Accounting News Roundup: The New Lease Accounting Exposure Draft Is Here; PCAOB Deal with China?; This Accountant Love KFC More Than You | 05.16.13
IASB and FASB Propose Changes to Lease Accounting [FASB, ED]
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) today published for public comment a revised Exposure Draft outlining proposed changes to the accounting for leases. The proposal aims to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations and the risks to which it is exposed from entering into leasing transactions.
Significant Changes Proposed in Lease Accounting [NYT]
Under the proposal, issued jointly by the international board, which sets rules for many countries around the globe, and by the Financial Accounting Standards Board, which writes the United States rules, [e.g.] an airline entering into a lease for a plane would show an asset of the right to use the plane and an equal liability based on the current value of the lease payments it has promised to make. That accounting would be similar to what it would show had it borrowed money to buy the plane.
Camp Statement on Miller Resignation [Ways and Means]
“The American people should be able to trust and have faith that, not only the IRS, but that the tax code will treat them fairly. This resignation does nothing to change the culture of discrimination at the IRS. And, it certainly does nothing to change the fact that the tax system is targeting honest, hardworking taxpayers instead of working for them. There are still far too many unanswered questions and until we know what truly happened, we cannot fully fix what is wrong. This Committee wants the facts, and the American people deserve answers to why they were targeted on the basis of their political beliefs. The IRS has demonstrated a culture of cover up and has failed time and time again to be completely open and honest with the American people. This investigation will continue so Congress can ensure that no taxpayer is unfairly targeted. The Committee and the American people deserve honest answers from Mr. Miller at our hearing this Friday."
It sounds like the PCAOB is going to have take a crappy deal: "I expect the agreement will be announced as part of the Strategic and Economic Dialogue between the U.S. and China scheduled to take place in early July. Once the SEC gets the requested working papers, I expect it will dismiss the case against the firms. That removes the most urgent risk that the accounting firms might lose the right to practice. Accordingly, this agreement likely removes the risk that U.S. listed Chinese companies will be delisted. For the PCAOB, the agreement is a painful compromise. There is no deal allowing for inspections. But the protocol might allow working papers to be shipped to the PCAOB in the U.S. for inspection, presumably after being redacted for state secrets. That is a poor substitute for on the ground inspections. I believe that the PCAOB is facing significant political pressure to accept this deal." Google Denies Misleading Parliament Over U.K. Tax Liabilities [Bloomberg] Matt Brittin, vice president for sales and operations in northern and central Europe for the world’s most popular Internet search engine, said he stood by November testimony that the company pays taxes where it creates “economic value.” Lawmakers today tried to establish whether the company was closing sales in the U.K., making it liable for more tax. “Nobody in the U.K. has had an opportunity to close a transaction with a customer,” Brittin told the cross-party Public Accounts Committee. “I stand by what I have said." IRS Delay in Disclosing Groups’ Scrutiny Focus of Probes [BBW] “My question is who’s going to jail over this scandal?” House Speaker John Boehner told reporters today. “Someone made the conscious decision to harass and to hold up these requests for tax-exempt status,” said Boehner, an Ohio Republican. “Clearly someone violated the law.”
The other IRS scandal [CJR]
David Cay Johnston lists a few, including: "Missing from much coverage is the relevant recent history—the role of the Supreme Court’s 2010 Citizens United decision and how it prompted a deluge of requests from new organizations seeking tax-exempt status under tax code Section 501(c)(4) as “social welfare” organizations—despite the fact that many of these are blatantly political operations."
KFC smugglers bring buckets of chicken through Gaza tunnels [CSM]
For six years, Rafat Shororo longed for the taste of a KFC sandwich he had eaten in Egypt. This week, he got his finger lickin' fix at home in the Gaza Strip after a local delivery company managed to smuggle it from Egypt through underground tunnels. "It has been a dream, and this company has made my dream come true," says Mr. Shororo, an accountant, as he receives his order from the delivery guy.
