Going Concern

Accounting News Roundup: Former Dell Staff Facing SEC Action Related to Accounting; Herz, Tweedie to Present on Global Issues at GWU; NASBA Taking Back Some March Scores? | 04.02.10

Caleb Newquist
April 2, 2010

We’ll be posting on a lighter schedule today. Hopefully many of you are enjoying a long weekend.

• Dell says several former staff may face SEC action [Reuters]
Some former Dell employees are facing possible SEC actions related to the company’s accounting. The Commission started its inquiry back in 2005 and Dell disclosed that the U.S. Attorney for the Southern District of New York had subpoenaed documents shortly after in 2006. This all led to the Accounting Code of Conduct that the Company implemented last fall. The company stated that it believes ‘monetary penalties’ will be part of the settlement but otherwise they’re keeping a lid on it.

• FASB Chairman Robert H. Herz and IASB Chairman Sir David Tweedie to Discuss Global Accounting Issues at The George Washington University [FASB]
Herz and Tweeds will be at G Dubs on Wednesday, April 7th kicking around global accounting issues. “Greater Global Transparency in Financial Reporting: Lighting the Path for Investors” starts at 6 pm and is free and open to the public, so you best get there early before the groupies overrun the joint.

• NASBA Takes Back (Some) Passing CPA Exam Scores for March [JDA]
In what could amount to the worst April Fool’s joke in history, Adrienne is reporting over at JDA that NASBA is taking back some of the scores for March after extending the test dates in the third month:

[F]rom a reliable source within the Big 87654 that test-takers outside of the blizzard-affected areas have actually gotten their scores taken away and thrown out. Yes, that means all of you who put it off until the very last minute and rescheduled for the March extension are pretty much screwed unless you also got snowed in on top of it. Yes, those of you who paid for and passed the exam in March.

Huh. We’re checking into this. We’ll get back to you if we learn more.

Quote of the Day

Quote of the Day: That Profit Really Put Patrick Byrne in a Good Mood | 04.01.10

Caleb Newquist
April 2, 2010

“Dear Sam, I apologize. Sincerely, Patrick”

~ Patrick Byrne, finally responding to Sam Antar.

In bizarro world.

Three Remedies for the Busy Season Hangover

Daniel Braddock
April 2, 2010

Greetings, red-eyed accountants. I hope those of you who celebrated yesterday’s sign-off didn’t drink the local watering holes dry last night. The markets are closed tomorrow, so hit the town again tonight and find yourself a Wall-Streeter (or is it a midtowner now?) to shack up with!

Who am I kidding? You’re probably going to sleep like babies for the first time in months.

Regardless of how you spend your first few days of re-born freedom, you need to be sure not to get caught up in the whirlwind slow season.

These short drops in production need to be stretched to maximum gain. Here’s are few ways to make the most of your slow hours:

• Cash in that vacation time – One of the (few) perks of a public accounting gig is the incredible amount of personal time. Five to six weeks of vacay is simply unheard of in the private sector (three weeks are standard issue). So why not do something with your time? Sign up for the mass emails from travel sites and pick a random location to cash in those hotel points that have accumulated over the last three busy seasons.

One GC reader told me, “I’m going to Bermuda in a few weeks. Why? Because JetBlue had a special, I’ve never been, and I’ll be damned if I lose out of my vacation time.” FWIW, many of the airlines are running specials now for flights in the next few months. Pick a random location and get the hell out.

• Recharge your batteries and your resume – Pick a Friday or Monday in the coming weeks and call in sick. Book yourself a day of relaxation; hit the spa, the golf course, or work on that rusty ‘72 Chevy taking up room in the garage. Whatever you do, keep the Blackberry on your nightstand and spend your day away from the office. After a day of mental relaxation, pick up your resume and make your time in public start working for you.

