Going Concern

Accounting News Roundup: BAE Admits to Shoddy Accounting; IFRS Roadmap to Nowhere; Tax Tips for Poker Players | 11.23.10

Caleb Newquist
November 23, 2010

BAE Admits Guilt in Accounting Case, Faces December Sentencing [Bloomberg]
BAE Systems Plc, Europe’s biggest defense company, said it failed to keep proper accounting records of payments in a case that tests U.K. fraud prosecutors’ ability to negotiate plea deals.

BAE lawyer David Perry said today at a hearing at a Magistrates Court in London that the company will enter a guilty plea at a higher court next month. The company has entered into a plea deal, Louis Mably, a lawyer for the Serious Fraud Office, which is prosecuting the case, told the judge.

Cowen Tries to Placate Opposition, Rebels [WSJ]
Irish Prime Minister Brian Cowen pressed opposition parties and independents to back a financial aid package for the country and hold off from seeking an immediate election, even as he found himself on the defensive against rebels within his Fianna Fail ruling party on Tuesday.

The opposition parties and independents are struggling to decide if they should support Mr. Cowen’s government in the upcoming budget, which is crucial to securing a bailout worth tens of billions from the European Union and the International Monetary Fund. Their other option is to push for an immediate election that could delay a rescue package.

Forget About Touching Junk, You’re Going To Piss Yourself When You Hear This [JDA]
The terrorists have won.

SEC Staff Report on IFRS Roadmap: The Public Deserves to Know More [Accounting Onion]
Tom Selling isn’t impressed so far, “It’s appalling how little the SEC staff has accomplished over the ensuing eight months. If I were the SEC’s ‘thesis adviser’, I would be torn between two painful conclusions: this progress report was a rush job from a student with an attitude problem; and/or, she is just not capable of getting the job done.”

Welcome to the Tax Blogosphere: Tax Tips for Poker Players [TaxProf Blog]
For those considering it.

Bush tax cuts: What happens if Congress punts [CNN]
Punch and pie for everyone!

Questions You Should – and Shouldn’t – Ask in an Interview [FINS]
A perfect opportunity to showcase your knowledge about quantitative easing.

Watchdog abandons Hogan chase [Sydney Morning Herald]
Victory for Mick Dundee.

Cuba Gooding Jr’s Dad sued, allegedly didnt pay his accountant [NYP]
Celebrity parents should really know better.

Quote of the Day

Fiscal Chickenhawks

Caleb Newquist
November 23, 2010

“I’m not sure who invented the term ‘deficit hawk,’ but it seems an odd name for a creature too chicken to raise taxes.”

~ Nancy Folbre, economics professor the University of Massachusetts Amherst.

News

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

Caleb Newquist
November 23, 2010

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.

Career Center

Big 4-Bound Associate Needs Rainmaking Tips

Caleb Newquist
November 23, 2010

Welcome to the we’ve-already-checked-out-for-the-week edition of Accounting Career Conundrums. In today’s edition, a Big 4-bound associate is looking for some rainmaking opportunities as a young up-and-comer. Is this typical young grasshopper idealism or can this young man be helped?

Need some career advice? Recently been let go and want some ideas on how to go out on top? Looking for an interpretation of the latest message from your firm’s CEO? Email us at advice@goingconcern.com and we’ll translate thrning to the rain dancer:

I start with a Big 4 firm in January. I have no public accounting experience (not really counting 2 internships I had 3 years ago). I have gotten lots of advice/tips from people in the last few weeks concering advancement. “You have to be a rainmaker” to move up.

I’ve read articles (some on Going Concern) about making sure you can show your value to your employer when negotiating raises/advancement. My questions are: how can a first year staff member begin to take steps to developing their value in a firm? What can a first year do to begin to develop “rainmaking” qualities? Is it even possible to be a rainmaker so early in a career?

I imagine networking, volunteering, and getting involved are all things that I’d normally hear regarding this topic. But I’m wondering if you have any more tangible, practical advice.

Dear Rain Dancer,

Not sure why you assume “networking, volunteering and getting involved” aren’t “tangible” but those all seem like a good places to start. As for “practical,” your firm will probably give you plenty of opportunities for all of these, so again, not sure why those options strike you as inconvenient or unrealistic.