Steven Miller figured it was time:May 15, 2013 The internal message to IRS Employees from Acting IRS Commissioner Steven T. Miller Dear Colleagues, It is with regret that I will be departing from the IRS as my acting assignment ends in early June. This has been an incredibly difficult time for the IRS given the events of the past few days, and there is a strong and immediate need to restore public trust in the nation's tax agency. I believe the Service will benefit from having a new Acting Commissioner in place during this challenging period. As I wrap up my time at the IRS, I will be focused on an orderly transition. While I recognize that much work needs to be done to restore faith in the IRS, I don't want anyone to lose sight of the fact that the IRS is comprised of incredibly dedicated and hard-working public servants. During my 25-year IRS career, I am profoundly proud to have worked alongside you and to be part of an institution that has worked hard to support the nation. I have strong confidence in the IRS leadership team to continue the important work of our agency. I want to thank everyone for all of their support and friendship during my career in government service. And I especially want to thank each and every one of you for your continued commitment to the nation's taxpayers. Steve [via CNN]
Footnotes: Camp Has More Questions; PCAOB Scholarship Falls in Student's Lap; Amazon's UK Taxes | 05.15.13
Camp: IG report raises as many questions as it answers [The Hill]Sarbanes-Oxley Compliance Costs on the Rise [AT] This student at the University of Minnesota Duluth got a $10,000 scholarship from the PCAOB and he didn't even apply for it. [UMD] Texas Fertilizer Explosion Victims in No Mood to Pay Property Taxes [ABC] Report: Florida has one the nation’s highest business tax burdens [MH]
Amazon's UK Unit Pays $3.7 Million In Taxes On $6.5 Billion In Sales [Reuters]
Former accountant stole more than $670K from St. Paul archdiocese [MST]
EY Connect Day is this Friday. [E&Y]
KPMG is moving into a new Knoxville office. [KNS]
Seniors Charged for Drug, Prostitution Ring at Jersey Old Folks' Home [Gawker]
Right now, the FASB and IASB are nowhere near agreeing on how loan loss accounting should be done and fifteen (!!!) banks including Bank of America, JPMorgan, Citigroup, Morgan Stanley, and Wells Fargo would like the rulemaking bods to get their act together:While we acknowledge the difficulty inherent in reconciling disparate points of view, we strongly encourage the Boards to achieve convergence on what we believe is the most important MOU project. Although we continue to support an event-driven accounting framework for recognizing credit losses consistent with the proposal previously provided by members of the US banking industry, we acknowledge the need for a balanced approach that will broadly appeal to numerous constituents. While a converged standard may not necessarily lead to fully comparable results in practice, the differences between the models proposed by the Boards are far too great and will generate vastly different results. Ultimately, we believe compromise will be necessary by both Boards in order to achieve a converged credit impairment standard. We strongly encourage the Boards to renew their cooperation on this critically important matter. Did you read that? The banks concede that other companies -- maybe even those outside financial services! -- may have concerns on this issue and therefore, the Boards need to get to work so we can all move on with our lives. Get with it, you guys. I mean, the banks! Geez. [FASB via AT]
The "duh" comes from AICPA Insights:
According to a new survey conducted for the AICPA by Harris Interactive, only 39% fully understood the burden student loan debt would place on the future and 60% have at least some regret over the choice of education financing. Furthermore, 75% have made a personal or financial sacrifice--such as delaying a home purchase and postponing marriage and children--because of monthly student loan payments. The press release includes tips for parents and students on both saving for college and managing loan payments. The below 360 Degrees of Financial Literacy infographic, Realities & Regrets of Student Debt, highlights the findings.
And there's a nice fancy infographic to accompany it:
Of course, you guys decided to be financial professionals when you grew up so you don't have these kinds of problems. You save by wearing the same cheap blue shirt every other day, drive a 1995 Honda Accord and steal leftovers out of the office fridge to save a few bucks on lunch. Right?
He group grew up in the Bronx, attended the University of Miami (aka Suntan U.) and didn't have the personal hygiene and fashion sense necessary for an ambitious young accountant:
I had a big mustache and bad hair. Also, I had two suits, one brown and the other green polyester.
Okay, so Joe E was a hipster before being a hipster was a thing. That's respectable. But it's not like he was trying to stick out like a sore thumb. No one had the heart to tell him that he needed a little makeover:
I had no social graces, either — I didn't know where the bread plate goes on a table, had never drunk coffee out of a cup with a saucer. It took me a long time to realize that these things matter in the corporate world. No one was willing to tell me.
This got Joe the "low potential" label at Haskins & Sells (you probably never heard of them) for a while, but luckily he had a mentor who was able to steer him in the right direction:
I had a boss, a Hispanic woman, who gave me good advice. Right before I left on vacation, she said to me, "You're coming back without that mustache. You will never make it into management if you look like the Frito Bandito." I had never realized that was holding me back.
And now he's shown all of you!
However, the important question here is -- WHERE ARE THE PICTURES? WE MUST HAVE THEM. If you dig these treasures up, email them to us immediately.
As we tumble through the post-busy season spring, an untold number of recruiters are on the hunt for accounting professionals whose asses can fill the empty seats of their clients. Recruiters use a number of different tactics when pursuing talented accountants but one of the trickiest parts of this cat and mouse game has to be cold calling candidates. The obvious goal for any recruiter to sound like you've got something enticing to share with Jim or Jane, CPA but not come on so strong that you give him or her the creeps.Recently a tipster shared with us an email sent by a recruiter who successfully accomplished neither of those things: From: [Recruiter] Date: Fri, May 10, 2013 Subject: [Candidate], I'm interested in you To: [Candidate] [Candidate], Your career is impressive. I'm compelled to reach out to you. Right off the bat you get a bad feeling. At least for our reader who wrote us, "You need to start a column entitled the creepy things recruiters say." And I can kinda see why this is a little weird. Usually when some opens with "I'm interested in you," that's code for "I'm interested in you with your clothes off." Maybe that's just me. Pretty much any other subject line would have successfully not weirded this person out. Anyway, it's funny because the rest of the email is pretty standard non-creep stuff: I'm also fortunate to lead a team of highly successful professionals. Passionate about opening new career doors for people like you. Doors to opportunities that help move you forward toward realizing your goals professionally and personally. Our specialty is public accounting. We have contacts with over 5000 firms in every region of the US. Managing Partners who are glad to pay our referral fee, because the outstanding professionals we refer, also help them move forward toward realizing their goals. Our first step is to speak. Tell us what's important to you. We're ready to listen - when is convenient for you? Best regards, [Recruiter] Like I said, standard. But that opening? Probably need to take another look at that. Anyone else ever get weird vibes from recruiters over email? Share them with us.
