Tag: KPMG

Accounting News Roundup: KPMG Survey: Half of Execs Want Option to Adopt IFRS Early; PW India Plea Rejected on Satyam; Two-thirds of States Have Raised Taxes Since Recession Began | 03.09.10

• Half of US execs want to use IFRS early-survey [Reuters]
KPMG surveyed some shot-callers and lo and behold, half of them are ready to get down with International Financial Reporting Standards before the SEC’s target date of 2015. That’s if the SEC is even down with the whole idea.

KPMG’s surveyed also discovered that executives would like the SEC to be a little more transparent with their plans re: IFRS. You know, other than more meetings.

“Many U.S. companies with subsidiaries around the world are already using IFRS for statutory reporting,” said Janice Patrisso, partner and national IFRS leader at KPMG. “For them, having the option to synchronize it all up front at the U.S. company is a positive.”
…
Patrisso said companies with international subsidiaries that have already made conversions to IFRS were looking at the way those units had chosen to use the rules. They are also preparing for changes U.S. and international accounting rulemakers are making to converge the two sets of rules.

It’s nice to see some pushback to the SEC’s waffling. Despite where you fall on the IFRS debate, most people would agree that allowing businesses to make their own decisions about what financial reporting method to use (as long as it is consistent and high quality). Especially since the AICPA recognized the IASB as an official standard setter, thus giving private companies the go-ahead on IFRS, shouldn’t public companies be allowed the same freedom?

While the SEC spends the next five years trying to figure out what all this means, some businesses already see where this is going and don’t want to waste time. The SEC isn’t so enthused.

• PW plea on Satyam probe rejected [Business Standard]
Pricewatherhouse India really wants everyone to forget about Satyam. Their latest plea to the Securities regulator in India, the Securities and Exchanges Board of India (SEBI) has been rejected BUT apparently the firm is going to try making their case again. Sigh.

Don’t get any illusions about this case making any progress, “The next step is for ICAI’s disciplinary committee to send notices to the PW auditors charged by law enforcement agencies in the fraud case…this could happen only after the auditors, under judicial remand, are in a position to argue their case before the committee.” And we complain about the bureaucracy here.

• CBPP: 33 States Have Raised Taxes by $32 Billion/Year [TaxProf Blog]
You may have noticed a state fiscal crises here or there in the last couple of years and by God, they’re trying to do something about it. Unfortunately, the most common solution, according to the Center on Budget and Policy Priorities, is the raising of taxes. Thirty-three out of 50 states have taken a number of measures from eliminating tax exemptions and broadening tax bases to good old fashioned higher sales, income, or property tax rates.

We’re Not Convinced That CFOs Mean What They Say When They Switch Audit Firms for No Apparent Reason

Today in boilerplate press releases, MedAssets dropped BDO as its auditor for the bigger and bluer KPMG and the CFO punted on giving a real reason as to why.

“We are very fortunate to have had the pleasure of working with BDO Seidman for many years, including during the period of time covering our initial public offering in 2007,” said Neil Hunn, Executive Vice President and Chief Financial Officer, MedAssets. “BDO has been a tremendous business partner for us and instrumental in our success. MedAssets has experienced tremendous growth, especially over the last few years, and we expect this trend to continue. As such, we feel that KPMG is best suited to serve our Company and stockholders in the future. We look forward to our new relationship with KPMG.”

So if we were translate this statement, basically it sounds like MedAssets wants a big firm because the business is growing like gangbusters and they simply can’t be held back by a second-tier firm like BDO.

Or maybe we’ve got it dead wrong. Maybe MedAssets is spooked about BDO’s chances in the Banco Espirito appeal. Maybe KPMG’s Atlanta office is desperate for work and lowballed the audit fee. Feel free to share your own speculation but we’re sure as hell not buying the statement that a firm (in this case, BDO) ‘has been a tremendous business partner’ and ‘instrumental in our success’ and just gets up and dropped because ‘tremendous growth’ is expected to continue. Is BDO really that incapable of continuing to serve the company?

Basically, we are asking for more honest language in SEC filings and press releases.

MedAssets Engages KPMG as Auditor [Press Release]
8-K [SEC.gov]

KPMG Knows You’re Feeling Like a Fatty

Yes. You. Spending day after day at that desk, consuming a steady diet of red meat, bagels loaded with cream cheese that is going straight to your [insert problem area] and, of course, caffeine. Sweet, sweet caffeine.

It all adds up to a bunch of tubby Klynveldians, and tubby = not happy. This is not lost on the leadership at KPMG. They want you to know that they want to help you lose that paunch ASAP and they are prepared to offer you a human being to assist you.

