Morgan Stanley Swings to Profit [WSJ]
Morgan Stanley swung to a third-quarter profit, helped by a large accounting gain that stemmed from declines in the value of its debt. The Wall Street bank posted profit of $2.15 billion, or $1.15 a share, compared with a loss of $91 million, or 7 cents a share a year ago. Revenues rose 46% to $9.89 billion from $6.78 billion a year ago. Excluding a gain of $3.4 billion from a debt-valuation adjustment, Morgan Stanley earned 2 cents per share.

Now Let Us Say Certain Things About DVA [DB]
Matt Levine explains how the banks use bizarro accounting to their advantage.

A Taxing Debate: The Mortgage-Interest Deduction [Bloomberg]
The mortgage-interest deduction may be your favorite tax break, but be aware that it has some impressive enemies. The fiscal commissions of two different Presidents proposed eliminating it, first in 2005 and then in 2010. There’s also a steady stream of research from such places as the London School of Economics and the Brookings Institution arguing that the deduction doesn’t boost homeownership, but instead provides incentives for wealthier Americans to buy big houses and take on more debt. Nevertheless, the mortgage-interest tax deduction survives, fortified in Washington by strong housing industry support and its presumed popularity with voters. Now, according to a recent Bloomberg Poll, a growing number of Americans may be willing to end the mortgage tax deduction — as long as they get something in return.

Cain 9-9-9 Plan Challenged as Raising Taxes for Lower Income [Bloomberg]
The proposal would reduce the tax bill for almost 95 percent of Americans with cash income exceeding $1 million, according to the analysis released yesterday by the nonpartisan Tax Policy Center in Washington. Almost 70 percent of taxpayers with cash income between $200,000 and $500,000 would pay less in taxes, the analysis said. Meanwhile, about 95 percent of Americans with cash income between $30,000 and $40,000 would pay more in taxes. This analysis presumes the 2001 and 2003 tax cuts would be permanently extended. The 9-9-9 plan “substantially increases the tax burden on low- and middle-income families and it substantially cuts the tax burden on the highest-income taxpayers,” said Eric Toder, the Tax Policy Center’s co-director. “Most taxpayers would experience an increase under this plan.”

Olympus Defends Fees Paid to Advisers [NYT]
Last week, Olympus ousted its president, Michael C. Woodford, citing a management culture clash. Striking back, Mr. Woodford on Monday accused the company of wrongdoing, saying that it had paid $687 million, or a third of the purchase price, to two advisory companies related to its acquisition of the Gyrus Group in 2008. Tsuyoshi Kikukawa, the Olympus chairman, told the Nikkei newspaper that the actual amount was about $391 million, and the company issued a statement denying that the payments broke accounting rules. “Investors expected that management would deny everything but in fact the chairman started to admit things,” Yuuki Sakurai, president at Fukoku Capital Management, said in a phone interview. “Only the numbers are different. They admitted the payment even though several years ago they didn’t disclose it. It makes you wonder if there’s more out there.”

The PCAOB Wants to Name Audit Engagement Partners: Would Its “Red A” Really Matter? [Re:Balance]
Jim Peterson: “It’s a bogus issue, and not worth the distraction from serious matters.”

The PCAOB Should Name Names – All of Them [Accounting Onion]
Y la cebolla: “If the PCAOB truly wants the naming of responsible engagement partners to have information and deterrent value, it needs to be more forthcoming itself about the results of its inspections, and to publish the information in a timely manner.”

Groupon planning IPO launch for next week–sources [Reuters]
Groupon Inc is pushing ahead with plans to go public in the face of a volatile equity market, a recent executive departure and questions about its accounting and financial disclosures, sources said on Tuesday. Groupon, the largest daily deal company, is planning to launch a roadshow for its initial public offering next week, on Monday or Tuesday, three sources familiar with the situation said. The IPO is expected to value the Chicago-based company at over $10 billion, likely in the range of $11 billion to $12 billion, two of the sources said.

