Going Concern

The AICPA Doesn’t Mind If You Copy and Paste Their Letter for the Expressed Purpose of Telling the IRS That the Preparer Regs Suck

Caleb Newquist
August 25, 2010

The AICPA is following the ABA’s strategy of mass letter sending by urging its members to inundate the IRS with tearful pleas to reconsider the Service’s Tax Preparer Registration Proposal.

The issue is so serious that the Tax Vice President, Edward Karl, went on the Hill today to testify about the AICPA’s concerns, in what had to have been one raucous hearing:

The AICPA has serious concerns that the proposed IRS regulations are an overreach and would place immense burdens on CPA firms, particularly small- and medium-size firms. Further, the AICPA questions whether the IRS has adequately examined the costs that would be imposed on tax preparers and American taxpayers.

The IRS has proposed four broad new requirements for paid tax return preparers including: mandatory registration, application of enforceable ethical standards, competency testing and continuing education requirements. At [today’s] hearing, the IRS specifically requested comments about registration and the fees tax preparers will be charged for newly required personal taxpayer identification numbers, or PTINs.

While the AICPA has consistently supported the IRS’s efforts to increase tax compliance and elevate ethical conduct through the adoption of a registration process for paid tax return preparers, the AICPA does not believe other elements of the policy are fully justifiable or necessary, according to Karl.

The AICPA is urging all of its 360,000 members to contact the IRS about the proposed regulations to express opposition to elements of the plan.

Adrienne urges everyone to do the copy and paste thing ASAP and since there’s no mention of the IRS being anti-form letter, then we’d probably say that it’s safe to proceed with the letter with the AICPA’s language.

That being said, that’s a pretty boring approach and if you can muster the passion of either side of the fair value debate, we suggest you write from the heart.

Small Business

Automatic IRA Act Will Be a Boon for Financial Services Companies; Small Business…Not So Much

GoingConcern
August 24, 2010

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

There’s pending legislation in the Senate to require even tiny businesses that don’t already have a retirement plan to create an IRA for employees. Whether or not it will do much to help people save for their retirement in a meaningful way is debatable.

The bill, the Automatic IRA Act of 2010, introduced by Senator Jeff Bingaman (D-New Mexico) mandates that businesses establish individual IRA accounts for all employees. Contributions would come from payroll deductions, so employers wouldn’t have to cough up any money themselves, and employees would be able to opt out. Accounts would be managed by banks, mutual funds, and insurance companies that already manage this type of account.

Also employers would have no ERISA fiduciary liability as long as they used a provider on a government-approved list. And there’s a default investment structure: a principal preservation fund for balances of less than $5,000 and a lifecycle fund for bigger accounts.

Seems reasonable, until you drill down further. First there’s the infinitesimal default deferral rate. That’s 3 percent. As a result, since employers aren’t even allowed a match, it’s unlikely employees will be able to save a whole lot. Also employers get a measly $250 tax credit to cover administrative costs.

Mostly this bill will be a potential goldmine for financial services companies, at least those on the official government list of approved providers. While each account will be small in aggregate, the amount will come to quite an attractive proposition for these businesses.

If there were any doubt about just what a windfall this could be, consider the provision for a gradual phase-in of the law. For example, in the first year, the bill will apply only to businesses with 100 or more employees. It won’t cover companies with less than 10 employees until year four.

But that provision wasn’t put there with the company owner in mind. Instead it’s all about the retirement services providers to help them “prepare for a significant expansion in the number of IRA accounts.”

To be sure, something needs to be done to boost the retirement savings rate in this country. With this bill, however, the real beneficiaries will be the usual suspects–big financial services companies.

News

The Two Best Comment Letters Written to the FASB You’ll Ever Read

Caleb Newquist
August 24, 2010

Last month we told you about how the American Bankers Association encouraged anyone that disagreed with the FASB’s proposed fair value rule to write a letter telling Herz & Co. how much the proposal suind enough to provide a template for said “FASB Blows” correspondence so the anti-fair value crowd could get the gist of what needed to be said.

The ABA did warn, however, that the FASB hates, loathes, DETESTS form letters, so in order to make a valid point, it was advisable to not simple slap your name in the appropriate place but to articular your own special brand of hatred for the FASB.

As you may recall, many ABA groupies did not heed this warning, which no doubt resulted in Bob Herz and the rest of the Norwalk team using the letters to stoke their mid-summer weenie roast bonfire.

As disappointed as the ABA must have been with the lack of originality, we were sent this shining example that has been making the rounds at the Big 4 (or so we’re told). Our guess is that this is more of what the ABA had in mind:

FASB1

Bravo, James C. Blaine. Bravo. You are most definitely into the brevity thing. You have, presumably, made the ABA proud. But wait, there is a pro-fair value letter worthy of these pages.

