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Financial Reporting

In Need of Cash, Goodyear to Sell $650 Million in Bonds

A day after Goodyear announced that an informal SEC probe into accounting irregularities within the company had turned formal, the tire-maker also said it plans to sell $650 million in bonds through a private offering in what some say is a desperate attempt to raise cash.Goodyear is apparently in dire need of new financing, according to the Wall Street Journal, which reported the company has $1.9 billion in debt that will mature next year with another $1.3 billion maturing in 2006.

Global Accounting Standards Mired in Dispute

The lofty goal of one world: one set of accounting standards remains just out of reach as three major players in the world economy grapple over some major sticking points.The European Union is insisting that Japan use international accounting standards rather than Japan’s generally accepted accounting principles (GAAP) if Japanese companies want to list in Europe in 2005, Dow Jones Newswires reported.

Section 404 Could Cost Big Companies $4.6 Million or More

Total costs of first-year compliance with Section 404 of the Sarbanes-Oxley Act could exceed $4.6 million for each of the largest U.S. companies, according to a survey of 321 companies by Financial Executives International (FEI). The added costs are driven by a projected investment of 35,000 hours of internal manpower, $1.3 million in spending on external consulting and software, and additional audit fees of $1.5 million (a jump of 35 percent). FEI is the leading professional organization serving chief financial officers (CFOs) and other senior financial executives.

Europe Looks to SEC as Regulatory Model in Light of Scandals

The European Parliament believes business and finance needs to be regulated across Europe rather than on a country-by-country basis.In an overwhelming vote Thursday, the European Parliament recommended creating a regulatory body similar to the Securities and Exchange Commission in the U.S., the Wall Street Journal reported. The way it works now, individual European countries write laws and implement them, but in light of the massive accounting scandal centering on Parmalat, the fallen Italian food giant, Parliament recommended a new course of action.

FASB Confirms Existing Rules on Medicare Accounting

The Financial Accounting Standards Board (FASB) on Wednesday cleared up some of the confusion surrounding accounting for the effects of the new Medicare law.The Medicare Act, signed into law in December, has sparked not only political arguments but also an accounting debate over how companies should book the amount of federal subsidy they expect to receive in their financial statements.FASB’s Wednesday vote confirmed that existing rules governing post-retirement benefit costs should be used.

SEC Votes for Clearer Mutual Fund Cost Information

The Securities and Exchange Commission will require more frequent and more understandable reports on mutual fund costs and fund holdings under new rules approved Wednesday.The SEC agreed unanimously to require fund companies to provide semiannual reports to shareholders showing expenses in dollar terms, based on a $1,000 investment, the Wall Street Journal reported. To help investors compare costs of different funds, reports will also have to include cost figures adjusted for a hypothetical, 5 percent annual return.

Companies Finding SOX Compliance Expensive Speak Out

Accountability is expensive.

Personal Use of Corporate Jets Just Became More Lucrative

The use of corporate jets for personal trips by officers and employees has gotten a whole lot more beneficial to the company at tax time due to an IRS rule issued last fall. Owners and employees of Subchapter S corporations (those that pass profits and losses through to its owners) have had to report the value of their personal trips on the company planes as taxable income, the Washington Post reported recently. Under an IRS ruling that is just now making it on to the radar of tax lawyers and corporate jet salespeople, allowable deductions could be much larger than the reported income.

GASB Issues Revised Exposure Draft on Employer Reporting of Other Postemployment Benefits

The Governmental Accounting Standards Board (GASB) has issued a revised Exposure Draft, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The Exposure Draft addresses how state and local governments should account for and report their costs and obligations related to postemployment healthcare and other non-pension benefits provided to retirees (collectively referred to as other postemployment benefits, or OPEB).