According to the Centers for Disease Control and Prevention, more than one-third of American adults are overweight, and many people are actively seeking a solution for weight loss. Losing weight isn’t just about looking better in the mirror—being overweight can contribute to a range of health issues, including heart disease, diabetes, hypertension, and even certain types of cancers.

Lots of us have tried to lose weight, but find ourselves giving up because it can be tough to do. But what if you had your own weight-loss coach, someone who could provide personalized guidance about nutrition and exercise, and provide strategies geared toward your specific situation? What if you could call that coach as many times as you wanted over a six-month period, when you had a question or needed some encouragement?

You can have just that, at no cost to you, thanks to KPMG and LifeWorks through the iCanChange program. iCanChange gives you access to a dedicated, experienced and credentialed health coach who will help you identify goals, strengths, challenges, and strategies for managing your weight.

You will be able to receive four scheduled calls from your coach, and you can call him/her as many times as you would like over a six-month period. Your coach will help you track your progress and set realistic goals to lead you along the road toward losing weight.

So, just who exactly is KPMG recruiting to help these numbers nerds get back in fighting shape? Richard Simmons? Chuck Liddel? Phil Mickelson?

Assuming this doesn’t have to wait until after busy season you best get crackin’ in case Radio City announces its own Canadian Tuxedo reprieve. Fat guy in a little denim coat is not a good look.

KPMG Survey: Cost Cuts May Not Be Sustainable

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

Corporate executives have really gotten to show off their cost-cutting skills during the financial downturn and the ongoing, tepid recovery, as many have managed to push earnings up even as revenues sagged.

But, in looking forward, they have to wonder what cost those reduced expenses came at.

According to a survey released by KPMG on Wednesday, board members and senior executives are doing just that. Forty-five percent of the respondents expressed concern about the sustainability of the cost reductions undertaken by their companies in response to the economic crisis.


“Significant cost cutting can create a variety of risks to the business, both near- and long-term,” said Mary Pat McCarthy, KPMG Vice Chair and Executive Director of the Audit Committee Institute, in a press release.

In particular, two-thirds of those surveyed said they were most concerned about the impact of cost cutting on their company’s employee talent and training. Other concerns include the impact of cost-reductions on internal controls (36 percent), fraud risk (25 percent), management of outsourcing and supply chain (24 percent), financial reporting integrity (21 percent), and the Foreign Corrupt Practices Act and compliance issues (9 percent).

Some 13 percent of the respondents said their companies had not implemented significant cost reductions.

While previous recessions were characterized by short-term belt-tightening and a quick return to normal, KPMG noted that current cost reductions may be much longer-term, and possibly permanent.

The long-term nature of the cuts is understandable in light of the executives’ economic outlook. The survey found that 45 percent of respondents don’t expect the U.S. economy to reach pre-crisis growth in terms of investment, employment and productivity before at least 2013, and 22 percent said it would be beyond 2014.

Another 17 percent were particularly pessimistic, saying the economy would not see pre-crisis growth “for the foreseeable future,” while 15 percent said recovery could come in 2011. Just 1 percent said recovery could occur in 2010.

Similarly, in a separate response, 66 percent said American companies will not return to “business as usual” and will operate in this new environment through at least 2013.

AIG Adopts Big 4 “Forced Ranking” Method

Good news servants of the capital markets! Remember how we talked last summer about forced ranking and how it’s rampant within the Big 4 performance ranking system? No? Put it right out of your minds? Had occurred to you because you’re delirious from the lack of sleep, poor diet, et al.?

Well as soon as busy season
is over, we’re sure it’ll come back to you; in the meantime, you’ll be happy to know that everyone’s favorite ward of the state, AIG is now joining you in implementing what might be the worst possible method of rewarding its employees.

American International Group Inc. is rolling out a plan to revamp how it doles out annual incentive pay to its employees, as the government-controlled insurance giant moves away from retention bonuses that have proved controversial over the past year.

The new initiative, called a “forced distribution” system, is being pushed by Chief Executive Robert Benmosche. Under the plan, thousands of AIG employees will be ranked on a scale of 1 to 4 based on their performance relative to their peers, and their annual variable compensation, which may include bonuses, will be determined by their rank. Individuals ranked in the top 10% will get far more relative to their peers.

Yes! The 1 to 4 ranking scale. That’s not quite as shrewd as PwC’s 1 to 3 scale and it’s at least simpler than KPMG’s 9 box but AIG employees have every right to be concerned about this arbitrary ranking system.

