Author: Caleb Newquist

Founding editor, Going Concern.

KPMG Suggests Toronto Let the Lawn Get Out of Hand a Bit, Wait Longer to Shovel Snow to Cut Some Spending

The City of Toronto needs some help with ideas of how to cut some spending in their budget. STAT. Enter KPMG. They have to find savings where they can and sometimes that means making suggestions that may not go over so well. For example, those perfectly manicured lawns you see around the city? That’s due to a weekly grass cutting regimen. And guess what? It’s gotta go:

The report […] says weekly grass cutting may not be necessary except for “high-use surfaces” such as playing fields. Public works chair Councillor Denzil Minnan-Wong recently complained that a wet spring had grass and weeds growing out of control on city sites and called for more grass cutting.

Can you imagine if the City of New York let the grass go for an extra few days? You can just imagine the outrage. Anyone with a park view would be calling up 411 to complain that they can see “weeds” and “that jungle of a lawn” from their veranda on the 20th floor. “Absolutely shameful,” they’d say. Not sure if Toronto’s residents are so hung up on those sorts of details but it stands to reason that there are at least a few citizens who are meticulous about the city’s lawns.

Anyway, KPMG had another suggestion:

KPMG says the city could wait for more than five centimetres of snow before clearing parking lots and pathways, although there would be increased risk of “slip and fall claims.”

Of course Canadians are little tougher when it comes to the snow, so a couple more inches of snow is probably NDB. But with the offset of increased “slip and fall claims” this could be a net zero effect.

But the best savings idea of all? Those zoos and “farm attractions” that your kids love so much? Those should probably go too:

“Consider elimination of the zoo and farm attractions . . . Some zoo and farm attractions could be closed, however, these are enjoyed by many Toronto residents,” the report states.

Happy families out on a Sunday be damned! There’s a fiscal crisis to be averted! The city still has to decide whether to implement these suggestions but if they do, KPMG will have crying children to answer to. Ones that aren’t employees.

Close small zoos and Riverdale Farm, consultant suggests [Toronto Star]

Accounting News Roundup: Facebook’s Value; Yankee Fan’s Loot; San Diego’s Cats | 07.14.11

Is Facebook Worth $100 Billion? [WSJ]
The Palo Alto, Calif.-based social network was valued at $15 billion in October 2007 when Microsoft Corp. invested in the company. By this January, Facebook commanded a $50 billion price tag when Goldman Sachs Group Inc. led a $1.5 billion funding round in the company. Today, transactions of Facebook stock on private marketplaces value it at about $84 billion. Some people believe that if Facebook goes public next year, it will trade at a $100 billion valuation, more than the market capitalizations of Hewlett-Packard Co. (currently at $74 billion) and Amazon.com Inc. (at $9g>US board changes swaps accounting for local govts [Reuters]
The board that sets accounting standards for state and local governments on Wednesday changed some financial reporting requirements for swaps and other hedging instruments the governments use. The Governmental Accounting Standards Board said that “deferred outflows” and “deferred inflows” of resources should be reported separately from assets and liabilities on financial statements.

Raters Put U.S. on Notice [WSJ]
Moody’s Investors Service said it was reviewing the government’s top Aaa bond rating for a possible downgrade, citing the “rising possibility” that the government’s $14.29 trillion borrowing limit won’t be raised soon enough to prevent the U.S. from running out of money to pay its bills. In addition, ratings agency Standard & Poor’s privately has told lawmakers and top business groups it might cut the U.S. credit rating if the government fails to make any of its expected payments—including Social Security checks—even if it makes all its debt payments, people familiar with the matter said.

Fan Who Returned Ball Is Reaping Rewards [WSJ]
On Wednesday, the 23-year-old from Highland Mills, N.Y., was guaranteed at least a $50,000 donation, given a 2009 World Series ring, and got an offer to have his taxes covered should the IRS not consider the items Lopez received Saturday gifts. In case there are still some contrarians who believe Lopez didn’t make the right decision, Topps announced Lopez will also have his own baseball card. “It’s an incredible feeling,” Lopez said yesterday at Modell’s Sporting Goods in Times Square, his newfound public relations team not far from his side. “Never ever would I have expected this, so it’s a cool thing.”