AICPA Prepares for Canadian CPA Expansion [AT]
The American Institute of CPAs has been holding discussions with the Canadian Institute of Chartered Accountants and CMA Canada on bringing the CPA designation up north and combining it with the CA and CMA designations. At the AICPA’s Fall Meeting of Council in Phoenix on Tuesday, AICPA president and CEO Barry Melancon described the Institute’s international expansion plans, including how the CPA Exam will soon be administered in South America, starting with Brazil.

Bank of America swings to $6.2bn profit [FT]
Bank of America reported a third-quarter net profit of $6.2bn but the results were flattered hugely by accounting gains and its sales of shares in China Construction Bank. Stripping out a litany of exceptional items, from a $3.6bn gain due to the CCB stake sale to a $4.5bn boost from an accounting rule that allows banks to book a profit on the falling value of their own debt, BofA’s businesses produced a loss.

Paul Seeks $1 Trillion Spending Cuts [WSJ]
Mr. Paul, a longtime Texas congressman, said he would close the departments of Education, Energy, Commerce, Interior and Housing and Urban Development, as part of a broader plan to cut federal spending. The federal work force would be cut by 10%. Mr. Paul also called for stopping foreign aid and “ending foreign wars.” His “Plan to Restore America” would end the estate tax and taxes on personal savings, “allowing families to build a nest egg.” He would extend tax cuts on personal income, capital gains and dividends that were enacted under former President George W. Bush.

Corporate leaders say they understand protests [FT]
“I understand some of the angst and the anger. This downturn has been too long, unemployment is too high, and people are hurting. We get that,” said John Stumpf, Wells Fargo chief executive, on a conference call announcing that the nation’s largest bank by market capitalisation had recorded a record $4.1bn quarterly profit.

The Tax Reform Act of 1986: Should We Do It Again? [Economix/NYT]
Republican tax reformers of the 1980s, such as Representative Jack Kemp of New York and Senator Bob Kasten of Wisconsin, were willing to put specific tax preferences on the table for elimination and take the heat for doing so. Reagan built on their efforts and put forward a very detailed plan for tax reform in May 1985, based on several years of work by the Treasury Department, that identified a long list of tax provisions needing pruning from the tax code, along with supporting analysis and documentation. Today, Republicans like Mr. Cain put most of their efforts into devising catchy slogans and almost none into providing details of their tax proposals.

The Young Are Happy at Work [WSJ]
ounger workers tend to be happier with their employers than their older counterparts—but they are also more likely to be looking for an exit. Those attitudes—culled from a recent survey by consulting firm Mercer of nearly 30,000 workers from a variety of industries world-wide—might seem contradictory, but they do make sense, says Bruce Tulgan, founder of Rainmaker Thinking Inc., a workplace consulting company. Twenty-somethings may see a job in a “short-term, transactional way,” he says. “They don’t necessarily think ‘Where do I fit in with this employer?’ “

Bad Math Hurts Cain’s Good Tax Intentions [Bloomberg]
Not to worry: There’s also no reason to think the federal government would ever enact Cain’s plan. Even if, per impossibile, Cain were elected president, Congress isn’t going to tell senior citizens that, after having paid taxes on income all their lives, they will now incur extra sales taxes when they spend the money. It’s not going to raise taxes on millions of poor and middle-class people.

U.S. bank accounting rule has big earnings impact [Reuters]
“This is the most vilified accounting rule I’ve ever seen. It’s amazing how universally despised it is,” said Robert Willens, author of the Willens Report, which analyzes corporate accounting and tax matters.

IRS chief: Budget cuts would hurt U.S., taxpayers [WaPo]
Shulman said that because the IRS workforce accounts for 92 percent of enforcement spending, slashing the IRS budget by the amounts being considered would force substantial cutbacks in front-line IRS staff. The federal government would lose about $4 billion in annual revenue, he said, “or seven times the reduction in IRS budget.”