Category: News

Georgia Voters Will Decide on the Use of Accrual Accounting by the Department of Transportation

Interestingly enough, Caleb just covered accrual vs cash here on Going Concern the other day. Not interestingly enough, as a subsection of the Georgia state government, the Georgia DOT’s only option is government accounting and that sure as hell ain’t accrual. Apparently Georgia governor Sonny Perdue is hip to this accounting trick that just can’t be tapped and is questioning whether or not the DOT has the legal authority to use accrual for multi-year state funding commitments.

The short answer, without being an authority on matters of accounting legality, is HELL no. They better stick to fund accounting like every other government agency but that comes with its own set of flaws. See also: 49 of 50 states facing massive budget deficits.


If you aren’t familiar with government accounting, let me make it very simple: in regular accounting, balance sheets balance. Companies shoot for assets to outweigh liabilities and if they don’t for an extended period of time, shareholders bail and the company goes under.

In government accounting, there is no real concept of “balance” and it’s all about expenditures and estimates of spending that have little connection with actual money coming in. Most government agencies would be crippled if they were forced to institute GAAP, even with the magic of government accounting we have already witnessed from the smallest municipality to entire sovereign nations.

Anyway, in 2008, an audit of DOT practices concluded that accrual accounting was a violation of Georgia’s constitution (and the sanctity of government accounting fortheloveofsweetbabyJesus) but DOT officials claim that sweating their questionable accounting methods prevents the state from funding important road projects.

Again, magic on paper, garbage in practical application. Accounting methods are not meant to turn insolvency into funding, they are merely options and their use should not be abused for users. Seriously.

Georgia voters will be trusted with resolving the issue. Better start reading some Advanced Accounting textbooks, Georgia voters, you’ll need them to pick the right door on this little game show.

Voters to weigh on DOT accounting system [Atlanta Business Chronicle]

Believe It or Not, There’s a Millionaire Accountant Love Triangle

I know, I had to read it twice. First of all, millionaire accountant?! Second of all, the guy was ancient and probably hasn’t calculated depreciation since 1971. Whatever, he was depreciating some hot assets and I guess that’s all that matters.


Here’s the sitch:

Millionaire UK accountant Peter Rust is being sued by both the wife and the mistress as they apparently both share a piece of his £3.2million [$4.86 million US] property portfolio. What kind of firm did this guy work for amassing a portfolio like that?! Patricia Rust (the 58 year old wife who has stood by his side for 40 years, even through jailtime Peter served for money laundering) and Virginia Madden (the 38 year old mistress who claims dibs on some of his property) are both claiming that part of Rust’s assets are theirs and theirs alone.

The problem is that he didn’t exactly tell his estranged wife that he was going to get some property with the new chick. Oops. The Daily Mail has the scoop:

In a statement provided to the court, Mr Rust said that in 2000 he and his wife agreed to start investing in property – using joint funds – even though they had separated.

“Although we were living apart at this time, Pat agreed I could do this providing she had an equal share in the properties,” he said.

But he added: “But I did not tell Pat that I intended to buy these properties in the joint names of myself and Ginny Madden.”

Listen, dude, you need to read a book on keeping mistresses. Property?! Come on, everyone knows you are supposed to rent them a pad or maybe get taxpayers to pay for it or claim nonprofit status to house the hoes at your “church”, whatever, you don’t actually buy property with her.

Anyway, as if it couldn’t get worse, Madden was paid over the years as “stable girl” with investment income from the properties (and, presumably, action from Mr Rust but there is not IASB guidance on how to classify affairs in the books and records) and claims a 50% share on five homes. Mrs. Rust claims 50% rights to her house and 6 others.

