Recently, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) made yet another effort to show their dedication to one set of globally accepted financial reporting standards. It resulted in an exposure draft published on November 14, 2011 entitled Revenue from Contracts with Customers.[1] The collaborative standards may supersede all previous international and local reporting standards regarding revenue recognition as early as January 1, 2015.[2] The new rules set forth clarified principles for recognizing revenue from the original draft released in June, 2010 and ensure the standards will be consistently applied in different transactions and industries.[3] As imperative as revenue is in assessing a company’s success and viability, the differences in international and U.S. standards make it a challenge to compare the two results.

The two standard-setting boards first realized that both the current international standards and U.S. standards resulted in inadequate information being relayed to investors in order to understand the judgment and estimates used by a company in getting to their financial results.[4] Specifically, international standards contain too limited of guidance for complex transactions often resulting in applying U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) in certain situations.[5] Due to the specificity of industry regulations under U.S. GAAP, a similar transaction across industries may vary in results.[6] The framework proposed by the FASB and IASB in the draft would solve these problems and revenue will be recognized when it reflects the transfer of promised goods or services in an amount the transferor expects to receive for those goods or services.[7]

For an example on reactions to the draft, one of the biggest accounting firms in the world, PricewaterhouseCoopers, commented by making suggestions to amend the details of the standards, but the firm showed their overall support for the goal of one set of revenue recognition standards and the effort that both the standard setting boards put into addressing comments from the original exposure draft.[8] The comment period for Revenue from Contracts with Customers ended on March 12, 2012.[9]

Fact met fiction recently when a bastion of journalistic integrity, This American Life, broadcast parts of a one-man show that purportedly exposed further abuses of Chinese laborers by factories manufacturing iPads and iPhones for Apple.[1]  The episode, entitled “Mr. Daisey and the Apple Factory,” featured parts of Mike Daisey’s monologue that allegedly described his visits to Chinese factories and interactions with Chinese workers.[2]  The episode aired in January and quickly became This American Life’s most popular podcast, boasting more than 888,000 downloads.[3]  In the wake of the broadcast, reporters for radio and print outlets fact-checked Mr. Daisey’s claims to determine their validity and found that, in fact, some of Mr. Daisey’s assertions were fabrications.[4]

On March 16, 2012, This American Life retracted the story due to the “dubious” nature of some of Mr. Daisey’s claims, leading to yet another media blitz about Chinese factory conditions.[5]  Mr. Daisey has defended his show by claiming that he is a performer and that theater or drama is very different from journalism.[6]  This is despite the fact that his show is billed as “nonfiction” and that he never warned This American Life that the monologue contained inconsistencies.[7]  Journalism and theater are two different entities; one with the intent to inform and the other with the intent to entertain.  Drama is not to be confused with reality nor is it to be considered news.

The poor working conditions in Chinese factories are likely a result of the “race to the bottom” culture of manufacturing.[8]  The “race to the bottom” is a practice wherein countries, in an effort to have the cheapest labor costs, ignore labor and employment standards to attract foreign companies shopping for cheap labor and manufacturing opportunities.[9]  By competing against one another to give the lowest bid, Chinese manufacturers are creating environments where the workers are forced to sign pledges that they will not commit suicide and where nets to thwart suicide attempts surround workers’ dormitories.[10]  Some critics are concerned that the altered facts and exaggerations in Mr. Daisey’s show may ultimately undermine the cause of improving working conditions in Chinese factories.[11]  Most hope that the attention garnered by “Mr. Daisey and the Apple Factory” will serve to increase the public’s awareness of poor working conditions and labor abuses in China.  Any attention, whether positive or negative, will help increase public awareness of the poor working conditions and labor abuses in China and encourage reform.

