Revenue accounting could hit loans, bonuses
With the new accounting guidelines for revenue recognition expected to be issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) in the first half of this quarter, CFOs will likely soon have a heads-down focus on the ways companies calculate the top lines of income statements, David M. Katz of CFOwrote yesterday.
But accountants say taking such a narrow view might be a mistake, causing financial executives to ignore the ripple effects of the change on debt covenants, bonuses, corporate taxes, and many other areas of their organizations.
“Those working in the software, real estate, auto, and similar industries that regularly issue complex, multi-element invoices, for instance, would see longstanding, highly proscriptive rules replaced by a single, principles-based international standard,” Katz wrote. “Although the rules wouldn’t become effective for public companies until 2017 and for private companies a year later, there would be much to do in the interim.”
[Click here for AccountingWEB’s coverage of the pending revenue recognition standard.]
Restatements: What’s in a name?
Financial statements are increasingly leaving out a crucial word in their disclosures: “restatement” – the thing itself. This coincides with the continuing increase in the percentage of revision restatements, i.e., those filed without an Item 4.02, Olga Usvyatsky wrote in a blog yesterday for Audit Analytics.
“In the past few years we have noticed a trend in financial restatements that suggests companies are changing the way they disclose restatements,” she noted. “We have reported on the increasing number of so-called ‘revision’ restatements, for example, and the decrease of nonreliance ‘Re-issuance’ restatements – or small ‘r’ and big ‘R’ restatements, as they are often informally called.
“In analyzing these restatement filings, we noticed what seemed to us to be another trend. Namely, that the word ‘restatement’ was itself showing up less frequently in restatement disclosures: an odd paradox,” Usvyatsky continued.
To test this hunch, Audit Analytics performed a textual analysis of its restatement database from 2005 to 2012.
“In 2006, over 93 percent of the companies used the word ‘restate’, or some derivative of the word, in the text of their disclosure,” she wrote. “By 2012, only 44 percent of disclosures correcting prior-year results actually mentioned ‘restate’ or a derivative, a remarkable change in pattern in less than a decade. If the companies no longer ‘restate’ their financial statements, what do they do with errors?”
IRS expands use of electronic signatures
According to an update of IRS Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns, the agencyhas provided new methods for taxpayers to electronically sign Form 8878, IRS e-file Signature Authorization for Form 4868, andForm 2350, the e-file signature authorization form, Alistair M. Nevius, JD, wrote for the Journal of Accountancy.
“Taxpayers can use one of two methods to electronically sign tax returns,” he noted. “One involves using a self-selected personal identification number (PIN) and requires taxpayers to provide their prior-year adjusted gross income or PIN to the IRS. The second method requires the taxpayer to sign Form 8878 permitting an electronic return originator (ERO) to input the taxpayer’s PIN and e-file Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return, or Form 2350, Application for Extension of Time to File US Income Tax Return. Taxpayers may now sign this authorization form electronically using an electronic signature pad, but that signature pad must be in the ERO’s office; taxpayers cannot sign remotely.”
IRS: More Americans filing taxes on their own
As of March 7, nearly 27.4 million people had prepared their own taxes, a 5.8 percent increase over the same period last year, when 25.9 million had filed at home, according to data released by the IRS yesterday.
Returns filed by tax preparers are down this season. Roughly 34.8 million Americans have had their taxes e-filed by a professional, a decrease of 2.2 percent from last year. Traffic to IRS.gov has also decreased, down 8.3 percent, with about 181.2 million visits. Last year there had been about 197.7 million visits at this point.
Jeff Porter, a CPA with Porter & Associates in Huntington, West Virginia, told the USA Today he's noticed more of his clients waiting to come into his practice until later in the season because of the delay in receiving necessary forms related to investments.
“I have seen a trend over the last four or five years that's slower starting every year, people coming in to have their taxes prepared,” he said, adding many higher-wealth clients are waiting on 1099 forms from financial institutions that detail interest and dividends from stock transactions.
