Category: News

Some People Are Ready to Vote for a Caribou Killer in 2012, If Necessary

According to of reports, there is a tentative deal on tax cuts, with all of the current rates being extended for two years in exchange for an extension of unemployment benefits.

That has a few people upset with President Obama (notably, the “liberals,” whoever that is):

Daniel Roche, a 2008 Deputy Field Organizer in Nevada for Mr. Obama, is quoted in an email from the Progressive Change Campaign Committee saying that if the president “capitulates on this, there really is no point in voting for him in 2012.”

“The difference between voting for a Republican and voting for someone whose default negotiation strategy is rolling over and dying whenever the Republican Party says mean things is marginal,” he said. “This should be a ridiculously easy fight to win.”

One More Voice For Ending U.S. GAAP

It’s been said before so the argument that GAAP is bulky and pointless is really nothing new but in a WSJ op-ed this morning, guest writer Mike Michalowicz insists that GAAP is wrong… for profits, that is.

The GAAP actually directs us to spend first, then pay ourselves, and call the leftovers profit. How are you going to grow a successful business and accumulate wealth using that method? Generate more revenue, you say? Well, sure. Except that you’re going to spend it. So you’re right back where you started—working with the leftovers, if you have any.

I propose a new type of accounting: Profit First Accounting (PFA). The difference between GAAP and PFA is simple: Deduct profit first, from the top down. On a PFA income statement, the first line item is revenue, followed by a profit deduction, then your salary, followed by cost of goods and all other expenses.

Hey, guess what? We already have an alternative accounting system lurking in the wings. Allegedly IFRS will help companies that spend quite a bit on R&D buff up equity as R&D costs are considered assets, isn’t that an improvement over GAAP? IFRS also allows for financial statements to come together in whatever order, however those preparing the statements feel is most relevant to the entity’s economic picture. So what’s to stop them from slapping them together as the author suggests above?

GAAP is not meant to transform internal accounting departments into psychics and I doubt any U.S. companies use it because they feel it helps construct a useful picture of the entity that can be used for goal-setting and forecasting. That’s just not what it’s there to do and I think we can all agree on that.

Oh and by the way, Mike is the author of The Toilet Paper Entrepreneur, which he will be able to follow up with a sequel if we actually take his suggestion and try this Profit First idea. Yes business is all about profit but I think Mike is forgetting that companies file for the good of investors and regulatory bodies breathing down their necks, not necessarily for their own good or for the good of their almighty profits.

One Man’s Holiday Wish List Includes Tim Geithner and Charlie Rangel Sharing a Prison Cell with Wesley Snipes

Actually, if Wes Benedict, Executive Director of the Libertarian Party, had his way, Wes wouldn’t be doing time at all.

“The three-year federal prison sentence for Snipes’s failure to file tax returns is absurd. Snipes is not a threat to anyone, and the judge who sentenced him clearly just wanted to scare others who might think about resisting federal taxes.

“Maybe it’s worth reminding people that Wesley Snipes was acquitted of tax fraud and conspiracy charges in 2008. He was only found guilty on misdemeanor charges of ‘willful failure to file an income tax return.’


Right, so the ‘willful failure’ part is where we kind of have a problem. If you willfully fail to control your urge to get cop-slugging drunk and then actually slug a cop, you have committed a crime. Mr Benedict doesn’t buy it though:

“Why is a failure to file a tax return a criminal non-act? Should people ever be sent to prison for not doing something? If the IRS wants to come after Snipes and take his money, they have power to do that. Who does it help to send the man to prison?

“The tax code is incredibly vague and open to interpretation [Ed note: UNDERSTATEMENT OF THE CENTURY]. In fact, the ‘law’ is largely written by IRS bureaucrats. If they decide the law says one thing, you’re OK; if they decide it’s something else, then you’re headed for prison.

“The federal tax code also allows for ‘selective enforcement,’ to put it mildly. Why is it that Wesley Snipes gets a prison sentence, but known tax cheat Tim Geithner gets promoted to Secretary of the Treasury? Maybe Tim should be Wesley’s cellmate. Throw tax cheat politician Charlie Rangel in the slammer too for good measure.