The world looked on in shock as the Costa Concordia lay on its side off of the Tuscan coast.[1]  As rescue crews frantically searched for survivors, fresh attention was drawn to the flaws in international rules and standards for cruise ship safety.  Survivors spoke of the madness of fleeing a sinking ship, raising eyebrows about how well cruise liners are preparing their passengers for such an event.[2]

Current law mandates that passengers be informed of safety protocols and emergency evacuation procedures within 24 hours of boarding the ship.[3]  However, after countless accounts of the chaos surrounding Costa Concordia’s evacuation, industry leaders have decided to tighten protocols.  Three major worldwide cruise line associations have recently agreed to inform passengers of the protocols and procedures before the ship leaves port.[4]  The associations have also agreed to the implementation of safety reviews, which would examine safety protocols and other practices within the industry.[5]  Effective implementation of these new safety standards will require the cooperation of governments and regulatory bodies, who are responsible for assuring compliance with laws and regulations.[6]  For example, the Cruise Lines International Association, one of the agreeing parties to the new standards, is regulated by the U.S. Coast Guard.[7]  Under the agreement, the U.S. Coast Guard conducts unannounced safety inspections, which include examination of fire safety equipment, lifesaving equipment, and fire and abandon ship drills.[8]  Problems may arise, however, when cruise lines are regulated by countries with less stringent standards.  Because cruise lines are able to choose which country they are registered in, many choose not to register in the United States, where standards are strict.[9]

Although the cruise industry is taking efforts to improve safety, it may be too late to maintain high sales.    After the Costa Concordia disaster, some people are looking for refunds on already-purchased cruise tickets.[10]  According to a recent survey, one-fourth of those polled were less likely to book a cruise because of the recent events.[11]  It is not surprising, therefore, that cruise bookings have declined compared to this time last year.[12]  However, industry leaders attribute the decline to common fluctuations, and are confident that the incident will not have a long-term impact on business.[13]  Only time will tell.

UEFA’s new Financial Fair Play measures have been welcomed with open arms by some, while others have responded by questioning its legality.  The new regulations are meant to protect creditors, players, tax collectors, and keep clubs from bankrupting themselves.[1]  The new regulations have been hailed as a means for professional football to save itself from its financial decadence and become a viable business.[2]  However, whether FFP can financially rescue football may hinge on a basic question: are its mandates legal?

Many of football’s biggest clubs have cyclically spent beyond their means, running exorbitant losses, and taking loans to pay off existing loans.[3]  Clubs tend to dig themselves into financial holes with player salaries and transfers.[4]

Despite the apparent need for fiscal responsibility in football, UEFA President Michel Platini anticipates litigation brought by clubs who challenge the legal validity of FFP’s sanctions.[5]  Second Tier English club West Ham United’s current grievances pose a prime example of what could become a common challenge to FFP.[6]  West Ham alleges that FFP’s introduction will penalize smaller clubs, who will be barred from spending and buying new players.[7]  This disparity in buying power will widen the gap between the Premier League and lower level clubs.  The wealth disparity will also widen between the bigger leagues, such as the English, French, Spanish, and Italian leagues, and smaller leagues like the SPL and Austrian Bundesliga.[8]  The most likely legal argument against FFP is that its de facto transfer ban constitutes an undue restriction on trade—at least for clubs of EU member countries—as under EU law there is no exclusion for sports leagues.[9]  Until FFA is challenged in court or arbitration, the world can only speculate what the legal outcome will be, or whether the specter of litigation will curtail FFA’s implantation.
 

