When accounting goes unaccounted for
While everyone has basically forgotten how bent out of shape they were at GE for their tax savviness (all legal!), the company’s CFO mentioned today that earnings are looking decent regardless.
At the company’s shareholders meeting Keith Sherin said “This is the best earnings outlook we’ve had in the last 10 years,” which indicates that tax planning might not be everything. [Reuters]
Whenever you feel unmotivated to get your accounting degree or are concerned you’ve made an awful career decision, just think about this Iowa woman who worked 19 long, tedious-ass years to get her bachelor’s in accounting.
We’re totally OK with this woman being too busy to take the CPA exam, this is the ultimate excuse to be unable to get through the exam in 18 months. Bow to her greatness and insantly feel guilty for being greedy when it comes to compensation and slacking so hard on the job.
In 1992, a gallon of gas cost $1.13, Bill Clinton won the presidential election and Kathy Vitzthum took her first class at Iowa State University.
Vitzthum has taken about one class each and every semester since. For 40 semesters. Since Miley Cyrus was born. Since Charles and Diana split up. Since Ross Perot pulled out his charts and pointer on TV. Since the World Wide Web was in its infancy (and text only).
On May 7, the 48-year-old Vitzthum, who lives in Slater, graduates summa cum laude from Iowa State. She has achieved her goal — a bachelor’s degree in accounting — after juggling family and career with finals and papers for 19 years.
Now, we don’t judge as we all have our different career paths but while congratulating this woman for her epic accomplishment, it’s wise to point out that we don’t necessarily recommend this bundle of choices for just anyone. It’s easiest to go college, then pass the CPA exam or start work (it’s usually easiest to do the exam in-between school and starting work), then get married and/or have kids. You are welcome to do these in any order you like, we just wouldn’t feel right if we didn’t point this out.
I’m not sure what you all were doing in 1992 but I was in 6th grade. Think about that for a minute next time you hate your life and/or career decisions.
That said, it’s not as if investors can be everywhere at once. Audit committees could stand to get better at sharing information.
Liz Murrall, director of corporate governance and reporting at the Investment Management Association, strongly refutes this claim. “Investors do care”, she insisted, saying “no one wants to see an auditor in place for 50 years”.
However, Murrall warned that investors cannot engage with every company, and therefore cannot be expected to watch over audit committees’ shoulders to check every appointment. “Shareholders want the option of being involved, but don’t want consultation to be mandated – they don’t always have the time or resources.”
Transparency is the order of the day, according to the IMA. If audit committees increased disclosure about the tender process, shareholders would be more motivated and able to engage, boosting choice and competition in the market.
Investors ‘do care’ about audit competition [Accountancy Age]
That, according to a report in the Minneapolis/St. Paul Business Journal:
At risk are millions of dollars, the company’s reputation and the entire health care practice now led by a Minneapolis partner, according to a lawsuit recently filed by the accounting, consulting and tax firm against the three rainmakers who went to New York-based J.H. Cohn. Bloomington-based McGladrey and the former partners said they’d rather not discuss the dispute. Public records show that McGladrey is seeking a federal court order to keep the partners away from their clients
And unfortunately, that’s all we know. The MSTPBJ is behind a paywall (and my publisher is currently not springing for a membership) so we can’t really tell you much more than that. But we do love a good Benedict Arnold story, so we called around and are anxiously awaiting both firms to call us back. In the meantime, if you’re in the know get in touch or discuss below.
Joe Adams is 30+ year vet of the firm and gets some high praise from the M&P Chairman of the Board, Jerry Bourassa, “His commitment to quality and McGladrey’s success make him an excellent choice for the Managing Partner position. I’m looking forward to working with him in his new role overseeing McGladrey & Pullen’s national strategy and business operations.”
