Category: ANR

Accounting News Roundup: Accounting for Healthcare Reform Begins; Should Small CPA Firms Partner with Large Firms on Projects?; Lawsuits Against Accounting Firms Rising Fast in UK | 03.28.10

• The healthcare party is over – now comes the (accounting) hangover [FT Alphaville]
Now that healthcare reform is behind us, the matter of sorting out the impact on corporations now falls to the accounting professionals in those companies as the first quarter winds down this week.

FT Alphaville notes that AT&T, for one, has already filed an 8-K that states that it will “take a non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change.” The change that the company is referring to is the “Medicare Part D subsidy” which, under the new law, is no longer eligible for a write-off against a company’s taxes. The subsidy is given to companies to help to pay prescription drug benefits to its employees.


FTA cites a report by Credit Suisse that shows many companies’ (including Goodyear Tire, International Paper and The New York Times) first quarter earnings will be impacted significantly by new healthcare legislation. And it also appears that it will cause companies to take a second look at the benefits they currently provide to employees, as Ma Bell stated in its filing that it “will be evaluating prospective changes to the active and retiree health care benefits offered by the company,” as a result of the legislation.

• Why solos and small firms shouldn’t “partner” with larger CPA firms on projects [Fraud Files Blog]
Tracy Coenen recently had a large firm approach her to see if she’d be interested in helping them out with some “Fraud Risk Assessment services.”

The larger firm asked her if she would be interested in “a partner/subconsultant” arrangement. Tracy explains why this isn’t a good situation for solo practitioners like herself, “[T]he consulting firm doesn’t have the know-how necessary to provide their client with the services they need. But they’re not about to let something silly like competence stand in the way of collecting fees! They will find a way to do it.”

Tracy says that the larger firm will ask you to discount your billing rate, train their staff, and ultimately, give them the secrets to your practice, “Don’t lose money by discounting rates, training someone else’s staff for those discounted rates, and creating a competitor for yourself who uses your proprietary methodology.”

• U.K. Accounting Suits Reached 5-Year High Last Year, Study Says [Bloomberg BusinessWeek]
The number of lawsuits filed in the UK against accounting firms in the past year is greater than the last five years combined according to Bloomberg. The thirteen suits filed in 2009 is more triple than the four suits filed in the previous five years. Although the number of suits is considerably smaller than the 61 suits filed after the collapse of Enron, et al. in the 2002-2003 time period, Jane Howard, a partner at Reynolds Porter Chamberlain LLP, is quoted that it’s not clear whether things are just getting started, “What is still hard to tell is whether this sudden rise in claims will subside quickly or whether accountants will face a higher number of claims over the coming years.”

Accounting News Roundup: Marion Barry’s Latest Trouble; IRS Phishers Go After the Gullible; Doug Shulman Is Sick of Being Asked if He Prepares His Own Taxes | 03.26.10

• IRS officials file lien against Marion Barry [WaPo]
If you’re not familiar with Marion Barry, let’s just say that the guy has been in fair amount of trouble over the years. Check that, dude has been in a lot of trouble. Yet, somehow this man still somehow manages to get elected to public office in Washington, DC. The latest trouble involves a tax lien that has not been paid for taxes owed from 2005 to 2008, according to the Washington Post. It’s only $15,000 but considering what he could potentially spend it on (e.g. crack, girlfriend) the IRS kinda wants it.

It’s not like the Service hasn’t been trying to get the back taxes owed. They’ve been garnishing his wages $1,350 every two weeks and his attorney is quoted as saying that this “isn’t a new thing.” We agree. We’re been used to the idea of Marion Barry being an elected criminal for quite some time now.


• IRS Phishing Scams on the Rise [Tax Girl]
A random email from the IRS requesting things like your SSN#, your shoe size, bank account number and should be taken as seriously as an IKEA give away on Facebook. If the Service wants to get your attention, they do it by snail mail people. Lesson over.

• Tax writers can’t figure out the tax code, either [The Daily Caller]
When the IRS Commish was asked again about using a tax preparer, the Daily Caller quotes his curt response as, “I don’t have time for this … If you want an interview, you can call my office,” and sped away. He’s crackin’. Maybe he should just try doing his own taxes. Joe Biden used to!

