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Bramwell’s Lunch Beat: AT&T Among Those Pushing for Later Rev Rec Effective Date

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Nov 19th 2014
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Ryan to chair tax panel, a possible 2016 platform
House Republican leaders chose Rep. Paul Ryan (R-WI) on Tuesday to head the powerful House Ways and Means Committee for the next two years, giving him a high-profile platform if he decides to run for president in 2016 or beyond, wrote Stephen Ohlemacher of the Associated Press.

On Ways and Means, the next chairman is expected to lead House Republican efforts to overhaul the nation's tax code, which politicians of many stripes agree is too complicated. If House Republicans offer an alternative to President Obama's health law, the Ways and Means Committee could play a key role, Ohlemacher wrote.

“We have a lot of work to do to get our economy back on track, and the Ways and Means Committee will be at the forefront of reform,” Ryan said, according to the article. “We will work together to fix the tax code, hold the IRS accountable, strengthen Medicare and Social Security, repair the safety net, promote job-creating trade agreements, and determine how best to repeal and replace Obamacare with patient-centered solutions.”

House Republicans passed a rule last week that could complicate Ryan's plans if he decides to run for president. The rule says committee chairman must give up their gavels if they run for another office, such as Senate, president, or governor. Ryan, however, could apply for a waiver, Ohlemacher noted.

FASB to consider delaying changes to revenue recognition rules
Michael Rapoport of the Wall Street Journalreported that a Financial Accounting Standards Board (FASB) official said on Monday that the accounting rule-makers would consider whether to delay implementing new, sweeping changes in how companies book their revenue, in the wake of complaints from some companies that the current effective date of 2017 doesn’t give them enough time.

The FASB plans to reach out to companies and other parties affected by its new rules on revenue recognition, and will assess next year whether a delay is warranted, said Cullen Walsh, a FASB assistant director, at a Financial Executives International conference in New York.

Such companies as AT&T Inc., TiVo Inc., and Verizon Communications Inc. have sent letters to the FASB asking for a delay, and “we are taking it seriously,” Walsh told reporters, Rapoport wrote. The board recognizes that companies “need clarity … one way or another” as to how much time they will have to revamp their practices and systems to put the new rule into effect, Walsh said.

Some companies believe the two-and-a-half years from final passage of the rule to implementation simply isn’t enough. “An extension of the effective date … would afford us the time to fully understand and interpret the new standard prior to beginning any modifications to our current systems,” Verizon said in an August letter to the FASB, according to the article.

US audit regulator scrutinizing PwC over Caterpillar tax advice
Rapoport also reported for the Wall Street Journal that the Public Company Accounting Oversight Board (PCAOB) is scrutinizing PricewaterhouseCoopers (PwC) LLP over tax-saving strategies it provided to audit client Caterpillar Inc., according to people familiar with the matter.

The government’s audit regulator is looking at whether the practice might create a conflict of interest that could compromise PwC’s ability to perform a tough audit of the manufacturer, the people said.

The regulator’s review dates back several months and follows an April request from Sen. Carl Levin (D-MI) for the PCAOB to look at the matter after he alleged earlier this year that Caterpillar had deferred or avoided $2.4 billion in taxes under strategies devised by PwC, Rapoport wrote. Neither PwC nor Caterpillar have been charged with any wrongdoing, and both organizations said they complied with all tax laws.

In April, Levin sent a letter to the PCAOB requesting that it “conduct a formal review” of the services that PwC provided to Caterpillar. The letter also asked the PCAOB to review whether its rules should be strengthened to prohibit an auditor from auditing a company’s tax obligations when those obligations rely on a tax strategy developed by the same firm, according to the article.

PCAOB spokeswoman Colleen Brennan told the Wall Street Journal that the board “is looking further at the nature of tax services that auditors are performing for their audit clients.”

FASB issues new guidance on pushdown accounting
New guidance issued by the FASB on Tuesday provides direction on whether and at what threshold an acquired business or not-for-profit organization can apply pushdown accounting.

The guidance, Accounting Standards Update No. 2014-17, Business Combinations (Topic 805): Pushdown Accounting, is a consensus of the FASB Emerging Issues Task Force. The board issued the update to address the lack of guidance in US Generally Accepted Accounting Principles on this topic, resulting in a lack of comparability among public, private, and not-for-profit organizations.

Pushdown accounting occurs when an acquired organization uses the acquirer’s basis of accounting to prepare its financial statements. The new guidance provides an acquired business with the option to apply pushdown accounting in its separate financial statements when an acquirer obtains control of the acquired business.

It also requires disclosures (similar to the disclosures provided by an acquirer under Topic 805, Business Combinations) that enable users of financial statements to better evaluate the effects of pushdown accounting.

[The US Securities and Exchange Commission also released an accounting bulletin on the new pushdown accounting rules yesterday. Click here for more information.]

BDO USA to acquire UHY Advisors’ Texas practice
Chicago-based professional service firm BDO USA LLP has entered into an agreement to acquire the Texas practice of UHY Advisors Inc., including its offices in Dallas and Texas. The transaction is expected to be completed on Dec. 1, officials from both firms said on Tuesday.

The UHY Texas practice provides a broad range of financial and consulting services to clients in such industries as energy, manufacturing, distribution, professional services, health care, and real estate.

The acquisition will double BDO USA’s practice in the Texas market, BDO USA CEO Wayne Berson said.

“Upon completion of this transaction, we will be the dominant alternative to the Big Four in both the Texas and the national energy markets,” Berson said in a written statement. “These offices established strengths in the energy sector, particularly in upstream and oilfield services, and will be an excellent addition to our strong natural resources industry practice. Combined with other additions we have made over the past two years, this transaction continues the expansion of BDO’s footprint into new markets and elevation of our presence in existing locations.”

