FASB mulling a revamped income statement
David M. Katz of CFOwrote on Tuesday that the Financial Accounting Standards Board (FASB) is in the early stages of researching whether to launch a project aimed at improving and updating the presentation of items on the income statement.
While the project wouldn’t affect the amount of net income companies report, for example, it would change how companies present and organize the information on their income statements, according to Katz’s article. A particular focus would be on bringing US accounting rules up to date in terms of financial reporting.
FASB staff members are currently researching the question of what changes would be useful for investors and how preparers would go about gathering and organizing the new information. Further, they will look into what such changes could cost companies, Katz wrote. Once that research is done, the board will evaluate whether to propose revisions to the income statement.
He also noted that the standard-setting board tipped its hand last week about the kind of income statement changes it’s considering when it issued a shorter-term proposal to simplify income statement presentation by removing the concept of “extraordinary items” from US Generally Accepted Accounting Principles (GAAP). Current accounting requires companies to evaluate whether an event or transaction is extraordinary. If management thinks that it is, the company must separately present and disclose the item.
San Francisco vs. Berkeley: Who’s got the better soda tax proposal?
The San Francisco Board of Supervisors on Tuesday approved putting a 2-cents-per-ounce soda tax on the November ballot. The measure would put a tax on sodas, sports drinks, and other beverages sweetened with sugar and sold in the city. It would have to be approved by two-thirds of the electorate to take effect.
Kerry Cavanaugh of the Los Angeles Timeswrote on Tuesday that the tax would be levied on the distributors, such as grocery stores, but the cost would probably be passed on to consumers, who would theoretically reduce their consumption of calorie-laden drinks.
Across the bay, the city of Berkeley has put a similar soda tax on the November ballot. That measure calls for a one-cent-per-ounce charge on sweetened beverages. But Cavanaugh wrote there is another important difference between the two cities’ proposals, and it’s the reason why San Francisco’s is better than Berkeley’s.
“San Francisco would use the money generated by the tax – an estimated $35 million to $54 million a year – for nutrition and physical education at schools, recreation centers, and athletic programs, and to install more water fountains around the city,” she noted. “The purpose of the tax, proponents say, is to make San Francisco healthier, and the spending plan supports that.
“Berkeley’s new tax revenue – about $1.5 million a year – would go into its general fund, which pays for basic city services and programs,” Cavanaugh continued. “The Berkeley measure calls for the creation of a Sugar-Sweetened Beverage Product Panel of Experts to recommend if and how the city should spend the money on programs to reduce soda consumption, but city leaders are free to spend the money however they choose. Certainly, Berkeley leaders today may be committed to using the revenue for community and school nutrition programs, but there’s nothing binding future officials to do the same.”
Banks and hedge fund grilled on tax schemes
Executives of Deutsche Bank and Barclays Bank, along with officials of Renaissance Technologies, a large Long Island, New York-based hedge fund, were questioned on Capitol Hill Tuesday over a Senate report that found the institutions participated in complex financial transactions that enabled the funds to avoid paying billions of dollars in taxes, Kevin McCoy and Paul Davidson of the USA Todayreported.
The banks sold “basket options” to the hedge funds that allowed the funds to report trading profits as long-term capital gains for tax purposes – even though 97 percent of the assets were held for less than six months, a Senate Permanent Subcommittee on Investigations report found.
Additionally, McCoy and Davidson wrote, the trades were made in the banks’ accounts so that the hedge funds would not be subject to leverage limits that prevent banks from lending more than $2 for every dollar put up by the hedge funds, according to the report. The funds, however, controlled all assets, executed all the trades, and reaped the profits, the subcommittee said.
From 1998 to 2013, the banks sold 199 basket options to hedge funds to conduct more than $100 billion in trades, the report found. Renaissance alone earned about $34 billion in profits and avoided paying $6.8 billion in taxes through the financial legerdemain, the report said.