Granted, it was written back in May but Brian Cowell is no less passionate than Mr Blaine:

FASB2

Nicely done, both of you. Everyone take note.

Job of the Day

Job of the Day: Mimecast Needs a Financial Analyst

GoingConcern
August 24, 2010

Mimecast is a fast growing Software as a Service company that provides Unified Email Management services, currently comprising of email security and data leak prevention, archiving and continuity solutions. They are looking for an experienced professional to fill a Financial Analyst role in Boston.

This position will provide a broad range of financial and analytical support to the controller and the sales and marketing team.

Qualifications include 3-5 years of experience with ERP systems exposure preferred.

Company: Mimecast

Title: Financial Analyst

Location: Boston

Compensation: Depends on experience

Description: The Financial Analyst will be responsible for providing a broad range of financial and analytical support services to the Controller and to sales and marketing management.

Responsibilities: To assist in the preparation of the monthly accounts and KPI reports – to include the reconciliation of key control accounts (up to 25% of time in total); To assist in the preparation of budgets, forecasts and cash flow projections; To investigate, diagnose and rectify reporting anomalies; To provide a range of reports and analysis for sales and marketing management; To track, report and explain performance trends in finance and non-financial measures; To analyze sales and business development pricing proposals; Assist with the definition of appropriate metrics and reporting; To provide expense variance analysis reports; Other ad hoc duties and project

Qualifications/Skills: BS in accounting or finance; 5 years of experience in financial analysis role; Excellent logic and diagnostic skills; Good organizational and analytical skills; Knowledge of ERP systems – Netsuite the preferred system (in use throughout the Group); Highly competent in Microsoft Office; High standards of work.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

News

Who Leaked the MLB Financial Statements?

Caleb Newquist
August 24, 2010

This morning we mentioned the Deadspin story that presented leaked financial statements of several Major League Baseball teams. This included the Pittsburgh Pirates who have had 18 straight losing seasons yet remain profitable – making $14.4 million and $15 million in net income for the fiscal year ended October 31, 2008 and 2007 respectively.

The Seattle Mariners financials are also now available and the Texas Rangers numbers will be rolling out tomorrow, so there’s plenty of financial analysis treasure hunting for you to engage in, if that’s your thing.

Fis is unprecedented access to the teams’ financial position and performance, PLUS! all the wonky details of their Summary of Significant Accounting Policies – everything from revenue recognition to prepaid signing bonuses, guaranteed contracts, so on and so forth.

However, it also includes details that give insight into MLB controversial revenue sharing program, such as the Pirates using $44 million in ’07 and ’08 to develop players, as reported by the New York Times. With the lowest payroll in baseball and perpetual loserness, baseball fans in the Steel City might rather see that money spent on some free agents so they have something to discuss between the hockey and football seasons.

But perhaps more importantly, the Times reports that MLB is not taking this breach lightly. Since these teams are privately held, the information is not widely shared and the suspects are few:

Access to the teams’ audited financial statements is usually limited to the commissioner’s office; baseball’s lead bankers, Bank of America and JPMorgan Chase; and two accounting firms, Ernst & Young and PricewaterhouseCoopers. But [Florida Marlins President David] Samson said that “in the course of business, other entities have access.” Teams do not see one another’s financial reports, but receive a general accounting of where they rank compared with the other 29 clubs in profitability.

Of course this is the point in the post where you’d expect us to point the finger at E&Y or PwC but in reality, it seems unlikely that the leak would come from either firm. Likewise, it doesn’t make much sense for it to have come from BofA or JP Morgan. All these firms no doubt boast the services they provide to Major League Baseball and any professional servicing those clients wouldn’t dare risk damaging their firm and their career by exposing sensitive financial data of such a high profile client. Does it really make sense for an E&Y/PwC/BofA/JPM employee to leak the financials to Deadspin on a whim?

The leak has to be from within the commissioner’s office. First of all, someone there has the access to all these records and it is extremely more likely that Deadspin has sources in the commissioner’s office that would be willing to leak the information (especially teams no one gives a shit about). Secondly, we shouldn’t forget that baseball has had its share of squealers. There’s no reason to believe that the whole sport isn’t infested with them.

And as we mentioned – who gives a shit about the Pirates, Mariners or Marlins? These are low payroll teams whose financial information doesn’t cause much of a stir other than the fact that this is first time the data has been available to the public at large. If someone really wanted to bomb the hell out of us, the Yankees, Red Sox and Cubs financial statements would have been leaked and then the disparity (financial and thus, competitiveness) between the teams would really on display.

