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Bramwell’s Lunch Beat: GOP Miffed Over Lois Lerner Interview

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Sep 24th 2014
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SASB issues provisional sustainability accounting standards for transportation industries
The Sustainability Accounting Standards Board (SASB), a 501(c)3 not-for-profit organization that provides sustainability accounting standards for use by publicly listed US corporations, issued on Wednesday provisional standards for industries in the transportation sector.

The standards are intended to help corporations comply with existing regulation, Regulation S-K, to disclose all material information in the Form 10-K.

The SASB’s provisional standards address environmental, social, and governance issues most likely to contain material information for companies in eight industries in transportation: automobiles, auto parts, car rental and leasing, airlines, air freight and logistics, marine transportation, rail transportation, and road transportation. Examples of issues included are accident and safety management, environmental footprint of fuel use, and fair labor practices.

“The transportation sector is unique in that there are fewer issues per industry, but the magnitude of these issues commands attention. Companies in this sector are operating in a context of rising energy costs, changing energy regulation, and the need to improve worker and passenger safety, among other variables,” Jean Rogers, PhD, founder and CEO of the SASB, said in a written statement. “SASB standards help companies manage – and investors evaluate – the sustainability issues most likely to affect the operating performance and financial condition of a company.”

SASB standards are designed to be concise and cost-effective for companies and decision-useful for investors. The average number of sustainability issues in each industry standard in the transportation sector is between three and four, and 87 percent of the suggested accounting metrics are quantitative.

The SASB’s standards development process includes evidence-based research, multistakeholder industry working groups, a 90-day public comment period, and review by an independent standards council. The working groups for transportation industries – which  included 230 registrants – represented publicly traded companies with more than $621 billion market capital and investment firms with more than $3.3 trillion in assets under management. A full list of working group members can be found here. The SASB’s standards will remain provisional for at least one year after the issuance date, and the organization welcomes feedback on the standards during the provisional phase.

The transportation sector is the fifth set of industry standards released by the SASB. By 2016, the SASB will have released standards for 10 sectors covering more than 80 industries. View the full schedule of the SASB’s standards development process here.

Republicans fume over Lois Lerner remarks
House Republicans are steaming that ex-IRS official Lois Lerner decided to talk to Politico for a profile on her life after twice taking the Fifth before Congress, Rachael Bade of Politicowrote on Monday.

Lerner refused to answer questions before the House Oversight and Government Reform Committee and quickly became the center of the Tea Party targeting saga that erupted 16 months ago. The former head of the IRS tax-exempt unit declared her innocence in the interview, as she has maintained throughout, but would not discuss her time at the IRS in the run-up to the firestorm, Bade wrote.

Republicans, who voted to hold Lerner in contempt of Congress and held countless hearings blasting her for refusing to speak, said it was unfair for her to speak to media and not lawmakers.

“Her decision to make unsubstantiated claims to a media outlet while claiming Fifth Amendment protections from answering Congress’ questions is telling,” House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) said in a statement on Monday, according to the article. “She appears to have great confidence that her allies in the Obama administration will not consider legal action after she resigned and declined to discuss the IRS’s actions against private citizens.”

House Speaker John Boehner’s (R-OH) staff posted a blog calling out Lerner for telling Politico she is “not sorry for anything I did.”

“Thanks to President Obama and his cadre of cover-up artists, we still don’t know what exactly that entailed,” Boehner’s communications adviser, Matt Wolking, wrote in the blog, according to the article.

New tax rules to slow, not halt, inversion deals
The Obama administration's move to tighten rules on corporate inversions should discourage new deals, at least for a while, by making them harder and less profitable, tax experts said. On Tuesday it already was roiling some pending transactions, according to a Wall Street Journalarticle by John D. McKinnon, Liz Hoffman, and Hester Plumridge.

“Some of these transactions are going to become a little less profitable. Some are going to become a lot less profitable,” said Ronny Gal, a pharmaceutical analyst at Sanford C. Bernstein, according to the article. “The logic remains for most of them, but companies may attempt to rethink the terms.”

Lawyers also questioned whether terms in merger agreements designed to let buyers walk away from the deal if the tax system changed would apply. Some lawyers said the new rules would be unlikely to trigger such outs, because they make inversions harder and less profitable, but don't prevent the deals entirely, McKinnon, Hoffman, and Plumridge wrote.

In June, medical-device maker Medtronic agreed to acquire Dublin-based Covidien PLC for $42.9 billion and become an Irish company. Medtronic included a caveat that would allow the Minneapolis-based company to walk away from its deal without paying an $850 million breakup fee if tax rules tightened. The current change from Washington isn't enough for Medtronic to exit the deal without paying the breakup fee, said a person familiar with the deal.

Medtronic has said the company is “studying Treasury’s actions,” according to the article.

