20% of US Firms Cook the Books During Earnings: Report [Yahoo]
In an anonymous survey of CFOs last year, the study found that at least 20% of companies are "managing" earnings and using aggressive accounting methods to legally alter the outcome of their earnings reports. […] Of the 20% of companies that manipulated their earnings to hit a target, Graham says, a surprising 40% did so to the downside, not the upside. Why would companies downplay their numbers? To pad and improve future quarters' earnings. "It does cause you to pause a little bit and think how should an investor interpret earnings numbers when they hear those announcements," says Graham.
Romney Refines Message on Taxes and Abortion [NYT]
Mr. Romney inched closer to filling in details of his sweeping tax cut plan, which Mr. Obama says would give huge breaks to the wealthy and raise the burdens on the middle class. Although Mr. Romney has insisted that he would lower tax rates with no loss in revenue by closing loopholes, he has never specified which ones, opening him to charges that he would do away with popular deductions for mortgage interest and charitable donations. But in an interview with CNN, Mr. Romney said he would protect those deductions, at least for the middle class. The problem is that doing so would make it harder to collect enough tax revenue, deepening the federal budget deficit, independent budget analysts say.
Facebook Fought SEC to Keep Mobile Risks Hidden Before IPO Crash [Bloomberg]
When Facebook Inc. (FB) filed its proposal Feb. 1 to go public, it touted the effectiveness of ads linked to customers’ friends, citing research from Nielsen, the audience-counting company. Barbara Jacobs, an assistant director for corporation finance at the U.S. Securities and Exchange Commission, was skeptical, as she and her staff vetted the filing to ensure Facebook had disclosed all material information to investors. The claim appeared to be drawn from marketing materials, not a Nielsen study, she wrote to Chief Financial Officer David Ebersman, 42. She gave him an ultimatum: Produce the study and provide Nielsen’s consent for use of the data — or don’t use it, she wrote to Ebersman on Feb. 28. Facebook dropped the reference after initial resistance. The incident was part of a two-and-a-half-month volley of messages among SEC officials, Ebersman and Facebook’s law firm Fenwick & West LLP. A dozen letters, published a month after the May 17 IPO on the SEC’s website, depict a management team hesitant to disclose information and still guessing at even rudimentary aspects of its business just weeks before the company held the largest-ever technology initial public offering. Many of the issues raised by the SEC and now unnerving investors were foreshadowed in the then-private correspondence between the SEC and Facebook.
FASB has reached some tentative decisions under its massive overhaul of financial instrument accounting that a company would present gains that materialize when its credit risk rises in “other comprehensive income,” a component of equity, rather than net income. An entity that accumulates gains and losses in OCI as a result would recognize those gains or losses through net income when it eventually settles the liability. […] “A company can be deteriorating in terms of its financial results but still be booking gains because the value of its debt is declining. So if historical debt on the balance sheet is trading down in price, it creates the illusion of a gain.” […] “There's still a lot of discussion on this.”
Marginal Tax Rates Matter More than Average Tax Rates [TaxVox]
Teasing over flatulence leads to deadly fight [WOIO]
Police say a 16-year-old girl is dead and another 16-year-old girl is in police custody. Officials say the girls were fighting around 8 p.m. Wednesday at 4769 Walford Road in Warrensville Heights. According to witnesses the victim was teasing the suspect because she passed gas. One thing led to another and fisticuffs began flying. Witnesses also tell 19 Action News that several adults stood around and watched the whole thing go down, including the victim's stepfather. But by the time he intervened, it was too late. Shaakira Dorsey collapsed once the fight was broken up. EMS rushed her to the hospital, where she died.