Category:

BREAKING: Tax Season Leads to Poor Work/Life Balance for Accountants

This newsflash is brought to you by OfficeMax’s National “Tax it To Me” survey:

For busy accountants responsible for filing taxes on behalf of the approximately 82 million out of 228 million American adults who opt to use professional services, tax season is perhaps even more emotionally wrought. A busy plate often leads to a poor work/life balance, botched sleep schedules, poor eating habits, and problems in personal relationships.

And if you can believe that, the survey also found that taxpayers blame procrastination of filing their returns on nervousness, confusion and laziness (among other things). Now remove your hand from your forehead and get back to work.

[via The Hill]

Did PwC Help the Fed Cook Its Books?

After every Federal Open Market Committee meeting, you can peek into the Fed’s brain in a highly succinct fashion when the statement and minutes are released shortly after it ends but five years must pass before the full transcript of the meetings is released to the public. If you’re playing along at home, that means the FOMC transcripts should be full of all sorts of intriguing info specifically pertaining to the market collapse of 2008 on or around 2013.

But we’re talking about the 1999 minutes today and that’s where Adrian Douglas at Market Force Analysis comes in. He decided to read through some of the now-available minutes (hey, we all need hobbies) and look at what we have here. Did PwC help the Fed brush out a material accounting boo-boo?


Maybe when you actually create the money and the financial accounting handbook to go with your audits you can get away with sort of thing but something about this just doesn’t sit right.

This is System Open Market Account Manager Peter Fisher speaking to the committee:

Last spring, as members of the Committee will recall, we entered into a series of transactions with the ESF to re-balance our euro and yen holdings so we could come to a better split both in terms of total holdings and the currency mix. This involved a number of transfers of ownership of a series of investments and resulted in quite a significant amount of accounting activity. In the course of reviewing that, our own accounting staff identified an error that had been introduced in the prior year in our treatment of the premium on bonds held in the accrual account, overstating the accrual account by about $5 million. In the course of confirming that, they identified an additional $26.6 million overstatement in the accrual account for interest on foreign currency investments. We have had a number of staff members working full time trying to trace the source of that $26.6 million overstatement. They have worked back through the records to December 1994, before which detailed records at the transaction level just no longer exist due to the routine and appropriate destruction of documents.

The Board examiners were at our Bank to conduct an examination of the System Open Market Account in September and PricewaterhouseCoopers also has looked over our methodology to try to trace this overstatement back through time and find its source. PricewaterhouseCoopers is confident that we have traced it back as far as we can. They have tested our work papers and agree with our conclusion that we simply can’t go back any further.

After a quick back and forth over whether or not this could be a diversion involving a few folks within the Fed working together to funnel out the money and shooting that theory down, they present the solution:

The Board’s staff and our accounting function at the New York Fed have worked out an accounting treatment to correct for both the $5 million and the $26.6 million errors. That involves reducing the accrued interest asset account by the entire $31.6 million, with an offsetting reduction in interest income on foreign currency investments. We will make that adjustment before the end of the year and spread it among all the Reserve Banks. Of course, for all of us with responsibilities for SOMA this is an embarrassing, indeed humbling, event. As a technical matter, though, I understand that PricewaterhouseCoopers is comfortable with the conclusion of both our accounting and audit function and the Board staff that this is not a material event for purposes of disclosure for any Reserve Bank.

That’s right, the Fed fudged the numbers to make things add up right and PwC gave it the all clear. Perhaps I’m a bit ignorant on how things work but “working out an accounting treatment” to scrub out over $30 million in errors is no easy feat, maybe friend of GC and former criminal Sam Antar can give us some hints on how to accomplish such a task?

Notice also that no one else gets the privilege of “the routine and appropriate destruction of documents,” leading us to ask the obvious question: how is it they get away with it?

Accounting News Roundup: Swiss Firms to Get PCAOB Oversight; Some Married Gay Couples Refuse to Lie on Tax Returns; ADP Founder Dies | 04.05.11

Swiss Accounting Firms to Get U.S. Oversight [WSJ]
The agreement between the U.S. Public Company Accounting Oversight Board and Swiss authorities, announced Monday, allows the PCAOB to review Swiss audit firms whose clients trade in the U.S., including multinational companies with operations in Switzerland. The PCAOB conducts regular inspections of the audit firms under its purview to assess their performance and their compliance with accounting rules and professional standards.

Discover names Graf as new CFO, replacing Guthrie [BBW]
Discover Financial Services on Monday named R. Mark Graf its new chief financial officer, replacing Roy A. Guthrie, who is retiring from the position after six years. Graf, 46, will also hold the titles of executive vice president and chief accounting officer for the Riverwoods, Ill.-based credit card company beginning April 11. He most recently worked as an investment advisor with private equity firm Aquiline Capital Partners in New York.