• Shop around for new work – So you want to work at a hedge fund but are currently auditing depositories – what the hell are you wasting your time for? Now is the time to talk to your mentors and work with staffing to really push your accounting career in the direction of an industry that interests you. Volunteer to do clean up work on a client that is decimated by team members taking vacation. Do what you need to do to begin getting the exposure to work that is relevant to your career aspirations.

For those of you done with busy season, have a drink and enjoy your weekend, but don’t forget about your comrades with 4/15 deadlines. The end – after all – is near.

PwC Report: We’re Not Getting Sued for Accounting Issues Nearly as Much

Caleb Newquist
April 2, 2010

That goes for the rest of you Big 4 and non-Big 4 too! Okay, the report doesn’t come out and state that CPA firms are the ones getting slapped around by plaintiffs but it seems like a logical conclusion since we’re talking about, ya know, accounting.

The PricewaterhouseCoopers report states that of the 155 federal lawsuits in 2009, only 37% of them were related to accounting issues, compared to 41% in 2008. To clarify just a little bit, the decline was because “many of the cases were connected to the financial crisis and tended to focus more on disclosure issues not having to do with whether the defendants followed generally accepted accounting principles.” In other words, the accounting is wrong as much but apparently people are forgetting to bring up certain important details. Like say, repos?

Plus the lawsuits that do involve accounting issues are the most expensive settlements. The reports states that out of the top ten lawsuits, seven of them had an accounting component to them. The total value of settlement in ’09 was $2.3 bil.

So what causes all the problems? Lots of bad guessing for starters. According to the report, 57% of the cases mentioned issues related to estimates, while 43% of the suits cited internal controls. Unfortunately, those two things are right in the wheelhouse of auditors. Bright side is that revenue recognition isn’t citied nearly as much. Don’t let anyone tell you different, screwing up less is a good thing.

Accounting-Related Lawsuits Fall [CFO]

On Campus

What if the Final Four Was Based on Accounting Research Production?

Caleb Newquist
April 1, 2010

We realize this is a strange question but hear us out. Many of you have had brackets on the brain for the last couple of weeks and this was not lost on some faculty members at Brigham Young University. David Wood, Brady Williams, Scott Summers and Joshua Coyne created the bracket below to demonstrate what this year’s NCAA tournament would look like if the schools advanced based on the productivity of accounting researchers. It was based on their paper entitled, “Accounting Program Research Rankings by Topical Area and Methodology.”

We spoke with David Wood, Assistant Professor at BYU and he clarified for us that the bracket was based solely on the schools in the 2010 tournament. “For example, Stanford is rated first for number of articles published but they weren’t in this year’s tournament, so their productivity isn’t seen here,” David said.

As you can see above, BYU did okay for themselves, reaching the Final Four, along with real-life Final Four teams Michigan State and Duke. Ultimately, accounting powerhouse Texas-Austin came out on top, taking out the CPA mavens at Wake Forest in the first round. Professor Wood explained, “There is a disconnect between CPA exam success and research production,” thus a research program like McCombs that produces many papers every year will always come out on top.

Eleven journals were selected for the purposes of the paper:

• Accounting, Organizations, and Society
• Auditing: A Journal of Practice & Theory
• Behavioral Research in Accounting
• Contemporary Accounting Research
• Journal of Accounting & Economics
• Journal of Accounting Information Systems
• Journal of Accounting Research
• Journal of Management Accounting Research
• Journal of the American Taxation Association
• Review of Accounting Studies
• The Accounting Review

Now before you judge, this particular method of illustrating both basketball and accounting prowess may serve those of you well that are considering a PhD in future. Don’t laugh, we know you’re out there.

Accounting Program Research Rankings by Topical Area and Methodology [SSRN]
NCAA Tournament Simulated Using Accounting Research Rankings

Tiger Woods Mistress: Candidate for IRS Audit?

Caleb Newquist
April 1, 2010

Maybe! Our imagination tends to run wild so if you’ve got reason to believe that hush money paid to Tiger’s mistresses is of no interest to the IRS, please advise.