Tim Geithner’s poor choice in self-prep tax software and an actor giving the 16th Amendment the middle finger for 10+ years aren’t quite the same thing. Maybe it’s just us.

[h/t Tracy Coenen]

The House Decides Tax Cut Extension Is Not Chicken Crap After All

Our favorite minority attention whore, House Republican leader and next Speaker of the House John Boehner, seems to feel as though all this nonsense over extending the Bush tax cuts is chicken crap, whatever that is supposed to be. Did he mean bullshit? Just tell us what’s on your mind, Mr Boehner, we won’t hold it against you if you say bullshit on C-SPAN. “I’m trying to catch my breath so I don’t refer to this maneuver going on today as chicken crap, all right?” he said. “But this is nonsense, all right? The election was one month ago. We are 23 months from the next election, and the political games have already started trying to set up the next election.” No no, homie, this has nothing to do with the next election, this has to do with y’all just getting around to this now when no one’s cared since 2002.

If there are any doubts as to the stimulative or depressive effect of a tax rate change in terms of tax receipts received by the Treasury, check out this WSJ op-ed by W. Kurt Hauser which tells us that historically, tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised.

Anyway, regardless of our feelings on the matter (many of which include expletive-filled rants like “WTF, why are you guys just now trying to figure this out?!”, “please! Can’t you work well with others for just once in your life” and/or “Gee, maybe if we addressed the problem of an overly complicated tax system this wouldn’t be such an epic pain in the assets”), the House has finally made a decision. Frankly we couldn’t be happier to see the light at the end of the W-2 on this at last.

A mere 29 days before the scheduled December 31st Tax Cut Armageddon, the threats votes have been counted and it appears as though the yeas have it. With 6 minutes to go on the vote and with little help from House Republicans, Democrats rallied together to get the 218 votes they needed to extend tax cuts to those earning up to $250,000 and then some.

It doesn’t really matter because there’s no way the Senate is going to let this fly so you may go back to whatever you were doing and start socking away a few bucks for your 2011 tax bills.

Ahhh political process. It’s like watching a car crash in slow motion from the driver’s side.

Feds Not Amused by Area Man’s Crank Calls to Coast Guard, Filing of Tax Returns for Hookers

So. You’re 22 years old, you operate an Internet escort service out of your house and you’re feeling a little bored. What’s a man-child to do?

Well, making the assumption that you spend a lot of your spare time watching old Crank Yankers episodes, you might ring up the Coast Guard and tell them a shuttle at the Kennedy Space Center is about to be under attack.

Or if that doesn’t get the fired stoked in your plums, try calling them up again to say that your yacht is sinking off the coast of New York with ’10 souls’ on board.

Yeah! That’s the ticket:

Nicholas Barbati of Daytona Beach twice made the U.S. Coast Guard scramble to check out false information he gave them on separate occasions — including reports of a threat from the sea headed for a space shuttle about to take off from the Kennedy Space Center, federal officials said Tuesday.

Barbati, 22, also called the Coast Guard in Washington, D.C., to tell them his 32-foot yacht was sinking off the coast of New York, investigators said.

Oh. And about those escorts, “Barbati pleaded guilty to the two hoax cases in August, the U.S. Attorney’s Office said. Then, in October, Barbati pleaded guilty to filing false claims with the IRS. He filed income tax returns for prostitutes employed by his Internet escort service operating out of his house, investigators said.”

Now you may be thinking that Barbati was just a little mischievous and he just made some poor decisions. Let us dispel that notion from your head right now:

Barbati’s computer was seized and it showed Barbati had made 584 other harassing and hoax calls. Between May and June 2009, Barbati made “swatting” calls to law enforcement dispatch centers around the world so dispatchers could not identify where the calls came from, investigators said.

In one case, Barbati told dispatchers he was going to kill a baby if the police did not arrive soon and gave a fictitious address, the release said.

But back to the hookers for second – if you’re going to provide employer-prepared tax returns, the least you could do is prepare the them accurately. You don’t want the Better Business Bureau on your case.

