Accounting standards

The Internal Revenue Service has come out of the gate in 2006 with a shiny new employment tax form for small employers.Effective January 1, employers who expect to owe no more than $1,000 in federal employment taxes for the 2006 calendar year will be required to file Form 944, Employer's Annual Federal Tax Return, replacing the quarterly Form 941.

Twenty-five different sets of contract law - one for each of the EU's individual member countries - looked recently as if they might soon be joined by a "26th Regime" applicable for certain areas in financial services.However, that proposal has now been put on the back burner by the European Commission's Internal Market Division, which oversees the EU's financial legislation.

Many of the 19 former tax professionals facing trial over the sale of KPMG tax shelters, whose legality has been questioned by the federal government, have asked for the dismissal of the charges in a variety of joint motions.More than 25 motions were filed in Manhattan's U.S. District Court, several requesting that the charges against the professionals be dropped entirely, as no court has ever actually ruled the shelters to be illegal. Many additional motions asked for the dismissal of charges because the defendants said that they were being unfairly singled out from other KPMG officials who sold similar shelters.

The overriding objective of the Sarbanes-Oxley Act is to strengthen the public securities market by holding management accountable for material information filed with the Securities and Exchange Commission and released to investors. To help achieve this overall goal, Sarbanes-Oxley includes several underlying objectives, specifically improving corporate governance, promoting ethical business practices, enhancing the transparency of financial statements and disclosures, and ensuring that company executives are aware of material information emanating from their business.Sarbanes-Oxley is not law for nonprofit organizations, but its guidelines for achieving its underlying objectives can be applied to all organizations, including nonprofits. By adopting the principles and best practices promoted by Sarbanes-Oxley - customized to meet an organization's unique nature and needs - a nonprofit organization can better realize its mission and meet the expectations of its key stakeholders.

The Roth 401(k) contribution option, even with almost five years of advance warning, is taking a while to catch on.Reports are that fewer than 20 percent of eligible 401(k) plans now have them, with the rest sticking with tried-and-true pre-tax deferral contributions. If field data is accurate, however, this tepid reception is about to change. When employers, especially those also wearing the hat of the highly paid employee, begin to run the numbers, Roth 401(k) accounts are looking very attractive. This view is especially true following the recent release of favorable final regulations on Roth 401(k) contributions.

The Governmental Accounting Standards Board's agenda for 2006 will rank among its most ambitious ever.Within the first few months of the year, it may have six or more projects underway, with exposure drafts going out the door as comment letters are coming in.

On Dec. 6, 2005, Financial Accounting Standards Board Chairman Robert Herz addressed the American Institute of CPAs National Conference on Current Securities and Exchange Commission and Public Company Accounting Oversight Board Reporting Developments in Washington.The chair traditionally speaks at this venue, but often the remarks are only perfunctory. This time, though, Herz showed his leadership by calling on capital market participants to lay aside their self-interest and work together to achieve "progress ... in improving the quality and transparency of financial reporting."

Canada's Accounting Standards Board has agreed to adopt international accounting standards for the country's public companies over the course of the next five years.The accounting rules known as Canadian GAAP will cease to exist as a separate basis of financial reporting after the end of the implementation program. The 25-member board also agree to pursue separate strategies for three major categories of reporting entities, including public companies, private businesses and not-for-profit organizations.

The Securities and Exchange Commission named John W. White to the post of director of the regulator's division of corporate finance.

The heads of the investor protection agencies for the United States and the European Union both said that they expect U.S. GAAP will ultimately be deemed equivalent to the E.U.'s International Financial Reporting Standards.

In one of the largest regulatory settlements ever, American International Group Inc. will pay more than $1.6 billion to settle allegations that it used deceptive accounting practices to mislead investors and regulators.

The American Institute of CPAs has released two new standards, one on auditing professional requirements, which includes a section on attestation engagements, and a second dealing with audit documentation.

In a case that may wind up in the Supreme Court, an unnamed accounting firm is poised to lodge a legal challenge questioning the constitutionality of the Public Company Accounting Oversight Board.

Alongside the release of President Bush's budget proposal for 2007, the White House asked Congress to create a new regulator for home mortgage giants Fannie Mae and Freddie Mac. The regulator would be directed to cut the $1.4 trillion investment portfolios held by the companies.

Insurer American International Group is expected to announce a settlement with federal and state regulators requiring the company to pay $1.6 billion in order to settle charges covering a range of regulatory issues, according to reports.

Stricter pension accounting rules from the Financial Accounting Standards Board could cost billions for shareholders, HR company Towers Perrin said.

Five former executives at the reinsurance unit of Berkshire Hathaway Inc. and insurer American International Group Inc. have been charged in a fraud probe of the two companies, the Securities and Exchange Commission and Justice Department announced.

Consulting firm BearingPoint Inc., the spinoff of KPMG's former consulting business, reported a $546.2 million loss for 2004 and said that it still faces liability issues under the Foreign Corrupt Practices Act.

The Governmental Accounting Standards Board issued an exposure draft that would require governments to account for all the obligations and costs related to pollution remediation.

The head of the European Commission's financial markets division said that public companies from the United States and Japan will be given another year to bring their accounting standards closer to new European Union standards.