Married Gay Couples ‘Refuse to Lie’ on Tax Forms [Bucks/NYT]
Some same-sex married couples are refusing to file their federal tax returns separately this tax season, as part of a movement demonstrating that they’re no longer content to quietly comply with the federal law that does not recognize same-sex marriage. And in some cases, these taxpayers will pay Uncle Sam more when they do so.

The Curious Case of the Fed Analyst Fired After Asking Too Many Questions [JDA]
A very interesting and thought-provoking post from AG (sans f-bombs).

Ventry Presents Americans Hate Paying Taxes Today at Seattle [TaxProf Blog]
From the abstract: DUH.

The Gnome of Nebraska: Warren Buffett, Berkshire Hathaway, and Self-Dealing [Forbes]
Francince is not impressed with the whimsical, folksy investing advice from O-squared (or cubed, if you prefer).

“Bloomberg Thinks He’s Stopping People from Smoking” [ATR]
Loosies are the new black market gold mine in Manhattan.


Henry Taub, a Founder of a Payroll Firm That Became a Global Giant, Dies at 83 [NYT]
Henry Taub, a founder of the payroll company that grew into the global giant Automatic Data Processing, died on Thursday in Manhattan. He was 83 and lived in Tenafly, N.J.

AICPA: Financial Instruments Compromise Potentially Flawed [JofA]
Although we recognize the need for convergence, the current proposal does not address many issues and may not be conceptually sound,” FinREC said in a letter to FASB. “Due to the short comment deadline, we do not have sufficient data to provide adequate input, which makes it difficult to determine whether this proposed Standard would work in practice.”

Your Chinese Company CFO Resignation Du Jour: Duoyuan Global Water Inc.

It could be that Stephen Park really is pursuing another professional opportunity but most people (and by that I mean investors) don’t believe that story.

Duoyuan Global Water Inc. (DGW) said Chief Financial Officer Stephen C. Park would resign from the China-based water treatment equipment supplier to pursue another professional opportunity. Park will remain with the company until the completion of a third party review or until June 30, whichever is earlier. Duoyuan said it is in the process of selecting an international search firm to assist in appointing a successor. The company’s American depositary shares slid 7.3% to $3.70 in after-hours trading.

Duoyuan Global Water CFO To Resign [Dow Jones]

Don’t Let Anyone Tell You That Some People Aren’t Passionate About Governmental Accounting

As you may have heard, many states in our union have budget troubles; one of the biggest problems being underfunded pensions. Reuters reports that estimates put the gap in the range of $700 to $3 trillion. Despite the range being akin to saying, “I’m somewhere between Ohio and Nevada” the shortfall has gotten a whole host of people bent out of shape. It’s gotten so bad that Bill Gates has chimed in, evoking Enron for crying out loud (and here we thought that was only for journalists who cover accounting once every decade).

All this has the GASB to going back to the drawing board as David Bean, the GASB’S Director of research and technical activities, announced that the more disclosures will be proposed this summer. There are plenty of areas that up for debate but Mr. Bean mentioned that certain topics get especially contentious, apparently to the point that it comes to blows.

“Where the fistfights occur is with the discount rate,” Bean said about returns on pension funds’ investments, which affect how well a government can cover those liabilities. The board would require governments to disclose their long-term expected rate of return on plan investments as determined by actuaries, Bean said. “This is the actual expected rate of return as recommended by the actuaries,” he said. “We’re going to make very clear this is not a number that is pulled out of the air. This is based on solid science.”

It’s pretty clear that this problem will only get worse. If you were suddenly told that you had to use science rather than a dartboard, wouldn’t you want to punch someone’s lights out?

U.S. wants states to reveal more about pension funding [Reuters]

And the Coolest Accounting Firm Is…

After four rounds of bracket magic including a back and forth championship match-up, we have our very first winner of the Going Concern March Madness: Coolest Accounting Firm competition. Let’s look at the final bracket.


For those of you that haven’t been refreshing the page for the last 48+ hours, Rothstein Kass pulled their final upset, this time of West Coast rival Moss Adams. Along the way RK dismantled the biggest of the Big 4, Deloitte, McGladrey and BDO.

You may think that such a run of upsets was the result of the double-entry stars perfectly aligning themselves but RK Co-CEO and Managing Principal Steve Kass explained it differently, “Many will look at results and call Rothstein Kass a ‘Cinderella story,’ or characterize our victory as an upset. Though we embraced the underdog role, we knew that our low seeding was more likely a function of strength of schedule. The fierce competition we encountered during the season prepared us for the rigors of the tournament, while quality of our recent recruiting classes left us confident that we could make a run at the title,” Mr. Kass said. “As thrilled as we are by our success, however, there will be no champagne sprayed in locker room celebrations, nor ticker tape parades through the halls of our offices. Over the years, we’ve observed that the more time you spend reflecting on how cool you are, the less time you have free to do cool things. Notwithstanding, winning was pretty cool!”