CPAs Predict More Audits of Small Businesses

Accountants say a recent restructuring announced by the IRS could mean more audits of small companies and their owners.The IRS is adding 2,200 new positions to its audit operations in 2005, reversing declines over the last several years. IRS audit personnel decreased by more than 25 percent between 1996 and 2002, the Associated Press reported."The feeling out there is that they have lost money over the years and they're trying to regroup," said Theodore Kravitz, CPA, with New York-based accounting firm ERE LLPP.

Investors Believe That Sarbanes-Oxley Will Protect Investments

Movaris, a provider of corporate compliance management software recently announced the results of a nationwide poll measuring individual investors' attitudes to the Sarbanes-Oxley Act as well as the level of penalty they would like the law to apply. The poll found that the majority of stockholders want to see punishment for those who violate the law, proving that investors are looking for good corporate governance and adherence to the Sarbanes-Oxley Act. The poll was conducted by Harris Interactive(R) and surveyed a total of 1,022 adults residing across the United States.

HealthSouth Probe Now Includes Possible Kickbacks

The Justice Department is now looking into whether HealthSouth officials offered bribes in an attempt to secure business in Saudi Arabia, which would be a violation of federal laws that prohibit such payments to secure business oversees.Specifically, federal prosecutors are investigating a deal signed in 2000 by HealthSouth to manage a 400-bed rehabilitative hospital outside of Riyadh, Saudi Arabia.

NYSE's Thain Seeks to Enhance Big Board’s Electronic Capabilities

The New York Stock Exchange’s new chief executive hopes to vastly increase the percentage of Big Board trading done electronically.

New Tax Form For Corporate Returns Proposed

In an effort to increase the transparency of corporate tax return filings, the Treasury Department and Internal Revenue Service released a new proposed draft form, Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More, for use by certain corporate taxpayers filing Form 1120, U.S. Corporation Income Tax Return.

2003 a Record Year for Investor Claims Against Brokers

Investors filed more formal grievances against their brokers in 2003 than any other year, and the amount of damages they won nearly tied a 1998 record.The National Association of Securities Dealers (NASD) received 8,945 cases in 2003, which is 16 percent more than the year prior.
Practice Management

Brand Reputation Outranks Financial Performance as Measure of Success

Corporate reputation is a more important measure of success than stock market performance, profitability, and return on investment, according to a survey of some of the world's leading CEOs and organization leaders. Only the quality of products and services edged out reputation as the leading measure of corporate success.The World Economic Forum sent a written survey in December to all 1,500 delegates to the 34th Forum currently underway in Davos, Switzerland.

Corporate Fraud Not Likely to Diminish in 2004

Over the past several weeks of 2003, a number of high profile corporate titans - ranging from Credit Suisse First Boston's Frank Quattrone to Tyco's Dennis Kozlowski, were finally brought to trial to face charges of white collar crime. With a number of additional trials involving corporate executives set to start in 2004, the focus on corporate fraud will continue to increase this year.
Community News

Parmalat Suits Start Piling Up, Deloitte and Grant Thornton Dropped as Auditors

Three law firms have said they filed or started lawsuits against Parmalat, dubbed (Europe's Enron), the Italian food giant that is enmeshed in a multibillion-dollar accounting scandal.On Wednesday, Parmalat's court-appointed administrator formally dropped Deloitte as one of the group's auditors, following the move earlier this week to remove Grant Thornton, the other auditor.

Janus to Restore $31.5 Million for Improper Trades

The Janus Capital Group announced on Friday that it will pay $31.5 million to funds or shareholders harmed by improper trades.The $31.5 million figure was determined by the accounting firm Ernst & Young LLP, which conducted an inquiry into the effect of quick trades on the funds and their shareholders.
Community News

HealthSouth Victim of Its Own Fraud, Prosecutors Say

Federal prosecutors used documents to show how a massive accounting fraud not only hurt HealthSouth investors, but the company itself as it bought back its own stock between 1998 and 2002.During that time period, the Birmingham, AL-based operator of rehabilitative clinics shelled out $349.2 million to buy back 48.9 million shares of its stock in 113 transactions, the Associated Press reported.


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