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Accounting News Roundup: GM – Back in the Game; Film Credits Get No Love; FASB Parent Names CEO | 11.18.10

GM Is Low-Key About Return to Stock Market [WSJ]
General Motors Co., though eager to shed the “government motors” stigma, will take a low-key approach to touting its return to the public markets.

GM’s $18.1 billion IPO is its biggest step yet away from being owned by the U.S. government, which rescued the auto maker and became its largest shareholder with last year’s government bailout. The offering will reduce U.S. Treasury’s stake from 61% to around 26%.

The Bipartisan Policy Center’s Bold, Controversial Stab at the Deficit and Tax Reform [Re:Balance]
Jim Peterson writes, “Having taken M Barnier to task, I was rightly challenged by readers to stop complaining and be constructive.” Accordingly, he has presented the message.

Leftish Think Tank: Film Credits Stink [Tax Update Blog]
Bipartisan opposition! Who knew it was possible?

FinReg May Hamper Job Growth [FINS]
New York’s Comptroller took a swing at D.C.’s financial reform measures in a report on the securities industry released this morning.

The office noted that measures to hamstring Wall Street compensation, prop trading and derivatives trading would crimp growth in the state’s overall workforce. Each securities job in New York creates two other jobs in the city and one position outside of the city, according to the comptroller.

Mark-to-Make-Believe Perfumes Rotten Loans [Jonathan Weil/Bloomberg]
Banks exploiting loopholes in fair value reporting rules? Get out!


2 Former Madoff Aides Are Arrested [DealBook]
Annette Bongiorno was arrested at her home in Boca Raton, Fla., and Joann Crupi was arrested at her residence in Westfield, N.J., the spokesman said. Both women worked for Mr. Madoff for more than 25 years. Ms. Bongiorno served as Mr. Madoff’s longtime personal secretary; Ms. Crupi, among other responsibilities, handled Madoff’s daily cash balances.

Qantas A380 suffered “cascade of failures”: report [Reuters]
The last thing you’re looking for when a plane is in the air is a ‘cascade’ of things going wrong.

FAF, FASB’s Parent Organization, Names Its First CEO [JofA]
Teresa S. (Terri) Polley gets the honor as well as keeping her old job as president.

Spreading the Sacrifice Around

“Everybody must sacrifice so this quiet killer won’t eat us alive before we have a chance to fix what was our doing.”

~ Former Senate Budget Chairman Pete Domenici who, along with Alice Rivlin, rolled out their fiscal deficit solution today that includes a 6.5% national sales tax.

Apple’s New Audit Committee Chairman Is a Rocket Scientist

No, a for-real rocket scientist.

Apple Inc. named former Northrop Grumman Corp. Chief Executive Officer Ron Sugar as a director, adding an aerospace-technology expert to a board that includes leaders in retail, cosmetics, software and politics.

Sugar, 62, will serve as the board’s audit and finance committee chairman, Cupertino, California-based Apple said today in a statement. Sugar headed Northrop, the third-largest U.S. military contractor, from 2003 until last year, helping the company consolidate $26 billion in acquisitions.

Okay, accounting/auditing isn’t the most mind-bending of trades, so why does Steve Jobs feel the need to appoint someone who has spent most of their careers putting things into space as their audit and finance chairs? We’re sure Mr. Sugar is an extremely smart man – c’mon, A ROCKET SCIENTIST! – and is obviously good with numbers but doesn’t this level of irrelevant expertise seem a tad ridiculous? Just wondering out loud.

(UPDATE) Sachdeva Defense Team Throws a Hail Mary

With a sentence coming down circa any minute, the Koss embezzlement queen is probably starting to freak just a tad.

Accordingly, her attorneys are pulling out all the stops. The defense is now claiming that Sue’s assistant, Julie Mulvaney was “an enabler” and kept SS from having a nervous breakdown when things got dicey around the scam:

•In May of each year — a few weeks prior to scheduled visits from Koss outside auditors — Sachdeva would review the cash in the company’s ledgers, compare it with the cash in the company’s bank accounts and then determine the difference between the two. Sachdeva would presume the shortfall was equal to her theft of company funds.