Joe takes over for Dave Scudder who turned in his papers back in February. Joe was kind enough to give Dave a nod of appreciation in the press release, “I’m looking forward to these new responsibilities, and continuing the excellent work that Dave Scudder did in this role.” He gets the big chair on May 1st and we assume cake and punch will be served but an appearance by Natalie Gulbis has yet to be confirmed. [McGladrey]
They want to replace a mildly progressive tax with a decidedly regressive tax and make the argument about fairness? You can have an articulate argument about whether income taxes deter economic development. You can have an argument about whether such taxes lead to out migration of people and firms. Heck you can have a philosophical argument about whether society should be able to tax the fruit of your labor (or your trust fund). But you cannot argue with a straight face that replacing an income tax with a broad based sales tax (one that taxes necessities) is fair. That insults people’s intelligence. [David Brunori]
Sometimes when your profits need a little boost, the best thing to do is change an accounting policy, amiright?
CapitaLand Ltd., a property developer in Singapore has pulled the double-entry sleight of hand to get a big boost in their first quarter profits:
The company […] said net profit for the three months ended March 31 was 101.5 million Singapore dollars (US$82.1 million), up from a restated S$29.8 million a year earlier, and was “underpinned by higher development profits and portfolio gain.” The company’s year-earlier net profit before the revision was S$115.4 million.
Okay, “higher development profits and portfolio gain” sounds a little vague so let’s see what else is helping these numbers:
The large increase also reflects a change in comparable figures for the year earlier due to an accounting policy change at the start of this year.
The new policy means overseas projects and local projects on a deferred payment scheme have to be fully completed before they are recognized.
This will result in “income recognition that is lumpy and back-ended, thus creating more volatility in profit recognition even though the underlying projects’ cashflows have not changed,” CapitaLand said in a statement.
Investors will likely view the results with caution as a result, analysts say.
“As CapitaLand has mentioned, this new policy gives rise to lumpy earnings that are not very meaningful, especially since over 50% of CapitaLand’s earnings are from overseas,” CIMB analyst Donald Chua said, adding other developers with large overseas market exposure will also be affected.
[T]he tediously-reported proclamation of real convergence commitment has never been more than a smokescreen behind which the divergent interests of the Americans and the Europeans have knocked heads to the point of insensibility. (For which, recall the continued fudging of the SEC as to whether, if ever, that agency is even going to confirm a date certain on which to decide if to weigh in or not […].) Why no-one has called the question on this endless charade reflects the two-level fantasy in the dialog: the IASB and the FASB both pretend to believe in the desirability of fully-converged accounting standards, and the community of financial statement issuers and users pretend to believe them. [Re:Balance]
Earlier I attempted to give a BDO senior manager some perspective on the how to deliver the news that he was jumping ship. Oddly enough, a friend of GC also sent us this message yesterday:
Since this ‘Tis the Season’ for attrition, it would be interesting to see a survey on who is looking for employment beyond their current employ.
So since we like to get a feel for such things, we’re putting on a little poll to see how many people are grabbing life preservers. Vote in the poll after the jump and discuss the particulars in the comments.
Once again, we call attention to troubles from across the Pond, courtesy of AccountingWEB UK.
This time, the Single Fat Accountant is dealing with his uncontrollable jealousy over Kate and Willy’s upcoming nuptials:
I would like to publicly admit that I am jealous of the about to be married Royal couple. I do not want to know anything about them. I would prefer if there a total media blackout on the whole wedding. This to my big disappointment will not happen. As the time is getting nearer for the big day, the media has gone frenzy over the upcoming nuptials.
I know I should be a decent human being and wish them all the very best for the future like most of the very class conscious Britain. l cannot lie and pretend to join in the well wishes. I know this does makes me a mean and a horrible person.
Isn’t saying disparaging things about the Royal punishable by death in Britain? Or something? Well, single fat accountant it’s cool because most of us here in the States (accountants or not) don’t give a flying rat’s ass about Kate and Willy. Are they a good-looking couple? Sure. Do they enjoy wealth and social status that most people would kill for? Obviously. Will their marriage crash and burn in an ugly affair that results in another Royal Family scandal that will result tabloid fodder for years to come? We give it a 50/50 shot. The point is – why are you jealous? It doesn’t make any sense. Are you not capable of not clicking on their pictures or stories with their names in the headline? You’re wasting your precious utilization, friend. Get back to your spreadsheets.
