Regulatory actions and programs

The Financial Accounting Standards Board has released its preliminary views on financial instruments with the characteristics of equity in an effort to simplify a patchwork of 60-plus pieces of guidance.

The Internal Revenue Service and the Treasury Department issued a notice that allows taxpayers to make corrections for operational failures in complying with rules for nonqualified deferred compensation, but only when the failures are unintentional.

A survey of accounting industry leaders from around the world found overwhelming support for convergence of accounting standards.

Adding to its continuing professional education portfolio, Thomson Tax & Accounting has acquired AuditWatch, a high-profile audit-training and process improvement consulting firm headquartered in Reston, Va.

The city of Miami named McGladrey & Pullen as its external auditor.

Problems with revenue, related-party transactions and outside auditors were among the deficiencies found among auditing firms, according to a recent report.

An official with the European Union said that U.S. companies with stocks listed on European exchanges will not be forced to conform to International Financial Reporting Standards, even as IFRS moves closer to convergence with U.S. generally accepted accounting principles.

Dave Scudder has been following developments in auditing standards closely.

Deloitte's office in the Netherlands is preparing for a lawsuit by a group of investors there over its audits of food distributor Royal Ahold in a case that could cost the firm hundreds of millions of euros.

CPA firm Habif, Arogeti & Wynne has acquired another Atlanta-based accounting firm, Miller Ray Houser & Stewart, in a multimillion-dollar deal.

The Public Company Accounting Oversight Board plans to explain the deficiencies it found in its recent inspections of smaller auditing firms during an upcoming webcast.

Auditors at some of the largest accounting firms are working on tougher standards for valuing the assets of banks in an effort to calm jittery investors.

It began in college, continued in law school, and still exists today, my fascination with court and disciplinary opinions that provide an inside view of something the involved parties would rather had never come to light. The most recent one is a PCAOB disciplinary order involving an accountant who worked for KPMG.

CVS CAREMARK DISMISSES KPMGCVS Caremark Corp., a prescription drug provider, has jettisoned Big Four firm KPMG as its independent accountant and named Ernst & Young as its successor.

Our column in the previous issue considered the Securities and Exchange Commission’s recently appointed Committee on Improvements to Financial Reporting, which has been charged with finding ways to strengthen the system. As our readers might expect, we found flaws among the premises in a discussion paper by the chair, Robert Pozen (available at www.sec.gov/about/offices/oca/acifr/acifr_discussion.htm).In this column, we look at the first five of 10 specific points in Pozen’s paper that deserve exposure and that will demand additional attention from the committee. Our next column will address the remaining five.

While the word is that defined-benefit plans are no longer in favor, they can still provide a tax savings for the right client.“A lot of the press would lead you to believe that defined-benefit plans are on the way out,” said Karen Shapiro, chief executive of Dedicated DB, a San Mateo, Calif.-based provider of such plans. “But for some small-business owners, it’s a terrific tax strategy.”

In a special area on its Web site (in a Q&A on home foreclosure and debt cancellation), the Internal Revenue Service advised, “Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended.”Also, in recognition of the important role that the “insolvency exception” plays in excluding a beleaguered homeowner’s forgiveness-of-indebtedness income, the site further advised, “Consider the tax consequences before foreclosure.” This article explores what planning can be done to maximize the use of the insolvency exception to reduce or eliminate forgiveness-of-indebtedness income for the individual caught in the current mortgage financing or similar credit squeeze.

The Securities and Exchange Commission Statement of Policy reaffirming the status of the Financial Accounting Standards Board as a designated private-sector standard-setter (Release Nos. 33-8221; 34-47743; IC-26028; FR-70) recognizes FASB’s financial accounting and reporting standards as “generally accepted” accounting principles for purposes of the federal securities laws.As a result, registrants are required to comply with those standards in preparing financial statements filed with the commission, unless the commission directs otherwise. The SEC has emphasized the responsibility of FASB to consider international convergence, principles-based standards, timeliness, and cost-benefit issues in pursuit of high-quality accounting standards, as appropriate in the public interest and for the protection of investors. Official positions of FASB are determined only after extensive due process and deliberations.

The American Institute of CPAs has given a thumbs-up to a Securities and Exchange Commission plan that would allow U.S. corporations to abandon generally accepted accounting principles and report their financial results using international accounting standards.But critics warn that a shift to International Financial Reporting Standards would drive up audit costs for U.S. companies, lower the quality of information available to investors, and put smaller accounting firms at a distinct disadvantage.

One of accounting’s most complex and significant projects — the codification of the country’s generally accepted accounting principles — is about to step into daylight.After four years of intense and technically complex labor, the Financial Accounting Standards Board is about to release the massive compilation of standards, statements, issues, interpretations, bulletins, positions, guides, abstracts and opinions.