Baseball Chases Leak of Financial Documents [NYT]
MLB Confidential, Part 2: Seattle Mariners [Deadspin]

Will the Big 4 Take a “Late Bloomer” with a Low Undergrad GPA?

Caleb Newquist
August 24, 2010

Today from the mailbag we have a Big 4 hopeful that – like many of you – enjoyed the splendors of undergrad life to the detriment of their GPA and want to know if this will dash their Big 4 hopes and dreams.

If you’ve got questions about your career, a problem at work (romantic, political or otherwise) or what you should have for lunch, shoot us an email at advice@goingconcern.com. We will ignore pension accounting questions with extreme prejudice.

Back to our friend:

I just started an MSA program this summer after graduating with a BA in Economics. My cumulative undergrad GPA was 2.78, which is certainly not helping me attain my goal of Big 4 employment. I’ve been told that talking to recruiters now would be certain career death and I’m hoping on using the “late bloomer” story whenever I do begin the recruiting process. I can honestly say my attitude towards academics has improved tremendously over the past year or so. In the two graduate summer classes I’ve taken so far, I’m pulling a 3.85 GPA.

My question is, how long will it take for my improved academic performance to become substantial evidence of my matured academic attitude? Should I hold off on fall recruiting? Go for an internship instead of FT? Any advice would be greatly appreciated.

While a 2.78 isn’t the end of the world, you are correct in your thinking that most Big 4 recruiters will turn their nose up at you. That being said, talking to recruiters is not “certain career death.” Quite the opposite, in fact. The more face time you get with these Big 4 types, the more they will remember you. Your “late bloomer” story certainly holds water now but you admit that you’ve only taken two classes. If you can maintain the GPA, then great, you’ll be in good shape. And yes, recruiters will see this is as a positive direction. If you revert to your keg standing ways (some people never get over it) then hopefully your guessing skills on exams have gotten better.

In the meantime, here are a couple of things you can do to hopefully marginalize that 2.78:

• List your summer course GPA on your resume – leave the undergrad GPA off, but be honest if and when you’re asked about it.
• Major GPA vs. Cumulative GPA – We’re assuming the 2.78 is your overall, or cumulative, GPA. Calculate your major-specific GPA (the classes that differentiate you from another business degree) – if it is above a 3.0, list it on your resume.

The problem with your situation, Late Bloomer, is that you don’t know what the thought process of the Big 4 recruiters, employees and partners that you meet are. Some of them may love you and others will take one look at your undergrad GPA and will respond not with “no” but “hell no.” Typically when a recruiting team is split on a candidate, the hierarchy trumps and if you didn’t impress the pants off that partner, you’ll be out.

Considering all that, you should absolutely attend the fall recruiting events and meet as many different firms and make as many contacts as possible. Also, be realistic with them – it’s okay to admit that you faltered a bit during your undergrad – just know that you’re going to have to prove it to them in the long run that you can keep things on the up and up.

Whether or not you should go for an internship or FT is your call. Will you be graduating in spring or summer of ’11? Then going for full time is probably the best move, regardless of the not-so-stellar undergrad GPA. If your MSA program can be stretched out, go for the internship. Even if you don’t get it, you’ll make plenty of contacts in the Big 4 so that when recruiting comes around for next year, you’ll be a familiar face and the recruiters will get a sense that you’re committed to academics and that you are a solid candidate for their firm.

CPA Exam

CPA Exam Memory Aids, Do You Need Them?

Adrienne Gonzalez
August 24, 2010

For some, lease accounting comes easy and you don’t need a catchy tune to help you remember title-transfer, bargain purchase and 75% of its useful life. But for most of us, retaining the information critical to getting through a multiple choice question every minute or minute and a half requires either divine intervention or a really excellent collection of memory aids. Since some of you may be atheists, let’s talk memory aids. Pay attention, especially those of you taking FAR who need help getting through such a huge mess of information.

Post its are your friend! Are you having trouble remembering present value tables or the three necessary components of an audit opinion? Not to worry, just grab a pack (or 20) of sticky notes and start writing down mnemonics or calculations and sticking them everywhere you might see them; your fridge, the bathroom mirror, your car’s rearview mirror (don’t forget to take it down before you drive), your desk, and especially on top of the PlayStation. Swap out your old notes for new ones every couple of days as you add new information and be sure to read them every time you pass the note. If you’re one of those folks who has this stuff down but just needs a little encouragement, you can also use this trick to get a much-needed boost of confidence by writing your name, CPA and slapping them all over the house. Talk about motivation!