ConocoPhillips to Split Into Two Businesses [DealBook]
ConocoPhillips said on Thursday that it would break itself into two companies, spinning off its refining business to shareholders by the first half of next year. ConocoPhillips would hold onto its higher-margin exploration operations, and would seek acquisitions to expand that business.

Small Firms Defend LIFO [In Charge/WSJ]
Known as last-in, first-out – or LIFO – the strategy is used by businesses of all sizes to reduce taxable income by deducting the most recent cost of goods from sales. Since newer goods added to inventories tend to be more costly than older ones, the result gives the appearance of lower earnings, especially during periods of high inflation. In practice, most businesses prefer to sell older inventory items first, before they lose their value or become obsolete. Rolling back the strategy, which has been used for decades, would raise more than $60 billion in tax revenue over 10 years by increasing the tax liability of manufacturers, wholesalers and retailers nationwide, according to the administration. It has proposed repealing LIFO from the tax code since 2009.

White House threatens veto for bill defunding Wall Street reform [The Hill]
The Office of Management and Budget (OMB) issued a statement Wednesday saying senior advisers would recommend the president veto an appropriations package for financial services and general government if it made it to the president’s desk. The legislation was approved down a party-line vote by the House Appropriations Committee. Among a litany of problems it identified with the package, OMB warned that the $19.9 billion package does not provide sufficient funding to the Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), or the new Consumer Financial Protection Bureau (CFPB).

EU’s Barnier says won’t budge on accounting rule [Reuters]
The European Union won’t give the green light yet to a new accounting rule that could ease fallout from the euro zone’s sovereign debt crisis on banks, a top EU official said on Wednesday. “I do not believe this will be the first solution to the problems we face in Europe at the moment,” EU Internal Market Commissioner Michel Barnier told a webcast meeting in New York. The International Accounting Standards Board (IASB), under pressure from policymakers at the height of the financial crisis, has eased its “fair value” or mark-to-market rule that was known as IAS 39.

Cat Owners Hiss at Licensing Proposal [NBC SD]
“So now you have Animal Control being your tax collector,” says Sandee Gilbert, the owner of a 1-year-old Cornish Rex male named Nike. “And as a tax collector, you’re going to accrue a tremendous amount of cost trying to find the owner of that cat.”

Grover Norquist Is Adequately Prepared for Anyone Who Might Try to Burn Washington, D.C. to the Ground

In case you haven’t been paying attention, GOP Taskmaster Grover Norquist takes his Taxpayer Protection Pledge very seriously. So serious in fact that not even a conservative stalwart like Tom Coburn has come under repeated attacks from Norquist and Americans for Tax Reform. So serious that not even our grandmothers’ lives will be spared were terrorists to demand that we raise taxes 1% on the highest earners.

Norquist’s steadfastness has managed to get under a lot of people’s skin including people who thinks he’s a little cuckoo, Democrats and even some guy at Deloitte.

This, understandably, has made Norquist a little paranoid. If someone were able to infiltrate ATR HQ with an army of ninjas, collect all the signed pledges and throw them into an incinerator, how could he continue holding the entire Republican party by their flag-wrapped testes? There would be no tangible proof that these sacred documents were, in fact, signed in front of two witnesses (as is required). Worry not, fiscally frugal readers, Grover is far too smart for that. As the Washington Post reports, GN has taken the necessary precautions to avoid such a catastrophe:

“I keep the originals in a [secret] vault, in case D.C. burns down,” said Norquist, referring to the pledge that his organization asks politicians to sign, vowing to “oppose any and all efforts” to raise taxes. “When someone takes the pledge, you don’t want it tampered with; you don’t want it destroyed.”

So bring your sissy Democrat political operatives, your ink bombs, your pledge-sniffing dogs. You’ll have to do nothing less than sic Jack Bauer on Grover if you want to get your mitts on those pledges. And even if you do, don’t think your grandmother won’t pay the price.

