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Bramwell’s Lunch Beat: Suit Alleges Ex-ARCP CEO Wanted Firm’s Books Altered

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Dec 22nd 2014
Staff Writer and Editor AccountingWEB
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IRS warns of possible shutdown
IRS Commissioner John Koskinen said on Dec. 18 that the agency is considering its own temporary shutdown due to recent budget cuts enacted by Congress, wrote Rachael Bade of Politico. Koskinen said furloughs – forced unpaid days off for employees as part of an IRS closure – is one idea being tossed about to save money. He said a shutdown would mean the IRS would “close the agency for a day, two days, whatever days it would take to close the gap that we can’t otherwise close in a reasonable way.” The agency estimates each closed day would save $29 million.

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Ex-American Realty Chair Schorsch accused of ordering accounting changes
Property mogul Nicholas Schorsch ordered subordinates to manipulate financial results at his firm, American Realty Capital Properties Inc., according to a lawsuit brought against the former chief executive by an ex-chief accounting officer, wrote Robbie Whelan of the Wall Street Journal. In her suit, Lisa P. McAlister alleges Schorsch instructed her and former CFO Brian Block to shift numbers in the company’s second-quarter results to cover up errors from the first quarter. McAlister repeatedly expressed concern about the directive to fellow executives and others, but her concerns were ignored, according to the complaint.

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Tesco faces fresh accounting investigation
The UK’s Financial Reporting Council (FRC) on Monday said it has launched an investigation into Tesco PLC’s accounts for fiscal 2012, 2013, and 2014, following the recent accounting scandal at the supermarket chain, wrote Ian Walker and Costas Paris of the Wall Street Journal. The FRC said it was investigating the parties involved in the preparation, approval, and audit of Tesco’s financial statements for the years in question, as well as their conduct in relation to accounting practices that led to a 263 million-pound ($410.75 million) overstatement of the company’s first-half profit forecast.

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Corporate governance watchdog to examine Barclays’ auditor
The FRC also said on Monday it is investigating accounting firm PricewaterhouseCoopers’ (PwC) auditing of Barclays after the British bank was fined this year for failing to properly segregate billions of pounds in client assets, according to an article by Chad Bray of New York Times DealBook. The FRC said it would review PwC’s role in reporting to British regulators on the bank’s compliance with client asset rules from Dec. 31, 2007, to Dec. 31, 2011. In September, Barclays was fined 37.7 million pounds (about $58.9 million) by the Financial Conduct Authority, a financial services regulator, for “significant weaknesses” in the systems and controls at Barclays’s investment bank from November 2007 to January 2012.

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PCAOB announces new webinar outreach initiative
The Public Company Accounting Oversight Board (PCAOB) recently launched a new webinar initiative to reach out to stakeholders on important time-sensitive issues and to make it more efficient and cost-effective for auditors, investors, audit committee members, and others to receive PCAOB updates. The first two webinars are directed to smaller audit firms of brokers and dealers, and will take place from 2 to 4 p.m. EST on Jan. 14 and Jan. 15, 2015. The webinars are open to members of PCAOB-registered firms. There is no fee to participate, but preregistration is required. Participants also have the opportunity to earn CPE credits.

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IRS technical guidance roundup (week of Dec. 15)
The IRS issued the following technical guidance last week:

Revenue Procedure 2014-64 provides an updated list of jurisdictions with which the United States has in effect an income tax or other convention or bilateral agreement relating to the exchange of information for purposes of the bank deposit interest reporting requirements under sections 1.6049-4(b)(5) and 1.6049-8(a), as well as jurisdictions with which the IRS and Treasury have determined the automatic exchange of such information is appropriate.

Publication 5187 explains how taxpayers enroll in minimum essential coverage, qualify for an exemption, or make a shared responsibility payment. It also provides information about the premium tax credit. The publication includes a glossary that defines Affordable Care Act-related terms.

Publication 2043, IRS Refund Information Guidelines for the Tax Preparation Community, is now available on IRS.gov. The publication contains the lasted guidance on communicating with your clients about refunds, direct deposit limits, and more.

Announcement 2015-01 provides guidance for retirement plans related to determination letters.

Revenue Ruling 2015-01 provides the applicable federal rates for January 2015.

