Regulatory actions and programs

Teams of accounting students from 22 colleges have accepted an invitation to participate in the inaugural KPMG National Audit Case Competition.

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.

CMS DISMISSES E&YCMS Energy Corp., a Jackson, Miss.-based electric and natural gas company, dismissed its auditor, Big Four firm Ernst & Young, and named PricewaterhouseCoopers as its new independent accountant.

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.

Robert H. Herz has been reappointed to a second five-year term as chairman of the Financial Accounting Standards Board.

A new report from the Public Company Accounting Oversight Board summarizes how practitioners have been implementing interim standards relating to auditor responsibility to detecting fraud.

Speaking at a New York State Society of CPAs conference earlier this week, Conrad Hewitt declined to speak in absolutes when it came to across-the-board implementation of the Sarbanes-Oxley Act’s infamous Section 404.The Securities and Exchange Commission chief accountant avoided absolutes when speaking on the question of compliance for micro-cap companies -- the first time that I’ve heard a federal regulator hedge their bets on implementation that’s currently planned for 2008. It would be far from the first deferral for companies will market capitalizations under $75 million -- but the first ray of hope for those small companies since the SEC declined to strongly move forward on a number of recommendations outlined last year by an advisory committee.

Texas law firm Andrews Kurth will pay Enron's estate $18.5 million to settle potential malpractice claims stemming from legal advice the firm allegedly offered concerning the energy giant’s asset transactions.

There have been calls by financial statement users for increased transparency with regard to financial statements. It seems the regulators are taking those demands seriously, not just by enacting standards aimed at increasing transparency, but also by ensuring that the standard-setting process is more transparent.

A board within the International Federation of Accountants has released a standard identifying disclosures to be made by governments and other public sector entities that make their budgets publicly available.According to the International Public Sector Accounting Standards Board, such disclosures will contribute greatly to improving accountability. The new standard, IPSAS 24, “Presentation of Budget Information in Financial Statements,” applies to entities that adopt the accrual basis of financial reporting. Additionally, the cash basis standard, “Financial Reporting under the Cash Basis of Accounting,” has been updated to include both required and encouraged disclosures that apply to entities that adopt the cash basis of financial reporting.

The Financial Accounting Standards Board has unanimously voted to move forward in implementing new rules that require public companies to take a more structured approach in reporting uncertain tax positions on their financial statements.

Sounding a familiar warning, the Public Company Accounting Oversight Board criticized Ernst & Young and KPMG for failing to follow accounting rules or gather sufficient evidence for judgments in a number of audits.