Economy

A crackdown on abusive tax shelters that includes codifying the economic substance doctrine would create legal booby traps for small businesses and open the door for new abuses by unscrupulous tax shelter promoters, the American Institute of CPAs warned Congress.

The number of internal controls weaknesses related to lease accounting issues jumped more than 10 percent in April, according to a report released this week.

In response to the Financial Accounting Standards Board's recent proposal on the Hierarchy of GAAP, the American Institute of CPAs has issued an exposure draft introducing a proposed Statement on Auditing Standards that would apply only to nongovernmental entities.

The Financial Accounting Standards Board has published an exposure draft to rank generally accepted accounting principles.

Complexity is eroding voluntary compliance with U.S. tax laws, a member of the American Institute of CPAs Tax Executive Committee told the House of Representatives Small Business Committee this week.

The Internal Revenue Service, in partnership with stakeholder groups, has set up a new Web-based list of frequently asked questions aimed at helping corporate taxpayers understand the requirements of the new Schedule M-3.

Ajilon Finance and the American Institute of CPAs are seeking nominees for the 7th annual AICPA Business & Industry Hall of Fame Awards program.

The American Institute of CPAs, the AICPA Foundation, the National Endowment for Financial Education and the American Red Cross have launched a new, broad-based disaster preparedness and planning guide for consumers.

The Professional Ethics Executive Committee of the American Institute of CPAs has proposed in an exposure draft a new ethics interpretation of rules to determine whether financial interests held by a company's external auditor impair independence.

New York - The American Institute of CPAs has introduced a new Web site for the information technology community. The site, at www.aicpa.org/infotech, is a portal containing resources, tools and guidance for CPAs interested in or performing IT functions.

American accounting contains an awkward contradiction. Though 99.7 percent of the country's 4.9 million corporations are privately held, a good deal of the country's generally accepted accounting principles are primarily relevant to the financial conditions of public companies traded on equities markets.

The American Institute of CPAs released an exposure draft of proposed business valuation standards that would be applicable to institute members performing valuation standards in tax, mergers and acquisitions, litigation, and financial reporting. Once the standards become finalized, members would be required to comply with them when performing valuation engagements that reach a conclusion of value or an indication of value. Roughly 25,000 institute members currently provide business valuation and forensic and litigation services. For further information, go to www.aicpa.org/bvfls.

The American Institute of CPAs has introduced a new Web site for the information technology community, www.aicpa.org/infotech, a portal containing resources, tools and guidance for CPAs interested in or performing IT functions. Information is broken up into five tabs on the new site:Resources, Community, Events, Membership and Products. Within those fields, users are able to share their experiences on best practices, get new product updates and strategies, and learn more about the AICPA's Certified Information Technology Professional credential. Members of the AICPA IT Membership section and CITP credentialed accountants can access technical and practice management content on the site and obtain discounts on AICPA conferences, publications and practice aids. "Our goal was to provide an online resource for all CPAs in the IT community, whether they are in business and industry, academia, government or public practice," said James Metzler, AICPA vice president of small firm interests, in a statement.

Financial services conglomerate Fidelity Investments has extended its partnership with the American Institute of CPAs to assist CPAs in establishing an investment advisory practice. As part of the extension to the five-year-old program, institute members will receive several new benefits, including low minimum asset requirements and discounts on marketing materials through PracticeMark, Fidelity's online marketing program. Originally sealed in 2000, the pact designates Fidelity as the exclusive, preferred provider of custody and clearing services to AICPA members. Information about the Fidelity program is available at http://pfp.aicpa.org/Resources/Investment+Planning.

The American Institute of CPAs will urge the Internal Revenue Service to delay, by at least a year, implementation of mandatory electronic filing procedures for large corporations and exempt organizations at a hearing before the IRS on March 16, 2005. The IRS's recently released regulations will generally require corporations with total assets of $50 million or more and tax-exempt organizations with total assets of $100 million or more to e-file their tax returns to the IRS starting in January 2006. In addition, smaller corporations and exempt organizations face an e-filing requirement starting in January 2007 under the regulations. Beginning in January 2007, corporations and exempt organizations with total assets of $10 million or more and all private foundations and charitable trusts, regardless of asset size, will generally be required to electronically file tax returns. "We view this as a dramatic change, with inadequate lead time," said Deborah J. Pflieger, former chair of the AICPA's Practice and Procedure Committee and a managing director in PricewaterhouseCoopers' National Tax Office. "The affected corporations and tax-exempt organizations, software developers and tax practitioners will have to make significant process and technology changes in order to comply with mandatory e-filing requirements," Pflieger said. "The changes require substantial collaboration and coordination by the IRS with all impacted parties, but the taxpayers and tax practitioners who prepare and file the majority of affected returns have not been provided ample opportunity to share their corporate e-file issues."

