Author: Caleb Newquist

Founding editor, Going Concern.

(UPDATE) Compensation Watch ’10: Are Raises Looking Bleak at E&Y?

It’s been awhile since we’ve heard any news on the E&Y comp front but we finally received a preliminary report from one source late last week:

[Roundtables] went the same way they always go. Surprisingly, less pushback on proposed ratings for the portion I was involved in. I really think they may be scared to lose more people. Indications are raises will be low (3-5% range for most, more for 4/5 rated people) Bonuses are probably non-existent for the masses. Annoucements of promotions for other levels will be made in August (staff to senior, senior to manager, manager to senior manager) they will also do comp increase discussions then. Effective 10/1…


So despite Ernst & Young re-reassuring merit increases the 3-5% for the meaty part of the curve and no bonuses isn’t exactly what “the masses” were expecting.

That being said, this office may be catching some bad luck since we that at least one E&Y partner was confident that the raises would beat PwC’s.

Although, some lucky E&Y soldiers have seen some “spot bonuses” for their hard work but it’s not clear how widespread that generosity is.

On a marginally-related note, we’ve received word that the partner promotions were announced but we’re still trying to run down some details. Get in touch with us if you’ve got the scoop on the new partners, what you’re hearing about comp in your office and discuss below.

UPDATE, Wednesday June 16th: A couple more accountants familiar with E&Y have their own take on the comp situation:

I heard that we “we’re not going to be disappointed with raises” here at EY. I don’t know what that means. And I tend to believe, that as you posted today, 3-5%, is a more realistic view of what’s going to happen (though that’s just my own pessimism).

and that is coupled with another source, “Haven’t heard anything further on comp other than ‘moderate.’

Continue attempting to decipher the latest. As you were.

Accenture Would Have You Believe That There Are No Losers in the IRS Return Preparer Registration Program

The firm fka Andersen Consulting finally got around to announcing their latest gig for Doug Shulman & Co. today, landing the contract to develop the IRS’ return preparer registration (“RPR”) system.

Accenture has done big projects for the IRS in the past but that doesn’t mean they’re any less excited about this particular project:

“The RPR program is really a win-win-win situation in which the IRS will gain the ability to identify and regulate paid tax preparers, tax payers will have better information about tax preparers before selecting one, and tax return professionals will be able to differentiate themselves in this competitive market,” said Lisa M. Mascolo, managing director of Accenture’s U.S. Federal client service group.

If you assume that Accenture is going to make out all right on this deal, then it’s actually a win-win-win-win situation. That would be a quad-win for those of you scoring clichés at home.

Having digested Accenture’s POV on the sitch, we’ll remind you that there are plenty of losers in the IRS’ RPR, as Joe Kristan told us back in January:

When there are winners, there are losers. These include:

Small tax prep shops – A solo practitioner will have to manage the new bureaucracy alone, while his giant competitors will have full-time fixers. When a little guy’s competency exam gets lost by the IRS bureaucracy, he might lose a season’s worth of business; fixers and lobbyists will make sure nothing like that happens to the big boys. And of course the inevitable capture of the IRS bureaucracy by the big players will continue to squeeze the little guys.

Enrolled Agents – Now that the IRS will be creating a new lesser level of licensing, these professionals will have a harder time distinguishing their much higher standards to a confused public.

Consumers – The most obvious result will be an increase in prices, both to pay for the new compliance costs and because the rules will run smaller preparers out of the market. Supporters of the regulations will say that it will be worth it because the new standards will improve quality. That’s a pipe dream. A bozo test and a few hours of CPE won’t turn a quack into a brain surgeon.

Low income consumers will, of course, not have to pay for the fancy “licensed” preparers. There will still be plenty of folks with pirated copies of Turbotax preparing unsigned returns in their cars and apartments, and the higher prices of the licensed competitors will send them more business. Other consumers will either struggle through their own returns without benefit of CPE or drop out of the tax system entirely.

Obviously there has to be some losers. A win-win-win-win-win-win-win-win (an octo-win) situation would be ridiculous.

Accounting News Roundup: UBS Deal Back on Track; Allen Stanford’s Circus Causes Problems for Co-Defendants; Zynga Lands $147 Million | 06.15.10

Swiss Parliament Backs UBS Pact [WSJ]
After telling U.S. and IRS to drop dead last week, the lower House of Swiss Parliament has approved the deal to turn over 4,450 names as part of UBS’ settlement involving their assistance to taxpayers in the U.S. evade their obligations through offshore accounts.

There’s one small problem remaining – the lower house wants to put the agreement to a popular referendum while the upper house in parliament is opposed to the idea. The two have until Friday to reconcile their differences, otherwise another vote will be necessary to settle the referendum issue.

