This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
Not that CFOs shouldn’t be blamed for irregularities but at least you’ll know what to expect.
Remember how
The Obama administration is slowly starting to pick its battles; starting with taxes on corporations’ foreign earnings. The administration has abandoned its proposal to eliminate U.S.-based multinationals’ ability to defer tax on income by shifting assets to foreign subsidiaries, according to a published report. While details are sketchy, Bloomberg reported on Tuesday that the administration’s proposed budget for fiscal 2011 shows that it has abandoned its plan to eliminate the so-called “check the box” system under which U.S. companies can defer U.S. tax on income by shifting income-generating assets to foreign subsidiaries without recognizing gains on the transfer. According to Bloomberg, the administration backed down in the face of intense opposition from multinationals. Observers note that Congress has tried to squelch the efforts of the Internal Revenue Service to clamp down on U.S. companies getting foreign tax breaks at the same time as U.S. tax breaks, although many of those breaks are facilitated by the check the box system. “Maybe the administration figured this was one it did not need to pick a fight on,” Jasper Cummings, a partner in the Raleigh, N.C., office of Alston & Bird and a former associate chief counsel of the IRS, said in an email to CFOZone Tuesday. “They have enough fights as it is.” Still, Cummings noted that the administration still has “a pretty long list of other changes” in international taxation that it is pursuing. Chief among them is a plan to tighten the pricing rules for transfers of intangible assets. As CFOZone reported last fall, one such proposal would crack down on asset transfers of employee compensation. In a paper released in May outlining its budget for the last fiscal year, the administration said it would “clarify” the treatment of transfers of intangible assets to include shifts of such expenses. At present, many companies avoid paying tax on gains resulting from transfers of so-called “workforce in place” under rules that also allow goodwill and “going concern” to go untaxed. In early 2007, however, the IRS issued a staff directive and audit guidelines warning that it was “improper” for taxpayers to classify workforce in place as goodwill and going concern. And an IRS official in September indicated that transfers of workforce in place should include the value of products or services the employees create if much of the work is complete at the time of the transfer. According to Bloomberg, the administration’s proposals to toughen the rules on transfer pricing would generate $15.5 billion in tax revenues for the coming year and along with other international tax changes produce $122.2 billion over a decade. Of course! It didn’t even occur to us that Florida CFO Alex Sink would be far too busy running for Governor to oversee the new CFO Depot. Accordingly, as is the rage in politics these days, there will be a Office Supply Czar to overlook this little treasure of savings. Not only does the video below inform us of this new critical position in the Florida government, the exact number of paper clips that were counted is made known: 402,419. This is not the news you hear when there is talk of “recovery.” Plus, it’s bad news for President Obama. The morning after our leader joined the rest of Americans and finally acknowledged that jobs are the most important issue facing the country, chief financial officers signaled they don’t expect the employment picture to improve anytime soon. Sure, 62 percent of the 371 corporate CFOs who participated in the latest quarterly survey conducted by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business said they do not plan any layoffs for this year. Big deal. Most companies have already gotten around to this cost-cutting measure. In fact, 77 percent of those surveyed said they already cut rank and file during the economic downturn. Just 44 percent of the total surveyed said they anticipate an increase in hiring at their companies. On the other hand, about one-quarter of the finance execs expect to cut back on hiring. Not too encouraging, huh? What’s more, non-cash payments seem to be high on the list of anticipated cutbacks. For example, executive perks were cited more than any other area for potential cutbacks (37.2 percent). Benefits in general ranked third (31.5 percent). “As far as the new normal is concerned, efficiency is the name of the game,” Marie Hollein, CEO and President, Financial Executives International, said in a press release. CFOs may become more confident later in the year, however. Virtually half of the respondents to the survey said they believe indicators such as bond yields, mortgage interest rates, U.S. unemployment rate and rising GDP will collectively improve and result in the start of a recovery in the U.S. economy in the second half of this year. Another 22 percent don’t expect these conditions to materialize until the first half of 2011. In general, however, CFOs indicated they were more optimistic about the U.S. economy in the fourth quarter survey than they were three