So it sounds like it’s back to business as usual for RK. Undoubtedly, this victory will catapult them up Vault’s prestige rankings making for a much more difficult tournament next year but for now they get to enjoy the spoils of a champion (which, in this case, is nothing – our publisher wouldn’t spring for a trophy but he’d love to hear from you about it). So congrats to Rothstein Kass on a great run and to the rest of the firms out there – get better.

Oh, and anyone expecting a “One Shining Moment” montage needs to slap themselves across the face right now. And then again.

The SEC Is Aware That Some Chinese Companies Have Shoddy Accounting

Or in some cases, just plain fraudulent.

In prepared remarks at an investors conference, Luis Aguilar said he is increasingly concerned about the proliferation of small private companies that elect to merge with public shell companies in lieu of more rigorous methods of becoming public, such as a traditional IPO. “While the vast majority of these companies may be legitimate businesses, a growing number of them have accounting deficiencies or are outright vessels of fraud” Aguilar said, speaking at a Council of Institutional Investors conference here.

And in case you missed it the auditing isn’t so hot either:

”There appear to be systematic concerns with quality of auditing and financial reporting,” he said. “Even though these companies are registered in the U.S., we have limitations when it comes to enforcing U.S. securities laws with them.”

US Securities Regulator Aguilar Sounds Backdoor-Merger Alarm [Dow Jones]
SEC official concerned with ‘back-door’ listings [MarketWatch]

Confidential to The New York Times: GE’s 2010 Tax Return Isn’t Finished Yet

Remember that New York Times story that put the universe on notice that General Electric made truckloads of money and ended up with a $3.2 billion “tax benefit”? It also mentioned that their tax department is known as the “best tax law firm” and is staffed with a small army of former Treasury whiz-kids and turbo-tax nerds to legally minimize the company’s tax obligation. The story got all sorts of people worked up from Jon Stewart to Henry Blodget and it whipped up a small amount of hysteria amongst the masses who had the courage to read an esoteric tax article that went on for more than one page.

Today a new report from ProPublica (a rebuttal of sorts, since they got scooped by the Times) is “Setting The Record Straight on GE’s Taxes“:

Did GE get a $3.2 billion tax refund? No.

Did GE pay U.S. income taxes in 2010? Yes, it paid estimated taxes for 2010, and also made payments for previous years. Think of it as your having paid withholding taxes on your salary in 2010, and sending the IRS a check on April 15, 2010, covering your balance owed for 2009.

Will GE ultimately pay U.S. income taxes for 2010? After much to-ing and fro-ing — the company says it hasn’t completed its 2010 tax return — GE now says that it will pay tax.

Also, part of the ProPublica report clarifies that the whole “financial reporting vs. tax reporting” thing:

GE’s 2010 financial statements reported a $3.25 billion U.S. “current tax benefit,” which is where the Times, which declined comment, got its $3.2 billion “tax benefit” number. But a company’s “current tax” number has nothing to do with what it actually pays in taxes for a given year. “Current tax benefit” and “current tax expense” are so-called financial reporting numbers, used to calculate the profits a company reports to shareholders.

In other words, the Times left out the tricky stuff or maybe just didn’t a bang-up job explaining the tricky stuff. But framing the shrewd tax planning and lobbyists working for a giant corporation is far more provocative than book-tax differences and defining deferred tax assets. Relevancy be damned!

Setting The Record Straight on GE’s Taxes [ProPublica]
Also see: GE and the power of iterative journalism [Felix Salmon/Reuters]

The AICPA Wants Your Thoughts on What the Future Holds for CPAs

Now is your chance to tell the AICPA exactly where you think the industry is headed in the future. CPAs don’t get many chances to be this candid about their chosen profession, so please make it count.

CPA Horizons 2025, coined “the profession’s effort to anticipate and plan for the future,” is a short survey that seeks to get professionals’ opinions on where the industry is going and the challenges it faces to get there. Participants are faced with the following directive:

Growing global competition, rapid technological development and increasing regulation are impacting the CPA profession today and will continue to in the coming years. As a result of the changing environment, how can the profession remain competitive? Will services being requested of the profession change? Will the profession’s core values, core services and core competencies remain the same or need to change to allow the profession to continue to best serve its clients and employers?

CPA Horizons 2025 is about your future and the future of your profession. It’s about forging a path to ensure both remain competitive in a rapidly changing world. Your participation in this profession-wide endeavor is vital in helping shape our collective future.

We are soliciting the thoughts of thousands of CPA’s along with other voices via this interactive survey, online discussion forums, in person forums and direct outreach to AICPA committee members, leaders in the profession and beyond. We ask for 15 minutes to help map out the next 15 years. Your 15 minutes will be on a limited # of questions that is a subset of a larger group of questions which will serve to identify what is on the Horizon impacting the profession. Your participation is important. What may the future hold? Help tell us.