New US tax rules won’t stop Burger King-Tim Hortons deal
Jacqueline Nelson of the Globe and Mailreported on Tuesday that the US government’s new regulations on companies seeking reduced US tax bills by way of foreign acquisitions are unlikely to slow the $12 billion merger of Burger King Worldwide Inc. and Tim Hortons Inc.

The Tim Hortons and Burger King combination is the biggest deal in the crossfire for Canada, and is reportedly one of the tie-ups that sparked the regulatory change, but observers argue that the deal is unlikely to buckle under the new pressures.

“We believe that the transaction still qualifies for inversion notwithstanding the new regulations, which are targeted toward more abusive transactions,” said Peter Sklar, analyst with BMO Nesbitt Burns, in a note to clients, according to the article. In this deal, Tim Hortons is the bigger business by earnings, he added.

The two companies previously stated in their jointly filed takeover circular that changes in US law or regulations would not provide a legal reason for either to walk away from the deal without paying hundreds of millions in termination fees, Nelson wrote.

“We are moving forward as planned,” said Scott Bonikowsky, senior vice president of corporate, public, and government affairs at Tim Hortons, on Tuesday, according to the article. “This deal has always been driven by long-term growth, not by tax benefits.”

Bill Clinton shies away from ‘unpatriotic’ label
Former President Clinton declined to call tax inversions “unpatriotic” on Tuesday, shying away from a term that President Obama has used repeatedly against companies that take advantage of the maneuver, Kevin Cirilli of The Hillreported.

Speaking at the Clinton Global Initiative, he was asked by CNBC’s Becky Quick: “Are corporate inversions unpatriotic?”

“Well, whether it is or not, companies – particularly those that are answering to shareholders – have a short-term perspective. A lot of these companies feel duty-bound to pay the lowest taxes they can pay,” Clinton responded, according to the article. “We have to come to terms with the fact that everyone else in the world has stopped taxing on the difference between what their companies earn in a different country and at home.”

Clinton made the comments a day after Treasury Secretary Jack Lew unveiled executive actions intended to deter companies from making inversion deals. The former president said he has “no problem” with the US Treasury Department’s move but that there are bigger problems in the tax code that these rules won’t fix, Cirilli wrote.

Tesco’s new CFO to join early
Peter Evans and Lisa Fleisher of the Wall Street Journalreported on Tuesday that Tesco PLC's new CFO will start work several months ahead of schedule as the UK retailer begins an investigation into a $410 million misstatement in its accounts.

Alan Stewart had been scheduled to join from rival retailer Marks & Spencer Group PLC (M&S) on Dec. 1, but Tesco said on Tuesday he would begin immediately. The move – negotiated between new Tesco Chief Executive Dave Lewis and Marc Bolland, his counterpart at M&S – comes the day after Tesco disclosed a “serious” accounting issue and suspended four executives.

Tesco has lacked an executive clearly in charge of finances since April, when previous finance chief Laurie McIlwee stepped down. Since then, the company's finances have been run directly by the CEO's office. During that time, Tesco has issued three profit warnings, according to the article.

Its latest warning came after a Tesco employee alerted its general counsel to an issue involving the early booking of income and delayed booking of costs, resulting in an overstatement of earnings guidance for the first half of the fiscal year ending in February. Shares plunged more than 11 percent on Monday and are down more than 15 percent so far this week.

But there could be worse to come, Evans and Fleisher wrote. The company's executives are awaiting the results of an investigation by Deloitte LLP and London law firm Freshfields Bruckhaus Deringer to discover the full extent of the accounting irregularity, according to a person with direct knowledge of the situation. The biggest fear is that the months without a full-time CFO meant further problems went unnoticed, according to the person.

CohnReznick LLP and Watkins Meegan LLC announce plans to combine firms in November
New York-based accounting firm CohnReznick LLP and Bethesda, Maryland-based accounting firm Watkins Meegan LLC have signed a letter of intent to combine practices,  which is expected to be effective on Nov. 1, the firms announced on Wednesday.

The combined firm will have approximately $600 million in revenues, nearly 300 partners, approximately 2,750 employees, and 28 offices. Officials say the move will bolster CohnReznick’s position as a leading firm in the Washington metro area.

Founded in 1975, Watkins Meegan has 13 partners and 200 employees with revenues of $40 million, and is ranked among the top 100 firms in the country. With Maryland offices in Bethesda and Annapolis, and Virginia locations in Tysons Corner and Herndon, Watkins Meegan has specialized in serving such industries as real estate, construction, not-for-profit, and hospitality, as well as government contractors.

Watkins Meegan Managing Partner Mike Micholas will continue to be a part of the senior management team in the region.