Accounting News Roundup: The Tanning Tax Isn’t Fair; Dubai World Gets Another Life; Guy Hands Won’t Have to Go to London | 03.25.10;

• Does New 10% Tanning Tax Discriminate Against Whites? [TaxProf Blog]
Are you being unfairly taxed just because you want some extra Vitamin D?!?


• Dubai World, Nakheel Get $9.5 Billion Injection [WSJ]
For now at least, it appears that Aidan Burkett, Deloitte’s rock star restructuring expert has saved the day at Dubai World. DW will get $9.5 billion from the Dubai Government and plans to pay $26 billion to its creditors that include HSBC, Lloyds, Standard Chartered and RBS.

The complex deal that has taken months to draw up involves Dubai World issuing two tranches of new debt and converting $8.9 billion, or 38%, of its existing obligations into equity, the company said.

The new debt won’t be guaranteed by Dubai government, which has previously been a thorny issue between creditors and the city-state’s advisors.

• Citi Loses Bid to Move EMI Trial [WSJ]
Remember Guy Hands, the founder of Terra Firma Capital, who hates taxes so much that he asks that his family come to visit him in Guernsey so that he doesn’t risk his non-resident status for England?

Well, you’ll be happy to know that Citi’s bid to get the trial moved to London was rejected by Judge Jed Rakoff so Hands won’t have to worry his pretty little head. Had the motion to move the trial been granted, Hands’ non-resident status could have been jeopardized and he may have had to pay taxes due to England. And, God forbid, do some of the traveling to see his family.

Accounting News Roundup: The SEC’s Porn Problems Somehow Get Worse; The Daily News Offers Free Tax Help While the Sun-Times Has More Obvious Tax Advice | 03.24.10

• SEC Employees Were Masturbating to Kiddie Porn While Your Economy Tanked [Gawker]
So this whole SEC/Porn fiasco has taken an unsuspecting and disturbing turn for the worse. Gawker has obtained documents that show that there have been sixteen investigations of SEC employees surfing the web for the likes of ladyboyjuice.com, kinkycomments.com, sexyavatars.net, cafebuckskin.blogspot.com and the list goes on and on and on and on.

Even more awkward is that it was discovered that one of the Commission’s porn connoisseurs computers contained videos that “potentially contained child pornography” and was referred to the FBI. Protecting our markets, people. Protecting our markets.


• Readers turn to Daily News Tax Hotline for free help filing tax returns [NYDN]
Can’t afford a CPA? NBD. Just call up the Daily News. Their annual tax assistance hotline runs today and tomorrow from 10 am to 4 pm. The DN partners with the NY State Society of CPAs so you can rest easy that it won’t be Rush & Malloy.

• Don’t pay taxes with credit card [Chicago Sun-Times]
Not such a good idea.

Accounting News Roundup: Joint Taxation Committee Explains IRS Penalties Under Health Care Bill; Madoff Owes New York $1 Mil in Taxes; ACORN Shutting Down | 03.23.10

• What Happens If You Don’t Buy Health Insurance under Health Care Reform Bill? [Tax Policy Blog]
Believe it or not, there is misinformation out there about the health care reform bill. No, it’s true!

One big fear is the IRS getting all up in your shit for not buying health insurance. According to some, heavily armed IRS agents will kick down your door if you haven’t made the necessary arrangements for coverage, take your children away and kick your dog as they exit your house with your money and your freedom. Fortunately, Tax Policy blog has presented the Joint Taxation Committee’s explanation of what would really happen if you decided to skip on the coverage.

The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.

• NY is newest Madoff victim [NYP]
Apparently Berns didn’t sort out all of his affairs before taking his permanent vacation to the Carolinas. He owes nearly $1 million taxes to New York State according to the Department of Tax and Finance’s list of largest delinquents.