Warden Robert Benmosche doesn’t care though, there were too many rock stars, “Mr. Benmosche said performance-appraisal systems previously in place at AIG weren’t discriminating enough. In one case, he said, there was a ranking system with four categories, but about half of the people got the highest rating, and half got the second rank. ‘You can’t have 50% in the top,’ he said.” Bobby B also said that AIG is “unlikely to impose a requirement that underperformers leave.” Write that one down.

Our contributor Francine McKenna who has written both here and on her blog about forced ranking told us, “Investors will get contrived ‘performance’ enforced by cutthroat atmosphere that further encourages excessive risk taking.”

In addition, Ravin Jesuthasan a “talent-management” consultant (not involved with AIG’s change) who was quoted in the Journal (our emphasis), ” [Mr. Jesuthasan said] the approach can work in turnaround situations by helping to foster more accountability, but could be risky if not communicated well or “if links to consequences like compensation and employment are not properly thought through.”

Any of that sound familiar?

AIG Plans Revamp on Pay [WSJ]

Ex-KPMG Associate Sets New Bar for Expense Reimbursement Abuse

We meant to get to this on Friday but as you recall, our plans we’re slightly derailed by forces beyond our control. We’re sharing it now because there are lessons here for all the newbies out there. Pay attention, this could one of you.

During busy season the temptation to get a little aggressive with the expense reimbursement comes naturally to just about everyone. If you deny this particular bit of weakness then you are either A) lying through your coffee-stained teeth or B) in the wrong profession; join the clergy.


It should be noted that the abuse of reimbursement policy has relative levels of ridiculousness. Partners can rationalize and get away with more extravagant abuse than a mere associate so keep that in mind here.

So maybe every once in awhile you and some team members slip out for a three martini lunch that falls on the expensive side and you ram it through on your expense report because you figure you deserve it. Totally natch.

It gets overboard when you have the tendency to place some wagers and because you’re a degenerate loser, you start submitting expenses to fund this little gambling hobby.

Vikas Gupta was employed by KPMG until he couldn’t pass his “accountancy exams” aaaaannnnddd it was discovered that he claimed expenses of £25,000 to fund his gambling and to pay off debt. Gupta claims that he hit “various internal charge codes” to charge the expenses; which, we hear, is a typical methodology.

Gupta also claims that he suffered from depression (losing streaks will do that), is now in Gamblers Anonymous and is employed by a new firm, so he’s back on the straight and narrow.

This didn’t impress a tribunal of the Institute of Chartered Accountants for England and Wales (the AICPA of E&W), who has recommended that Gupta be banned from having provisional membership for 12 months and to be “severely reprimanded.” Since he has no means to pay fines (he entered an individual voluntary agreement), one can assume that the reprimand will consist of 30 lashes, a marathon of technical accounting trainings, or both.

Ex-KPMG trainee admits £25,000 expenses fraud [Accountancy Age]

Winners and Losers in the Overstock Restatement

With Overstock.com announcing last week that they would be restating their financial statements for the the last three quarters and their 2008 consolidated financial statements, it marked another open-mouth-insert-foot moment for Patrick Byrne and his Company.

This will be the third restatement in the last three years. We understand that financial reporting can be tricky but this doesn’t make for a very good pattern.

Winners:

• Steve Cohen, Michael Milliken, Sam Antar, Joe Nocera, Gary Weiss, Roddy Boyd, Barry Ritholtz, Felix Salmon, Henry Blodget, John Carney, Joe Wisenthal, et al. – Anyone and everyone vilified by Patrick Byrne because they questioned either him, his Company, or both. Patrick Byrne has always maintained that these people were part of large conspiracy of short sellers and financial bloggers and journalists. The restatement simply proves that whatever suspicions they had about Overstock, they were right. Plus all their friends and family on Facebook were violated by creepazoid and Deep Capture hatchet-man, Judd Bagley. That’s just not cool.


• Grant Thornton – Not sure if GT realized it at the time, but getting fired by Overstock is looking pretty good right now. So they changed their minds on the accounting; BFD, right? It happens and clients typically get over it. Pat Byrne decided that it was unacceptable and that LOUDLY crucifying GT in SEC filings, the press, and on conference calls would convince everyone that the auditors were idiots and Overstock and he would triumph over this injustice. Grant Thornton did not hesitate in chanting “liar, liar pants on fire” to Patsy’s face (nothing to lose, they were already fired) and now they’re clear of this three ring circus.

