The tax extenders: Yes, Virginia, they really are tax cuts
Washington is in the midst of a partisan debate over whether the move by the House Ways and Means Committee earlier this week to make six business tax breaks permanent is in fact a tax cut or, conversely, whether failing to cut those business levies would be a tax increase.
In a TaxVoxblog yesterday, Howard Gleckman, Resident Fellow at the Urban Institute and TaxVoxeditor, said the issue really isn’t complicated.
“The Ways and Means bill is a tax cut,” he wrote. “And if it is not offset by other tax hikes or spending increases, it would raise the federal deficit by $310 billion over the next 10 years.”
At issue are some of the 50-plus targeted tax subsidies that have been on the books for many years but expired at the end of 2013. The operative word here is “expired,” Gleckman noted. He believes Congress should walk away from many of the now-expired tax cuts because it is the better pro-growth policy. But even if Congress prefers to restore them, it should sill find the money to pay for them.
“And no matter how much supporters of these tax cuts say it, these provisions don’t preserve the status quo. And leaving them expired is not a tax hike. They are a tax cut. And they should be paid for,” Gleckman concluded.
SEC frets it’s not getting enough accounting questions
Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal, wrote yesterday that the US Securities and Exchange Commission (SEC) Office of the Chief Accountant has received far fewer-than-normal consultation requests to help companies clear up complex accounting issues before they file their financial statements.
“The drop-off is pretty significant at around 40 percent,” said Daniel Murdock, the office’s deputy chief accountant, during a Baruch College accounting conference in New York on Thursday, according to the article.
The decline could potentially be caused by fewer new accounting rules, or a decline in mergers or acquisitions that have complex accounting consequences, Murdock said. It could also reflect the increasing focus by companies and auditors on internal controls rather than accounting issues, he added.
“It just makes me pause with respect to what it is [that’s causing the decline],” Murdock said, according to the article.
SEC changes tack on disclosure project
Chasan also wrote yesterday that the SEC is changing a project aimed at reducing so-called “disclosure overload” in corporate financial reports.
“We’re now calling it disclosure effectiveness,” Craig Olinger, SEC deputy chief accountant in its Division of Corporation Finance, said on Thursday during the Baruch College accounting conference, according to the article.
The SEC will now look at ways to both reduce and improve the information companies present in financial reports, he added.
Chasan noted that earlier this year, SEC Chair Mary Jo White said staff had begun an “active” review of corporate disclosures to look at ways companies could avoid repetition in financial reports, or make their disclosures clearer. But a few months in, according to Olinger, the SEC switched gears.
The staff will still look at situations where duplicate, redundant, or unnecessary disclosures have proliferated, but will also look at “holes in the regulatory regime,” where additional disclosure may be useful or necessary for investors, he said.
Revenue recognition: Do companies have enough time for implementation?
Another discussion at yesterday’s Baruch College accounting conference focused on the implementation of the converged financial reporting standard for revenue recognition from the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), which is expected to be issued at the end of the month.
According to an article from Journal of Accountancy Senior Editor Ken Tysiac, General Electric Controller and Chief Accounting Officer Jan Hauser believes companies will be challenged to do a full retrospective transition in the time that’s provided.
The standard will take effect for public companies for reporting periods beginning after December 15, 2016 (FASB), or reporting periods beginning on or after January 1, 2017 (IASB).
Companies that choose to do a full retrospective transition would need to start capturing data by January 1, 2015, to demonstrate comparability. That may require answering difficult questions and implementing complicated systems in a short time, Hauser noted.
“I think we’re going to need potentially more time than what we’re being allotted in implementing the standard,” Hauser said, according to the article. “We thought we would have had it out quite a while ago and had a lot of time. And particularly for companies that actually want to think about full retrospective or are needing to change systems … it’s a huge undertaking.”
FASB Chairman Russell Golden said in an interview with the Journal of Accountancy that the FASB is aware of concerns about the implementation date and is open to conversation about the issue.
[Click here for an article from the Wall Street Journal on how the new revenue recognition rules could ease contracting.]
Dolce and Gabbana lose appeal against tax evasion conviction
The Wall Street Journal also reported on Wednesday that a court in Milan, Italy, upheld a tax-evasion conviction of designers Domenico Dolce and Stefano Gabbana and sentenced the pair to 18 months in prison.
The two Italian fashion designers were convicted last June and each sentenced to one year and eight months in prison for failing to file tax declarations for a Luxembourg-based company called Gado, Deborah Ball wrote.
Prosecutors said Gado was created with the purpose of evading tax in Italy. The total tax that Dolce and Gabbana allegedly failed to pay is about €40 million ($55 million) for 2004 and 2005.
Ball noted that the tax arrangements of Italian fashion companies have drawn scrutiny over the years, particularly more recently as Italian authorities have taken a hard look at structures such as offshore companies. For many years, Italian companies established offshore subsidiaries, particularly in Luxembourg, to evade or avoid taxes, say tax authorities.
AstraZeneca nixes Pfizer’s sweetened $106B bid
According to an article from Kim Hjelmgaard of the USA Today, British drugmaker AstraZeneca today rejected a sweetened offer from New York-based rival Pfizer.
The new offer, which came in the wake of an earlier bid rejection by Britain's second-largest pharmaceutical firm, valued AstraZeneca at 50 pounds a share ($84.47) or $106 billion.
Pfizer, which makes Viagra, had said it would seek to pay a combination of cash and shares as part of the proposal. In January, Pfizer made a bid for AstraZeneca that valued the company at just under $100 billion, according to the article.
If the deal eventually goes through it would be one of the largest-ever foreign takeovers of a British firm, as well as one of the biggest acquisitions in the history of the drug industry.
PCAOB solicits nominations for Standing Advisory Group
Calling all accountants, auditors, those with expertise in corporate finance and corporate governance, and investors: The Public Company Accounting Oversight Board (PCAOB) has spots open for you to serve on its Standing Advisory Group (SAG).
The board is also seeking nominations of individuals with experience in auditing or financial reporting as related to broker-dealers and smaller public companies, according to a PCAOB press release.
Those interested in serving a three-year term (2015-17) on the advisory panel must submit a nominee form to the PCAOB by June 30. You can also recommend a person to serve on the panel by submitting a nominator form to the board by the end of next month.
The SAG provides input and advice to the PCAOB on a wide range of topics regarding its standard-setting agenda and related activities. Recent examples of topics include the auditor's approach to detecting fraud, potential changes to the auditor's report, and the development of audit quality indicators. The SAG meets two to three times per year in Washington, DC.
The SAG currently has 42 members, including investors, auditors, public company executives, and others. In 2014, 14 members' terms are expiring. Appointments will be announced in December, and the new terms begin in January 2015.
Click here for more information on the SAG.
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- How accounting, stop groaning, will save the world (Bloomberg Businessweek)
- Ex-Mizrahi banker said to be indicted in tax fraud case (Bloomberg)
- Congressman: No more bonuses for IRS tax delinquents (USA Today)
- The heavy hand of the IRS seizes innocent Americans’ assets (Washington Post)
- Sad pragmatism and tax incentives (Forbes)
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- Tax denier wins damage claim against IRS levy – kind of (Forbes)
- Tax moves to make in May 2014 (Don’t Mess With Taxes)