INVERSIONARY TRENDS
Much of midsummer in Washington was given over to outrage over and attacks on "corporate inversions" -- where a company essentially changes its country of address to evade taxes -- with various legislative proposals put forward to either outlaw it or punish its practitioners. A perfectly happy attack on corporate privilege turned unpleasant, however, when President Obama announced that accountants bore much of the blame, because they recommended the schemes. Right-thinking people were quick to point out that no accountants were involved, only lawyers, and anyway, the accountants were just doing their jobs.
The Internal Revenue Service told a judge that its technicians were utterly unable to save data, including e-mails, from the hard drive of a former official, Lois Lerner, who was at the heart of a scandal involving IRS employees improperly targeting conservative groups. U.S. District Judge Emmet Sullivan found this difficult to believe.
The American Institute of CPAs announced that it recently enrolled its 400,000th member -- Jennifer Highsmith, a 27-year-old senior audit associate with accounting firm Johnson Lambert in Florida. The institute's rolls have grown 13 percent in the past decade, and 25 percent in the past two.
H&R Block rolled out a new program to draw CPAs and other accountants who are interested in selling their practices or becoming H&R Block franchises. The new service will be spearheaded by accounting industry consultant Jennifer Katrulya.
The Financial Accounting Standards Board added five more projects to its agenda for simplifying accounting standards, including short-term projects related to debt and tax accounting. One of the new projects is related to the presentation of debt issuance costs, another to the measurement date of defined-benefit plan assets, and a third to balance sheet classification of debt, while a fourth is related to accounting for income taxes. Finally, FASB will also look into simplifying pension measurement dates. The board had earlier proposed two projects for simplifying the process of inventory measurement and eliminating the requirements for extraordinary items. Some of the changes contemplated will increase convergence with IFRS and be consistent with it, while others will not.
Later in August, the board issued a proposed Accounting Standards Update intended to simplify the accounting for a customer's fees paid in a cloud computing arrangement. The update aims to improve reporting of fees paid to public and private companies and not-for-profit organizations that are customers in a cloud computing arrangement. Comments are requested by November 18.
The Public Company Accounting Oversight Board released a report showing that auditors of brokers and dealers who were inspected last year continued to have a high number of problems with independence and audit deficiencies. The report is the third in a row that found problems with audits of broker-dealers. Although the percentage of audits with inspection observations was slightly lower than in previous inspections, the PCAOB expressed concern over the nature and number of these continuing observations.
Separately, the board released for public comment a staff consultant paper on standard-setting related to auditing accounting estimates and fair value measurements, noting that its inspection staff continues to identify numerous audit deficiencies in a variety of types of estimates across audit firms of different sizes. The paper describes the staff's preliminary views on a potential approach to changing the board's existing standards. Comments are requested by November 3.
The International Accounting Standards Board made something of an about-face on how leases should be categorized, opening up a new gulf between it and the Financial Accounting Standards Board.
Nearly half the members of the U.S. Senate signed a letter expressing concern about a tax reform proposal to require the use of accrual accounting, and are urging the leaders of the Senate Finance Committee to preserve the option of the cash method of accounting for tax purposes.
A U.S. appeals court ruled in mid-July that the government can't give financial assistance to anyone buying coverage on the insurance marketplace run by federal authorities - a potentially crippling blow to Obamacare that, if it withstands appeals, may deprive more than half the people who signed up of the tax credits they need to buy a health plan. The government will immediately seek review of the decision.
A separate ruling in mid-August said that Indiana can challenge an Internal Revenue Service rule making people who sign up for health-care coverage under the Affordable Care Act through federal government-created insurance exchanges eligible for a tax credit.
Between the two rulings, the IRS released draft versions of several forms for employers and individuals to comply with the Affordable Care Act, along with draft versions of more common forms such as the 1040 and 1040EZ for next filing season.
It also issued guidance for the 2014 fee year on how it and the Treasury Department will administer the definition of a "covered entity" for purposes of the health insurance fee under the Affordable Care Act, in Notice 2014-47.
IN ACTUAL TAX NEWS
The IRS Return Preparer Office mailed letters at the end of July to approximately 5,000 preparers who are doing returns without valid PTINs.
It also warned that it is continuing to hear from taxpayers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS. The Treasury Inspector General for Tax Administration has identified approximately 1,100 victims who have lost an estimated $5 million from the scams.
The IRS is also making its new Taxpayer Bill of Rights available in six different languages. Besides English, the document is now available in Spanish, Chinese, Korean, Russian and Vietnamese.
IN OTHER NEWS
Big Four firm Deloitte LLP named Frank Friedman its new CEO, succeeding Joe Echevarria, who retired nine months short of his full four-year term to focus on public service. Friedman has been based in Kansas City, and has been with the firm for 34 years, becoming its CFO in 2011. He has worked with the firm for 34 years after graduating from the University of Kansas in 1979. He intends to stay in the Kansas City area, even though Deloitte is headquartered in New York. The firm is in the midst of a leadership election, which occurs every four years, and it was unclear at press-time whether Friedman will serve as an interim CEO or will serve a complete four-year term.
PwC was fined $25 million after sanitizing a report to regulators on sanctions and money-laundering controls for Bank of Tokyo-Mitsubishi UFJ Ltd., which had persuaded PwC Regulatory Advisory Services to change a compliance report related to financial transactions with sanctioned countries including Iran and Sudan between June 2006 and June 2008, according to a settlement with the superintendent of New York's Department of Financial Services. PwC was also banned for two years from consulting work with companies regulated by department, and must implement changes to address conflicts of interest in consulting.
U.S. businesses paid $671 billion in total state and local taxes in fiscal year 2013, according to an annual study prepared by EY in conjunction with the Council on State Taxation that was released in mid-August. State business taxes grew 4.7 percent compared to local tax growth of 3.7 percent, representing the third consecutive year of growth for both categories. In Fiscal Year 2013, business taxes accounted for 44.9 percent of all state and local taxes. While this is the lowest share of total state and local taxes since FY 2006, the business share has remained relatively stable and peaked at 45.7 percent in FY 2007, less than one percentage point different from the current share.
Crowe Horwath sold its accounting and financial placement subsidiary, Creative Financial Staffing, to its employees through an employee stock ownership plan. The Boston-based company has roughly 165 employees, and will have 34 offices throughout North America and the Caribbean. It has more than 1,000 temporary accountants and placed 1,800 accountants in direct- hire positions last year. Crowe chief executive Chuck Allen noted that he intends to focus on the firm's "core services and industries." The divestiture will reduce Crowe Horwath's consolidated revenue by approximately $67 million.
Accounting Today announced its 2014 Growth & Profitability Summit, to be held Nov. 2-4 in Boca Raton, Fla. Details are available
