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December 7, 2022

Accounting News Roundup: Inversion Battles; Interim CEOs Managing Earnings; A Back Door Into China for PCAOB? | 11.19.15

Treasury Department Plans Anti-Inversion Tax Rules This Week [WSJ]
Jack Lew is determined to put a stop to inversions and this time around, the Treasury is focusing on "earnings stripping" which is when companies "load up their U.S. operations with deductions and effectively push profits to low-tax countries." Last year, Treasury warned that any inversions would be targeted with new earnings stripping rules and any would applied retroactively to September 2014, putting several in-process deals in jeopardy. This includes the Pfizer and Allergan deal which would be the largest inversion to date.

Interim CEOs Are Prone to Inflating Earnings [CFO]
Much like accounting talent, interim CEOs who "engage in considerably more earnings manipulation" are more likely to be promoted, according to a study. The difference, of course, is that the promotions interim CEOs receive usually drop the "interim" which could result in some long-term problems. To prevent earnings management, the study suggests, "Having several directors with finance or accounting backgrounds," which sounds like a boring board of directors (i.e. no Bono or other corporate conscious celebrities) and, therefore, a prudent move.

Gucci and the PCAOB [China Accounting Blog
Paul Gillis says that the PCAOB and Chinese regulators "are stuck" after their latest impasse but he sees hope in a court case involving Gucci and counterfeiters. Records from the Bank of China have been subpoenaed in the matter and the bank won't budge. If it plays out in favor of Gucci, the PCAOB could have a new path for inspections.

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