TMZ is reporting, based on “sources — and they are good” that Tigger paid Rachel Uchitel $10 million to keep her mouth shut regarding their affair.

Or maybe we’re not giving either of them enough credit. Maybe Rachel has a tremendous business acumen that we’re not aware of and she requested a 1099 from T. Dubs.

Plus, Tiger employs more people than Alaska, so someone on his team may have been looking out for this girl. TW, on the other hand, there’s NFW he considered the problems this could possibly create. Considering the fact that he has trouble communicating, we’re guessing the financial ramifications for his F-buddies slipped his mind.

10 Million Reasons Tiger Was Afraid of Rachel [TMZ]

Career Center

Job of the Day: Northwest Needs an Accounting Manager

GoingConcern
April 1, 2010

Northwest is looking for an experienced accounting professional to lead a team of approximately twelve individuals. This person needs experience evaluating, creating, and re-working effective controls along with leadership experience.

The position is located in Stamford, CT, requires a minimum of eight years experience, and a CPA license. Get more details after the jump.

Company: Northwest

Title: Manager, Portfolio Accounting (Investment Management)

Location: Stamford, CT

Description: Highly skilled Portfolio Accounting Manager sought to manage/mentor staff, evaluate existing processes/innovate new more efficient ones, create new controls, streamline workflows, etc.

Responsibilities: Responsible for monthly reconciliations, the calculation and reporting of monthly performance, pricing, valuations and NAV’s, and reporting to clients for SMA’s and DFI’s; Take ownership of the portfolio accounting metrics (review existing, create new), build new processes/procedures and controls, streamline/rebuild work flows to ensure efficiency, manage third party relationships, consistently identify areas of improvement within the department, build and execute strategy as well as manage numerous cross-departmental projects. Position will report to the department senior.

Qualifications: Minimum of a Bachelors degree; prefer Masters; CPA; Minimum of 8 years relevant accounting experience (portfolio accounting, fund accounting, partnership accounting, reconciliation/valuation expertise, or CPA out of a Fund Administrator); Experience managing a staff of at least 10 individuals. Experience creating staff performance metrics, evaluating staff performance, hiring; Extensive experience evaluating accounting processes and procedures, creating controls.

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

News

Here’s Why No One Needs to Get Worked Up Over the Healthcare Reform Earnings Hit

GoingConcern
April 1, 2010

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

The brouhaha over the hits to earnings from the new healthcare law that companies are announcing is much ado about very little.

First of all, the charge is an estimate of future costs and will have no immediate impact on cash flow. And the estimate is unusually large because the accounting rules require costs that would otherwise be reported in the future to be reported now, simply because they are the result of a change in tax treatment.

As my former colleague Marie Leone reports at CFO.com, such “true-ups” over differences in tax and book accounting practices are just that. The real cost will be spread out over many quarters.

More importantly, the hit is the result of a loss of a major taxpayer subsidy. Maybe it made sense before to provide that. But given all the concern about the federal deficit, it seems to me that asking shareholders to bear a bit more of the burden for retiree drug benefits is hardly unfair.

And in the greater scheme of things, the hit may be so small as to have little impact on companies’ valuations, as a Credit Suisse analyst pointed out the other day. General Electric didn’t even break out its estimate for that reason, calling the cost “immaterial.”

The question is whether companies will stop paying for the benefits because of the cost, and that’s unlikely unless they’re willing to compensate for the loss with higher wages, as economist Dean Baker reiterated to me in an email late last week.

“The standard economist view is that the cost of health care comes overwhelmingly out of wages,” Baker wrote. “If they have to pay more in taxes, then it will mostly come out of workers’ pay and have very little impact on their costs and ability to compete.”

If on the other hand, a decline in healthcare costs leads to higher wages, that would mean a stronger economy, so I don’t see how either taxpayers or shareholders will lose here in the long run.

Yes, that’s a big if, but as I’ve said before, the new healthcare law is the biggest effort to rein in costs undertaken to date. Of course more must be done, but the law will provide a big impetus to those efforts.