That being said, we’ll elaborate a little bit. For starters, this “rainmaker” talk is bullshit for someone in your position. Whoever is telling you this is giving you clichéd buzztalk that is frankly, useless. Advancement, at this point in your career is more about making the most of opportunities that are presented to you (networking, community involvement are good examples).

Furthermore, you’re correct to assume that it’s pretty difficult for a new associate to walk in and bring in a slew of new business. It’s a partner’s job to find new business, not yours. You can’t become the next Piet Klynveld without knowing what a tickmark legend is, now can you?

However, this shouldn’t dissuade you from looking for opportunities to build relationships with the professionals around you. Keep your eyes and ears open and build your network. You never know who will become a decision-maker and if you happen to have a good relationship with said decision-maker, you could land your firm some new business down the road.

Same goes for volunteering. If you’re helping in the community, you’re likely to meet people you wouldn’t otherwise, so this is another opportunity build your network that will allow you to shower your firm in cash in the future.

Do you honestly think you’ll can cold-call every business in town and charm them over the phone into accepting your business? Even if you did have them doing back flips on the other line, they’ll strike the deal with a partner at the firm, not you. If you’re lucky, you’ll get a nice little bonus for making the introduction and while that shows initiative that hardly makes you a “rainmaker.”

At this stage in your career, being involved in social activities at your firm, building relationships with clients and co-workers and having a good attitude will help you advance. Oh, and it helps if you know something about your given line of business (audit, tax, advisory).

Building those relationships (and being of capable intelligence) will give you the chance to bring some business to your firm. Then you can get all Pacman Jones on everybody.

Deloitte

Roland Berger Tells Deloitte to Drop Dead

Caleb Newquist
November 22, 2010

Last week we mentioned that Deloitte and Munich-based Roland Berger were talking about getting cozy with both firms sounding pret-tay excited about the future. Turns out, no one had asked the Roland Berger partners how they felt about the whole situation.

Plans to merge Roland Berger Strategy Consultants with Deloitte Touche Tohmatsu have fallen through after the Munich-based firm rejected the advances.

The two had been in advanced talks but directors at Berger overwhelmingly voted to remain independent.

Talks between the two firms had progressed so far it is believed they had already decided upon a new chief executive and were examining possible regulatory hurdles.

Over at the Financial Times, Adam Jones reminds us that this is a big wrench in Deloitte’s McKinsey-slaying plans, “[Roland Berger’s] decision to continue to go it alone is a blow to Deloitte’s ambition of eclipsing McKinsey in the market for strategic managerial advice.”

It’s a strange turn of events to be sure after last week’s PR lovefest but the FT reports that the Roland Berger was willing to put up his own cash to keep the green ink out of his firm:

Roland Berger said the vote to remain independent had been carried with a majority of “close to 100 per cent” on Saturday.

It added that partners in the firm – including Roland Berger, its founder – had agreed to put in more money to support the renewed go-it-alone plan.

People close to the deal talks suggested Mr Berger had agreed to invest about €50m ($68.5m) to help fund its expansion as a standalone business.

That’s not so much of a “No.” as it is a “Hell no.”

News

Is the Gen X Mid-life Crisis Upon Us?

GoingConcern
November 22, 2010

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.

A.O. Scott, currently movie critic for The New York Times, wrote a column in the Times‘ Week in Review (May 9. 2010) titled. “Gen X Has a Midlife Crisis.” He used film references such as “The Big Chill” for Barecent “Hot Tub Time Machine” and “Greenberg” for Gen X (his generation). He also references “The Ask,” a novel relating to Gen Xers as fodder for his view.

Scott characterizes Gen X as over-educated, insecure, coming of age in the late 80s and early 90s. He also ascribes to Gen Xers the phrases: “consumerist banality,” “the attempt to camouflage sincere confusion with winking insouciance,” “the obsession with generalizing a personal experience,” “we did what we could: the slogan of the underachiever, the excuse maker, the loser.” (Is his language off-putting to you too?)