• Acorn to Shut All Its Offices by April 1 [NYT]
After getting dropped from the VITA list by the IRS and getting snubbed by the Census Bureau, Glenn Beck’s favorite NPO is closing up shop on April Fool’s Day. Beck will certainly be on hand to see the headquarters burned to the ground to assure that the American people aren’t being duped again.

Accounting News Roundup: Dodd Requests Investigation of Lehman “Accounting Manipulation”; Ernst & Young Makes Case to Audit Committee Members; House Passes Health Care Reform | 03.22.10

• Dodd Seeks U.S. Inquiry Into Lehman’s Accounting [DealBook]
Late on Friday, Senator Chris Dodd (D-CT) sent a letter to Attorney General Eric Holder requesting that the Department of Justice investigate Lehman Brothers’ “accounting manipulation” that contributed to its bankruptcy. According to his letter, Dodd also wants the DOJ to investigate “other companies that may have engaged in similar accounting manipulation with a view to prosecution of employees or agents who contributed to any violations of the law.”

With the exception of Lehman, Dodd did not name any companies specifically. He wrote, “We must work tirelessly to reduce the incidence of financial fraud in order to restore trust and confidence in the financial markets. A task force investigation and taking appropriate Federal actions in these matters will contribute to these goals.”


• An Ernst & Young Response: Dear Audit Committee Member… [Re: The Auditors]
Ernst & Young is on the offensive, telling everyone who will listen their position on the results of the Bankruptcy Examiner’s report. The ubiquitous Enron and Andersen comparisons in the MSM — while cliché and misleading — have motivated E&Y to reach to audit committee members that ulitmately decide whether E&Y will be providing services to their companies. Francine McKenna posted the letter noting, “I guess they know where their bread is buttered: With the guys who hire and fire them in the Fortune 500.”

The firm addresses everything from the actual accounting, “The media reports that these were ‘sham transactions’ designed to off-load Lehman’s ‘bad assets’ are inaccurate,” to whistleblower Matthew Lee’s letter, “When we learned of the letter, our lead partner promptly called the Audit Committee Chair; we also insisted that Lehman’s management inform the Securities & Exchange Commission and the Federal Reserve Bank of the letter.”

Naturally, the firm plans to defend themselves vigorously stating, “EY is confident we will prevail should any of the potential claims identified against us be pursued.”

• Obama Hails Vote on Health Care as Answering ‘the Call of History’ [NYT]
Last night, the Senate bill was approved by the House, 219-212, and it could be headed back to the Senate for final approval as early as this week. In a shocker, Democrat and GOP views on the bill don’t seem to be converging as one Dem legislator described it as “the Civil Rights Act of the 21st century,” while a GOP member described the bill as, “a fiscal Frankenstein.”

Accounting News Roundup: GOP Says Healthcare Bill Will Expand IRS ‘Tentacles’; Jonathan Weil Counts Some of E&Y’s Bodies; RIP Jerry York | 03.19.10

• GOP targets IRS in latest health battle [The Hill via TaxProf]
The GOP is still fighting the health care bill tooth and nail and this may be the most effective strategy we’ve seen so far. Forget about debating coverage, preexisting conditions, etc. etc. Just name drop the IRS and a large group of people may change their minds about the whole thing.

“This is a vast expanse of power,” said Rep. Charles Boustany Jr. (R-La.) during a Thursday call organized by Republicans on the Ways and Means Committee. He said the IRS provisions in the healthcare bill “dangerously expand, in an ominous way, the tentacles of the IRS and its reach into every American family.”

On the surface this appears to be the typical GOP “the IRS is eeeevilllll” pandering but the real concern should be that the Service already has a lot to do. The Hill reports that if taxpayers are required to purchase health care insurance but fail to do so they could face fines. The IRS would be responsible for administering and collecting these fines.

Add that to this small task, “The IRS retrieved $2.35 trillion in 2009 by processing 236 million tax returns. It also is working to reduce a $345 billion gap in the taxes it collects and should collect.” Not to mention they’re trying to update systems, answer more phone calls, getting into high speed car chases. There’s always a lot going on.

And in case Rep. Boustany needs caught up, the Service is already auditing more people and trying to collect every dime nickel penny it can.