Accounting News Roundup: The Inspector General's IRS Report; Olympus Is Back in Black; Tax-exempt Org Returns Are Due | 05.15.13
Inspector General’s IRS Report: Highlights, Full Text [WSJ, Report]
The Internal Revenue Service used “inappropriate criteria” to review applications from tea party and other groups seeking to qualify as tax-exempt “social welfare” organizations, according to a government watchdog report that offers the clearest picture to date on a practice that began at least as early as 2010. The report found that while some work began right away on applications that presented potential “significant campaign interventions,” no work was completed on the majority of these applications for 13 months, while agents awaited guidance from the tax-exempt office headquarters.
Treasury Report: The IRS Owes Apologies to More Than Just Tea Party Groups [Atlantic]
The concerns are threefold. The first is that IRS employees established an unfair process for flagging applications for additional review. The second is that the review process itself took an exceptionally long time. The third is that requests for additional information from applicants was handled improperly.
Carney Says White House Not Involved in IRS Targeting Groups [Bloomberg]
“I am certainly not aware and am confident that no one here was involved in this,” Carney said.
Those exempt organization returns are due today. [Tax Update]
Joe Kristan reminds us.
Olympus books profit as it shrugs off accounting scandal [AFP]
Japan's Olympus said Wednesday it swung to an annual net profit as it turns the page on a huge accounting scandal, adding that it expects profits to more than triple in the current fiscal year. The camera and medical equipment maker said net profit for the year to March was 8.02 billion yen ($78 million), reversing a year-earlier loss of 48.99 billion yen. Sales were worth 743.85 billion yen, down 12.3 percent. The firm's return to profitability came as it rebuilds from a scandal for which several former executives are facing criminal charges.
Would You Pay $2 Million for This Painting of Naked Bea Arthur? [NSFW] [Gawker]
This reminds me of how much liked the movie Airheads.
Rich Manhattan moms hire handicapped tour guides so kids can cut lines at Disney World [NYP]
The “black-market Disney guides” run $130 an hour, or $1,040 for an eight-hour day. “My daughter waited one minute to get on ‘It’s a Small World’ — the other kids had to wait 2 1/2 hours,” crowed one mom, who hired a disabled guide through Dream Tours Florida. “You can’t go to Disney without a tour concierge,’’ she sniffed. “This is how the 1 percent does Disney.” The woman said she hired a Dream Tours guide to escort her, her husband and their 1-year-old son and 5-year-old daughter through the park in a motorized scooter with a “handicapped” sign on it. The group was sent straight to an auxiliary entrance at the front of each attraction.
Footnotes: There Are More Opinions on This IRS Drama Than Low-Level Staffers in Cincinnati | 05.14.13
Florida Atlantic University accounting grads once again have a 100% employment rate post-graduation [SunSentinel]
A former PwC partner in Northern Ireland who took a break from work due to stress and depression did not win his bid to overturn a ruling that he suffered disability discrimination [Belfast Telegraph]
If you're anywhere near Long Island and, like many, a Greg Kyte fanboy stalker, head over to the Laughing Devil Comedy Festival tonight to see him do what he does best when he isn't not writing here. Kyte's on at 8. [Laughing Devil]
Peter J Reilly thinks if the IRS would just stick to collecting taxes, everything will be cool [Forbes]
Under GW Bush, the IRS went after some "liberal" groups as well [Salon]
Justice Dept. Opens Criminal Inquiry Into I.R.S. Audits [NY Times]
There Is No Good Fix for the IRS Tea Party Problem [Bloomberg]
The Real I.R.S. Scandal [T]he scandal isn’t what’s illegal—it’s what’s legal. It’s what society chooses not to punish that tells us most about the prevailing ethical standards of the time. Campaign finance operates by shaky, or even nonexistent, rules, and powerful players game the system with impunity. A handful of I.R.S. employees saw this and tried, in a small way, to impose some small sense of order. For that, they’ll likely be ushered into bureaucratic oblivion. [New Yorker]
Oh, and in case you missed it, this has nothing to do with accounting but one of the greatest social media meltdowns of all time is happening as we speak, don't miss it. [Facebook]
In what is the most serious escalation yet of the revelations surrounding the agency, Holder said the Justice Department and the Federal Bureau of Investigation would examine whether any laws were violated at the IRS, which has acknowledged that it selected groups with the words “tea party” and “patriot” in their names for special audits. “The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters,” Holder said in announcing the investigation. “We are examining the facts to see if there were criminal violations.” The criminal probe ensures that the IRS will be the subject of intense attention for the foreseeable future. [WaPo]
The Only Thing Better Than Working an Eminem Lyric into Your Accounting Paper Is Your Professor Calling You Out For It
I haven't written anything for academic purposes in quite some time, but it's nice to know that some of the profession's future have some creative thoughts bouncing around the grey matter.
The following was sent to us from a student who told us that "one of my buddies who was able to slip in a Dr. Dre/Eminem reference in a paper for his capstone accounting class and was called out on it."
If you're not familiar with hip-hop, the excerpt highlighted comes from the song Forget About Dre, a single from Dr. Dre's album 2001 that features Eminem. I doubt that either man ever dreamed that any words they've written or uttered would ever wind up in an accounting paper, but there you have it.