I think it is unfair to characterize a whole generation this way, Further, there are big differences between the older and younger halves of the Gen X cohort (1962-1978) as there are with the Boomer generation, and my guess is that Scott is referring mostly to the Xers on the older end.

Yet the arts reflect the culture the artists are observing, so what do the patterns and kernels of truth in the films, books, etc, tell us? What will engage members of that generation to be the leaders and achievers they need to be?

Some speculation:

* More than other generations, Gen X may blame Boomers for blocking their opportunity and their underachieving. Unlike Gen Y/Millennials, they are not typically optimistic about their future at times of economic setbacks, and they don’t expect help.

* Gen Xers don’t look to others (older or younger) to explain their confusion or uncertainty.

* Gen Xers have a harder time trusting than other generations, having seen how the workplace social contract broke down for their parents and has never been particularly welcoming to them. In the workplace, they typically do not and will not place a premium on helping others and “making your fellow players look great” (as stated in the most important rule of improv performance).

* Materialism is evident. They outdo the Boomers in pursuit of luxury brands and symbols.

* Gen Xers (and Gen Y too) want freedom as represented by time, rewards in money and time, and to decide how to spend their time. The aspiration is “The Four-Hour Work-Week.” They were the first generation to see technology enable that. They work hard to create flexibility at an early age rather than waiting to achieve seniority and retirement. Gen Y is even more adamant about flexibility.

* Xers are resourceful personally (though not necessarily in groups), yet often feel like losers.

* Gen Y trusts group consensus or group determined “truth.” They expect help and resent Gen Xers who don’t specify expectations and don’t give them guidance, and call them spoiled, entitled, and over-protected. If not addressed in an enlightened way, this tension doesn’t portend well for long-tern engagement and productivity in the workplace as we know it.

Since Gen Xers, for a short time at least, are the next generation of leaders we all must look to, how can they capitalize on the strengths of their generation – which are often overlooked? And how can all the generations support them in using those strengths such as: self-sufficiency, desire for flexibility, results-orientation, entrepreneurial attitude, getting the job done wherever and however they choose, and belief in merit-based rewards to change deficient and debilitating business models for the better in a global context?

This is an important topic for future discussion and needs to start with a sincere expression of respect and candid dialogue in a non-threatening environment.

Phyllis Weiss Haserot is the president of Practice Development Counsel, a business development and organizational effectiveness consulting and coaching firm she founded over 20 years, with a special focus is on the profitability of improving inter-generational relations and transitioning planning for baby boomer senior partners (www.nextgeneration-nextdestination.com). Phyllis is the author of The Rainmaking Machine and The Marketer’s Handbook of Tips & Checklists (both West 2010). pwhaserot@pdcounsel.com. URL: www.pdcounsel.com.

Exposure of PwC Email Scandal Really Put a Damper on Irish Accountants’ Spirits

Caleb Newquist
November 22, 2010

We kid, we kid. The lid being blown off PwC Email Hottiegate probably has a few people down in the dumps but it’s more likely that Ireland’s Greece impersonation is what has the country’s accountants wallowing in their sorrows.

Irish accountants are more pessimistic than their international counterparts about the future of the economy, according to a new global survey.

Only about a quarter of Irish accountants, surveyed by the Association of Chartered Certified Accountants (ACCA), believed the global economy was in, or close to, recovery and more than half believed it would remain stagnant for some time yet.

This is much more pessimistic than the global view where less than half believed that conditions were stagnating or deteriorating. With regards to business confidence, Irish respondents continued to report falling confidence, but only marginally so, with 32 per cent reporting a loss of confidence and 27 per cent reporting gains.

Irish accountants more pessimistic than their peers [The Post]

News

Warren Buffett Still Stuck in His Way Re: Taxes

Caleb Newquist
November 22, 2010

You know how old people can get.

[via TaxProf]

Accounting News Roundup: Ireland Will Take That Money Now; Deloitte’s Role in the GM Soap Opera; SaaS Continues to Outpace On-site Vendors | 11.22.10

Caleb Newquist
November 22, 2010

Ireland Is Second Euro Nation to Seek Aid as Banks Wobble [Bloomberg]
Ireland became the second euro country to seek a rescue as the cost of saving its banks threatened a rerun of the Greek debt crisis that destabilized the currency.