“She would then call Julie Mulvaney into her office in a panic, and tell Mulvaney that cash was ‘off’ by a certain amount,” the memo states. “Mulvaney would respond by saying ‘let me look at everything and get back to you and don’t worry.’”

Mulvaney would then alter figures in the ledgers, the memo states.

•Sachdeva’s attorneys contend Mulvaney worked independently and without direct supervision “and only minimally shared her methods with Sachdeva.”

“Sachdeva, who was preoccupied with the fear of being discovered and too emotionally distraught to manage the fraudulent entries, would constantly ask Mulvaney at work if everything had been ‘fixed,’ and would frantically call Mulvaney at home, sometimes late at night, to see if the cash had been reconciled,” the memo states.

Sue was so emotionally distraught throughout the ordeal that she wandered into Valentina Boutique on a number of occasions and spent $1.4 million. Yeah, that makes sense.

UPDATE, circa 5:30 pm: From Milwaukee public radio, Suz gets 11 years.

Is Accounting Rule Anarchy a Good Idea?

John Carney comments on Sheila Bair’s bellyaching about mark-to-market today by simply wondering why there has to be a debate at all. That is, couldn’t accounting rules just be served up – presumably buffet style – and the banks would choose which treatment they like best and then regulators could judge their health based on their choices:

Here’s what I don’t get: why do we need one set of accounting standards at all? To put it differently, why should banking regulators feel obliged to judge the safety and soundness of financial institutions according to any measure that they do not like? If Bair doesn’t think fair value is appropriate to the banking sector, can’t she just ignore fair value when judging whether banks satisfy regulatory requirements?


It’s an interesting question. Why does the FDIC care what fair value says when determining bank health? Analysts use and refer to non-GAAP data all the time, so what difference does it make if regulators rationalize their analysis on similar non-GAAP measures?

After explaining that, despite the complaints of a certain billionaire (among others), transparency is actually a good thing, Carney floats an idea:

My truly radical proposal is that we should probably do away with this argument altogether by allowing banks—and every other company for that matter—to choose which accounting standards they want to use. If amortized cost is truly a better standard, banks using that will surely be rewarded by higher stock prices and cheaper access to credit. On the other hand, if fair value is appropriate, the market will reward that. Why not let banks choose and bear the costs of their choice?

While we’re with John in spirit (especially for the banks, they run things after all), the BSDs in the accounting will never let this fly. The idea of letting individual companies determine what accounting rules to follow is enough to cause Big 4 partners to set themselves on fire in the middle of Union Square in protest.

However, if you’ve got thoughts on we could put this thing in motion, it might be kind of fun to see how it works out.

Senior Manager Needs Help Enforcing the Short Skirt Policy

Welcome to the one-more-week-until-a-half-day edition of “I’m an accountant and I need you to fix my problem.” In today’s edition, a senior manager has a new associate who is bouncing between firm-approved and firm-unapproved skirts. The extra skin has gotten some attention and the SM has already given the associate a vague warning. What’s next?

Caughte at work? Need advice on how to behave around a monarch? Looking at some jail time and need some ideas on how to spend your final days outside? Email us at advice@goingconcern.com and we’ll make sure you’ll behavior is acceptable/memorable for your respective situation.

All right then, enough skirting the issue:

I am a Senior Audit Manger. “Danica” is a newly hired audit staff. I am not “Danica’s” mentor. Technically “Danica” is about average. Unfortunately, “Danica” wears skirts six to seven inches above the knee. The firm dress code is three inches above the knee.

When she interviewed and for her first two weeks her presentation was excellent, nicely tailored three inches above the knee or a pants suit, nice hair and make-up. I know this a not lack of knowledge or a lack of funds to purchase a work wardrobe. In week three, when the short skirts first appeared, I called her into my office explained that accounting was a conservative profession and regardless of what our clients wore they expected us to be dressed professionally. I also explained that it was just as important she dress conservatively in the office as she could be sent to a client at anytime and the partners form an opinion of her when she is in the office. I did not explicitly mention the length or her skirts. The following two weeks she dressed correctly again and I patted myself on the back for effectively counseling a nice young staff member.

