2. Facilities and included in the
Hospital Equipment Management Program.
Purpose
� To provide a procedure for the inspection of all electrical and
mechanical
equipment brought into the hospital
� To ensure that all electrical and mechanical equipment is
cataloged and
added to the hospital’s asset inventory
� To assess all risks associated with the use of a particular
piece of equipment and
to design and implement training and maintenance protocols
based upon the
equipment’s risks
� To comply with all local, state and national regulations and
accreditations
Procedure
1. Hospital Equipment Management Program
a. The Hospital Equipment Management Program shall be
administered by
the Director of Plant Operations with assistance as may be
required, from
3. time to time, by all other departments of the Acme Medical
Center.
b. Each hospital department shall be responsible for the costs of
procurement, training and maintenance of all electrical and
mechanical
equipment within its scope of control.
c. Records of equipment procurement, training and maintenance
will be
maintained by the Hospital Equipment Management Program.
2. Receipt of Equipment
a. The Director of Plant Operations or his designee is to be
notified of all
planned acquisitions of new electrical or mechanical equipment.
b. If possible, all deliveries of equipment for the Hospital
should be at the
Hospital’s main loading dock. In the event that a particular
piece of
equipment must be delivered and/or installed at another location
within
the hospital, the Director of Plant Operations is to be notified in
advance
5. and
serial number.
iv. Affix an Acme Medical Center asset identification tag to the
equipment.
v. Provide the Chief Financial Officer with a record of the asset
identification tag number and the equipment’s identifying
information. A separate copy of this information is also to be
maintained by the Director of Plant Operations.
vi. Coordinate with the department purchasing or leasing the
equipment and the office of the Chief Financial Officer to file
any
necessary documents in order to comply with the requirements
of
any applicable warranties or guarantees associated with the
equipment.
vii. Coordinate with the department purchasing or leasing the
equipment to file any necessary documents in order to comply
with
the requirements of any local, state or national regulatory
bodies
6. and/or any accrediting bodies that provide accreditation to
Acme
Medical Center.
viii. Acquire at least two (2) copies of all training, maintenance
and
user’s materials that are provided by the manufacturer and/or
seller of the equipment.
1. One (1) copy of the materials will be maintained by the
hospital department that is purchasing or leasing the
equipment.
2. One (1) copy of the materials will be maintained in a central
library by the Director of Plant Operations or his designee.
ix. Classify the equipment for inclusion in the Hospital
Equipment
Management Program.
3. Equipment Classification
a. All electrical or mechanical equipment owned or leased by
the Hospital
or any of its departments shall be classified into one of the
categories
8. to hospital employees on the use of hospital equipment. Each
hospital
department will coordinate with the Director of Plant
Operations to ensure
that all of the department’s employees receive the training
required
pursuant to this policy.
b. The Director of Plant Operations shall maintain records of
the training
received by all hospital personnel. A copy of such training
records shall
also be maintained by the employee’s hospital department.
c. When a new employee begins working for a hospital
department, the
department director or his designee shall determine what
equipment the
employee will need to operate as part of their job duties and
present that
information, along with the employee’s identifying information,
to the
Director of Plant Operations. This procedure is also to be
followed in the
event that an existing hospital employee transfers to a new
9. department
within the hospital.
d. Class A Equipment:
i. No employee shall operate any item of Class A equipment
until
they have completed a training course on the operation of the
equipment and been certified by the Director of Plant
Operations
as qualified to operate the equipment.
ii. Each department shall ensure that on any floor where it has
Class A
equipment, there shall always be at least one person on duty on
the floor who has been certified by the Director of Plant
Operations
to operate the equipment.
iii. Employees who operate Class A equipment must be
recertified by
the Director of Plant Operations annually.
e. Class B Equipment:
i. No employee shall operate any item of Class B equipment
until
11. recertified by
the Director of Plant Operations on the operation of a particular
type of Class B equipment any time the equipment is replaced
with
new or different equipment and the model of the equipment or
the
manufacturer of the type of equipment changes.
f. Class C Equipment:
i. Each department shall ensure that, as part of a new
employee’s
orientation, the employee receives training in the use of all
Class C
equipment the employee is expected to use in performance of
their job duties.
ii. Each department shall be responsible for providing training
to its
employees when new Class C equipment is obtained.
5. Maintenance
a. Maintenance records for all hospital equipment shall be
maintained by
the Director of Plant Operations.
12. b. Requests for equipment maintenance or repairs shall be
directed to the
Director of Plant Operations. The Director of Plant Operations
shall
determine whether required maintenance or repairs are to be
performed
by hospital personnel or by outside contractors.
c. The Director of Plant Operations shall manage the
maintenance and
repair of hospital equipment so as to minimize costs and
maintain
equipment guarantees and warranties in force.
d. Class A Equipment:
i. Class A equipment shall be maintained and repaired only by
persons that have been certified by the manufacturer of the
equipment as qualified to perform said maintenance or repairs.
ii. All items of Class A equipment shall be inspected annually
to
ensure that the equipment is in good condition and to perform
any
maintenance suggested by the equipment’s manufacturer.
e. Class B Equipment:
14. iii. The Director of Plant Operations shall make a list, updated
annually, of all other items of Class B equipment. In January of
each year, the Director of Plant Operations shall use such list to
take a statistical sampling of 10% of the items and schedule
them
for inspection and maintenance during the year.
f. Class C Equipment:
i. Items of Class C equipment that had an acquisition cost in
excess
of $10,000 or which are being leased, but have a replacement
value in excess of $10,000, shall be inspected annually to
ensure
that the equipment is in good condition and to perform any
maintenance suggested by the equipment’s manufacturer.
ii. The Director of Plant Operations shall make a list, updated
annually, of all other items of Class C equipment. In January of
each year, the Director of Plant Operations shall use such list to
take a statistical sampling of 5% of the items and schedule them
for
inspection and maintenance during the year.
