British financial watchdog to investigate Tesco accounting scandal
Britain’s financial watchdog, the Financial Conduct Authority (FCA), has launched a full investigation into the Tesco accounting scandal that has now wiped 4 billion pounds from the troubled grocer's stock market value, Sarah Young of Reutersreported on Wednesday.
Tesco, Britain's biggest grocer and the world's third-largest retailer, announced on Sept. 22 that it had overstated first-half profit by 250 million pounds – its third profit warning in two months.
“Tesco will continue to cooperate fully with the FCA and other relevant authorities considering this matter,” the company said in a statement, according to the article.
The accounting error highlighted the scale of the challenge facing new CEO Dave Lewis, who joined the 95-year-old business on Sept. 1, three days after a previous profit warning on Aug. 29, Young wrote.
Tesco said in its statement that the FCA's investigation will be in addition to the independent review already being conducted by accountant Deloitte, according to the article.
Accountants welcome new PCAOB name plan, but some investors grumble
Michael Rapoport of the Wall Street Journalwrote on Wednesday that accounting industry officials are upbeat about a new compromise idea from the Public Company Accounting Oversight Board (PCAOB) on where investors will be able to learn who exactly is in charge of a company’s audit. But some investor advocates aren’t thrilled.
The new idea would disclose for the first time the names of the audit firm “engagement partners” in charge of each public company’s audit, to better inform investors and help make auditors more accountable. But under the proposal this week from PCAOB Chairman James Doty, audit firms would be allowed to provide the names in a newly created form filed with the PCAOB – instead of in the company’s 10-K annual report, as the PCAOB had previously proposed.
The potential new form is seen as an industry-friendly option – audit firms had lobbied against disclosing the partner’s name in the 10-K’s audit report, citing liability concerns. The new form would be far less prominent a showcase for the partner’s name than the audit report, and it wouldn’t have to be filed as quickly, Rapoport wrote.
The Center for Audit Quality, an accounting industry group, is “encouraged” by the reported proposal to name the audit partner somewhere other than in the auditor’s report, Executive Director Cindy Fornelli said in a statement.
But Joseph Carcello, a University of Tennessee accounting professor and a member of the PCAOB’s investor advisory panel, said he was “a little disappointed” by the new proposal. Other countries already require the name in the auditor’s report, he noted, and in fact require the partner to sign the audit opinion, an idea that was discarded years ago in the United States, according to the article.
A battle’s brewing within the GOP over whether to pursue tax reform
Facing the prospect of a fully Republican Congress for the first time in eight years, GOP strategists are divided over how to advance a central tenet of their political agenda: a simpler US tax code with sharply lower rates, Lori Montgomery wrote on Wednesday for Washington Post’s Wonkblog.
In the House, Republicans weary of jousting with President Obama over sweeping tax and budget issues say they have little hope of suddenly finding consensus in the waning days of his administration. Better, they argue, to focus on smaller targets, such as approving the Keystone XL Pipeline and rolling back broadly unpopular pieces of the Affordable Care Act, such as a tax on medical devices and cuts to Medicare Advantage.
In the Senate, however, aides and advisers say a newly elected Republican majority may be more inclined to aim for much bigger prizes, such as a far-reaching tax code rewrite – if not for individuals, then at least for US businesses, which currently labor under the highest corporate tax rate in the developed world, Montgomery wrote.
GOP aides say Republicans would be under intense pressure to take a shot at a major tax bill if they held control of both chambers of Congress. A 25 percent top tax rate (down from the current 35 percent for corporations and 39.6 percent for individuals) is a centerpiece of the GOP agenda. And American business is growing increasingly impatient with the lack of action on the corporate code, which imposes the highest rate among advanced economies and is the only system that taxes overseas profits.
“Such ambitions would depend heavily on Obama, Republicans say; they would go nowhere unless the president, too, were determined to cut a deal,” Montgomery wrote.
TIGTA: IRS total revenues increased 13 percent in 2013
Despite budget cuts and fewer employees, the IRS increased the total dollars it received and collected for the third straight year, the Treasury Inspector General for Tax Administration (TIGTA) noted in a new report released on Wednesday.
