Ernst & Young seeks affirmation of Lehman accounting decision
Joseph Checkler of the Wall Street Journal wrote on Tuesday that Ernst & Young (EY) wants the New York State Supreme Court to sign off on its recent legal win against New York’s attorney general over whether it was responsible for the accounting woes that threw Lehman Brothers Holdings Inc. into bankruptcy.
The accounting firm late last month sought confirmation of an April decision by an arbitration council, which ruled EY wasn’t liable for the so-called “Repo 105” accounting maneuver that Lehman used to shift assets off its books.
The New York Attorney General’s office had sued EY – the first time a major accounting firm was targeted for its role in the financial crisis – over the accounting maneuver, which allowed Lehman to temporarily lower its leverage in 2008 while enabling the bank to present itself as financially stronger than it really was, Checkler wrote.
EY has long denied any wrongdoing in connection with Lehman’s demise and maintains the bankruptcy wasn’t caused by any accounting or financial-reporting issues, although a panel of three judges wrote in their April decision that EY knew about the accounting practices.
“Any wrongdoing associated with the Repo 105s is overwhelmingly attributed to Lehman,” the judges wrote in their decision, according to the article.
US expats sue over Canadian deal to tell Washington about their accounts
A group representing American expatriates is taking legal action against the Canadian government for its role in implementing the Foreign Account Tax Compliance Act (FATCA), a US law designed to clamp down on tax evasion, Rita Trichur of the Wall Street Journal reported on Tuesday.
The lawsuit, filed on Monday in the Federal Court of Canada in Vancouver, challenges the constitutionality of a Canada-US intergovernmental agreement reached in February that forces domestic banks to comply with FATCA. The agreement requires Canadian banks to share account information about US citizens with the IRS via Canadian tax authorities.
According to Trichur, the plaintiffs allege that the Canada-US intergovernmental agreement violates provisions of the Constitution Act of 1867 and the 1982 Canadian Charter of Rights and Freedoms. The court filing contends that the “collection and disclosure” of information on account holders “engage the privacy and property rights of individual account holders,” which are matters of provincial jurisdiction.
The court filing also argues that the intergovernmental agreement creates “a distinction” between dual nationals and other Canadians, which violates a Charter guarantee of equal protection under law. Neither the US government nor Canadian banks are named in the lawsuit, according to the article.
FATCA, which took effect on July 1, has cost Canada’s five biggest banks a combined sum of about 750 million Canadian dollars ($687 million) in initial compliance expenses, according to people familiar with the matter.
Obama donors embrace corporate inversions he criticizes
President Obama has been bashing companies that pursue offshore mergers to reduce taxes. But as Richard Rubin and Annie Linskey of Bloomberg reported on Wednesday, some people behind these inversion deals are also some of President Obama’s biggest donors.
Executives, advisers, and directors involved in some of the tax-cutting transactions include Blair Effron, an investment banker who hosted Obama for a May fundraiser at his two-level, 9,000-square-foot apartment on Manhattan’s Upper East Side.
Others are Jim Rogers, co-chairman of the host committee for the 2012 Democratic National Convention; Roger Altman, a former senior US Treasury Department official who raised at least $200,000 for Obama’s re-election campaign; and Shantanu Narayen, who sits on the president’s management advisory board.
The administration’s connections to more than 20 donors associated with the transactions are causing tensions for the president as he urges Congress to act against the deals and prods the Treasury Department for short-term steps to curb them. The president’s tough talk also may become a liability as Democrats seek corporate America’s cash this year as they try to preserve their majority in the Senate, Rubin and Linskey wrote.
White House spokeswoman Jen Friedman told Bloomberg that the president supports changing US law retroactively “so that companies do not have an incentive to try to squeeze through before the loophole is closed.” She didn’t comment when asked whether Obama would return donations or stop soliciting contributions from people involved in deals that he has labeled as wrong, according to the article.
Indiana challenge to Obamacare tax-credit rule goes ahead
The court battle over the meaning of a provision of the Affordable Cart Act regarding healthcare tax credits heated up on Tuesday when a US judge in Indiana followed contradictory rulings on the law elsewhere with one of his own, wrote Andrew Harris of Bloomberg.
US District Judge William T. Lawrence in Indianapolis denied a request by the IRS to dismiss part of a 2013 Indiana lawsuit, in which the state claimed an IRS rule on credits for those who enroll for Obamacare on federal exchanges is illegal. Indiana argued the rule conflicts with a provision of the federal law that limits credits to state-exchange enrollees, according to the article.
Lawrence’s ruling yesterday comes three weeks after US appeals courts in Washington and in Richmond, Virginia, reached conflicting conclusions about availability of the subsidy for which about 4.5 million people have qualified. Indiana was one of the states that opted to not create an exchange.
In his ruling, Lawrence rejected US contentions that Indiana and the 39 state public schools systems that joined it in the suit would suffer no harm from the rule. However, the judge threw out the state’s claim it may be compelled to comply with the coverage mandate even as Obama delayed that requirement to 2015, Harris wrote.
The judge also rejected Indiana’s contention the mandate violated its sovereignty, ruling it – and 25 other states – lost that argument in the early stages of a 2010 Obamacare challenge that ended with the US Supreme Court upholding the legislation as a valid exercise of Congress’s taxing authority.
