Panel meets this week to explore revenue recognition issues
The Transition Resource Group for Revenue Recognition, a joint body of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), will hold its first meeting on July 18 to begin working through implementation concerns arising as companies dig into the new standard governing how all companies will recognize revenue in financial statements, Tammy Whitehouse of Compliance Weekwrote on Wednesday.
The agenda for the initial meeting says the group will discuss gross versus net revenue and issues around amounts billed to customers, royalties in contracts that combine licenses with other goods or services, and impairment testing of capitalized contract costs.
The FASB and the IASB are not publishing letters sent to the group, but are providing staff-written papers explaining the issues that the joint Transition Resource Group will review, Whitehouse wrote. The panel doesn't have any authority to issue guidance or amend the standard, but it will determine what issues to recommend FASB and IASB consider for possible action.
[The Transition Resource Group’s first meeting begins at 8 a.m. ET on Friday. A video webcast of the meeting can be accessed here.]
House passes seventh 2015 appropriations bill with steep IRS cuts
The House on Wednesday passed its seventh fiscal 2015 appropriations bill to fund the IRS, Wall Street enforcement agencies, and general government programs. The measure, which passed 228-195, includes steep cuts to the IRS budget, Cristina Marcos of The Hillreported.
The bill would have originally provided $10.95 billion for the IRS for the fiscal year starting October 1, which would be $341 million less than the current spending level. But the House adopted amendments to cut the IRS budget by another $1 billion combined.
Before final passage, the House passed an amendment, 282-138, from Representative Paul Gosar (R-AZ) to ban awarding performance bonuses to senior executives at the IRS.
Provisions in the bill would block the IRS from further implementing the Affordable Care Act, including the individual mandate requiring Americans to buy health insurance or pay a penalty, Marcos wrote.
The Senate has yet to pass any appropriations bills for fiscal 2015 due to an ongoing disagreement over amendments.
Justice Department investigates lost IRS emails
John D. McKinnon of the Wall Street Journalreported on Wednesday that the US Justice Department is investigating the loss of IRS emails that might shed light on the agency’s treatment of conservative groups.
As part of its criminal probe into the IRS's treatment of politically active conservative groups, the Justice Department is “investigating the circumstances of the lost emails from [former IRS official Lois Lerner's] computer,” according to prepared testimony by James Cole, the deputy attorney general. Cole will appear at a hearing scheduled for Thursday before a House Oversight and Government Reform subcommittee. The Wall Street Journal reviewed his prepared testimony on Wednesday.
Cole's comments underscore the potential seriousness of the recently disclosed email loss, which has roiled congressional probes of the matter and angered some top GOP lawmakers, McKinnon wrote. His testimony also could indicate that administration officials sense political vulnerability on the issue.
Cole's testimony also says that when the department's investigation is finished, it will “provide Congress with detailed information about the facts we uncovered and the conclusions we reached in this matter.”
Congress at odds over how to curb inversion deals
McKinnon also wrote for the Wall Street Journal on Wednesday that Democrats are calling for a quick fix to make inversions harder for US companies. Republicans call for broader tax reform.
“The quick fix that some Democrats favor would close the exit doors for almost all firms seeking to leave by imposing a higher threshold of foreign ownership,” McKinnon wrote. “But other lawmakers argue that a temporary patch could actually hurt US companies by making them more vulnerable to a takeover. It also could lead corporations to move valuable headquarters jobs overseas.
“Meanwhile, the longer-term solution favored by many lawmakers – a politically difficult rewrite of the much-maligned US corporate tax rules – already is dead for this year, and likely faces long odds next year,” he continued.
Lawmakers worry that without congressional action on a tax overhaul in coming months, more companies will decide to make the leap. And the very prospect of congressional action to limit inversions appears to be accelerating the pace of the moves, as firms scramble to get ahead of changes in the law.
“As these various proposals have been made, there is 24 hours of frenetic activity,” said Todd Maynes, a tax partner at Kirkland & Ellis LLP, according to the article. “Then everyone realizes it's never going to pass, that the votes just aren't there. Calm settles in and people go back to doing their transactions.”
Slim chances seen for tax ‘inversion’ clampdown, analysts say
Treasury Secretary Jacob Lew wants to shut the door on so-called tax “inversions,” but a pair of analysts say it’s going to stay open – at least for the time being, Robert Schroeder wrote on Wednesday for Wall Street Journal MarketWatch.
The Obama administration wants lawmakers to pass legislation to limit US companies reincorporating overseas for tax purposes, something Lew urged in a letter to leaders of congressional tax-writing committees and reiterated Wednesday at a CNBC conference in New York. The curbs would be retroactive to May 2014, Schroeder noted.
But analysts say the clampdown sought by Lew isn’t in the cards right now. “Not only is there no time, there is no consensus among Democrats on inversions – and Republicans are almost entirely unified against action on inversions (at least outside the context of broad corporate tax reform),” wrote Chris Krueger of Guggenheim Partners, according to the article. He also pointed out Congress is only in Washington for about three weeks until the midterm elections in November.
Greg Valliere of Potomac Research Group sees some chance for curbs next year. But in the meantime the House is a sticking point, even if pharmacy chain Walgreen makes a move to leave the United States and reincorporate in Switzerland.
“Our bottom line: a Walgreen move would increase the chances of Senate action, but there’s little enthusiasm for anti-inversion legislation in the House. Curbs have a chance next year, as part of corporate tax reform, but provisions all the way back to May 8 look very unlikely,” he wrote, according to the article.
White House threatens veto on charitable tax breaks
Stop me if you’ve heard this one before.