Grover Norquist, the anti-tax enforcer behind the scenes of the debt debate [WaPo]

(UPDATE) Comp Watch ’11: Early Returns Are in at KPMG

From the mailbag:

How about an open thread for KPMG 2011 comp discussions? Sit downs are happening this week. I’m a senior, Midwest, 13% salary increase, $3K bonus.


It seems early for comp discussions at the House of Klynveld but none other than the memo from Johnny V. and Keizer Söze stated that they were happening “later this month.” Our tipster speculated as to the motivation:

In the interest of getting people to not quit, they moved up discussions this year. The salary increases are finalized. The bonus amounts are projected, but they have stated that they are conservative projections.

Okay, then. Feel free to add if you’re planning on deferring your Early Career Investment Bonus or taking the money and GTFO (if you make it to May 2013, that is).

UPDATE:
The latest from an auditor in New York:

I have my comp discussion tomorrow and I’ve heard good things (16.4% and up)

Keep us updated.

Comp Watch ’11: Regional CPA Firms

As you well know, compensation is a popular topic of conversation round these parts. A lot of the discussion revolves around the Big 4 and second-tier firms like Grant Thornton, McGladrey and BDO. For whatever reason, we rarely receive information from those working at regional firms. This led to a recent plea from a reader:

Please keep posting salary info, especially from mid-size firms, and what raises look like so I can see what I am really worth/not worth.

So take this as a call for you regional boys and girls to cough up your comp details for all the world to see. Right now since we don’t have specific details for specific firms, we’ll ask that you identify your firm along with other pertinent details (location, job title, raise, bonus) or email us and we’ll update this post.

If you’re wondering if your firm falls into the camp of “regional” if it’s not a Big 4 firm or one of the three we listed above, then consider your firm (for the sake of simplicity) “regional.” This would include Moss Adams, CBIZ/MHM, Crowe Horwath, BKD, Plante & Moran, et al. That’s wonderful if your firm has a “expansive international network to best serve our clients” but nobody gives a damn about that and I’m not going to split hairs here. If you’re still not sure, just post your information and hopefully the comments will self-regulate. Fire away.

UPDATE:
One addition from the mailbag:

Regional firm headquartered in [the Dixie]. I work in the [small Dixie town] office. I’m a second year (soon to be starting 3rd year) audit Manager. Base comp is $70,000 and based on my recent good annual evaluation will be getting an 8% bonus.

Keep it up, regionals. The more specific the details, the better.

(UPDATE 2) News Corp. Appears to Be a Big Fan of Offshore Tax Havens

Sure, GE may have the “best tax law firm” in house but the boys and girls working for Rupes seem to have a few tricks of their own. David Cay Johnston reports:

News Corp. has 152 subsidiaries in tax havens, including 62 in the British Virgin Islands and 33 in the Caymans. Among the hundred largest U.S. companies, only Citigroup and Morgan Stanley have more tax haven subsidiaries than News Corp., a 2009 U.S. Government Accountability Office study found.

News Corp. had nearly $7 billion permanently invested offshore in 2009, money on which it does not have to pay taxes unless it brings the money back to the United States. Meanwhile, it can use that money as collateral for loans in the United States, where interest paid is a tax-deductible expense.

This and other tax planning strategies result in a 20% tax rate for the company. And not a single phone hacked!

[via Reuters]

UPDATE:
Via NPR’s The Two Way news blog, Reuters has posted this statement:

Please be advised that the David Cay Johnston column published on Tuesday stating that Rupert Murdoch’s U.S.-based News Corp made money on income taxes is wrong and has been withdrawn. News Corp’s filings show the company changed reporting conventions in its 2007 annual report when it reversed the way it showed positive and negative numbers. A new column correcting and explaining the error in more detail will be issued shortly.

As of now, Johnston’s post remains unchanged and what I blockquoted above doesn’t seem to be in dispute but the situation appears to be fluid.

UPDATE 2:
Here’s a portion from Johnston’s new column:

Readers, I apologize. The premise of my debut column for Reuters, on News Corp’s taxes, was wrong, 100 percent dead wrong.

Rupert Murdoch’s News Corp did not get a $4.8 billion tax refund for the past four years, as I reported. Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion.