Losers:

PricewaterhouseCoopers – PwC was the auditor for Overstoc prior to Grant Thornton and had always signed off on the company’s financial statements (excellent service in PB’s mind). Now that the restatement has occurred, PwC gets dragged back into the fray to explain what they did, why they did it, and how they got it wrong. A) That just sucks and B) who the hell is going to remember what the hell they did four years ago?

Overstock shareholders – Any Company that restates their financial statements with any regularity whatsoever should be avoided like a group of lepers. If you’re still currently long in Overstock, you have the chance to make the right the decision: sell while the shares are worth something. Your humble servant Patrick Byrne has failed you.

Jury is out:

KPMG: For some reason, Klyneveld Salt Lake City decided that despite Overstock’s dubious past, they were willing to roll the dice. The firm now has the pleasure of guiding the firm through this restatement and somehow pulling the audit for fiscal year 2009 together. The whole exercise reeks of futility. Anyone that happened to be assigned to this engagement and a shred of sanity would have given their notice on the spot. For the time being, the firm seems to be sticking it out but time will tell if the firm changes their mind about their risky new client.

SEC: Everyone knows that the Commission doesn’t have the best track record of late. They have managed to be the laughingstock of the entire bureaucracy and despite a lot of huffing and puffing about new divisions and putting together a dream team of enforcement and financial experts, we haven’t seen much for results. Overstock may be a chance to show everyone that they’re done taking shit and that they are going to start smacking companies around.

KPMG, Grant Thornton DC Offices Are Closing at Noon

We heard that it was getting ugly in the Nation’s Capital so we called around to find out what’s what:

• KPMG – “Closing at noon both DC and Tyson’s”

• E&Y – “No word yet”


• Deloitte – “We’re hopeful”

• PwC – “We go by the Federal Government”

• Grant Thornton – Closing at noon.

Nothing like a snow day but a snow day during busy season is an especially welcome event. It’s supposed to get nasty in Philly too but it hasn’t started snowing there yet, so unfortch you’ll probably have a full day ahead of you (out at 3 pm if you’re lucky).

An added bonus is the possibility that the storm could keep you from working the weekend. Unless, of course, you plan on working from home. If this is the case, we advise you to get home safely, set everything down when you get there, take off your coat and slap yourself. Twice. Hard.

Nasty CEO Patrick Byrne; Blogging Is a Good Idea; Against Tax Breaks for Haiti Relief

America’s Nastiest CEO [The Big Money via Gary Weiss]
We’re still wondering if the KPMG Salt Lake City office knows what they got themselves into by taking Overstock.com on as a client.
Gary Weiss notes:

The Big Money this afternoon came out with a devastating (and gutsy) article by former Fortune writer Roddy Boyd on the corporate crime petri dish that is Overstock.com, and its nuts CEO Patrick Byrne. The title is “America’s Nastiest CEO,” and it descristematically harassed and attacked critics to cover up his own incompetence and wrongdoing–stuff that actually is a lot worse than has previously been acknowledged.

Calling all Manchester United fans [AccMan]
Dennis Howlett — never shy with his opinion — segues into an argument for blogging after noting that the Manchester United don’t need to:

There is a blog post over on Social Media Today that demonstrates as well as just about anything I’ve seen written why you should almost never listen to folk who call themselves ‘social media experts/gurus/consultants.’ Awarding itself the grand title: World’s Most Valuable Soccer Team Doesn’t Get Social Media the author proceeds to show almost zero understanding of The Beautiful Game or the people who are part of that world.


After blowing up one person’s argument for social media, DH turns the tables back to why it’s a good idea:

I have for the longest time said that professionals should write blogs. Many seem bemused by the question: we’re too busy, what would we say? we don’t want to blatantly promote, we’re not sure clients would care…the list goes on. Many talk about networking and the need for face to face meetings in order to make the kind of marketing impression they believe will win business.

In case you still think that the traditional networking is still more your speed, DH continues:

Unlike football fans, clients don’t congregate in large numbers every Saturday afternoon although they may do so in smaller numbers in industry specific associations from time to time. And of course you should be making an effort to attend those kinds of event. But in the meantime and if you are serious about running a business as opposed to a practice, then surely it makes sense to stand alongside your clients?

