EXIT 2012, ENTER 2013
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The end of 2012 came with plenty of action and confusion, with negotiations over the fiscal cliff playing out in acrimonious slow motion. At press time, no sort of deal had been reached, and it looked entirely possible that tax preparers would be facing yet another delayed filing season, while the nation would face potentially damaging tax hikes and spending cuts.
December hosted its usual slew of accounting firm mergers, acquisitions and other forms of combination, with the West Coast union of Top 100 Firms Moss Adams and Mohler Nixon only the largest of many.
Elisse Walter stepped up as chair of the Securities and Exchange Commission, succeeding Mary Schapiro, who left in mid-December. An SEC commissioner since 2008, Walter briefly served as acting chair before Schapiro was named chair in 2009. Walter previously served as a senior vice president at the Financial Industry Regulatory Authority.
In a tenure that lasted longer than those of most commission chairs, Schapiro was widely credited with toughening the agency's enforcement and strengthening it in the wake of its disastrous performance leading up to the financial crisis. In each of the past two years, the agency has brought more enforcement actions than ever before, including 735 enforcement actions in 2011 and 734 in 2012. However, under Schapiro the SEC was slow to reach any conclusions about the possibility of adopting International Financial Reporting Standards in the U.S., creating a fair amount of uncertainty in accounting standard-setting.
The new Private Company Council held its inaugural meeting in early December. In addition to certain housekeeping tasks, it identified four areas of research for agenda consideration.
The Public Company Accounting Oversight Board released a report in mid-December in which it identified widespread problems at eight major accounting firms with their audits of internal control over financial reporting.
Separately, the board issued a staff audit practice alert to remind auditors of their requirement to exercise professional skepticism throughout their audits, noting that it continues to observe instances in which circumstances suggest that auditors did not appropriately apply professional skepticism in their audits.
The chairs of the Financial Accounting Standards Board and the International Accounting Standards Board discussed some of the differences between the two standard-setters at an American Institute of CPAs conference as the convergence project approaches its end.
Separately, FASB issued a proposed Accounting Standards Update aimed at clarifying the scope of transactions that would be subject to disclosures about offsetting of assets and liabilities on the balance sheet. Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities would clarify the scope of transactions that are subject to the new disclosures about offsetting.
The AICPA has assembled a set of training courses and online resources to help auditors implement its new clarified auditing standards, which took effect in mid-December as a result of its Clarity Project, which aimed to make the standards easier to read, understand and apply.
IRS VS. AMT
With tax season approaching, the Internal Revenue Service took a few opportunities to remind Congress of unfinished business, particularly in relation to the uncertain status of the Alternative Minimum Tax. Acting Commissioner Steven Miller warned Congress that leaving the AMT unpatched could lead to higher taxes for millions, to say nothing of significantly delaying filing season. The IRS also released statistics showing that 4 million more people were hit by the AMT in 2010 than in 2009, and the IRS Oversight Board sent a letter to Congress urging them to act to prevent the AMT from extending to as many as 28 million more taxpayers.
Among its multitude of preparations for tax season, the IRS issued proposed regulations on the 0.9 percent Additional Medicare Tax for upper-income taxpayers scheduled to take effect next year as a result of the Affordable Care Act in Reg-130074-11; proposed regs and a FAQ on the Net Investment Income Tax of 3.8 percent on the net investment income of individuals, estates and trusts above a certain threshold; and interim guidance in Notice 2012-77 on the ACA's medical device excise tax.
It also released its annual update identifying the circumstances under which the disclosure on a taxpayer's income tax return with respect to an item or a position is adequate for the purposes of reducing the understatement of income tax and avoiding the tax return preparer penalty in Rev. Proc. 2012-51; raised the standard mileage rates by 1 cent per mile for next year; released, with the Treasury Department, their 2012-2013 priority guidance plan outlining 317 projects that they plan to prioritize from July 2012 to June 2013 in providing guidance and regulations to tax practitioners; and updated procedures to strengthen the Individual Taxpayer Identification Number program requirements, which had come under some criticism earlier in 2012.
On a happy note, a post on IRS.gov claimed that the service expects to get most refunds issued in under 21 days this season.
The Treasury Inspector General for Tax Administration said in a report that the IRS has made improvements to its IT systems, but still needs to do more to protect sensitive financial and taxpayer data and deliver new systems. TIGTA particularly noted concerns about the IRS's Modernization Program.
IN OTHER NEWS
KPMG International announced annual combined revenues of $23.03 billion for the fiscal year ended Sept. 30, 2012, a 4.4 percent increase in local currency terms over the previous year, and a 1.4 percent increase in U.S. dollar terms. Growth was strongest in advisory services, which grew by 8.3 percent, to $7.86 billion, and in tax, which grew by 6.3 percent to $4.86 billion, while audit revenues grew by only 0.9 percent, to $10.31 billion. The Americas delivered strong growth for the year, with revenues rising by 7 percent. The Europe, Middle East and Africa region reported increased revenues of 4 percent, while the Asia-Pacific region grew by only 1.1 percent, reflecting subdued growth in North Asia. KPMG firms in Argentina, Brazil, Chile, India and Turkey all grew by more than 20 percent, while revenues in Africa and Indonesia rose by over 10 percent. KPMG now operates in 156 countries, and increased its global workforce by more than 5 percent, to more than 152,000 partners and staff.
The member firms of the worldwide BDO network grew their annual revenue 6.11 percent for the year ending Sept. 30, 2012, for a total of $6.015 billion. Assurance services accounted for 61 percent of combined fee income, tax services represented 18 percent and advisory services 21 percent. The Asia-Pacific region was the fastest growing part of the world for BDO, with an increase in combined fee income of 48 percent. The Middle East region scored growth of 32 percent, and North America and the Caribbean saw double-digit growth. Sub-Saharan Africa saw an 8.4 percent increase and Europe a 4.6 percent increase. BDO's network includes 54,933 staff in 138 countries.
The National Association of State Boards of Accountancy named the members of its 2012-2013 board of directors, which will be chaired by Gaylen Hansen, a partner at Denver-based Top 100 Firm Ehrhardt Keefe Steiner & Hottman. Carlos Johnson will serve as vice chair; Douglas Skiles as Central regional director; Don Aubrey as Pacific regional director; and Nicole Olson-Kasin as chair of NASBA's executive director's committee and executive directors' liaison to NASBA's board of directors.
Accounting Today is in the midst of collecting responses for our annual Top 100 Firms and Regional Leaders reports -- if your firm should be considered and you haven't been contacted, e-mail us at AcToday@SourceMedia.com to participate.