months earlier. They are also more optimistic about their own company’s financial prospects than they were in the third-quarter survey. Or solve a state fiscal crisis! Enter Florida’s CFO, Alex Sink. Ms. Sink is taking cost saving initiatives to levels that the Big 4 either considered and found ridiculous (even for them) or will be implementing them in the near future. The staff that were found to hogging more than a reasonable amount of suppliers were fired on the spot. Okay, not really but yeah, staff were counting counting paper clips. Makes you glad to be working at public accounting, no? The latest idea from the CFO of the FLA that is the creation of the “CFO Depot”. This will allow employees to swap supplies as needed, as opposed to rummaging through every drawer at the their desk. Presumably this will cut down on violence in the workplace and will save the state money. Ms. Sink is encouraging other state agencies to set up similar systems, as this may save the state $14 million. Here’s the pitch: Yes, yes. There’s plenty of iPad talk going on out there but we’ll resist the urge and focus on the numbers here. Ron Fink wrote back in September about concerns over new accounting rules for revenue recognition doing little more than providing more areas of confusion for investors. Under the new rules, companies can book revenue based on estimated sales prices for all the components of “bundled deliverables” all at once instead of on their current fair value. The expectation is that the rule will boost upfront earnings for tech companies whose products combine hardware and software. Well, on Monday night, Apple made its first quarterly earnings report under the new rules and they certainly gave the tech darling a boost, but it’s unclear whether it will ultimately confuse investors. Indeed, they were likely distracted by Apple raking in $3.4 billion in net income for the quarter ended Dec. 26, up 50 percent from a year earlier. Apple went to great lengths to explain the effect of the rules on its financial statements. The company revised its financial statements for each quarter from fiscal 2007 through fiscal 2009, the period it’s been selling both the iPhone and Apple TV, which it had previously used subscription accounting for because it periodically provides free software upgrades and features for them. And in reconciling its first quarter 2009 to the new accounting standard, Apple showed net sales got a nearly 17 percent boost, while its cost of sales went up just 11 percent. That had the effect of stretching gross margins from 34.7 percent to 37.9 percent. Apple, which wasn’t required to adopt the new rule until the first quarter of its fiscal 2011, certainly is not objecting to the change. In its earnings conference call Monday, CFO Peter Oppenheimer said, “We are very pleased by the FASB ratification of the new accounting principles as we believe they will better enable us to reflect the underlying economics and performance of our business and therefore we will no longer be providing non-GAAP financial measures.” A tipster pointed us to Apple’s transcript from last night’s earnings call, noting that the company has indicated that they will no longer be providing non-GAAP measures. This is a result of the solid that the FASB did for Apple back in September: We are very pleased by the FASB’s ratification of the new accounting principles as we believe they will better enable us to reflect the underlying economics and performance of our business and therefore we will no longer be providing non-GAAP financial measures.White House Backs Down on Corporate Foreign Earnings Tax
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
The proposal would have eliminated companies’ ability to avoid tax on such transfers and forced the repatriation of earnings shifted in this way.Florida CFO: Office Supply Czar will Oversee Paper Clip Exchange
When you think about it, the appointment of a czar is a natural progression in the bureaucracy. If there is a specific problem (e.g. an overabundance of paper clips) appointing one individua to get on the problem like stink on a monkey is the best way to address said problem. The creation of a committee, while tempting, has run its course. Why appoint a team of 10 – 12 individuals to talk about a problem when you can get one person (with the appropriate qualifications) to make the solving of the problem their sole purpose for being on Earth? FEI Survey: Half of CFOs Don’t Plan to Replace Laid Off Positions
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
More significantly, nearly half of the CFOs that previously laid off people said they do not plan to replace those positions. Rather, they figure to deploy other strategies to increase production or output. For example, they plan to reinstate overtime for existing employees, turn to outside consultants, hire part-time employees, and/or make current part-time employees full time before rehiring new full-time employees.Florida CFO to Solve Budget Crisis with Paper Clip Exchange
CFOs have a tough job. Oh sure maybe a select few get to globe-trot with the Fab Four to the likes of Davos but the lion-share of them have to deal with less sexy tasks like, say, saving money.
