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Accounting News Roundup: Digging into the SEC vs. Big 4 China; Funny Business Around Herbalife; P&G CFO Talks Beards | 01.27.14

Posted on by Caleb Newquist

One Way Or Another: The SEC Versus The Chinese Big Four Firms [Re:The Auditors]
A comprehensive look at the situation including the effect on multinational companies: "[L]ook at the audit of NuSkin, a US-based, US-listed company recently in the news for its troubles with China over its multi-level-marketing business model. News reports put its China revenue at 31% of the consolidated revenue. NuSkin’s final audit report is signed by the PwC firm in Provo, Utah. However, PwC’s mainland China office is, presumably, supporting the audit of a significant portion of NuSkin’s revenue. […] How will PwC Provo and NuSkin get that work done if PwC mainland China is banned?"

Fortress Secrecy – No News Here [Tax Analysts]
Tax Analysts publisher Christopher Bergin writes that in the wake of the IRS exemption scandal, the agency has circled the wagons to an unacceptable degree, "Back in the day, as the saying goes, I often referred to the IRS as Fortress Secrecy, a term meant to describe the agency's obsession with hiding as much of its operations as it can get away with. I am not a casual observer, and I have never seen things this bad. Everything the IRS has done in addressing the exemption scandal leads to just one conclusion: that this agency now believes it is accountable to no one other than itself."

This will probably split the GC audience.

A Spike in Options Trading Before Herbalife’s Stock Fell [DealBook]
Safe to say that Scott London has an airtight alibi. "Last week, before a senator released letters that sent the shares of Herbalife into a tailspin, certain investors were positioning themselves to make money if the stock fell. Trading volume in put options — financial contracts that gain in value as a particular stock price declines — spiked late last week to a level not reached since last February, according to Bloomberg data. Even for a volatile stock like Herbalife, it was enough to make some market experts take notice." 

Six Business Groups Protest Accrual Accounting Proposal [AWEB]
The AICPA is all over this.

Growing beard popularity shaves P&G sales [AFP]
The finest CFO quote you'll read today: "While the incidence of facial shaving is somewhat down, the incidence of body shaving is up, and we can take advantage of that and plan to do that as well."

Posted in ANR

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Private-Share Trade Is Probed [WSJ]
The Securities and Exchange Commission is investigating potential conflicts of interest in the fast-growing market for buying and selling shares of private companies such as Facebook Inc. and Twitter Inc. The move is part of a broadening probe by the U.S. agency, still at an early stage, of the thriving bazaar that has sprung up largely beyond the reach of regulators and traditional securities firms. Trades handled by SecondMarket Inc., SharesPost Inc. and other market makers specializing in privately held shares are conveying eye-popping valuations on some companies while disclosir financial results.

PwC to proactively promote women [Accountancy Age]
The Big 4 firm will implement a “comply or explain” approach, which will ask division leaders to proactively consider women for promotion or explain what the blockers to progress there are. It said that the emphasis will initially fall on achieving proportionate promotion rates at manager and senior manager levels.

Wells Fargo CFO ‘Well Equipped’: Analyst [The Street]
“Not only is Mr. Sloan personable and candid, but also he is very conversant in many key areas of investor focus,” said Morford in a note describing Wells Fargo’s CFO Tim Sloan after meeting with him last week. Morford said that the 10-K for the company should be filed on time next week and that the company said there were no financial or accounting related issues to the sudden retirement of former CFO Howard Atkins.

Robert Herz, Former FASB Chairman, Joins WebFilings as Senior Advisor [Business Wire]
WebFilings, developer of the first and only end-to-end solution for external financial reporting, announced today that Robert Herz, former Chairman of the Financial Accounting Standards Board (FASB), has joined the company as Senior Advisor. “As a forward-thinking accounting industry leader, Bob brings a unique and valuable perspective to our team,” said Matthew Rizai, CEO of WebFilings. “We are extremely excited to leverage his knowledge and experience as we continue to evolve our industry-leading product and service offerings.”

‘Can you hear me now?’ Your cell phone’s state and local taxes are huge! [DMWT]
Nebraska is your big winner with a state and local rate of 18.64%. New York comes in at #3 with 17.78%.

Harry Reid Says Nevada Should Outlaw Prostitution, Gets Bitchslapped by Whores [JDA]
The lede from TLP, “Did you hear the one about the politician and the hookers? Turned out to not be so funny. Maybe that was because he was trying to fuck the hookers and take their money at the same time.”