Obama: ‘Specific’ tax reform proposals coming
President Obama on Friday vowed that his administration would “put forward some pretty specific proposals” as he tries to find common ground with Republicans on tax reform, wrote Bernie Becker of The Hill. The president said that he expected staffers from both the administration and Capitol Hill to intensify their discussions in the coming weeks about each side’s principles for tax reform. Obama also said that he and Republicans had some similar desires when it came to tax reform, including making the tax code simpler and fairer. Still, he warned, “The devil’s in the details. And I’ll be interested in seeing what they want to move forward.”

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Dems want more action on tax deals
Becker also wrote for The Hill that five Senate Democrats – Carl Levin (MI), Tammy Baldwin (WI), Dick Durbin (IL), Mazie Hirono (HI), and Jack Reed (RI) – urged the IRS to put harsher rules into place to stop the offshore tax deals known as inversions. The lawmakers said the recently finalized deal between Burger King and the Canadian doughnut chain Tim Hortons – perhaps the most prominent in the recent wave of cross-border mergers – could be a template for other companies seeking to slash their tax bill by moving abroad. The two fast-food chains, the Democrats charged, used holding companies to avoid taxes.

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I hear America singing ‘never pay taxes’: The inversion operetta
Here’s an interesting article from last week by Zachary R. Mider of Bloomberg that you may have missed. He wrote: “The only operetta ever written about Subpart F of the Internal Revenue Code made its debut on a rainy Sunday evening in May 1990, in a Fifth Avenue apartment overlooking Central Park. In bow ties and spring blazers, partners of the law firm of Davis Polk & Wardwell dined on lobster prepared by a Milanese chef. Then everyone gathered around a piano, and a pair of professional opera singers, joined by the few Davis Polk men who could carry a tune, performed what sounded like a collaboration of Gilbert & Sullivan and Ernst & Young. The 13-minute operetta, Charlie’s Lament, told how the party’s host, John Carroll Jr., invented a whole category of corporate tax avoidance and successfully defended it in a fight with the IRS.”

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EU files complaint with WTO about Boeing
The European Union (EU) on Friday filed a complaint at the World Trade Organization (WTO) alleging that billions of dollars of tax breaks handed to US aviation company Boeing Co. by Washington state violated international trade rules, wrote Matthew Dalton of the Wall Street Journal. The European Commission, which manages the EU’s trade policy, said on Friday that the complaint relates to Washington state’s decision in November 2013 to extend a tax incentives program for Boeing from its original end date in 2024 until 2040. The extension is worth $8.7 billion. International trade agreements limit the financial support that governments can give to companies.

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In about-face, Hungary softens stance on Internet
Hungary’s government has completely given up on its plan to launch a tax on Internet traffic, a measure that earlier this year set off large protests. Instead, the government will conduct an online poll next year, asking the public for its opinions on issues like net neutrality and Internet prices, wrote Margit Feher of the Wall Street Journal. Prime Minister Viktor Orban dropped the plan to levy a hefty tax of 150 forints ($0.62) for every gigabyte of data from next year after the proposal met with massive street demonstrations in October, with one protest attracting some 40,000 people.

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SEC cautions companies on consolidation analyses
The US Securities and Exchange Commission (SEC) is taking a closer look at who consolidates a variable interest entity, noticing some differences in how companies apply existing guidance and offering views to help make reporting more consistent, wrote Tammy Whitehouse of Compliance Week. The Financial Accounting Standards Board is trying to wrap up an update to accounting standards on consolidation, focused on the principal versus agent analysis. The final guidance will likely be issued in February 2015. Christopher Rogers, professional accounting fellow at the SEC, said recently that staff has noticed several practice issues with respect to the consolidation guidance, including how to consider power and economics when related parties are under common control.

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Survey: Audit and risk professionals challenged in communicating value to execs
According to the results of a new survey from risk management software company ACL, 42 percent of the more than 1,700 finance, audit, risk, and compliance professionals polled cited putting their work into a context that speaks to executives as the largest obstacle they face today. A majority of respondents reported they are not using purpose-built audit and risk software, with 27 percent reporting they use Microsoft products like Word and Excel, shared drives, or Sharepoint. However, 91 percent said their position in the organization enables them to identify opportunities that would improve operational performance – if senior management let them.

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SASB issues sustainability accounting standards for services industries
The Sustainability Accounting Standards Board (SASB) last week issued provisional standards for 10 industries in the services sector, such as advertising and marketing, cable and satellite, professional services, and restaurants. These standards will help corporations comply with existing regulation, Regulation S-K, to disclose material information in the Form 10-K. Example disclosure topics include energy management, fair labor practices, data privacy, and supply chain management and food sourcing.

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