Bramwell’s Lunch Beat: FASB ‘Redoubling Our Efforts’ on US GAAP

Senate Finance restarts tax reform debate
Peter Schroeder of The Hill reported yesterday that Senate Finance Committee Chairman Ron Wyden (D-OR) and ranking member Orrin Hatch (R-UT) announced a slate of summer hearings devoted to a tax code overhaul, underlining their renewed effort at taking on the massive project.

“This summer, the Senate Finance Committee will forge ahead with hearings that examine reforming the broken, dysfunctional tax code in areas ranging from taxpayer privacy protection to education to corporate taxation,” the pair said in a statement. “When it comes to tax policy, comprehensive tax reform is our ultimate objective, and we are committed to using these hearings as the building blocks to that goal.”

In June, the committee will devote a hearing to education tax incentives, while July has hearings scheduled for taxpayer protection and modernizing the corporate code. [The dates of those meetings have yet to be announced.]

Schroeder noted that the hearings could serve as an effective reset button for the tax reform debate, as the primary players in the last push head for the exits. The previous heads of Congress’s tax-writing committee vowed to take on tax reform but failed to make any headway.

US accounting rule makers sharpen focus on needs of GAAP-users
After more than a decade spent aligning US and international accounting rules, the Financial Accounting Standards Board (FASB) is shifting its attention back toward domestic standards, Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, wrote on Thursday.

Following the release of new revenue recognition rules last week, FASB only has three major convergence projects left to tackle with their counterparts at the London-based International Accounting Standards Board (IASB): financial instruments, leasing. and insurance, Chasan noted.

Going forward, the board expects it will focus on improving US Generally Accepted Accounting Principles (GAAP) while working to “cooperate and coordinate as peers” with the IASB and other accounting standard setters around the world, FASB Vice Chairman James Kroeker said during a University of Southern California accounting conference on Thursday, according to the article.

The FASB is “redoubling our efforts to develop high-quality standards that are useful to those who rely on GAAP,” said Kroeker, who added that the board has already received suggestions for about 70 areas where GAAP could be simplified.

Smaller auditors add market share
CFO Journal also reported earlier this week that more companies with market values of $700 million or more are turning to smaller auditors, like Grant Thornton LLP and BDO USA, according to data from Audit Analytics.

While the Big Four firms – EY, PwC, Deloitte, and KPMG - audit 92.7 percent of those companies, they have lost 2.4 percentage points of market share since 2008, CFO Journal reporter John Kester wrote. Of companies with public floats under $75 million, just 4.8 percent used the Big Four audit firms.

“As long as the economy continues to improve, then we’re going to see this trend [of large companies choosing smaller firms] continue,” said Trent Gazzaway, national managing partner of audit services for Grant Thornton, according to the article.

Hertz to restate results over accounting issues
Hertz Global Holdings Inc. on Friday said it would have to restate and correct its results from 2011 through 2013 as a result of accounting problems in recent years, Michael Calia of MarketWatch reported.

Citing the results of an internal audit, Hertz said its results for 2011, most recently included in its annual Form 10-K filing for 2013, “should no longer be relied upon,” and that the company must restate them.

To further reflect those errors, the company must correct its 2012 and 2013 financial statements, Hertz said in a regulatory filing. The results for those years may also be restated if further adjustments are determined to be material. The company also said it is reviewing if the issues have had any impact on 2014's results, Calia wrote.

Hertz said its management and the board's audit committee also determined that “at least one material weakness” was present in the company's internal financial reporting controls, and that disclosure procedures and controls were ineffective at the conclusion of last year.

EU to decide next week on Irish, Dutch tax-breaks probe
The European Union (EU) may open a formal probe as soon as next week into tax breaks that Ireland and the Netherlands use to attract international companies, according to people familiar with the case, Gaspard Sebag and Joe Brennan of Bloomberg Businessweek reported today.

The European Commission is scheduled to discuss the issue at a meeting on June 11, said two people, who asked not to be identified because the matter is private, according to the article. The probe into the Dutch tax breaks would include special treatment given to Starbucks Corp.

Luxembourg may also face a probe, one of the people said. EU antitrust regulators said in September they were seeking preliminary information on whether the tax deals constituted illegal state aid.

The possible EU investigation comes amid a global crackdown on tax-avoidance as governments struggle to increase revenue and reduce deficits. Lawmakers in the United States, the United Kingdom, France, and Italy have scrutinized such companies as Microsoft Corp., Hewlett-Packard Co., Google Inc., Apple Inc., and Amazon.com Inc.

CTJ and US PIRG mislead with new report on corporate taxes
In an article posted on its website yesterday, the Tax Foundation refuted information that was included in a report, Offshore Shell Games 2014, released on Wednesday by the US Public Interest Research Group (PIRG) and the Citizens for Tax Justice (CTJ).

For example, the US PIRG/CTJ report, which studied the use of tax havens by Fortune 500 companies in 2013, examined the public disclosures of 55 Fortune 500 companies and found that these corporations would collectively owe $147.5 billion in additional federal taxes. The report claims that based on the 55 companies’ public disclosures, the average tax rate they have collectively paid to other countries on this income is just 6.7 percent, suggesting that a large portion of this offshore money is booked to tax havens.

The Tax Foundation believes the report implies that most corporations are avoiding taxes.

“The issue though is that they try to paint this picture of tax avoidance using only a sample of 55 companies. Many exogenous factors, chiefly business cycles, can affect any corporation’s effective tax rate for any given year. Cherry-picking 10 percent of the Fortune 500 corporations does not produce a reliable result,” Tax Foundation economist Kyle Pomerleau wrote. “Additionally, PIRG forgot to mention that 15 of the 55 companies that they have data on reported an effective tax rate of over 20 percent, and five of those companies had effective tax rates over 30 percent.”

According to today’s Politico Morning Tax tipsheet, US PIRG’s Dan Smith pushed back against the Tax Foundation, noting in an email that “the main claim they make is misleading and ignores offshore profits that are booked to tax havens.”

Quick Links:

  • Promotion watch ’14: EY Americas admits 295 new partners (Going Concern)
  • Accounting is the best profession for women according to women (Going Concern)
  • Steve Kass insists he meant it when he said Rothstein Kass wasn’t for sale (Going Concern via Accounting Today)
  • The islands treasured by offshore tax avoiders (New York Times)
  • For Samsung heirs, little choice but to grin and bear likely $6 billion tax bill (Reuters)
  • As bank fines soar, US threatened $16 billion BNP penalty (Reuters)
  • SEBI may probe Credit Suisse in insider trading case (Reuters)
  • California residents support soda tax to fight obesity, health study shows (Reuters)
  • If an individual pulled the tax gimmicks of Apple and other big companies, they’d go to jail (Forbes)
  • How I was hacked by a tax scam: Safeguards you can employ now (Forbes)
  • How to make your summer vacation tax deductible (MarketWatch)
  • Hate taxes? Be thankful you’re not a pro athlete (Bloomberg Businessweek)
  • IRS: No bitcoin reporting on FBARs for this filing season, but future changes possible (Bloomberg BNA)
  • Schumer’s IRS (New York Post)
  • IRS employee sentenced for identity theft (Atlanta Journal-Constitution)
  • Map of state gasoline tax rates in 2014 (Tax Foundation)
  • No tax extenders action until after elections (Don’t Mess With Taxes)
  • Forty accounting students from 24 colleges ParenteBeard’s newest summer interns (ParenteBeard)

 

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