Emanuel Wins Big in Chicago [WSJ]
Almost five months after resigning as President Barack Obama’s chief of staff to enter this city’s mayoral race, Mr. Emanuel received 55% of the vote with more than 97% of the precincts reporting, more than the simple majority needed to avoid a run-off campaign against second-place finisher Gery Chico. Mr. Chico, a onetime chief of staff to Mayor Richard M. Daley, received 25% of the vote.

Tricia Conahan named Chief Marketing & Sales Officer at Grant Thornton [GT]
“It is exciting to be joining an organization with a renewed focus on growth,” Conahan said. “I am a passionate believer in the discipline of marketing, and the value that it brings to help grow businesses. I am looking to bringing Grant Thornton’s dynamic vision to the marketplace.”

Archstone Looks Likely to Go Public Again [WSJ]
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SEC Homes In on Lehman, ‘Funds of Funds’ [WSJ]
“The Securities and Exchange Commission’s investigation into the collapse of Lehman Brothers Holdings Inc. is zeroing in on an accounting maneuver used to give the appearance that the companyt levels, according to people familiar with the situation.

Agency officials also are probing whether former Lehman executives failed to adequately mark down the value of the huge real-estate portfolio acquired in the securities firm’s takeover of apartment developer Archstone-Smith Trust or to disclose the resulting losses to investors, these people said.

The narrowing probe could move the SEC closer to bringing civil charges related to Lehman’s collapse in September 2008, though a decision doesn’t appear imminent.”

Study Says Directors Favor Themselves, Not Shareholders [FINS]
“A new study found that directors who field whistleblowing claims are likely to discount charges that could threaten their board seats and will assign fewer resources into investigating such claims.

In weighing hypothetical charges, 83 veteran directors at large U.S. corporations said they would allocate 42% fewer resources on average to fraud tips that might ultimately cost them their board seats.”

Dubai World reaches $24.9 billion debt deal [Reuters]
“State-owned conglomerate Dubai World DBWLD.UL on Friday reached a formal deal to restructure around $24.9 billion of liabilities, partly easing recently heightened concerns over the Gulf emirate’s debt woes.

While Dubai World’s agreement with most of its creditors is seen as a positive step for Dubai, the announcement comes just days after a unit of Dubai Holding, the conglomerate owned by Dubai’s ruler, said it will delay repayment on a $555 million loan, the second time it has failed to meet a repayment deadline.”

Huguette Clark’s multi-million-dollar fortune remains in hands of her financial managers [NYDN]
“Millionaire recluse Huguette Clark’s $500 million fortune will remain in the hands of financial managers who are under investigation, a Manhattan judge decided Thursday.

Judge Laura Visitacion-Lewis tossed a request by Clark’s relatives to appoint an independent guardian to oversee her finances and property, including Fifth Avenue’s biggest co-op apartment.

The judge called the family’s concerns about Clark’s health and state of mind “speculative” and “insufficient” to merit wresting control from her lawyer, Wallace Bock, and accountant, Irving Kamsler.”

Control Freak Q&A With Caleb Newquist [Control Freak]
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Trump Offers to Buy Out Islamic Center Investor [WSJ]
“Mr. El-Gamal, founder of SoHo Properties, is one of eight investors who paid $4.8 million for a building two blocks from the site of the Sept. 11 terrorist attacks.

The statement came following reports that real estate mogul Donald Trump was offering to buy one investor’s stake in the property.

In a letter to Hisham Elzanaty, an Egyptian-born Long Island businessman and a major investor in the project, Mr. Trump offered to buy his stake for 25% more than Mr. Elzanaty paid for it.”

Former GE Unit Executive Says He Was Pushed Out for Questioning Accounting [Bloomberg]
“General Electric Capital Services was sued by a former executive who claims he was forced out for questioning the company’s treatment of an asset.

Edward Gormbley, who worked for GE Capital from 2000 until he quit in September 2009, filed his suit today in state court in Stamford, Connecticut. The complaint also names parent General Electric Co. and its chief executive officer, Jeffrey Immelt.

Gormbley said he was punished for challenging the valuation of silicon-maker Momentive Performance Materials, an investment asset. GE Capital overstated Momentive’s value in December 2008 to improve its own balance sheet, he said. Valuing the asset correctly would have reduced ‘GE Capital’s earnings 100 percent,’ in the fourth quarter that year, according to the complaint.”