• Lehman’s Auditor Goes Blind From the Cooking [Bloomberg]
Jonathan Weil is not buying what Ernst & Young is selling. He reports that E&Y spokesman Charlie Perkins denied that the firm had “mischaracertized [the Bankruptcy Examiner’s] findings,” and characterized it this way, “[B]y E&Y’s twisted logic, it would be possible for a company to lie in its financial statements about its off-balance-sheet liabilities, and still manage to account correctly for them in the same financial statements. Imagine that.”

Weil takes off the gloves and digs up some old bodies, namely: partners recently sentenced to prison time for tax shelters; Bally’s (including vice chair Randy Fletchall); HealthSouth; Cendant (man, he’s going way back). Weil then thinks out loud, “With that kind of track record, it’s a wonder anyone would accept anything this firm says at face value again.”

• Jerry York, Iconic CFO, Dies at 71 [CFO]
Served as CFO for IBM, Chrysler. Adviser to Kirk Kerkorian and board member at Apple.

Accounting News Roundup: Satyam Auditors Barred by PCAOB; TheStreet.com Pulls an Overstock.com; How High Are Your State’s Property Taxes? | 03.18.10

• US accounting watchdog sanctions Satyam’s auditors [Reuters]
Siva Prasad Pulavarthi and Chintapatla Ravindernath, the two auditors that were arrested in India for their roles in the Satyam fraud, have been barred by the PCAOB from “being an associated person with a registered accounting firm.”

The Board who released the two orders against the men on Monday, that describe their efforts to get them to testify about their roles in the engagement last spring but they refused to cooperate, “After several attempts to accommodate Respondent with respect to the dates and location of testimony, including a delay to allow new counsel to become familiar with the matter after Respondent changed counsel, Respondent, through counsel, informed the Division in January 2010 that he would not comply with the Demand for testimony.”


• TheStreet.com To File Annual Report Late On Accounting Review [WSJ]
TheStreet.com announced yesterday that it was pulling an Overstock, delaying the filing of its 10-K for 2009. The Company, founded by sound effects specialist Jim Cramer, said that in a filing that it and Marcum (its auditor) needed to “focus attention on matters related to the Company’s previously-announced review of the accounting in its former Promotions.com subsidiary.”

In other words, the SEC is snooping around the accounting which typically is not a good sign (just ask Jim!). Despite this little bump in the road, the company assures everyone that it will “be able to file its 2009 Form 10-K on or before the fifteenth calendar day following the prescribed due date.”

• Lowest and Highest Property Taxes [Tax Policy Blog]
This map, courtesy of Tax Policy Blog, shows Texas claiming top prize for highest property tax (as a % of median home value), with New Jersey not far behind:

Accounting News Roundup: Overstock.com Filing 10-K Late; Avoid Tax Related Status Updates on Facebook; IRS Is Getting to Most of Your Calls | 03.17.10

• Happy St. Patrick’s Day! Try to stay sober-ish at lunch today.

• Overstock.com Delays Filing 10-K, Reports Even More GAAP Violations, While Patrick Byrne Hides [White Collar Fraud]
Yesterday marked another SEC deadline that has come and gone, and if you’re one of those teams that has a client filing late, this means that your life is still not yours. Case in point, the KPMG team tasked with turning the ship around at Overstock.com still has some work to do as they filed form 12b-25 yesterday afternoon, notifying the SEC that the 10-K would be a tad late.


“Overstock.com nonchalantly lumped in its latest GAAP violations with other GAAP violations previously disclosed by the company on January 29, rather than separately disclosing them,” writes Sam Antar (emphasis original). Here are the new booboos:

Identification of amounts related to customer refunds and credits not properly included in the Company’s monthly reconciliation of customer refunds and credits to third party statements to determine the completeness and accuracy of returns expense.

The accounting for certain external audit fees on a ratable basis, instead of as incurred.

The recognition of co-branded credit card bounty revenue and promotion expense on an immediate recognition basis, instead of over time.