The millionaire, his stable girl mistress and her £3m property battle with the betrayed wife [Daily Mail]

Accounting News Roundup: Would IFRS Prevented Repo 105?; The Crazy Eddie Movie Hits a Snag; JP Morgan May Bolt Tax-Refund Loan Business | 04.29.10

Lehman case “backs” accounting convergence [Reuters]
Philippe Danjou, a board member at the IASB has been quoted as saying that Repo 105 would not have been allowed under IFRS, “From an IFRS perspective I would suspect that most transactions would have stayed on the balance sheet. It makes a case for convergence, it makes a case that we should not have different outcomes under different accounting standards when you have such big amounts.”

The G-20 asked the sages at both the FASB and the IASB to converge their rules by June-ish 2011 but some people don’t sec, as there are too many disparities on treatment of key issues between the two boards.


The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown [White Collar Fraud]
Danny DeVito wants to make a movie based on the Crazy Eddie Fraud, which was perpetrated by, among others, Eddie and Sam Antar. The project has run aground primarily because of Eddie Antar’s life rights and the potential profit he would reap from the making of the movie. Danny D is disappointed by the developments and has sympathy for Eddie, discussing it in s recent Deadline New York article:

“He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said. “He’s in his 70s and the past has come back to bite us all in the ass. Peter [Steinfeld] and I told him we think there is a terrific story there, but we can’t do it with you involved, in any way. We’ve taken a breather, but we’re figuring out how to jump back in.

Sam Antar is not amused by this and chimed in with his side of the story:

Eddie Antar is plainly still in denial about his cowardice towards his own family and investors. There actually is a “family dynamic” that “explains Antar’s fall” as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar’s bullshit excuses for his vile behavior.

As Chipotle Sizzles, CFO Sells Stock [Barron’s]
Ten thousand shares at $144 and change will buy a bunch of burritos.

Medifast Lawsuit: Anti-SLAPP motions filed [Fraud Files Blog]
Back when we discussed forensic accounting, the aforementioned Sam Antar said that forensic accountants can look forward to “making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.”

Tracy Coenen, no stranger to this retaliation, is now fighting back against Medifast who has sued her and others for saying not so flattering things about the company:

Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.

SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.

In filing an anti-SLAPP motion, we are essentially asking the court to rule in our favor and in favor of free speech. Consumers should have the right to discuss, analyze, and criticize companies without the fear of expensive lawsuits.

JPMorgan May Quit Tax-Refund Loans, Helping H&R Block [Bloomberg BusinessWeek]
Bloomberg reports that JP Morgan may discontinue its financing of 13,000 independent tax preparers, a move that will benefit H&R Block, according to a competitor:

“Block is the biggest winner in this,” said John Hewitt, chief executive officer of Liberty Tax Service, a privately held company in Virginia Beach, Virginia, that also may benefit…

The reason HSBC is exiting this industry, even though they’re making $100 million a year in profit from it, is because of reputation risk,” Hewitt said in an interview. “Bankers don’t like the consumer advocacy groups picketing outside their offices.”

Refund anticipation loans (RALs) are attractive to clients that need cash immediately, based on their anticipated refund. The business is controversial because the high interest rates can drive people further into debt and consumer groups oppose them vehemently.

Funding for smaller shops that offer these loans will likely lose the business altogether as large banks like JP Morgan discontinue the financing, thus driving the business to franchise tax prep shops like H&R Block, Jackson Hewitt, and Liberty.

The ECB Doesn’t Like FASB Fair Value Nor Prospects for a Single Global Standard Come 2011

European Central Bank Executive Board member Gertrude Tumpel-Gugerel insists that fair value is useless in illiquid (read: dysfunctional or non-existent) markets, putting forth the all-important query “what is the use of marking-to-market when there is no market?” in a Paris speech yesterday.

Tumpel-Gugerel is also a tad concerned that the push for convergence around the globe by 2011 could mean compromised accounting standards. “The ECB strongly opposes a full fair value approach,” she said. “In this context, convergence should not come at the expense of high-quality accounting standards.”