Barclays Managing Director Marty Malloy testified that its transaction with Renaissance was “subject to sufficient and significant internal and external review to ensure it complied with applicable tax laws and regulations,” according to the article.
Written testimony filed by Renaissance said the IRS has been reviewing the transactions for more than six years. The hedge fund said it has been cooperating fully with the review. “Ultimately, we expect to prevail, because we have complied with the law,” said Mark Silber, Renaissance CFO and chief legal officer, according to the article.
The hunt for Lois Lerner’s emails
Rachael Bade of Politicowrote on Tuesday that some technology experts are raising questions about a new court-ordered IRS account of what happened to ex-agency official Lois Lerner’s hard drive because it does not include typical documented proof of device destruction.
“Where is the paper trail?” asked Barbara Rembiesa, the head of the International Association of Information Technology Asset Managers, a nonpartisan trade group of IT professionals, according to the article. “There is a certification of destruction any time a piece of equipment is sent to a disposal company. … Where is that?”
The IRS would not comment on whether such documents exist, Bade wrote.
It’s in this context that IRS Commissioner John Koskinen returns to Capitol Hill on Wednesday, summoned once again by House Oversight Republicans for an update on the circumstances surrounding the disappearance of two years’ worth of Lerner’s emails.
And add this to the mix: House Ways and Means Committee Republicans on Tuesday afternoon said in a press release that they have learned from interviews that Lerner’s hard drive was merely “scratched,” that it was at one point labeled as recoverable, and that “in-house professionals at the IRS recommended the agency seek outside assistance in recovering the data,” according to the article.
Republicans also said that unnamed “former federal law enforcement and Department of Defense forensic experts” told them that most of the data on a scratched drive should have been recoverable, Bade wrote.
Wild day for Obamacare: Appeals court rulings conflict
Two federal appeals courts issued contradictory rulings on Obamacare subsidies within a few hours on Tuesday, one delivering a victory and the other a major blow to the White House in a chaotic legal fight that will determine whether millions of Americans can get subsidized coverage through HealthCare.gov, Paige Winfield Cunningham of Politicoreported.
First, the US Court of Appeals for the DC Circuit in a 2-1 decision said the insurance subsidies can’t be awarded through the 36 federal-run exchanges, that they can only flow through the state-run markets. Hours later, the Fourth Circuit court ruled 3-0 that people can draw on the subsidies in both kinds of exchanges. The divergent opinions set up a clash that could eventually end up at the US Supreme Court – and reverberate through the fall campaign.
For now, no one will have their subsidies cut off while the legal battle continues, Winfield Cunningham wrote. The Obama administration said it will appeal the DC ruling on Halbig v. Burwell by asking for an en banc review involving the full panel.
“We are confident in the legal case that the Department of Justice will be making,” said White House press secretary Josh Earnest, according to the article.
The plaintiffs in the fourth circuit’s King v. Burwell in Virginia haven’t yet said what they’ll do next.
Fictitious applicants able to get US health-insurance tax credits
Stephanie Armour of the Wall Street Journalreported on Tuesday that fictitious applicants who went on the federal exchange set up under the Affordable Care Act were able to fraudulently get approved for coverage and health-insurance tax credits, according to a new US Government Accountability Office (GAO) report.
The exchange approved coverage for 11 fictitious applicants who applied online or by telephone to obtain coverage, according to the report. The applicants were able to obtain premium tax credits, which are provided to defray premium costs. They were able to gain coverage by phone, though not online.
The investigation will be the focus of a House Ways and Means subcommittee hearing on Wednesday on the potential for waste and fraud in the subsidies. Republicans opposed to the health law say the GAO's findings are evidence of the government's inability to verify information, which they say creates the potential for fraud and abuse.
“Obamacare is a mess,” said Representative Charles Boustany Jr. (R-LA), according to the article. “Its broken structure invites waste, fraud, and abuse that will cost the American taxpayer millions in subsidies to individuals whose eligibility the administration won't bother to verify.”
