Off balanceGlenn Cheney's article, "FASB stock comp rule ends decade-old debate - for now" (Jan. 24-Feb. 6, 2005, page 14) refers to keeping "stock option compensation off their balance sheets" and "the hypothetical effect on the balance sheets if such compensation were expensed."

I wonder how this glitch could occur in such an outstanding accounting publication. Surely he meant to refer to the income statements rather than the balance sheets.

Ira M. Landis
Los Angeles

Not completely sold

I am writing in regard to Stuart Kahan's article, "Looking to sell your firm?" (Accounting Today, Jan. 24-Feb. 6, 2005, page 1). I found the article interesting and have some mixed feedback regarding the facts and points that were made.

Let me state up front that I agree with Marc Rosenberg - the scale of larger firms buying smaller ones is relative. I also agree that most firms are eager to talk about acquisitions. I found Rosenberg's comments to be accurate throughout the article.

However, in my experience, I have found that most of the firms eager to talk are not always willing to risk any of their investment money toward a downpayment. Instead, they want the seller to take all the risk on an earn-out-type transaction.

I was very surprised to read references to firms paying "two-and-a-half times annual fees." I have been a full-time practice broker and succession consultant to the CPA industry for 10 years, and I have never been involved with or even heard of a transaction based on a multiple of "two-and-a-half times annual fees." The calculation required seems a bit hyperbolic and, frankly, I do not understand how that type of valuation could cash-flow. Valuations up and down the Pacific Coast, from Seattle to San Diego, have run from a high of 1.5 times annual revenue to under one times annual revenue.

Finally, I am curious why an article on selling accounting firms did not source any accounting practice brokers. There are very few individuals or companies that spend the majority of their time actually selling and merging practices. ProHorizons, Accounting Practice Sales and Professional Accounting Sales are all very active in this area and represent hundreds of sales annually. They are also all owned and operated by CPAs.

John R. Ezell, CPA
President, ProHorizons
Los Altos, Calif.

Mom's 'I told you so'

Regarding Bill Carlino's editorial ("Social Security reform: An oxymoron?" Accounting Today, Jan. 24-Feb. 7, 2005, page 6): Just remind his mom that Social Security as we know and love it is primarily the product of two great liberal democrats - Franklin Delano Roosevelt, who wanted old folks to retire so young folks could get jobs instead of hanging around planning revolutions; and Lyndon Johnson, who merged the Social Security taxes into the general federal budget so that "the people" wouldn't notice the real costs of his Vietnam War, the Great Society, the War on Drugs and other liberal schemes.

If the truth was understood about these two actions, Ponzi would look good in comparison.

My comments have no relation to my employer.

Charles Brumbelow, CFO
Nashville Public Television
Nashville, Tenn.

More on transparency

I just read the letter by Thomas N. Tone ("Institute is anything but transparent," Accounting Today, Feb. 7-20, 2005, page 6), and have another thing to add.

Speaking of "transparency," I wondered what Mr. Tone or any of our other curious constituents thought about the "transparency" of our membership organization, the American Institute of CPAs, or any of its wonderful state society members. The most recent one published by my state society was "extremely transparent," if you call two totals being transparent: Total income and total expenses.

I wonder what type of opinion we would get on our peer review if our audits showed such "transparency." And I can't help but feel that an organization publishing such "transparent" financial statements just might be hiding something. Consider millions of dollars of members' dues listed as expenses going toward the CPA2biz project, while many of us still wonder what exactly sucked up so many millions of dollars to create a Web site. Not to mention the additional money collected from the companies who sponsored the Web site, coincidentally also selling their products on that Web site. Funny, but I can go to the Web, create a Web site, and have it hosted for hundreds of dollars.

Oh wait, this should probably wait for a response to the AICPA when they bring up the "independence" issue again. But then again, what do we expect?

Brian Boerner

Urgent reforms needed

I always enjoy reading Bill Carlino's editorials, and in the Feb. 7-20, 2005, issue he stated that the House Financial Services Committee has "quietly" assumed sole oversight of the Financial Accounting Standards Board ("Oversight or overrule?" page 6).

This indeed is great news.

Perhaps now we will not be faced with the ridiculous antics of FASB, as Mr. Halsey Bullen has so asserted in the article by Mr. Glenn Cheney, "FASB returns again to the philosophy of accounting" (page 12). Somehow I cannot accept this title, and I would like to change the word "philosophy" to "lunacy."

As for the other articles on page 1, I simply cannot restrain myself from laughing. Is Nina Olson for real? ("Olson: Simplify, simplify!") The only way to simplify the present Internal Revenue Service tax code is to flush it down the toilet and change the system to one and one only: a national sales tax.

The tax would be imposed on purchases of all goods and services (including investments), domestic and foreign, if consumed here. To satisfy the "regressionists," food consumed at home and medicine could be exempted. The advantages of taxing consumption overwhelm the present system in every respect, and it amazes me that this has not been accomplished years ago. How can anything be simpler?

The article "Social Security struggle starts" (page 1) is another example of utter nonsense. If we had any sense of making the ERISA Act back in 1974 a mandatory program replacing Social Security, then we would not be addressing this problem now. The principle of government is to govern and not get involved in business. Presently, as an employer, I must match one dollar for every dollar of withholding from the paychecks, while insurance companies expend pennies for collecting a premium dollar. Social Security should be privatized 100 percent, with an age break at 55, as suggested by President Bush.

As for "GAO says federal financials too poor to audit" (page 1), David Walker of the Government Accountability Office has the answer. Is this news? Not at all. I for one always had difficulties understanding the financial reports issued by governments at all levels. Why can't the government accept the traditional format used in the commercial world? At least I would be able to identify the number of aircraft carriers or the number of acres of land, etc., owned by the government on the balance sheet. Perhaps the national debt of approximately $8 trillion would not be that frightening and threatening after all, when compared to the total of assets.

However, I would like to congratulate Thomas N. Tone on his brilliant letter ("Institute is anything but 'transparent,'" page 6). I could not have done it any better, but I would like to take the liberty of suggesting that the word "transparent" be changed to "invisible," because I feel that the day has long since come when someone should lock the doors of the American Institute of CPAs and throw the keys away.

This nation is a constitutional republic, and the Constitution is the foundation of our freedom. And peer reviews violate our constitutional rights under the First, Fourth and probably Fifth Amendments. Furthermore, the workpapers of our clients are protected by the act of privacy. So, how can anyone be so stupid as to suggest the undertaking of a peer review without a subpoena?

In my opinion, the government must promulgate pertinent and relevant accounting laws and FASB should be disbanded; it should adopt a national sales tax as a replacement for the potpourri of taxes in the current system; and it must cut its own cost of operations substantially by eliminating the unwanted and unneeded bureaucracies accompanied by undeserved cost of perks that the average taxpayer must bear.

We, as a nation, face the potential collapse of our government due to its "over-size" and the impossibility of administering an "infinite" number of laws and regulations, if immediate and urgent reforms are not put into place.

Anatole Hramtsov, CPA
Glendale, Calif.

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