Accounting News Roundup: Don’t Call HP a Bullet Dodger; Phil Mickelson Is Done Talking Taxes; Hawaii Doesn’t Even Sweat Accounting Errors | 01.22.13

Inside H-P's Missed Chance to Avoid a Disastrous Deal [WSJ]
Days before Hewlett-Packard Co. dived into an $11 billion software deal it almost instantly regretted, it missed a chance to back away. During a call with an H-P delegation, outside auditors for British software maker Autonomy Corp. mentioned that an executive there had raised an allegation of improper accounting at the firm, according to people familiar with the call, who said the auditors added that the allegation was found to be groundless. The H-P executives never passed this mention on to their board or chief executive, one of the people said. Within days of agreeing to buy Autonomy, in the summer of 2011, H-P was looking for a way to get out of it. Before the deal even closed, H-P canned the CEO who pushed it. Then last fall, H-P wrote down the value of the software firm by $8.8 billion, blaming more than $5 billion of that on what it said was improper accounting at Autonomy designed to inflate its revenue and profit. Autonomy's founder denied any wrong accounting.

Stanford’s Former Finance Chief Seeks 4-Year Prison Term [Bloomberg]
Former Stanford Financial Group Co. finance chief James M. Davis is seeking a prison sentence 26 years shorter than the potential 30-year term he agreed to after pleading guilty to his role in a $7 billion investor fraud, citing his cooperation with prosecutors. Davis, 64, the second-highest ranking officer in the financial services empire of Texas billionaire R. Allen Stanford, will ask for four years in prison today when he is sentenced by U.S. District Judge David Hittner in Houston federal court, according to a defense filing in the case. Stanford, 62, is serving a 110-year prison term after being convicted — in part on testimony and evidence provided by Davis — in March of stealing more than $2 billion from investors for personal use. […] He “did not hedge his bets by waiting for a jury verdict against the main conspirator” before agreeing to plead guilty, David Finn, Davis’s lawyer, said in a sentencing memo that asks for a four-year sentence. “To characterize Mr. Davis’s cooperation efforts and assistance to the government as ‘extraordinary’ is an understatement.”

Phil, we have altered the deal. Pray we don’t alter it further. [Tax Update]
Joe Kristan gets it nailed down: "He will be paying a real federal rate, considering the itemized deduction phase-out, of 40.788%.  His California rate will be an insane 13.3%.  That will be deductible on his federal return, so the net combined income tax rate is about 48.662%. But there’s more! Golfers are independent contractors, so they have to pay self-employment taxes. That rate is 3.8% in 2013, but 1.45% can be deducted on the federal return, so the net is about 3.19%.  That gets his rate up to about 51.856%, or so. In 2011, Lefty’s combined rate worked out to about 42.589%.  That means his effective rate increased by about 9.266%.  But that understates it.  Think of Phil Mickelson as a business.  His after-tax profit on a given income level has taken a real hit.  Where after-tax income was about 57.411 cents out of every dollar in 2011, now its about 48.144%.  That means his after-tax income has fallen by about 16% – nearly 1/6.  Don’t think it matters? Try it sometime with your own after-tax income. A 16% cut in margins would be a worry in any business.  Mr. Mickelson is in a business where he can boost his margins by nearly 8% with a moving van.  He’d be an odd businessman indeed if he didn’t give the idea serious consideration." 

No, Phil Mickelson Isn't Retiring Because His Taxes Are Too High [@DarrenRovell via Atlantic]
"Right now I'm like many Americans who are trying to understand the new tax laws. I've been learning a lot over the last few months and talking with people who are trying to help me make intelligent and informed decisions. I certainly don't have a definitive plan at this time, but like everyone else I want to make decisions that are best for my future and my family. Finances and taxes are a personal matter and I should not have made my opinions on them public. I apologize to those I have upset or insulted and assure you I intend not to let it happen again."
 
Phil Mickelson, Stop Whining and Give Thanks for your Good Fortune [Forbes]
Plus, KPMG is probably feeling a little hurt by your lack of confidence.

Higher tax rates on top earners will pinch married couples faster than individuals [WaPo]
U.S. taxpayers with income of more than $200,000 a year will see federal tax rates rise this year on wages and investments. Tax increases will pinch married couples faster than individuals, especially if both spouses work and have capital gains and dividend income, said Joseph Perry, partner-in-charge of tax and business services at the accounting firm Marcum. In the law passed by Congress on Jan. 1, multiple thresholds for higher rates kick in for married couples only $50,000 above where they hit for singles. Married taxpayers with income of at least $300,000 also face limits on the value of deductions and personal exemptions that were reinstated for 2013. “If they’re sending a message, it’s not to be married,” Perry said of U.S. tax policy. “People who are married, working, earning two good salaries, are being penalized.”

Police say accountant embezzles $25,000 from Mount Pleasant meat packing company [MLive]
Stephanie Lynn Lyon, 34, of Mount Pleasant was arraigned on three felony charges of embezzlement of $20,000 or more, forgery and fraud, according to the Isabella County sheriff. Sheriff Leo Mioduszewski alleges she committed the crimes from 2010 to 2012, embezzling a total of $25,835, while working as an accountant. Police say Lyon double-signed and cashed 63 checks during that time, and produced and forged 10 checks.

UH took 7 years to discover $200K accounting error [HNN]
Sometimes you can be too easy going.
 
Michelle Obama Eye Roll: First Lady Not Amused By President's Banter With John Boehner [HP]
In GIF form!

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles

a dog on a sunny beach

Monday Morning Accounting News Brief: Where Are the Ethics?; The SEC is Watching | 6.13.22

Financial Times boldly suggests that because of constant financial scandals accounting programs need to do a better job of teaching students not to screw up. “These scandals have intensified concerns that a poorly developed approach to teaching behavioral, as opposed to technical, skills is reducing ethical standards and professional independence,” writes FT. Meanwhile in Canada, […]