16. Fire control equipment
Emergency communication and lighting
equipment
Invasive surgical equipment
B
X-ray equipment
Dialysis equipment
Equipment for regulating and
maintaining oxygen or pressure
environments such as incubators or
hyperbolic chambers
Patient monitoring equipment
Drug delivery systems
Noninvasive surgical equipment
Invasive diagnostic equipment
Laser equipment
Motorized patient transportation
equipment
Patient care computer equipment
C
17. Non-patient care computer equipment
Office equipment
Copiers
Fans
Noninvasive diagnostic equipment
Laboratory equipment
Non-motorized
patient transportation equipment
Televisions
Telephones / paging system
Hospital beds
Rehabilitation equipment
All other equipment not classified above
ACME MEDICAL
CENTER/FACILITIES/NTC409v3_AcmeMedicalCenter_FloorPl
an.pdf
20. legal compliance, and record keeping for all employees.
The department directs and monitors the organization’s efforts
to build and sustain a
diverse work force.
Human Resources is the primary resource for supervisors and
employees concerning
employment and management issues related to the
administration of policies and
procedures. The organization invests in the development of the
work force through
several training and development programs administered by the
Human Resources
Department.
Strategic Goals
� Recruit and retain the very best employees that the
organization can afford.
� Grow/enhance a participative employee culture that includes
a focus on
diversity and sensitivity awareness programs.
� Be an employer of choice.
� Create an environment of employee success.
22. � Offer skill enhancement and leadership development training
opportunities
through effective training and development methods such as
licensure,
qualification, recurring, and certification programs.
� Create and maintain equitable personnel policies and
procedures to ensure a
fair workplace for our employees.
� Create systems for reducing litigation exposure to employee-
driven adverse
actions.
� Administer cost-effective health care programs which provide
for the well-being
of employees.
� Provide a safe working environment for all employees
through OSHA- and
JCHCO-driven procedures.
ACME MEDICAL CENTER/INFORMATION TECHNOLOGY
MENU/Network
Diagrams/NTC409v3_AcmeMedicalCenter_ND_AdminNetwork.
pdf
25. NETWORK DIAGRAM: I.T. Data Center
Acme Medical Center
I.T. Data Center
ACME MEDICAL CENTER/INFORMATION TECHNOLOGY
MENU/Network
Diagrams/NTC409v3_AcmeMedicalCenter_ND_LogicalNetwork
.pdf
College of Information Systems and Technology
28. Acme Medical Center
Radiology
Emergency Room per bay
I workstation for use with the
portable X-Ray machine:
MAC PRO
2 Dual 3 GHz Processors
8 GB RAM
2 750 GB HD RAID
Fiber card
Super drive
OS Virtualization with MAC OS X
Leopard and Windows XP Pro,
Osarix imaging SW
30 “ Display
30. Copyrights are retained by their owners.
Acme Medical Center Network Diagram: RIS Data Center
ACME MEDICAL CENTER
NETWORK DIAGRAM: RIS Data Center
Acme Medical Center
RIS Data Center
ACME MEDICAL CENTER/INFORMATION TECHNOLOGY
MENU/Network
Diagrams/NTC409v3_AcmeMedicalCenter_ND_TopView.pdf
32. This top view diagram represents the hospital structure from an
I.T. network perspective.
The red outlined boxes are clinical areas and the black outlined
boxes are
administrative functions. The backbone network structure for
the entire hospital is 1000
BaseT. Individual sections of departmental networks such as
Radiology use different
standards such as 1000 BaseF. The entire hospital has a
complete power backup system
with automatic cutover to a large diesel motor generator set.
Individual departments
have local UPS as depicted on the individual department
network diagrams. HIPAA is
rigorously enforced. All patient data files are encrypted for
storage using AES. All access
to patient data files requires identification and authentication of
each user. In all
Radiology modalities the DICOM standard and PACS are
standard.
Acme Medical Center
Top View Functional Structure from an I.T. Network
35. Acme Medical Center Information Systems Overview
ACME MEDICAL CENTER
INFORMATION SYSTEMS OVERVIEW
Acme Medical Center (AMC) utilizes multiple network-
integrated clinical and
administrative information systems to improve the
communication and collaboration
between organizational leadership, senior management at the
department level,
employees, doctors, nurses, and clinical students working at
AMC. The information
systems increase the efficiency of hospital operations, improve
relationships with current
and future patients, and assist senior executives in managing
hospital finances,
department and programs budgets, and programs.