UHY Advisors CEO Tony Frabotta said many firms had contacted UHY over the years to inquire about its energy industry expertise and SEC practice in the Texas market.

“As we implement our strategic plan and move forward as a united firm, it made sense to divest our Texas operations and continue our focus on growing as a top middle-market services provider,” Frabotta said. “We have enjoyed working with our fellow professionals in Texas over the years, and we wish them the best as they move to BDO. We, at UHY Advisors, will continue to provide extraordinary service to our many clients throughout the country. Our professionals consider themselves to be entrepreneurially focused, something we embrace deeply in our culture, and also why we work so well together with our clients. We are focused on providing mid-market core services, expanding capabilities, and expanding our geographical footprint with like-minded, dynamic organizations that also carry the same entrepreneurial spirit.”

[Some additional reading: Chicago-based professional service firm McGladrey LLP announced on Tuesday it has acquired substantially all the assets of Oklahoma City-based accounting firm Cole + Reed PC. The deal is expected to close on Dec. 1. Also, New York-based accounting firm O’Connor Davies LLP yesterday announced it has acquired Bethesda, Maryland-based CPA firm Grubman Anand PC, auditing and tax specialists of affordable housing properties.]

AICPA urges Senate to approve automatic tax relief for natural disaster victims
An American Institute of CPAs (AICPA) official told a Senate committee on Tuesday that Congress should pass legislation that would give victims of natural disasters access to permanent and timely tax relief.

“Our current system provides inconsistent tax relief,” Troy Lewis, CPA, CGMA, chair of the AICPA Tax Executive Committee, testified during a hearing of the Senate Finance Subcommittee on Taxation and IRS Oversight. “In the past, Congress has considered each disaster as an isolated event and restricted any special tax relief to the individual event.”

As a result, similarly situated taxpayers receive different tax benefits for comparable losses, Lewis said. “It is important that all victims – regardless of the state in which they reside or the type of disaster they endure – receive comparable relief.”

He added that tax relief should be triggered when a federal disaster declaration is issued.

“By having a trigger mechanism in place, Congress allows the IRS to promptly issue notice of the available relief to the public and enables the IRS to program its systems appropriately,” Lewis said. “Under the current system, individuals and small business owners do not know what tax relief they will receive until Congress enacts legislation sometimes months or even years after the event. The uncertainty surrounding such delayed relief impedes recovery.”

Lewis outlined 10 specific permanent recommendations that the AICPA believes should be activated when a taxpayer resides in, or has a principal place of business located in, a Federal Emergency Management Agency disaster declaration area for which individual disaster assistance is available. Among the recommendations are:

  • Waive individual casualty loss minimums.
  • Waive the penalty for early retirement withdrawal.
  • Exclude nonbusiness discharge of indebtedness from taxable income.
  • Extend the net operating loss carryback to five years.
  • Increase the property replacement period to five years.

In addition, Lewis said, “A set of standard disaster tax relief provisions will minimize the administrative burdens on the victims, as well as the IRS.”

GOP backs duck hunting tax hike
House Republicans on Monday passed a $120 million tax hike on duck hunters. Well, sort of, wrote Rachael Bade of Politico.

The House gave voice vote approval to legislation that will increase the cost of the annual bird hunting permits from $15 to $25 – even after a big money conservative group said it would hold lawmakers accountable for a tax hike if they voted for the measure.

Technically, it’s a fine, but it seems to have ruffled the feathers of Koch brothers-backed Americans for Prosperity, which is crying foul, Bade wrote.

“[T]he scrooges in Congress want to ask American families for even more of their paycheck to help fund a bloated, oversized government that cannot properly do the few things it is supposed to be doing, never mind all of the things it is not supposed to be doing,” reads a blog post by the group, according to the Politico article.

The bipartisan bill, introduced by Rep. John Fleming (R-LA), has the backing of duck hunters. That’s because the money will go toward bird conservation – meaning more game to shoot over the long run, Bade wrote. The permit price hasn’t been increased since the early 1990s.

Quick Links:

  • Your open office may be making you a crappy worker (Going Concern)
  • PCAOB says audit failures are no longer audit failures (Going Concern)
  • BDO fixin’ to acquire UHY Texas (Going Concern)
  • The truth about federal accounting practices (The Hill)
  • Business lobby makes push for expired tax breaks (The Hill)
  • Ted Cruz seeks to stop plan to tax more Internet purchases (Bloomberg)
  • It’s crunch time in Congress for tax breaks (New York Times)
  • A carbon tax could bolster green energy (New York Times)
  • As Sharpton rose, so did his unpaid tax bills (New York Times)
  • De Niro and New York town end fight over property taxes (New York Times)
  • Private study urges overhaul of commuter parking and transit tax benefits (Washington Post)
  • 3 reasons the GOP should support raising the gas tax (US News and World Report)
  • Tax attorney used IDs of dead children to avoid taxes (Los Angeles Times)
  • Was Obamacare’s Cadillac tax misrepresented? (Forbes)
  • How to ease the tax bite on your 401(k) payouts (Forbes)
  • Lessons from Japanese tax policy (Tax Foundation)
  • Obamacare’s contradictory tax incentives (Tax Foundation)
  • Federal taxes in the United States are progressive (Tax Foundation)
  • Critics misrepresent the reality of bonus depreciation (Tax Foundation)
  • Saving and investment are in long-term decline (Tax Foundation)
  • Will Obama’s executive action on immigration kill tax reform? Hint: You can’t kill something that’s already dead (TaxVox)
  • States continue efforts to tax e-cigarettes as vaping grows (Don’t Mess With Taxes)
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