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Accounting News Roundup: Diamond Foods’s Lawsuits; PwC’s ‘Honest Mistake’; Norquist’s Next Debate | 11.29.11

Posted on by Caleb Newquist

American Airlines Parent Files for Bankruptcy [NYT]
The parent company of American Airlines said on Tuesday that it has filed for bankruptcy protection, in an effort to reduce labor costs and shed its heavy debt load. American’s parent, the AMR Corporation, was the last major airline in the United States to resist filing for Chapter 11 in an effort to shed contracts, a move that analysts said left it less nimble than many of its competitors. AMR intends to operate normally throughout the bankruptcy process, as previous airlines have done. The company doesn’t expect the restructuring to affect flights or frequent flier programs.

Diamond Foods says more lawsuits may come [AP]
Diamond Foods Inc., which is in the midst of an internal accounting probe and facing several related lawsuits, says it expects more suits will be filed against the company in the future. The company, based in San Francisco, is looking into allegations of improper accounting for crop payments to walnut growers. Diamond said earlier this month that its $1.5 billion acquisition of chip company Pringles from Procter & Gamble Co. would be delayed due to the investigation. It is slated to be Diamond’s biggest acquisition yet, more than tripling the size of its snack foods business.

Facebook Said to Plan IPO at $100B Valuation [Bloomberg]
Facebook’s $100 billion valuation would be twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. and other backers. The IPO is far enough away that the details may change, said Lise Buyer, principal of the Class V Group, an IPO advisory firm. “It’s far too early to accurately predict where the valuation will be on deal day,” Buyer said.

PwC defends ‘honest mistake’ in JP Morgan audit disciplinary [Accountancy Age]
PwC fought for minimal sanctions yesterday after it admitted audit failures in the case of JP Morgan Securities Limited.
Appearing before a disciplinary panel, it argued JPMSL shortcomings were to blame as it omitted to flag up non-segregation of client assets for the seven years to 2008, not systemic audit failure. PwC committed an “honest error” as it “strove to test segregation and reconciliation of client assets”, argued Tim Dutton of law firm Herbert Smith. Dutton said the firm’s penalty should be in the region of £500,000 to £1m, saying it would be “appropriate to keep the fine at the lower end due to mitigating reasons”.


Is the Judiciary about to Give the SEC a Backbone?* [Accounting Onion]
Tom Selling’s old stomping grounds got the business from Judge Jed Rakoff.

Grover Norquist v. Ross Douthat on the Taxpayer Protection Pledge [TaxProf]
We’re still waiting for a real match up.

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Accounting News Roundup: Hans Has His Work Cut Out; Paladino Trickster Owes Back Taxes; Rand Paul Wants IRS Abolished | 10.13.10

EC proposes mandatory rotation of auditors [Accountancy Age]
“The European Commission is proposing a radical restructure of the audit industry including a multinational regulator, mandatory rotation and caps on advisory fees.

Some proposals, audit to draw up living wills or a detailed “long form report” for regulators or hive off their audit arms, under the measures raised in a new green paper”

18,000 Tagging Errors in XBRL Filings So Far [CFO]
“Companies that have filed data-tagged quarterly and annual reports appear to be handling the task fairly well, even as the overall number of errors continues to pile up.

About 500 of the largest companies were required to use XBRL, or eXtensible Business Reporting Language, to tag data in their financial statements for periods ending on or after June 15, 2009. As of June 15 of this year, approximately 900 more companies had to do so, and the first group of filers additionally had to tag all amounts and tables in their financial-statement footnotes.”

IASB a tightrope walk for Hans Hoogervorst [FT]
“The appointment of Hans Hoogervorst, 54, as chairman of the International Accounting Standards Board raises two big questions

First, does it matter that he is not an accountant? Second, will his elevation lessen the likelihood that the US will adopt the IASB’s IFRS accounting rules in place of its own?

The lack of professional qualifications were not a concern for Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales.

‘I don’t think that it is an issue,’ he said on Tuesday, citing the simultaneous appointment of Ian Mackintosh – a veteran accounting standards-setter with enviable professional credentials – in a supporting role as IASB vice-chairman.”

Some IRS servers down during crucial filing week [AP]
Move along, nothing to see here.