The Obama administration on Thursday threatened to veto another House package of tax breaks, this time aimed at spurring charitable giving. The White House has threatened to stop previous House legislation on business tax breaks for research and development and bonus depreciation.
In a statement, the Obama administration said it “wants to work with Congress to make progress on measures that strengthen America’s social sector.” But the White House says the House proposal goes in the wrong direction, by approving tax breaks without offsetting their costs, Bernie Becker of The Hillwrote.
“Republicans are imposing a double standard by adding to the deficit to continue and create tax breaks that primarily benefit higher-income individuals, while insisting on offsetting the proposed extension of emergency unemployment benefits,” the White House said, according to the article.
The House measure, set for a Thursday vote, would permanently extend and expand the charitable deduction for food donations and restore indefinitely a provision allowing tax-free contributions from certain retirement accounts.
It would also allow taxpayers to claim donations made until April 15 on their previous year’s tax return, extends a tax break for landowners that conserve their property, and reduce taxes for certain private foundations’ investment income, Becker wrote.
The measure would cost roughly $16 billion over a decade.
Why do accounting firms feel the need to vigorously defend themselves?
You might like this article – as I did – from Adrienne Gonzalez over at Going Concern on accounting firms’ use (or overuse?) of the term “vigorously defend” in court cases.
“That language felt a little familiar, either because accounting firms are constantly ‘vigorously’ defending themselves in court or … no, never mind the or, that’s the reason,” she wrote.
“So it got us thinking, what happens if we Google it? The results were really not surprising. Google ‘vigorously defend’ + Deloitte and you get tons of results, some of which may ring a bell: Parmalat, Navistar, Booz Allen Hamilton, Livent. It’s so pervasive in the Deloitte vernacular that it is used outside of the realm of lawsuits on Deloitte's own webpage.”
Statement on the anniversary of the Dodd-Frank Act
July 17 is the fourth anniversary of the passage of the Dodd-Frank Act. Here’s what US Securities and Exchange Commission (SEC) Chair Mary Jo White had to say on Thursday about the occasion:
“The fourth anniversary of the passage of the Dodd-Frank Act provides an opportunity to reflect on why the Act was passed, how the SEC has used the Act to promote financial stability and protect American investors, and what remains to be completed. The financial crisis was devastating, resulting in untold losses for American households and demonstrating the need for strong and effective regulatory action to prevent any recurrence.
“In my first year as chair of the SEC, the commission has made significant progress in putting to work the tools provided by the Dodd-Frank Act. We have implemented new restrictions on the proprietary activities of financial institutions through the Volcker Rule, created a new regulatory framework for municipal advisors, put in place strong new controls on broker-dealers that hold customer assets, reduced reliance on credit ratings, and barred bad actors from securities offerings. We have pushed forward new rules for previously unregulated derivatives, and we have begun implementing additional executive compensation disclosures. We have also advanced significant new standards for the clearing agencies that stand at the center of our financial system. And, I expect the commission will soon implement critical Dodd-Frank Act rules for credit rating agencies and securitization, in addition to finalizing important new rules for money market funds. I want to express my admiration and gratitude to the SEC staff for their hard work and exceptional dedication on all of these efforts.
“Among the many areas the SEC was directed to address under the Dodd-Frank Act, certain ones stand apart to me – asset management, especially private fund advisers; proprietary activities by financial institutions; derivatives; clearance and settlement; credit rating agencies; asset-backed securities; municipal advisors; and executive compensation. The commission has already completed the mandates in half of these areas. In the other areas, we have issued proposals and shortly will be finalizing some of the most important.
“We must continue our work with intensity, and we must be deliberate as we consider and prioritize our remaining mandates and deploy our broadened regulatory authority. Progress will ultimately be measured based on whether we have implemented rules that create a strong and effective regulatory framework and stand the test of time under intense scrutiny in rapidly changing financial markets. Beyond the mandated rulemakings, the Dodd-Frank Act established the Financial Stability Oversight Council, which provides an important forum for the financial regulators to meet and work together to identify current and future systemic risks. The overarching objective of all of the regulators must be to help safeguard our economy and investors from another financial crisis.
“Our responsibility is much greater than simply ‘checking the box’ and declaring the job done. We must be focused on fundamental and lasting reform. That is what I committed to Congress, the agency, and investors when I first arrived, and that is what I remain pledged to do.”
- Compensation Survey: Which firm pays the most? (Going Concern)
- Groundbreaking study discovers Big 4 partners tend to be hardworking, male, and white (Going Concern)
- The California Board of Accountancy wants you to Facebook them your CPA exam worries (Going Concern)
- Barclays, Deutsche facing US Senate hearing (Bloomberg)
- States siphon gas tax for other uses (Wall Street Journal)
- Inverted thinking on corporate taxes (Wall Street Journal)
- We don’t need a corporate income tax (Bloomberg View)
- Corporate tax: Is it all about patriotism and morality? (Tax Analysts)
- Sales tax compliance concerns loom large, but does automation help? (Tax Analysts)
- What went wrong in Kansas? Maybe nothing (Tax Analysts)
- Extenders are part of the long game in tax overhaul (Roll Call)
- Treasury urges end to foreign tax flights, but quick action is unlikely (DealBook)
- Environmentalists denounce repeal of Australia’s carbon tax (New York Times)
- The sad, sad cancellation of Australia’s carbon tax (Forbes)
- Use a Roth conversion to achieve lower tax bills (Forbes)
- Internet tax ban could be big win for Skype and Snapchat, major loss for states (Forbes)
- Revised Internet tax law could cost state (Albuquerque Journal News)
- The Senate is trying to tax what you buy online – again (National Journal)
- Six takeaways from CBO’s new long-term budget outlook (TaxVox)