Accounting News Roundup: Ugh, Revenue Recognition; Ex-Deloitte CEO Appreciates Convergence Effort; Video Game Tax Breaks | 12.12.12

Autonomy spurs questions on looming accounting overhaul [Reuters]
The scandal at Autonomy, a UK software group bought last year by Hewlett-Packard Co, has some accountants wondering about the wisdom of new, global standards in the pipeline that would change how companies account for revenue. "Revenue recognition" is the most common type of corporate book-cooking. The Autonomy scandal, though still murky, allegedly involves a great deal of overstated revenue, or how much money was coming into the company from customers. That allegation has been leveled by HP, which said last month it overpaid for Autonomy and accused it of "serious accounting improprieties." Autonomy has rejected such allegations and said HP is looking for "scapegoats." The dispute comes as accounting standard setters grapple with new standards for recognizing revenue. Some accountants fear these standards, set for completion by mid-2013, could mean a step backward in fighting accounting abuses.

CEOs break with GOP on rate hikes [OTM/The Hill]
In an about-face, the CEOs of the Business Roundtable said they now believe any agreement to avoid the tax increases and spending cuts of the “fiscal cliff” must include a combination of revenue increases, spending cuts and entitlement reforms. “We understand that raising revenue has to be done with rates,” said David Cote, vice chairman of the Roundtable and chairman and CEO of Honeywell. The executives said that, after weeks of talks on Capitol Hill and in the White House, they have come to believe that tax increases are the “only way to get to a reasonable compromise,” an outcome that is “more important than sticking to any ideological view,” Cote said.

Why The Fiscal Cliff Is Boring Washington To Death [BuzzFeed]
“People are sick of it,” one longtime operative said of the various episodes of brinkmanship that have been the hallmark of the 112th Session of Congress.

IFRS Foundation Trustee: Don’t wave white flag on cooperation [JofA]
IFRS Foundation Trustee James Quigley said in an interview that the current convergence projects need to be finished soon, but that the IASB’s focus on the nations that use its standards should not come at the expense of continued cooperation with the United States. Quigley also said the convergence process needs to be appreciated for its progress in moving IFRS and U.S. GAAP closer together, rather than being criticized for the differences. “If the ambition is a single set of high-quality, globally accepted, and, in my view, principle-based standards, we’re closer now than we were five years ago,” said Quigley, a former global chief executive officer of Deloitte Touche Tohmatsu Limited. “And five years from now, we’re going to be closer again. And the capital markets and investors will be better for it.”

PwC names new managing partner for Raleigh office [WRALT]
Laura Robinette is the name.

HSBC Mexican Branches Said to Be Traffickers’ Favorites [Bloomberg]
HSBC Holdings Plc (HSBA)’s Mexican branches had become so well-known to drug traffickers as the place to launder proceeds from illicit sales that cartels began using special boxes to speed transactions, U.S. prosecutors said. From 2006 to 2010, the Sinaloa cartel in Mexico and the Norte del Valle Cartel in Columbia moved more than $881 million in proceeds through HSBC’s U.S. unit, said Lanny Breuer, assistant attorney general for the U.S. Justice Department’s criminal division. Breuer, along with U.S. Attorney Lorretta Lynch in Brooklyn, New York, announced yesterday the bank had agreed to pay at least $1.9 billion to settle money laundering probes. “These traffickers didn’t have to try very hard,” Breuer said at a press conference in Brooklyn. “They would sometimes deposit hundreds of thousands of dollars in cash in a single day into a single account using boxes designed to fit the precise dimension of the tellers’ windows in HSBC’s Mexico branches.”

Video Game Tax Breaks in the UK [TF]
The Tax Foundation is critical of film tax credits for a variety of reasons – they're wasteful, ineffective, undermine tax neutrality, and so forth. In addition to the economic arguments, there are also free speech concerns – some states require films to portray them in a positive light to be eligible for the credit, for example. They use the tax code to regulate content. Other forms of media and entertainment besides film get similar treatment, and video games are no exception. The latest example of this trend is the UK government's proposal of a particularly byzantine "cultural test" to ensure that British video games are sufficiently British. It's based on a complicated "points" system where different amounts of points are awarded for doing things that the British government approves of. In addition to receiving up to 16 points for producing and creating the game within the UK, you can also get 1-4 points depending on how much of the game is set in the UK and another 1-4 points depending on how many British characters you have; you can also get points for using certain languages and contributing to the "enhancement of British culture." If you get to 16 points, you win! That is, you get a big tax break.