The problem with the referendum is that it could take months for happen and it could cause the Swiss to miss the August deadline that it agreed to. This could lead to fresh charges against UBS and further extending a story that pretty much everyone has grown tired of.


Stanford’s Co-Defendants Try to Flee the ‘Circus’ [DealBook]
Stanford’s Chief Investment Officer, Chief Accounting Officer and Controller are all attempting to sever themselves from Al’s proceedings because he’s an absolute drama whore.

Former CIO Laura Pendergest-Holt’s motion to have her trial severed describes RAS’ conduct as ‘egregious and circus-like conduct,’ using the term “circus” at least eight times.

So while a circus is infinitely fun for the rest of us, it doesn’t really do co-conspirators any good when they are trying to get a fair trial.

Dealing With a Toxic Resumé [FINS]
How can you move past a job with a tax company like Stanford, Countrywide, Bear Stearns et al.? You might just want to GIVE UP (and that could be advisable if you were a perp) but there are some things you can do to wash away that taint on your resumé.

For starters don’t bad mouth the old company, even though they probably deserve it. Secondly, you might attach an addendum to your resumé in order to explain the whole sitch and you can always turn the situation into a positive by explaining how you’ve learned from working at such a lousy company.

Keep your chin up, you’ll be back to being a white collar working stiff in no time.

Duke boy dodges tax hazard [Tax Watchdog]
John Schneider, aka Bo Duke, and his wife owe California about $28,000 in back taxes. Turns out his old accountant left him ‘high and dry’ so he’s working it out with Arnie.

Zynga Receives $147 Million Investment From Japan’s Softbank [Bloomberg BusinessWeek]
Memo to Farmville Haters: it’s here to stay and there will be more to come.

Satyam: Does Anyone Mind if We Take Another Three Months to Finish Our Restatements?

With just a couple weeks until the June 30 deadline for the company to issue its restated financial statements, Satyam is requesting just a little more time to get this mulligan nailed down. Three months to be precise.

Yes, they’re completely aware that it’s been nearly 18 months since the shit hit the fan. And yes, this is the third time they’ve asked India’s Company Law Board (“CLB”) for an extension on the filing but at this point they figure expectations are so low, no one will get too worked up over it.


Except for an “analyst with a leading brokerage house.” who is quoted in the Business Times, “There is no clarity on what is happening within the company. They should have at least provided the current sales figure or the bench strength. How is the shareholder supposed to rate their stock?”

Since more than a few people might be caught up in “sales figures” and whatnot, Satyam went to the trouble to let everyone know that they’re working hard, ordering in, etc. etc. so you can rest your pretty little heads:

A Satyam official said, “The records have been under the custody of investigating agencies and we recently got a court clearance. Also, our auditors (KMPG and Deloitte) told us they need some more time for the restatement. It’s only a matter of a quarter.”

See? It’s just a matter of a quarter. Plus, you can’t really blame them – KPMG and Deloitte are the ones saying they need more time. Satyam has likely been bugging them for months about wrapping up but KPMG and Deloitte are probably complaining, saying things like, “we can’t find any documentation to supports these numbers” and “this doesn’t add up.”

So, TFB if some whiny analysts don’t like it. We’ll just find out just how big of nightmare these financial statements will be in due course.

Alabama Candidate Must Not Be Aware That the IRS Has a Stockpile of Shotguns

Alabama Congressional candidate Rick Barber arranged a sit-down with some Founding Fathers to do some venting in his most recent ad:


GW looks serious about this “armies” thing doesn’t he? Well, there’s a good reason for that as, David Weigel notes at WaPo or you can see at the U.S. Treasury website, Washington did some of his own army gathering when he squashed the Whiskey Rebellion that arose from the Whiskey Act of 1791.

So it’s more likely that #1 is warning young Barber, saying “Knock yourself out ‘Bama. You’re going to need all the help you can get.”

Earlier:
The IRS Goes Gun Shopping

Accountant’s ‘Ridiculous Amount of Time’ Surfing the Web Not Ridiculous Enough to Warrant Firing

We realize that hardly any of you will be able to relate to this story but we’ll present it as a point of reference in case you know of anyone that gets jammed up in the future.

David Innes, 42, was fired from his job at Scottish and Southern Energy after TPTB decided that he was spending a little too much time surfing the web. In their words, a ‘ridiculous amount of time.’ And to get an idea of ridiculous, 27,500 website hits was the magic number.


This is quite a jump over the 16,000 hits that an SEC accountant spent looking at porn. This randy ne’er do well managed to keep his/her job as well as the other porn junkies. If you make the assumption that Innes had a SEC-esque porn habit, that still leaves a lot of surfing to be done.

Regardless, it’s safe to assume that somewhere in between 16,000 and 27,500 hits (presumably in a month) lies the threshold of you being thrown out on your ass.