Prank calls to Coast Guard, dispatch centers land man in federal prison [DBNJ]

Norwegian Businesses Take Bathroom Access Far More Serious Than Ernst & Young’s Long Island Office

You may remember way back in January when we told you about Ernst & Young’s Jericho office putting the clamps down on its water closets. The long/short of it was that the firm made them only accessible by key like some flithy gas station shithouse.

As bad as that is, some businesses in Norway are taking things a bit further:

A boss in Norway has ordered all female staff to wear red bracelets during their periods – to explain why they are using the toilet more often.

The astonishing demand was revealed in report by a workers’ union into ‘tyrannical’ toilet rules in Norwegian companies. The study claimed businesses were becoming obsessed with lost productivity due to employees spending too much time answering the call of nature. It found 66 per cent of managers made staff ask them for an electronic key card to gain access to the toilets so they could monitor breaks. Toilets in one in three companies were placed under video-surveillance, while other firms made staff sign a toilet ‘visitors book’, the report by the Parat union said. It added: ‘But the most extreme action was taken by one manager who made women having their period wear a red bracelet to justify more frequent trips to the loo. ‘Women quite justifiably feel humiliated by being tagged in this way, so that all their colleagues are aware of this intimate detail of their private life.’

Now we don’t know if the key system is still in place in Jericho (residents can let us know) but this should give you pause.

Boss orders female staff to wear red bracelets when they are on their periods [Telegraph via DB]

Some People Aren’t Convinced Nancy Pelosi Wants to Compromise on Tax Cuts

President Obama is darn sure that a deal will get made on the expiring tax cuts before the end of the year despite the ‘logjam’ between the two political parties.

He’s confident because hard-working families need it, the economy is fragile yada yada yada and now that Tim Geithner and OMB Director Jack Lew are on the case, this thing is a shoe-in.

While the next Speaker of the House, John Boehner, is not quite on the same page as the President, he’s pretty much in the same chapter:

“Republicans made the point that stopping all the looming tax hikes and cutting spending would, in fact, create jobs and get the economy moving again,” said Representative John Boehner, who will become Speaker of the House next year.

“We’re looking forward to the conversation with the White House over extending all of the current rates, and I remain optimistic,” he said.

Well, as close as to the two will likely get in public anyway. However, this a slightly more optimistic stance than what some people have for Nancy Pelosi, who would, presumably, rather give up her Armani suits than hand the wealthy a tax cut:

“There is some thought that the last thing that Nancy Pelosi wants to do on her way out of the Speaker’s office is to have Congress approve an extension for tax cuts for the wealthy,” said Brian Gardner, an analyst for investors at Keefe, Bruyette and Woods.

“She could muck things up a little bit.”

Well! This should be fun! Stay tuned.

Obama and Republicans agree to negotiate on taxes [Reuters]

Your Future Accounting Jobs Belong to Sri Lanka

Ahhh, outsourcing. Nothing like American jobs going overseas to whip up fury among the masses. The latest example, via yesterday’s Times, is accounting jobs going to Sri Lanka.

As this tiny island nation staggers back from a bloody, decades-long civil war, one of its brightest business prospects was born from a surprising side effect of that conflict. Many Sri Lankans, for various reasons, studied accounting in such numbers during the war that this nation of about 20 million people now has an estimated 10,000 certified accountants.

An additional 30,000 students are currently enrolled in accounting programs, according to the Sri Lankan Institute of Chartered Accountants. While that ratio is lower than in developed economies like the United States, it is much greater than in Sri Lanka’s neighboring outsourcing giant, India.

But if you think these jobs are just 10-key jockeys and plugging digits into tax returns, you would be wrong, wrong, wrong:

Offices in Sri Lanka are doing financial work for some of the world’s biggest companies, including the international bank HSBC and the insurer Aviva. And it is not simply payroll and bookkeeping. The outsourced work includes derivatives pricing and risk management for money managers and hedge funds, stock research for investment banks and underwriting for insurance companies.

Many developing countries have “one particular competency that they do better than anyone else,” said Duminda Ariyasinghe, an executive director at Sri Lanka’s Board of Investment. “Financial accounting is that door opener for us.”