When General Motors reported their recent record breaking profits the media took this as an opportunity to indicate the United States economy is on the mend.[1]  In the same breath the media identified a cloud of caution that still loomed due to the volatility of the economic status of the European Union.[2]  If the European Union is so economically volatile, how do the European lawmakers have a much easier time acknowledging and acting on the concerns and weighing them against the economic advantages of Fracking?  Domestically, United States lawmakers have yet to impose regulations with a reach beyond driller’s own voluntary moratoriums although research has identified a number of growing concerns.[3]  Proponents of fracking are quick to downplay these concerns in the name of industry growth and job creation.[4]  How can much more volatile economic societies clearly weigh the facts in favor of supporting the safety of their citizens over the availability of an economic advantage?[5]

The impacts on the citizens closest to fracking operations are becoming blurred with efforts by environmentalists.[6] Beyond the environmental concerns, the concerns include sub-surface property rights, negative impacts on underground water supplies, and safety concerns due to earthquakes in areas with building codes that are inadequate.[7]  The immediacy of the concerns do not create the long term paternalistic approach typically identified with environmentalists.  Instead, these issues create an immediate reasonable risk for the safety of those who live in close proximity to fracking operations.

Undeniably, the United States’ position on fracking has an impact on the international growth of these operations.[8]  Chevron, who was most impacted by the fracking ban in Bulgaria, is a United States corporation.[9]  Due to corporate and political relationships within the United States, this primarily unconfirmed process, first developed within the United States, remains unregulated in the name of job growth.[10]  Therefore, the countries with lawmakers who can be most unaffected by the influence of large corporations, promises of economic advantages, and influence of the United States can best form their own unbiased opinions truly based upon the facts.  Only then can these unbiased beliefs be reflected in regulations imposed by lawmakers.  Therefore, foreign lawmakers are in the best position to avoid all of these influences.   A number of European countries have arguably taking the lead by putting safety ahead of economic advantage.  It is best said, “Some economists and environmentalists say that while the governments of poorer countries may benefit from the new tax revenues and jobs, they may not be paying enough attention to the environmental risks of drilling.  They also note that local residents – who bear the brunt of the air pollution, potential water contamination from spills or underground seepage, and truck traffic that comes with drilling – may see few benefits.”[11]

The United States has not yet reached a definite conclusion on the impacts of this U.S. developed process.[12]  In an attempt to balance the economic advantages with the safety concerns, the United States lawmakers are additionally hesitant to impose regulations, of which there are no local community enforcement options.[13]  Yet, the safety concerns are mounting and United States based corporations are not hesitating to promote this unproven process in poorer countries that have even fewer legal options to protect the safety of local residents and their water supplies.[14]

Iranian lawmakers have threatened to close the Strait of Hormuz in response to European and American sanctions designed to curb Iranian oil exportation.[1]  One-fifth of the world’s oil supply—mostly from other Arab nations—passes through the Strait every day, making the Strait’s maintenance vital to Western economies.[2]  On Monday, January 23, those sanctions, which aim to destabilize the Iranian economy in order to force Iran to negotiate the cessation of its nuclear weapons program, became a reality.[3]

Iran cannot legally close the Strait of Hormuz.  According to the United Nations Convention on the Law of the Sea (UNCLOS), “[s]tates boarding straits shall not hamper transit passage.”[4]  Read in context, the treaty completely denies any right to block straits used for international passage, limiting bordering states to defining shipping channels and enforcing safety regulations.[5]  UNCLOS is customary international law, making compliance obligatory for all states.[6]  Thus, even though Iran has not ratified the Convention, it is subject to it; furthermore, the shipping channels are within the territorial Sea of Oman.[7]

The United States, chief among those insisting on the Strait remaining open, is not a party to UNCLOS, though American courts and one President have recognized UNCLOS’s status as customary international law.[8]  The use of American military strength to enforce the terms of a document we refuse to sign is ironic at the very least.

UNCLOS, however, may hinder military action against Iranian attempts to close the Strait because it “impedes maritime interception in the territorial sea, where the coastal state enjoys sovereignty,”[9] denying a right of action against threatening vessels that seek safety within the Iranian territorial sea.

Furthermore, UNCLOS requires parties—including most of Europe, and thus, presumably, NATO—to settle disputes concerning the treaty’s enforcement peaceably.[10]  Our recognition of the Treaty as customary international law, if not our signature, may also limit our unilateral military response capabilities. This is especially true considering that UNCLOS is the justification for denying Iran the right to close the Strait.  The rule of law loses much of its sheen if we enforce a treaty by breaking it.