However, a Glasgow tribunal found that Scottish and Southern didn’t really have a frame of reference for “a ridiculous amount of time” since David Pratt, the man who fired Innes, “made no attempt to obtain advice from the respondent’s IT department. His view was essentially that he was faced with this enormous report and this therefore showed an extraordinary amount of internet usage.”

In other words, a “ridiculous amount of time” is subjective, as is “a lot of time,” “quite a bit of time,” or “a metric ass-ton of time.” And even if you do reach your own perceived level of unacceptable web surfing volume, you still better check with the IT boys to see what their opinion on hella-web surfing is before you go firing people like Steinbrenner.

Meanwhile, for you do-nothings out there, it appears that your time wasted at work surfing the web can easily be defended, although you can safely assume that if you wade into the NSFW waters, your chances of survival are slim.

Transocean Saved Billions in Taxes by Moving Legal Domicile Offshore

While BP continues to get murdered in the press for its role in the Deepwater Horizon nightmare in the Gulf of Mexico, we bring you a new reason to hate on another big player in this mess, Transocean. Martin Sullivan writes in Tax Analysts’ Tax Notes about the billions in taxes Transocean has managed to avoid since moving its domicile offshore – first to the Cayman Islands and then to Switzerland.

For those of you not completely up-to-speed on your Deepwater Horizon cast of baddies, Transocean was the owner and operator of the De BP was the project operator (think of a general contractor) of the rig, paying Transocean $500,000 a day to drill the well.


Sullivan writes in his piece that despite Transocean being legally domiciled in Zug, Switzerland, (a transaction known as an inversion or corporate expatriation) it really does very little to change the substance of the company’s operations, “These tax-motivated restructurings occur with little or no real change in day-to-day business operations. Top executives, key personnel, and all significant business operations in the United States before the transaction remain in
the United States.”

The transactions were controversial to be sure, and companies that engaged in them were likened to Benedict Arnold by politicians when the came under fire back in the early Aughts. To get an idea of Transocean’s savings, Mr Sullivan presents data that shows the company’s preinversion average effective tax rate of 31.6% and its postinversion tax rate of 16.9%. This saved the company just over $1.8 billion in taxes over the last ten years.

Transocean consummated their inversion back in 1999, so they were far ahead of the curve, as the tax benefits for inversions were stripped out in the code effective for transactions that occurred after March 4, 2003 but the savings have added up over the years as the company saved over $750 million just last year.

But Transocean has largely stayed out of the spotlight in this whole shitshow and has been in CYA mode virtually the whole time, consistently citing an indemnification agreement with BP, filing to limit its liability:

As set forth under Federal Law, the complaint also asks that the companies be judged not liable on claims for certain, defined losses or damages relating to the casualty or, if they are judged to be liable, that the liability for such claims be limited to the value of their interest in the Deepwater Horizon rig and its freight including the accounts receivable and accrued accounts receivable as of April 28, 2010. The petitioners assert in the filing that the entire value of their interest does not exceed $26,764,083.

And scoffing at any notion of not paying its dividend, reminding everyone that they declared it long before explosion on the rig they were operating, “Transocean will honor all of its legal obligations arising from the Deepwater Horizon accident. The dividend proposal was announced on February 16, 2010, described in the preliminary proxy statement which was filed with the Securities and Exchange Commission on March 1, 2010, and approved by shareholders at the company’s annual general meeting on May 14, 2010.”

Throw the decade or so of tax savings and it sounds like Transocean has it made in the shade. How’s that for corporate responsibility and accountability? It’s not like we’re dealing the largest environmental disaster ever.

Transocean: Better at Tax Planning Than Oil Drilling [TaxProf]

The IRS Is Sitting on Your Checks

We haven’t come across a single person that is happy about cutting a check to the United States Treasury. In fact, some people would like their CPAs to stick their beard trimmings in with checks and include a note that says, “Here’s my money. Shove it. Oh, and enjoy the scruff.”

You would think that – after washing their hands for 20 minutes – someone at IRS would rip open your letter to find your check and drop everything to make the deposit. “Thank God! Everybody! We’ve got the Johnson check! I’ve got to get to the bank ASAP to make sure we can cover our glorious new pens.”


But this is not the case. No, the IRS doesn’t have a sense of urgency that you might have when you get a check in the mail. The Service’s resident mother-in-law, the TIGTA let’s us know how about their latest disappointment:

TIGTA found that the IRS is generally scanning checks and accurately posting checks to taxpayer accounts. However only 13 percent of the 770,504 payments reviewed by TIGTA payments were deposited the next business day through the Treasury Department’s Financial Management Service. As a result, the IRS lost $695,115 in interest on the payments that were not promptly processed. TIGTA found that the IRS is generally scanning checks and accurately posting checks to taxpayer accounts. However only 13 percent of the 770,504 payments reviewed by TIGTA payments were deposited the next business day through the Treasury Department’s Financial Management Service. As a result, the IRS lost $695,115 in interest on the payments that were not promptly processed.

