Staff Writer and Editor AccountingWEB
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Bramwell’s Lunch Beat: Big Four Firm’s Audit Work May be Banned in Saudi Arabia

Dec 2nd 2014
Staff Writer and Editor AccountingWEB
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Ideas for guidance on auditing estimates draw mixed reviews
The Public Company Accounting Oversight Board (PCAOB) is getting mixed feedback on its initial ideas for revising guidance on auditing fair value measurements and accounting estimates, Tammy Whitehouse of Compliance Weekwrote on Nov. 26.

The PCAOB has received nearly 40 letters commenting on the staff's consultation paper on auditing accounting estimates and fair value measurement, said associate chief auditor Barbara Vanich, in a recent presentation to the PCAOB’s Standing Advisory Group.

“Many of the comment letters were very supportive of outreach efforts made through the paper and applauded the effort,” she said, according to the article. “A few organizations didn’t believe we should change the existing standards, but overall people thought it was good that we were examining them.”

While most were supportive of the board’s efforts, “many of the letters contained diverse views on maybe how to get to a solution,” Vanich said. Some comments suggested revising existing rules, while others suggested a single comprehensive new standard, and still others suggested getting the US Securities and Exchange Commission involved to look at areas that fall outside the PCAOB’s auditing authority, Whitehouse wrote.

“Some suggested the topic of fair value measurements and accounting estimates might require a response broader than just an auditing standard,” Vanich said.

Deloitte said to face Saudi regulator’s ban on audit work
Bloombergreported on Monday that Deloitte LLP may be blocked from auditing companies in Saudi Arabia after the country’s market regulator told firms registered in the kingdom to stop using its local services.

In a circular dated Nov. 27 that was obtained by Bloomberg, the Capital Market Authority (CMA) said that publicly traded companies it regulates should avoid working with Deloitte’s Saudi Arabian practice as of June 1. The ban could be revoked if Deloitte resolves a dispute the regulator didn’t specify, according to the circular.

The issue relates to Deloitte’s audit work for Mohammad Al-Mojil Group (MMG), a construction-industry services provider based in Dammam, Saudi Arabia, according to four people with knowledge of the matter, wrote Dinesh Nair, Matthew Martin, and Deema Almashabi of Bloomberg.

Deloitte operates in the kingdom as Deloitte & Touche Bakr Abulkhair & Co., and has had a practice there for more than 50 years, according to its website. It audits 35 listed companies in Saudi Arabia, according to data compiled by Bloomberg, including state-owned Saudi Telecom Co., Yanbu National Petrochemicals Co., and Al Rajhi Bank.

The CMA has filed a case against Al-Mojil officials, who were there between 2008 and 2011 during its initial public offering, the regulator said on Nov. 11. During that period Deloitte acted as an auditor to MMG, according to the article.

Lawmakers divided over renewing tax breaks
John D. McKinnon and Siobhan Hughes of the Wall Street Journalwrote on Monday that lawmakers divided about whether to renew a raft of expiring tax breaks appear increasingly likely to extend them only through 2014, a move that would leave businesses and individuals in limbo for 2015 and beyond.

The vast majority of the 50 or so provisions expired at the end of 2013, but still can be claimed for 2014 if Congress can agree soon on how to renew them. Extending the breaks through 2014 would mean they could be claimed during the 2015 tax-preparation season.

On Monday, the situation was further muddled as Senate Majority Leader Harry Reid (D-NV) called for extending tax breaks for working families and businesses but didn’t offer specifics, McKinnon and Hughes wrote.

Reid last week was negotiating with House Ways and Means Committee Chairman Dave Camp (R-MI) on a broad package that would have made permanent a few of the most popular business provisions, such as a widely used research credit. It also would have extended the bulk of the temporary provisions for two years, through 2015. But the White House signaled it would veto that package, arguing it was too favorable toward businesses and didn’t extend an expansion of the Earned Income Tax Credit and the Child Tax Credit.

Rep. Pat Tiberi (R-OH), a member of the Ways and Means Committee, said Monday he expected the House would vote this week on a bill extending the tax breaks through 2014. “It’s either this or nothing,” he said, according to the article.

[Some additional reading: Kelsey Snell of Politicowrote on Monday how pro-business Democrats and liberals are at odds over the tax breaks.]

My Favorite (Expired) Tax Breaks
That is the name of the lighthearted song written by Roberton Williams, Sol Price Fellow at the Tax Policy Center, which can be sung to the tune of The Sound of Music’s “My Favorite Things.”

Here’s a little sample:

Special deductions of teachers’ expenses,
Tax-free forgiveness for lost residences,
Deducting money that state sales tax takes,
They’ve all expired – we’ve lost our tax breaks.

We’ve lost tax credits for R&E spending,
Special exceptions for subpart F lending,
Deduct tuition that your college takes,
Now they’ve expired – we’ve lost those tax breaks.

Still they argue.
The clock’s ticking.
Please don’t make us sad.
If you don’t renew all our favorite breaks,
This tax year will be so bad.

Reps enlist Reagan to sell gas tax hike
A bipartisan pair of House members are using former President Reagan to build support for a potential increase in the federal gas tax, Keith Laing of The Hillwrote on Monday.

