UK watchdog expects progress on global accounting rules
Win Bischoff, the new chairman of Britain’s Financial Reporting Council, which polices accountants and audit firms, said today that the United States may start to allow its companies to use international accounting rules but won’t make it mandatory, Huw Jones of Reuters reported.
The United States has declined to adopt the International Financial Reporting Standards (IFRS), which are written by the London-based International Accounting Standards Board (IASB). The rules are used in more than 100 countries and are mandatory in the 28-country European Union.
Foreign companies listed in the United States are not required to file separate accounts under US Generally Accepted Accounting Principles (GAAP). At a financial conference on Tuesday, Bischoff said that flexibility could be expanded.
“I could see that American companies would be given the choice over a period of time,” he said, according to the article. “Will they stick to US GAAP? Probably they will stick to US GAAP, but I think the two standards are getting closer together.”
Jones noted there is talk in the accounting industry that the US Securities and Exchange Commission (SEC), after resisting a switch to IFRS, may propose in the coming months giving US companies a choice of using IFRS or GAAP.
Cox dissects GAAP-IFRS convergence meltdown
During a speech at an SEC conference in California last week, former SEC chairman Chris Cox said IFRS won’t be adopted in the United States “in our lifetime,” according to an article by Tammy Whitehouse of Compliance Week.
“Today, I come to bury IFRS, not to praise them,” he said, according to the article. “The fact is, far too much time has gone by with no meaningful progress. I think we have to fairly conclude that the moment has passed. Full-scale adoption of IFRS in the United States might once have been possible, but it is no longer. This is not a prognosis. It's just a statement of fact.”
Over the past six years, the SEC remained “agnostic” while the Financial Accounting Standards Board (FASB) and the IASB did the “heavy lifting” of trying to make convergence work, Cox noted. It was a chance for American stakeholders to get a good view of how convergence would work.
“And what they saw, they mostly didn't like,” said Cox, according to the article. “These stakeholders began to realize that each of the five main things they wanted out of the standard-setting process was being degraded by virtue of making the system global.”
Those five things, according to Cox, are standards developed in their interests, a standard-setting process that is transparent, independent, and accountable, and the ability to participate in the process, Whitehouse wrote.
Darrell Issa alleges IRS data dump to FBI illegal
Mackenzie Weinger of Politico reported yesterday that Republicans charged the IRS with potentially violating federal tax privacy laws by turning over a database of tax-exempt organizations to the FBI, the latest salvo in their ongoing probe of the IRS’s scrutiny of conservative groups.
The IRS acknowledged that some nonpublic taxpayer information was shared in the documents but said a tiny fraction of the data at issue was “inadvertently” shared, Weinger noted.
During the course of its probe into the IRS targeting scandal, the House Oversight and Government Reform Committee said it learned the tax agency sent 1.1 million pages of tax return data about 501(c)(4) organizations to the FBI just before the 2010 midterms, Chairman Darrell Issa (R-CA) and Representative Jim Jordan (R-OH) wrote in a letter to IRS Commissioner John Koskinen.
The IRS responded that it identified issues with 33 tax returns out of more than 12,000 that included confidential taxpayer information. The majority of those groups “do not appear to have any connection to political activity,” the IRS said, according to the article.
Plan to refill Highway Fund stokes conflict in Congress
The struggle to replenish the nearly depleted Highway Trust Fund has linked Senate Majority Leader Harry Reid (D-NV) with Senator Rand Paul (R-KY) – and pushed against the bipartisan leadership of the Finance Committee – with the clock ticking, Jonathan Weisman of the New York Times wrote yesterday.
Both senators are quietly pressing for a one-time tax “holiday” – a special and lucrative tax deduction – to lure multinational corporations to bring profits home from overseas, producing a sudden windfall.
Companies would be allowed to deduct 85 percent of the money their parent corporations in the United States receive from foreign subsidiaries, a move that would bring the US Treasury Department between $20 billion and $30 billion in the next two years, while flooding the domestic economy with hundreds of billions of dollars otherwise trapped abroad, according to Weisman.