For the first time in my 45-year-old career I am writing a skinback. That is what journalists call a retraction of the premise of a piece, as in peeling back your skin and feeling the pain. I will do all I can to make sure everyone who has read or heard secondary reports based on my column also learns the facts and would appreciate the help of readers in that cause.

Johnston goes on to explain in detail how the error occurred. He also states that a number of the facts originally reported, including the number of News Corp. subsidiaries in tax haven (that we blockquoted above), remain.

Accounting News Roundup: News Corp’s Tax Rate; A Tepid Defense of Auditors; LIFO on the Chopping Block? | 07.13.11

Debt Talk Mired, Leader for G.O.P. Proposes Option [NYT]
From the White House and Congress to financial centers, pessimism spread on Tuesday about the prospects of a debt-limit deal between President Obama and Republicans, prompting the Senate Republican leader to propose a “last-choice option” that piqued the administration’s interest but angered conservatives in his own party. The leader, Senator Mitch McConnell of Kentucky, said a bipartisan budget-cutting deal is probably out of reach, making it unlikely that Republicans would approve an increase in the government’s debt limit by Aug. 2. To prevent default, he proposed that Congress in effect empowe the government’s borrowing limit without its prior approval of offsetting cuts in spending.

News Corp pays 20% tax in US [FT]
News Corp’s political influence, which has ruptured dramatically in the UK in the past week, has not come as a result of its contributions to government coffers. Its latest 10-K statement showed that although the corporate tax rate in the US is 35 per cent, News Corp’s effective tax rate last year was 20 per cent. The company earned $2.5bn in profits and still managed to receive a tax benefit.

Senate Bill Seeks to Raise Revenue by Closing Tax Havens [NYT]
A bill introduced by Carl Levin of Michigan and Kent Conrad of North Dakota would tighten rules that allow hedge funds and corporations in the United States to skirt federal taxes by opening shell companies overseas. The measure would also change the I.R.S. regulations that allow traders of credit-default swaps to avoid paying federal taxes on many transactions that begin in the United States. And to help tax collectors track down hidden assets overseas, the proposal would empower the Treasury Department to ban any foreign bank that refused to cooperate with the I.R.S. By closing the loopholes, the plan could bring the Treasury as much as $100 billion a year, according to various estimates cited by Mr. Levin.

CFOs Having Second Thoughts on Capital Investments [CFOJ]
More than 40% of the 78 CFOs polled in the last two weeks of May said they would rather keep their cash and stay liquid than invest it. Respondents projected that capital spending would increase by 10.7% over the next year, less than the 11.8% forecast they gave in the previous quarter.

China frauds: In (partial) defense of the auditors [Bronte Capital]
I’m guessing audit firms will gladly take a partial defense from someone who isn’t a law firm that represents them.

PwC Will Answer For Centro But Judge Slams Directors First [Forbes]
PwC’s latest problems are down under.

FASB Tackling Private Company Accounting [CFOJ]
The Financial Accounting Standards Board took a step forward in developing modified GAAP for private companies on Monday, a move a main advocate of the standards found encouraging. The accounting standard setter announced that it had completed an initial assessment of the differences in the way private company financial statements are used by lenders, investors and others. In its announcement, FASB said that it would continue working towards creating a framework for private-company GAAP, and is seeking additional input on the issue.

Watchdog Proposes Dodd-Frank Standards for Broker-Dealer Audits [Bloomberg]
Accounting firms would have to consider how much risk their clients take when auditing brokerage firms under rules proposed by the industry’s new watchdog. The proposal from the Public Company Accounting Oversight Board comes a month after the nonprofit corporation established an inspection program for auditors of broker-dealers under terms of the 2010 Dodd-Frank financial reform act. “It would require auditors to use judgment to identify and focus on matters that are most important to the customer- protection objectives,” said PCAOB Chairman James R. Doty, in a statement.

