effective cooperative and durable cooperative principles developed for the International Cooperative Alliance ( Federation of international non-governmental cooperative ) is

• Membership is open and voluntary
• Management of a democratic ,
• Participation in member economies ,
• Freedom and autonomy ,
• Development of education , training , and information

In Indonesia alone has made ​​the Law no . 25 of 1992 on Cooperatives. Cooperative principles according to Law no . 25, 1992 are :

• Membership is voluntary and open
• Management is done through democracy
• Distribution of SHU conducted fairly in accordance with their respective business service members
• provision of fringe benefits that are limited to capital
• Independence
• Cooperative education
• Cooperation among cooperatives

3. Form and Cooperative Type

3.1. Type Cooperative by function

• Cooperative purchasing / procurement / consumption is a cooperative which has the functions of purchase or procurement of goods and services to meet the needs of the final consumer . Here the member acting as the owner and purchaser or consumer to cooperatives.
• Cooperative sales / marketing is a cooperative that organizes the distribution function of the goods or services produced by its members to get in the hands of consumers . Here the member acting as the owner and supplier of the goods or services to cooperatives.
• Cooperative production is a cooperative that produces goods and services , where members work as an employee or employees of the cooperative . Here members take ownership and worker cooperatives.
• Cooperative service is a cooperative which organizes services needed by members , for example : savings and loans , insurance , transportation , and so on . Here members act as owners and users of services cooperative.

If cooperatives organized a function called single cooperative effort ( single -purpose cooperative ) , while the cooperative that organizes more than one function called business cooperatives ( multi purpose cooperative ) .

3.2. Type cooperatives based on the level and the area of work

• Primary Cooperative - Primary cooperative is a cooperative that has a membership of at least 20 individuals
• Cooperative Secondary - Is a cooperative made ​​up of a combination of cooperative bodies and has a wide working area coverage compared to the primary cooperatives . 

Secondary cooperatives can be divided into :

• Cooperative center - is a cooperative made ​​up of at least 5 primary cooperatives
• Joint cooperative - a cooperative whose members are at least 3 cooperative center
• Parent cooperatives - are members of cooperatives minimum is 3 combined cooperative

3.3. Type of Cooperative according to membership status

• Cooperative producer cooperatives whose members are producers of goods / services and have a household business .
• Consumer Cooperative is a cooperative whose members are the final consumer or user of goods / services offered by suppliers in the market .

Position of members in the cooperative may be in one state or two. Thus according to the status of members of cooperatives grouping closely related to cooperative grouping by function.

4. Superiority cooperative

The possibility of co-operatives to obtain comparative advantages of other companies large enough considering the cooperative has the potential advantages such as economies of scale , real activity , precuniary factors , and others.

5. Entrepreneurship cooperative

Cooperative entrepreneurship is a positive attitude in trying to be cooperative , to take innovative initiatives and the courage to take risks and hold fast to the principles of cooperative identity , in the realization of real fulfillment and collective welfare . From these definitions , it can be argued that entrepreneurship cooperative is a positive mental attitude in trying to be cooperative

Wirakop main task is to take innovative initiatives , it means trying to find , find , and take advantage of opportunities that exist for the common interest . Entrepreneurship can be done by the cooperative members , managers bureaucrats who play a role in the development of cooperatives and catalysts , that is, those who care about the development of cooperative

6. Administrator

Cooperative board elected from among and by the members in a meeting of members . There are times when the member is not meeting to elect all members of the Board from among its own members . It thus happens for example if the candidates come from members of his own circles do not have the necessary ability to lead the cooperative is concerned , while it turns out that that can meet the requirements are those who are not members or not members of the cooperative ( probably also served by cooperative but has not officially asked to be a member )

7. Cooperative in Indonesia

Cooperatives in Indonesia, according to the 1992 Act , is defined as a business entity consisting of individuals or legal entities with the bases cooperative activities based on the principles of economic cooperation as well as people's movement that is based on a family basis . In Indonesia , the cooperative principles specified in this Law. 12 of 1967 and Law no. 25 of 1992 .

Cooperative principles in Indonesia is approximately equal to the internationally recognized principles with slight variations , namely the description of the SHU ( Business Profits )

7.1. History cooperatives in Indonesia

A brief history of the cooperative movement began in the 20th century , which generally is the result of that effort was not spontaneous and was not done by people who are very wealthy Cooperative grow from among the people , while the suffering in the economic and social field generated by the capitalist system mounting . Some people whose livelihoods are simple with limited economic capacity , driven by the suffering and economic burden of the same , spontaneously joined hands to help himself and his fellow man .