So all that you put in to knowing derivative accounting inside and out? Yeah, someone in Sri Lanka has a similar level of understanding and naturally, the labor there comes cheap. Extremely cheap:

In the United States, the median annual wage for accountants and auditors in May 2008 was $59,430, according to the Bureau of Labor Statistics. Sri Lankan workers in the accounting profession receive an average annual pay package of $5,900, according to a 2010 survey by the Chartered Institute of Management Accountants.

Wages in Sri Lanka for financial outsourcing are about one-third less than in neighboring India, and hiring educated employees is easier in Sri Lanka, according to executives who do business in both countries.

Yes, that’s a savings of 90%. No, there’s not much you can do about it. Except discuss below.

Sri Lankan Accountants Lure Global Outsourcers [NYT]

An Accountant’s Thanksgiving Leftovers | 11.24.10

~ That’s it for us team. Have a great Thanksgiving! We’ll be back on Monday. That is, unless we get the locale for the PwC NYC feast tomorrow (pictures too).

Man Up When Called for Your Junk Pat-Down [Bloomberg]
You want your genitals left untouched or terrorists on your plane? You can’t have both.

Ireland Ushers In four Years Of Brutal Cuts, Tax Hikes [Dow Jones]
Will Irish eyes ever smile again?

UBS, Others Sued for $2 Billion Over Madoff Fraud [ABC News]
Irving Picard still has the most thankless job in the world.

States Slashing Film Tax Subsidies [Tax Foundation]
Somewhere, Joe Kristan is doing a happy dance.

CFOs Cool Their Heels [CFO]
Turnover is down for the second straight year.


Compliance costs rise for small business [CFOZone]
Sayeth the SBA.

Convicted felon hired to teach accounting at university in Missouri [AccountingWEB]

Lawmakers want IRS to make breastfeeding a medical expense [Healthwatch/The Hill]
Doug Shulman is being asked to reconsider the IRS’s anti-boobs stance.

Al-Qaeda Marching Band To Join Macy’s Parade After Incredible Audition [TO]
FYI – for those attending.

All Those Frazer Frost Christmas Cards Will Go to Waste Now

Last Friday, we linked to a Reuters article that told the story of Chinese clean-tech firm Rino International Corp. admitting that their books weren’t exactly in tip-top shape.

In fact, Rino has some hella-fraud going on, as the CEO is quoted, “[T]here might be problems with 20-40 percent of [customer contracts],” according to a letter from the company’s auditor Frazer Frost. As is the natural progression of these matters, an 8-K was filed informing anyone who cares to know that restatements are happening and that previously issued numbers are more or less worthless.


Then came the news from Financial Investigator’s Roddy Boyd, that Frazer Frost – the offspring of a merger between Moore Stephens Wurth Frazer and Torbet and Frost PLLC – was not really Frazer Frost:

One day shy of the one year anniversary date, the accountancy is scrapping a “trial merger” and is splitting back into Frost LLP of Little Rock, Ark. and Raleigh, N.C. and Moore Stephens, which is headquartered in Brea, Ca.

“Trial merger” kinda sounds like a two accounting/finance types hooking up for the first time. It’s nothing major, just testing the motion in the ocean. But if you go by the Accounting Today article from last year, there doesn’t appear to be anything “trial” about it.

Anyway, Boyd reports that Frost managing partner Dan Peregrin told him that a ‘culture clash’ led to the break up and that, “There is a lot of [issues] right now in [Chinese reverse mortgage] practice area and we just felt it would be smarter to wish them luck and stick to our practice areas.”

Right. The old, “it’s not you, it’s me” routine. But there’s more! Over at Citron Research, it’s not entirely clear just what is going on:

If you call Frost today in Arkansas, they answer “Frost & Co” and say they’re no longer associated with Frazer. Citron spoke to managing partner Dan Peregrin and twice he told us that the two firms have gone their own way. ….but if you call Frazer, they answer “Frazer Frost” and in a brief conversation with Susan Woo, the RINO auditor, she told Citron that Frazer Frost is still an operating entity.

Really? If you go to the Frazer Frost website, you see a homepage with no content in the about us section.

