Author: Caleb Newquist

Founding editor, Going Concern.

Accounting News Roundup: Amazon vs. California Over Sales Tax; Petty Bickering Over Tax Overhaul; Millennials Are So Over This Economy | 07.12.11

Obama Seeks Grand Bargain on Deficit [Bloomberg]
“Now is the time to deal with these issues,” Obama said at a White House news conference yesterday before resuming talks with congressional leaders on reducing deficits and raising the $14.3 trillion U.S. debt ceiling before the government exhausts its borrowing authority on Aug. 2. “If not now, when?”

Amazon Backs End to Online Sales Tax in California [NYT]
Amazon said Monday that it would back a California ballot initiative that would rolaw that forces more online retailers to collect sales tax. Amazon’s decision to support the proposed referendum pits the world’s biggest online retailer against the state government, which is looking for ways to raise additional revenue to cover budget shortfalls.

High-Speed Tax Rewrite Falters as Lawmakers Bicker Over Basics [Bloomberg]
Republican congressional leaders and President Barack Obama discussed a rewrite of the tax code over the past week and couldn’t resolve even the basic outline of what it should look like. They disagreed on revenue targets, the progressivity of the code, international taxation issues and the treatment of large businesses that aren’t currently taxed as corporations, according to two Republicans familiar with the talks.

Alleged Ponzi Scheme Accountant Settles SEC Complaint [Dow Jones]
In 2009, Philadelphia-area investment-fund manager Joseph S. Forte pleaded guilty to charges of wire fraud, mail fraud, bank fraud and money laundering, all linked to a Ponzi scheme he admitted to the year before. He is serving a 15-year prison sentence. Monday, the SEC said it has filed and settled a civil action against accountant John N. Irwin and his consulting firm, Jacklin Associates Inc. Both agreed to settle the Commission’s charges, without admitting or denying allegations. The complaint claimed Irwin and the firm participated in Forte’s scheme by recruiting investors for it.

Millennials frustrated with weak economy, scarcity of jobs [AW]
Dennis Nally can’t hire everyone now, can he?

KPMG Names Marc Moyers to Head U.S. Private Equity Group [KPMG]
Moyers takes over for Shawn Hessing.

PwC Sends Partners, Staff and Interns to Belize to Boost Financial Literacy Among Students and Teachers [PwC]
Don’t get jealous. It’s probably not too nice down there.

Cantor outlines $353B in Medicare, Medicaid savings [The Hill]
House Majority Leader Eric Cantor (R-Va.) on Monday proposed changes to Medicare and Medicaid he said would save $353 billion over the next decade. Cantor made the proposal in talks at the White House. His plan was immediately criticized by House Minority Leader Nancy Pelosi (D-Calif.), who said it would lead to benefit cuts.

Disturbing Trend: Chief Risk Officers Blowing Past CFOs On the Way to Meeting with the Boss

Time was, a CFO functioned as the main consiliere to the CEO. Finance issues? The CFO is on it. Accounting irregularities? Done. Taking the flak from analysts on the earnings calls? It’s not all glitz and glam, now is it? Nowadays, after some not so solid decisions were made in the recent past, another member of the C-suite has successfully curried favor with the boss. Someone who would ordinarily be fetching the CFO’s 3 pm pick-me-up. That is, the Chief Risk Officer:

Citigroup Inc. (C), American International Group Inc. (AIG) and UBS AG (UBSN) are among other companies raising the profile of risk executives. The derivatives meltdown that sparked the 2008 Lehman Brothers Holdings Inc. collapse and an 18-month recession catapulted the role from obscurity to contention for future chief executive officers. “The person sitting in the risk chair now is reporting to the CEO so the caliber has to be higher,” said Neil Hindle, who runs the CRO search practice at Egon Zehnder International in New York. “There has been a real increase in power over the last two years.” That’s evident in the compensation, which can reach $10 million at large financial institutions now, compared with $500,000 as recently as 2001, Hindle said. Five years ago, a CRO typically reported no higher than the CFO, he said.

Granted, if you’re someone like Dave Viniar, you’ve got very little to worry about since you’re irreplaceable. But if you’re slightly lower on the intellectual scale, you best watch for that CRO buzzing right by you on the meeting that you weren’t invited to. Next thing you know, CFOs will be picking up their shirts and dry cleaning.