The late recognition of a reduction in the restructuring accrual for a new sublease and the recognition of interest expense related to the accretion of the restructuring accrual.

The Company reports that the filing will be delayed “until it has completed the restatement process and all procedures necessary,” to get things right. Patrick Byrne is nothing, if not thorough. Oh, and they mentioned that they’ll be reporting material weaknesses in their internal control system but, BUT! that they are still going to report their first annual profit. Shareholders can tepidly rejoice.

• IRS Uses Social Networks for Tax Probes [Web CPA]
The IRS has decided that the best way to discover your tax dodging ways is to look for clues in the one place no one can resist being completely and uncomfortably honest: Facebook.

Web CPA reports, “The Electronic Frontier Foundation has released documents uncovered from Freedom of Information Act requests, showing that the IRS as well as the FBI and other government agencies have been using social media sites like Facebook to collect information for investigations.”

Right. We suggest you stop talking about the six-figure 1099 you got that didn’t have any withholding and that you didn’t bother making estimated tax payments. Or roll the dice, lock up your privacy settings and continue with the financial TMI. Your choice.

• TIGTA: IRS on Track to Meet Goal of Answering 71% of Taxpayer Phone Calls After a 12-Minute Wait [TaxProf Blog]
The IRS is making good on its promise to ignore less than 30% of the phone calls from taxpayers needing help with their 2009 tax returns. They’re also getting to each caller in less than twelve minutes which is pretty good considering all the shit they’re putting up with these days (planes, packages full of personal items that might be a something, people having seizures, overzealous agents). If you’ve got an extra twelve minutes, call them up and thank them for their service.

Accounting News Roundup: Sarbanes-Oxley’s Credibility Takes a Major Hit; You Shouldn’t Hate the IRS; You Especially Shouldn’t Tell Inappropriate Jokes About the IRS | 03.15.10

• The Valukas Report on Lehman Brothers: Sarbanes/Oxley’s Credibility Takes a Dive [Re:Balance]
Has the Vakulus report exposed Sarbanes-Oxley as a, dare we say it, a waste of time? Perhaps that’s a stretch but the question of its effectiveness in the case of Lehman Brothers is certainly worth noting, “if Sarbox didn’t have an impact on Dick Fuld and Lehman, what possible good has it wrought?” asks Jim Peterson.

CNBC tried having this discussion on Friday although it didn’t seem to get anywhere. And some may say that SOx has resulted in a many positive developments, although this latest disaster may indicate that overwhelming support of legislation should be a sign that something doesn’t smell right, “the hindsight revelation of the Valukas report is that the inability of Sarbox to reach global-scale problems shows the futility of legislation so politically anodyne that it passed the US Senate by a vote of 96-0.”


In other words, SOx was sold as the cure-all to the problems revealed by Enron et al. and it made for some nice pandering during an election year. Once the election was over, Congress figured their work was done and nearly eight years later people are asking questions. The question now is, who will pick up the Lehman/E&Y torch in this cycle? There’s less than eight months until election day!

• Why I Don’t Hate the IRS — and Neither Should You [Politics Daily]
Okay, so maybe the IRS isn’t perfect but using planes, guns or more subtle forms of dissatisfaction doesn’t really help matters.

“While it may be superficially gratifying, it is absurd to use the IRS as a whipping boy. Is there anyone who really believes that we could live in a world where citizens expect the government to provide benefits without raising the taxes needed to pay for them?”

Last we checked, the answer to that question is yes, starting with the fans of Joe Stack’s Facebook page.

• TIGTA Is Investigating 70 Jokes/Inappropriate Statements About the Attack on the Austin IRS Office [TaxProf Blog]
Aaaannnd another thing. If you think you can tell semi-serious jokes about the IRS plane crash, you will be dealt with in a swift and serious manner. Expect to receive yearly financial rectal exams for the rest of your time on Earth. Someone in Utah should be paying especially close attention.