“We are very excited about what this combination means for our ability to serve our clients and our employees in the future,” Micholas said in a written statement. “CohnReznick’s formidable commercial real estate, construction, not-for-profit, and hospitality industry practices will provide valuable resources to our clients in those industries. All of our clients will benefit from a deeper bench of professionals with diverse technical expertise, as well. And our employees will find greater opportunities for learning and growth as part of a larger organization.”

CohnReznick has 26 offices, including three in Maryland and Virginia that house more than 600 employees. Among the firm’s specialties are assurance, tax, and advisory services, as well as its global reach through Nexia International. The firm is also an award-winning workplace recognized for its women’s program, flexibility, dedicated learning and development department, and community service initiatives.

“We are continually looking at quality firms whose specialties complement our own. Watkins Meegan is a firm we have known for a number of years and have admired from a distance. We are very pleased about the synergies created by this combination,” CohnReznick Co-CEO Ken Baggett said in a written statement.

Co-CEO Tom Marino added, “Both firms sought a partner with the same core values, particularly a commitment to technical excellence and superior client service. When you have that, along with complementary experience and expertise, you know you will make a positive impact on your clients, your employees, and your community.”

AICPA Auditing Standards Board clarifies standards on attestation engagements
The American Institute of CPAs (AICPA) Auditing Standards Board issued a third exposure draft resulting from the Attest Clarity Project. The project is an effort to address concerns about the clarity, length, and complexity of the board’s standards. The Auditing Standards Board has completed clarifying Statements on Auditing Standards and is currently clarifying Statements on Standards for Attestation Engagements.

Among other things, Proposed Statement on Standards for Attestation Engagements, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting: Clarification and Recodification, revises extant AT Section 801, Reporting on Controls at a Service Organization (AICPA, Professional Standards), to conform it with chapters 1–4 of an updated version of the Proposed SSAE Attestation Standards: Clarification and Recodification that was presented at the Auditing Standards Board’s July meeting.

An explanatory memorandum provides a rundown of the most significant changes to the existing standard.

Comments are due by Dec. 18.

Quick Links:

  • EY celebrates its second year as the most attractive professional services employer (Going Concern)
  • Why your firm needs a bring your dog to work policy (Going Concern)
  • Tesco’s accounting problems: Turning orange (The Economist)
  • UK watchdog FRC monitoring Tesco amid accounting probe (Bloomberg Businessweek)
  • Kevin Parker appointed to SASB’s board of directors (SASB)
  • Introducing [email protected], a new online master of science in accounting from Syracuse University’s Martin J. Whitman School of Management and 2U Inc. (Syracuse University)
  • SEC charges Barclays Capital with systemic compliance failures after acquiring Lehman’s advisory business (SEC)
  • The SEC and capital markets in the 21st century: Evolving accounting infrastructure for today’s world (Brookings Institution)
  • Germany tightens rules for tax cheats (Associated Press)
  • Cracking down on corporate tax games (New York Times)
  • Treasury takes a modest step on inversions (DealBook)
  • Barack Obama’s halfhearted swipe at tax inversion (Financial Times)
  • Obama is inverted on inversions (Bloomberg View)
  • How tax-inversion rules may stall mergers (MarketWatch)
  • Treasury’s new rules may slow, but won’t stop corporate tax inversions (TaxVox)
  • The Obama administration’s incomplete answer to corporate inversions (Los Angeles Times)
  • US crackdown on inversions isn’t all it’s cracked up to be (Newsweek)
  • The Treasury’s chicken soup take on tax inversions (Fortune)
  • Q&A on Treasury’s plan to curb inversions (Wall Street Journal)
  • Mike Lee and Marco Rubio: A pro-family, pro-growth tax reform (Wall Street Journal)
  • Big art collector tax win in Fifth Circuit (Forbes)
  • Derek Jeter’s big tax bill on ‘gifts’ that really aren’t gifts (Forbes)
  • In any effective tax planning technique, substance is just as important as form (Forbes)
  • Proposals for a mansion tax on luxury real estate fuel Britain’s electoral debate (Forbes)
  • Voters not sold on tax money for Obama library (Chicago Tribune)
  • Philadelphia cigarette tax measure moves to Corbett for enactment (The Patriot-News)
  • What does a less progressive income tax look like? (Tax Foundation)
  • Entrepreneurship and a pro-growth tax code (Tax Foundation)
  • Reducing compliance costs for small businesses (Tax Foundation)
  • $1 billion is the new normal in the incentives world (Tax Analysts)
  • French farmers ignite fiery tax, ag policy protest (Don’t Mess With Taxes)
  • Sixth Circuit on the definition of “theft” for purposes of IRC Section 165 (Tax Litigation Survey)
  • Thomson Reuters releases multi-volume tax planning treatise for estate planners (Thomson Reuters)
  • Wolters Kluwer, CCH reveals the top 10 highest and lowest gasoline tax rates (Wolters Kluwer, CCH)
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