There’s Still Some Confusion About the BDO/Grant Thornton Situation in Hong Kong
The Wall St. Journal’s China Real Time Report stumbled upon the BDO/Grant Thornton poaching exodus merger situation (some may say, “clusterfuck”) in Hong Kong and we have no choice but to take issue with it.
The headline reads, “Missed It? Hong Kong’s Big Accounting Merger” and they mention the original report from the South China Morning Post. They manage to tone down the narrative but more or less tell the same story, full with quotes from BDO Hong Kong’s CEO Albert Au Siu-cheung:
On Wednesday, about a month after the joint press release, the South China Morning Post featured a front-page article describing the merger as a mass poaching of staff by BDO, “the biggest such raid in the city’s accounting sector.”
“It’s a bit sensational,” Au said, adding there was no raid. “Poaching is I pick a few heads here and there,” he said. “What you’re seeing here is the whole firm, meaning the partners and staff, coming to join us in BDO.”
In other words, “Sure it sounded bad but really it was just people making a choice”:
“There is no goodwill payment of any kind,” Au said. “I like to think they are voting with their feet. By that, I mean they think they’re joining a platform they have commitment to and believe in.” Clients were informed of the change and had the option to find another accounting firm. All clients have stayed with Grant Thornton for this merger.
Of course if someone at the Journal had rang up Grant Thornton International they would have likely gotten the story that we reported on last Friday which is that GTI booted the affiliate firm in Hong Kong and that BDO is kinda, sorta misrepresenting the situation:
They did not choose to leave, they were told to leave…[I]t is disingenous, or possibly wishful thinking, on the part of BDO to suggest that Grant Thornton is pulling out of Hong Kong. Many partners and staff from the former Hong Kong firm have already contacted the new Grant Thornton firm and clients will, of course, decide for themselves whether to move to BDO, which operates in the region as a loose affiliation, or remain with the more integrated, ‘one firm’ approach of Grant Thornton.
And of course there are the opposing press releases. The joint one issued by the BDO/GT firm dated October 7th that states:
Leading accounting firms BDO and Grant Thornton are pleased to announce that their firms have agreed in principle to merge their businesses and practise in the name of BDO Limited.
And the one from GTI, also dated October 7th that states something quite different:
Grant Thornton International gave its Hong Kong member firm notice on 20 September to leave the global organisation by March 2011.
With that mandate and probably few options, it appears that GTHK ran into the arms of BDOHK. BDO is using the Journal to disseminate a story that makes them look proactive and ambitious when in reality, none of this would even be happening if GTI hadn’t told their HK firm to get lost. The Journal – like the South China Morning Post – doesn’t mention that. Some people might consider that a major piece of the story.
We’ve put out a warning in the past about wandering into our corner of the sandbox without knowing what the hell you’re doing (or at least checking with us first) and you can consider this a friendly reminder about that. We’re more than happy to help because this accounting/accounting firm stuff is tricky when you don’t spend every single day reading and writing about it.
Grant Thornton: BDO Suggestion That We Are Pulling Out of Hong Kong Is ‘Disingenuous’
Following up on our post from Wednesday on the movement of 600+ Grant Thornton Hong Kong employees to BDO, we’ve received some correspondence from Grant Thornton International that clarifies the situation.
Turns out, a brief press release – whole thing after the jump – was issued by GTI last month that announced that the firm had given notice (confirming speculation in the comments) to its HK firm to GTFO by March 2011.
In email to Going Concern, GTI spokeswoman Hilary East broke it down for us:
They did not choose to leave, they were told to leave. Success in China is critical to the long term ambitions of G are committed to an integrated approach to the China market, which includes Hong Kong. While many partners in the former Hong Kong firm supported that strategy, their leadership was unable to agree amongst itself and separation became the only option. Grant Thornton China immediately set up a new firm in Hong Kong, led by a group of partners from the original Hong Kong firm with support from the 1500 partners and staff across mainland China.
The new firm that Ms East mentions, presumably is Jingdu Tianhua Hong Kong which we mentioned in our previous post that will adopt the Grant Thornton name “in due course.”
But what about this article in the South China Morning Post that quotes BDO Hong Kong’s CEO as saying, “The opportunity to have a massive admission of so much established accounting talent is rare.” ?
Ms East elaborated for us:
[I]t is disingenous, or possibly wishful thinking, on the part of BDO to suggest that Grant Thornton is pulling out of Hong Kong. Many partners and staff from the former Hong Kong firm have already contacted the new Grant Thornton firm and clients will, of course, decide for themselves whether to move to BDO, which operates in the region as a loose affiliation, or remain with the more integrated, ‘one firm’ approach of Grant Thornton.
If you read the South China article, you won’t see a single mention of GTI giving the Hong Kong firm notice, unless you count the extremely vague and misleading passage:
Grant Thornton chief executive Patrick Rozario, who led the move to BDO, said the team decided to shift because of Grant Thornton International’s directive for the mainland member firm to lead Grant Thornton’s Hong Kong office.
“We consider BDO, which is run independently in Hong Kong and China, respectively, is a model that suits us better,” Rozario said.
No mention of the GTI press release. No mention of the new firm that GTI was setting up. No mention that some staff and partners were considering their options. The headline (and sub-hed) in the article is even ridiculously misleading: “Troubled accounting firm’s staff jump ship Grant Thornton to close as BDO gains full team”.
And why the article even brings up Gabriel Azedo’s disappearance is mystifying. It’s more than hella-stretch to suggest that the trouble caused by him has anything to do with GTI’s or BDO’s moves. Plus hardly anyone (including the Financial Times) gives a damn any more about his whereabouts. The guy has been on the lam for over a year and is probably some accounting Kurtz figure by now.