Two weeks later the short skirts were back again. Since that time one client made a negative comment as “Danica” walked past the conference room. Two other staff have asked me if new staff received copies of the dress code.

We spent a lot of money putting her through training. I would like to salvage “Danica’s” career if I can. I personally like her. I don’t think it is too late. In a few months people would chalk it up to poor judgment by a new staff member; not much worse than posting drunken photos on their facebook page. If she corrected her dress between now and the end of Decmber, then I could staff her on my jobs during busy season. However, I don’t want to open the firm up to a discrimination lawsuit if she takes this the wrong way.

What if anything do I do next?

Dear Fashion Police,

Being a proponent of fantastic gams, this particular issue may cause our thoughts to drift but we understand that you have a problem and we’ll do our best to stay objective here.

Judging by the timing (short skirts are appearing every two weeks) it’s possible that the young lady’s wardrobe is of the size that the shorter hems are simply appearing in their usual spot of the attire rotation. Your sit-down in week three sounds a little ambiguous and it appears the associate’s did not get the point of your little chat.

The fact that others have noticed is cause for concern (unless the associate is campaigning) and it may be time for another chat. This time reference your firm’s dress code rather than explain that accountants are expected to “dress professionally.” Ask the associate if has questions and allow them to communicate their feelings on the situation. You need to avoid any confusion on situation, otherwise you’re just compounding the problem.

The risk of a discrimination lawsuit is minimal** based on the fact that you have an explicit policy that all employees must follow. Danica is a new associate and this is a blip on her career so nip this issue in the bud and everyone will move on quickly.

**DISCLAIMER: I’m not a lawyer but, come on. There’s a policy!

From Traditional IRA to Roth IRA: New Rollover Rules

For years prior to 2010, only taxpayers with modified AGI of $100,000 or less generally were permitted to convert a traditional IRA into a Roth IRA. For years beginning in 2010 and after, the AGI limitation has been eliminated. Thus, regardless of AGI, all otherwise eligible taxpayers will be allowed to convert an IRA to a Roth IRA. The amount converted is includible in income as if a withdrawal had been made, but no early withdrawal penalties are assessed.


Two-year income spread if conversion done in 2010 – For conversions occurring in 2010, unless a taxpayer elects otherwise, none of the amount is includible in gross income in 2010, with half of the income resulting from the conversion includible in gross income in 2011 and h, income inclusion is accelerated if converted amounts are distributed before 2012. In that case, the amount included in income in the year of the distribution is increased by the amount distributed, and the amount included in income in 2012 (or 2011 and 2012 in the case of a distribution in 2010) is the lesser of: (1) half of the amount includible in income as a result of the conversion; and (2) the remaining portion of such amount not already included in income. The following example illustrates the application of the accelerated inclusion rule.

Example – Betty has a traditional IRA with a value of $100,000 consisting of deductible contributions and earnings. Betty does not have a Roth IRA. She converts the traditional IRA to a Roth IRA in 2010, and as a result of the conversion, $100,000 is includible in gross income. Unless Betty elects otherwise, $50,000 of the income resulting from the conversion is included in income in 2011 and $50,000 in 2012.

Later in 2010, Betty takes a $20,000 distribution, which is not a qualified distribution and all of which, under the ordering rules, is attributable to amounts includible in gross income as a result of the conversion. Under the accelerated inclusion rule, $20,000 is included in income in 2010.

The amount included in income in 2011 is the lesser of (1) $50,000 (half of the income resulting from the conversion); or (2) $80,000 (the remaining income from the conversion). The amount included in income in 2012 is the lesser of (1) $50,000 (half of the income resulting from the conversion), or (2) $30,000 (the remaining income from the conversion, i.e., $100,000 – $70,000 ($20,000 included in income in 2010 and $50,000 included in income in 2011)).