Can you guys help cheer our friend up? Tell him everything is cool despite his lack of bloodline, wealth and hot fiancée.
I’ll tell you how I’m celebrating – continuing my successful string of years not celebrating. Adrienne? She’s experimenting with home remedies for a stomach flu. But never mind our problems, you guys have somehow survived the January to April stretch without going nuts, assaulting someone and successfully avoiding awkward sexual advances (the latter two sometimes happening at the same time). That means you deserve to celebrate; whether or not that’s on company dime is another question.
Back in the KPMG days, I attended a pretty good throw-down at the Central Park Boathouse for the Financial Services group but that was in the spring of 2008 when the Bear Stearns embers were still hot and everyone who worked on the Citi still thought they worked for a great client (that’s what I was told, anyway). In 2009, end of busy season soirees were a much more muted with individual team celebrations because the world had basically just ended.
Last spring it sounded like it was more of the same. Nothing too out of control and individual teams were left to celebrate how they saw fit. Of course with a successful fiscal 2010 and fiscal 2011 looking good, firms may be ready to jump into the ostentatious end of busy season blowout parties once again. Maybe your partner(s) is/are taking you to Peter Luger’s; maybe it’s an intimate evening at the his/her home where some entertainment will be provided (hopefully from inside the firm). Or maybe it will just a drinks and awkwardly dancing the night away. We can’t possibly know since we don’t get invited to such things (at least officially), so discuss your plans, send us your invites or come up with your own ideas about how to best celebrate getting your life back.
Deroy Murdock seems to feel that the government should revisit its accounting practices since it appears government accounting is little more than legal fraud. Obviously he has absolutely no idea how accounting really works or he’d call the entire thing fraudulent (I mean, let’s be real, it is and everyone knows it), so let’s humor his opinion for a moment and consider government accounting.
Rep. John Shimkus (R., Ill.) grilled Health and Human Services secretary Kathleen Sebelius about this before the House Energy and Commerce Subcommittee on Health. He wondered how, in essence, the Obama administration could move $500 billion from its left pocket (Medicare) to its far-left pocket (Obamacare) and somehow finance $1 trillion worth of Medicare and Obamacare.
“Your law cuts $500 billion in Medicare,” Shimkus reminded Sebelius at a March 3 hearing. “Then you’re also using the same $500 billion to say you’re funding health-care [reform]. Your own actuary says you can’t do both.”
“So,” the eight-term congressman continued, “are you using it [the $500 billion] to save Medicare, or are you using it to fund health-care reform? Which one?”
Secretary Sebelius confessed: “Both.”
“So, you’re double-counting,” Shimkus replied.
“The same dollar can’t be used twice,” observed Health Subcommittee chairman Rep. Joe Pitts (R., Pa.). “This is the largest of the many budget gimmicks Democrats used to claim Obamacare would reduce the deficit.”
As any college business major knows, such double counting would earn a big, fat F on an accounting final. Far worse, this is illegal.
Obviously Joe Pitts is not at all familiar with how accounting works. The funny part, as Murdock points out, is that the SEC does not consider non-GAAP financial statements to be anything but misleading and inaccurate. It’s a good thing the federal government won’t be trying to file an IPO any time soon.
Peep Title 17, Part 210 of the Code of Federal Regulations:
Financial statements filed with the Commission which are not prepared in accordance with generally accepted accounting principles will be presumed to be misleading or inaccurate.
Question: is there a particular reason “generally accepted accounting principles” is not capitalized? Because GAAP and gaap are two different things, one of which is a set of rules (not principles, no matter what James Kroeker may believe) while the other is basically a bunch of bullshit that we call “accounting” and agree is OK. Sort of like Don’t Ask Don’t Tell for financial statements.