Bramwell’s Lunch Beat: New University Study Makes Case for Audit Transparencyby
Ohio calls an Obamacare tax illegal in healthcare suit
President Obama’s signature healthcare overhaul has illegally forced Ohio and its local governments to pay more than $5.3 million in taxes, the state said in a new lawsuit seeking to chip away at the law, wrote Andrew Harris of Bloomberg. The state said in its complaint filed on Monday in federal court in Columbus that the law known as Obamacare improperly imposes a three-year assessment that also covers counties and public colleges. Ohio claims the United States has no right to tax states and local governments. According to the complaint, the provision at issue illegally requires government entities that provide self-insured group-health plans to pay a three-year reinsurance tax.
CU Denver Business School study calls for audit transparency
As major accounting companies increasingly outsource audit work to other firms, a new study from the University of Colorado Denver Business School says more transparency is needed to help investors assess the quality of those audits. The study’s authors examined a Public Company Accounting Oversight Board (PCAOB) proposal that would require registered accounting firms to disclose, in audit reports of US Securities and Exchange Commission (SEC) companies, the names, locations, and extent of participation of outside auditing firms. They also looked at whether quality is negatively affected when part of an audit is completed by auditors other than the principal auditing firms, as well as publicly available data to see if disclosure of outside auditors provided information useful to investors. “Our findings suggest that the PCAOB's proposal requiring disclosure of other audit participants would, if implemented, provide information useful to investors in assessing audit quality for SEC issuers,” the authors said.
Obama aims to raise taxes on inheritances
White House officials call it “perhaps the largest single loophole in the entire individual income tax code.” In the tax world, it’s described as the “stepped-up basis” on inherited assets. It essentially means that the value of an asset “steps up” to the current value when inherited, no matter what the original buyer paid for it. Whatever its label, the tax break sits at the center of a slate of tax changes proposed by President Obama last week that would raise taxes on the rich with the aim of reducing them for the middle class, wrote John D. McKinnon of the Wall Street Journal. The Obama administration would basically get rid of stepped-up basis, by imposing capital-gains tax on the transfer of the asset to the heir. But GOP opposition in Congress means the proposal will unlikely become law.
IRS commissioner: ‘It’s a challenging year’
The IRS is turning to Twitter and YouTube to reach taxpayers this year in an effort to increase online information about filing taxes as the agency faces an abysmal customer-service rate, wrote Hadley Malcolm of the USA Today. Strained by budget cuts and a declining staff, the IRS plans to direct more taxpayers to the Web to try to reduce the burden on its ill-equipped call center, IRS Commissioner John Koskinen told USA Today on Monday. YouTube videos posted in recent months explain how the Free File program works and give advice to first-time filers. The IRS Twitter feed is filled with links to commonly asked questions and answers and information about the effect of health coverage on tax returns this year. The “Where’s My Refund” application on the IRS website lets people check the status of their refunds. “Last year, 15 percent to 18 percent of our calls were people asking for information about their refunds or their transcripts that they could have gotten online,” Koskinen said.
How Yahoo might sell billions in Alibaba stock and pay no taxes
Yahoo! Inc. on Tuesday is expected to reveal something most companies usually try to keep secret: how it plans to avoid a multibillion-dollar tax bill, wrote Jesse Drucker of Bloomberg. The Web portal has spent more than a year figuring out how to cash out a chunk of its $40 billion stake in China-based Alibaba Group Holding Ltd. Typically, a US company faces a federal tax bill of about 35 percent when it sells stock in another enterprise for cash. Yahoo took a $3 billion tax hit last year when it sold about $10 billion in Alibaba shares. This time around, activist investors are leaning on the Sunnyvale, California-based company to be more savvy. Drucker details two legal options Yahoo could take to avoid capital-gains tax.
Tech mounts pre-emptive strike on taxes
The tech industry is ramping up its lobbying efforts on tax reform, seeking to make sure it doesn’t end up the loser if Washington can find a consensus on rewriting US tax laws, wrote Bernie Becker of The Hill. The Tax Innovation Equality Coalition, a group that counts both technology and pharmaceutical titans among its members, released a report on Monday that seeks to protect the tax treatment of patents, copyrights, and other intangible properties. Matthew Slaughter of Dartmouth, the report’s author, argued that wringing more taxes out of the most innovative US companies would be counterproductive in the long run. The coalition is urging lawmakers not to treat intangible offshore property more harshly than brick-and-mortar assets. But liberal groups and lawmakers insist it’s far easier for companies to shift assets, like copyrights and patents, to low-tax countries, making tougher rules for those intangible properties a necessity.
