Accounting standards

Resurgent House Democrats are on a collision course with the Securities and Exchange Commission over the need for restrictions on corporate executive compensation - an issue Republican lawmakers managed to keep bottled up despite repeated reports of corporate pay abuses during the last Congress.Leading the charge for reform is corporate America's worst congressional nightmare: Massachusetts Democrat Barney Frank, who has long championed legislation to force the SEC to take a stronger stance against excessive compensation for boardroom big shots.

If the plans of the Financial Accounting Standards Board come to fruition, 2007 will represent a historic year in international accounting - a giant leap forward in global financial efficiency.It was just four years ago that FASB and the International Accounting Standards Board decided to get serious about their efforts to converge U.S. and international standards. They planned to move ahead on two fronts: one toward the short-term convergence of relatively simple issues, the other toward convergence of issues that were either relatively complex or controversial.

A ballooning number of corruption scandals at non-profits may result in more NFPs adopting tighter policies and procedures according to global CPA and business advisory firm Grant Thornton.

William H. Donaldson, who co-founded the investment bank Donaldson, Lufkin & Jenrette and later became chairman of the Securities and Exchange Commission, has joined Perella Weinberg Partners as chairman of its advisory council, the firm announced yesterday.

The Public Company Accounting Oversight Board announced that it its Standing Advisory Group will meet on Feb. 22 in Washington.

KPMG said that it would miss the upcoming Feb. 16 target to complete a long-overdue audit of San Diego's 2003 financial statements.

The Securities and Exchange Commission has appointed James L. Kroeker as deputy chief accountant in the agency’s Office of the Chief Accountant.Kroeker, 37, started work at the commission this week, where he will be responsible for resolving accounting issues and rulemaking projects, as well as oversight of private sector accounting standards-setting efforts.

The Internal Revenue Service’s Whistleblower Office opened for business this month. The congressionally mandated program is designed to receive information that helps uncover tax cheating and provide appropriate rewards to whistleblowers.

Fannie Mae’s chief executive received a compensation bump of about 25 percent in 2006 -- including salary, stock and bonuses.

The American Institute of CPAs and the Canadian Institute of Chartered Accountants are gearing an expanded version of their 2003 Privacy Framework towards a broader business audience.

A board within the International Federation of Accountants has issued revised standards to increase the clarity and usability of International Public Sector Accounting Standards.

Successful filing of electronic tax returns, as well as meeting the accounting requirements of FIN 48, are the biggest challenges facing corporate tax professionals in 2007, according to an informal survey by Thomson Tax & Accounting.

More new tax laws, continued new e-filing mandates, an expected increase in total returns, and a delay in processing are certain to mark the start of the 2007 tax filing season.Recent changes in the tax law, primarily those involving three tax deductions - for state and local sales tax, higher education tuition and fees, and educator expenses - mean that the Internal Revenue Service will not be able to process some individual returns until early February. "We will not be processing any returns, whether they are filed electronically or on paper, that contain the extended tax breaks until early February," confirmed IRS spokeswoman Nancy Mathis. "We estimate the number of returns affected by this delay is approximately 930,000 returns out of 136 million returns we expect to be filed."

In a nod to opponents and critics who complained about the costs of internal controls audits, the Public Company Accounting Oversight Board last month voted unanimously to circulate a proposal that would scale down the amount of testing necessary to evaluate internal controls over the financial reporting process.The board's proposal, a rare regulatory about-face for a standard-setter, calls for replacing the PCAOB's existing Auditing Standard No. 2 with a new "principles-based" standard on internal control "designed to focus the auditor on the most important matters, increasing the likelihood that material weaknesses would be found before they cause material misstatement of the financial statements."

The call for differential accounting - separate sets of generally accepted accounting principles for public and private companies - has been heard for roughly three decades. Now, at last, something is happening - but just as the United States has decided to go in one direction, the rest of the world may go in another.The underlying problem is that GAAP is designed for public companies, which tend to be large enough to deal with the complexity of the standards.

Victims of the alternative minimum tax quirk that taxes nonexistent income of incentive stock options when the stock loses value received a welcome holiday gift from Congress.As one of its final actions before adjournment, the 109th Congress passed the Tax Relief and Health Care Act of 2006, one of the provisions of which includes a scaled-down version of legislation originally sponsored by Rep. Sam Johnson, R-Texas, to fix the problem at the intersection of the AMT and stock options. The new law provides relief to many victims by accelerating the refund of stranded ISO overpayment credits that, under previous law, would not be returned within the taxpayer's lifetime.

The Tax Relief and Health Care Act of 2006 passed Congress on Dec. 9, 2006, and was signed by President Bush on December 20. Most of the provisions are good news for taxpayers - extending popular tax breaks, many of which had expired at the end of 2005.Still, the timing could have been better.

You have to admire the Governmental Accounting Standards Board.In 2007, it will be deliberating some of the trickiest, thorniest accounting issues in contemporary governmental finance.

By the time this column is printed, many will be trying to comply, audit or otherwise cope with the Financial Accounting Standards Board's new standard on pensions.While there is no doubt that SFAS 158 is a huge improvement, no one should complacently think that it takes care of accounting issues related to pensions and other post-retirement employee benefits. Much remains to be done to make financial reports more realistic and useful because, in fact, generally acceptable accounting principles for pensions and OPEBs are almost totally unacceptable, not only when they are compared with reality, but also when they are contrasted with GAAP in other areas.

A recent study by the Australian Bureau of Statistics showed more than 1,400 accountants left the country to work overseas permanently last year, according to Australia’s Daily Telegraph.According to experts in the industry, that trend is only likely to worsen in the common years as the rest of the world adjusts to the International Financial Reporting Standards, which have been in place in Australia since January 2005. Those standards are set to be widely adopted in 2008.