Accounting News Roundup: Lehman Failure Was a Team Effort; Boston Provident Ex-CFO Faces Prison After Guilty Plea; Who Wants to Watch a Toxic Asset Die? | 03.12.10

• JPMorgan, Citigroup Helped Cause Lehman Collapse, Report Says [Bloomberg]
There’s so much blame to go around: Dick Fuld! Every Lehman CFO that ever worked there! JP Morgan, Citi, Ernst & Young (who we’ll get to shortly), you’re all at fault too! But mostly Dick Fuld. He was putting lots of pressure on Lehman’s balance sheet magicians to reduce the bank’s debt. The report states that Fuld was “at least grossly negligent” and if it gets worse than that, you’ll certainly hear about it.

According to the Bankruptcy Examiner’s report, there was plenty of parties that didn’t help matters. JP Morgan and Citi were demanding more collateral from Lehman as the firm tried to stave off death while E&Y sat back as LEH got all hocus-pocus with their accounting. So pick a company or person you don’t like and point the finger. It sounds like an argument can be made.

All this amounts to largest bankruptcy in history and boy will it sell a helluva lot of books, movie tickets, and HBO subscriptions. Silver lining!


• Trader faces up to 6 1/2 years in prison [Bloomberg via Boston Globe]
Former Boston Provident CFO Ezra Levy pleaded guilty to securities and wire fraud after being accused of stealing $3 million from New York-based Boston Provident Partners, LP. Levy told the judge that he used the money to pay ‘personal expenses’ although no word on what the loot was. Presumably not a fleet of limos.

• We Bought A Toxic Asset; You Can Watch It Die [NPR]
Ever dreamed of owning just a small piece of a toxic asset just watch the slow, agonizing death? Of course! Some reporters at NPR chipped in to invest $1,000 in a bond with over 2,000 bad, really bad mortgages all for the sake of journalistic interest. If the team somehow manages to make money it’s going to charity.

Accounting News Roundup: Record Number of ‘Nonpayers’ of Income Tax in ’08; IRS Getting Used to Threats?; Donations for Chile Bill Passes House | 03.11.10

• Record Numbers of People Paying No Income Tax; Over 50 Million “Nonpayers” Include Families Making over $50,000 [Tax Foundation via TaxProf Blog]
For all the bellyaching Americans do about taxes, a large portion of them have managed to turn “Tax Day into a payday.” What the hell does that mean? It means that a growing number of people are considered to be “nonpayers” or people that get back every dollar withheld on their paycheck.

Sounds great, right? It’s my money, F the government, etc, etc. Well, the Tax Foundation is a little concerned because as the federal budget continues to grow, the income tax system becomes a less effective method of financing expenditures:


“[R]ecently released IRS data for the 2008 tax year show that a record 51.6 million filers had no income tax obligation. That means more than 36 percent of all Americans who filed a tax return for 2008 were nonpayers, raising serious doubts about the ability of the income tax system to continue funding the federal government’s ballooning expenditures.”

The Foundation concludes that if the trend of credits continues, the more people will get used to the idea that their refund from the Feds is annual windfall rather than an even greater inefficient government. “As the number of refundable tax credits continues to grow, more and more tax filers are seeing the IRS as a source of income, not something to which taxes are paid.”

• Eye Opener: Threats against IRS workers continue [Federal Eye/WaPo]
Despite so many people being “nonpayers” people still hate on the IRS, as we’ve covered. And actually, the IRS is okay with that. It’s expected:

“It would be a little naïve to think that we don’t get some threats over the course of doing business,” said IRS Communications Director Terry Lemons.

Perhaps it would be naïve but there seems to be shit going down every week. When does the ‘over the course of doing business’ become “day-to-day challenges that we deal with”?

• House Passes Chile Earthquake Donations Bill [Web CPA]
Yesterday, the House approved the extension of the deadline for donations made to victims of the earthquake in Chile, to considerable less fanfare than the Haiti bill from back in January. Presumably, Congress is under the impression that voters aren’t that concerned about what goes on in the southern hemisphere, thus the need for grandstanding on this issue isn’t needed.

The bill, sponsored by new Ways & Means Chair Sander Levin (D-MI) and Dave Camp (R-MI), would allow donations made through April 15, 2010 to be included on your 2009 tax return.