The tax, which pays for federal transportation projects, was increased in 1982, just two years into the Reagan administration, which remains very popular with modern conservatives. It has not changed since 1993, four years after Reagan left office.

Reps. Earl Blumenauer (D-OR) and Tom Petri (R-WI) will spotlight Reagan’s support for the 1982 gas tax increase in a press conference on Wednesday. The two lawmakers “will stand together on the one-year anniversary of Blumenauer’s introduction of the UPDATE Act (HR 3636), which would increase the gas tax by 15 cents over three years and tie it to inflation,” their offices said in a joint statement on Monday, according to the article.

“The two congressman will be joined by the words and image of former President Ronald Reagan, who spoke eloquently on the need for Congress to raise the gas tax in 1982,” the statement continued. “Blumenauer and Petri will speak on the need for Congress to immediately enact this modest increase to adjust for modern times, and on the necessity of repairing our nation’s crumbling transportation infrastructure.”

The gas tax, which is currently 18.4 cents per gallon, pre-dates the development of the Interstate Highway System. It has been the primary source for federal transportation projects since its creation in the 1930s, Laing wrote.

Medtronic sells $17 billion of bonds for Covidien deal
Katherine Chiglinsky of Bloombergreported on Monday that Medtronic Inc. sold $17 billion in the biggest dollar-denominated bond offering in more than a year to help fund its $42 billion purchase of Covidien PLC.

The maker of heart-rhythm devices issued the debt in seven parts, including 10-year notes that sold at 140 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The deal is the biggest since Verizon Communications Inc. raised $49 billion in a bond offering in September 2013, Bloomberg data show.

Medtronic has said it intends to borrow to finance the Covidien deal instead of using cash it keeps overseas after the US Treasury Department proposed rule changes that would prohibit “hopscotch” loans that allow borrowers to lend money earned by foreign operations to a new parent company and avoid US corporate taxes, Chiglinsky wrote. The device maker plans to shift its legal address from Minneapolis to Ireland, where Covidien is based.

[Some additional reading: The Wall Street Journalreported on Nov. 28 that Medtronic secured European Union (EU) approval for its merger with Covidien, two days after US authorities cleared the deal.]

Germany, France, Italy press EU to end company tax deals
Birgit Jennen of Bloombergwrote on Monday that Germany, France, and Italy urged EU regulators to speed up and widen curbs on tax-lowering deals for companies, saying the EU should adopt rules by the end of next year.

Measures should go beyond greater transparency and company registries to a “general principle of effective taxation” to stem the EU’s lack of “tax harmonization” that entices companies to cherry-pick where they pay, according to a joint letter by finance ministers Wolfgang Schaeuble, Michel Sapin, and Pier Carlo Padoan to the EU Commission.

“Our citizens and our companies expect us to cope with tax avoidance and aggressive planning,” the ministers said in the proposal obtained by Bloomberg, according to the article. “The diagnosis is made and the solutions are already known, so we should act without any delay.”

Pressure for European countries to halt sweetheart tax deals for international companies has grown as governments compete for revenue in the wake of the debt crisis, Jennen wrote. European Commission President Jean-Claude Juncker became a lightning rod after revelations that he helped more than 340 companies reduce their tax bills when he was Luxembourg’s prime minister.

The proposal by the finance ministers of the three biggest euro-area economies to Economic and Tax Commissioner Pierre Moscovici asks him to prepare a draft directive by the end of the year and suggests an end-of-2015 deadline for adopting EU-wide rules, according to the article.

Quick Links:

  • This timesheet-addicted managing partner will make you grateful not to work for him (Going Concern)
  • Here’s the real reason mid-tier firms are merger mad (Going Concern)
  • Tchenguiz sues Grant Thornton, Kaupthing, others for $3.5 billion (Reuters)
  • Chicago area accounting firms Porte Brown and Brown, Kaplan + Liss announce merger (Porte Brown)
  • DMLO CPAs acquires Healthcare Practice Consultants LLC (DMLO CPAs)
  • Registration opens for Dec. 15 FASB webcast for private companies and not-for-profit organizations (FASB)
  • CohnReznick names Richard Leach as director and senior advisor in Government Services practice (CohnReznick)
  • Frank Jakosz appointed to AICPA’s inaugural Not-For-Profit Advisory Council (Sikich)
  • CliftonLarsonAllen announces promotions (CliftonLarsonAllen)
  • A battle over taxes divides Democrats. More to come? (Washington Post)
  • Chinese tax authorities to step up supervision of multinationals (Wall Street Journal)
  • Norway urged to cut tax rates paid by companies and individuals (Wall Street Journal)
  • Germany expected to approve tax incentives for electric cars (Wall Street Journal)
  • How a deal on tax extenders would add to the debt (Wall Street Journal)
  • Boost the low income housing tax credit (The Hill)
  • Taxes and divorce, what you need to know (Fox Business)
  • Betting on a rebound from tax-loss selling (MarketWatch)
  • Employer mandate, not Obamacare tax credit, real issue before Supreme Court (Forbes)
  • EPA’s $10 carbon tax (Forbes)
  • They’re spouting nonsense about the Starbucks tax situation again (Forbes)
  • The politics and policy of tax extenders (Tax Foundation)
  • December to-do list: shopping, family visits and tax tasks (Don’t Mess With Taxes)

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