It's equally remarkable that this professor recognized it and we're told that the "12" was 100% of the points possible, so the prof rewarded the student appropriately.
Really nice job all around.
Until last Friday, tax reform seemed to be working a steady pace towards...something. I mean, Max & Dave have both a Twitter account and a website dedicated to the cause so you know they were getting serious about the thing. This kind of effort is enough to get the ghost of Ronald Reagan wandering around DC handing out Jelly Bellies.
But then last Friday happened and pretty much everybody grabbed the nearest flak they could find to issue a statement about how appalled they are that such a violation of public trust could occur at an agency that should be scrutinizing everyone with the same fervor.
Naturally, this IRS targeting Tea Party Patriots thing has some people worried that some lawmakers will get a little distracted:
The question, lobbyists said, is how much time and resources the scandal ends up siphoning from the reform effort. If links to Obama administration appointees can be made, the problems at the IRS could mushroom. The House Ways and Means Committee has set its first hearing on the matter for Friday, and the Senate Finance Committee has pledged to investigate as well. Pro-tax-reform lobbyists worry that any time spent dissecting the Tea Party targeting is time not spent on comprehensive tax reform — a project that demands lots of attention, scandal or no.
Right! Tax reform is complicated! So when some people would rather focus their efforts tearing down an easy target to score political points rather than working improving our tax code that could set things back a bit.
But some people aren't as worried. This is the Ways and Means Committee after all and they're used to multi-tasking:“This committee has pretty expansive jurisdiction and is used to having a lot going on simultaneously,” a House GOP aide said. That's good news, I guess. Plus, there's a chance to tie in new legislation that would criminalize targeting political groups with tax audits to the reform effort, which could get some Tea Party types on board who weren't before. That's pretty clever! But ultimately, this scandal crushes any momentum the tax reform effort had. Our pals Dave & Max are now focusing on these investigatory hearings and something tells me the political theater of grilling IRS bureaucrats will make for good soundbites in the media as opposed to, say, the merits of the mortgage interest deduction. Maybe I'm wrong. Maybe Baucus and Camp will dig in even more now, forgoing sleep, family, food, Mad Men, etc. to get this thing done because of what it would mean for their legacies and for the political climate in DC. MAYBE. But if I had bet on the "Pass" line for tax reform, I wouldn't feel very good about my wager right now. K Street worries over spread of IRS scandal amid push for tax reform [The Hill]
Remember back in 2011 when KPMG announced a loyalty compensation program called the Early Career Investment Bonus? It was a pretty creative plan on the firm's leadership to entice senior associates to stick with the firm for the better part of a decade. For that commitment, a person could hypothetically accumulate a $36,000 payout through the deferment of their bonuses over the course of three years. New seniors were kind of excited about the possiblities; third-year SAs were not.
The days and weeks and busy seasons have rolled by as they tend to do and last week, a source at KPMG reminded us that the payouts start tomorrow. That matches the date in the written communication from KPMG CEO John Veihmeyer and then-Vice Chair Henry Keizer that we published back in July 2011.
So unless there's been some kind of Scott London clawback, 1, 2, and 3-rated senior associates from 2011 that elected to take a payout, will receive $4,000 tomorrow. Less applicable taxes of course. If you're not getting a payout because you're deferring your bonus, good luck to you -- you'll need it. If you're not getting a payout because you weren't rated a 1, 2, or 3, then you're probably not at KPMG any more. If by some small miracle you are still of the House of Klynveld, then I suggest you walk around looking for someone willing to kuddle.
How are people responding? Well, when we asked one source -- a senior manager, who didn't qualify for ECIB -- whether the SAs were "grumbling or do they need to curb the enthusiasm" the person responded:
They're not grumbling. But they might be rubbing people above them the wrong way who didn't qualify for it.
That's not exactly a ringing endorsement of the plan, but it's not a condemnation either.
Since we're on the topic of money, there has to be some opinions out there. Feel free to share them now.
Accounting News Roundup: The New COSO Is Here; 'We should have done a better job'; Weird IRS Questions | 05.14.13
COSO Issues Updated Internal Control-Integrated Framework and Related Illustrative Document [COSO]
Authored by PwC under the direction of the COSO Board, the updated Framework is expected to help organizations design and implement internal control in light of many changes in business and operating environments since the issuance of the original Framework, broaden the application of internal control in addressing operations and reporting objectives, and clarify the requirements for determining what constitutes effective internal control.
IRS: 'We should have done a better job' [USAT]
Acting Commissioner Steven Miller: "The Internal Revenue Service recognizes that we should have done a better job of handling the influx of applications by advocacy organizations. Mistakes were made, but they were in no way due to any political or partisan motivation. We are — and will continue to be — dedicated to reviewing all applications for tax-exempt status in an impartial manner. We sought to centralize work in this area in 2010 because our office of Exempt Organizations observed a sharp increase in the number of section 501(c)(3) and 501(c)(4) applications coming from groups potentially engaged in political campaign intervention. Between 2010 and 2012, the number of applications for 501(c)(4) status more than doubled, from 1,591 to 3,398. Because the law limits and in some cases prohibits political intervention by exempt organizations, the IRS must carefully review applications based on the facts of each case. While centralizing cases for consistency made sense, the way we initially centralized them did not."
