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September 27, 2023

Accounting News Roundup: FASB Joins New Club; PwC Slips in UK Auditor Ranking; MID Reform Options | 03.19.13

Cyprus Set to Reject Bailout, Citing Tax on Bank Deposits [NYT]
Cyprus’s Parliament is likely to reject an international bailout package that involves taxing ordinary depositors to pay part of the bill, President Nicos Anastasiades said Tuesday, despite a revision that would remove some objections by exempting small bank accounts from the levies. Lawmakers were scheduled to vote late Tuesday on the €10 billion, or $13 billion, bailout. Should the measure fail in Parliament, Mr. Anastasiades and his E.U. partners would have to return to the negotiating table. Analysts have also raised the possibility of bank runs and a halt in liquidity to Cypriot banks from the European Central Bank if the measure did not pass. The bailout plan, negotiated over the weekend, has aroused harsh criticism in many quarters for its unprecedented inclusion of ordinary bank depositors — including those with insured accounts — among those who would have to bear part of the cost.

Calpers Ex-CEO Faces Criminal Charges [WSJ]
The former head of Calpers, one of the world's largest pension funds, was charged with concocting fraudulent documents to help a friend collect millions of dollars in fees from private-equity group Apollo Global Management. The grand jury indictment of Federico R. Buenrostro Jr., who was chief executive of the California Public Employees' Retirement System until 2008, and his friend, Alfred J. Villalobos, are the first criminal charges in a long-running "pay-to-play" case involving the $257 billion retirement system. Pay-to-play cases focus on the sometimes-murky relationships between pension funds and the financial groups that vie to manage their huge pools of money. Previous cases have centered on the role of "placement agents" such as Mr. Villalobos. In exchange for a fee, these agents act as middleman between pensions and private equity with the aim of identifying and vetting the firms charged with managing pension funds' money.

U.S. FASB Accepted into New International Accounting Forum [AT, Earlier]
The trustees of the IFRS Foundation have included the U.S. Financial Accounting Standards Board among the national and regional standard-setters in the new Accounting Standards Advisory Forum, the new group that will advise the International Accounting Standards Board on development of International Financial Reporting Standards. The IFRS Foundation, which oversees the IASB, announced the membership Tuesday of the newly formed ASAF. Inclusion of the U.S. had been in doubt until recently, as the Securities and Exchange Commission has not yet approved the use of IFRS by U.S. public companies. The ASAF is seen as a multilateral group that will include the views of a variety of international standard-setters after the decade-long convergence efforts between FASB and the IASB have still not succeeded in harmonizing IFRS with U.S. GAAP.

PwC falls to third place in auditor rankings [Accountancy Age]
PwC moved down to third from joint second place on the FTSE 250 listing after it lost three clients and was left with 57. However, it was succeeded by KPMG which picked up two clients to give them a total of 62. Deloitte continued to lead the way in first, with Ernst & Young remaining in fourth and BDO standing still in fifth.

Accounting errors may force Harvest Natural to restate results [Reuters]
Harvest Natural said in a regulatory filing that there were errors related to incorrect capitalization of some lease maintenance costs and internal selling, general and administrative costs. The company's cash-flow presentation also had an error and some of its long-lived assets have been impaired, it said. "Additional material weaknesses could be identified," Harvest Natural said in the filing.

How the Taxman Cleared the Dance Floor [WSJ via Tax Update]

In 1944, a new wartime "cabaret tax" went into effect, imposing a ruinous 30% (later merely a destructive 20%) excise on all receipts at any venue that served food or drink and allowed dancing. The name of the "cabaret tax" suggested the bite would be reserved for swanky boîtes such as the Stork Club, posh "roof gardens," and other elegant venues catering to the rich. But shortly after the tax was imposed, the Bureau of Internal Revenue offered this expansive definition of where it applied: "A roof garden or cabaret shall include any room in any hotel, restaurant, hall or other public place where music or dancing privileges or any other entertainment, except instrumental or mechanical music alone, is afforded the patrons in connection with the serving or selling of food, refreshments or merchandise." The tax hit not just swells, but anyone who liked to go out dancing—which in those days included just about everyone who went out at all.

Options to Reform the Deduction for Home Mortgage Interest [TPC]
Who doesn't like options?

Minnesota Governor Drops Reform Parts of Tax Reform Proposal [TF]

See-through pants problem causes Lululemon recall [CNN]
Athletic apparel maker Lululemon Athletica will be hurt by a large recall of black yoga pants that were unintentionally see-through. "The ingredients, weight and longevity qualities of the pants remain the same, but the coverage does not, resulting in a level of sheerness in some of our women's black Luon bottoms that falls short of our very high standards," the company said in a statement late Monday. Lululemon said the recall, which amounts to 17% of all women's pants sold in its stores, will cause shortages of this staple and have a significant impact on its financial results.

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