Acme Medical Center has developed a long-term purposeful
strategy to ensure
compliance with current and future government mandates
pertaining to health
information technology and meaningful use. The clinical and
administrative systems
36. have the capacity to allow AMC to purchase and implement
additional clinical and
administrative applications to meet the needs of internal and
external stakeholders,
which will help to ensure timely compliance with government
mandates and allow
users to take advantage of meaningful use (MU) incentives.
Some departments are
limited to specific applications and functions, such as health
information systems (HIS)
and the electronic medical records (EMR) system.
CLINICAL SYSTEMS
Health Information System (HIS)
The HIS is used by clinical program managers and senior
executives to collect, capture,
process, transmit, report, and analyze patient, program, and
AMC operations data.
Access to and use of data for making quality evidence-based
financial, operational,
and management decisions pertaining to health care service
delivery and improving
the quality and use of health information requires completing a
new or updated Access
37. Request Form. This form is signed by the Department Director
based on access
justification and then submitted to the Director of the IT
Department for approval and a
work order assignment to set up employee access.
Department staff will provide new employee training on how to
use the basic HIS
resources. All employees have their own unique computer sign-
on user name and
access code that bring up all system-related resources to which
they have access.
Before signing on for the first time, employees most
acknowledge reading the company
policies and expectations that relate to the use of the health
information system.
College of Information Systems and Technology
2 College of Information Systems and Technology
Unauthorized use, duplication and/or distribution of the content
39. Admissions, registration, billing, and other administrative
departments have limited
access for specific applications that are required for these
functions.
Occupational Medicine Clinic and other departments have
limited access for shared
patients, such as the ED, and from referrals by the clinic for
ancillary services such as lab
and radiology. This clinic provides injury treatment and other
occupational health
services to AMC employees and other employers.
Gaining access to EMR system:
Gaining access to this system is the same as for the HIS, with
the exception of added
formal basic and departmental-specific training and assessment
requirements. All new
employees and EMR users are required to either attend a class
offered at AMC or have
access to a departmental EMR-designated trainer who has
received advanced
training on the use of the EMR, including training on the
applications and processes
used across the hospital departments and/or to meet specific job
duty requirements of
40. day-to-day departmental operational needs.
Training modules:
Training modules with assessments were developed by AMC
and the EMR vendor, with
oversight by a health care consulting company, to ensure that all
employees are
trained on the system and applications they are required to use.
While in training, employees will be required to complete EMR
training modules and
assessments in their department on their assigned computer
through the AMC intranet.
The training website offers general simulations that are used by
all departments. New
employees and users of new applications are required to learn
and demonstrate
competencies based on successfully completing all assessments.
Once new users are able to master these simulations and
complete end-of-module
assessments with a passing score of 100% in all areas, they will
be shown how to use
customized department functions by the department trainer or
senior staff.
42. generate financial statements required by federal regulations.
This system is also used
by the President/CFO, Chief Executive Officers, Department
Directors, and their
designated administrative and program management support
staff that are involved in
daily operations. They assist with the preparation of
departmental budgets and
program evaluation reports, using the program evaluation and
data analytic tools to
determine if departments and programs are meeting financial,
accounting, and other
related performance expectations.
Training is provided to new users on how to use these tools
upon request. If training is not
available, assistance in running the tools will be provided. The
required analyses should
be generated to enable the departments to analyze reports based
on data collected
to use for submitting reports to leadership to make evidenced-
based decisions about
departments and programs.
Human Resources Information System (HRIS)
43. The HRIS is used to manage hospital policies, procedures, and
compliance
requirements that involve HR. It allows other department heads
and managers that
have HR reporting responsibilities to conduct HR-related
business through the hospital
intranet. It enables organizational department directors to
communicate HR needs and
to submit requests, reports, and performance appraisals.
Employees are able to
communicate needs, respond to online job postings, and to
access the Employee
Health Promotion program website via the Internet, allowing
HR employees to
concentrate on more critical HR actions.
Customer Relationship Management (CRM) Information System
The CRM is used to for multiple purposes.
The first purpose is to build patient loyalty by allowing patients
to interface with the
hospital through the Internet. Patient recommendations,
complaints, and comments
are tracked by the CRM and provide patient satisfaction reports
to senior managers.
45. contacts and company protocols. For those that have after-hours
needs, the protocols
in the CRM are shared with the Emergency Department.
Each department has the ability to restrict access to non-contact
information that can
be stored in CRM. Each department can set up its own database
and choose what to
share with other departments. This typically involves
customized reports, referral
contacts, procedures, and policies that impact authorization for
payment of insurance
claims and services not covered by insurance.
Medical Knowledge Management (KM) Information System
The Medical KM information system is used by doctors and
nurses to access online
medical databases to assist in patient diagnosis and drug
administration. There is also
access to online medical research and online journals and
publications that AMC
subscribes to. Copies of AMC research studies that have been
published are also in the
AMC Medical Library.
The Chief Nursing Officer, Chief Medical Director, and Chief
47. Services
ACME MEDICAL CENTER
I.T. HELP DESK AND TECHNICAL SUPPORT SERVICES
Our primary mission is to provide technology assistance to
Acme Medical Center (AMC)
staff, physicians, and others who are registered users of our
system. The AMC Help Desk
is located in the I.T. Department. The I.T. Department is under
the leadership of the
Director of I.T.