Last year Ms. Sink had her staff count paper clips in order to reduce costs. No, seriously. “Her staff spent untold hours determining the Department of Financial Services has 537 pounds of paper clips, 37,601 binder clips and 17,425 pens.” In Non-iPad Apple News, A Look at Earnings Under New Accounting Rules
Editor’s note: This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for corporate finance executives.
Under subscription accounting, revenue and associated product cost of sales for iPhone and Apple TV were deferred at the time of sale and recognized on a straight-line basis over each product’s estimated economic life of 24 months. This resulted in the deferral of significant amounts of revenue and cost of sales related to iPhone and Apple TV. The changes had the effect of slimming the company’s balance sheet considerably. Assets at the end of its fiscal year 2009 were reduced by $6.4 billion and liabilities were cut by $10.2 billion, giving a $3.8 billion boost to shareholders’ equity.Will Apple’s Accounting Encourage Others to Drop Non-GAAP Measures?
Our tipster noted that since using non-GAAP measures are a commonly used by companies and analysts, Apple’s declaration that they would not be “providing non-GAAP financial measures,” could potentially change things. It’s one thing if say, Koss were to say they’re not going to provide non-GAAP numbers, but this is Apple.
The company enjoys a top of the mind position, so other companies may embrace this method of engaging with analysts and other users. And since Apple isn’t shy about controlling the information they provide (e.g. Steve Jobs’ pancreas) this seems to be another way for them to dictate the information they are providing.
It’s not a stretch to say that many companies try to emulate Apple; whether or not they will emulate Apple’s financial reporting methods remains to be seen. Strange, because we figured they were just innovative on the gadget front.Your Suspicions About the Controller Not Liking You Are Well Founded
Editor’s Note: A controller friend of GC — who is clearly in the Holiday spirit — presents their top methods of annoying the hell out of their co-workers. We have kept their identity secret* for their own protection. No one likes tragedy around the holidays.
Top ten ways a Controller can piss off co-workers:
1. Start charging for stamps.
2. Stop reimbursing your #1 sales guy’s T&E and when he calls to ask you where his check is tell him to “get fucked” and hang up.
3. Get up during a company meeting and announce that the new per diem has been reduced to $20 a day and that all employees must stay at La Quinta when traveling for business.
4. March into the CFO’s office and tell him your quitting and the books are fucked. Give him/her about 30 minutes to digest and then send them an email to say “just joshin’ ya, boss”.
5. Siphon off ALL the company’s money to an offshore bank account then parachute out the window into your Ferrari waiting below.
6. Write an all company email on December 25th announcing massive layoffs and your recent promotion to CFO.
7. Cancel the holiday party for “budgeting purposes”.
8. Announce that you need to sublease most of the company’s office space and that all employees will be doubling up in offices.
9. Let your corporate checking account go into the negative so that all your year-end bonus checks bounce.
10. Tell your staff that in order to close the books in three days you’re doubling the staff but and they’re going to have to work in shifts.
By,
Anonymous Controller
*For a price, certain information (read: name, address, usual routine) could be provided.Renegotiate Everything NOW
Editor’s Note: Chad Cohen is a licensed CPA in California and currently serves as a Senior Director of Finance and Corporate Controller for Zillow.com in Seattle, WA. He has over 13 years of experience in corporate finance, audit and accounting; primarily in the technology and entertainment sectors. He has also functioned in financial planning and Sarbanes Oxley compliance efforts. Previously he also worked as a Big 4 auditor of high technology clients both domestically and abroad. Chad spent the first 12 years of his life in Hong Kong and as such enjoys eating dimsum in Chinatown and practicing Kung Fu in his free time. You can follow him on Twitter @cfolounge.
