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December 8, 2022

Accounting News Roundup: Inversions Can’t Stop, Won’t Stop; SCOTUS Won’t Hear PwC Case; Lots and Lots of Leases | 01.26.16

Tyco Merger Will Shift Johnson Controls’ Tax Liability Overseas [NYT]
Treasury tried to slow the pace of inversions late last year with more rules to discourage them, but what the rules can't and will never do is prevent a foreign company from acquiring a US company:

Johnson Controls, which introduced a device that could control room temperature some 130 years ago, has agreed to combine with Tyco. With the deal, Johnson Controls will relocate its headquarters from Milwaukee to Cork, Ireland, where Tyco is domiciled and where corporate taxes are lower than in the United States.

The move, known as an inversion, will enable the combined entity to save at least $150 million in annual tax payments, the companies said in announcing the deal on Monday.

Now that it's 2016, inversions will incite even greater political rage than they have in the recent past. Hillary Clinton says she has "a plan to 'block deals like Johnson Controls and Tyco, and place an exit tax on corporations that leave the country to lower their tax bill,' " and Bernie Sanders said that Tyco and Johnson Controls are "corporate deserters." I think it'd be helpful to remember that the US taxes companies at US rates for income earned abroad and most countries don't do that. It's possible that President Clinton or President Sanders or President Trump will try to change that but if they don't, they shouldn't expect companies to stop moving to domiciles with friendlier tax rates.

U.S. top court declines to review PricewaterhouseCoopers case [Reuters]
SCOTUS declined to hear the case of PwC, who has been fighting former employees "who took lump-sum retirement payments between 2000 and 2006." The plaintiffs say that the firm broke the law when they set vesting terms that were unrelated to retirement age:

PricewaterhouseCoopers has been fighting claims that its plan deprived certain workers of "whipsaw payments," which guarantee that participants who take lump-sum payments once they retire receive the full value of their accounts. The U.S. Congress eliminated mandatory whipsaw payments in 2006.

The accounting firm's pension plan required workers to achieve five years of service prior to vesting. The Employment Retirement Income Security Act mandates that employees be fully vested in pension plans once they reach "normal retirement age," though companies have latitude to define that term and it does not have to be the same age for every employee.

The workers suing PricewaterhouseCoopers had more than five years of service and say they were short-changed because they received lump-sum payments of only the cash balance of their retirement accounts without the additional amount from proper actuarial calculations.

The Big Number: $593B [WSJ]
According to LeaseAccelerator, Inc., that's the amount of lease obligations for the largest 100 companies in the US. Walgreens Boots Alliance has the largest amount coming on, $33.7 billion, but the company seems chill:

A spokesman for Walgreens said it is planning for the new rules, which would have a “material impact on our financial position.” It is evaluating any effect on its results if the rules are passed as is, he said. The change wouldn’t affect its cash position. 

Previously, on Going Concern…
An interview with Facebook controller Matt Banks. And on Open Items: Why would you usually not want someone on your engagements?

In other news:

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