Which is quite true. This is all very strange/sad/pathetic because everyone else seems to be aware of the situation. It’s like Frazer doesn’t know they’ve been dumped and are just going along like everything is find and dandy.

Could someone let them down gently?

News From Auditorville [Financial Investigator/Roddy Boyd]
Dude! Where’s My Auditor?? The Curious Case of Frazer Frost [Citro Research]

Green Mountain Coffee Roasters: Gosh, We Ended Up Having Way More Accounting Errors Than We Thought

Back in September, Vermont-based Green Mountain Coffee Roasters put the world on notice that the SEC was asking some questions about their revenue recognitions policies. Despite the SEC Q&A, analysts we’re cool with the company and the GAAP the crunchy accounting group was putting out.

Also at that time, the company disclosed that there were some immaterial accounting errors that were NBD. That was until they dropped a little 8-K on everyone last Friday!


Turns out, there was a whole mess of accounting booboos and the company will be restating “previously issued financial statements, including the quarterly data for fiscal years 2009 and 2010 and its selected financial data for the relevant periods.”

From the aforementioned 8-K with all the bad news:

The Company has discovered the following errors:

• A $7.6 million overstatement of pre-tax income, cumulative over the restated periods, due to the K-Cup inventory adjustment error previously reported in the Company’s Form 8-K filed on September 28, 2010. This error is the result of applying an incorrect standard cost to intercompany K-Cup inventory balances in consolidation. This error resulted in an overstatement of the consolidated inventory and an understatement of the cost of sales. Rather than correcting the cumulative amount of the error in the quarter ended September 25, 2010, as disclosed in the September 28, 2010 Form 8-K, the effect of this error will be recorded in the applicable restated periods.

• A $1.4 million overstatement of pre-tax income, cumulative over the restated periods, due to the under-accrual of certain marketing and customer incentive program expenses. The Company also has corrected the classification of certain of these amounts as reductions to net sales instead of selling and operating expenses. These programs include, but are not limited to, brewer mark-down support and funds for promotional and marketing activities. Management has determined that miscommunication between the sales and accounting departments resulted in expenses for certain of these programs being recorded in the wrong fiscal periods.

• A $1.0 million overstatement of pre-tax income, cumulative over the restated periods, due to changes in the timing and classification of the Company’s historical revenue recognition of royalties from third party licensed roasters. Because royalties were recognized upon shipment of K-Cups by roasters pursuant to the terms and conditions of the licensing agreements with these roasters, Keurig historically recognized these royalties at the time Keurig purchased the K-Cups from the licensed roasters and classified this royalty in net sales. Management has determined to recognize this royalty as a reduction to the carrying cost of the related inventory. The gross margin benefit of the royalty will then be realized upon the ultimate sale of the product to a third party customer. Due to the Company’s completed and, when consummated, pending acquisitions of third party licensed roasters, these purchases and the associated royalties have become less of a factor, since the post-acquisition royalties from these wholly-owned roasters are not included in the Company’s consolidated financial statements.

• An $800,000 overstatement of pre-tax income, cumulative over the restated periods, due to applying an incorrect standard cost to intercompany brewer inventory balances in consolidation. This error was identified during the preparation of the fiscal year 2010 financial statements and resulted in an overstatement of the consolidated inventory and an understatement of the cost of sales.

• A $700,000 understatement of pre-tax income for the Specialty Coffee business unit, due primarily to a failure to reverse an accrual related to certain customer incentive programs in the second fiscal quarter of 2010. The over-accrual was not identified and corrected until the fourth fiscal quarter of 2010.

• In addition to the errors described above, the Company also will include in the restated financial statements certain other immaterial errors, including previously unrecorded immaterial adjustments identified in audits of prior years’ financial statements.

So naturally you shouldn’t rely on anything out there. Despite the discovery and disclosure of this massive fuckup and warnings from Sam Antar including some possible insider trading (it’s a theme today) and disclosure violations, an analyst at Bank of America Merrill Lynch thought it would be rad to upgrade the stock which has sent the price soaring. Why not, right?

In directly related news, anyone on the PwC audit team shouldn’t make any Thanksgiving plans.