In 1896 a Civil Service Patih R.Aria Wiria Atmaja in Purwokerto set up a bank for civil servants ( gentry ) . He was driven by his desire to help those employees who increasingly suffer from trapped by moneylenders who provide loans at high interest rates mean the regent to establish credit cooperative models such as in Germany . Ideals are then forwarded by the spirit of De Wolffvan Westerrode , a Dutch resident assistant while on leave De Wolffvan Westerrode managed to visit Germany and advocated Aid Savings Bank will convert the existing Aid to Banks , Savings and Agriculture . In addition to civil servants farmers also need to be helped because they suffer even more because of the pressure of the pengijon . He also advocated changing Banktersebut be cooperative . In addition, he also founded the village granaries are encouraging farmers to save on the loan musimpanen and provide rice aid to famine He was trying to make it into barns Credit Cooperative Rice But the Dutch government at that time another opinionated . Bank Aid , Savings and Agriculture and Cooperative Village Office is not used but the Dutch government established a new village barns , village banks , pawnshops and Cash Centrale which later became the Bank Rakyat Indonesia ( BRI ) . All of that is a business entity 's authority and led by the people government

In the days of the Dutch -forming cooperatives can not be implemented because :

• There has been no government agencies or non- governmental agencies that provide information and education about cooperatives .
• There is no law governing cooperatives life .
• Colonial government itself was hesitant because of political considerations advocated cooperative , cooperative worry it will be used by the political objective harm to the colonial government .

Anticipate the development of cooperatives already socialized , Dutch government issued regulations regarding cooperatives . The first , issued Regulation No. Cooperative Society . 43 , 1915 , and in 1927 issued Regulation No. anyway . 91 , 1927 , which governs the Cooperative Society - Society for Bumiputra groups . In 1933 , the Dutch East Indies government stipulate Society General Cooperative Society - No . 21 , 1933 . Regulations 1933 , it is only applied to groups that are subject to the legal order of the West , whereas Regulation 1927 , applicable to class Bumiputra . Discrimination is enforced at the level of cooperative life

In 1908 , Budi Utomo is founded by Dr . Sutomo provide a role for the cooperative movement to improve the lives of the people . In 1915 the rules made ​​Verordening op de Cooperatieve Vereeniging , and in 1927 Regeling Inlandschhe Cooperatieve .

In 1927 established Islamic Trade Union , which aims to fight the economic position pengusah - indigenous entrepreneurs . Then in 1929 , the Indonesian National Party stood fighting for the dissemination of the cooperative spirit .

However , in 1933 a law came out like Law no . 431 so lethal cooperative efforts for the second time . In 1942 the Japanese occupation of Indonesia . Japan and establish cooperative kumiyai . Originally cooperative is running smoothly but its function has changed dramatically and become a tool to benefit Japan , and misery to the people of Indonesia.

After Indonesian independence , on July 12, 1947 , the cooperative movement in Indonesian Cooperative Congress held the first in Tasikmalaya . Today is then set as the Indonesian Cooperatives Day at a Time formed the Central Organization of Indonesian People's Cooperative ( SOKRI ) located in Tasikmalaya ( Bandung as the capital of the province is being occupied by the Dutch )

7.2. Fungction and cooperative role of Indonesian

According to Law no . 1992 25 Section 4 explained that the cooperative has the function and role of , among others, to develop the potential and economic viability and community members , working enhance the quality of human life , strengthen the economy of the people , developing the national economy , as well as develop creativity and spirit organization for the nation's students .

7.3. Cooperative based on law

Cooperative legal entity under the Act 12 of 1967 is the [ organization ] ] people's economic social character , consisting of the persons or legal entity which is a cooperative economic arrangements as a joint venture , based on the principle of kinship . Specifically about the performance of cooperative associations , cooperatives must work under the provisions of the general law on business organization ( proprietorship, partnership , etc. . ) And commercial law and tax law .

THE ECONOMIC PROBLEM: SCARCITY AND CHOICE

• Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources
• Choice consists of the mental process of judging the merits of multiple options and selecting one of them.

Types of choices

• Command decisions
• Delegated decisions
• Avoided decisions
• "No-brainer" decisions

Three basic questions must be answered in order to understand an economic system:

• What gets produced?
• How is it produced?
• Who gets what is produced?

Capital refers to the things that are themselves produced and then used to produce other goods and services.

According to Adam Smith and David , factors of production:

• Land :naturally-occurring goods such as water, air, soil, minerals, flora and fauna that are used in the creation of products
• Labor : human effort used in production which also includes technical and marketing expertise
• Capital: human-made goods (or means of production), which are used in the production of other goods.