Rush to Defend Tax Rule on Inventory and Profits [NYT]
One of the biggest revenue-raisers proposed by President Obama in negotiations with Congress is what he describes as an arcane change in the tax treatment of business inventories — things like steel, groceries and oil. But however complex the details, the effect of the change would be substantial, and in pushing for it Mr. Obama has kicked a hornet’s nest. Lobbyists from companies of all sizes are swarming around Congress to kill the proposal, which would prohibit the use of an accounting technique known as last in, first out, or LIFO. The technique is used to determine the cost of goods sold, and therefore the income earned, by a company.

Mitch McConnell Has Given Up on President Obama

Mr. McConnell said he concluded after the latest negotiations that the administration had “expressed a fundamental unwillingness” to agree to significant spending cuts.

“But after years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is unattainable,” Mr. McConnell said in a Senate floor speech. [WSJ]

About 100,000 Tax Preparers Sorta Forgot Those Identification Number Rules Went into Effect This Year

For those of you that haven’t nailed down the CPA yet, hopefully you’re not amongst those receiving nastygrams from the IRS for not complying with the new ID requirements.

And, on behalf of the thousands of tax preparers who did comply with the new rules, Doug Shulman doesn’t appreciate your apathy, “The vast majority of federal tax return preparers complied with the rules. We owe it to the compliant tax preparers to make sure that everyone is on a level playing field.” [Bloomberg]

Everyone Is Going to Have to Accept the Fact That the Guy Who Caught Derek Jeter’s 3,000th Hit Is Going to Pay Some Taxes

As you may have heard, Derek Jeter hit a home run for his 3,000th hit on Saturday and it has resulted in fanfare that usually follows noteworthy accomplishments by media darling sports superheroes-cum-ladykillers.

What also has become news is tught the baseball. Sure Christian Lopez has over a hundred grand in school debt but since he’s a stand-up guy, he gave the ball to DJ because “it rightfully belonged to Jeter.” Also, if Lopez had kept it, everyone in the Bronx would have hunted him down like Osama bin Laden.

Anyhoo, after catching the ball, Lopez was whisked away by security to meet with Yankee President Randy Levine, who said, “What do you want?” Answer:

[T]he Yankees gave Mr. Lopez four Champions Suite tickets for their remaining home games and any postseason games, along with three bats, three balls and two jerseys, all signed by Jeter. For Sunday’s game the team gave him four front-row Legends seats, which sell for up to $1,358.90 each.

The Times rang up Paul Caron who reminded everyone that when Oprah gave her audience cars back in ’04, they all incurred taxes and Lopez would be no different. The Times then breaks down the value of the loot:

On SportsMemorabilia.com, an auction site, baseballs signed by Jeter were being sold for up to $600, jerseys for close to $1,000 and bats for $900.

The tickets to the 32 remaining home games (after Sunday) have a combined face value of $44,800 to $73,600, according to the team’s Web site. The tickets could be worth a lot more if the Yankees play deep into October. Steven Bandini, a tax partner at the accounting firm Zapken & Loeb, said that if the items were valued modestly at $50,000, they would probably carry a tax burden of about $14,000.

Elie Mystal, editor of our old sister site Above the Law wrote me, “[Taxing the memorabilia/tickets] [is] the kind of thing that makes people hate the Government.” Elie’s statement struck me as odd for a couple of reasons: 1) He is unabashed Mets fan and I would expect him to wish nothing but bad luck on Jeter, Lopez and the entire Yankee organization after this overt jerking off by media; 2) He is also an unabashed liberal which means that he should love the government and by virtue, love taxes. Not because taxes are lovable like puppies or grandmothers but because they build roads, fund public schools and go to pay salaries for government employees (that includes lawyers, accountants, engineers and whole bunch of people that aren’t IRS agents).

The items have value. Sorta like cash. Cash that is deposited into your bank account when your employer pays you for performing average work at your job. That cash gets there only after your employer has withheld taxes from your paycheck. Lopez was handed these tickets and memorabilia on a pinstriped platter. FREE. OF. TAX. By all accounts, he doesn’t have the income to purchase those items. If he did, he would have already paid taxes on that income. Simple.

