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Accounting News Roundup: Romney’s Tax (or Penalty?) Conundrum; Olympus Ordered to Pay Back Taxes; The Future of IFRS Post-Kroeker | 07.05.12

Posted on by Caleb Newquist

Rate Scandal Set to Spread [WSJ]
A day after abruptly resigning amid a mushrooming scandal over interest-rate manipulation, former Barclays PLC chief Robert Diamond on Wednesday was assailed by British lawmakers for the bank's actions, in a preview of the scrutiny likely to lie ahead for other big lenders that are under investigation. Barclays last week agreed to pay $453 million to settle U.S. and British authorities' allegations that the British bank tried to manipulate the London interbank offered rate, or Libor, which is the benchmark for interest rates on trillions of dollars of loans to individuals and businesses around the world.

Lie More, as a Business Model [Economix/NYT]
On Monday, Robert E. Diamond Jr., the chief executive of Barclays, one of the largest banks in the world, was supposedly the indispensable man, with his supporters contending that he was the only person who could see the global megabank through a growing scandal. On Tuesday, Mr. Diamond resigned, and the stock market barely blinked. In fact, Barclays stock was up three-tenths of 1 percent. As Charles de Gaulle supposedly remarked, “The cemeteries are full of indispensable men.”
 
Romney's Tax Confusion [WSJ]

If Mitt Romney loses his run for the White House, a turning point will have been his decision Monday to absolve President Obama of raising taxes on the middle class. He is managing to turn the only possible silver lining in Chief Justice John Roberts's ObamaCare salvage operation—that the mandate to buy insurance or pay a penalty is really a tax—into a second political defeat. Appearing on MSNBC, close Romney adviser Eric Fehrnstrom was asked by host Chuck Todd if Mr. Romney "agrees with the president" and "believes that you shouldn't call the tax penalty a tax, you should call it a penalty or a fee or a fine?" "That's correct," Mr. Fehrnstrom replied, before attempting some hapless spin suggesting that Mr. Obama must be "held accountable" for his own "contradictory" statements on whether it is a penalty or tax. Predictably, the Obama campaign and the media blew past Mr. Fehrnstrom's point, jumped on the tax-policy concession, and declared the health-care tax debate closed.

San Diego Accidentally Set Off All Its Fourth Of July Fireworks at Once [AW]
Folks in San Diego witnessed what was either the worst Fourth of July fireworks celebration — or the absolute best — when a technical malfunction caused all of their pyrotechnics to go off at the same time. The annual Big Bay Boom extravaganza began and ended in spectacular fashion when an inadvertent signal set off the explosions about five minutes early and caused the entire 18 minute show to take place in about 15 seconds. Confused spectators waited around for what they thought was going to be the rest of the show, but were sent home and told the show (that was supposed to be choreographed to music) was canceled. 

Olympus ordered to pay back £40m in taxes [Accountancy Age]
Tokyo's regional taxation bureau has ordered Olympus to pay back about ¥5bn (£40m) that it owes in back taxes and penalties from its 2008 purchase of British medical equipment maker Gyrus Group. The bureau told Olympus to pay the liability, which is linked to a ¥15bn advisory fee the company claimed it received in relation to the acquisition of Gyrus.

 
What the Chief Accountant's Resignation Means for the Future of IFRS in the U.S. [Accounting Onion]
Even the most ardent IFRS supporter will recognize that the timing of Mr. Kroeker's resignation leaves little doubt as to the reason: that he should be spared the final indignity of the SEC's inevitable retreat from IFRS adoption. It was the idée fixe of his three-year tenure, but it quickly devolved into an exercise in damage control with as little as could be said about IFRS from the SEC, the better. Sad to say, but failed IFRS convergence is Mr. Kroeker's only legacy.

Joey Chestnut Downs 68 Hot Dogs To Win Sixth Straight Nathan’s Hot Dog Eating Contest [Deadspin]
And you think your meat sweats are bad.

Posted in ANR

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UBS Hit by $2 Billion in Unauthorized Trades [WSJ]
UBS AG was rocked early Thursday by its disclosure that a rogue trader racked up about $2 billion in losses, an announcement that came hours after British police arrested a man on suspicion of fraud. A person familiar with the matter said the man arrested is Kweku Adoboli, a London-based trader on UBS’s exchange-traded-fund desk in London. British police confirmed that they arrested a 31-year-old man in London on “suspicion of fraud by abuse of position” at 3:30 a.m. Thursday, but declined to name him.