And that’s your interest, American Taxpayers, sayeth J. Russell George, “When payments are not promptly processed, taxpayers lose the benefit of the interest earned that is credited to the Department of the Treasury.”

The TIGTA obviously understands that it was painful for you to cut that check in the first place, so the quicker it gets cashed, the sooner you will be doing your part – earning interest for every man, woman and child in this great land.

Plus, the sooner the money is out of your account, the less likely you’ll be to continue stewing about the unfairness of it all, only to conclude that quitting your job to attend rallies or participating in virtual marches may be the only way to help you to feel better.

The IRS Needs to Process Paper Checks More Quickly, TIGTA Finds [TIGTA PR]
Full Report [TIGTA]

Accounting News Roundup: BP Weighing Options on Dividend; Will the “New Wealth Taxes” Affect You?; Medifast Keeps Things Vague | 06.14.10

BP unlikely to cancel dividend, but mulls several ideas: source [Reuters]
They may defer it, pay it in shares or “pay into a ring-fenced account until the oil spill liabilities become clearer.” All of which will please absolutely no one.

Auditors to reveal bank talks under new plans [FT]
Proposals by the ICAEW would require auditors to disclose their private discussions with bank audit committees afteshowed that “the value of bank audits had shown investors especially were dissatisfied by the audit report. The internal process involved was perceived as helping to keep bank executives in check, but investors felt the report was only a box-ticking exercise.”

The Big 4 have historically resisted these types of proposals, arguing that it will expose them to additional legal liability.

Suggestions cited include assurance on the “front half of annual reports,” as well as an audit of the banks’ summaries of risks. The ICAEW said it was aware that this would add to the auditors’ workload.


Vantis trading suspension follows difficult financial period [Accountancy Age]
The court-appointed liquidator for Allen Stanford’s bank, Vantis, has had trading of its shares suspended by the AIM after the company was unable to obtain any funds for their services related to the Stanford case, among other financial difficulties.

Ernst & Young had issued a going concern opinion for the company back in February, warning that continued lack of cash flow would have to be remediated quickly for any possibility for the continuation of the business.

How the New Wealth Taxes Will Hit You [WSJ]
Are you one of those “rich” people? That is, do you have an adjusted gross income of $200,000 or more ($250,000 for joint filers)? If so, you’ll probably want to know that two new tax levies will come your way in 2013 as a result of the new healthcare legislation – a 0.9% levy on wages and a new 3.8% tax on investment income.

The 0.9% tax is on any wages over $200k/$250k. For example, if you are single and made $300,000, your additional tax would be $900.

Similarly, the investment income tax would tax any investment income in excess of the $200k/$250k threshold and the 3.8% tax would be applied. What’s investment income you ask?

Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don’t participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.

Income that is not considered investment income include: distributions from IRAs, pensions and Social Security, annuities that are part of a retirement plan, life-insurance proceeds, muni-bond interest, veterans’ benefits, and income from a business you participate in, such as a S Corporation or partnership.

KPMG considering move to 1801 K [Washington Businsess Journal (subscription required)]
KPMG might move their Washington, DC office location to 1801 K St. NW from 2001 M St. NW according to “real estate sources.” KPMG’s spokesman said that the firm is continuing to “examine all of our options.” The situation is fluid.

Open Letter to the [SEC]: Why You Must Review Medifast’s Revenue Accounting Disclosures [White Collar Fraud]
Sam Antar would like to put the SEC on notice that Medifast seems to be less than transparent when it comes to its disclosures, “it seems that Medifast is recognizing revenue upon shipment and not delivery. As a minimum, Medifast, like Overstock.com, should be required to expand and clarify its disclosures to avoid confusing investors.”

Everyone at Deloitte Worked for Free Today

As you may or may not be aware, it’s Deloitte’s 11th Annual Impact Day today:

“Deloitte is providing hundreds of nonprofit leaders from across the country with valuable counsel to help them deal with common business challenges, at no cost.”

That’s right friends, no one is – gasp – billing time! It’s a 100% green dot free-for-all across this great land.


However, we did speak to one source at the firm who told us that they haven’t participated in Impact Day in 3 years, “everyone leaves me alone so I can get something done,” so despite the message at Deloitte HQ that “no one is available to take your call,” and what you’re reading on Twitter, we know some people are working.

Obviously that’s lame but the real question is how many Green Dots called in sick and are currently getting blitzed watching the World Cup? And keeping an eye on their fantasy teams? AND maniacally laughing while watching Barry Salzberg live Tweet the whole day?