However, Senate Finance Committee Chairman Ron Wyden (D-OR) and ranking member Orrin Hatch (R-UT) want that money to help smooth passage of a broad rewrite of the tax code.
“The showdown is the first test for Mr. Wyden, as he and other committee leaders try to assert more power against the strong arm of Mr. Reid,” Weisman wrote. “And there is wide skepticism of the proposal.”
Repatriation tax holiday would cost US $95.8 billion
But according to the Joint Committee on Taxation, a temporary tax holiday for US companies to repatriate offshore profits [which Reid and Paul proposed, as cited in the article above] would cost the government $95.8 billion in revenue over a decade, Richard Rubin of Bloomberg reported yesterday.
According to the estimate, dated June 6, repeating the tax holiday enacted in 2004 would generate $19.6 billion over the first two years and then start costing the government money.
“A second repatriation holiday may be interpreted by firms as a signal that such holidays will become a regular part of the tax system, thereby increasing the incentives to retain earnings overseas,” Joint Committee on Taxation Chief of Staff Thomas Barthold wrote in the estimate, according to Rubin.
In a statement, Hatch said a tax holiday should only be considered when it makes economic sense, such as part of comprehensive tax reform. He added that the committee’s report “clearly outlined the ramifications of a temporary tax holiday, and the outlook is not in the best interest of the American people nor for the coffers of the federal government,” according to the article.
US Supreme Court declines to hear Wells Fargo-IRS tax squabble
On Monday, the US Supreme Court declined to hear an appeal from Wells Fargo & Co. in a case involving a complex financial deal implemented by the banking group that the government said was set up solely to avoid millions of dollars in taxes, Reuters reported.
The high court's order will let stand an appeals court ruling last year that said the Wells Fargo deal, which generated more than $400 million in tax loses, lacked any business purpose or “economic substance” beyond tax avoidance. The multimillion-dollar tax-saving deals used by Wells Fargo and other big banks are known as STARS, or “structured trust advantaged repackaged securities.”
The economic substance doctrine is a legal strategy that focuses less on the technicalities of particular financial structures and more on their broader purposes and outcomes, according to Reuters.
Wells Fargo had argued that the government was enforcing tax law too broadly and that the San Francisco-based bank properly structured the transaction as legitimate tax planning.
Two ex-BDO vice chairmen get prison for tax shelter scheme
Charles Bee and Adrian Dicker, former vice chairmen of accounting firm BDO Seidman, were sentenced to prison on Monday after pleading guilty to engaging in a conspiracy to defraud the United States through the promotion of tax shelters, Nate Raymond of Reuters reported.
Bee was sentenced to 1-1/3 years in prison, while Dicker received 10 months, in separate hearings before US District Judge William Pauley in New York. They were also ordered, together with other co-conspirators in the case, to make more than $69 million in restitution to the IRS.
Both men had pleaded guilty in 2009 to charges stemming from their roles in what the government called a tax shelter scheme involving BDO and the law firm Jenkens & Gilchrist. The scheme generated $6.5 billion in bogus losses, prosecutors said, according to the article.
BDO USA, as the accounting firm is now known, agreed in June 2012 to pay $50 million to resolve related government claims through a deferred prosecution agreement.
- Merger spurs outsourced accounting firm’s growth plans (Minneapolis Star Tribune)
- Now available for viewing: Archive of IASB/FASB webcast on new revenue recognition standard (FASB)
- Finance professionals are upbeat, but they have staffing concerns (Journal of Accountancy)
- The Enron-style accounting that deprives Americans of economic growth (Forbes)
- Special rules for net investment income tax application to trusts and estates (Forbes)
- Tax cheats took billions from Ukraine (Associated Press)
- Pot tax collections booming in Colorado (Associated Press)
- Hidden assets seen worth $2 trillion targeted by India (Bloomberg)
- Whistleblower highlights undue influence at the IRS (Tax Analysts)
- How not to tax the rich (Tax Analysts)
- Lowest US property tax bill? Probably $2 in coastal Georgia (Don’t Mess With Taxes)
- Antique store owner sentenced for tax scheme (Springfield News-Leader)
- Thomson Reuters launches Checkpoint Catalyst (Thomson Reuters)