IPO accounting and legal fees: 2013 update
An analysis of accounting and legal fees disclosed by initial public offering (IPO) companies shows that these fees have increased dramatically in the past two years, especially in 2013, Jessica Belanger wrote yesterday in a blog for Audit Analytics.
From 2008 to 2011, average accounting fees decreased – from about $880,000 to about $622,000. The decrease was likely related to fee pressure caused by the financial crisis and its subsequent fallout, according to the blog. In 2012, however, average accounting fees related to IPOs jumped significantly to about $934,000.
“The data from 2013 confirms a new trend,” Belanger wrote. “[A]verage accounting fees related to IPOs increased to over $1.2 million, a 22 percent increase from 2012. Total accounting fees related to IPOs are also up significantly compared to 2012, increasing by 87 percent to about $277 million, which far exceeds the 54 percent increase in the number of accounting fees disclosed (from 149 to 229).”
Wall Street trains fire on idea of a bank tax
Stephanie Armour and Ryan Tracy of the Wall Street Journal reported yesterday that several large banks, including Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., and JP Morgan Chase & Co., are marshaling opposition on Capitol Hill to kill a proposal by House Ways and Means Committee Chairman Dave Camp (R-MI) to tax the nation's largest financial firms, according to people familiar with the efforts.
The bank tax would apply to financial firms with assets greater than $500 billion, levying 0.035 percent on total consolidated assets each quarter. Some firms could pay in excess of $2 billion a year, according to analysts and industry groups.
“Behind the scenes, banks are pressing lawmakers to publicly denounce the plan, according to interviews with industry officials and congressional aides,” Armour and Tracy wrote. “On Friday, 54 Republicans signed a letter to Mr. Camp conveying ‘deep concerns’ about the bank tax, saying it threatens economic vitality by reducing access to credit and curbing economic growth.
“The proposal has galvanized Wall Street in a way largely unseen since the financial crisis,” the article continued. “While banks have pushed back on postcrisis regulation, they rarely act as one, since the rules affect firms differently. This time, banks large and small are coordinating on the resistance.”
US regulator warns on auditors’ marketing practices
Public Company Accounting Oversight Board (PCAOB) member Jeanette Franzel is sounding the alarm over what she fears may be a false stamp of approval that some accounting firms are using as they market themselves to potential clients, Sarah N. Lynch of Reuters reported yesterday.
A growing number of accounting firms register with the PCAOB, but are never actually inspected. Some of these firms tout their PCAOB registration on their websites to drum up business, according to the article.
This raises concerns for investors, Franzel said, because registration with the PCAOB may give customers a false impression that every audit firm is subject to strict supervision.
“There are legitimate reasons for firms to be registered with the PCAOB even if they are not currently performing work that is subject to our oversight,” Franzel said, according to the article. “But I become concerned when I see firms using their PCAOB registration as a marketing tool to tout their audit quality when their only interaction with the PCAOB has been to file registration forms and pay annual fees.”
The PCAOB has limited jurisdiction over the kinds of audits it can regulate, but any firm can pay a fee to apply to register with the board, the article stated. Annual fees are as low as $500.
US tax preparer rules land in Congress, tough road ahead
Patrick Temple-West of Reuters reported yesterday that after setbacks in the courts, the Obama administration this month asked Congress to pass a law that would specifically empower the IRS to regulate preparers, from sector leader H&R Block Inc. to thousands of mom-and-pop shops.
The IRS had argued for years it did not need legislation to do this, but three independent tax practitioners recently prevailed in appeals court in their effort to block the tax agency's attempts on its own to impose new regulations on up to 700,000 tax preparers.
The IRS now wants Congress to act, but there is little prospect that it will move quickly on that request.
“I don’t think it’s a go. I don’t look for Congress to jump on that,” said Floyd Williams, a former IRS chief of legislative affairs who is now a lawyer at a lobbying firm, according to the article.
[Click here to read AccountingWEB’s article on the three independent tax practitioners’ recent victory against the IRS in appeals court.]
Foreign-entity reconciliation strategies
John Sullivan, CFO of Nair & Co., wrote an article yesterday for CFO on basic strategies financial executives can use to align accounts and track foreign accounting standards.
“It goes without saying that CFOs are responsible for ensuring that their companies are on a sound financial track, have clear strategic plans, and that they apply the necessary financial tools and resources to execute,” Sullivan noted. “As CFOs, we must remain on course and focus on where the company is headed, be that an IPO, acquisition, or market expansion.
“For the sake of this column, let’s focus on expansion – specifically international expansion,” he continued. “For a foreign entity, financial executives will need to reconcile US-headquartered financial results based on US generally accepted accounting principles (GAAP). Reconciliation is increasingly more complicated when accounting standards from multiple countries are involved.”
Don’t neglect your tax department
In another CFO article, this one written late last week by Mark Mendola, vice chairman of PwC and its US tax leader, financial executives should not just look at their tax function with an eye toward minimizing risk; look at it as a place where value can be created.
“I am not suggesting CFOs overlook the former for the latter. Identifying, analyzing, and mitigating tax risk can and should be a critical role for a tax department,” Mendola wrote. “But CFOs must concurrently seek to deliver value from the tax function. This is a difficult balance: I find that most companies focus primarily on mitigating risk and neglect the opportunity to create real value from their investment in tax.”
A recent PwC study of tax departments found that tax personnel spend roughly 40 percent to 60 percent of their time on data management tasks. In addition, a majority acknowledged they spend less than 30 percent of their time on strategic analysis.
“The answer to … truly unlocking the value of the tax department is to simply use the same approach you did to transform other segments of the business,” Mendola wrote. “Challenge leaders to transform the way they think about people, processes, data, and technology. The most telling statistic in our recent study was that more than half the companies surveyed (55 percent) admitted they do not have a long-term plan related to tax technology nor any plans to develop one.”
Going Concern March Madness: The ultimate Excel bracket
It’s that bracket-y time of year, so you MUST do this. And, if you missed it, check out the article by our resident Excel wizard, David Ringstrom, on how to use Excel to manage your March Madness bracket.
- ‘Jeans Day’ helps accounting firm give back to community (CPA Practice Advisor)
- Mutual fund tax guide (Forbes)
- In Camp’s camp: Praising the effort on tax reform (Roll Call)
- The strange, suicidal odyssey of Dave Camp’s tax reform plan (Mother Jones)
- To catch tax ID thieves, states turn to big data (NBC News)
- Rewriting the rules for 501(c)(4)s (Los Angeles Times)
- IRS accused of targeting conservatives as soon as Obama took office (WND)
- Who should get the tax revenue from Apple’s intellectual property? (TaxVox)
- College bowl tax audits and Colorado pot taxes (Don’t Mess With Taxes)