The ECB has taken the financial crisis as a lesson in valuation, guidance, and a deft accounting system that leaves plenty of slack available for adjustments should the need arise in, say, a crisis situation. That’s all well and good but guidance only gets you so far and without a firm commitment to when and how to use fair value around the globe, we can pretty much keep debating this point indefinitely.

Her views on FASB’s fair value approach are not at all subtle. In short, it appears as though the ECB supports convergence but only if the idiotic American ways are better aligned with the IASB’s. “With regard to recent assertions made by the IASB and FASB that convergence is on track, I would like to highlight that we are not so optimistic,” she said. “In this regard, putting in place a reconciliation mechanism that simply discloses figures at amortised cost and fair value for each item on the balance sheet would certainly not achieve the aim of convergence.”

Well snap, guess she told us.

Elements for intervention on accounting issues [ECB]

Some Feedback for PwC

From a source at 300 Mad House:

“I just took the firm wide pulse survey and I laid into them. I told them to stop falsely advertising work life balance.”

Not being intimately familiar the work/life whathaveyous that comes by way of Bobby Mo emails but acutely aware of the motivation techniques employed, we can understand the frustration. Especially judging by some of your reactions to last week’s number. If you feel like sharing your feedback for the year that was at P. Dubs, let it rip.

SEC Wins Backdating Case Against Former Maxim CFO

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The SEC, under attack last week for its Goldman lawsuit and porn allegations, late Friday finally had a victory to celebrate.

Carl Jasper, the former chief financial officer of Maxim Integrated Products was found liable for securities fraud in a stock-option backdating lawsuit filed by the SEC’s San Francisco office, according to Bloomberg.

Carl Jasper, the former chief financial officer of Maxim Integrated Products was found liable for securitioption backdating lawsuit filed by the SEC’s San Francisco office, according to Bloomberg.

It was a rare civil jury trial involving backdating allegations.

Even rarer, it was the second backdating case decided in a court in one week.

Earlier in the week the former CEO of KB Home was convicted of four felony counts in a criminal stock option backdating case.

In the Jasper case, the former finance executive of the maker of chips for laptop computers was found liable on eight out of 11 counts, and cleared him on three, according to The Recorder. Bloomberg said he was found liable for fraud, lying to auditors, and aiding Maxim’s failure to maintain accurate books and records.

“We are pleased that a jury sitting in the heart of Silicon Valley recognized that stock-option backdating is, in fact, a fraudulent practice that matters to investors, and that Mr. Jasper, as the CFO of a public company, was ultimately responsible for misleading investors about the accuracy of Maxim’s financial reports,” Mark Fickes, trial counsel for the SEC, told the wire service in an e-mail statement after the eight-day trial.

Jasper’s lawyer, Steven Bauer, told Bloomberg in an e-mail he will ask the judge to overrule the jury verdict at a May 24 hearing. “Carl Jasper is a good man who never intended to do anything wrong,” he reportedly said. “This is the first step in a long road, and we are confident that in the end he will prevail.”

In late 2007, the SEC filed civil charges against Maxim, Jasper and former chief executive officer John F. Gifford, alleging that they reported false financial information to investors by improperly backdating stock option grants to Maxim employees and directors.

The Commission alleged that Jasper helped the company fraudulently conceal tens of millions of dollars in compensation expenses through the use of backdated, “in-the-money” option grants.

In a separate action, Gifford agreed to pay more than $800,000 in disgorgement, interest, and penalties to settle charges relating to his role in the options backdating.

Maxim, without admitting or denying the Commission’s allegations, consented to a permanent injunction against violations of the antifraud and other provisions of the federal securities laws.

The Commission’s complaints also alleged that Jasper was aware of the improper backdating practices, drafted backdated grant approval documents for Maxim’s CEO to sign, and disregarded instructions from CEO Gifford to record an expense in connection with certain backdated options. According to the Commission, Gifford should have known that the company was not reporting expenses for those in-the-money stock options and instead was falsely reporting that they were granted at fair market value.

