Accounting standards

This year’s tax return filing season appears to be proceeding smoothly, despite the initial confusion that was generated by the seemingly annual last-minute tax legislation.Included in that flurry of new guidelines were the Tax Increase Prevention Act of 2007, which passed in December and included an Alternative Minimum Tax patch for the year that required some fine-tuning of the Internal Revenue Service’s computers to process returns that might be subject to the AMT; and the Mortgage Forgiveness Debt Relief Act of 2007, which also passed in December, and excluded mortgage debt forgiveness for homeowners whose home at foreclosure sold for less than the outstanding mortgage, if a portion of the unpaid debt was forgiven. In total, more than 10 forms this season were affected by the AMT patch.

The Financial Accounting Foundation’s board of trustees has voted to approve a range of sweeping changes in the oversight, structure and operations of the FAF and its two standards-setting boards — the Financial Accounting Standards Board and the Governmental Accounting Standards Board.The FAF plans to expand the number and breadth of investors, accounting, business, financial and government organizations and entities invited to nominate FAF trustees. Final authority for all the appointments will remain at the discretion of the board of trustees, who are responsible for the oversight, administration and finances for both of the standard-setting boards.

Much of the election-year criticism of hedge funds misses the point when it focuses on the claim that hedge fund operators get unfair tax breaks, experts say.There is abuse in the current Tax Code when it comes to hedge funds, but it affects the investors, according to Alan Dlugash, a tax partner at New York-based CPA and business advisory firm Marks Paneth & Shron. They’re often subjected to taxes that wipe out nearly all — or more than all — of the income that they made from the fund, he observed.

Accounting firm BDO Seidman said corporate executives and board members should be prepared to address various questions about the effect of the credit market crisis on their companies at their upcoming annual shareholder meetings.

The Securities and Exchange Commission said it has settled with six former executives and employees of Riverstone Networks who had been accused of inflating revenues at the communications router maker after they agreed to pay penalties and fines.

The Securities and Exchange Commission has charged Canadian pharmaceutical company Biovail and its former CEO and CFO and two current senior executives with engaging in fraudulent accounting schemes and making a series of misstatements to analysts and investors.

Software developer Compliance Coach introduced CompliancePal, a product intended to help businesses comply with new rules for safeguarding against identity theft.

The Financial Accounting Standards Board has issued a statement intended to improve financial reporting on derivative instruments and hedging activities.

The International Accounting Standards Board has issued a discussion paper, "Reducing Complexity in Reporting Financial Instruments," intended to be the first step in developing principles-based standards that are less complicated than existing standards for reporting on derivatives and other investments.

The California Society of CPAs said it would begin an educational initiative to help its 31,000 members cope with International Financial Reporting Standards.

The administration’s budget proposal to conform the penalty standards applicable to preparers and taxpayers has been welcomed by tax professionals concerned about possible conflicts of interest between preparers and their clients.The budget, the administration’s blueprint for legislative proposals, also calls for making permanent the 2001-2003 tax cuts, and offers measures to increase savings and investment and to improve compliance with the tax system. Rather than address Alternative Minimum Tax reform, it proposes a one-year patch to keep the number of taxpayers subject to the tax at around 4 million.

While many Washington observers have called much of the tax revenue side of the Bush administration’s Fiscal Year 2009 budget proposals dead on arrival, this year’s “Blue Book” of Treasury explanations nevertheless remains an important tax-planning tool.It underscores what the Bush administration considers are problems remaining to be solved. As such, they are problems that need to be either addressed or “planned around” in the meantime. Here is our take on some of the highlights in making that determination.

The Financial Accounting Standards Board’s Private Company Financial Reporting Committee has been active for barely a year, but it has already changed the way accounting standards are set.And 2008 may well be the group’s breakout year, according to committee chairperson Judith O’Dell.

XBRL US named Campbell Pryde as vice president, domain and chief standards officer of the nonprofit consortium, which is setting standards for the use of the Extensible Business Reporting Language in the United States.

The nation's economic policy heads outlined sweeping recommendations to strengthen the nation's credit markets -- calling for stronger licensing standards for mortgage brokers, more duel diligence from credit-rating agencies and stronger trading systems for complex instruments in an effort to avoid another credit meltdown. "Regulation needs to catch up with innovation and help restore investor confidence but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it," Treasury Secretary Henry Paulson said during a speech at the National Press Club. "We are encouraging financial institutions to continue to strengthen balance sheets by raising capital and revisiting dividend policies; we need those institutions to continue to lend and facilitate economic growth." Paulson, who heads the President's Working Group on Financial Markets, said the recommendations emanate from seven months' work by the group, which is comprised of the heads of the Treasury, the Federal Reserve Board, the Securities and Exchange Commission, the New York Federal Reserve Board and the Commodity Futures Trading Commission. Specifically, the PWG recommended strengthening the credit markets in the following areas: transparency and disclosure, risk awareness, risk management, capital management, regulatory policies, and market infrastructure. Paulson stressed that both state and local regulators need to strengthen oversight of mortgage originators, while credit rating agencies, must "perform robust due diligence" of originators of assets that are securitized or used as collateral for structured credit products. Federal Reserve Chairman Ben Bernanke labeled the recommendations an "appropriate and effective response to deficiencies in our financial framework that contributed to the current turmoil in financial markets," in a release accompanying the working group's policy statement. Securities and Exchange Commission Chairman Christopher Cox said the agency would use its new authority to address rating agency issues to restore investor confidence. "This effort is not about finding excuses and scapegoats. Those who committed fraud or wrongdoing have contributed to the current problems; authorities need to and are prosecuting them. But poor judgment and poor market practices led to mistakes by all participants," Paulson said. Paulson's remarks can be read at: http://www.treas.gov/press/releases/hp872.htm