Five questions on the IRS mess [Wonkblog/WaPo]
Sorta important: "Did the IRS higher-ups act appropriately? Right now, much of the reporting indicates that IRS higher-ups shut this down pretty much as soon as they heard about it. Their sin, if there was one, was that they didn’t disclose that anything had gone awry when asked whether the IRS was targeting conservative groups. But they may also have thought that this wasn’t targeting conservative groups — it was simply a reasonable, but ultimately unwise, way of filtering politicized applications for appropriate scrutiny. The IG report should tell us more on this score." BUT ALSO: "In which direction does our outrage point? Do we think the tea party groups really are primarily non-political social welfare organizations and they should’ve received 501(c)4 designation more smoothly? Or do we think that they’re clearly political organizations and their applications should’ve been closely scrutinized and maybe even rejected – but so too should the applications from a host of other politicized groups on the left and the right?"
Just 55 Questions, Ma’am [Slate]
“The first we heard from them was in a letter dated January 25, 2012, asking for the answers—get this—by February 16.”
Weirdest IRS Questions for the Tea Party: Views, Donors, and Etymology [ABC]
"Please explain in detail your organization’s involvement with the Tea Party."
Political storm bursts over IRS [The Hill]
“I don’t care whether you’re a Democrat, independent or Republican. At some point there are going to be Republican administrations. At some point there are going to be Democratic ones,” Obama said in a news conference. “Either way, you don’t want the IRS ever being perceived to be biased and anything less than neutral in terms of how they operate.” The top lawmakers at the House Ways and Means Committee, Chairman Dave Camp (R-Mich.) and ranking Democrat Sandy Levin (Mich.), announced Monday that their panel would hold the first congressional hearing on the IRS’s actions Friday, one week after the news first broke. “The Committee on Ways and Means will get to the bottom of this practice and ensure it never takes place again,” Camp said.
Four Easy Fixes for Corporate Taxation [BI]
By forcing companies to un-consolidate their reports, we would know where their employees were, where their their sales (both source and destination of products and services) were, where they declared their profits and paid their taxes, etc. Part of the beauty of "publish what you pay" is that it doesn't require the cooperation of the tax havens to obtain the information.
Tom Selling's adorable cynicism is showing: "I can’t help thinking that E&Y conducts these types of studies to brand itself a thought leader on issues relating to fraud prevention, bribery and corruption. There is nothing wrong with that; but, it seems that in this case EY is walking a tightrope. On the one hand, EY is attempting to induce potential clients to consider engaging consultants to help design and implement controls for reducing business risk from bribery, fraud, etc. On the other hand, EY has to be careful not fall off the wrong side of that tightrope. The survey appears to have been conducted, and the report was written, such that nothing should explicitly suggest that audit quality (i.e., EY’s flagship product) could be part of the problem; or stated another way, that the audit profession should be doing a better job of reducing business risk through the audit itself — without charging more fees to do what they should be doing already."
Unruly woman, belting out Whitney Houston songs, kicked off flight [WBTV]
The woman disrupted the flight in part by belting out Whitney Houston songs. And based on the video posted by a passenger on the flight, the woman won't be getting a golden ticket onto the American Idol competition anytime soon. The American Airlines flight departed Los Angeles International Airport at 3:30 p.m. Thursday. It was headed to John F. Kennedy International Airport in New York. But it made an unscheduled landing at KCI at 6:06 p.m. "The woman was being disruptive and was removed from the plane for interfering with the flight crew," airport spokesman Joe McBride said Friday. "There was a federal air marshal on the aircraft, who subdued the woman and put her in cuffs and removed her from the plane." As she was leaving the plane, she crooned, "I will always love you," which was written by Dolly Parton. Both Parton and Houston performed the song.
Footnotes: Acting Commish Knew About Targeting in 2012; A Pirate Accountant; Banks Have a Suggestion for Loan Loss Accounting | 05.13.13
IRS: Top Official First Told of Targeting in 2012 [AP]
I.R.S. Focus on Conservatives Gives G.O.P. an Issue to Seize On [NYT]
Europe Eases Corporate Tax Dodge as Worker Burdens Rise [Bloomberg]
CAQ Advises PCAOB on Audit Quality Indicators [AT]
Sales Tax Talk and Reality [Economix/NYT]
Germany Arrests Alleged Somali Pirate Accountant German police arrested a man who allegedly acted as an accountant for Somali pirates blamed for the hijacking of an oil tanker in 2010, authorities said Monday. The man, who was identified only by the initial 'M', was arrested Wednesday at a center for asylum seekers in the central city of Giessen, Lower Saxony state police said in a statement. "According to initial investigations he was responsible for the seized ship's food supply as well as the bookkeeping, which formed the basis for distributing the ransom money to the pirates involved," police said, adding that the man had made a partial confession. [AP]
Beyonce's Dad has some tax troubles. [TMZ]
Bloomberg's Jonathan Weil debates Ken Langone on Corporate Board governance. [Bloomberg]
U.S. banks push back on change in loan loss accounting Donna Fisher, a senior vice president at the American Bankers Association, said banks are trying to get standard-setters to agree on a middle ground. "The FASB model will result in significantly larger, more volatile and less reliable (loan loss) allowances," Fisher said. FASB's proposal would require businesses to look at both past experience and reasonable estimates of future losses, and reserve for those losses the day a loan is originated. The IASB's proposal would only make banks consider losses expected over the next 12 months, unless a loan's credit has deteriorated significantly. If that is the case, reserves would have to be made for the full expected loss.Friday's letter said banks had concerns with both models. It suggested losses be estimated over 12 months, or the period that could yield reliable estimates, whichever is greater. [Reuters]
The IRS Was Wrong to Single Out Tea Parties, But Many Political Groups Should Not be Tax-Exempt [TaxVox/TPC]
As you may recall, after Joe Echevarria became CEO of Deloitte in 2011, we learned that his house in Westchester was up for grabs with an asking price of $2.8 million. The 6,000 square-foot spread had hit the market in March of that year listed at $3 mil, so you can safely assume that Joe and his wife Ana were anxious to move the thing.