The American Institute of CPAs named Mark Gardner Peterson to the post of vice president of government affairs. In his new role, Peterson will oversee key lobbying efforts on behalf of the institute. He will report to James A. O'Malley, senior vice president of public affairs and head of the AICPA's Washington office. Prior to joining the AICPA, Peterson served as vice president with the Alpine Group -- a lobbing and government consulting concern -- and as a government affairs executive for former Big Five firm Andersen and for Toyota Motors North America. From 1992 though 1999, Peterson worked in the House Republican leadership in several capacities, including special assistant to then-Speaker of the House Newt Gingrich.In that capacity, he coordinated high-level projects and communications with GOP lawmakers.

As an overhaul of the Social Security program takes center stage during the second term of the Bush administration, the American Institute of CPAs has released a comprehensive analysis of factors that should be considered in a reform strategy. The institute said that the catalyst for the report -- developed by economic, tax and accounting experts -- was the Social Security Administration's estimate that the Social Security Trust Fund balance will peak in 2028 and be exhausted by 2041. Benefits would then be limited to the then-current cash flow into the system. Current actuarial calculations indicate that the trust fund will need an additional $3.5 trillion to pay anticipated future benefits over the next 75 years. "The debate surrounding Social Security reform brings to the forefront philosophical differences, varying opinions, and the age-old trade-offs between fairness, simplicity, economic growth and social policy. We at the AICPA strongly urge policymakers and the public to thoroughly understand the issues surrounding Social Security reform before taking a position," said the AICPA's vice president of taxation, Tom Ochsenschlager. The report, available online at www.aicpa.org/members/socsec.htm, addresses the pros and cons of such issues as: _ The current financial condition of Social Security; _ The relationship between Social Security and the elderly living in poverty; _ The redistribution of income inherent in the current system and how changes might affect that in the future; _ How changes to the current system might affect decisions about when to retire, the amount of work performed in retirement and personal savings rates; _ The tradeoff between additional risk and higher rates of return; and, _ Potential issues related to transition funding.

The Big GAAP vs. Little GAAP debate rages on. An American Institute of CPAs' task force charged with examining private company financial reporting standards wants to begin a process to implement changes in generally accepted accounting principles for private issuer companies. "Fundamental changes should be made in the current GAAP standards-setting process to ensure that the financial reporting needs of private company constituents are met," read the report issued by the institute's task force. The task force, established last year and headed by former AICPA chairman James Castellano, made its determinations based on the input of some 3,700 business owners, public practitioners, financial managers, lenders, investors and sureties. The research was conducted by Omaha, Neb.-based MSR Group, an independent market research firm. "This group did not approach its research with a preconceived notion that issues or problems with GAAP financial reporting for private companies existed," Castellano said. "We wanted to understand if what many of us had been hearing was simply the opinion of a vocal minority or the true expression of concerns by stakeholders of private company financial reporting." Public issuers are required to prepare financials in accordance with GAAP, and privately held companies -- which comprise an overwhelming majority of the roughly 5 million companies in the U.S. -- have traditionally used GAAP as well, thus fueling the protracted public-versus-private-standards debate. The AICPA board -- subject to input from Council -- along with accounting standard-setter the Financial Accounting Standards Board and its overseer, the Financial Accounting Foundation, have agreed to collaborate on possible courses of action. However, FASB and the FAF neither endorsed nor rejected the task force's conclusions. The AICPA, the FAF and FASB agreed that any proposal would need to be fully exposed for public comment and debate. A complete copy of the task force report can be found at: http://www.aicpa.org/members/div/acctstd/pvtco_fincl_reprt/index.htm.

With two of its top executives departing, the American Institute of CPAs announced a series of top management changes.The AICPA said that chief operating officer Clarence Davis, who has relocated his family to Savannah, Ga., will step down effective March 31, as he works towards retirement. Alan Anderson, senior vice president of both the member and public interest teams, is leaving the AICPA at roughly the same time to join Franklin Templeton Investments as senior vice president of global project management and strategy.

The American Institute of CPAs' Auditing Standards Board is poised to issue an exposure draft of five proposed statements and amendments to statements relating to auditors' risk assessment.