SPLITTING THE DIFFERENCE
The Financial Accounting Foundation released its much-anticipated response to the findings of the Blue Ribbon Panel on Standard-Setting for Private Companies, proposing a new council that could identify and vote on improvements to U.S. accounting standards specifically for private companies. The changes would be subject to ratification by the Financial Accounting Standards Board, so the council would not be the autonomous standard-setter some in the profession had hoped for. The American Institute of CPAs, in particular, was disappointed, vowing to renew its letter-writing campaign for an independent board, and even going so far as to empower its board to consider another standard-setter for private companies. (See our cover story.)
Merger season got into high gear, as firms across the country announced a flood of hook-ups before year's end. California saw two especially high-profile unions, with Top 100 Firm Burr Pilger Mayer merging with Southern California's Windes McLaughry, and Top 10 Firm Crowe Horwath snapping up Perry-Smith in the middle of the state. (See our expanded M&A Watch section, page 40.)
The Public Company Accounting Oversight Board published previously confidential portions of its 2008 inspection report of Deloitte & Touche after the firm failed to address problems with its audit procedures after a 2007 report. The board in part criticized the firm's quality controls and skepticism about management assertions, and pointed to problems with Deloitte's culture. The Big Four firm defended its audit procedures in response to the report. "We have complete confidence in our professionals and the quality of our audits, and agree that there were and always will be areas we can improve," said CEO Joe Echevarria.
Separately, the board permanently barred a Denver-based audit partner, Samuel Cordovano, and revoked the registration of Cordovano and Honeck LLP because Cordovano had participated in audits while subject to a previous bar.
The PCAOB also proposed requiring registered accounting firms to disclose the name of the engagement partner in audit reports, as well as any other accounting firms and other persons not employed by the auditor that took part in the audit.
Finally, the board reached an agreement with Japanese regulators that will allow the two countries to carry out joint inspections of auditing firms in Japan and the U.S.
The Financial Accounting Standards Board released a new Accounting Standards Update aimed at improving employer disclosures for multiple-employer pension plans (see page 18). It also said that it would consider postponing the effective date of certain provisions of a recently issued standard on the presentation of comprehensive income, ASU No. 2011-05, due in part to complaints about the timing and amount of detail required.
The standard-setter's Not-for-Profit Advisory Committee also recommended fundamental changes in the accounting rules for nonprofit organizations that would require them to explain their finances to donors and other interested parties in greater detail. The board is expected to discuss the recommendations at a public meeting later this fall.
In his first speech in the U.S. as chairman of the International Accounting Standards Board, Hans Hoogervorst once again urged the U.S. to adopt International Financial Reporting Standards, noting, among other things, that the U.S.'s share of global market capitalization has shrunk from 45 percent to 30 percent in the last five years.
TAX SEASON PREVIEW
With tax season looming, Internal Revenue Service Commissioner Doug Shulman warned Congress that proposed cuts to the IRS budget would severely impact its ability to enforce the tax law and serve taxpayers. The House Appropriations Committee had voted to cut the IRS's funding by $600 million, to $11.5 billion. The Senate Appropriations Committee had voted to cut it to $11.7 billion. Shulman said that the cuts would be counterproductive, endangering revenue at a time when the government is trying to narrow the budget deficit.
While waiting to see how much money it would get, the service didn't sit still: It reminded tax preparers of the new e-filing requirements (see page 17), and proposed regs that would require preparers to file a due diligence checklist, Form 8867, with any tax return claiming the Earned Income Tax Credit. It also revamped its Web site, and announced a new transcript delivery system (though the launch date was delayed shortly before press time).
Separately, the service introduced a new voluntary compliance program to convince employers to resolve their past issues with classifying employees as independent contractors. (See Tax Strategy, page 16.)
Due to budget constraints, the Taxpayer Advocate Service said that is temporarily changing the criteria it uses for accepting cases: It will no longer deal with cases in which the problem involves an IRS delay in processing certain tax documents, in order to focus on taxpayers who need assistance the most.
H&R Block announced plans to add another 100 franchise locations to its 11,000-office network. Last year it added over 120 franchise locations. The tax prep giant is focusing on independent tax business owners who want to join its franchise network, and owners who are ready to retire or are looking for an exit strategy. At the same time, it said that it would discontinue service under its ExpressTax brand, which primarily served early filers who wanted quick refunds. Block will invite many of the 269 ExpressTax franchisees to join the H&R Block brand.
IN OTHER NEWS
At its Fall Meeting of Council, the American Institute of CPAs announced that it has been holding discussions with the Canadian Institute of Chartered Accountants and CMA Canada on bringing the CPA designation up north and combining it with the CA and CMA designations. The Canadian organizations are going through a process of evaluating the viability of transitioning the CA and CMA designations into the CPA, with CPA standing for "chartered professional accountant." As with state CPA societies in the U.S., the CICA needs to consult with provincial organizations in Canada.
The institute also announced plans with the Chartered Institute of Management Accountants to officially launch their new Chartered Global Management Accountant credential on Jan. 31, 2012. They have already set up a Web site, www.cgma.org.
Finally, the AICPA unveiled the results of its CPA Horizons 2025, a research project forecasting where the accounting profession will be in 10 years. Dealing with technology, improving education, and building the CPA brand emerged as major themes. The full report is online at www.cpahorizons2025.org.
PwC and Deloitte Touche Tohmatsu announced their global financial results, with PwC posting $29.2 billion in annual worldwide revenue, taking back the lead from Deloitte, which reported global revenues of $28.8 billion.
The National Association of State Boards of Accountancy announced plans to allow candidates to apply online for the CPA Exam, as well as accessing their application information, importing prior application data and viewing their examination scores. The new system will be available only in the 32 states where NASBA's CPA Examination Services provides its full array of services.
The International Federation of Accountants began the search for a successor to its current chief executive, Ian Ball, who is not seeking another term after his contract expires in 2013.
Sage North America revealed the details of its rebranding effort to hundreds of its reseller partners. Beginning in April 2012, the majority of Sage's product names, such as Accpac, MAS, Timberline, and even Peachtree, will be replaced simply with the company name and a number. The changes are expected to be complete by the end of 2012.
CPA2Biz, the business arm of the AICPA, announced that it will offer a CPA-branded e-mail service, CPA.com, for AICPA members this fall. Members will be able to order basic e-mail, or step up to a business-class offering. Pricing and service details were due to be released later in the fall.
Alfonse M. Mattia, a founding partner of Amper, Politziner & Mattia, one of the legacy firms of Top 15 Firm EisnerAmper LLP, passed away in early October, at the age of 69.
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