Preparer note – While you cannot elect out of the two year spread on only a portion of the conversion income in 2010 (it’s an all or nothing election), husband and wife may each make separate elections for their individual IRA accounts. For example, a wife could elect to report her conversion income in 2010 and her husband could report his 2010 conversion income in 2011 and 2012. This may result a better spread of the income. The same taxpayer is allowed to make separate elections for separate IRA accounts.

If you need guidance on answering the question, “should my client convert to a Roth?” check out CPE Link’s Federal Tax Update: Part 2 webcast scheduled November-January.. You’ll get a myriad of planning ideas and even access to a simple, but sophisticated, calculator. (Note: The above information was excerpted from Vern Hoven’s manual used in the webcast.) In addition to coverage of the IRA & Individual Retirement area, you’ll get an update on Real Estate & Investment, and Estates, Trusts & Beneficiaries.

The AICPA Teaches Congress What “Burdensome” Really Means

On July 19, the AICPA sent a letter to the House and Senate condemning new 1099 reporting requirements (said requirements being carefully hidden inside The Patient Protection and Affordable Care Act a.k.a. Obamacare) as burdensome and annoying. Apparently the AICPA must feel quite strongly about this matter as it is now November and they have sent a very similar letter to Congress, perhaps to show them just how burdensome extra paperwork can really be.


The House letter may be found here.

The AICPA doesn’t like that rental property owners could now be required to keep extensive records and bother with tax issues in typically tax-free January, among other things:

This would be the first time that individual taxpayers owning rental property who are not “engaged in a trade or business,” would be required to provide Forms 1099-MISC. For example, many individuals, who own a vacation property that is rented part of the year to help defray their costs, would be subject to the provisions of the SBJA. We are concerned that (1) keeping records to track expenses by provider, (2) obtaining tax identification numbers and other information from providers of property and services, and (3) providing Forms 1099-MISC during January, a month when taxpayers would not normally be focused on tax issues, would be extremely burdensome. Additionally, the AICPA questions the need for sending information forms to certain providers of services, such as utility companies.

Thankfully the AICPA has everyone’s back and feels as though business owners should be allowed to focus on growing their businesses instead of worrying over filling out massive amounts of paperwork. We’ve got to appreciate that attitude as any other professional organization might salivate over the idea of plenty of billable hours to go around as CPAs line up to hook up business owners with the right paperwork but not the AICPA, who said “businesses do not need the added cost of more regulatory requirements at a time when their efforts must be focused on profitability and sustainability.” Word!

We look forward to the next round of angry letters from the AICPA on this matter and hope that they don’t find fighting Congress too burdensome.

(UPDATE) Ex-Grant Thornton Partner Gabriel Azedo Arrested in Spain

~ Updated includes statement from Grant Thornton International in final paragraph.

The South China Morning Post is reporting that former Grant Thornton partner, Gabriel Azedo was arrested in Spain, citing “people with knowledge of his detention.”

Gaby was on the lam for over year and has allegedly stolen HK$91 million (around USD$11.7 million) from those close to him, although one of his alleged victims doesn’t see this as a half glass full situation:

Yesterday one of his alleged creditors, racehorse owner Archie da Silva, said: “I don’t know whether to be happy or not. Just because he has been arrested doesn’t mean we will get our money back. It could be a very tedious process to get him back to Hong Kong.”

Arch’s concerns about bureaucratic nightmare that is extradition seem to be well-founded, as the article explains that getting Gaby back to Hong Kong really isn’t going to be easy:

“There is no bilateral agreement between Hong Kong and Spain but a transfer under multilateral treaties the two jurisdictions are signatories to, or under provisions in Spanish domestic law, are two areas that can be looked at,” the person said.

However, it is likely extradition could involve a lengthy legal and diplomatic process because Hong Kong has no Surrender of Fugitive Offenders Agreement with Spain.

Another officer linked to the case said: “It’s really up to Spanish authorities to decide whether to hand over the man to us. They could ignore our request as there is no legal obligation for them to hand over Azedo.”