Chief Risk Officer Rises to $10 Million Job [Bloomberg]

Eric Cantor Describes Debt Ceiling Debate Using the Most Unimaginative Expression Possible

“We don’t believe that we ought to be raising taxes right now on people in this recession and in this economy, and they do,” the majority leader added.

“That is just an irreconcilable difference, and if the president wants the debt ceiling, we’re not going to go along with that if they want to raise taxes, and it just is what it is.”“That is just an irreconcilable difference, and if the president wants the debt ceiling, we’re not going to go along with that if they want to raise taxes, and it just is what it is.” [The Hill]

AICPA Enthusiastically Offers the IRS Its Help Developing the Registered Tax Return Preparer Exam

Not unlike the overachiever that sits in the front row of class waving their outstretched hand like some ecstatic cruise ship passenger, the eager beavers at the AICPA have put the IRS on notice that they are willing and able to help out with the registered tax return preparers (“RTRPs”) exam.

As the national professional organization of certified public accountants comprised of approximately 370,000 members, the AICPA is well situated to provide input to the IRS on the technical issues related to developing and administering competency examinations. AICPA members provide services to individuals, not-for-profit organizations, and small and medium-sized businesses, as well as America’s largest businesses.

The AICPA offers to assist the IRS build on the Service’s already significant experience with the Special Enrollment Examination. Our own experience with the Uniform CPA examination has shown us that there are a number of critical steps in the test development process, including: (1) defining the material to be tested; (2) developing the test questions; (3) pre-testing or trying out test questions; (4) constructing and reviewing test forms which require that the final test be fair to all candidates regardless of which test form they take; (5) reviewing candidate comments on test questions; (6) protecting the security of the examination (including the examination questions and candidate data); and (7) conducting an annual review of the quality of the examination.

Despite the hint at a compliment (e.g. “Service’s already significant experience”), you can’t help but think that AICPA doesn’t quite trust the IRS to pull this off. What with the security issues, lack of warm bodies and beating terroristic threats off with a stick.

IRS Comp Examination

[via AT]

Indiana Department of Revenue Will Waffle on Whether It Wants Your Overdue Taxes If It Damn Well Pleases

Taxes are difficult. Given. Even for the professionals that deal with them every day, it can be an exhausting mental exercise that will inevitably lead to mistakes. Example: Back in 2003, Indiana’s Department of Revenue (“DOR”) sent a $1.1 million refund to Aisin USA Manufacturing for its 2001 return. Aisin filed an amended return to show this refund only to have the DOR inform the company that a “clerical error” had been made and the company actually owed over $600k. Aisin wasn’t exactly thrilled with this and, citing the statute of limitations, told Indiana to drop dead. Surprisingly, this seemed to work:

The company then received a letter from DOR stating, “Your recent explanation and/or payment, with respect to the specific liability number referenced above, is satisfactory. No further action is required on your part for this liability.”

Then, not unlike the girlfriend who decides to change her outfit the moment you’re working out the door, the state took it back:

[I]n 2007 and 2008, the DOR notified Aisin that they actually did have to pay the disputed sum.

The state gave the company a break, cutting the amount due by about $70k but begrudgingly added, “Aisin’s continued wrongful retention of this amount d[id] not represent the action of a responsible corporate citizen.”

Long story, short – the DOR sued Aisin to get the taxes due in trial court because it hadn’t jumped through all the hoops necessary to submit the case in tax court. The Court of Appeals wasn’t impressed by this but ultimately the Indiana Supreme Court said everything was kosher and ruled in favor of the state and is now going back to Superior Court.

So, there are lots of lessons here. It appears that Indiana’s DOR can 1) make really bad mistakes; 2) decide those mistakes are NBD; 3) can change their minds and conclude that, mistakes or not, you owing them money is a BFD; 4) don’t feel the need to follow their own rules.

And they ultimately win the right to continue a battle over half a million bucks that has been going on for almost ten years. Seems about right.