Hopefully, all this will become clearer as a result of the hearings Rep. Henry Waxman plans to hold next week on this issue, but I’m not holding my breath.

IFRS

Professor David Albrecht: IFRS Will Make Financial Statement Comparison an Impossibility

Adrienne Gonzalez
April 1, 2010

Ed. Note: This is the second installment of our dialogue with experts on International Financial Reporting Standards. See our first post with IFAC President Bob Bunting here and if you are an IFRS expert interested in joining the discussion, please contact us at tips@goingconcern.com

It’s appropriate to disclaim that The Summa’s Professor David Albrecht is a friend of Going Concern and for the most part he and I share similar views on the US conversion to IFRS. If you have not read any of our previous rants

It Literally Took an Act of God* for the IRS to Do Something Nice

Caleb Newquist
April 1, 2010

There’s a slew of “reasons” that people have for hating on the Internal Revenue Service. They’re responsible for discourse on television, they don’t observe Shabbos, perverts (alleged!), etc.But every now and again the IRS gives you a reason to say, “well, that’s nice of them,” even if it takes rainfall that makes you consider cobbling an ark together and rounding up the animals in the neighborhood.

The Service is not unreasonable. Apologetic? Never. But not unreasonable. Accordingly, if you live in eastern Massachusetts or Rhode Island the IRS took notice of the rising waters and is extending the April 15th deadline to May 11th (?).

It’s unlikely that this will garner much favor with the IRS haters outside of the Northeast but at least the Service won’t have to ignore the flood of calls from Bay State and Ocean State residents about whether they’ll still be expected file on time. Grab a bucket.

IRS will delay April 15 deadline for many in Mass. [Boston Globe]
Flood weary Rhode Islanders get tax extension [AP via Globe]

*For the militant atheists – Calm down, wouldja? It’s a religious week. Just sub “Nature” and move on.

Accounting News Roundup: KPMG Dodges Madoff Feeder Fund Lawsuit; SEC May Disclose More Details in Settled Lawsuits; Tax Code? Now There’s an App for That | 04.01.10

Caleb Newquist
April 1, 2010

• KPMG wins dismissal of Madoff feeder fund lawsuit [Reuters]
A class action lawsuit brought against KPMG by Meridian Horizon Fund, L.P. and other investors in Tremont Partners was dismissed yesterday in New York. Tremont had more than half of its assets were Berns andKPMG audited Tremont funds in 2006 and 2007.

Judge Thomas Griesa ruled that the plaintiffs’ case did not show that KPMG had any intent to deceive the investors in Tremont. Emily Chasan reports that Judge Griesa wrote, “Merely alleging that the auditor had access to the information by which it could have discovered the fraud is not sufficient,” and that the firm would have had to botch the engagements so badly that it would have amounted to “no audit at all.” He did not rule out the possibility of Meridian re-filing their lawsuit in the future.

• SEC may require more details of wrongdoing to be disclosed in settlements [WaPo]
The SEC is thinking about disclosing more details in their civil action settlements; a move that would do away with the quick and dirty “neither admitted nor denied the charges.” This could result in a more transparent process where violations of the law are — God forbid — disclosed in detail.

Securities lawyers said a more detailed public record of cases could make defendants less likely to settle and make it easier for shareholders to file class-action lawsuits piggybacking on the SEC’s claims. It could also lead to embarrassment for executives if the agency publicized their roles in violating securities law, even if they are not personally charged.

God knows we can’t have executives embarrassed.

• The Tax Code and Regs for Your iPhone [TaxProf Blog]
Who wants to schlep around the physical tax code?

Quote of the Day: Never a Dull Moment in Accounting | 03.31.10

Caleb Newquist
April 1, 2010

“Accounting can be exciting — exciting like finding out you are going broke, or exciting like driving a big profit.”

~ Jay Goltz, entrepreneur and contributor to You’re the Boss.

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