We contacted Grant Thornton International to see if they wanted to comment but have yet to hear back. It goes without saying that this story is pretty strange/intriguing so, we’ll continue to follow the developments.

UPDATE, circa 10:45 am ET: A Grant Thornton International spokeswoman provided us with the following statement regarding the matter:

“We understand from media reports that Gabriel Azedo has been arrested in Spain and that he may be the subject of extradition proceedings to Hong Kong. He was a member of the global leadership board of Grant Thornton International until his dismissal in October 2009. Immediately following his disappearance, Ms. Angela Gardner, a close relative of Mr. Azedo, filed a lawsuit in Hong Kong against Grant Thornton International Ltd but this was subsequently dismissed by the Hong Kong court.

While the situation is highly regrettable for the individuals concerned, this is now a matter for them and for the Hong Kong courts.”

Reminder: Going Concern Reader Survey (Fall 2010)

Against my will, TPTB have forced me to remind you that it is imperative that you take our Fall 2010 Survey if you haven’t already.

It’s also been impressed upon me to also re-mention that we are offering you the chance to win a $500 gift card and it also makes you a good American.

Kindly follow this link to take our survey. As always, your time (billable or not) and participation are appreciated.

Thanks!

Accounting News Roundup: Deficit Reduction Part II; Eloquence Beats the Truth in Interviews; AICPA Still Begging for 1099 Repealment | 11.17.10

Another Deficit Plan Targets Taxes [WSJ]
A panel of Democrats, Republicans, economists and other experts is set to say Wedne overhaul of the U.S. tax code is the best way to address the nation’s fiscal problems—a new and likely controversial idea aimed at tackling the growing deficit.

The report, co-authored by Democratic budget veteran Alice Rivlin and former Sen. Pete Domenici (R., N.M.), follows a separate proposal last week by the two chairmen of President Barack Obama’s deficit commission. The many similarities between the two offer a window into the types of proposals that might win backing as Washington launches into what is likely to be a protracted debate on deficit cutting.

Pretty Good for Government Work [NYT]
A “Grateful Nephew” sends a thank you note to his uncle, “Uncle Sam, you delivered. People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic — and, overall, your actions were remarkably effective.”

Facebook’s messaging: would you like a rectal probe with that? [AccMan]
Dennis Howlett reacts to the reactionary.

Eloquence in an Interview Is Better Than Accuracy, Says Study [FINS]
If you’re stumped by a question in an interview, fake it. That’s the advice coming out of a new study from Harvard.

You’ll have a better chance of making a good impression if you respond eloquently and slightly irrelevantly than if you answer truthfully but with a dozen “uhs” and “ums” thrown in, according to the study.

Politicking Hinders U.S. Recovery [CFO Blog]
Sayeth Zanny Minton-Beddoes, an economics editor at the…Economist.

AICPA Urges Repeal of Expanded 1099 Reporting Requirements [JofA]
The House and the Senate each got their own letter.

City Could Extend No. 7 to New Jersey [WSJ]
Hizzoner is exploring the idea.


Shorter Agenda for Convergence [CFO]
Chief financial officers and controllers can breathe a little easier now that accounting rule makers have decided to scale back their aggressive schedule and focus on completing five priority projects by next year. The announcement was made on Monday by Leslie Seidman, acting chairman of the Financial Accounting Standards Board, at a financial-reporting conference sponsored by Financial Executives International. She was reiterating decisions made by the board earlier this month.

Do all your audit activities add value? [Marks on Governance/IIA]
Well?

The Housing Crisis Didn’t Stop the Fannie Mae CFO From Keeping Everyone in Stitches

“Since joining Fannie Mae in 2008, David has worked diligently and successfully to help Fannie Mae respond to the housing finance crisis while developing strategies to enhance the finance function and prepare our company for the future. We will miss David’s intellect, energy, and good humor.”

~ Fannie Mae CEO Michael Williams in an email to employees announcing the resignation of CFO David Johnson.