Unemployment is over 10%, the US dollar is going through the floor as interest rates continue to tank and Congress wants to push through a 2,000 page, $1 trillion health care bill. It might appear that our country is coming apart at the seams but if you are riding out this tidal wave, now is the perfect time to take advantage of the crappy macro conditions and start turning the screws to your vendors.
I don’t care if you’re an accounting manager, a senior buyer, AP clerk or CFO; everyone in the finance department should have a part in looking for ways to save the company some coin and NOW is the perfect time.
Here are a few ideas off the top of my head:
Commercial real estate is in the crapper &mdash Talk to your landlord about extending your lease and locking in or lowering your rents for the next 3 to 5 years. Get concessions, push for free TIs, get a couple more parking spaces, etc.
Strong Arm Your Outside Accountants &mdash Accounting firms have been laying off employees left, right, and center so lock in a long term contract and negotiate a steep discount on standard audit rates and other services like taxes. OR have a bake off with other accounting firms. This will get your auditors attention and encourage them to drop their rates to be competitive with these other firms. BDO, Moss Adams, RSM, etc. also audit public clients (it’s not just the Big 4 firms, folks) and their fee structure is 20 – 30% less than the Big 4. Don’t be afraid to switch firms or give parts of your accounting business (tax compliance, SALT, audit, etc.) to other firms.
Contracts &mdash If you find yourself in the middle to end of a contract term, try to extend your subscription, maintenance or service contract for multiple years in exchange for steeply dropping prices. Mandate that your IT, sales or marketing departments bid out services to multiple businesses when deciding who to give your precious business to. Find a free service that can do what your paid service does &mdash these do exist (they’re usually crappier but you may not need the “Cadillac”).
Price out hardware purchase orders with new vendors &mdash You’ll be surprised what others are willing to do now to get your business. You can usually negotiate better at quarter-ends as sales departments have quotas and targets to meet.
I could go on and on but I think you catch the drift.
I read a book on negotiations a couple years ago that encouraged its readers to negotiate “fearlessly”. I couldn’t agree more.
Thoughts?CFO of the Week: Chen Tang
Not to mention father of the year and buddy for life.
Chen Tang, a former CFO of a private equity fund in San Francisco, is being accused of running an insider trading ring that includes friends, relatives, and his two daughters, aged 9 and 11.
Allegedly the ring made off with $8 million trading on non-public information related to Tempuc-pedic International, Inc. and Acxiom Corporation.
Tang’s daughters are considered relief defendants, as trades were carried out in brokerage accounts opened in their names. Personally we’d like to see them charged as the masterminds in this case but nothing in the complaint indicates that they knew anything about the scam.
The SEC stays on a roll with this latest bust, however this is the first case that we’ve heard of that includes minors (but still probably have maturity levels that are above Mark Cuban’s). The SEC obviously has to maintain the blind justice concept, so no mercy will be shown on the two pre-teens who probably spent the money on Miley Cyrus tickets.
The SEC’s latest haul includes two kids, aged 9 and 11… [FT Alphaville]
SEC Charges Former CFO and Six Relatives and Friends in California-Based Insider Trading Ring [SEC Press Release]MySpace, Trying to Remain Relevant, Hires a CFO
Maybe it won’t help but at least they hired one. There may be something to the strategy of not having a CFO but we’ll be damned if know what that is. Hey, if you’re making money hand over fist and getting the checks cut on time, who gives a damn, right?
Unfortunately for MySpace, their ever-shrinking market share has maybe gotten to the point where some semblance of a financial strategy may be necessary. Enter Mark Rosenbaum who will surely help turn this ship around. Or maybe not, who knows. Good luck man.
MySpace Hires Finance Chief [WSJ]Former Citi CFO Doesn’t Hate Life Enough, Takes Position with Bank of America
In what appears to be serious case of self-loathing, former Citigroup CFO, Sallie Krawchek has just taken a position to run the global wealth and investment division at Bank of America.
It’s rumored that Krawchek left Citi because she and Vikram couldn’t play nice, so apparently she thinks that working for a rarely sober Ken Lewis will be a much more manageable.
Former Citi CFO takes Bank of America job [AP]