Ocwen shares fall amid review of accounting controls
Dakin Campbell and Zachary Tracer of Bloomberg reported that Ocwen Financial Corp., the worst performer in the Russell 1000 Index for the past year, fell again on Tuesday after saying investors shouldn’t rely on its financial statements as the firm’s auditor reviews accounting controls.
Ocwen, the largest nonbank mortgage servicer, fell 4.5 percent to $25.16 in New York. That extends its slide over the past 12 months to 51 percent, compared with a 15 percent gain for the 1,033-company benchmark. The company said it plans to restate results and delayed its quarterly filing for the three months ended June 30.
There may be “material weakness” in the firm’s accounting for how it booked a sale of mortgage-servicing rights to Home Loan Servicing Solutions Ltd., Atlanta-based Ocwen said on Tuesday in a regulatory filing, Campbell and Tracer wrote. Pretax income for 2013 probably increased by $17 million and declined by the same amount in this year’s first quarter, the filing stated.
“The company anticipates it will determine that a material weakness existed in the relevant time periods in the adequacy of our controls,” Ocwen said in the filing, according to the article.
The top seven issues facing young professionals
In an August 11 blog on the Maryland Association of CPAs’ (MACPA) website, Executive Director Tom Hood wrote about the top issues facing young professionals and emerging leaders in the CPA profession.
MACPA talked to young professionals during a private ThinkTank session as a follow-up to its 2014 Leadership Academy class and at the American Institute of CPAs (AICPA) EDGE Conference in New Orleans last week.
The No. 1 issue was consistent across both groups: not enough time.
In his blog, Hood lists the top seven issues and includes advice on how young CPAs can tackle these challenges.
IMA achieves record growth in fiscal year 2014
The Institute of Management Accountants (IMA) announced on Tuesday that it increased membership and had record-setting growth for its Certified Management Accounting (CMA) credential in fiscal year 2014, ending June 30.
Having just opened two new international offices in Shanghai and Cairo, in addition to existing global branches in Zurich, Dubai, and Beijing, the IMA has seen growth in membership and new candidates, enhancing the organization’s international relevance, as well as highlighting the critical role management accountants play in the global economy, the organization stated in a release.
In FY 2014, IMA’s total membership rose 7 percent to 72,921, including more than 10,000 college and university students and young professionals. Outside the United States, membership grew 23 percent over 2013, reaching nearly 28,000.
“Our increase in numbers – as well as in respect and influence – is a result of the integrity and consistency of this organization,” IMA President and CEO Jeff Thomson, CMA, CAE, said in a written statement. “The trust in our organization and in our certification standards is what make the CMA the leading global management accounting credential. We are proud to be fulfilling our mission to promote the best interests of the profession, and we commit to growing with confidence and integrity.”
The CMA – IMA’s globally recognized, advanced-level credential for accountants and financial professionals in business – has also shown tremendous growth. The total number of new CMA candidates reached a record high 14,662 in FY 2014. Also, 3,003 new CMA certificates were awarded to management accountants, also a record.
In addition, the total number of CMAs is up 6 percent in FY 2014, and total candidates have increased 19 percent in the past year, now standing at 22,277. To date, more than 43,000 professionals have earned the CMA credential.
- Grant Thornton may have hosed fire engine company audit (Going Concern)
- PwC’s Bob Moritz on why you shouldn’t miss your kid’s birthday party for work (Going Concern)
- CAQ-commissioned study finds reasonable assurance somewhat more reasonable these days (Going Concern)
- Ilieva Ageenko joins Grant Thornton as leader of its Financial Services Advisory Model Risk Management practice (Grant Thornton)
- Moss Adams welcomes Gregory Matayoshi as a director of IT consulting (Moss Adams)
- Accountant Joe Mooney joins Gross Mendelsohn (Gross Mendelsohn)
- Robert Keyes, senior officer in [SEC] New York regional office, to retire after nearly 22 years of federal service (SEC)
- Measuring accounting disclosure complexity with XBRL (FEI Daily)
- After Kinder Morgan deal, what’s next for master limited partnerships? (DealBook)
- Will Alaskans vote to repeal state’s tax cut on oil production? (NPR)
- Democrats court former Gov. Sarah Palin in Alaska oil-tax fight (Wall Street Journal)
- Medtronic’s tax inversion lesson (Wall Street Journal)
- CVS in middle of overseas tax flight debate (Providence Journal)
- If Congress won’t, Obama may have to address inversion (Washington Post)
- Do tax inversions hurt America’s bottom line (Al Jazeera America)
- How to stop tax inversions with a carbon levy. Seriously (Bloomberg)
- Will tax inversions sink the US economy? (Forbes)
- This isn’t a low minimum wage, this is tax poverty (Forbes)
- Japan’s GDP falls by 6.8% in the second quarter on sales tax rise (Forbes)
- Your real tax rate is higher than you think (MarketWatch)
- 20 big profitable US companies paid no taxes (USA Today)
- Mansion wars and mansion taxes (Bloomberg View)
- FBAR filing, some acrobatics required (Tax Roundup)
- Congress shouldn’t make state tax systems worse (Tax Analysts)
- Expanded tax break for elderly parent care introduced (Don’t Mess With Taxes)
- Tax Court rejects RV business expenses even though appropriate & helpful (Tax Litigation Survey)
- Colorado lawmaker seeks marijuana tax review amid disappointing sales (Denver Post)