Accounting standards

Two years ago, Bob Bunting saw the writing on the wall for U.S. GAAP.As former chief executive and chairman of super-regional firm Moss Adams LLP, Bunting established resources to prepare for the reality of International Financial Reporting Standards becoming the future of financial reporting for public companies in the United States.

A company may take a position on its tax return in good faith, but due to the complexities of tax law, it’s never a sure thing that it will be sustained.The now two-year-old FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48, establishes a “more-likely-than-not” threshold for the reporting of uncertain tax positions on financial statements. Under the rule, an uncertain tax position may not be recognized on the financial statement unless it is more likely than not that it will be sustained on its technical merits, and then it is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement.

National Taxpayer Advocate Nina E. Olson’s list of objectives — detailed in the first of her two annual required reports to Congress — zeroes in on the problems that she intends to focus on during the fiscal year ahead.At least one of the objectives — which focuses on the liabilities of incentive stock options under the Alternative Minimum Tax — has a good chance of being resolved, according to Tim Carlson, president of the Coalition for Tax Fairness and pro bono attorney for a number of victims of the anomaly. “Pending legislation will fix it, and it has support from both sides of the aisle,” he said.

With volatile economic times threatening, flexibility in all aspects of financial affairs, including charitable giving, is more desirable than ever. While there is an increased need for charitable donations, there are also fewer resources among potential donors. One charitable giving vehicle that has grown popular over the past ten years because of its efficiencies is the charitable remainder trust.A CRT can provide a new income stream for the donor and a benefit to charity — a classic win-win situation. CRTs should continue to have viability for present-day donors, especially those who maximize the flexibility that the rules allow. In pushing CRTs to their legal limit, however, taxpayers also must heed restrictions that, if not followed, can result in disastrous tax consequences.

It’s vacation season, and we’re buying some relief from the never-ending stream of deadlines by republishing our all-time favorite tongue-in-cheek column that sheds light on how ludicrous many important features of GAAP are.If financial statements really are scorecards for business, reporting real outcomes, as well as sources of information for predicting the future, it’s essential that they usefully describe what actually happens instead of what someone hoped would happen.

Apple's former general counsel, Nancy Heinen, agreed to pay $2.2 million to settle stock options backdating charges with the Securities and Exchange Commission.

The Securities and Exchange Commission said it has resolved its litigation with Sun Communities over the company's accounting practices and will impose a $25,000 penalty on the mobile home community developer's former CFO.

The Financial Accounting Standards Board has certainly been hearing an earful in recent days from a variety of organizations warning that the amendments it is proposing to two of its accounting statements could lead to a spate of lawsuits.

Several organizations are criticizing a proposed standard on accounting for loss contingencies, saying it could lead to possible abuses, including a flurry of spurious lawsuits.

The Securities and Exchange Commission said it would distribute over $48 million to more than 12,000 investors who had been affected by Vivendi Universal's fraudulent financial reporting.

Prudential Financial has settled with the Securities and Exchange Commission over charges that it engaged in improperly accounting for reinsurance agreements.

Ernst & Young has settled charges with the Securities and Exchange Commission for $2.9 million alleging a conflict of interest in its audits of three companies.

The Financial Accounting Standards Board has issued a revised exposure draft of a proposed standard on earnings per share, along with a staff position on endowments for nonprofit organizations.

The Internal Revenue Service and the Treasury Department have issued a ruling to discourage companies from transferring pension plans to unrelated firms.

The Securities and Exchange Commission has issued a warning about the use of 401(k) debit cards that allow employees at some companies to borrow money from their retirement plans.

The Securities and Exchange Commission held a roundtable discussion on the performance of International Financial Reporting Standards and U.S. generally accepted accounting principles during the subprime crisis.

When I am a loss for the subject of a column, all I have to do is go to the Internet and I quickly find something to write about. What I found is a SEC press release that states the SEC has charged a mutual fund manager with violating socially responsible investing restrictions in socially responsible mutual funds that investors were told would not contain securities issued by companies involved with producing weapons, alcohol, tobacco, or gambling products.

The Securities and Exchange Commission’s Advisory Committee on Improvements to Financial Reporting has released a draft of its final report.The draft report updates a progress report released in February. Among the committee’s proposals are putting executive summaries at the beginning of annual and quarterly financial reports. The committee also wants to increase investor representation on the Financial Accounting Standards Board and the Financial Accounting Foundation. The committee proposes creating a Financial Reporting Forum to coordinate the efforts of FASB with the SEC, the Public Company Accounting Oversight Board, investors, auditors and other parties.

The fourth stage of the pending UCITS directives, which sought to introduce a complete “passport” allowing fund managers based in one European Union member state to run and trade funds in another in a pan-European format, has been temporarily tabled following outcries from Ireland and Luxembourg.The controversy surrounds Version IV of the “Undertakings for Collective Investment in Transferable Securities,” or UCITS — a set of EU directives that allow collective investment schemes to operate freely throughout the EU on the basis of a single authorization from one member state.

In a time of volatile energy prices and economic uncertainty, the Governmental Accounting Standards Board has issued a standard that should allow state and local governments to more easily use derivative financial instruments to hedge against changes in prices and interest rates.