Production

Production is a process, and as such it occurs through time and space. There are three aspects to production processes:

• The quantity of the good or service produced,
• The form of the good or service created,
• The temporal and spatial distribution of the good or service produced.

Resources or factors of production are the inputs into the process of production; goods and services of value to households are the outputs of the process of production

Scarcity and Choice in a One-Person Economy

• Nearly all the basic decisions that characterize complex economies must also be made in a single-person economy.
• Constrained choice and scarcity are the basic concepts that apply to every society.
• Opportunity cost is that which we give up or forgo, when we make a decision or a choice.

Scarcity and Choice in an Economy of Two or More

• A producer has an absolute advantage over another in the production of a good or service if it can produce that product using fewer resources
• A producer has a comparative advantage in the production of a good or service over another if it can produce that product at a lower opportunity cost.

Specialization, Exchange and Comparative Advantage

• According to the theory of competitive advantage, specialization and free trade will benefit all trading parties, even those that may be absolutely more efficient producers

Capital Goods and Consumer Goods

• Capital goodsare goods used to produce other goods and services.
• Consumer goodsare goods produced for present consumption
• Investment is the process of using resources to produce new capital. Capital is the accumulation of previous investment.
• The opportunity cost of every investment in capital is forgone present consumption

The Production Possibility Frontier

• The production possibility frontier (ppf)is an expository figure for representing scarcity, cost, and efficiency. In the simplest case an economy can produce just two goods (say "guns" and "butter")

The Law of Increasing Opportunity Cost

• The slope of the ppf curve is also called the marginal rate of transformation (MRT).
• The negative slope of the ppf curve reflects the law of increasing opportunity cost. As we increase the production of one good, we sacrifice progressively more of the other.

Economic Growth

• Economic growth is defined as the increasing capacity of the economy to satisfy the wants of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs (labor, capital, material, energy, etc.)
• The main sources of economic growth are capital accumulation and technological advances
• Outward shifts of the curve represent economic growth
• An outward shift means that it is possible to increase the production of one good without decreasing the production of the other.
• From point D, the economy can choose any combination of output between F and G.

Measuring economic growth : Economic growth is measured as a percentage change in the Gross Domestic Product (GDP) or Gross National Product (GNP)
Capital Goods and Growth in Poor and Rich Countries

• Rich countries devote more resources to capital production than poor countries.
• As more resources flow into capital production, the rate of economic growth in rich countries increases, and so does the gap between rich and poor countries.

Economic Systems

• The economic problem: Given scarce resources, how, exactly, do large, complex societies go about answering the three basic economic questions?
• Economic systems are the basic arrangements made by societies to solve the economic problem. They include:Command economies, Laissez-faire economies, Mixed systems
• In a command economy, a central government either directly or indirectly sets output targets, incomes, and prices.
• In a laissez-faire economy,individuals and firms pursue their own self-interests without any central direction or regulation. 
• The central institution of a laissez-faire economy is the free-market system.
• A market is the institution through which buyers and sellers interact and engage in exchange.
• Consumer sovereignty is the idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase
• Free enterprise: under a free market system, individual producers must figure out how to plan, organize, and coordinate the production of products and services.
• In a laissez-faire economy, the distribution of output is also determined in a decentralized way. The amount that any one household gets depends on its income and wealth.
• The basic coordinating mechanism in a free market system is price. Price is the amount that a product sells for per unit. It reflects what society is willing to pay.

Mixed Systems, Markets, and Governments

Since markets are not perfect, governments intervene and often play a major role in the economy. Some of the goals of government are to:

1. Minimize market inefficiencies
2. Provide public goods
3. Redistribute income
4. Stabilize the macroeconomic:

• Promote low levels of unemployment
• Promote low levels of inflation

Finding a Location for Electronics Component Manufacturing in Asia (case study)