I.T. Help Desk Phone Number: 557-7000
� Staffed 24 hours a day, seven days a week, including holidays
� Answers questions and schedules services provided by the
I.T. Department
Responsibilities of I.T. Help Desk Staff:
� Receive all incoming calls and route calls to the appropriate
I.T. technician
� Return calls in a timely manner
� Provide direction and assistance if the user’s problem is
within the scope,
practice, or knowledge base of the staff member
48. � Follow up with users to ensure that problems/issues have
been resolved
� Maintain the log book of all incoming calls
Responsibilities of I.T. Department Technicians:
� Address I.T. needs within their scope and practice
� Offer phone, email, and remote access support for AMC
technology issues
I.T. SERVICES
Basic Services:
We offer basic services such as AMC-provided iPhone® setup,
facility phone installs, on-
site computer troubleshooting and appointment arrangements,
and network support.
Specialized I.T. Services:
We have specialized I.T. professionals within the I.T.
Department that maintain and
support various technological areas and systems. The hours for
non-emergency services
are 7:00 a.m. – 11:00 p.m. daily.
After Hours- Assistance with emergencies, such as systems
outages and technology
51. Date: Time: A.M. or P.M.
(select one)
User ID:
First and Last Name:
Department:
AMC Phone Extension or Alternate Contact Number:
Requested Service or Problem:
Common Reasons to Contact Technical Support
Hardware Issues
� Computer will not turn on
� Computer screen will not come on
� Operating system will not pull up home screen
AMC Main System and Email Access Issues
� Unable to log on to the network with user name and/or
password
� Need password reset
� Unable to access Intranet to check email
� Problem sending or receiving email
Network Resource Issues
� Unable to print to any networked printer on the computer
� Unable to print to a specific printer ID on the computer
56. Acme Medical Center Organizational Chart: Environmental
Services (EVS)
ACME MEDICAL CENTER
ORGANIZATIONAL CHART: Environmental Services (EVS)
ACME MEDICAL CENTER/ORGANIZATIONAL
CHARTS/NTC409v3_AcmeMedicalCenter_OCExecutiveOfficer
s.pdf
College of Information Systems and Technology
1 College of Information Systems and Technology
Unauthorized use, duplication and/or distribution of the content
59. Copyrights are retained by their owners.
Acme Medical Center Organizational Chart: Food and
Nutritional Services (FNS)
ACME MEDICAL CENTER
ORGANIZATIONAL CHART: Food and Nutritional Services
(FNS)
Food and Nutritional Services provided under
contract by XYZ Catering and Canteen, LLC.
ACME MEDICAL CENTER/ORGANIZATIONAL
CHARTS/NTC409v3_AcmeMedicalCenter_OCLab.pdf
College of Information Systems and Technology
63. Acme Medical Center Organizational Chart: Plant Operations
(POS)
ACME MEDICAL CENTER
ORGANIZATIONAL CHART: Plant Operations (POS)
ACME MEDICAL CENTER/ORGANIZATIONAL
CHARTS/NTC409v3_AcmeMedicalCenter_OCPOST.pdf
College of Information Systems and Technology
1 College of IS&T
65. Acme Medical Center Organizational Chart: Radiology
ACME MEDICAL CENTER
ORGANIZATIONAL CHART: Radiology
ACME MEDICAL CENTER/ORGANIZATIONAL
CHARTS/NTC409v3_AcmeMedicalCenter_OCRespiratory.pdf
College of Information Systems and Technology
1 College of Information Systems and Technology
Unauthorized use, duplication and/or distribution of the content
contained in this document are hereby prohibited without the
69. Location
Boise, ID
Background
Generic Financial has completed the tenant improvements on its
Boise, Idaho office and is
getting ready to formally open its office there. Mary Prince met
with Hugh Generic and
discussed the company's needs. A transcript of the conversation
can be found in the student
area. A formal requirements document and a logical design,
based on Hugh and Mary's
conversation, need to be prepared and approved before work on
the network can
proceed.
Expected Results
A Network Requirements document. A Logical Design for the
LAN.
71. needed for Generic’s planned offices.
(MP) Good morning Hugh. Tell me a little about your company.
(HG) Generic Financial Services is going to be the preeminent
provider of low cost
mortgage services in its region. We will offer mortgages to
homebuyers, specializing in
first time buyers and problem credit clients. We’ll make our
profits by strictly controlling
costs. Rather than having a large staff of brokers and secretaries
to sell financing
packages to each customer, I will keep the staff small and rely
upon technology to let
the customers sell themselves on the mortgages they want.
Customers will need to
enter their own mortgage applications online and approvals or
denials will be sent
electronically. The loan decisions will be made at the home
office by the lending
committee; However, committee members will not always be in
the office and will
need to access the database from wherever they may be on a
daily basis.
(MP) How many offices will there be?
72. (HG) Eight. The first two will open in Boise, Idaho and Sioux
Falls, South Dakota. The Boise
location is the home office.
(MP) Where will the other office be?
(HG) One in Montana, two in Wyoming, two in North Dakota
and one more in South
Dakota in Rapid City.
(MP) How many people will be in the home office?
(HG) To start, three brokers and two admin assistants to handle
administrative issues
company wide.
(MP) How many people will be in the other offices?
