Category: News

A Mountain of Hate Mail Gets FASB to Backtrack on Fair Value

If the drinks at Davos weren’t already free, we’re pretty sure Stephen Schwarzman would be buying.

From the Journal’s man on the accounting beat, Michael Rapoport:

Accounting rule makers took a key step Tuesday to reverse a proposal that would have required banks to value their loans based on the ups and downs of the market. The Financial Accounting Standards Board agreed that companies could continue to carry a variety of financial assets and liabilities at amortized cost, an adjusted version of their original cost, as they do now. That would reverse a proposal the board introduced last May that would have required bank loans and other financial assets to be carried at “fair value,” based on market prices.

What happened, you ask? What caused the FASB to fold like a cheap lawn chair? Remember all those nastygrams that were sent to Bob Herz? It sounds like the FASB took those personally:

FASB indicated the overwhelmingly negative reaction to its proposal, from companies and investors alike, played a big role in prompting the board to change its mind. The board received more than 2,800 comment letters on its fair-value proposal, most of them opposed to the move, and heard more opposition at a series of public roundtables before it began reconsideration of its proposal for fair-value changes.

So the bankers win this round. Oh, wait…they win every round.

Accounting Board Backs Off ‘Mark to Market’ Push [WSJ]

The Fed’s Financial Accounting Is a Beautiful Thing

Controllers, don’t you wish you had this sort of authority? Imagine writing your own financial accounting handbook (forget GAAP, it doesn’t apply here!), plugging your financial statements with all the footnotes you want and rewriting the rules in the middle of the reporting season just because you feel like it and, maybe in this case, because it will paint a rosier picture of your financial condition.

Wouldn’t it be great if we could do this with our checking accounts? You could just take the money that is owed to others (let’s call “bills” “negative liabilities” instead, even though in strictly technical terms a negative liability would be an asset, which we know bills are not) and change its name, give it a new presentation and VOILA! Instant solvency!

On January 6th, they tried to sneak a little change in presentation that, for now, doesn’t really matter but might when interest rates skyrocket and they are no longer handing out huge amounts of “profits” to the Treasury. Read:

Effective January 1, 2011, as a result of the accounting policy change, on a daily basis each Federal Reserve Bank will adjust the balance in its surplus account to equate surplus with capital paid-in and, in addition, will adjust its liability for the distribution of residual earnings to the U.S. Treasury. Previously these adjustments were made only at year-end. Adjusting the surplus account balance and the liability for the distribution of residual earnings to the U.S. Treasury is consistent with the existing requirement for daily accrual of many other items that appear in the Board’s H.4.1 statistical release. The liability for the distribution of residual earnings to the U.S. Treasury will be reported as “Interest on Federal Reserve notes due to U.S. Treasury” on table 10. Previously, the amount necessary to equate surplus with capital paid-in and the amount of the liability for the distribution of residual earnings to the U.S. Treasury were included in “Other capital accounts” in table 9 and in “Other capital” in table 10.

So instead of counting up the amazing Fed profits to the Treasury every year like they’ve done for as long as we can remember (and lately with lots of huge fanfare and fireworks, including the last record $78.4 billion), they’ll be readjusting the numbers on a weekly basis. Why they feel this is appropriate is beyond my analytical ability but should anyone have some insight, I’d love to hear it.

In the meantime, I guess it is reassuring to know that accounting tricks or not, the Fed can’t possibly be insolvent.

John Boehner Would Prefer If Some People Took Their Bellyaching About the 1099 Requirement Elsewhere

It seems that everyone and their dog is staking a claim as the biggest enemy of the 1099 requirement that was part of the healthcare reform law that passed last year. The latest self-proclaimed champions of small business are a few Senate Democrats who wish John Boehner would quit sitting on his orange hands and get a bill moving in the House, because let’s face it, the repeal passed by the House is going nowhere fast.


The Speaker is not deterred however, and his spokesman would like to remind the Ds in the S, that they can S a D and should bring it up with someone else:

Michael Steel, a spokesman for Boehner, said the speaker also supports eliminating the 1099 requirement, but “it is far from the only job-destroying provision in Washington Democrats’ law.”

“Now that the House has passed a law to repeal it, the best course would be for the Senate to do the same, and I hope these senators are pressing Senate Majority Leader Reid to do just that,” said Steel.