Just to Clear It Up: Grant Thornton Is an Accounting Firm Not a Law Firm
We stumbled upon this letter recently that appears to indicate that there was some confusion between the Grant Thornton Atlanta office and a Judge in Florida about what kind of services GT provides.
So it appears Mr Bowles has a little bit of responsibility here since he admits, “I did not submit a written request to appear as an other qualified representative in the form specified in [rule] which would have triggered a specific determination by you about my qualifications to go forward.” The lengthy explanation that follows kinda sorta indicates that maybe, he feels like this was his bad that the mistake got made. If you disagree and would like to blame the judge, fire away.
That being said, we figured that GT had enough of a reputation as an accounting firm to be recognized as such with little or no investigation. Apparently that is not the case. We left messages with both Judge Holified and Mr Bowles to get an explanation but so far neither of them have returned our calls.
In Washington State, a Kit-Kat Bar is Not Considered Candy for Sales Tax Purposes
[caption id="attachment_10643" align="alignright" width="260" caption="Not candy"]
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Listen up people. Since many of you regularly get either your breakfast, mid-morning snack, lunch, pre-midafternoon snack, afternoon snack, pre-leaving work snack or – during busy season – your dinner out of a vending machine this could be cause for concern.
States are strapped for cash so t��������������������ve you joy is a logical and effective conclusion. Accordingly, sweets, sodas, booze, cigarettes, strippers are all fair game. Some of these are old hat (e.g. booze, cigs) and some are becoming more popular (e.g. candy, soda). Washington state is rolling out its candy tax on June 1, 2010 and as you might have guessed, it’s not nearly as simple as you would think. There are many questions.
First off, candy needs a definition, so Department of Revenue de Washington presents its version:
“Candy” means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. Candy does not include any preparation containing flour. Candy does not require refrigeration.
OFTLOG. Couldn’t it just boil down to: “Anything handed out on Halloween”? But wait, the questions get better:
Are bags of trail mix containing small amounts of candy subject to sales tax?
No, trail mix is not considered to be candy if it contains only small amounts of chocolate chips or other candy.Are sweetened breakfast cereals considered candy if they do not list flour as an ingredient?
No. Breakfast cereals are non-taxable food, even if they are sweetened and do not list flour as an ingredient.What about prepackaged combination packs of candy? I sell bags of mixed candy bars for one, non-itemized price. Some of the bars contain flour, while others meet the definition of candy. Do I collect sales tax on the bags of candy?
The sale of the bags of candy represents a bundled transaction. See RCW 82.08.190 for more information on bundled transactions. Because one of the items in this bundled transaction is subject to sales tax, the entire bundle of products is subject to sales tax. See RCW 82.08.195 for more information.However, you can exempt the bundled transaction from sales tax if you demonstrate that the purchase price or sales price for the taxable candy is 50% percent or less of the total purchase price or sales price of the bundled food products. See RCW 82.08.190(4) for information about how this 50% exception works.
Are nicotine gum and analgesic gum candy?
They are not candy, but they are subject to sales tax because they are over-the-counter drugs. Over-the-counter drugs refer to any drug sold with a label that identifies the product as a drug and includes either of the following:A “drug facts” panel; or
A statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance, or preparation.Nicotine gum and analgesic gum (gums containing aspirin) meet the description above and should be treated as taxable over-the-counter drugs unless purchased with a prescription. See RCW 82.08.0281 for more information regarding over-the-counter drugs.
How are products in the baking aisle treated?
Below is information on selected baking aisle products [we’re skipping the table but fact that there is a table to explain the candy/non-candieness of the baking aisle is ridiculous]Are fruit snacks such as fruit roll-ups and fruit leathers subject to sales tax as candy?
Fruit roll-ups and fruit leathers are subject to sales tax if they contain any sugar, honey, or other natural or artificial sweeteners and do not contain flour or require refrigeration. The fruit added to such item is not considered a sweetener (fruit is not intended to refer to concentrated fruit juices).Are sweetened dried fruits candy?
Yes, dried fruits are candy when they are sweetened with natural or artificial sweeteners. This is true whether the product is sold prepackaged or in a bulk bin, by weight. Unsweetened fruits are not candy.Is halvah candy?
Halvah is a confection usually made from crushed sesame seeds and honey, but in some instances may be made with grain based ingredients. It has been a traditional dessert in India, the Mediterranean, and the Balkans. Halvah that is based on nut butters (or seeds) and contains no flour is candy. Halvah that is flour-based is not candy. You should read the ingredient label if you are unsure.Are energy bars and protein bars candy?
Energy bars and protein bars that contain no flour and require no refrigeration are taxable as candy. Bars that contain flour or require refrigeration are not candy.Are cough drops subject to sales tax as candy?
Cough drops are not taxable as candy if they have either:A “drug facts” panel; or
A statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance, or preparation.In such situation, the cough drops represent over-the-counter drugs. These cough drops are subject to sales tax unless purchased with a prescription. See RCW 82.08.0281 for more information regarding over-the-counter drugs.
Cough drops that do not have either of the above are candy.
Some takeaways: 1) Careful with the trail mix that has lots of M&Ms, it could possibly be taxable 2) Lucky Charms, et al. are safe 3) If anything has the word “gum” in it, it’s up for debate (e.g. Nicotine gum). Strangely enough, condom gum, edible undies, etc. is not mentioned 4) Fruit Roll-ups, energy bars, halvah and cough drops are all in the gray area.
And in case that doesn’t clear it up, there’s an entire spreadsheet that you can refer to (file below) but no, a Kit-Kat bar is not considered candy. Neither is a Milky Way. Got it?
Quick Tax Quiz: When Is a Candy Bar Not a Candy Bar? [Tax Policy Blog]
Washington State Candy List