(HG) Each office will have 2 – 3 brokers. Each of the brokers
will work on commission
and will provide their own laptop computers. The company will
provide the networks,
Internet access, printers, fax and telephones for each office. In
addition to the brokers,
each location will have an experienced receptionist in the office
from 8am – 5pm
Monday through Friday to open and close the office, greet
clients, answer the phone
74. downtown areas of the selected cities. Being on the ground floor
has a number of
advantages, but, with the right location and lease package, we
would consider a
space on a higher floor of an office building. For example, the
Boise office is already
leased. As the home office, it needed more space since it will
handle the administrative
needs of the whole company, and we’ve got just under 1200
square feet.
Unfortunately, we couldn’t find that much space on the ground
floor in the right
location in the city. We actually ended up occupying two spaces
in the building. On
the ground floor, we’ve got an 800 square foot space where the
brokers will meet the
customers. The last tenant did a beautiful job in finishing the
space – a lot of oak
paneling and hardwood flooring. We don’t want to change a
thing. The administrative
people will work up on the 7th floor in a space that is just under
300 square feet. We’ll
have to figure out some way to connect the admin staff with the
brokers so that we’re
75. not running up and down the stairs or calling back and forth on
the telephone to
exchange information.
(MP) How about the Sioux Falls location?
(HG) We just signed the lease on the Sioux Falls office. It is
900 square feet on the
ground floor in a strip office building. The space is just one
large room right now. The
landlord has given us an allowance for TIs and we’re looking
for someone to help us
with the design layout.
(MP) Do you see any areas in the offices that will be devoted to
specific needs?
(HG) Well, each office will have a file storage area, a
computer/phone area, and
private meeting area for client broker meetings. Depending on
the office size and the
budgets for Tenet Improvements, some of the locations will
have private offices, while
others will have cubes with one or two private meeting rooms.
Each office will also have
a client waiting area, and each of these waiting areas will have
self-serve kiosks with
77. about security. I don’t want to face a lawsuit from a disgruntled
client because the
client’s identity was stolen or even get a letter from a couple
telling us that their
personal information was posted on the Internet. All the
technology that will be
implemented has to be on the leading edge when it comes to
security. We also want
to implement some kind of internal security system so that not
every employee can
access all of the company’s clients’ information. So, security is
very important. We
realize it won’t be cheap to secure our information, but we can’t
spend all our money
on security and not have our other technological needs met. In
addition to technical
security, I am concerned with physical security of the computer
systems, but I don’t
really understand how we can protect our information but still
provide access to clients
in the office. Each office has to have a separate location to keep
all the computers
and other equipment. I am so concerned about the various
security issues because I
78. know that the success of the company will be based on the
clients’ perceptions of how
their personal information is kept private in addition to how
well I can service their
mortgage needs.
(MP) What are the surrounding neighborhoods like?
(HG) The Boise office is in a downtown area of Boise
dominated by different banks.
There are a few trendy restaurants and coffee shops nearby. The
Sioux Falls office is on
the edge of a residential neighborhood. It is along two main
streets that have a number
of insurance companies and mortgage brokers in store front
offices. There are some
coffee shops and a number of fast food restaurants nearby.
There is a hyper market
store about a block away. Both offices are fairly close to
Interstate highways.
(MP) What kind of technology are you envisioning?
(HG) The plan is to have a company website that can be
accessed either from the in-
office kiosks or online that customers can use for self-service
until they can be seen by
79. one of the office brokers. This website will need to have access
to the latest interest
rates, financial calculators and other information that a person
applying for a home
mortgage might be interested in accessing while waiting for
their broker. Each office’s
network should be connected to the home office, but I’m not
sure of the best way to
accomplish this interoffice connectivity. I want to be able to be
in any of the offices
and be able to access the data the same way, no matter which
office I happen to be
in. Another reason that offices’ networks must be connected to
each other is that we
will create our own client database and I want to be sure that
each mortgage
application is stored in a central location so that it can be
reviewed by the committee
wherever we might be. However, I’ve read about what happened
to the companies
directly affected by the 9/11 terrorist attacks in New York and
am concerned with
disaster recovery. We must have some kind of redundancy in
each office. I know that
81. clients that their data is secure when people in other offices
could access my network?
So, unless you can really demonstrate that wireless is secure,
I’m not interested in
hearing about how great wireless can be. I know a little about
databases, so I want to
have a powerful one that can help increase the profitability of
the company while at
the same time be easy for the employees to access the
information they need. The
database needs to be fast enough so that no one is waiting too
long for the computer
to respond with the information needed to answer a client’s
question. Since the
database will contain virtually all the information about the
company and its clients, we
need to have it backed up regularly in case something happens
to it. In addition to the
database, I’m sure that we will have lots of other files and
things that need to be
backed up. I once had a computer crash and lost all my
important files because I
didn’t understand that I was responsible for backing up my data.
Someone once told
82. me that there are two kinds of computer users, those that have
lost data, and those
that will. I guess I’m now a ‘have lost’ and don’t want to have
that experience again. I
think I want to have a website that is connected somehow to the
database. I was
reading on a flight to Boise a few weeks ago just how easy it
can be, but as I continue
to research the topic, I begin to wonder if it makes sense to do
that at all. I have a
sneaking suspicion that if people that enter the data can later
retrieve it, that people
that didn’t enter it could retrieve it as well. For instance, let’s
say a couple goes to an
Internet café and fills out their application online. What would
happen if someone used
that same computer immediately afterwards? Another concern is
hacking. How do we
protect our website from being hacked?