Earlier:
Vastly Unpopular 1099 Requirement Survives Thanks to the Reliable Dysfunction of the U.S. Senate

Here’s What Happens When 150 Maryland CPAs Storm the State Capitol

What do you get when you cross 150 CPAs with the state capitol? You get the Maryland Association of CPAs’ CPA Day and, lucky me, I got to be there when a record number of MACPA members stormed Annapolis, Maryland (on Inauguration Day, none-the-less) and brought their passion (and the sun) with them.

Driving in the dark at the crack of dawn to Annapolis, I had absolutely no idea what I was in for. I’d heard about previous CPA Day successes and knew the day involved legislators and CPAs swarming their offices but I had no idea the day would be so powerful, nor did I expect the passion I gathered from those in attendance.

For the day, I got to chase MACPA vice chair and association Legislative Executive Committee head Allen DeLeon, CPA. Al is partner at Gaithersburg’s DeLeon and Stang, a 2010 Accounting Today winner for best places to work, and yet another CPA touched by MACPA CEO Tom Hood’s powerful social media message.


As Tom so eloquently stated yesterday, the MACPA’s primary legislative mission is to protect the CPA license in the state of Maryland. Their secondary level of legislative influence means keeping an eye on tax policy in the state. The association has identified the following five issues for the 428th session of the Maryland General Assembly:

1. Pass 120/150 legislation. This legislation will allow students to sit for the CPA exam after completing the accounting requirements in an undergraduate program. They would be able to get their license upon completion of the 150 credit hours. This bill (HB 1137) passed the House and Senate committee last year but ran out of time before the end of the legislative session. See our prior post about this issue.

2. Stop sales tax on accounting, tax and consulting services. The real issue here is the compliance costs to CPA firms (and their clients), as intangible services are hard to identify where and when they are delivered to and from.

3. Exempt CPAs from proposed regulation of debt counselors. The CPAs education, examination and experience requirements, along with rigorous state licensing and oversight, make it unnecessary to include CPAs in this legislation. See our prior post here.

4. Stop the lawsuit tax. Efforts by the trial bar to liberalize tort law will be detrimental to CPAs and small businesses as the basis to argue suits would increase and liability would be linked to the entities with insurance. This means more suits and more settlements, effectively creating a lawsuit tax. This is bad legislation even in a good economy.

5. Pass “safe harbor” legislation. This is a technical correction necessary since the passage of mandatory peer review legislation in 2005. This will clarify the definition of “attest” and practicing certified public accountancy in Maryland law. This will allow non-licensed CPAs to prepare compilations for clients provided that they do not use AICPA SSARS language and state that they are not required to undergo peer review.

For Al’s part in yesterday’s event, we met with Senator Rob Garagiola, Senator Nancy King, Delegate Brian Feldman and Andrew Aleshire, aide to brand spanking new Delegate Aruna Miller. Having done this several years in a row, Al wasted no time bringing up the key issues with each legislator. We cruised between the House of Delegates and the Senate buildings (he’s done this so many times he even knows of the secret underground tunnel that connects them both) discussing taxes, the 120/150 rule, reviews and compilations and regulation of CPAs as debt counselors.

I was especially impressed by Senator King’s willingness to sit down with Al and discuss current issues, including a highly controversial (Tom Hood called it “dangerous”) 2 – 3% gross receipts tax, which the state is apparently considering in lieu of a sales tax hike. Al volunteered to give any proposed legislation a good once over as a politically-independent CPA, something young CPAs getting involved in legislative issues should take note of. While MACPA members came to Annapolis to push the association’s legislative agenda, it’s also important to remember that part of protecting the public interest also means protecting the profession from unnecessary or burdensome legislation.

Comments from first-time attendees included “I was surprised at how receptive everyone was” and one Rockville CPA noted that though CPAs had invaded state buildings, they did not get the sense that they were perceived as “a bunch of people coming to bother them.”

Barrett Young, one such first-timer in attendance yesterday, stated that he was surprised at how “normal” legislators were. The 27 year old Charles County CPA (who can be found blogging at CP…eh?) attended CPA Day after Tom Hood came to his area for a town hall on these issues and, like me, didn’t realize the full impact 150 CPAs would have in Annapolis that day. He came because he wanted to meet other CPAs in the state, not because he knew it would be a legislative day of action. But now that he’s attended one CPA Day, he is both informed and inspired to take action moving forward. “The MACPA keeps us focused on a bigger picture than our revenue sources,” he said.

