Accounting News Roundup: Google’s Bermuda Vacation; Autonomy’s Lynch Still Waiting for HP’s Call; Accountant Wants Twinkie | 12.10.12

Posted on by Caleb Newquist

Google Revenues Sheltered in No-Tax Bermuda Soar to $10 Billion [Bloomberg]
Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show. By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011. The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.

I believe in innovation except in accounting , say Autonomy's Mike Lynch [Telegraph]

“I understand why they did a write off, I understand why they wanted to get it into that [accounting] year, but the reality of the situation is that we and, I understand, Deloitte are very comfortable with it.” Mr Lynch added that he “absolutely rejects” the claims being made by HP, but appeared relaxed and was able to muster some humour despite the cloud hanging over his reputation. “From our point of view it’s just wait and see what they’ve got to say….but I can tell you one thing, Meg is not on my Christmas card list this year,” he joked.
 
Autonomy’s Lynch Hasn’t Heard From HP in Accounting Row [BBW]
“We haven’t heard anything from anybody,” Lynch said in an interview with Bloomberg News at a conference in London today. “It’s a very strange way of doing things, but we’d love to hear more.”
 
How could HP find a $5bln gap in Autonomy’s value? [Reuters]
Given what it now believes about Autonomy’s profitability and growth, HP is effectively saying it would have paid a little more than half the sticker price for the Cambridge-based company. The writedown outstrips the deal’s $4.6 billion premium over Autonomy’s market value at announcement. Autonomy doesn’t have much in the way of hard assets or outstanding invoices, so the charge can’t relate to a sudden revaluation of kit or the failure of existing customers to pay their bills. The last balance sheet shows just $43 million of plant and equipment, and “accounts receivable” – customer debts – of $330 million: 0.4 percent and 3 percent of the purchase price respectively. Even if, say, half of accounts receivable proved suspect, that would only make up 3 percent of the mega writedown. So the charge must reflect a reassessment by HP of the future cash flows it will obtain from the business. HP now thinks these are worth a lot less than it thought: smaller and growing less quickly.
 
Deutsche Bank Fair Value Fakeout Didn’t Prevent Backdoor Fed Bailout [Re:The Auditors]
FM: "The argument pushed by some columnists, and the bank itself, is that 'all’s well that ends well' and the end justifies the means. Deutsche Bank survived without a German bailout and that’s a good thing. The global financial system was saved and investor confidence was maintained. Let’s 'den Mist hinter sich bringen'."
 
Weatherford Seen Target After Accounting Lapses [Bloomberg]

Weatherford International Ltd. (WFT) is shaping up to be a takeover target with accounting issues that wiped out half its market value on the verge of being resolved. The world’s fourth-largest oilfield services company has slumped 53 percent since March 2011, when it disclosed income- tax errors and weaknesses in its internal controls. The decline left Geneva-based Weatherford valued last week at 5.1 times its estimated 2013 earnings before interest, taxes, depreciation and amortization, a cheaper multiple than 90 percent of similar- sized peers in the oil and gas services industry, according to data compiled by Bloomberg.
 
High Earners at Fannie, Freddie Draw Scrutiny [WSJ]

An inspector general's report is bringing renewed scrutiny to the pay levels of hundreds of senior managers at Fannie Mae FNMA 0.00% and Freddie Mac FMCC +1.00% who earned more than $200,000 last year, a time when Congress threatened to sharply cut the pay of rank-and-file employees by putting the firms on federal wage scales. The report from the inspector general for the Federal Housing Finance Agency, slated for release on Monday, looked at the 2011 take-home pay for some 2,000 senior but nonexecutive employees. While executive pay at Fannie and Freddie has received close examination, figures for the next-highest earners haven't previously been disclosed. The report found that 333 employees at the "vice president" level had median pay of $388,000, meaning half were paid more and half were paid less. Some 1,650 employees at the "director" level had median pay of $205,300. Those 2,000 employees account for roughly one-sixth of the workforce.
 
CORRECTION [WSJ via Felix Salmon]
Peter Schiff's Dec. 7 op-ed, "The Fantasy of a 91% Top Income Tax Rate," included some faulty data due to a misreading of IRS tax tables. In 1958, an 81% marginal tax rate applied to income of $140,000 and the 91% rate at $400,000 for married couples, which would correspond to income levels about eight times higher today. The article misstated the income thresholds and the comparison to income today. In the same year, roughly 10,000 of the nation's 45.6 million tax filers had income subject to a rate of 81% or higher. The number is an estimate and is inexact because the IRS tables list the number of tax filers by income ranges, not precisely by the number who paid at the 81% rate. The original article said the number of such filers was 236.