The Echevarrias' broker was Bernice Gottleib, who had an exclusive 6-month contract to sell the house that would earn her a 4% commission. She was even a long-time friend of the couple and trained Ana to be a broker. That sounds like a pretty good deal -- friends helping each other out and all that.
Of course, people get a little prickly when it comes to their homes and Ana Echevarria didn't think things were moving along quick enough:[T]he couple secretly sold it to realty firm Weichert, which handles Deloitte relocations, in 2011. Small problem -- the sale occurred in the window of Gottleib's contract. Gottleib sued (see the suit on the next page), naturally, for breach of contract: [L]ast week, Supreme Court Justice Mary H. Smith ruled their contract “unambiguously” made it clear the Echevarrias were obligated to direct all sales inquiries to Gottlieb, and that “Ana had admitted that she had failed to inform Ms. Gottlieb of the Weichert offer.” Did we mention that the house only sold for $2.1 million? Yep! So that means Joe and Mrs. Joe cut their original asking price by 30% in five months and now they get to hand over $85k (plus, $25k in attorney's fees!) to their broker who didn't even earn it. Ms. Gottleib told the Post that she was relieved "just has been done" but was also "embarrassed, betrayed and humiliated." No one in Camp Echevarria (lawyer, Deloitte) commented. They're probably content to let this one go. Tax mogul must pay broker [NYP]
As you've probably heard by now, the head of the IRS's tax-exempt organizations divison, Lois Lerner, apologized on Friday that the agency targeted 501(c)4 organizations with "Tea Party" and "patriot" in their names. Lerner said this was not done out of political bias, because, as we all know, those words don't hold any political overtones.
What we also now know is that the audit from the IRS watchdog -- the Treasury Inspector General of Tax Administration -- will come out this week and say that the agents in Cincinnati who are being thrown under the bus for this fiasco actually expanded their search to include groups seeking to “make America a better place to live” or “criticize how the country is being run” and, as ABC reports, "limited government." So, if you weren't sure if the IRS was targeting groups based on political motivations before, you have to agree that this sorta looks bad! Add in the fact that former IRS Commissioner Doug Shulman testified in March 2012 that "There's absolutely no targeting," when Ms. Lerner knew about the targeting in June 2011 and this looks SUPER bad!
The President has said this targeting by the Service is "outrageous and there’s no place for it," vowing that someone will get to the bottom of this, but the Republicans are way ahead of him as hearings are already being scheduled. So if you enjoy bad political theater, get your DVRs ready.
Anyway, there's a roundup of things from across the web below and while it's still early on in this shitshow to come to any concrete conclusions, we're currently in the "this was gross incompetence in action" camp that Kevin Drum discusses (don't worry, the counter to this is below).
Simply, if you want your organization to be in compliance with 501(c)4, the majority of your activities have to be non-political. In their search for applicants who were not complying with those rules, the IRS employees involved figured they'd make their lives easier by searching for things like "Tea Party" and "patriot" in the names of the organizations. The problem is they didn't apply that kind of scrutiny to groups with "progressive" or "change" or "tea baggers" and the like in their names. Omitting those investigative measures makes things look incredibly biased against conversative conservative organizations. It doesn't matter if there was an explicitly political motive or not. The appearance is that these employees were using the political viewpoints of the Tea Party groups to conduct their investigations into compliance with 501(c)4.
The Washington Post Editorial Board, like Drum, wonders if stupid is as stupid does and they can't be trusted to find out:
If it was not partisanship, was it incompetence? Stupidity, on a breathtaking scale? At this point, the IRS has lost any standing to determine and report on what exactly happened. Certainly Congress will investigate, as House Majority Leader Eric Cantor (R-Va.) promised. Mr. Obama also should guarantee an unimpeachably independent inquiry.
Tax Analysts' Jeremy Scott continues with the dummies narrative:
The incompetence boggles the mind. It’s also bewildering how the Service could sit in front of GOP lawmakers and chastise them for underfunding tax enforcement when employees were using some of those supposedly precious funds to conduct a politically charged vendetta against conservative exempt organizations.
But at The Daily Beast, Megan McArdle doesn't buy it; that is, the IRS didn't need the magic words of "Tea Party" and "patriot" if they were doing investigations the right way:
[The IRS] have all the information they need to do that without any special filter. They can search for the date of the application. If what you're concerned about is that most of the new groups being created are in fact thinly disguised electioneering vehicles, then what you want to do is take a random sample of the new groups, review them, and see what percentage turn out to be self-dealing or otherwised engaged in inappropriate behavior. Instead, the IRS method for dealing with the volume was to take an unrandom sample. And how did they decide that you deserved extra scrutiny? Because you had "tea party" or "patriot" in your name. Since the Tea Party was a brand new movement in 2010, they couldn't possibly have had any data indicating that such groups were more likely to be doing something improper. So how exactly did they come up with this filter? There is no answer that does not ultimately resolve to "political bias".