According to The Recorder, in his opening statement at the trial, Bauer said Gifford, who is now deceased, was to blame for the backdating and not Jasper.”You can’t talk about options at Maxim without talking about Mr. Gifford,” Bauer reportedly told the court. “You can’t talk about picking dates without talking about Mr. Gifford.”

The SEC is seeking injunctive relief, disgorgement of wrongful profits, a civil penalty, and an order barring Jasper from acting as an officer or director of a public company.

Early last week, Bruce Karatz, the former CEO of KB Home was convicted of four felony counts in a stock option backdating case. He was found guilty of two counts of mail fraud, one count of lying to company accountants and one count of making false statements in reports to the Securities and Exchange Commission, according to published reports.

He was acquitted on 16 other counts, including mail and wire fraud, securities fraud and filing false proxy statements, according to Bloomberg.

He faces up to 60 years in prison when he is sentenced.

Credentials for Accountants: Certified Management Accountant

Last week we kicked off our certification series by looking at the CFE for those of you interested in becoming numbers sleuths that also have the figurative iron-clad stones that Sam Antar insists are imperative for any CFE.

This week we look at the Certified Management Accountant (“CMA”) credential and while it’s probably not as sexy as the CFE, a lot of you may want to consider the CMA if you see yourself spending a good portion of your career working as an in-house accountant or finance pro.


The credential is administered by the Institute of Management Accountants whose website states that “85% owork inside organizations, where expertise in decision support, planning, and control over value-adding operations are crucial elements of operational success,” and boasts 60,000 members worldwide.

Here’s the rundown on the CMA:

Education Requirement
You can meet the education requirement by verifying that you have a bachelor’s degree from an accredited college or university or that you have a professional qualification, such as a CPA (here’s a partial list of global certifications that qualify).

Professional Requirements
The professional requirement for the CMA is two continuous years of experience in management accounting or financial management. This can be completed prior to the application or within two years of passing the CMA exam. The website states that, “Qualifying experience consists of positions requiring judgments regularly made employing the principles of management accounting and financial management.”

There is a long list of experience that will satisfy this requirement including financial analysis, budget preparation, management information system analysis, financial management, management accounting, auditing in government, finance or industry, management consulting, auditing in public accounting, research, teaching or consulting related to management accounting or financial management.

CMA Exam
The CMA Exam is currently transitioning from a four-part format to a two-part format. The two-part format rolls out on May 1st but testing of the four-part format will be available through December 31, 2010. The new format will focus on financial planning, analysis, control, and decision support. The two four hour exams consist of 100 multiple choice questions and two 30 minute essay questions.

Part 1 breaks down like this:
Planning, Budgeting and Forecasting (30%)
Performance Management (25%)
Cost Management (25%)
Internal Controls (15%)
Professional Ethics (5%)

And Part 2:
Financial Statement Analysis (25%)
Corporate Finance (25%)
Decision Analysis and Risk Management (25%)
Investment Decisions (20%)
Professional Ethics (5%)

There’s a lot of information on the new exam format including fees, testing windows, and more that can be seen here.

After certification, you are required to complete 30 hours of CPE annually, of which, 2 hours are required to be in ethics.

Career Options
Many CMAs work in budgeting, financial planning, cost accounting, performance evaluation, asset management and other various capacities. The work often times result in internal reports that will help management make prudent decisions rather than just taking wild stabs at running their respective companies. So it goes without saying that this is important stuff.

For those of you still working in the public realm, you can get benefits out of a CMA too. Our favorite Exuberant Accountant, Scott Heintzelman, has a CMA and he told us that it helps him better understand the needs of his manufacturing clients, “I had a bunch of clients in the manufacturing space and many of the controllers were CMA’s. I thought taking the time to get this certification would give me more creditability with this group…it helped me gain more manufacturing clients as they saw me as one of them, not just a CPA.”