The Internal Revenue Service has issued a notice with procedures for vehicle manufacturers to certify that a fuel cell vehicle meets the requirements for a tax credit. It also provides guidance to taxpayers who purchase certified vehicles regarding what they must do to use the credit. Under the law, the new qualified fuel cell motor vehicle credit is available to purchasers of qualified vehicles. The amount of the new qualified fuel cell motor vehicle credit is based on the weight of the vehicle and on when the vehicle is placed in service. An additional credit may be available for a fuel cell passenger automobile or light truck based on a comparison of the city fuel economy rating of that vehicle with the 2002 model year city fuel economy of a vehicle in its weight class. For fuel cell vehicles that weigh not more than 8,500 pounds, the base credit amount is $8,000 if the vehicle is placed in service on or before Dec. 31, 2009. The base credit amount is reduced to $4,000 if the vehicle is placed in service after that date. The amount of the credit available for heavy vehicles varies from $10,000 to $40,000, depending on the weight of the vehicle. The purchaser may claim a credit for the certified amount for a fuel cell vehicle if it is placed in service by the taxpayer after Dec. 31, 2005, and is purchased on or before Dec. 31, 2014.

In its effort to better police microcap securities, the Securities and Exchange Commission suspended the trading of 26 companies for "corporate hijacking."Hijacking refers to when someone seizes the identity of a defunct publicly traded corporation. The SEC said that the incident involved certain people incorporating each of the 26 companies using the same name as a then-defunct or inactive publicly traded corporation.Under trading rules, each class of an issuer's publicly-traded securities is assigned a ticker symbol by Nasdaq Reorganization and a CUSIP number by the Standard & Poor's CUSIP Bureau. The commission said the same persons appear to have usurped the CUSIP numbers and ticker symbols assigned to the defunct or inactive corporations' publicly traded securities for use by the newly incorporated entities.The regulator said the suspensions are first actions under the SEC's Enforcement Division's recently formed Microcap Fraud Working Group. The trading suspensions will last until March 27.

The American Institute of CPAs sent a letter to the Senate Finance Committee prior to its March 12 hearing on estate tax reform urging lawmakers to make permanent changes to the estate tax prior to the current law expiring in 2010.In a letter, the institute reiterated a prioritized series of reforms -- a list that the AICPA had previously sent to Congress in 2005 and again in 2006.

Sen. Max Baucus, D-Mont., chairman of the Committee on Finance, and Sen. Chuck Grassley, R-Iowa, ranking member, have written to several religious ministries to urge cooperation with an earlier information request from Grassley. The ministry inquiry that Grassley launched last November is meant to gauge the effectiveness of certain tax-exempt policies. "This ought to clear up any misunderstanding about our interest and the committee's role," Grassley said. "We have an obligation to oversee how the tax laws are working for both tax-exempt organizations and taxpayers. Just like with reviews of other tax-exempt organizations in recent years, I look forward to the cooperation of these ministries in the weeks and months ahead." Grassley wrote to six ministries in November, asking a series of questions on the nonprofit organizations' expenses, treatment of donations and business practices. The questions were based on presentations of material from watchdog groups and whistleblowers and on investigative reports in local media outlets. One of the six ministries, Joyce Meyer Ministries of Fenton, Mo., has cooperated substantially with his request and provided the requested information. Benny Hinn Ministries of Grapevine, Texas, has indicated a willingness to cooperate and provided answers to five of the 28 questions so far. Representatives for Randy and Paula White of Without Walls International Church/Paula White Ministries, Tampa, Fla., have verbally indicated to Finance Committee staff that they would cooperate. The remaining ministries have not cooperated, citing privacy protections or questioning the committee's standing to request the information. Baucus and Grassley wrote to them on March 11 to describe the committee's jurisdiction and role in determining the effectiveness of tax policy developed by the committee, distinct from the Internal Revenue Service's role, which is to enforce existing law. The three ministries are: Kenneth and Gloria Copeland of Kenneth Copeland Ministries, Newark, Texas; Creflo and Taffi Dollar of World Changers Church International/Creflo Dollar Ministries, College Park, Ga.; and Eddie L. Long of New Birth Missionary Baptist Church/Eddie L. Long Ministries, Lithonia, Ga.

The Securities and Exchange Commission and the Commodity Futures Trading Commission have put aside their regulatory turf wars and entered into a memorandum of understanding that fosters cooperation between the two enforcement bodies in market oversight and regulation. The agreement includes an information-sharing platform along with guidance for new product reviews - particularly if the products can trade as both a security or a commodity. The first order of business under the joint relationship is notices requesting public comment on two new products --the first is an option that would be traded on options exchanges, and the other is a future that would trade on a single stock futures exchange. The requests for comment will be published in the Federal Register.