(MP) We’ll figure out a way to protect you. What about Email?
(HG) We’ll need Email, but I want to be sure that someone else
can’t read our
messages. We should have our own Email name; You know –
Hugh [email protected]
83. GenericFinancial.com and our own server to send and receive
our Email. I’ve read
about spam and viruses, so I want to eliminate as much of that
junk as possible, but not
be so restrictive that potential clients send us Email that we
never receive.
(MP) Do you hand any specific hardware needs?
(HG) Well, we’ll need printers, both black and white and color.
I’d like to be sure that
we don’t miss a fax that comes in. I have heard about fax
machines that can be
connected to the network, but don’t understand how that would
work. A guy I golf with
sometimes says the he can actually send a fax without printing a
page and I’m sure
that would save us a bunch of money, both in time and in
supplies. I’ve also seen ads
College of Information Systems and Technology
5 College of Information Systems and Technology
Unauthorized use, duplication and/or distribution of the content
85. has its headquarters in Atlanta, and offices in South Carolina.
The computer guys in
Atlanta can call a user in South Carolina and then make the
mouse move and type on
the computer so that the user in South Carolina feels like a
ghost has haunted the
computer. That sounds like something that could help us, with
the people from XYZ’s
Consulting being able to see what we did wrong and fix it
without us having to pay for
them to come to North Dakota.
THE BIG PICTURE – QUESTIONS
The CEO of MV-Link Productions has hired your consulting
firm to produce a report on this possible breach of contract
case, including recommendations. Use the report writing guide
from the course website. In your analysis of this case include
answers to the following questions:
Q.
Assuming the contract is valid, prepare the following financial
analyses:
a. Prepare a budget of expected minimum revenues under the
contract. Show the sources of revenues from the set of five
films and the fee.
b. What are the general revenue recognition criteria established
under Generally Accepted Accounting Principles (GAAP)
86. c.
How would you apply the GAAP criteria for revenue
recognition to account for the revenues under this contract?
Explain your logic for both realizable and earned.
Note: To the extent that you may recognize any antitrust issues
(which we would not expect) please ignore them for purposes of
this analysis.
In preparing your report remember to review LDC financial
accounting concept 5 (cash flow vs. GAAP income), financial
accounting concept 8 (understanding the timing of revenue
recognition), management accounting concept 5 (understanding
how to budget revenue), and business law concept 1 (offer and
acceptance of contracts; enforcement of contracts: interpreting
the parties’ intent).
MV-Link Productions (MV-Link) is a producer and distributor
of motion picture films. It specializes in action
adventure films popular with males, mostly in the teen and
young adult market. While it has only been in
business for 7 years, it has produced several moneymaking hits
as well as many more minor "B" films
that are shown on cable networks and through video rental
stores.
MV-Link has recently completed the production of five new
films. This set of five films contains one film
(“Kombat Rex”) that marketing research indicates will be a top
box office hit. The other four (KR II, KR III,
KR IV, KR V) are "filler" films that will be bundled with the hit
87. and licensed to theatres for exhibition. To
receive access to the hit, theatres must agree to show all films a
minimum number of times.
In July 2006, MV-Link entered into an exclusive contract with
PACE Theatres, Inc. (PACE), a large
theatre chain with approximately 475 theatres across the United
States. This contract provided in part as
follows:
Agreement: PACE is granted the right, license, and permission
to display the five films listed herein during
the contract period. In consideration of this contract, MV-Link
will receive:
1. $5,000,000, payable $2,500,000 upon contract signature and
$2,500,000 on September 1,
2006.
2. $500 for each film showing in each location.
Contract period: The contract period shall be the six months
commencing on September 1, 2006.
Limitation on screenings: PACE agrees to show Kombat Rex no
more than 42 times per theater and the four
accompanying films (KR II, KR III, KR IV and KR V) no fewer
than 18 times each per theater.
88. Exclusivity: PACE shall have exclusive screening rights during
the contract period. MV-Link acknowledges
that an integral inducement in consideration of the contract is
PACE’s interest in being the sole source,
without competition from other theaters in the market, during
the contract period.
At the signing of the contract, PACE paid $2,500,000 of the
$5,000,000.
PACE sent checks to MV-Link for $2,500,000 on September
1,2006, and $5,462,500 on January 20,
2007, along with an audited statement detailing the number of
showings as of December 31, 2006. The
following is a summary of that information:
Film Number of Showings Amount Due
Kombat Rex 8,550 $4,275,000
KR II-V 2,375 1,187,500
10,925 $5,462,500
In March 2007, MV-Link received a demand notice from PACE
that all monies previously paid were to be
returned or they would file a lawsuit. In their letter, they
enclosed a newspaper clipping from a movie
theatre in Toronto, Canada that was advertising the set of five
films for showing the second week of
February 2007.
89. Required
Write a report using the report writing guide from the course
website.
