Accounting standards

Merck & Co. disclosed four separate tax disputes that have combined potential liabilities for the drug maker of more than $5.5 billion.

The International Federation of Accountants is seeking proposals for the development of an explanatory guide on implementing its quality control standard.

The bankrupt maker of Twinkies and Wonder Bread has reportedly settled a Securities and Exchange Commission investigation into its recordkeeping and accounting.

The Securities and Exchange Commission has filed and settled enforcement actions against former officers and directors of Spiegel Inc., the owner of catalogue retailers Spiegel, Eddie Bauer and Newport News.

CPAs in Congress came to the rescue of their profession with the passage of a bill that eliminated the need to send privacy notices to clients."The Financial Services Relief Act of 2006 is a common-sense bill that will give CPAs more time to serve their clients," said Rep. Colin C. Peterson, D-Minn. "As a CPA myself, I can tell you that it's more important to spend time working with clients than it is to be filling out redundant paperwork."

Representatives from industry, government and the accounting profession called on Congress to reform the nation's business tax structure, warning that the current web of corporate tax incentives and penalties is pressuring companies to adopt inefficient practices.Tax Executives Institute International president David Bernard urged the Senate Finance Committee to abandon the current "patchwork of tax incentives and inducements" for businesses, and switch instead to a "simpler, more administrable code" that will promote sound tax policy. Rather than legislating business tax preferences in an effort to "pick winners and losers" in the marketplace, he recommended a broader tax base with lower rates for all businesses.

With the nation in an uproar over widespread pension fund problems, the Financial Accounting Standards Board has set a standard that will soon require companies to fully recognize on the balance sheet either an asset for a pension plan's overfunded status, or a liability for a plan's underfunded status.Standard 158, Employers' Accounting for Defined-Benefit Pension and Other Post-Retirement Plans, would eliminate companies' ability to only partially report the funded status of a post-retirement benefit plan - that is, the difference between the plan's assets and liabilities.

Harmonization of corporate taxation rates in the European Union took a small step forward with a ruling by the European Court of Justice in favor of Cadbury Schweppes, where the ECJ found against the British government's policy of applying its own higher national tax rates to a company's subsidiaries in another, lower-taxed, EU member nation.However, despite the positive implications of the ruling for the British confectionery and soft drinks company, observers said that any move towards a serious union of corporate tax policy in Europe still faces a long road.

Earlier this year, Congress passed the Pension Protection Act of 2006.Included in that legislation are some features that encourage preparation and spending for long-term care. In particular, the act allows the transfer of excess pension benefits to fund estimated retiree medical costs, and it permits annuity and life insurance contracts to expand their coverage to include long-term-care costs, including skilled care from medical professionals and custodial care (such as assistance with bathing, eating, dressing, walking, etc.).

Congress left town without passing a number of tax breaks that expired at the end of 2005, including the option to deduct state sales taxes in place of state income tax, a deduction for college tuition and fees, the deduction for school teachers, and a research and development credit.Although the breaks themselves are not controversial, and leaders of the Senate Finance Committee pushed for their enactment, the breaks became mired in political infighting when they were attached to "trifecta" legislation that would have included an increase in the minimum wage and a slash in estate tax rates.

With no shortage of improvements needed in its field, the Governmental Accounting Standards Board has taken on an array of complex projects that should result in a series of important documents over the next six months."This is proving to be a rather ambitious agenda, and it's quite a busy time here at the GASB," said Chairman Robert H. Attmore. "We are cranking out documents and expect to have a busy period from now through the middle of 2007."

Planning to pass a business to the next generation, or to non-family members, involves a combination of complex issues requiring legal, tax, financial and management planning.Too often, a business owner devotes her entire career to building the enterprise, but fails to plan for the future of the business. When a thorough succession plan is in place, however, the business owner can anticipate and effectively manage change. The process must involve family members, professional advisors, shareholders, partners and key employees. A successful plan will address many issues, the more common of which are: the decision to pass the business to family, or sell the business to outsiders; the death, disability or retirement of the owner or co-owner; tax and estate planning; and the retention of key employees.

For contributions, bequests, and gifts made after Aug. 17, 2006, the Pension Protection Act of 2006 limits deductions for charitable contributions of fractional interests in tangible personal property. It also provides rules for valuing the donor's additional fractional interest contributions, and provides for recapture of the charitable deduction.In calculating deductions, the PPA requires consistent valuation of all the fractional interests in the same item (or collection of items) of property that has appreciated in value since the initial contribution.

The Securities and Exchange Commission has awarded a trio of contracts totaling $54 million to transform the financial statements in its Edgar database into interactive information.Included in that strategy was some $5.5 million earmarked for XBRL US Inc. to complete the writing of XBRL taxonomies, so that every item in a company's financial statement, such as net income or gross sales, can be assigned a unique, computer-readable label.

The Public Company Accounting Oversight Board will delay implementation for one part of a rule relating to professionals who provide both tax and audit services to companies.Adopted in July 2005, Rule 3523, “Tax Services for Persons in Financial Reporting Oversight Roles,” went into effect on Oct. 31. The rule prohibits auditors from providing tax services to certain members of management who serve in financial reporting oversight roles at an audit client.

H&R Block Inc. said that it will provide better and more transparent notification to customers detailing all the costs tied to its refund anticipation loans.

The Securities and Exchange Commission has filed and settled financial fraud charges against Delphi Corp. and six of the auto parts supplier’s former employees -- including the company’s former chief accounting officer.The SEC charged the company with engaging in a variety of accounting schemes and making material financial misstatements between 2000 and 2004, all resulting in a series of restatements totaling more than $200 million. Delphi settled the charges of financial fraud without admitting or denying the allegations, and no financial penalty was levied against the company.

Intuit Inc. announced that the Securities and Exchange Commission has closed its investigation into the software maker's stock option accounting practices without taking any punitive action.The SEC began its Intuit inquiry in June and in August, Intuit announced that based on its internal investigation of the handling of its stock options dating back to 1997, it wouldn’t need to restate past profits.

Initially, my column was only going to cover that a day after former Enron CEO Jeffrey Skilling was sentenced to 24 plus years, the SEC announced it settled civil fraud charges involving options backdating. The agreement provides for the payment of nearly $2.4 million in disgorgement and prejudgment interest, a permanent injunction, a permanent officer-and-director bar, and suspension from appearing or practicing before the Commission as an accountant.The SEC had charged the former CFO of Comverse Technology, Inc., David Kreinberg and two other former Comverse executives with engaging over many years in a fraudulent scheme to grant undisclosed in-the-money options to themselves and to others by backdating stock option grants to coincide with historically low closing prices of Comverse common stock. The SEC also alleged that Kreinberg and Comverse's former chairman and CEO created a slush fund of backdated options that the former Chairman and CEO used to recruit and retain key personnel.

To assist governments and other public sector entities in appropriately accounting for the costs of employee benefits, a board within the International Federation of Accountants has issued an exposure draft of a new standard.The International Public Sector Accounting Standards Board’s exposure draft No. 31, “Employee Benefits,” is based on the the International Accounting Standard No. 19, of the same name. The draft addresses the same categories of employee benefits -- short-term employee benefits, post-employment benefits, other long-term employee benefits and termination benefits.