Indiana Department of Revenue Rivals the Ministry of Silly Procedures in Tax Refund Case [Tax Foundation]
Zoeller v. Aisin USA Manufacturing, Inc. [Justia]

Heresy: Dennis Nally Says Money Isn’t the Only Motivator for Recruiting Millenials at PwC

Apparently, things like “mobility” and “skill development” are important too. If you can believe that.

Having a competitive compensation base is really important. It’s [also] about how to create an environment where people want to be. This millennial generation is not just looking for a job, they’re not just looking for salary and financial benefits, they’re looking for skill development, they’re looking for mobility, they’re looking for opportunities to acquire different skills and to move quickly from one part of an organization to another. How you manage that sort of talent and how you deal with their expectations is very different from what’s been done in the past.

So I guess that means that none of the London recruits will be stuck at the Embankment Place dump. That doesn’t sound like an environment where anyone would want to be.

PwC Chairman Aims to Keep Millennials Happy [WSJ]

Accounting News Roundup: Bachmann’s IRS Job; Taxes and Jeter’s 3,000th; KPMG Greenies | 07.11.11

Debt reduction talks in limbo as clock ticks toward Aug. 2 deadline [WaPo]
The White House meeting adjourned after roughly 75 minutes without agreement over how far the parties should go in cutting the deficit over the next decade or whether tax cuts and entitlement reductions should be a part of any deal. Congressional leaders will return to the White House on Monday to continue talks, administration officials announced, and Obama will hold a morning news conference before they do.

Bachmann’s Tax Attorney Job Was Collector for the IRS [WSJ]
Republican presidential hopeful Michele Bachmann touts one job as her primary professional experience before entering politics. On the campaign trail, she describes it as being a “federal tax litigation attorney.” Others might call it tax collector.

SEC IFRS Roundtable Debrief: March of the Zombies [Accounting Onion]
Tom Selling opines on the thoughts of the undead from last week’s roundtable.

Auditors and Audit Reports: Is The Firm’s “John Hancock” Enough? [Forbes]
What’s in a name? Maybe a lot.

Tax implications of Derek Jeter’s historic 3,000th MLB hit [DMWT]
Just when you thought taxes couldn’t invade a good show of sportsmanship.

Taxes Upon Taxes Upon . . . [WSJ]
So the fondest Washington hopes for a grand debt-limit deal have broken down over taxes. House Speaker John Boehner said late Saturday that he couldn’t move ahead with a $4 trillion deal because President Obama was insisting on a $1 trillion tax increase, and the White House quickly denounced House Republicans for scuttling debt reduction and preventing “the very wealthiest and special interests from paying their fair share.” How dare Republicans not agree to break their campaign promises and raise taxes when the jobless rate is 9.2% and President Obama’s economic recovery is in jeopardy?

KPMG Achieves 22 Percent Carbon Reduction Through “Living Green” Initiative [KPMG]
You miss the bottled water, don’t you?

Groupon Financial Assumptions Upended [CFOJ]
Customer acquisition and retention — already one of its highest costs, and arguably the most important – is becoming more expensive by the day and getting a lower return. According to its S-1 filing, Groupon spent some $179.9 million in the first quarter to acquire new customers, up from $3.9 million in the first quarter of 2010. Those costs were the main reason the company lost $117.1 million in the first three months of the year.

After Today’s Job Report, Eric Cantor Can’t Imagine Why Anyone Would Think Raising Taxes Is Good Idea

” ‘Disappointing’ is an understatement,” Cantor said on the floor in a colloquy with House Minority Whip Steny Hoyer (D-Md.). Cantor was citing the jobs report for June that said only 18,000 private-sector jobs were created in that month, and that the unemployment rate increased to 9.2 percent.

“Just look at the jobs report today,” Cantor added. “I cannot fathom how anybody, how anyone thinks right now is a good time to raise taxes. Who thinks that raising taxes on individuals and small businesses can help create jobs?” [The Hill]

Let’s Dig into the NFL League Office’s Audited Financial Statements, Shall We?

Once again, Deadspin has scooped up some audited financial statements of a sports organization and this time it’s a big fish – the National Football League League Office. Audited by Deloitte, these financial statements (in full on page 2) present the Statement of Financial Condition (I’ll call this the balance sheet to keep things easy), Statement of Activities and Changes in Net Liabilities (going with income statement here), and Statement of Cash Flows with the accompanying notes for the years ended March 31, 2010 and 2009. All right, let’s do this.


