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Accounting News Roundup: Big 4’s ‘Virtuous Circle’; DVA Is Done; Do the Financial Crime? Do No Time | 10.01.12

Big Four audit tenders benefit from ‘virtuous circle’ [Accountancy Age]
A "virtuous circle" that exists for the Big Four is hindering the mid-tier's ability to win FTSE 350 audits, according to the Competition Commission. The commission, which is investigating competition issues in the market for large-listed audits, found that the Big Four's ability to point to an extensive international network and audit engagement partners with relevant experience increases their chances of successfully tendering business.

Odd Debt Rule to Lose Bite [WSJ]
Accounting rule makers are on the verge of rolling back a widely assailed provision that counterintuitively adds to U.S. banks' profits when their debt looks riskier to investors and penalizes them when it looks safer. The provision—known as the debt or debit value adjustment, or DVA—has come under increasing fire as major banks posted quarterly results whipsawed by big gains one quarter and big losses the next as the market value of their own debt fluctuated. Major banks and securities firms have posted almost $4 billion in cumulative DVA gains over the past year, but big DVA losses are expected in the third quarter, including an anticipated $1.9 billion at Bank of America Corp., disclosed Friday. The Financial Accounting Standards Board, which sets U.S. accounting standards, tentatively agreed in June to strip the changes out of net-income calculations, which would prevent the DVA swings from affecting banks' marquee earnings numbers any longer. The board is expected to formally propose the move by the end of the year— none too soon, in the view of some banking observers. "They cannot get rid of this rule fast enough in my opinion," said Chris Kotowski, an analyst with Oppenheimer & Co. J.P. Morgan Chase & Co. Chief Executive James Dimon last year called the rule "one of the more ridiculous concepts that's ever been invented in accounting."

Restoring Criminal Liability for Financial Fraud [GOA]
Grumpies on a Monday morning: "What has happened to our institutions?  Is justice dead in America?  Does the current administration care, or is it just incompetent?"

Payroll Tax Cut Is Unlikely to Survive Into Next Year [NYT]
Regardless of who wins the presidential election in November or what compromises Congress strikes in the lame-duck session to keep the economy from automatic tax increases and spending cuts, 160 million American wage earners will probably see their tax bills jump after Jan. 1. That is when the temporary payroll tax holiday ends. Its expiration means less income in families’ pocketbooks — the tax increase would be about $95 billion in 2013 alone — at a time when the economy is little better than it was when the White House reached a deal on the tax break last year.

Private equity managers fear tax hit [FT]
Private equity fund managers are so worried about changes to the way their income is taxed in the US that some are trying to rewrite agreements with investors to protect themselves against any cut in take-home remuneration. The fears result, partly, from increased scrutiny of the private equity industry, sparked by Mitt Romney’s bid for the White House. Barack Obama’s campaign has tried to portray the Republican candidate’s work at Bain Capital as “vulture” capitalism.

Girl Scout Cookie boxes get design makeover [Reuters]

Girl Scout Cookies, a perennial U.S. snack favorite, will get a new-look package for the upcoming sales season, the organization said on Friday. The new design will showcase five entrepreneurial skills that the $790 million business teaches girls, the Girl Scouts said in a statement. "We have more than 50 million cookie customers across the country, and the cookie box is the most tangible and powerful way for us to communicate directly with consumers," said Girl Scouts of the USA Chief Executive Anna Maria Chávez. The skills that will be displayed are goal setting, decision making, money management, people skills, and business ethics.


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