Credit Suisse said to face SEC probe of accounting moves
The US Securities and Exchange Commission (SEC) is investigating whether Credit Suisse Group AG improperly shifted money in its private banking unit to obscure a drop in asset growth amid a US probe of tax evasion at Swiss banks, Alan Katz and David Voreacos of Bloomberg reported today.
The bank is also conducting an internal investigation to determine whether it violated accounting rules in the United States or Switzerland, according to a Senate report released yesterday, the article stated.
“Credit Suisse touted the amount of ‘net new assets,’ or net cash inflows, to its private banking business as a key gauge of the lender’s ability to generate earnings, the Senate Permanent Subcommittee on Investigations said in the report,” Katz and Voreacos wrote. “Those inflows began to dry up in 2011 and 2012 as Swiss banks faced growing scrutiny for helping tax evaders, according to an internal e-mail cited by the report.”
The article continued: “Credit Suisse didn’t follow its own policies for determining the value of new assets, and shifted them between regions to hide a decline in the Switzerland-based unit, the subcommittee said. [CEO Brady] Dougan acknowledged in a December interview with the subcommittee that the Zurich-based bank may not have followed those policies in at least one instance, according to the Senate report.”
Some small businesses have taken a liking to the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs) that the American Institute of CPAs (AICPA) unveiled last June. The special-purpose framework is meant to be an alternative to US Generally Accepted Accounting Principles (GAAP) that small businesses can use for their financial reporting.
“For many small businesses that have used it, the simplified reporting framework is welcome,” wrote Chris Cumming of American Banker on February 25. “Keith Willy, a partner at Twain Financial Partners, a small St. Louis startup that manages assets for banks, says he persuaded the company's backers to accept financials prepared under the new framework last year. The move saved around $200,000 in accounting and other costs, he says.”
The AICPA’s framework is not an authoritative set of rules; banks can choose to accept financial statements prepared in accordance with it or stick with US GAAP, the article stated.
“But banks that go the new route could get a leg up in small-business lending by making it easier – and cheaper – for companies to apply for loans, advocates say,” Cumming wrote.
[Click here for AccountingWEB’s articles on the FRF for SMEs.]
McConnell douses tax reform talk
The day before he is set to release his long-awaited discussion draft of his tax reform plan, House Ways and Means Committee Chairman Dave Camp (R-MI) ran into roadblocks from his own party, most notably Senate GOP Leader Mitch McConnell (R-KY), Bernie Becker and Russell Berman of The Hill reported yesterday evening.
McConnell poured cold water on tax reform’s prospects, insisting that the differences between Democrats and Republicans were too great to overcome, the article stated. McConnell suggested the GOP would be better served waiting until after the midterm elections, when his party might have majorities in the House and the Senate.
“I think we will not be able to finish the job, regretfully, in 2014,” McConnell told reporters on Tuesday, according to Becker and Berman. “Now, if we had a new Republican Senate next year, coupled with a Republican House, I think we could have at least a congressional agreement that this is about getting rates down and making America more competitive, not about giving the government even more revenue.”
Camp is scheduled to officially roll out his draft, which would slash individual and corporate tax rates while eliminating or paring back incentives, at 1:30 p.m. Eastern time today.
Dave Camp: How to fix our appalling tax code
Camp put pen to paper – or fingers to keyboard – on how his tax reform plan will make the tax code simpler and more fair.
“The tax code should make it easier for American companies to bring back profits earned overseas so they can be invested here. It should not hinder small businesses from growing into large businesses. And the individual income tax needs to be simpler, fairer, and flatter for everyone,” he wrote in an opinion piece for the Wall Street Journal on February 25. “The guiding principle is that everyone should play by the same rules – your tax rate should be determined by what's fair, not by who you know in Washington.”
Click here to read more about Camp’s tax reform plan, in his own words.
House panel recalls Lois Lerner to witness table
Gregory Korte of the USA Today reported yesterday that Lois Lerner, one of the key figures in the IRS targeting scandal last year, has been summoned by the House Oversight and Government Reform Committee to reappear on March 5, more than nine months after she invoked her Fifth Amendment right against self-incrimination.
During a May 22, 2013, hearing before the committee, Lerner, the former director of the IRS’s Exempt Organizations unit who retired last September, protested her innocence and invoked her Fifth Amendment rights.
“But she then answered a single question, confirming the authenticity of a document she provided Treasury inspectors,” Korte wrote. “And that, Committee Chairman Darrell Issa [R-CA] ruled, means she waived her rights and can be compelled to testify.”
In a letter to Lerner's attorney on Tuesday, Issa said the hearing next week is a continuation of the May 22 hearing, so her subpoena is still in effect, the article stated.
[Click here for AccountingWEB’s articles on Lois Lerner.]
Whistleblower awards are ordinary income, Tax Court says
Andrew Zajac of Bloomberg reported yesterday that a whistleblower’s $6.8 million in awards must be taxed as ordinary income, a US Tax Court judge ruled, rejecting arguments that the money should be recognized as capital gains and subject to a lower rate.
Craig Patrick, a former reimbursement manager for California medical device maker Kyphon Inc., helped win the recovery of tens of millions of dollars for the United Stated from an alleged Medicare fraud. While Judge Diane Kroupa applauded Patrick for his efforts, she wrote in her ruling on February 24: “Rewards, however, are treated as ordinary income” and “subject to tax as such,” the article stated.
Kroupa’s ruling upheld the IRS’s determination that Patrick and his wife, Michele Patrick, with whom he filed joint returns, owed a total of about $812,000 for 2008 and 2009.
The top tax rate for ordinary income in those years was 35 percent, compared with 15 percent for capital gains, according to Zajac.