Accounting News Roundup: Alibaba, PwC on Trial, Accountant Fantasy Literature | 08.10.16

The best way to tackle the Big Four [FT]
Michel Barnier has shocked the Big Four accounting firms. The European Union internal market commissioner wants to ban them from operating as consultants as well as auditors, force them to work jointly with others, and set time limits on how long they can audit each company. It could be the biggest shake-up of accounting since the collapse of Enron laid low Arthur Andersen and led to the 2002 Sarbanes-Oxley Act. Yet it will not amount to much unless the industry’s looming disaster – the failure of another audit firm and contraction to a Big Three – can be avoided.

E&Y Says Greek Defau [Bloomberg]
“The euro zone sovereign-debt crisis shows no sign of abating,” E&Y said in an e-mailed report in London [Wednesday]. “A default on Greek government debt now seems unavoidable. The key question is when this default will occur and how it will be managed.”

To Ease the Crisis, Tax Financial Transactions [NYT]
Governments, both rich and poor, urgently need a way to calm speculation in the financial markets and to raise revenue. On Wednesday, the European Commission president, José Manuel Barroso, proposed a tax on financial transactions. Such a measure, already supported by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, is long overdue. Indeed, a tax of just 0.05 percent levied on each stock, bond, derivative or currency transaction would be aimed at financial institutions’ casino-style trading, which helped precipitate the economic crisis. Because these markets are so vast, the tax could raise hundreds of billions of dollars a year globally for cash-strapped governments and could increase development aid.

D.C. tax employee’s arrest followed years of warnings [WaPo]
[F]ederal prosecutors charged a D.C. tax office employee with stealing about $414,000 from the city coffers. Mary Ayers-Zander did it, charging papers state, by making fraudulent manual adjustments to legitimate taxpayers’ income tax withholding, resulting in payments to personal accounts she had set up. In other words, Ayers-Zander found a weakness in the system and exploited it, finding a way to enrich herself because the internal controls within the Office of Tax and Revenue were not up to par, according to court records.

Snoop Dogg tax debt goes up in smoke [TW]
Robert Snell’s celeb tax scoop du jour.

Mr. Buffett’s Tax Secrets [WSJ]
[T]he opportunity to educate the public would be even greater if Mr. Buffett would let everyone else in on his secrets of tax avoidance by releasing his tax returns. Going only by Mr. Buffett’s unverified claims, his federal taxes in 2010 amounted to 17.4% of his taxable income, probably because much of his income was from capital gains and dividends. It’s also likely that he took significant deductions for charitable donations. No doubt the millions of Americans who could end up paying more because of this claim would love to see the details.

Medicis, its auditor will pay $18 mil to settle suit [Arizona Republic]
Medicis Pharmaceutical Corp. and its auditing firm, Ernst & Young, have agreed to pay $18 million to settle a shareholder class-action lawsuit stemming from the pharmaceutical company’s financial statements. Scottsdale-based Medicis would pay $11 million and Ernst & Young would pay $7 million under terms of a settlement agreement filed last week in U.S. District Court in Phoenix.

The iPad Decision [JofA]
Ask one CPA, the managing partner of a 160-employee firm, what he thinks of using the iPad in his work, and he tells you “there’s no other way to practice right now.” Ask another, the IT head of a 400-employee firm, and he tells you that his iPad is no more useful than a paperweight.

Richest Americans Get $1.4 Million Tax Cut in Pawlenty Plan [Bloomberg]
The top 0.1 percent of U.S. taxpayers would save an average of $1.4 million in taxes under the economic plan of Republican presidential candidate Tim Pawlenty, according to an independent analysis. Pawlenty’s $11.6 trillion tax-cut plan, which reduces rates on income, capital gains, interest, estates and dividends, is almost three times larger than the proposals endorsed by House Republicans.

Chinese investors shrug off U.S. accounting scandal fallout [ two dozen Chinese retail investors gathered at the dimly lit public hall of a brokerage firm in Shanghai, the accounting scandals involving U.S.-listed Chinese companies are far from the hot topic of the day’s trading as they swap strategies over tea and cigarettes. Many of the investors, mostly retirees, have not even heard about the saga over fake numbers among some Chinese firms that has shaken U.S. investors and stunned regulators there.

Stray Cat Strut: Woman Beats IRS [WSJ]
When Jan Van Dusen appeared before a U.S. Tax Court judge and a team of Internal Revenue Service lawyers more than a year ago, there was more at stake than her tax deduction for taking care of 70 stray cats. Hanging in the balance were millions of dollars in annual tax deductions by animal-rescue volunteers across the nation—and some needed clarity on the treatment of volunteers’ unreimbursed expenses for 1.55 million other IRS-recognized charities. Early this month, Ms. Van Dusen learned she had won her case. “I was stunned,” she said. “It feels great to have established this precedent.”

Fuzzy Accounting Enriches Groupon [NYT]
Groupon, the Internet coupon company, had an operating loss of $420 million last year. But it thinks investors in its initial public offering should instead look at “adjusted consolidated segment operating income,” or adjusted C.S.O.I. It is easy to see why Groupon wants prospective shareholders to view its accounts this way. Strip out marketing expenses, acquisition-related costs, stock compensation, interest expense and payments to the tax man and, presto, the start-up earned $60.6 million.

VF to Buy Timberland for $2 Billion in Cash [WSJ]
Branded-apparel company VF Corp. agreed to buy Timberland Co. for about $2 billion, taking advantage of the footwear company’s beaten-down stock price to boost its outdoor and action-sports businesses. VF’s offer of $43 a share represents a premium of 43% to Friday’s close. Shares of Timberland, which specializes in boots and outdoor apparel, traded above $45 as recently as late April, but a first-quarter report that fell well short of estimates sent the stock tumbling. Its earnings in the period fell 30% as it spent more on planned initiatives and saw higher product costs.

$90 million accounting mistake costs county official his job [WBEZ]
The former worker, Faisal Abbasi, 36, of Prospect Heights, accidentally made double entries for county cigarette and sales tax revenue from 2009, said Cook County Chief Financial Officer Tariq Malhance. “It was really a human error that one person booked it, and then, not realizing that it had been booked before … he [duplicated it], and booked again,” Malhance said. But Abbasi, who was laid off from his county job when the Preckwinkle administration took office in February, said he is simply a scapegoat for the mistake. The idea that he alone could have caused such an error is “a bunch of hogwash and smoke and mirrors,” Abbasi said. “You can’t just put in a $20 million or $30 million dollar entry without the external auditors looking at it.,” he told WBEZ on Friday.

Vote to end ethanol subsidies revives Coburn-Norquist tax revenue battle [The Hill]
Coburn successfully pushed for a Tuesday vote on a measure to cut subsidies for ethanol, a proposal that the Oklahoma Republican and Norquist, the anti-tax crusader, feuded over earlier this year. Both Coburn and Norquist have said they opposed a tax credit that gives refiners and gasoline blenders 45 cents for every gallon of ethanol bought and combined with gasoline – a policy the Government Accountability Office says cost about $5.4 billion in 2010.