Compensation and Other Benefits
According to the IMA’s most recent survey, CMAs earn 24-31% more than their non-certified colleagues. Those surveyed that have both a CMA and a CPA have even higher salaries. Now, we know what that you’re hung up on money but there are some other advantages too.

According to Scott, “Partners then had this belief [then] that the CMA was a brutal test (and it was). So a year later I started the process and actually was fortunate to pass the entire test on the first attempt. I had also passed the CPA exam on the first attempt a year earlier and so my partners suddenly thought I was some super smart young accountant and many believed I was ‘fast tracked’ to partner. I believe I just worked my butt off to learn that stuff, but none the less several of my partners looked at me differently. A very key moment in my young career.”

Help the IRS Improve Its Service on the Taxpayer Advocacy Panel

If you are some kind of tax activist, not a felon and ready to serve your country, we may have the volunteer opportunity of a lifetime for you: Serving on the IRS’ Taxpayer Advocacy Panel (TAP). The deadline for applications is this Friday and we’re pretty sure the Service has been swamped with would-be heroes vying for a chance to provide a voice to the poor, abused little taxpayer.


“TAP members represent the typical taxpayer and provide the IRS with invaluable insights that are crucial to sound tax administration,” said IRS Commissioner Doug Shulman.

To qualify, you must pass an FBI fingerprint check (sorry, Lone Wolves, you’re pretty much disqualified right off the bat and will have to stick to crashing planes into IRS buildings if you want your voice to be heard), not be a lobbyist, and of course be caught up on your own tax bills.

Think of it like a focus group for taxes except unlike traditional focus groups, you won’t be getting $75 for an hour’s worth of opinions. TAP members serve a 3 year term and are expected to commit 300 – 500 hours per year serving the Service taxpayer. Members are required to attend a yearly meeting in Washington, DC each fall, at least one face-to-face subcommittee meeting with other members in their region and must participate in a monthly conference call.

So go on, little taxpayers, give the IRS a piece of your mind. And 500 hours of your time, of course.

KPMG Resigns as TierOne Bank Auditor

In a bizarre piece of auditing news released late on a Sunday night, KPMG has verbally resigned as Nebraska-based TierOne Bank’s independent auditor, withdrawn its audit opinion for 2008 and taken back its review of TierOne’s financials for the quarter ended March 31, 2009.

Well damn, we’re fairly sure it couldn’t get any worse than that for TierOne, could it?


Citing risk of material misstatement, KPMG has also warned the audit committee that TierOne’s financials are not to be relied upon by investors. Even Overstock.com doesn’t get that kind of treatment.

Last month the Office of Thrift Supervision – TierOne’s primary regulator – gave it until April 30th to merge with or sell its assets to a healthier financial institution so we’re going to go out on a limb here by assuming that they aren’t going to have good news come Friday and KPMG is just doing the responsible thing by backing away from the mess with a week left.

The Ernst & Young Las Vegas Office Should Try to Nab This Guy for Their Next Singalong

It’s fair to say that of all the fine accountants that participated in the E&Y video from earlier this week, none of them will be bagging a Grammy any time soon (regardless of what the E&Y bigwigs say).


That being said, there is at least one accountant out there who must decent enough pipes to garner this headline:

The Singing Accountant set to be this year’s Susan Boyle?

Not surprisingly, the young lad is a little timid:

Christopher is an accountant who lacked confidence to follow his singing dream. After years of hiding his talent, his family finally persuaded him to pluck up the courage and audition for the show.

“I’ve come to Britain’s Got Talent to audition today mainly from pressure from my parents, more than anything else. They’ve been telling me for years and years that I need to do something like this.”

If Simon Cowell says this, “I think you have a really, really good voice,” then that’s a pretty good indication that you’ve got a better than average singing voice (unfortch there’s no video at this time).