Russia experienced great change in the 90s after the fall of the Soviet Union with both Yeltsin’s rapid push towards a market-based economy and privatization (A) and later with ex-KGB Vladimir Putin’s swift cuts to the freedoms enjoyed by the “oligarchs.”[1]

Putin served two four-year terms as president from 2000 to 2008.[2]  Putin loyalist Dmitry Medvedev took over as president in 2008 with Putin as Prime Minister.  This puppet presidency, along with Putin’s run for the 2012 presidency, came as little surprise to the international community since only consecutive terms are limited.  There are no limits to nonconsecutive terms, and new reforms[3] allow Putin the potential for two additional consecutive six-year terms.[4]

At first glance one would think that the people of Russia would be tired of Putin and his manipulation of the electoral system.  However, the people of Russia have remained loyal and without major discontent since 2000.  This all changed after the December Duma elections (parliamentary elections) as critics and protesters felt the election was rigged.[5]  Protests erupted and calls for legitimacy were made.  The Kremlin responded with internet attacks to censor opposition.[6]  These bold acts only bolstered the reputation of the United Russia party as a party of “crooks and thieves.”[7]

The December election gained the attention of the normally placid middle class.[8]  For over ten years the middle class has remained largely unfazed by Putin’s stronghold over Russia.  However, the December elections drew some of the largest protests since the fall of the Soviet Union and gave the middle class a much needed reason to voice their concerns and be heard by the very government that has been steadily consolidating power within the country with little benefit being seen by the middle class.[9]    This middle class now seeks respect and legitimate leadership.[10]

Protesters also called for a “rerun” of the December election.[11]  However, Putin rejected this notion and has instead shifted blame to the protesters themselves.[12]  Police action has also been increased to stifle protests and incarcerate protesters.[13]

Putin’s nearly-assured 2012 presidency is now left tainted with the glaring possibility that the mighty and powerful Putin may finally have to take his place in the unemployment line.[14]

Editors Note:  Our 2012 3rd Annual Symposium will deal with this very topic. Navigating Anti-Bribery Legislation: Remaining Compliant and Competitive in the Global Marketplace will take place on Friday, March 30, 2012 in the Law School’s Moot Court Room from 1:30- 4:30 p.m. 2.5 Free CLEs (pending approval) are available. The event will be open to the public.  More information can be found on our homepage.

On November 20, 2011 Spain elected Mariano Rajoy, of the conservative People’s Party, as prime minister.[1]  During his campaign he claimed that “cleanup and restructuring” of the banking system in Spain was his primary concern.[2]  Rajoy pledged to adopt a program to fund Spain’s recovery by increasing the amount of available credit.[3]  With the current financial troubles in the Eurozone, reviving Spain’s banks could be a daunting task for the newly elected prime minister.  The BBC reports that “Spain is[a] much more indebted or leveraged country than Italy” when aggregating all debts including government, corporate, financial, and institution debts.[4]

To fix the financial issues of Spain, Rajoy must conquer the seemingly insurmountable amount of troubled real estate loans held by the country’s lenders.[5]  The Bank of Spain stated that half of the 308 billion euros of real estate loans are classified as troubled.[6]  These problems seem to stem from the decreasing values of Spanish homes, which have decreased by 28 percent on average since April 2007.[7]  Pablo Cantos, a managing partner of MaC Group who advises Spanish banks on risk, claims that about 30 billion euros of real estate held by Spanish banks are “unsellable.”[8]  The future for Spanish real estate assets remains bleak as Taurus Iberica Asset management–a Spanish mortgage servicer–reports that financial institutions have foreclosed on 200,000 homes and the foreclosures will rise to 600,000 homes due to the increase in unemployment.[9]  Fernando Acuan Ruiz, managing partner of Tauras Iberica, stated that Spain has 1 million new homes that will not be consumed until 2017.[10]