In preparing your report remember to review LDC financial
accounting concept 5 (cash flow vs. GAAP
income), financial accounting concept 8 (understanding the
timing of revenue recognition), management
accounting concept 5 (understanding how to budget revenue),
and business law concept 1 (offer and
acceptance of contracts; enforcement of contracts: interpreting
the parties’ intent).
Note: To the extent that you may recognize any antitrust issues
(which we would not expect) please
ignore them for purposes of this analysis.
91. Statement of Financial Accounting Concepts
Statement 5. Recognition and Measurement in Financial
Statements of Business Enterprises
Financial Accounting Standards Board
GUIDANCE IN APPLYING CRITERIA TO COMPONENTS OF
EARNINGS
CON5, Par. 78
78. This section discusses the need for and provides further
guidance in applying the fundamental
criteria in recognizing components of earnings. Changes in net
assets are recognized as components of
earnings if they qualify under the guidance in paragraphs 83-87.
Certain changes in net assets
(discussed in paragraphs 42-44 and 49-51) that meet the four
fundamental recognition criteria just
described may qualify for recognition in comprehensive income
even though they do not qualify for
recognition as components of earnings based on that guidance.
CON5, Par. 79
79. Further guidance in applying the recognition criteria to
components of earnings is necessary
because of the widely acknowledged importance of information
about earnings and its components as a
primary measure of performance for a period. The performance
measured is that of the entity, not
necessarily that of its management, and includes the recognized
effects upon the entity of events and
circumstances both within and beyond the control of the entity
92. and its management.48 The widely
acknowledged importance of earnings information leads to
guidance intended in part to provide more
stringent requirements for recognizing components of earnings
than for recognizing other changes in
assets or liabilities.
CON5, Par. 80
80. As noted in paragraph 36, earnings measures the extent to
which asset inflows (revenues and
gains) associated with substantially completed cash-to-cash
cycles exceed asset outflows (expenses and
losses) associated, directly or indirectly, with the same cycles.
Guidance for recognizing components of
earnings is concerned with identifying which cycles are
substantially complete and with associating
particular revenues, gains, expenses, and losses with those
cycles.
CON5, Par. 81
81. In assessing the prospect that as yet uncompleted
transactions will be concluded successfully, a
degree of skepticism is often warranted. Moreover, as a reaction
to uncertainty, more stringent
requirements historically have been imposed for recognizing
revenues and gains than for recognizing
expenses and losses, and those conservative reactions influence
the guidance for applying the
recognition criteria to components of earnings.
CON5, Par. 82
82. The guidance stated here is intended to summarize key
considerations in a form useful for
93. guidance for future standard setting—guidance which also is
consistent with the vast bulk of current
practice. The following paragraphs provide guidance separately
for recognition of revenues and gains
and for expenses and losses as components of earnings.
Revenues and Gains
CON5, Par. 83
83. Further guidance for recognition of revenues and gains is
intended to provide an acceptable level
of assurance of the existence and amounts of revenues and gains
before they are recognized. Revenues
and gains of an enterprise during a period are generally
measured by the exchange values of the assets
(goods or services) or liabilities involved, and recognition
involves consideration of two factors (a) being
realized or realizable and (b) being earned, with sometimes one
and sometimes the other being the more
important consideration.
a. Realized or realizable. Revenues and gains generally are
not recognized until realized or
realizable. Revenues and gains are realized when products
(goods or services), merchandise, or other
assets are exchanged for cash or claims to cash. Revenues and
gains are realizable when related
assets received or held are readily convertible to known
amounts of cash or claims to cash. Readily
94. convertible assets have (i) interchangeable (fungible) units and
(ii) quoted prices available in an active
market that can rapidly absorb the quantity held by the entity
without significantly affecting the price.
b. Earned. Revenues are not recognized until earned. An
entity's revenue-earning activities involve
delivering or producing goods, rendering services, or other
activities that constitute its ongoing major or
central operations and revenues are considered to have been
earned when the entity has substantially
accomplished what it must do to be entitled to the benefits
represented by the revenues. Gains
commonly result from transactions and other events that involve
no "earning process," and for
recognizing gains, being earned is generally less significant
than being realized or realizable.
Business Law concepts
Interpretation of contracts
General rules of construction
Courts look to contracts to determine the parties’ obligations.
Most of this is based on the language of the
agreement, however sometimes there are issues not mentioned
or ambiguously addressed in a contract.
What to do if there is a dispute about a topic not addressed (or
ambiguously addressed) in the contract?
95. Courts follow general rules in construing contracts called “rules
of construction.” Some of these rules are
articulated in cases, some are intuitive but few are codified in
statute. It makes it difficult, sometimes, for
business people to make business decisions. The more you
understand how courts tend to approach
contractual disputes, the more effective you will be at managing
resources. Here are a few rules of
construction that may apply to Adventure Films. Think about
how they affect your analysis of the case.
Use them (cite to specific sources) in your analysis of the case.
Courts seek to preserve, not invalidate agreements
Courts in general try to preserve contracts, even if there is a
flaw in the agreement. There are important
reasons for this: courts want parties to a contract to rely on the
contract. Business would be harmed if
everyone who entered a contract thought that with a sharp
enough lawyer they could find some defect
that would get the contract invalidated. Commerce relies on the
premise that parties will do what they
have agreed to do, and that if not, there will be some remedy at
law. If you need an illustration of this
point, think of any country in which political power, wealth or
corruption mean that getting legal rights
enforced depends on your political clout rather than on the law.