Beyond answering simply yes or no questions based on pre-determined criteria, you will have the opportunity to write in your answers regarding trends, opportunities and challenges facing the profession. You will also get an entire box to fill in what you think the profession should do to remain relevant, a huge opportunity for those of you who feel the current food chain just isn’t doing it for you.

And then you get to watch a video. Frankly I’ve got to say this video was pretty depressing, showing how the U.S. is falling behind in the global scheme of things, continuously getting spanked by India and China when it comes to science, math and the economy. Ouch.

Take the survey here.

Accounting News Roundup: Should Nonprofits Be Required to Disclose Their Donors?; Employees at LECG Dwindling; GE Tax Planning for Commoners | 04.04.11

Widespread cracks found on Southwest jet-NTSB [Reuters]
Evidence of widespread fuselage cracks and fatigue were found on a Southwest Airlines Co (LUV.N) jet that made an emergency landing in Arizona with a hole in the cabin, a U.S. safety investigator said on Sunday. The incident on Friday prompted Southwest, the largest domestic airline by passengers flown, to ground planes and cancel hundreds of flights over the weekend so it could inspect its older model 737-300s. Small subsurface fuselage cracks were found on two other planes, which may require repairs, Southwest said.

Bring Donors Out of the Shadows [NYT]
The billionaire industrialist brothers Charles and David Koch have drawn sharp criticism for their extensive giving to libertarian causes. Though some of their organizational ties are public, many are unknown, thanks to a provision in the tax code that allows the Koch brothers and other donors, on both the left and the right, to conceal the recipients of their largess, even as they get to write it off on their taxes. Fortunately, there is a solution to this problem: require all nonprofit organizations that engage in political advocacy to reveal their donors.

You’re not writing me another big check? You tax hiker! [Tax Update Blog]
Refundable tax credits draw the ire of Joe Kristan.

Lil Wayne falls in deeper tax hole [Tax Watchdog]
Perhaps this is why he was working so hard while in prison.

Disintegrating accounting firm LECG down to 70 employees [PBJ]
LECG Corp., which listed 1,200 employees just three months ago, said it now has fewer than 70 employees, the majority of whom management expects to leave within the next 30 days. The Devon, Pa.-based accounting firm has been selling off practice groups and paying down its $30 million debt. These transitions will not result in any proceeds to LECG’s common stockholders and it is not anticipated that future operations will, either.


Rich Are Targeted in IRS Audit Offensive [WSJ]
According to the agency’s latest statistical report for the fiscal year ended Sept. 30, the percentage of taxpayers who were audited increased in every category of adjusted gross income above $500,000, compared with a year earlier. The biggest jumps came at the top of the income ladder. About 18% of Americans earning at least $10 million were audited in fiscal 2010, up from 11% in fiscal 2009, according to the IRS. For those earning $500,000 to $1 million, the audit rate rose to 3.4% from 2.8%.

How You Can Pull a GE on Taxes [SmartMoney]
Without paying for all the lobbyists and tax lawyers.

Office Depot Loses Tax Credits; CFO May Have Lost His Lunch

Office Depot CFO Mike Newman can’t handle – CAN’T HANDLE – the bad news handed down by the IRS:

“I’m sick about it,” Newman said of the mistake the company and its advisors made in thinking Office Depot could use tax credits of $80 million last year and $63 million this year, calling the mistake his responsibility. Office Depot and its tax advisors believed the company was eligible to use prior losses to get tax credits under the American Recovery and Reinvestment Act of 2009, but the IRS told the company that other tax rules superseded the ones under which Office Depot was using to determine eligibility.

Of course we’d love to know who this “advisor” is that Newman is referring to. Since Deloitte earned over $589k in tax fees for fiscal year ’10 you could conclude that he’s referring to D. It’s certainly possible that it’s someone else so we invite you to come up with some theories.

Office Depot Off; Explains Impact Of IRS Tax-Credit Denial [Dow Jones]

The Waning Days of Tax Season Are Wearing Thin on at Least One Accountant

Michael Grossbach is taking it out on the help.

Michael Grossbach, 32, surrendered himself to police when he learned of his impending arrest for allegedly assaulting his office assistant on March 5, police said.

“Apparently there was an argument and he lunged at her, grabbing her hand forcefully,” said Sergeant Michael Buck of Irvington Police. “There were injuries, but nothing serious.”

Sergeant Michael Foley arrested the Garrison resident for having illegal physical contact with his 31-year-old employee at his accounting firm at 106 North Broadway. The defendant was charged with assault in the third degree, a misdemeanor. According to police, if convicted he is facing anything from a fine to one year in prison.

Irvington Accountant Charged with Assaulting His Assistant [RP]