Did yesterday change his view on these important issues? Absolutely. “I do have a big chance of running into my delegates at the store,” he said, “and now, I have the confidence to know that they are approachable – and interested – in my views on the profession. The MACPA knows what impacts us, and is doing a great job to remain nonpartisan. [They do not favor] a specific county, but protect our license as a whole.”

Tom reminded those in attendance that making face-to-face contact with legislators allows CPAs in the state the opportunity to show lawmakers that we care enough to show up, shake hands and make our concerns known. For young CPAs like Barrett, it also gives the next generation of the industry a chance to see how powerful their profession really is. “I have a responsibility to see that the profession is greater than just me, my career, and my need to make an income. CPA Day does this by introducing me to older CPAs, and connecting me with peers from my own age group,” he told us. Who would pass up a chance like that?

“If we had two or three hundred of you, we could rule the state,” Tom joked to the audience.

Judging by the tangible buzz yesterday, I’d say Maryland CPAs are pretty close to ruling the state as is.

Once again, we have to congratulate the MACPA for a job well-done and I’m already looking forward to following along next year.

The Fortune 100 Best Companies to Work For: Plante & Moran #26 (2011)

Early January marks another edition of Fortune’s 100 Best Companies to Work For and unsurprisingly, accounting firms are littered all over it. If it were any other year, we could give a rat crap and would cover the list out of basic necessity. However, this year an interesting development has occurred – the highest ranking accounting firm is not a Big 4 firm. Now we realize that this may come as a surprise to you but P&M has been on the list for 13 straight years, topping out at 12 in 2006, so this is hardly a fluke.

Anyway, let’s get to the tape, shall we?


Plante & Moran – Previous rank: #66. Fortune informs us that good times have returned at P&M after a year off, “Employees cheered when the accounting firm reinstated its annual gathering, eliminated in 2009.” Also, the firm throws around busy season survival kits that include “aspirin, stress balls and candy.” No word if they help employees survive cranky spouses and kids but the line has to be drawn somewhere, s’pose.

Stats of note:
• New Jobs (1 year): -61
• % Job Growth (1 year): -4%
• % Voluntary Turnover: 9%
• No. of Job Openings at 1/13/2010: N/A
• Most common salaried job: Audit staff with average salary of $64,300
• % Minorities: 6%
• % Women: 54%

It’s interesting to note that the number of new jobs, % job growth and average salary are all down from last year, while % voluntary turnover is up and yet the firm jumped 40 spots in the ranking. Perhaps the leap is due to a HR policy change from last year: the firm now has a nondiscrimination policy that includes sexual orientation and offers partner benefits for same-sex couples. Regarding these issues last year, we said this:

The firm offers onsite child care during busy season but does not have a nondiscrimination policy that includes sexual orientation nor does it offer domestic partner benefits for same-sex couples.

We’re not saying the latter two reasons are why they fell from #12 but it might help them jump back into the top 50.

Not that we’d dream of taking any credit but could a positive change in human resources policy result in a forty spot jump, despite the salary and hiring stats being down? It certainly didn’t hurt. Discuss P&M’s minor upset and we’ll get to the rest of the firms in due course.

Earlier:
The Fortune 100 Best Companies to Work For: Plante & Moran #66

Accountant Sets Bar for Idiotic Embezzlement Schemes

The snatch and grab and burn technique isn’t the most sophisticated plan we’ve read about but we are talking about a man who is an accountant first (we’re guessing a very bad one) and an extremely dimwitted criminal second:

An accountant faces seven years in jail after a court convicted him yesterday of deliberately setting fire to Dh250,000 in cash and stealing a similar amount from the taxi company where he worked.


Why this particular accountant-cum-thief decided half the money wasn’t worth his trouble is unclear but what is CRYSTAL is that setting the remainder on fire was the equivalent of writing “I’M EMBEZZLING FUNDS” with a Sharpie™ across the cash ledger.

According to the arraignment sheet, prosecutors said [the accused] deliberately set fire to the money bag which contained Dh500,000. He burned Dh250,000 and stole the rest.

He was also charged with causing intentional damage and financial loss to the company. The company’s Indian manager testified that one of the employees informed him over the phone that the accounting office was on fire.

“I rushed to the company’s premises to check what happened. We had left nearly half a million dirhams in a money bag which we kept inside a wooden cupboard. The money was our drivers’ daily revenues. I discovered that half of the money got stolen and the remaining half was burned,” the manager told prosecutors.