As opposed to what he might have said to the E&Y LV peeps, which we might be something along the lines of:

A) That’s the worst performance I’ve ever heard.

B) That would make my labrador howl uncontrollably for hours.

C) That explains why your pay was frozen.

D) I know Jim Turley, and when he gets wind of this, you’re all going to be fired.

E) Now I know why Lehman Brothers failed.

Now you go.

(UPDATE) Let’s Take a Closer Look at This SEC Accountant’s Porn Activity

Since we’ve been out of the number crunching biz on a day to day basis, our reaction to the 16,000 attempts by an SEC accountant to access porn was simply, “Holy shit, that’s a lot.”


Thankfully, we still have plenty of friends that still burn up the 10-key calcs and we got a drop from one of them a little while ago:

I did [a] calc on that accountant that viewed porn sites up to 16,000 in one month. He was averaging 725x per day (including weekends). That is impressive. I don’t think I can hit 725 times in a year (and I don’t even have a girlfriend), let alone one month.

The best part of this whole ordeal is that it’s now becoming a political football and hyperbole that even makes us scoff.

UPDATE: Our stupid friend is obviously rusty on the calc (they’re no longer in public accounting) and we’ve been re-informed by said friend that 725x is based on 22 workdays (i.e. not including weekends).

Even more importantly, how many accountants out there double-checked this pre-update calc and then failed to get all self-righteous about it?

Furthermore, and perhaps most importantly, the bar has been raised in the wasting time department. Granted this accountant was wasting everyone’s tax dollars while those of you in public accounting are wasting your clients’ dollars but these porn surfing numbers are no doubt a challenge worth accepting. Go forth.

Five Questions with MACPA’s Bill Sheridan

If you don’t know the MACPA and their quality content machine Bill Sheridan, you’re probably not in accounting, have never used Twitter, and most definitely wouldn’t have any clue what Second Life is. When it comes to social media, the Maryland Association of CPAs was on it long before a certain cable company figured it out and Bill has been just one of the organization’s main “faces” as far back as I can remember.

Bill speaks of using CPA Success as a tool to reach the MACPA’s members in ways they never thought they could and speaks as someone who truly enjoys what he does for a living. He likes posts he’s written in airports (who doesn’t love travel blogging? *cough*) while his co-blogger Tom Hood (I believe you all are familiar with his work as MACPA CEO and CPA) prefers tackling the topic of leadership. Whatever your accounting poison, CPA Success covers it all.

Bill was hard to pin down but finally found a moment to get to our five questions, enjoy.


Why do you blog?
It’s yet another way of connecting with our members. Our blog allows us to present news and analyses much more quickly than we ever could before. It allows us to communicate with members in ways we never had before. We’ve had an opportunity to carve out a niche as a thought leader in the CPA space that we never could have established without blogging.

A good accountant is…
A good CPA is a trusted advisor, strategic thinker and confidant, someone who sees beyond the numbers and helps companies grow and clients understand how their finances impact their personal and professional lives. And at all times, honest and ethical.

A good blogger is…
… observant, and a good story-teller.

What is the biggest benefit you’ve gotten from starting your blog?
Notoriety. But the biggest benefit is this: CPAs have really worked hard to carve out a place for themselves in the social arena. When we first started playing around with this stuff three years ago, there weren’t a lot of accounting and finance folks in there with us; it seemed like we were working in a void. Since then, though CPAs have really taken the social bull by the horns. They’re blogging, they’re using things like Twitter and LinkedIn and Facebook, and they’re figuring out to put these tools to use in ways that benefit their businesses and their clients. It’s been fun and extremely rewarding to see CPAs make the leap and work with them to figure all of this out.

The biggest issue facing accountants today is…
… complexity. The profession is facing numerous legislative and regulatory changes these days, and that’s in addition to the many changes in accounting standards and other technical rules that have been enacted recently. Keeping up with all of these changes is a monumental task for CPAs, who are busy enough simply serving their clients.