E&Y faces probe on Anglo Irish Bankhref=”http://www.ft.com/intl/cms/s/0/e28c7832-ded4-11e0-a228-00144feabdc0.html#axzz1Y1fs9Tqq” target=”_blank”>FT]
Ernst & Young faces a fresh threat to its reputation after an Irish accounting regulator said it would hold a disciplinary hearing to examine E&Y’s auditing of Anglo Irish Bank, a lender that had to be rescued by the Irish government in 2009. Already contesting a US lawsuit over its vetting of Lehman Brothers’ accounts, E&Y’s handling of the Anglo Irish audit has been challenged in three key areas by a special investigator hired by the Chartered Accountants Regulatory Board. The Irish arm of E&Y on Wednesday said it would defend itself vigorously, saying it “fundamentally disagrees” with the decision to initiate a formal disciplinary process.

SEC officials ‘lawyering up’ [WaPo]
Under intense scrutiny from congressional critics and a probing inspector general, current and former Securities and Exchange Commission officials have been lawyering up, sometimes at their own expense. The practice reflects the highly charged atmosphere at the SEC and one of the costs of government service when investigations can put careers, reputations and more on the line. It goes all the way to the top.

The Last Posting [CEO Insights]
BDO’s Jeremy Newman signs off.

50 Fantastic Accounting Blogs [OAD]
Apparently there are 49 others.

How Hollywood Accounting Can Make a $450 Million Movie ‘Unprofitable’ [Atlantic]
Return of the Jedi, no less.


FAF Group Plans Changes in Accounting Standard-Setting [AT]
A trustee working group at the Financial Accounting Foundation plans to release its proposals in the next few weeks for changing the structure and process of the Financial Accounting Standards Board’s oversight of standards for private companies and nonprofits. Teresa Polley, president and CEO of the Financial Accounting Foundation, which oversees FASB and the Governmental Accounting Standards Board, indicated the proposals for structural changes at FASB should be out by the end of September or early October.

Groupon Back on Track for Its I.P.O. [DealBook]
Groupon is planning to put its initial public offering back on track even as markets remain rocky. After postponing presentations to potential investors early this month, the online coupon giant is now aiming to go public in late October or early November, according to people briefed on the matter. That would mean that Groupon could embark on its investor roadshow by the middle of next month, these people said.

Accounting News Roundup: Microsoft Says Financial Reporting Model ‘Broken’; Average Tax Rate for Top Earners Fell to 20-year low in ’07; U.N. Climate Chief to Join KPMG | 02.18.10

• Financial reporting based on bygone era, Microsoft says [Accountancy Age]
Softie’s Technical Accounting Director Bob Laux says that the financial reporting model is waaaaayyyyy behind the rest of the world in providing relevant information. In a letter to the IASB, Mr. Laux describes the broken model:

“In essence, we have a financial reporting model largely based on a manufacturing economy and the industrial age, while the economy has moved to the information age and the financial reporting model has failed to change accordingly,” he said.

He also said that arcane accounting rules, creative accounting to meet analyst expectations, etc. are all ‘symptoms of a bigger problem – a broken financial reporting model.’

This is probably the most poignant example of the “historical financial reports are of limited use” argument that we’ve ever heard. No one uses historical financial statements to make decisions about investing anymore. Sure there are fundamentals that you can derive from them but ultimately you have outdated information that’s part of a large compliance exercise and in this day and age, few people (including Microsoft, apparently) have little use for that.


• Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data [Tax.com via Bloomberg]
If you’re wealthy (Chris Rock definition) then you’ll be happy to know that your taxes during 2007 were the lowest they had been in 20 years, according to statistics provided by the IRS.

The top 400 earners paid an average effective tax rate of 16.6% during the ’07 while in 1993, the average effective rate was 29.4%. KA-ching. Now before you rich haters get all worked up, there is another way to see this data:

Bill Ahern, director of policy and communications for the Tax Foundation, a Washington research group that advocates lower taxes, said the 2007 data doesn’t reflect the current economic circumstances.

“In a good year like 2007, it’s not surprising to see that the owners and managers of the nation’s largest firms made a fortune,” Ahern said. “Notice that two-thirds of their 2007 income was in capital gains, which have dropped like a rock since then.”

Regardless of how you feel about the widened gap, it’s not a stretch to say these facts will be exploited as populist pandering during the upcoming election cycle, as Democrats see their popularity slipping.

• U.N. Climate Chief to Resign [WSJ]
Yvo de Boer will be resigning his position with the United Nations to join KPMG as an adviser on climate and sustainability as well as working with several universities on the issue.

“It was a difficult decision to make, but I believe the time is ripe for me to take on a new challenge, working on climate and sustainability with the private sector and academia,” said Mr. de Boer, who has led the U.N. Framework Convention on Climate Change as its executive secretary since September 2006…

“I have always maintained that while governments provide the necessary policy framework, the real solutions must come from business,” he said in a statement.

Plus the money is probably good. Pretty impressive for KPMG to bag such a high profile dude on a still-emerging issue. Seems that KPMG et al. are making a seriou push into climate change as the IFRS and XBRL opportunities are slow to develop.