Of course some (who are obviously unapologetically biased) might argue that these items were gifts and not taxable:

“The legal question of whether it is a gift or prize is whether the transferor is giving the property out of detached and disinterested generosity,” [Columbia Law] Professor Graetz said. “It’s hard for me, not being a Yankee fan, to think of the Yankees as being in the business of exercising generosity to others, but there’s a reasonable case to be made that these were given out of generosity.”

Right. Gifts. Gifts are what people give you when you get married. Gifts are what you give your friends when they move to the suburbs because you’ll never see them again. Gifts are what you give your friends’ (who moved to the fucking suburbs) kids because if you show up empty handed, you look like a complete dick.

These items are not gifts. The Yankees wanted the ball, Levine asked Lopez what he wanted and he told them what items would do the trick. TA-DA, we’ve got a deal. Besides, I’m guessing if Christian Lopez is the kind of guy to hand over the ball that was Jeter’s 3,000th hit, he isn’t too caught up thinking about the tax consequences of falling bassackwards into some tickets and priceless (to a Yankees fan, anyway) memorabilia.

UPDATE: Standup guy status CONFIRMED:

“Worse comes to worse, I’ll have to pay the taxes,” he told the Daily News on Monday. “I’m not going to return the seats. I have a lot of family and friends who will help me out if need be. “The IRS has a job to do, so I’m not going to hold it against them, but it would be cool if they helped me out a little on this.”

Returning Jeter’s Big Hit: No Good Deed Goes Untaxed (Perhaps) [NYT]
Christian Lopez, fan who handed over Derek Jeter’s historic 3,000th-hit ball, will owe IRS thousands [NYDN via DB]

Bonus Watch ’11: KPMG Officially Rolls Out “Early Career Investment Bonus” Program for Senior Associates

Last month we told you that KPMG was kicking around the idea of loyalty bonuses for senior associates. Today we bring you the good news that the firm has officially announced the “Early Career Investment Bonus” which more or less amounts to a loyalty bonus.

This news was brought to Klynveldians this morning by John Veihmeyer and Henry Keizer (full memo on page 2). Let’s take a look at what the boys had to say:

Here’s how it works: If you are a current CSD senior associate with a 1, 2, or 3 rating you will be awarded $4,000 to be paid on May 15, 2013, provided you are employed by the firm on that date��������������������ut it gets better. By December 31, 2011 (just prior to the earnings period), you can elect to defer that $4,000 award for one year or two years and watch it grow:

• Defer the bonus for one additional year and receive $8,000 in May 2014
• Defer the bonus for two additional years and receive $12,000 in May 2015

And it gets better still because next year the cycle starts all over again. And, the following year, it starts again! So a typical first-year senior can look forward to three ECIB cycles with the opportunity to “layer” up to $36,000 in total bonus payments by the end of the last cycle. Alternatively, participants who are eligible for multiple ECIB enrollment cycles can choose different deferment options for each cycle, giving them theopportunity to customize the timing and amount of their ECIB award to meet their own needs or particular life events, like a down payment on a new home.

Obviously the catch here is that you’ll have to endure the next few years of your life within the House of Klynveld. But to that end, it seems like a halfway decent opportunity. Some might see this as a suicide mission but if you do in fact make it to May 15, 2015, that’s $12,000 in your pocket. John and Hank even gave us a nice example:

As this example shows, it will take a pretty huge commitment from anyone looking to score all three of the cycles for the big payout of $36,000. SIX. YEARS. AWAY. I won’t even begin to try and tell you what can happen in that time frame. Obama will have finished his second term by then (assuming re-election, obv). Countless people you know who are gigantic losers will get married, have kids and then probably get divorced. Facebook (and many people on it) will be dead. I’LL BE ON THE CUSP OF MY 40s. Get it? This isn’t exactly around the corner, people.

All told, this is a pretty progressive idea put out by KPMG and it seems better than the Above and Beyond awards which were a total flop.

So HoK, what say you? Got any career moves planned in the next two years or you sitting tight for the $12k? Anyone feel like the firm will take the opportunity to guilt those that don’t defer the bonus? Does anyone know if this in addition to any annual incentive comp? Discuss.

KPMG Loyalty Bonus