You have a few minutes and some scratch paper at the exam, so use it! While the Powers That Be may discourage using the 10 minutes before you actually get into the exam as a brain dump, there is no reason you can’t use 2 or 3 of those minutes to scratch out everything you can on the scratch paper you are given at Prometric. Mnemonics, keywords, formulas, FASBs, whatever, just start writing everything down before you actually launch the exam. You can help yourself out by bringing your review book with you to the test center (but not inside!) and reviewing it one last time in the car before you go in. But be careful, if you use the whole 10 minutes and don’t get through the screens, you’ll blow the whole exam and have to reschedule! 5 minutes tops!

Flashcards are your friend! No, I’m not talking about overpriced CPA review materials that your firm is nice enough to pay for, I am talking about a good old pack of 3x5s that you mark up yourself. I once had a student who claimed his homemade flashcards were what helped him through FAR even though his handwriting was so atrocious that even he couldn’t read it. Just the very act of writing down key topics helped him remember those areas when crunch time came and he was struggling at the exam. Of course this works best if you can actually read your own handwriting but don’t let that keep you from using this important tool to help in your retention of key areas. You can use them to quiz your study buddy or simply make a stack of hard-to-remember topics for your own review. Again, slip these in the car the night before you head to Prometric and flip through quickly before you walk in to take your exam.

Here’s the deal, the CPA exam isn’t meant to be easy and you aren’t supposed to be an expert on dozens if not hundreds of topics. You need to know a little bit about a lot so with the help of some simple tricks to train your brain to work in exam mode, you’ll be breezing through exam parts like no one’s business. Good luck!

Accounting News Roundup: Wells Fargo Comes Out Against FASB Fair Value Proposal; PwC Buying Diamond Management; MLB Teams Financials Leaked | 08.24.10

Caleb Newquist
August 24, 2010

Wells Fargo “Strongly” Opposes Accounting Board’s New Rules on Loan Value [Bloomberg]
“Wells Fargo & Co., the largest home lender in the U.S., said it disagrees with an accounting board’s plan that would require banks to report the fair value of loans on their books.

‘We strongly oppose the expansion of fair value as the primary balance-sheet measurement attribute for virtually all financial instruments,’ Wells Fargo Controller Richard Levy wrote in the Aug. 19 letter. ‘It will only serve to cement a short-term focus on fair-value measures.’

Wells Fargo is the first of the largest U.S. banks to publish its p writers who named an affiliation, according to the Financial Accounting Standards Board website. The letter was written to officials at the board, which said in May that it may require banks to report the fair value and amortized cost of loans and some other financial instruments on their balance sheets.”

PricewaterhouseCoopers to Buy Consulting Firm Diamond Management [WSJ]
PwC is paying $378 million for Diamond Management & Technology Consultants, “[share]holders will get $12.50 a share, a 31% premium to Monday’s closing price. The stock, up 29% in 2010 through Monday, was last at the bid level three years ago.

‘This is an attractive all cash opportunity for our stockholders, creates exciting prospects for our people, and will provide us new and enhanced capabilities to bring to our clients,’ said Diamond President and Chief Executive Adam Gutstein. ‘There’s a clear strategic fit between PwC’s assets and aspirations and Diamond’s positioning.’ “

Return prudence to accounting [FT]
“What a pity that ultra-theoretical standard-setters around the world have chosen to jettison prudence, a generally accepted accounting convention derived from more than 100 years of experience. This high-risk approach has led to absurdly lengthy and unrealistic annual reports that are now virtually incomprehensible.”

Sex Harassment at Work Gets Weirder, Scarier [Bloomberg]
“Not that I think it’s weird that a brokerage firm chief executive would pin a female clerk on the floor by putting his shoe on her breast (the right one, if you must know), or that some insurance company guy in Fullerton, California, would put a sample of his semen in a female colleague’s water bottle. Twice.

But it did get my attention when I started leafing through this year’s press releases from the U.S. Equal Employment Opportunity Commission and found a case where a supervisor allegedly said that women should outfit themselves in Vaseline, and nothing else; one where a manager in human resources (yes, in human resources) allegedly inquired as to the color of an assistant’s panties; and a case against a company president who the EEOC says pulled a subordinate’s pants down in front of her coworkers.”

Borders CFO resigns for new job [Reuters]
Mark Bierley is moving on after 12 years for a new gig.

Businesses Add iPads to Their Briefcases [WSJ]
“Apple, which said it sold more than three million iPads through the end of June, attributes some of the device’s success to businesses. The Cupertino, Calif., company’s Chief Operating Officer Tim Cook said in July that ‘very surprisingly’ half of the Fortune 100 are testing or deploying iPads.