ACM is an electronics component manufacturer that has been located in Singapore since 1991, supplying original equipment manufacturers (OEMs) with quality components. In the past several years, ACM has experienced increasing pressure from other manufacturers located in other countries. In Singapore, while labor remains quite inexpensive, there has been a relatively steady increase in labor costs. In addition, utility costs – most notably water and energy costs – have led the firm to contemplate moving operations elsewhere in Asia in an attempt to make the firm more competitive. ACM remains profitable, but margins have shrunk, and management is interested in ensuring that the firm remains competitive in the medium term to long term against other component manufacturers. A team of senior management has formed a committee to reach a decision regarding possible relocation. The committee has identified two additional locations as possible candidates for relocation: Hong Kong (People’s Republic of China [PRC]) and Kuching (Malaysia). Hong Kong’s main attractions stem from the fact that since 1997, when its sovereignty was transferred back to the PRC, labor costs have decreased as access to labor has increased. Hong Kong enjoys a large seaport and very good transportation infrastructure, and this is important in moving in raw materials and moving out finished components to customers. Senior management believes that an increasing number of OEMs will move to the PRC in the next several years, as has been the case in the past decade. Twill only increases the attractiveness of locating the manufacturing facility in Hong Kong. Kuching is located in the Malaysian province of Sarawak, on the island of Borneo. It is the fourth largest city in Malaysia and home to a population of around 650,000. Several points make Kuching attractive to the relocation committee. First, locating here would give access to natural resources and other production inputs. Second, the transportation infrastructure is good, and the city hosts a deep sea port for moving raw materials in and finished good out. That said, the port is not as large or accessible as those of Hong Kong or Singapore, and several committee members have expressed concern about the frequency of ship visits to Kuching. If the port does not receive regular service from container ships, transportation costs to ship components to OEMs will doubtlessly stable and inexpensive in Malaysia. The committee has contracted the government of Singapore to elicit possible incentives to not relocate to another country. Singapore is offering a five­year exemption on taxes for ACM if the plant remains in Singapore. The government will also assist by partially subsidizing labor, water, and energy costs for five years. Committee members realize that the Singapore plant, which has been operating for years, has already been amortized, and opening a new plant would require additional capital costs. That said, opening a new factory would also provide an opportunity to upgrade production equipment to more productive and energy efficient alternatives.

If you are appointed as a new manager for that company, what will you do?

If I was the manager at ACM, the first I would make advantages and disadvantages of each location has to offer. For example:

Singapore

• Advantages: relatively cheap labor, good transport infrastructure and incentives Offered to stay 
• Disadvantages: increasing labor costs and increasing utility costs.

Hong Kong

• Advantages: labor consistently cheap and good transport infrastructure.
• Disadvantages: no specific disadvantage has been -identified in the case but students should attempt to discuss this further.

Malaysia

• Advantages: access to raw materials and natural resources inexpensive labor.
• Disadvantages: Concern with the frequency of ship visits.

After that I would look for other factors that have not been described in this case, which may influence in choosing the location has to offer. For example, labor costs, utility costs, raw material costs , transport costs , exchange rates and political stability will impact the profitability .

In this case I prefer Hong Kong as a place suitable for the relocation of the ACM, because Hong Kong has a good transport infrastructure and cheap labor. While Singapore has labor and utility costs are high, and Malaysia have a little visit.

Case Study – What Happened to Kmart? (Management Information System)

1. Evaluate Kmart using the value chain and competitive forces models. What was Kmart’s business model and business strategy?
2. What was the relationship of information systems to Kmart’s business processes and business strategy? How well did its systems support its strategy?
3. What management, organization, and technology factors contributed to Kmart’s problems?
4. How important was supply chain management in contributing to Kmart’s problems? Evaluate Conaway’s decision to use i2 software to improve Kmart’s supply chain management.
5. Were those blaming software for the collapse of Kmart correct? Explain your answer.
6. It has been said that “Wal-Mart uses their IT strategically, and they fully integrate it into their operating model.” Does this statement apply to Kmart? Explain your response.
7. List the problems Conaway faced when he took over Kmart, and then describe the short- and long-range policies you would have followed had you been in his place.

ANSWER

1. Evaluate Kmart using the value chain and competitive forces models. What was Kmart’s business model and business strategy?


Kmart has numerous problems with its value chain. This is evident from the suppliers sending items that the suppliers want to sell, shelves remaining unstocked, the “hand shifting” reordering process for popular items, products being allocated by central planners and not based on individual store demand, excess inventory stored in 15,000 truck-trailers behind its stores, shrinkage, and having to choose to either ship toothpaste or Christmas trees. Since its entrance as the first discount store in the 1960s, Kmart has not been able to ward off new entrants into the discount chain business. The new entrants, such as Wal-Mart and Target, have come on strong and surpassed Kmart. Kmart’s suppliers seem to be calling the shots with the retailer, since they are promoting the items that they can sell and not helping Kmart address its mounting problems. Kmart’s customers are voting with their pocketbooks and shopping at its competitors’ stores.


Kmart uses a promotions-drive business model. The company uses advertising circulars to promote its “blue-light” specials.

2. What was the relationship of information systems to Kmart’s business processes and business strategy? How well did its systems support its strategy?

Kmart’s information systems and its business processes and business strategy were not in alignment. As an example, the information systems could collect data, but the data were not available for analysis and decision-making ......

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