The euro erased gains and Irish bonds pared an early advance after Moody’s Investors Service said a “ multi-notch” downgrade in Ireland’s Aa2 credit rating was “most likely.” The prospect of January elections loomed as the Green Party said it would pull out of Prime Minister Brian Cowen’s coalition.

Deloitte, Delphi, and GM: Duped or Duplicitous? [<auditors.com/2010/11/21/deloitte-delphi-and-gm-duped-or-duplicitous/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+ReTheAuditors+(re:+The+Auditors)">RTA]
Francine McKenna takes a peak at underbelly of one part of the GM situation.

Authorities may be close to filing insider trader cases [Reuters]
Federal authorities may file a series of insider trading cases against hedge fund traders, consultants and Wall Street bankers within weeks, several lawyers familiar with the situation said.

Prosecutors and securities regulators are likely to file a number of cases targeting the $1.7 trillion hedge fund industry rather than a single spectacular case, said the lawyers, who have knowledge of the investigations but did not want to be identified since details have not been made public.

SaaS players still outperforming on-premise vendors [AccMan]
Dennis Howlett: “In the past it was possible to ignore or critique this kind of assessment on the grounds the SaaS vendors operate on a fraction of the revenue the on-premise vendors enjoy and are in growth mode. Therefore you would expect to see high growth percentage based on the total size of the market. That’s changing.”

Cultures Clash in Combination of Bank Regulators [FINS]
The bigger concern is bridging the gap in culture. Consumer protection advocates have criticized both agencies for failing to police financial institutions adequately during the crisis.

“[The merger] could exacerbate problems at the two agencies, but it won’t make them better,” said Travis Plunkett, legislative director at the Consumer Federation of America. “A severe house-cleaning from the top down, focused on changing the culture and improving regulatory oversight, is necessary.”

BAE to Face Accounting Charge as Prosecutors Test Plea Powers [Bloomberg]
BAE Systems Plc, Europe’s biggest defense company, will be charged with failing to keep proper records of payments at a London court tomorrow, testing U.K. fraud prosecutors’ ability to negotiate plea deals.

BAE will plead guilty to accounting irregularities regarding its business dealings in Tanzania and may pay 30 million pounds ($48 million) under a proposed settlement with the U.K. Serious Fraud Office, said Sam Jaffa, a spokesman for the SFO. BAE was under investigation in the U.K. since November 2004 for allegedly paying bribes to win deals in six countries including Tanzania and the Czech Republic.

In Pictures: 10 Highest State Income Tax Rates For 2011 [Forbes via TaxProf]
Damn you Hawaii, with your bait and switch tactics.

Google CFO Pichette Says Social Networking a Part of Strategy [Bloomberg]
The quest for world domination will be disguised as fun!

FASB, GASB Standards to Undergo New Review Process [JofA]
The Board of Trustees of the Financial Accounting Foundation (FAF), the oversight body for the two standard setters, announced a review process it described as independent of the standard-setting process of FASB and GASB. FAF Chairman John J. Brennan called it a “mechanism for obtaining ‘real world’ feedback and analysis” of standards.

Quote of the Day

Tax Cuts Can Wait

Caleb Newquist
November 20, 2010

“Congress has gone since 2002 without dealing with the December 31, 2010 expiration of the Bush-era tax cuts. What’s another week or two?”

~ Joe Kristan hasn’t considered the risk of tryptophan hangovers.

You Realize We Will Be Without Wesley Snipes for Three Years, Don’t You?

Caleb Newquist
November 20, 2010

Sure, it could be shortened for reasons that can’t currently be foreseen but this is a huge blow to the culture…oh, to hell with it.

Judge Terrell Hodges was fed up with this circus and dude is going to jail.

Wesley Snipes was ordered on Friday to start serving a three-year prison sentence for a felony tax conviction after a Florida judge rejected his bid for a new trial.

“The Defendant Snipes had a fair trial … The time has come for the judgment to be enforced,” U.S. District Judge Terrell Hodges said in his ruling.

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