More than 500 of the 11,000-plus applications built specifically for the iPad are in the business category. A free app from Citrix Systems Inc., which allows people to access internal corporate programs from the iPad, has been downloaded more than 145,000 times.

‘Everyone in IT is jumping on this one,’ said Ted Schadler, an analyst at Forrester Research. ‘Rather than wait for people to start complaining they’re saying why don’t we get a few of them in and see what they are good for.’ “

MLB Confidential: The Financial Documents Baseball Doesn’t Want You To See, Part 1 [Deadspin]
Deadspin got their hands on financial statements for several Major League Baseball teams and even the lowliest of clubs – namely the Pittsburgh Pirates – make truckloads for their owners: $20.4 million in partner distributions for fiscal year ’08.

The sports rag also has financial statements for the Tampa Bay Devil Rays, Florida Marlins and L.A. Angels. And as you might expect, people (MLB and the clubs’ people) are not happy.

Quote of the Day

New Jersey Nets Fans May Have Gotten Ripped Off

Caleb Newquist
August 24, 2010

“She promises to significantly reduce their IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills.”

~ California Attorney General Jerry Brown isn’t impressed with Roni Deutch’s advertising. And the Nets likely have one less way to try and draw crowds.

Fraud

Sue Sachdeva Guarantees That She’ll Be Able to Watch It’s the Great Pumpkin, Charlie Brown a Free Woman

Caleb Newquist
August 24, 2010

And the World Series too!

Maybe we’re unfairly assuming that Suze is a fan of the Peanuts gang or baseball but what else is going on in between October and November 18th? A few Badger football games?

Koss Corp. embezzler Sujata “Sue” Sachdeva will get a one-month reprieve on her sentencing after requesting, and receiving, an order from U.S. District Court Judge Lynn Adelman.

Adelman said in a brief order that federal prosecutors did not oppose Sachdeva’s request to adjourn the sentencing to Nov. 18 from the previously scheduled Oct. 18.

Koss’ Sachdeva gets sentencing reprieve [Business Journal of Milwaukee]

Is Philadelphia’s Tax on Bloggers That Big of a Deal?

Caleb Newquist
August 24, 2010

Every state, municipality, township and hamlet is desperate to close their budget gaps. With such desperation comes a flood of bad ideas that include taxes on everything from juggling to hot air balloon rides.

The Philadelphia City Paper ran a story last week about the $300 Business Privilege Tax that the city is imposing on bloggers, freelancers and other contractors since they are engaged in the activity for profit. Seemingly, another stupid idea.

The City Paper speaks to a couple of bloggers – clearly doing it as a hobby – that are technically engaged in a for-profit activity because they have ads on their blogs. They were notified by the city that they owed the $300 for a lifetime business privilege license (you can also opt for a $50 annual license). The Philadelphia Department of Revenue argues that “simply choosing the option to make money from ads — regardless of how much or little money is actually generated — qualifies a blog as a business.”

Supposedly, changes to the city’s law are in the works to be introduced next month that would exempt the first $100k of a business’s profit.

However, there is a far simpler solution to this problem that is mentioned by Christina Warren over at Mashable which is, quit running ads on your blog. Maybe the city’s tax is excessive, annoying, desperate for reform or just plain stupid but if you don’t run ads on your blog – that wasn’t designed to make money – you avoid the business privilege license altogether. It’s as simple as clicking a mouse and the government is out of your life (at least this respect).

Or continue to be stubborn and fight the bureaucracy of the Philly City government. Your choice.

Pay Up [Philadelphia City Paper]
Philadelphia Tax Code Sparks Big Controversy with Small Bloggers [Mashable]

CFOs

Ex-BofA CFO Would Appreciate It if Andrew Cuomo Got His Name Right

Caleb Newquist
August 23, 2010

Andrew Cuomo must be feeling pretty good about his chances at becoming Governor of New York, even with some new competition entering the race.

However, we came across a little mistake that could worry voters that Drew doesn’t really pay attention to the little things that matter. Like people’s names.

You’d think that if Cuomo was going to traipse all over town throwing allegations at people, he’d at least know what those people’s names are.

Case in point, the first line of the response from former CFO (and current consumer banking CEO) Joe Price had to go to the trouble of pointing out that his name is not, in fact, “Joseph,” it is “Joe.”

Talk about a low blow, Cuomo. You think you can run Albany and just get people’s names wrong? They’ve threatened to shut down the whole government for less than that.

Hey, Cuomo, The Name’s Joe, Not Joseph [Charlotte Business Journal]

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