Look at how much foreign investment
gets made in such countries. Look at the overall wealth of the
citizens of such countries. It is not hard to
conclude that the American legal system, despite its flaws,
helps the economy by ensuring that the
judicial system enforces legal rights.
96. This brings up an important point with students studying
business law: there is a tendency to seize on any
contractual defect and conclude that entire agreements are not
binding. This is a serious error. For one
thing, it’s sloppy; sometimes students are concluding that
contracts are not binding in order to avoid
completing their analysis ( e.g. “They didn’t mention xxx!
That’s wrong! There’s no contract!”). Some of it
is naïve: there are few contracts that do not have some
ambiguities; invalidating all of them would mean
that there were virtually no legally binding agreements. Some of
it is well-intentioned but overzealous:
when you first learn about business law even good students
often want to apply it literally. Avoid this
tendency and recognize that only in cases where courts conclude
that the parties never, truly, agreed will
they invalidate a contract based on missing or ambiguous
contractual terms. Courts are not “contract
police” rather “contract enforcers.”
Here are some references that should aid your analysis:
In DeSantis v. Wackenhut Corp., 793 S.W.2d at p. 677, the
court observed that "the most basic policy of
contract law . . . is the protection of the justified expectations
of the parties. The parties' understanding of
their respective contractual rights and obligations depends in
part upon the certainty with which they may
predict how the law will interpret and enforce their agreement.”
“The law does not favor but leans against destruction of
contracts because of uncertainty; it will, if feasible, so
construe agreements as to carry into effect (the) reasonable
intention of parties if that can be ascertained.” Bohman v
97. Berg (1960) 54 Cal 2d 787.
Courts construe a contract’s meaning to be consistent with the
parties’ intention
The central rule of contractual analysis is to interpret based
upon the parties’ intent on entering the
agreement. It is central to legal analysis to recognize that courts
do not enforce agreements based upon
what the judge thinks is fairest, “right” or best. The judge was
not a party to the agreement and his or her
opinion is irrelevant on this issue. Instead, interpret contracts to
most consistently enforce the parties’
reasonable expectations. The judge’s job (and your job in this
assignment) is to figure out what the
parties intended and to interpret the contract consistent with
that intent.
Here is some authority for this proposition:
The contractual meaning “is determined by objective
manifestations of the parties' intent, including the
words used in the agreement, as well as extrinsic evidence of
such objective matters as the surrounding
circumstances under which the parties negotiated or entered into
the contract, the object, nature and
subject matter of the contract, and the subsequent conduct of the
98. parties." Morey v. Vannucci (1998) 64
Cal.App.4th 904, 912.)
“The fundamental goal of contractual interpretation is to give
effect to the mutual intention of the parties.
The mutual intention to which the courts give effect is
determined by objective manifestations of the
parties' intent, including the words used in the agreement, as
well as extrinsic evidence of such objective
matters as the surrounding circumstances under which the
parties negotiated or entered into the contract;
the object, nature and subject matter of the contract; and the
subsequent acts and conduct of the parties.”
1 Witkin Summary of Cal. Law, Contracts (9th ed. 1987) § 684,
pp. 617-618.
“A contract must be so interpreted as to give effect to the
mutual intention of the parties as it existed at
the time of contracting, so far as the same is ascertainable and
lawful.” Cal. Civ. Code § 1636.
Missing or ambiguous terms
Contracts are interpreted as they were apparently intended by
the parties at the time the contract was
created. If the parties’ intent can be determined, courts will
supply missing terms or clarify ambiguities.
They will not, however, insert terms to create an agreement
where none, really, exists.
Here are some relevant references:
“A contract extends only to those things concerning which it
appears the parties intended to contract. Our
99. function is to determine what, in terms and substance, is
contained in the contract, not to insert what has
been omitted. We do not have the power to create for the parties
a contract which they did not make and
cannot insert language which one party now wishes were there.”
Levi Strauss & Co. v. Aetna Casualty &
Surety Co. (1986) 184 Cal. App. 3d 1479, 1485-1486.
“However broad may be the terms of a contract, it extends only
to those things concerning which it
appears that the parties intended to contract.” Cal. Civ. Code §
1648.
“If parties had concluded (a) transaction in which it appears
they intend to make contract, (the) court
should not frustrate their intention, if it is possible to reach fair
and just result, though this requires choice
among conflicting meanings and filling of some gaps left by
parties.” Rivers v Beadle (1960) 183 Cal App
2d 691.
Plain meaning
This is not a trick. It is just common sense. Interpret
contractual language consistent with commonly-
understood definitions and interpretations of its language.
Here is a source for this statement:
"The paramount consideration is the intention of the contracting
parties'. . . as it existed at the time of
contracting, so far as the same is ascertainable and lawful.' This
100. intention must be ascertained from the
words used, after taking into consideration the entire contract
and the circumstances under which it was
made. The words used in a contract must be given their ordinary
meaning, unless there is evidence that
the parties intended to use them in a unique sense or to give the
words some different meaning." Moss
Development, 41 Cal.App.3d at p. 9.