AAA, Chamber, truckers: Raise the gas tax now
A trio of influential lobbying groups is pushing lawmakers to increase the 18.4 cents-per-gallon federal gas tax to pay for a new transportation bill, wrote Keith Laing of The Hill. The US Chamber of Commerce, AAA auto club, and the American Trucking Association said in a letter to members of Congress on Monday that raising the gas tax would be the easiest way to close a transportation funding shortfall that has reached an estimated $16 billion per year. “While no one wants to pay more, we urge you to support an increase to the federal fuels user fee, provided the funds are used to ease congestion and improve safety, because it is the most cost-efficient and straightforward way to provide a steady revenue stream to the Highway Trust Fund,” the groups wrote. High-profile Republicans, such as House Speaker John Boehner (R-OH), have expressed skepticism about asking drivers to pay more at the pump to finance new transportation projects.
SEC faces challenges over the constitutionality of some of its court proceedings
A recent push by the SEC to bring more cases before its administrative law judges rather than filing charges in federal district court is drawing increased attacks from defense lawyers claiming that the entire process is not just unfair, but also unconstitutional, wrote Peter J. Henning of New York Times DealBook. Two recent challenges by defendants to the SEC’s choice of forum argued that the use of administrative judges violated the constitutional principle of separation of powers that gives the president the power to control the executive branch (under which the SEC falls), including whether its officers should be fired. In an interesting twist, these challenges claim that the SEC’s administrative law judges hearing the cases have too much protection from being removed from office, thus interfering with the president’s authority to control the executive branch.
For new revenue-recognition rules, it’s ready vs. not
Maxwell Murphy of the Wall Street Journal’s CFO Journal is the latest to write about the possibility of a delay in the implementation of new revenue-recognition accounting rules. The rules, which would change the way thousands of companies book revenue, are set to start on Jan. 1, 2017, but officials at the Financial Accounting Standards Board (FASB) received roughly 1,400 comment letters from companies that are spending millions to update computer software, recalculate contracts, and rejigger past financial results. Last Wednesday, a group of US software companies, including Adobe Systems Inc., Symantec Corp., and VMware Inc., asked the FASB for more guidance and a two-year delay. However, some big companies, like Intel Corp., say they plan to be ready if the new rules take effect as scheduled. The FASB is expected to make a decision early in the second quarter on whether or not to delay the implementation period.
ASB issues auditing interpretations to SAS No. 126 on going concern
The American Institute of CPAs (AICPA) Auditing Standards Board (ASB) issued four auditing interpretations on Friday to address some of the effects of accounting standards on going concern, wrote Ken Tysiac of the Journal of Accountancy. A standards update issued in August by the FASB established management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Going-concern responsibilities for state and local government preparers, meanwhile, were incorporated into the Governmental Accounting Standards Board’s standards in 2009. The ASB expects to undertake a more comprehensive project in the longer term to align AU-C Section 570 with the various accounting and auditing standards.
AICPA develops Q&A on application of ASU No. 2014-02
Developed by the AICPA Not-for-Profit Entities Expert Panel, Question and Answer (Q&A) section 6140.26 (AICPA Technical Questions and Answers) has been issued to provide nonauthoritative guidance about a not-for-profit entity that has a for-profit subsidiary that it consolidates under US GAAP. The reporting entity is the consolidated not-for-profit entity, which is not permitted to adopt the accounting alternative in ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill (a consensus of the Private Company Council). Therefore, the for-profit subsidiary that is part of that consolidated reporting entity is not permitted to use the amortization accounting alternative in the consolidated financial statements. The for-profit subsidiary could adopt the accounting alternative in ASU No. 2014-02 in its standalone financial statements.
Booz Allen Hamilton nudges federal court to get moving on Deloitte lawsuit
A lawsuit Booz Allen Hamilton Inc. filed against Deloitte Consulting LLP and some of its employees has been in a holding pattern. And it appears Booz Allen is losing its patience, wrote Jill R. Aitoro of the Washington Business Journal. The attorney representing McLean, Virginia-based Booz Allen sent a letter on Jan. 23 to the judge presiding over the matter in the US District Court for New Jersey, requesting a status conference to discuss re-engaging in discovery. Booz Allen claims that Deloitte schemed with former Booz Allen employees to steal proprietary information, which it then used to recruit away an entire team of employees and then target Booz Allen's contracts and clients. Deloitte has denied the allegations. Aside from a motion to dismiss that was filed last August, little has happened in the case.
PwC’s new CIO focused on global IT strategy
Big Four firm PwC recently hired Sigal Zarmi as its new network CIO and vice chairwoman to boost its global focus on technology adoption and big data, wrote Rachael Power of AccountingWEB UK. She joins PwC from GE Capital Americas, a commercial finance company where she worked for 17 years, most recently as CIO. The Big Four firm is focused on implementing new collaborative technologies. It's also focused on data analytics and mobile apps to enable employees to work from tablets and smartphones. In addition to overseeing this, Sigal will also support PwC's network of accounting firms worldwide. “Using technology that is adaptable to different geographies, customers, currencies, and operating environments will be critical to our success,” she said. “As well, we will continue to develop our highly mobile, flexible, technology enabled workforce tailored to the specific needs of our clients.”