The presentation for the balance tement is broken out between the NFL League Office, the League’s G-3 Stadium Program with the total of the two making up the third column. Tommy Craggs focuses primarily on the G-3 Stadium Program which he points out is “a matter that lies at the heart of lockout.”

The G-3 Program is interesting because this is how the league has financed the boom of new stadiums in the last year or so. Currently 13 teams are involved in the program for twelve new stadiums (the Jets and the Giants get to share). Here’s the table from Note 5:

It’s pretty amusing to see some of the disparity in this table, most notably the Detroit LionsGreen Bay Packers owing the League a measly $6.9 million while the Jets and Giants owe over $150 million each. The total owed by the two New York teams accounts for over 40% of the total for FYE ’10 (and the principal balance managed to go up for both, the Chiefs being the only other franchise to have this happen). These funds owed to the League compromise for over 80% of their total assets, financed by notes payable that compromise more than three-quarters of the total liabilities. Essentially, the crux of the organization’s balance is in play here. Obviously, the culture of cheap cash in the Aughts was not lost on the ownership and if banks were handing out money left and right, why not take advantage?

Here are the details on the notes payable:

As you can see, the fun ended in 2008, just as things were getting interesting. The League has entered into a half dozen of interest rate swaps to protect themselves with notional amounts of $249 million.

Some other notable items:

• The Game Officials’ Pension Plan (under Note 7) is underfunded by approximately $20 million, although the majority of the benefit payments come between 2016 and 2020.

• Related Parties (Note 8) has plenty to dig through, however one thing that sticks out is under “Other Related Party Transactions” is the $2 million loan made to “a senior executive” in May 2007. As of March 31, 2010 not a cent of this had been paid back and the note states that “In accordance with the terms of an employment agreement” an amendment was made in March 2010.

• The following paragraph under “Other Related Party Transactions” discusses “amended certain terms of an employment agreement with an executive, including certain termination rights.” This executive can request renegotiation “following ratification of a new CBA agreement [repetitive?].” If a new employment deal cannot be reached, the executive can execute termination rights for approximately $19 million which is equivalent to two years compensation. Just spitballin’ here but it wouldn’t be a stretch to conclude that this part of Roger Goodell’s deal.

• Hilariously, under “Litigation” the matter of Richardson et al. v. NFL et al. we find that Drug Program Agents (i.e. guys who collect cups of piss) sued the NFL and several of its affiliates for treating them as independent contractors as opposed to employees. This was filed in 2007 but in 2008, the plaintiffs filed an amended complaint for “typographical errors” but the complaint didn’t change. In other words, the plaintiffs’ lawyers didn’t use spellcheck. Ultimately the claims were dismissed in 2009 against the NFL but a settlement was reached between the NFL Management Council and the piss collectors.

WHEW! Lots of good stuff in there, so enjoy over the weekend. Deadspin is promising more “documents from a different arm of the NFL,” so hopefully we’ll see more pieces of this. Stay tuned!

NFL League Office

Some Are Suggesting That the IASB Is Filled with a Bunch of Spineless Jellyfish

Representatives of large institutional investors told the Securities and Exchange Commission on Thursday that they had serious qualms about the London-based International Accounting Standards Board replacing the U.S. Financial Accounting Standards Board as the primary arbiter of accounting rules in this country.

Speaking at an SEC panel focusing on investor views of international financial reporting standards, the representatives roundly supported the goal of establishing a single set of high-quality global financial reporting standards in the United States in the form of IFRS. But they suggested that the IASB, the current promulgator of IFRS, lacks the backbone and outreach capability of FASB — qualities that would be needed for a global system to succeed. [CFO]

Jeremy Newman’s Blogging Career Is Coming to End

Related: he’s also stepping down as BDO International’s CEO on September 30:

[After] 33 years in total with BDO UK and BDO International, I will be stepping down on 30 September 2011.

I have had a fantastic career and have been privileged to lead BDO UK for 7 years and BDO International for the last 3 years. I have had some great colleagues, worked with some brilliant people and, in my earlier career, been involved with some terrific clients.