Massachusetts accountant submits handwritten Hostess bid [NYP]
A 59-year-old Massachusetts accountant has submitted a “bid” for the maker of Twinkies, Ho Hos and Wonder Bread — offering to buy the operation in a letter written to CEO Gregory Rayburn and the judge who will oversee the bankruptcy auction. “I’ve been looking for a business to buy for a long time but do not have the capital,” Donald Sheridan, of Wellesley, Mass., told The Post yesterday. […] “I’ve come to the conclusion that bankruptcy proceedings have become nothing more than a means to employ stupid lawyers and stupid judges instead of being the means to teach stupid people hard lessons in stupid management,” Sheridan wrote.

Police: Man stabbed by Westmoreland Co. woman for taking last beer [WPXI]
Vanessa Robinson is facing charges after investigators said she stabbed James Gallone when tried leaving her Hempfield Township apartment last Thursday. Police said Robinson attacked him because she was angry that he took the Colt 45 beer from her home. Gallone was treated for non-life-threatening injuries.

 

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U.S. Audit Watchdog to Ramp Up Enforcement, New Chairman Says [Bloomberg]
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Happy Valentine’s Day: Itemizers can finally file taxes [CNN]
On Monday, the Internal Revenue Service will begin accepting itemized tax returns, after having pushed back the process due to Congress’ delay finalizing the tax code this year. That delay — during which the IRS reprogrammed its processing systems — meant that if you itemize deductions on Form 1040 Schedule A, you weren’t able to file your taxes earlier than Feb. 14.

Maule: The Tax Consequences of Congressional Sleepovers [TaxProf Blog]
Do Congressmen Who Sleep in Their Offices Receive a Taxable Fringe Benefit?. Citizens for Responsibility and Ethics in Washington thinks so. In a press release summarizing a letter to the Office of Congressional Ethics, CREW concludes, “[U]nder the Internal Revenue Code, members who sleep in their offices are receiving a taxable benefit.”

The FASB Could Rescue the Financial System – But It Won’t [Accounting Onion]
Memo to Leslie Seidman.

How many years should you get out of PC’s? [AW]
Software drives hardware….or, is it the other way around? It changes in terms of which one is the driver. Regardless, it seems advances in both are slowing down a bit. Useful life on computers seems to be getting longer, which is good for CPA firm budgets. While users may want a new, sleeker, thinner laptop, the fact is a 3-4 year old machine should serve most accountants very well.


Attention, Virginia: Your tax deadline is still April 15 [CPA Success]
Apparently there’s no Emancipation Day in Virginia.

House Members Create Bipartisan CPA Caucus [JofA]
Reps. Brad Sherman, D-Calif., and Michael Conaway, R-Texas, the caucus’s inaugural co-chairs, announced the group’s creation on Wednesday. The representatives said another main goal of the caucus is to provide input on issues being debated by Congress on which CPAs have particular expertise, including budgeting and fiscal issues.

Nokia Siemens Networks Names Marco Schroter CFO [Dow Jones]
Telecom equipment maker Nokia Siemens Networks Monday named Marco Schroter as its new financial chief, succeeding Luca Maestri who will join Xerox Corp (XRX). Schroter, a 47-year-old German, was previously chief financial officer at logistics company Schenker AG and at German semiconductor maker Infineon Technologies AG (IFX.XE). His appointment is effective March 14.

Fiesta Bowl hires criminal defense lawyer [AP]
Officials at the Tostitos Fiesta Bowl have retained a high-profile Southern California attorney specializing in representing individuals and organizations involved in state and federal criminal investigations. The hiring of Nathan J. Hochman comes as federal and state investigators continue looking into the bowl group’s financial and political dealings.

Energy Drink Ingredients May Pose Risk to Children, Study Says [Bloomberg]
Energy drinks like Red Bull and Monster Energy have levels of caffeine that may be harmful to children who consume them often, a study showed. Some of the ingredients in the drinks are understudied and not regulated, according to a review of previous research and surveys in the March issue of the journal Pediatrics. Children with diabetes, mood disorders and heart, kidney or liver diseases may have reactions including heart palpitations, seizures, cardiac arrest or even death, the authors said.