Have you run out of excuses for your firm having a blog?
Don’t Give Special Tax Breaks for Haiti Relief [Tax Vox]
Before everyone gets excited about the possibility of your contributions to the Red Cross, Doctors without Borders, et al. being deductible for 2009, don’t forget that many of you won’t benefit from a tax standpoint:

The proposal won’t help the two-thirds of taxpayers who take the standard deduction since it only accelerates itemized deductions. Even among itemizers, those millions of givers who are contributing $10 by text message are not going to care much about whether they can write off those few dollars this year or next.
Those who might benefit–relatively high-earning itemizers who give substantial gifts–can easily address this cash flow problem under current law. All they’d need to do is change their withholding or estimated tax payments to reflect any unusually large gifts to Haiti relief.

And not only that, what about other charities that are not subject to the timing change? Don’t they still need money?

Btw, a 2008 paper by Jon Bakija and Bradley Heim finds that higher-income taxpayers are more likely to adjust their giving to reflect changes in their after-tax cost–another reason they’d be the biggest beneficiaries of this bill. But even for them, this small temporary timing change is not likely to matter very much.
Still, some people would change their behavior, and that troubles me. Will they reduce gifts to other worthy causes in favor of newly tax-favored Haiti-related charities? Many organizations are already struggling with major recession-driven reductions in contributions and this would hurt even more.

Haiti still needs everyone’s help, no question but don’t be shocked if Congress’ latest attempt at helping out doesn’t turn out to be that helpful.

Some Former New Century Execs Are Not Having a Good Monday

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for 140px-United_States_Securities_and_Exchange_Commission.pngFormer executives of New Century, the Southern California subprime lender that filed for bankruptcy in 2007, are the latest examples on the SEC’s “We’re Back to Cracking Skulls” tour. The SEC has filed a civil complaint against former CEO Brad Morrice, CFO Patti Dodge, and controller David Kenneally.
From the press release:

In its complaint, the SEC alleges that New Century disclosures generally sought to assure investors that its business was not at risk and was performing better than its peers. Defendants, however, failed to disclose important negative information, including dramatic increases in early loan defaults, loan repurchases, and pending loan repurchase requests. Defendants knew this negative information from numerous internal reports they regularly received, including weekly reports that Morrice ominously entitled “Storm Watch.”
The complaint also alleges that Dodge and Kenneally fraudulently accounted for expenses related to bad loans that it had to repurchase. In the face of dramatically increasing loan repurchases and a huge, undisclosed backlog of repurchase demands, Kenneally, with Dodge’s knowledge, made changes to New Century’s accounting for loan repurchases in both the second and third quarters of 2006. These undisclosed accounting changes violated generally accepted accounting principles and resulted in New Century’s improperly avoiding substantial repurchase expenses and materially overstating its financial results.

“Violated generally accepted accounting principles” has got to make more than a few people at KPMG nervous. Especially if you’re the partner that wrote, ‘As far as I am concerned, we are done. The client thinks we are done. All we are going to do is piss everybody off.’ We’re guessing he/she wasn’t on the ‘Storm Watch’ mailing list, otherwise KPMG might not have a $1 billion lawsuit on its hands.
SEC Charges Former Officers of Subprime Lender New Century With Fraud [SEC Press Relase]
Also see:
SEC Charges Former New Century Executives With Fraud [WSJ]
S.E.C. Accuses 3 New Century Ex-Officers of Fraud [DealBook]

Deloitte, KPMG Will Make Out Okay on This Whole Dubai Thing

dubai-the-world.jpgIf you spent the last four days in a tryptophan-induced coma, you may have missed the news that there’s a bit of a problem in Dubai. A $59 billion problem.

Long/short: Dubai World, the state sponsored investment company, asked for a six month extension on repaying principal and interest maturities to its lenders.

While this spooked a lot of people, the latest reports indicate that Dubai is of the opinion that it’s NBD.


Despite the claims by DW that nothing is fucked, it’s being reported that at least two Big 4 firms will get to bill the hell out of the parties privy to this latest debt-related SNAFU.
Dubai World has hired Deloitte to help them restructure their house of cards debt while KPMG is representing banks that hold $30 billion of the Dubai World debt in the negotiations. Now while we’d like to imagine tense, smoked-filled rooms with fists being slammed on conferences tables and screaming into speaker phones, it’s likely that it will be a much more cordial affair but we remain hopeful.

As for the other two usual suspects, why E&Y has been left out of the proceedings altogether is a mystery but the PwC/Becks/Dubai World connection seems like a good enough reason to us to keep P. Dubs on the sidelines. Call it a hunch.

We’ll keep you updated on the Big 4 angle of this story as it continues long into 2010.

KPMG lined up in $30bn Dubai rescue mission [The Independent]
Also see: Duh, Dubai! [JDA]
Deloitte Versus KPMG in Dubai World Saga [The Big Four Blog]