The tax agency’s appropriated budget decreased 7.4 percent between fiscal years 2010 and 2013, from $12.1 billion to $11.2 billion after sequestration, according to the report. The budget cuts resulted in reductions in the number of employees available to provide services to taxpayers and enforce the tax laws.
Specifically, the number of full-time equivalents dropped by nearly 9 percent, from 94,618 at the end of FY 2010 to 86,310 at the end of FY 2013, including a 4 percent reduction between FY 2012 and FY 2013. The number of enforcement personnel decreased by more than 1,000 employees during FY 2013.
Despite these challenges, total dollars received and collected increased for the third straight year to $2.9 trillion, a 13 percent increase, in FY 2013. Revenue from audits also increased, from $50.2 billion in FY 2012 to $53.3 billion in FY 2013, due, in part, to several appeals case settlements. Tax return filings continued to increase, as did gross accounts receivable, which increased to $400 billion.
However, the IRS collection function continued to receive more delinquent accounts than it closed, and the agency conducted fewer audit examinations, the report found. Examinations decreased 6 percent in FY 2013 and the decline occurred across all tax return types, including individual, corporation, S corporation, and partnership.
Ford loses bid to recoup $450 million interest on overpaid taxes
Jonathan Stempel of Reutersreported on Wednesday that a federal appeals court rejected Ford Motor Co.’s bid to recoup about $450 million of interest from the US government on taxes overpaid by the automaker.
The 6th US Circuit Court of Appeals in Cincinnati did not accept Ford's argument that its overpayments, dating back to 1983, were essentially a loan to the IRS on which it should have been able to accrue interest.
Wednesday's unanimous decision by a three-judge panel upheld a June 2010 ruling by US District Judge Patrick Duggan in Detroit, which the 6th Circuit had affirmed two-and-a-half years later, Stempel wrote. In December 2013, the US Supreme Court vacated that affirmation and directed the appeals court to consider whether the case belonged in a different court. The appeals court decided it did not.
The case stemmed from Ford having made about $875 million of payments to the government in the 1990s, after the IRS said the Dearborn, Michigan-based automaker had underpaid its taxes by nearly $2 billion in the previous decade. Ford initially treated its payments as cash bond deposits, and later converted them into advance tax payments that would bear interest in the event of an overpayment.
But after the IRS concluded the payments were in fact overpayments for the tax years in question, it calculated interest only from when Ford designated them as advance tax payments. Ford countered that interest had begun to accrue on the deposit dates, and sued in July 2008, according to the article.
Poll: Voters support stronger nonprofit rules
The vast majority of voters want rules to clearly state how much political activity nonprofits can carry out, according to a new poll conducted for consumer right advocacy group Public Citizen and the conservative Hudson Institute, Bernie Becker of The Hillwrote on Tuesday.
In all, 86 percent of voters believe strong rules are important, including almost six in 10 who think that it is very important. The poll also found that eight in 10 voters believe it’s an issue that political operatives and donors take advantage of vague and blurry rules.
The rules governing political activity for nonprofit groups is at the center of the current controversy surrounding the IRS, which has acknowledged that it improperly scrutinized Tea Party groups seeking tax-exempt 501(c)(4) status, Becker wrote. IRS Commissioner John Koskinen said this year that the agency would take another shot at rewriting the rules governing those groups, which are likely to come at some point in 2015.
The poll, from the Democratic firm Lake Research Partners, found that support for stronger rules for nonprofits and political activity came from across the political spectrum. Voters, the poll found, still favored stronger rules after hearing the argument that they would limit free speech, according to the article.
AICPA panel develops technical practice aid on accounting for primarily single employer retirement plans
The American Institute of CPAs (AICPA) Employee Benefit Plans Expert Panel recently developed Technical Questions and Answers (TPA) 6931.18–.30 (AICPA, Technical Practice Aids), which provides nonauthoritative guidance about the effect of Financial Accounting Standards Board Accounting Standards Update No. 2013-07, Presentation of Financial Statements—Liquidation Basis of Accounting, on the accounting for primarily single employer defined benefit pension and defined contribution retirement plans.
The material is based on selected practice matters identified by the staff of the AICPA’s Technical Hotline and various other bodies within the AICPA.
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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.