Team Paladino’s Roger a ‘dodger’ [NYP]
“Roger Stone, a key adviser to Republican gubernatorial candidate Carl Paladino, owes Uncle Sam more than $400,000 in unpaid taxes, The Post has found.

The Internal Revenue Service filed a $405,035 lien for unpaid income taxes against the consultant — one of politics’ most notorious dirty tricksters — and his wife, Nydia, last fall in Dade County Circuit Court in Florida, records show.

The debt makes Stone the second high-profile Paladino adviser to run afoul of the taxman. Paladino’s campaign manager, Stone protégé Michael Caputo, recently admitted to a federal tax debt topping $52,000, although he says he’s paid back all but $9,302.”


Rand Paul supports replacing income tax with higher sales tax, eliminating IRS [LCJ]
“Republican U.S. Senate candidate Rand Paul said Tuesday the federal tax code is a ‘disaster,’ and he wants to replace the income tax with a 23 percent sales tax on goods and services.

Paul said he supports changing the federal tax code to get rid of the Internal Revenue Service and would vote to repeal the 16th Amendment that created the federal income tax.

‘The federal tax code is a disaster no one would come up with if we were starting from scratch,’ Paul said in a written statement distributed by an anti-tax group and verified by Paul’s campaign. ‘I support making taxes flatter and simpler. I would vote for the FairTax to get rid of the 16th Amendment, the IRS and a lot of the control the federal government exerts over us.’

Paul refused to answer questions on the issue during a campaign stop in Louisville Tuesday afternoon. At a previous stop in La Grange, he told reporters he’d also like to see the U.S. Department of Education eliminated.”

The Year of Magical Thinking [TaxVox]
“California is just always in a budget mess. Indeed, the state has faced operating shortfalls – or gaps between inflows and outflows – in every year since 2002.

But this year, it would seem that state lawmakers and outgoing Governor Arnold Schwarzenegger have really outdone themselves. They busted through last year’s tardiness record by enacting a budget 100 days into the new fiscal year. Like last year, they balanced the books – but with a combination of spit and polish and pixie dust. “

Accounting News Roundup: Obama’s Budget Proposal; Davos Wraps Up; FINS’ Top Tax Blogs

• Obama Offers $3.8 Trillion Budget With Focus on Boosting Jobs [Bloomberg]
The $3.8 trillion budget calls for an additional $100 billion in stimulus spending and would increase the federal deficit to $1.6 trillion. “The $1.6 trillion deficit forecast for the current year represents 10.6 percent of the U.S. gross domestic product, making it the biggest by that measure since World War II, according to administration figures.”

The most impressive part is that the WH blew all the other forecasts out of the water, “The White House deficit projection exceeds other forecasts. The Congressional Budget Office has forecast this year’s shortfall at $1.35 trillion. The median of 39 analysts survey by Bloomberg News is for $1.37 trillion this year and $1.10 trillion next year.” Look! We’re going to dig the hole way deeper than anyone thinks!

As we mentioned last week, the spending freezes that will dig us out of said hole that were proposed last week would aim to cut that deficit to less than $1.3 trillion in 2011 and $828 billion in 2012; just in time for the election.


• Leaders in Davos Admit Drop in Trust [DealBook]
After all the chocolate, blondes, and awkward interviews, the other thing that is pretty obvious is that no one knows what the hell is going to happen, “the one certainty seemed to be continued uncertainty.” It’s nice to be confident about something.

Plus, everyone pretty much agrees that if you’ve got even a sliver of power in government or business, you are not to be trusted. Ordinarily this wouldn’t be a news flash, what with the near financial apocalypse and all but Tim Flynn said we were moving towards the green light of trust. Is this not the case? Did TF just figure, “I’m out of here, I’ll just say whatever I feel like.”? One can’t help but wonder if he’s shooting from the hip a little bit. Oh well; all in all, good times. Good Davos times. See you next year (right?)!

• The Top Five Tax Accounting Blogs [FINS]
For those of you that are inclined towards the tax side of the house, FINS presents its top five picks for wonky tax goodness that you should be reading if you’re not already. TaxProf Blog, The Tax Policy Blog and Don’t Mess with Taxes are three that we are intimately familiar and a couple we just discovered: Tax Watch and A Taxing Matter.