A solution to Spain’s bank problems may lie in facilitating a “bad bank” according to some analysts.[11]  Creating a “bad bank” would relieve banks of their toxic real estate assets and the bad bank would attempt to sell the assets as prices improve.[12]  Fernando Fernandez, IE professor and former International Monetary Fund economist, believes that a bad bank is the only cure to clean up bank balance sheets and revive the flow of credit.[13]  A bad bank worked well in Ireland because it restored confidence to investors.[14]  However, creating a bad bank in Spain with the current financial troubles of the euro zone could be a disaster according to analysts.[15]  One London-based analyst believes that the additional debt that will encumber Spain will be more than it can afford.[16]  Prior to the election, Rajoy did not support a bad bank program, but sources have stated that Rajoy “has asked for at least two papers from academics on how to create” a bad bank.[17]  While which solution Rajoy will ultimately employ to resolve the Spain’s financial issues is uncertain, the current financial outlook remains very grim.

You’ve just completed a satisfying shopping trip at Sandton City Mall in Johannesburg, South Africa.  After throwing your numerous bags in the car, you begin the trek back to your hotel.  “What an amazing vacation this is,” you think to yourself, as you approach a traffic light.  However, your warm fuzzy feelings dissipate as a young woman, dressed in tattered and dirty clothing, stands tapping at your window at just the appropriate angle to display the small, peaked-looking child strapped to her back.  She smiles, waves, and puts her hand to her mouth, signaling that she is hungry.  Feeling guilty about all of the money you just spent shopping, your heartstrings are officially tugged. You reach into you bag, and hand her a crisp bill.  She thanks you and moves on to the next car.  Your fuzzy feelings return, since you made it possible for a mother and child to finance their next meal.  You feel good about your deed.  The question is, should you?

Probably not.  It’s likely that you’ve been scammed.  Most people think child human trafficking is done for sexual purposes.  However, using children to panhandle unsuspecting tourists is becoming increasingly popular.  Panhandlers know that using children garners sympathy and can be very lucrative.  So much so that children are often rented out, kidnapped, or lured away from their homes.

In South Africa, police investigated a crime syndicate that involved panhandlers renting babies and small children from crèches for about $3 per day.[1]  A crèche is a public daycare for the poor that cares for the children while the mothers are at work.[2] Children are also rented directly from the mothers.  In these cases, older children’s legs are sometimes broken so that the children appear smaller than what they are when tied to the “mother’s” back. Smaller children garner more sympathy. Children may also be drugged so that they appear sickly.[3]  This practice can net up to nearly $70 per day.[4]

Child trafficking for pan handling purposes is not limited to South Africa.  It is increasingly popular in other third-world countries as well.  For instance, in India, gangs are known to kidnap children from their homes, and force them into a life of panhandling.  These children are starved and beaten for several days, and are then maimed or blinded to garner more sympathy.[5]

In Senegal, parents send their young boys to daraas, Quranic schools run by religious leaders to educate the boys in religion and academics.[6]  However, these boys receive a rude awakening when they arrive.  Instead of being taught and nurtured, they are forced onto the streets for long hours to beg for money.[7]  These schools collect up to $60,000 per year from the children.  One would question why parents would be willing to send their children off to these schools if tragic results are inevitable, but in Muslim societies, such as Senegal, sending your children away to daraas is not out of the ordinary.

Knowing these facts puts the compassionate tourist in a tough position.  He is left to decide whether or not he should give money to these poor, begging children.  There is always the chance that the child’s plight may be legitimate, and not forced on him by a con artist.  As difficult as it may be, the answer is no.[8]  To give to these children perpetuates the problem.  The “bleeding” must be stopped at its source.  If tourists continue to “feed” the child trafficking industry by donating to child beggars, kidnappers, scammers and con artists will continue to funnel these poor children into that life.