PCAOB flags half of Crowe audits in latest report
The Public Company Accounting Oversight Board (PCAOB) says Crowe Horwath failed to properly audit half of the audits that inspectors studied in their 2012 inspections, Tammy Whitehouse of Compliance Weekreported yesterday.
The PCAOB’s recently published 2012 inspection report on Crowe says inspectors selected 12 audits for the annual review and found deficiencies that are significant enough to call failures in six of the 12 audits. That's an improvement over the firm's earlier failure rates – 62 percent in both 2011 and 2010, according to the article.
“It also improves Crowe's standing among the major firms that are inspected annually by the PCAOB,” Whitehouse wrote. “Since 2009, Crowe has had the highest failure rate of the Big Four and second-tier firms, which audit the vast majority of the US public company markets. For the 2012 inspection cycle, Grant Thornton and BDO USA turned in higher failure rates, at 65 percent and 55 percent, respectively. McGladrey's 2012 report is the only report for the major firms that is not yet published.”
Cash abroad rises $206 billion as Apple to IBM avoid tax
Richard Rubin of Bloombergreported on March 12 that the largest US-based companies added $206 billion to their stockpiles of offshore profits last year, parking earnings in low-tax countries until Congress gives them a reason not to.
The multinational companies have accumulated $1.95 trillion outside the US, up 11.8 percent from a year earlier, according to securities filings from 307 corporations reviewed by Bloomberg News. Three US-based companies – Microsoft Corp., Apple Inc., and International Business Machines (IBM) Corp. – added $37.5 billion, or 18.2 percent of the total increase.
“Even as governments around the world cut tax rates and try to keep corporations from shifting profits to tax havens, Congress remains paralyzed in its efforts,” Rubin wrote. “The response of US-based companies over the past few years has been consistent: book profits offshore and leave them there.
“Congress hasn’t acted because of disagreements over whether to be tougher on US companies operating abroad amid broader disputes over government spending and taxation,” he continued. “The stalemate has prevented the United States from tapping a pot of money that President Barack Obama and the top Republican tax writer in Congress have eyed for such projects as rebuilding highways.”
Ukraine financial aid package stalled in Congress
A Ukraine financial aid package got caught up in a fight over reforms for the International Monetary Fund (IMF) and an unrelated dispute over IRS rules aimed at curbing political activities by nonprofit groups, CNN reported yesterday.
Senate Democrats rejected a proposal floated by Republicans to add language to the Ukraine measure that would delay new IRS regulations for how the agency oversees some tax-exempt organizations.
New rules stemming from the IRS targeting scandal would clearly define how much of their budgets 501(c)(4)s could spend on political advocacy. Opponents fear the rules would curb the free speech rights of the groups and inhibit their ability to influence political campaigns.
House Speaker John Boehner (R-OH) said Senate Democrats should take up a House-passed Ukraine aid bill and not deal with the controversial IMF reforms at this time because it could delay passage of loans needed by Ukraine.
- A review of banks in Europe gets results (New York Times)
- IRS can audit you forever – but key steps can prevent it (Forbes)
- 2013 Elijah Watt Sells Award winners announced and crikey there are a ton of them (Going Concern)
- Registration opens for April 3 webcast on structured data (XBRL) in financial reporting (FASB)
- Survey: Compliance officers expect personal liability to increase in 2014 (Compliance Week)
- Cyber security rises as concern in risk: Survey (Wall Street Journal)
- SEC charges former CR Intrinsic analyst with insider trading (Wall Street Journal)
- Colorado residents may get a refund for pot tax (CNN)
- Marijuana tax law reform: Grover Norquist and Dana Rohrabacher boost the ultimate pot bill (Slate)
- Holding ex-IRS official in contempt looks increasingly unlikely (Government Executive)
- The Taxslayer.com Gator Bowl and two other bowls are being audited by the IRS (Yahoo Sports)
- Bayern Munich president Uli Hoeness facing jail for tax evasion (CNN International)
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.