General Motor’s Crisis
By Mariano Harari
Very often the average investor is fooled into believing something a source like the Wall Street Journal says. However, as students of accounting at the University of Richmond, we have learned to make our own interpretations of what is really going on. A perfect example of this can be illustrated by analyzing an article published on the WSJ about a month ago regarding General Motors and their catastrophic losses last year. From simply reading the article, we are influenced to believe that General Motors did terrible last year. Even though they were in the red, they were not nearly as bad as the article made them out to be. What the author had missed is that General Motors has turned 38 billion dollars of deferred taxes into an allowance account, which caused an immediate loss that year. As we know from studying deferred taxes, this is not nearly as alarming as if the 38 billion loss had come from operational activities. Therefore, this example of General Motors provides a perfect illustration of a current event that is being misinterpreted by the average investor, while ,we as students of the University of Richmond, are able to truly see what is going on.
April 20th, 2008 at 4:24 pm
FOUR STARS!
Mr. Harari’s podcast provides an interesting insight into an important current event in the accounting world. Mr. Harari clearly demonstrates his mastery of the subject and his skills learned during his education in accounting while at the University of Richmond. As a student of Professor Hoyle, the topic was of particular interest to my understanding of current accounting issues. However, Mr. Harari’s careful explanation of the topic would be engaging to a major in any business or non-business field. Mr. Harari’s speculation on the issue and his use of accounting knowledge proves to be accurate in its confidence. As the accounting students learn to interpret events that most investors would misinterpret, this podcast provides a sound example of how to apply our education to an important real-life investing decision with a major U.S. company. While some of the images are poorly placed and in low detail, the Garage band application is difficult to master for a first-time user. For this reason, I am still confident that Mr. Harari’s podcast deserves a four star rating.
April 20th, 2008 at 11:27 pm
Mariano delivers a very clear and well articulated podcast on the General Motor’s crisis dealing with deferred tax assets. Overall, I give Mariano 4 stars. There were no real weaknesses in the production. It was very informative and unique, and kept my attention throughout with ease. The pictures were well coordinated for the most part, although many of them were a little blurry. He, also, added music as a nice hearing aid, and the clarity and pace of his voice was very suitable for a podcast. I found it very interesting that GM was able to swing $38 B from an asset to an allowance overnight, and thus cause this huge loss. Mariano did a good job explaining why this loss happened, and why the company probably wanted to take a “big bath”. He also explained the difference between the old FASB rules and the new FASB rules relating to probability of generating income, which was key in explaining GM’s situation. It appears Mariano did some quality research about the topic, and created a very strong podcast.