But to be fair to our asshat accountant du jour, “a money bag which we kept inside a wooden cupboard” isn’t the most secure internal control procedure we’ve ever heard of. Let this be a lesson.

Nightmare Audit Rooms Have Their Consequences

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight — everything you need to help you prosper and enjoy the accounting profession.

With no place to work in the office of the housing authority of a major city, the audit team was provided tables and chairs in the hallway of a renovated apartment building that connected the swinging front door with the elevators. In the middle of winter in a city located on a bay, the wind swept into the hallway driving temperatures to near freezing. Clothed in parkas, scarves, wool hats and gloves, the audit team struggled through the engagement.

Auditing rural hospitals, CPA firm personnel were ordinarily assigned to a patient room for workspace since there was no room for them in the hospital office. This year there were no patient rooms available so they were assigned to the morgue! Steel tables and high stools were their accommodations. Formaldehyde, dead bodies draped in sheets and the medical examiner’s buzz saw greeted them each day.


The auditors of a plumbing contractor were assigned a dark, damp room in the basement for workspace. The room was two flights of stairs and several hundred yards from the accounting office.

Two auditors were assigned workspace at a desk adjacent to and facing the controller. The controller smoked, they didn’t.

I could relate more true stories on and I suspect you could add your experiences to this list of inadequate fieldwork workspace. Here are some obvious questions:

1. Did any of these scenarios increase time charges on the engagements?
2. Who had responsibility to correct or prevent these circumstances?
3. When should corrective action be taken?
4. What actions should have been taken?

Question 1: Of course time charges were increased! The auditors of the housing authority said the audit required almost twice the amount of time it should have. The hospital auditors lost numerous hours going for fresh air and to the restroom to vomit! Going back and forth to the accounting office wasted enormous amounts of time, although the team did lose weight. Not only was the health of the non-smokers impaired, they wasted time leaving the room to discuss audit issues and securing all working papers and electronic equipment every time they left the room.

Question 2: The in-charge accountants on these engagements had responsibility to run the fieldwork but their “stick” wasn’t big enough to get the managements to change their workspace. It was the engagement leaders’ responsibility to speak with managements to correct the situations.

Question 3: If the workspace could not be improved internally, a nearby motel room, a recreation vehicle parked outside a client’s facility or an electronic air filer could be remedies. The cost of these alternatives is likely far less than the unbillable wasted time.

Question 4: This is a planning activity! Proper workspace should be arranged by the engagement leader before the fieldwork begins. Engagement profits can be increased considerably by using foresight and arranging for proper workspace!

(UPDATE) Accounting Firm Merger Monday: Dixon Hughes, Goodman & Co. Combine to Form Dixon Hughes Goodman

~ Update includes Goodman & Co. quote in fourth paragraph.

Late last week we heard some rumbling about a merger between High Point, NC-based DIxon Hughes and Virginia Beach, VA-based Goodman & Co. and lo and behold, this morning the press teams from both firms have dropped us the press release announcing the merger and a link to this page that includes details on the merger, a letter to clients, a list of office locations and FAQs.


The combination, effective March 1, will make Dixon Hughes Goodman the 13th largest firm (by revenue) in the U.S. with a combined revenues of over $280 million. This places them one spot ahead of Baker Tilly Virchow Krause and behind directly behind Plante & Moran (this is going by Accounting Today‘s count). The combined firm of Dixon Hughes Goodman will have 30 offices (with HQ in Charlotte), in 11 states with 1,700 professionals. The firm’s leadership will consist of Thomas H. Wilson, Managing Partner of Goodman & Company, as the Deputy Chairman and Chief Operating Officer, Charles Edgar Sams, Jr., Chairman of Dixon Hughes, will continue to serve as Chairman and Kenneth M. Hughes, Chief Executive Officer of Dixon Hughes, will also remain in that position.

Both firms ranked very high in Vault’s Accounting 50, with Dixon Hughes coming in at #5 and Goodman & Co. landing at #15. Goodman ranked very high in some notable categories including #2 in compensation, #3 in business outlook and #1 in green initiatives.

The press release states that Goodman & Co. “retain all of its existing Virginia, Maryland and Washington, D.C. offices,” which we interpret as “no reductions in headcount” but we’re waiting to confirm and we’ve confirmed this with Goodman’s Gary Thomson who said, “we anticipate an increase in the near term as we take new industry specialties to our new markets.”

On a far more exciting note, Goodman & Co., by virtue of this merger, has broken into the Elvis-impersonation market, of which Dixon enjoys a sterling reputation.