Ezra Klein reminded everyone on Friday that most people are missing the broader point, which is that all 501(c)4 organizations need to be scrutinized:
The problem wasn’t that the IRS was skeptical of tea party groups registering as 501(c)4s. It’s that it hasn’t been skeptical of Organizing for America, Crossroads GPS, Priorities USA and Heritage Action Fund registering as 501(c)4s. The IRS should be treating all these groups equally and appropriately — which would mean much more harshly.
Writing at CNN, Michael Macleod-Ball and Gabe Rottman of the ACLU's Washington Legislative Office opine, "It shouldn't need to be said: Even the tea party deserves First Amendment protection."
[T]he IRS apology shows that concerns over selective enforcement are prescient. Those in power will always be tempted to use political speech restrictions against opposing candidates or causes.
The New York Times' Ross Douthat says the anxiety created at the IRS about Tea Party groups might be a "Brown Scare":
Where might an enterprising, public-spirited I.R.S. agent get the idea that a Tea Party group deserved more scrutiny from the government than the typical band of activists seeking tax-exempt status? Oh, I don’t know: why, maybe from all the prominent voices who spent the first two years of the Obama era worrying that the Tea Party wasn’t just a typically messy expression of citizen activism, but something much darker — an expression of crypto-fascist, crypto-racist rage, part Timothy McVeigh and part Bull Connor, potentially carrying a wave of terrorist violence in its wings.
Naturally, the Republicans are all over this and Senator Susan Collins (R-ME) thinks it goes higher than just the offenders in Cincinnati:
“I just don’t buy that this was a couple rogue IRS employees,” said Sen. Susan Collins, R-Maine, on CNN’s “State of the Union.” “There’s evidence that higher level supervisors were aware of this.”
Senator Marco Rubio (R-FL) wants Acting Commissioner Steven Miller to resign:
“It is clear the IRS cannot operate with even a shred of the American people’s confidence under the current leadership,” Rubio wrote in a letter today to Treasury secretary Jack Lew. “Therefore, I strongly urge that you and President Obama demand the IRS Commissioner’s resignation, effectively immediately. No government agency that has behaved in such a manner can possibly instill any faith and respect from the American public.”
Rep. Michael Turner (R-OH) has got the ball rolling on the impassable legislation front:
"Americans of all political beliefs have been rightly outraged by the revelation of the IRS's efforts to target certain political organizations," Turner said Monday. "The fact that this could occur with little to no corrective action against those who seek to silence their fellow citizens is unacceptable." Under current law, IRS workers who discriminate against taxpayers can already be fired, although discretion lies with their supervisors. Turner's bill would boost the maximum penalty to a $5,000 fine, five years in prison or both.
And believe it or not, even Democrats are jumping on the pile:Monday morning, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sens. Tim Kaine (D-Va.) and Joe Manchin (D-W.Va.) all issued statements denouncing the IRS and calling for an investigation and corrective action. “These actions by the IRS are an outrageous abuse of power and a breach of the public’s trust. Targeting groups based on their political views is not only inappropriate but it is intolerable,” Baucus said, adding: “The IRS will now be the ones put under additional scrutiny.” [...] “The actions of the IRS are unacceptable and un-American,” [Mancin] said. “Government agencies using their bureaucratic muscle to target Americans for their political beliefs cannot be tolerated. The president must immediately condemn this attack on our values, find those individuals in his Administration who are responsible and fire them.” Added Kaine: ”There’s no excuse for ideological discrimination in our system. The Administration should take swift action to get to the bottom of this to ensure those responsible for misconduct are held accountable and establish appropriate safeguards to prevent this from ever happening again.” As a sage greenskeeper once said, "I don't think the heavy stuff's going to come down for quite a while."
Protip: Threatening to Kill Your Colleagues, Even in the Midst of a Brutal Busy Season, Is Never Cool
Over the weekend, we received quite the disturbing item in the ole tip box. Our tipster did not leave an email address so we cannot possibly verify this but wanted to share anyway:
Something very interesting happened to me during busy season. An entry level threatened to kill me. He wrote a note saying he wanted to kill me. I scolded him for plugging numbers during testing and this is what happens to me. Funny thing is the guy didn't get fired. Didn't get reprimanded one bit. Got kicked off the client but that's about it. Absolutely unbelievable.
Presumably still fearing for his life, our tipster did not include a photo of this note or any other evidence, so we have included an artist's rendering of the note:
Now, I think we've all been to the point where we want to blurt out really inappropriate things like "FIRE!!" in a movie theater or "I AM GOING TO KILL YOU" to a manager but most of us have the sense to bite our tongues. I'm pretty sure I've told my esteemed editor Colin I want to strangle him more than once but I generally do this on the phone and if in a written communication, I make sure to include a condescending "haha" and my choice of emoticon at the end of the statement so he doesn't call the cops on me.
