Accounting standards

The American Institute of CPAs presented awards to 10 budding CPAs who achieved the highest cumulative scores last year on the four sections of the Uniform CPA Examination.

On a muggy July day five years ago, President George W. Bush put his pen to the Sarbanes-Oxley Act, an expansive piece of corporate reform legislation designed to help restore investor confidence in a nation scarred by an apparently unending series of accounting scandals.The 11-section measure, which essentially changed the way public companies do business, ushered in a cascade of new reforms, service prohibitions and standards for public issuers, their boards and the CPA firms that audit them. It was the most deliberately invasive regulatory reform passed since the Roosevelt administration, touching nearly every aspect of the financial reporting process.

Is the Governmental Accounting Standards Board in trouble? "Trouble" may be too strong a word, but it's been a bumpy couple of months for the state and local government standard-setter.In December, the Government Financial Officers Association voted to "re-assess GASB's role as the authoritative accounting standard-setting body for state and local governments."

The Securities and Exchange Commission approved the Public Company Accounting Oversight Board's new internal control auditing standard by a 5-0 vote in late July.Registered audit firms are now required to use the new standard for all audits of internal controls no later than for fiscal years ending on or after Nov. 15, 2007. Auditing Standard No. 5 replaces the older AS2.

This coming January officially marks the three-year countdown before the axe falls on the lower individual capital gains rates now in place.Since May 6, 2003, thanks to the Jobs and Growth Tax Relief Reconciliation Act of 2003, gain from the sale of most long-term capital assets is subject to a maximum tax rate of 15 percent (5 percent for individuals in the 10 percent or 15 percent tax bracket). Starting in 2011, however, these rates are scheduled to revert to their former pre-May 6, 2003, levels of 20 percent and 10 percent, respectively. Nevertheless, before the party ends, a 0 percent rate will replace the 5 percent rate for tax years beginning after Dec. 31, 2007.

The Governmental Accounting Standards Board has unveiled a new standard on accounting and reporting for intangible assets, clearing up a requirement of Statement 34 that had caused widespread uncertainty in the preparation and comparison of governmental financial reports.GASB Statement 51, Accounting and Financial Reporting for Intangible Assets, adopts a clear and simple description of intangibles as assets that have no physical substance, are non-financial in nature, and have a useful life extending beyond a single reporting period. Such assets would include easements, internally generated and third-party computer software, water and timber rights, patents, and trademarks.

On the heels of a conviction against former Brocade Communications CEO Gregory Reyes, the Securities and Exchange Commission has filed fraud charges against Michael Byrd, the company's former CFO and COO.

The Internal Revenue Service and the Treasury Department's Office of Tax Policy have released a "priority guidance plan" for 2007-2008, outlining the 303 projects they plan to complete through June 2008.

Linden Lab, creator of the online virtual world Second Life, has begun outsourcing its finance and accounting work to Consero Global Solutions.

The Securities and Exchange Commission filed charges against the former CEO, CFO and treasurer of natural gas distributor Nicor, charging the Chicago-area company with financial fraud spanning the period of 1999 to 2002.

The American Institute of CPAs is criticizing proposed regulations for how post-death events might be considered in determining the value of a taxable estate.

Roel Campos, one of the two Democrats on the five-member Securities and Exchange Commission, announced plans to return to the private sector next month, further tipping the balance on the panel as the SEC continues to issue and enforce regulations affecting accountants.

Japanese GAAP is moving closer to International Financial Reporting Standards under an agreement that will accelerate the process.

Longstanding weaknesses in the financial systems of government agencies pose a "formidable challenge," according to a report released by the Government Accountability Office.

The Financial Accounting Standards Board said it is looking for suggestions on whether it should pursue a project on accounting for insurance contracts, and whether it should team up with the International Accounting Standards Board, which has been working on a similar project.

Connecticut Governor Jodi Rell vetoed a bill that would have allowed Connecticut to set its own accounting standards."I have serious concerns about the potential fiscal impact this bill may have," said Rell. "The plain language of this bill would allow the comptroller to issue financial statements in whatever standards she prescribed."

It may seem belated, but the Governmental Accounting Standards Board has just recently gotten around to defining such fundamental accounting concepts as "asset" and "liability."It has also defined a pair of distinct financial statement elements that are new to accounting and whose definitions should clarify certain questions that have confounded governmental accountants and auditors for years.

Fewer taxpayers took advantage of the Internal Revenue Service's free electronic tax return filing service in 2007 than in previous years, according to a new audit report released by the Treasury Inspector General for Tax Administration.Moreover, the audit identified multiple calculation errors made by the commercial software of Free File Alliance firms.

The more we consider what the Financial Accounting Standards Board accomplished with SFAS 159, the more we're warming up to the sea change it represents. This standard, titled "The Fair Value Option for Financial Assets and Financial Liabilities," permits without requiring managers to account for financial assets and liabilities using their fair values, with unrealized gains and losses flowing through the income statement. Some have disparaged SFAS 159 for not mandating full fair-value reporting, while others have criticized its "optionality."We see it quite differently. For years we have endorsed the Quality Financial Reporting paradigm that calls managers to step out on their own and try to meet the needs of the capital markets for useful information. In effect, SFAS 159 provides a nudge in this direction by allowing, even encouraging, innovative managers to jump into QFR by applying fair value without waiting for everyone else to get into the pool. We've often said that the biggest rewards will go to those who start providing better financial statements, so we're gratified that FASB seems to have seen it our way.

The Securities and Exchange Commission has begun distributing $267 million to about 200,000 investors from the fund it set up as part of its settlement with Qwest Communications over allegations of accounting fraud.