Congrats to both firms on the merger and we wish them many happy years together. Obviously, the honeymoon will have to wait – busy season and all. We’ll keep you updated on any further developments.

More Bell Effect: Santee, California Dropping Mayer Hoffman McCann

After learning last week that the City of Riverside was kicking Mayer Hoffman McCann to the curb, another small town in SoCal is dropping MHM after that little mishap up the road in Bell.


From the Santee Patch:

Santee Mayor Randy Voepel has confirmed that the city will soon be searching for a new auditor.

The city’s current firm, Mayer Hoffman McCann (MHM), found itself amid scandal and controversy in July 2010 when the Los Angeles Times reported the firm “rubber stamped” a 2008-09 audit for the city of Bell.

Despite the announcement, MHM gets the pleasure of finishing Santee’s ’09-’10 audit (partner has to be LOVING it) but Mayor Voepel, not being the type to give second chances to two-bit accounting firms, is cutting them loose:

Although Voepel said that none of the people who worked on Bell’s audit have worked with Santee, he’s not interested in continuing a relationship with MHM at this time.

“We’re going out to bid for a new auditor,” he said. “Anyone that does bad deserves to be punished, and I would like to not have that particular firm perform our audits in the near future. Down the road, sure, they can quote in our bids again. But right now I’d like to get new bids.”

Possible translation: “We don’t want anything to do with these clowns. Mayer Hoffman McCann will only audit Santee, California over my dead body or impeachment after I am caught on camera at a donkey show in Tijuana.”

Earlier:
Apparently, Mayer Hoffman McCann Passes on GAAS All the Time

Accountants Aren’t Saving Any Personal Finance Savvy for Themselves

This is the risk to providing excellent client service to anyone and everyone; you forget to keep any of that wisdom for yourself.

A support group says it has received a record number of calls from accountants in personal debt over the past few months.

The Chartered Accountants’ Benevolent Association (CABA) for UK chartered accountants says that it has seen a sharp rise in calls from accountants with debt problems over the past few months.

CABA said that it has received its highest ever number of calls from accountants asking for help in dealing with personal debt – and expects the problem to worsen over the next few months.

Kath Haines, chief executive of CABA, said: “The number of calls that we are receiving about debt is probably at a record high and we believe that this will grow quite substantially during early 2011.

Accountants racking up record level of personal debt [Accountancy Age]

Area Man Pretty Sure the IRS Audited Him Because He Reported $23 Worth of Veggies on His Tax Return

How he came to this odd conclusion isn’t clear.

Donald Dunklee, a Richfield Township, Michigan, resident, says the sale of $23 worth of vegetables from his garden was enough to trigger an IRS audit.

“I understand the needs of the IRS to keep the honest people honest so to speak, but this seems like overkill to me,” Dunklee tells Michigan television news provider WEYI.

Dunklee operates a nearby drugstore and generates all the energy for his 20-acre home, the news source says. After haggling with the woman, Dunklee says he refused to take $50 for the food and instead the woman shoved $23 money into his pocket. He later reported this on his income taxes.

Another report says the whole thing went off without a hitch but Don Dunklee still felt like it was “a huge waste of time and resources.” (That’s a new one.) The Service, however, claims it was just a random audit. Right, like we’re supposed to believe that the IRS isn’t secretly mining 1040s for “hippie vegetable farmer income” to help fill the tax void.

Volunteers for an Emergency Inventory Needed (Audit Experience Desired)

This is getting ridiculous.

“[A]n estimated 500 birds that littered a quarter-mile stretch of highway,” in Louisiana, according to the AP. Oh, and apparently in Kentucky too only numbering in the dozens, so that barely qualifies as a story.

Obviously, no one in the MSM is concerned about getting an exact body count but an “estimated 500” is certainly better than the Journal’s stab of “Between 1,000 and 5,000.”

As for the cause, well, everyone seems to have a theory but the conclusion we’re most inclined to believe is along the lines of “we’ve got no fucking idea”:

“There was probably some physical reason, but I doubt anyone will ever know what it was,” Thurman Booth, Arkansas’ wildlife services director, told CBS.

The latest occurrence of more dead birds turning up in Louisiana only compounds local residents’ worries, as in the week prior to the Arkansas blackbird mystery, 83,000 dead drum fish washed up along a river about 100 miles west of Beebe. Wildlife officials claim the incidents are not related.

Oh, right. The fish. People are needed to count fish too.