Senate advances bill to end tax breaks for outsourcing
Ramsey Cox of The Hillreported that the Senate voted 93-7 on Wednesday morning to advance a bill that would end tax breaks for companies that send jobs overseas. Only 60 votes were needed to advance S. 2569, the Bring Jobs Home Act.
Senators John Walsh (D-MT) and Debbie Stabenow (D-MI) introduced the bill, which would give companies incentives to bringing jobs back to the United States, including a tax write-off for the relocating costs and an additional 20 percent credit.
“We’ve got to make sure the tax code reflects the right values and policies,” Stabenow said, according to the article. “Why would anyone be opposed to giving everyone a fair shot?”
Currently, US companies can deduct from their corporate taxes some expenses of moving facilities overseas, Cox wrote. Democrats said 2.4 million jobs have been outsourced in the past 10 years.
Some Republicans argue that if Democrats truly wanted to keep companies in the United States, they would work with Republicans to overhaul the tax code and reduce corporate tax rates.
“It’s a bill that’s designed for campaign rhetoric and failure – not to create jobs here in the US,” Senate Minority Leader Mitch McConnell (R-KY) said on Tuesday. “Everyone knows that the Democrats aren’t being serious here.”
SEC is set to approve money-fund rules
The US Securities and Exchange Commission (SEC) is expected to approve new rules on Wednesday that are aimed at avoiding a repeat of the investor stampede out of the $2.6 trillion industry that threatened to freeze corporate lending during the 2008 financial crisis, Andrew Ackerman of the Wall Street Journalreported.
Under the SEC plan, “prime” money funds whose shares are held by corporations and large institutional investors will have to abandon a stable $1-a-share price and float in value like other mutual funds, according to people familiar with the matter. Investors in these funds would risk losing principal if the share price fell. Prime funds invest in short-term corporate debt, Ackerman wrote.
The plan also would allow all funds to temporarily stop investors from redeeming shares in times of market tumult or impose fees on them to do so, these people said, meaning corporations and other investors may not always have immediate access to their cash.
The rules are aimed at training institutional investors to accept fluctuations in the value of their investments, as well as ensuring funds can stop a trickle of outflows from turning into a flood, according to the article.
The SEC is expected to give companies up to two years to comply with the rules.
- Dennis Nally would like everyone to remember that auditing is still important to PwC (Going Concern)
- Finally, someone wrote an article about grooming millennial leaders that isn’t completely stupid (Going Concern)
- What the PCAOB’s new related-party standard means for auditors (Journal of Accountancy)
- Revenue transition group debates difficult implementation issues (Journal of Accountancy)
- Accounting firm reaches $1.8 million settlement with state (Indianapolis Star)
- 270 Big Four partners earn more than £1m (Economia)
- Gwen Jorgensen: From accountant to No. 1 triathlete (Wall Street Journal)
- IRS agrees to monitor churches for electioneering (Washington Post)
- 10 signs your tax missteps are ‘willful’ triggering IRS penalties or jail (Forbes)
- Use of condo by son blows 1031 exchange for state tax purposes (Forbes)
- Sen. Durbin derides Walgreen for possible tax-driven overseas move (Chicago Tribune)
- US companies need tax reform (Columbus Dispatch)
- Credit Suisse loses $779 million after settling tax evasion case (DealBook)
- Have we created a two-tiered tax system – one for the powerful and one for the rest of us? (TaxVox)
- Abuse of financial products by hedge funds (TaxVox)
- Who wants to tax a millionaire? Lots of people (Tax Analysts)
- Will Republicans finally find a tax cut they hate? (Mother Jones)
- Keith Denham to join CohnReznick as managing principal and national director of CohnReznick Advisory Group (CohnReznick)
- Fraud and forensic accounting specialist joins Marks Paneth LLP as senior director (Marks Paneth)