Threatening the life of a colleague is defintely a fireable offense, no? If I were the tipster, I'd find a new firm as the culture at this one clearly isn't a good fit if this murderous newbie is running around leaving notes like this.
Tipster, if you're out there, make up a Mailinator account or something and get back in touch, we have to see this note.
Accounting News Roundup: IRS Taking Heat; Deckers Keeping KPMG as Auditor; Signs Your Firm's Partners Don't Trust Each Other | 05.13.13
IRS targeted groups critical of government, documents from agency probe show [WaPo]
At various points over the past two years, Internal Revenue Service officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general. The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.” The staffers in the Cincinnati field office were making high-level decisions on how to evaluate the groups because a decade ago the IRS assigned all applications to that unit. The IRS also eliminated an automatic after-the-fact review process Washington used to conduct such determinations. Marcus Owens, who oversaw tax-exempt groups at the IRS between 1990 and 1999, said that delegation “carries with it a risk” because the Cincinnati office “isn’t as plugged into what’s [politically] sensitive as Washington.”
One of the small lingering questions from the insider-trading scandal involving a former KPMG LLP partner has finally been addressed: What would Deckers Outdoor Corp. do? [...] The answer for Deckers, disclosed this week: Keep KPMG as its auditor, but cancel its vote for its shareholders to approve KPMG, apparently out of concern that the insider-trading affair complicated efforts to ensure that shareholders had enough information and notice about what had happened before they cast their votes. Seven Signs You’re Working in a Firm Where the Partners Don’t Trust Each Other [CPAT] #8 -- They all work at Dewey, Cheatum & Howe. Minnesota budget deal: Higher taxes on high earners, tobacco [MST] DFL Gov. Mark Dayton and Democratic legislative leaders reached a budget agreement Sunday that calls for $2 billion in new taxes and boosts spending for schools and property tax relief. The Democrats are relying on a tobacco tax hike and the governor’s long-sought income tax increase on high earners to pay for the new spending. The budget outline scraps a proposed sales tax on clothing, but lawmakers continue to consider resurrecting at least part of a heavily criticized plan to tax businesses services. “It’s a budget that is going to work for Minnesota. It’s going to put Minnesota to work,” Dayton said Sunday afternoon. “It’s going to fulfill our promises to invest in education and infrastructure. We’re going to see a better Minnesota as a result of this budget.” Treaty shopping and auditor independence [China Accounting Blog]
Maybe a little heavy for a Monday morning, but Paul Gillis has a nice payoff at the end: "Auditors have a conflict of interest here. Setting up these treaty structures has been a profitable business for the firms. How can they now tell their clients that it is more likely than not that the structure does not actually work, and that they need to accrue withholding taxes at a higher rate? The audit partner may be concerned with this issue, but how can he demand the company accrue withholding taxes at the non-treaty rate when he has his tax partner who he uses as an expert to evaluate the issue advocating the client’s position? Audit committees should not permit audit firms to also provide tax services." DPS rehires accountant accused of fraud, forgery [ADS] The Arizona Department of Public Safety is rehiring an accountant who was fired for allegedly making false statements to the police agency about his qualifications. A state law-enforcement review board overturned the firing of Richard Echols, and DPS spokesman Bart Graves said the department is reinstating Echols because the board's decision is binding. "We will abide by the board's ruling," Graves said. [...] He has pleaded not guilty to the criminal charges of fraud and forgery and awaits trial in Maricopa County Superior Court. The charges accusing him of lying about his qualifications by signing employment applications and through other actions. His attorney contends prosecutors have insufficient evidence and that Echols had no criminal intent. According to the Arizona State Board of Accountancy, Echols has not been a certified accountant in Arizona since 2000.
Instagram 'food porn' photo leads IRS to identity thieves [OSS]
IRS agents on the trail of a man who claimed he had 700,000 stolen identities to sell said they only had a few clues about who he was early in the investigation. A witness working undercover for the IRS told agents the man went by the name "Troy," he was dating [Tenise] Thomason and said he was from Harlem during a Jan. 5 meeting at YOLO restaurant on Las Olas Boulevard. The break came Jan. 7 after the three met up again – at the swanky Morton's steakhouse on the corner of Federal Highway and Broward Boulevard – so the couple could turn over a flash drive containing 50,000 identities they thought would be used to file fraudulent income tax returns. When IRS agents examined the drive – which contained only 50 identities – they found hidden data linking the drive to "Troy Maye." Louis Babino, a special agent with the IRS criminal investigation unit, searched online and found a profile for "TROYMAYE" on Instagram, a social media website for sharing photos. Babino wrote that he found "a photo of a steak and macaroni and cheese meal containing the caption "Morton's" that coincided with the Jan. 7 meeting between the witness and the couple.
Apology not accepted, IRS. [FOX]
Republicans slam IRS on 'Tea Party' targeting [Reuters]
Clarity on Revenue Recognition Coming [CFO]
PCAOB member Jay Hanson gave a speech in Ohio today about auditing and stuff. [PCAOB]
Is Model N A Transparency Violation? [GOA]
Auditors miss basic steps in corporate fraud cases: study [Reuters]
The Charitable Contributions Deduction: A Tax Debate or a Question of Charity Versus Government? [TPC]
Joint Tax Committee Scores President's Budget as $890 Billion Tax Increase [TaxProf]