Bramwell’s Lunch Beat: Mt. Rushmore of Tax Professors

Expired ‘bonus depreciation’ tax credit could be cash flow drag
Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, reported yesterday that the absence of a popular corporate tax break – one of the more than fifty tax extenders that expired at the end of last year – could drag down cash flow numbers for capital-intensive companies.

The tax break, known as “bonus depreciation,” has helped reduce corporate tax bills, particularly for energy, utility, and industrial companies. It has had a big impact on capital spending patterns and corporate cash flows because it reduces the amount of taxes companies have to pay, David Zion, a tax and accounting analyst at ISI Group, said in a recent note to clients, according to Chasan.

“Over the past two years, the credit let business owners deduct as much as $500,000 from their taxable income in the first year on up to $2 million of equipment purchased,” the article stated. “Now that it’s expired, companies can only claim $25,000 of extra depreciation in year-one on $200,000 of equipment purchases.”

Tax Prof Mount Rushmore
Before the Presidents Day holiday, Miami Heat superstar Lebron James gave his Mount Rushmore of NBA players, which created much discussion and debate on social media and sports-talk radio.

In his TaxProf blog, Paul Caron decided to have some fun by creating a Tax Prof Mount Rushmore. He asked the 350 subscribers to the TaxProf Email Discussion Group to take a survey identifying the four tax professors who belong on the Tax Prof Mount Rushmore. Fifty-seven (16.3 percent) of the subscribers completed the survey and voted for fifty-six different tax professors.

Find out who made the Tax Prof Mount Rushmore here.

US funding for IASB: A fence in a tangle of vines
Steve Burkholder of Bloomberg BNA wrote today that to understand what led to the January 28 news of a $3 million donation by the Financial Accounting Foundation (FAF), the parent group of the Financial Accounting Standards Board (FASB), to the IFRS Foundation, the parent group of the International Accounting Standards Board (IASB), it’s useful to delve into the history of the debate about funding of the IASB.

“Even a quick study shows that the issue of US funding for IASB’s operations seems to amount to a fence separating the United States and the London-based board. A fence in a tangle of vines. Thorny vines,” the article stated. “In years-long discussions by the trustees of the IFRS Foundation and associated panels, as well as in formal papers that make points and counterpoints, the exchanges reveal polite discord.”

[Click here for AccountingWEB’s article on the FAF contribution to the IFRS Foundation.]

SEC takes steps to stem courtroom defeats
In case you missed this article last week, Jean Eaglesham of the Wall Street Journal reported that US Securities and Exchange Commission (SEC) Chairwoman Mary Jo White is shaking up the way the agency prepares for trials after a recent run of courtroom defeats.

According to a source close to the matter, Eaglesham wrote that White has restructured the SEC’s trial unit in recent months, allowing investigators and litigators to work closer together as a case develops.

“The changes come as the SEC's win rate in court has slipped,” the article said. “The agency has won 55 percent of its trials since October, a sharp drop after three consecutive years when it prevailed more than 75 percent of the time, according to previously unreleased figures. Among the recent setbacks was the verdict finding billionaire Mark Cuban not liable on insider-trading charges.

“The increase in courtroom losses could prove a short-term blip, and the cases were initiated well before Ms. White became SEC chairman [in April 2013],” Eaglesham continued. “Still, defense lawyers say the trend will likely encourage more people to fight the agency rather than settle its allegations.”

FASB considers direct write-off of goodwill
Tammy Whitehouse of Compliance Week reported last Friday that the Financial Accounting Standards Board (FASB) is weighing whether, after giving private companies a more straightforward method to write down goodwill on its balance sheet, the same or a similar simplification should be extended to public companies as well.

During a recent meeting, the FASB directed its staff to do some additional research on two possible methods – a one-step impairment test that would simplify the current two-step test and a direct write-off of goodwill that would spare companies any testing and measurement at all, the article stated.

“The board took no interest in approving or further considering the method permitted for private companies, which is to amortize or write down goodwill over a ten-year period, with a faster pattern permitted if some event or circumstance warrants it,” Whitehouse wrote. “Private companies also can decide if they want to impair goodwill at the parent company or entity level, or at a tier below, looking at impairments for each individual business unit that rolls up into the parent company's financial statements.”

[Click here for AccountingWEB’s coverage on FASB’s goodwill standard.]

Municipal-debt rules proposed to ensure brokers seek best prices
The Municipal Securities Rulemaking Board (MSRB) today released proposed stricter rules on brokers in the $3.7 trillion municipal-debt market designed to prevent investors from being shortchanged when trading state and local government bonds, William Selway of Bloomberg wrote.

The rules would require that brokers seek to trade at the most favorable prices possible for clients in the municipal-bond market, which lacks a centralized exchange, the article stated. Brokers would have to check prices on various platforms before trading.

The proposal would need to be approved by the US Securities and Exchange Commission (SEC), which said in 2012 that stricter rules could lead to fairer prices for buyers and sellers of state and local government bonds.

PwC faces a trial for SemGroup audit and its defense is predictably slick
Want a detailed and thorough review of SemGroup’s malpractice lawsuit against PwC, which is scheduled to go to trial in August? Then check out Francine McKenna’s latest post on her blog, re: The Auditors.

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