Martin van Roekel, the firm’s Managing Partner in the Netherlands, will officially be the new International Chief on October 1.

Newman says “it is time for a change,” but he “[doesn’t] know what I will do but after 33 years in this business, I am looking forward to seeking new opportunities outside the accounting profession.” He is promising to keep blogging through September, so hopefully he’s still working on his delicate sensibilities.

Moving On [CEO Insights]

Accounting News Roundup: IRS Ends Audits of Political Donors; Goldman’s Irreplaceable CFO; SEC Urged Not to Rush to IFRS | 07.08.11

Sights Set on Grand Debt Deal [WSJ]
President Barack Obama and congressional leaders agreed Thursday to strive for a blockbuster deficit-reduction deal and will spend the weekend determining whether political support is possible for a sweeping plan to curb entitlements and make major tax-code changes. The package to reduce the federal deficit by $4 trillion or more over 10 years is much more ambitious than negotiators envisioned just two weeks ago, and represents the most far-reaching of three options Mr. Obama presented to lawmakers Thursday in a closed-door meeting in the White House Cabinet Room.

I.R.Slitical Donors [NYT]
The Internal Revenue Service on Thursday abandoned its effort to force five big-ticket donors to pay gift taxes on contributions they made to nonprofit advocacy groups that are playing an increasing role in American politics. “Until further notice, examination resources should not be expended on this issue,” Steven T. Miller, deputy commissioner for services and enforcement, wrote in a memo posted on the I.R.S. Web site. “This is a difficult area,” Mr. Miller wrote, “with significant legal, administrative and policy implications with respect to which we have little enforcement history.”

Accounting That Comes in Flavors [NYT]
[I]t appears increasingly likely that for a substantial period of time there will be two sets of accounting rules in the United States, with companies able to choose between American or global rules. And while most countries, including the United States, will say they embrace international accounting standards, there may be numerous flavors of them, with investors perhaps having trouble figuring out just how comparable financial statements really are.

Caterpillar Accused of Demoting Executive Discovering Tax Dodge [Bloomberg]
The company, the world’s largest construction-equipment maker, sold and shipped spare parts globally from an Illinois warehouse while improperly attributing at least $5.6 billion of profits from those sales to a unit in Geneva, according to the suit filed by Daniel J. Schlicksup. He was a global tax strategy manager for Caterpillar from 2005 to 2008. Schlicksup, 49, sued in U.S. District Court in Peoria, Illinois, in 2009, claiming he was moved to a job that limits his career opportunities because he complained to superiors that the “Swiss Structure” ran afoul of U.S. tax rules.

Being Goldman Sachs’s Brains May Make Viniar Irreplaceable CFO [Bloomberg]
David A. Viniar, the finance and risk-management overseer who some investors deem more essential to Goldman Sachs Group Inc. (GS) than Lloyd C. Blankfein, may not be replaceable. At least not by one person. The longest-serving chief financial officer of any major Wall Street firm may find his multiple roles distributed among two or even three deputies when he eventually steps down, according to two people with knowledge of the firm’s internal deliberations.

BofA’s Deal Has Other Player—IRS [WSJ]
Any deal has tax implications. That is especially the case for Bank of America’s proposed $8.5 billion settlement related to mortgage securities sold to investors. The Internal Revenue Service will play a particularly important role. BofA has said the settlement won’t be final until the IRS signs off on it.

SEC urged to go slow on global accounting move [Reuters]
The United States should move towards use of international accounting standards but must not rush the process, business representatives and accountants told the Securities and Exchange Commission on Thursday. If the United States does not shift to a global accounting regime, it will cut itself off from the rest of the world and lose influence over international standard-setting, participants at an SEC roundtable said. “I don’t think anybody disagrees with the ultimate goal” of a single set of high-quality global accounting standards, said Mark LaMonte, managing director at Moody’s Investors Service. In practice that may difficult to achieve, “but it doesn’t mean we should stop working toward this goal,” he said.

PwC Appoints Christina Dutch Managing Partner in Albany [PwC]
Christina Dutch succeeds Richard Grant.