Accounting standards

The Public Company Accounting Oversight Board approved a $136.4 million budget for the 2007 calendar year, an increase of 4.2 percent over last year.Under the Sarbanes-Oxley Act, which created the accounting regulator, the board’s budget, less registration fees collected from accounting firms throughout 2006, form the basis for assessment of accounting support fees in 2007. The board will agreed to tap into an excess of its working capital reserve fund to reduce the overall accounting support fee by $10 million next year.

Hitachi America Ltd. XBRL Business Unit announced the launch of its Xinba 2.0 Reader and Analyzer, a desktop-based Microsoft Excel add-in that gives users the capability to import, open and manipulate Extensible Business Reporting Language directly in the program.XBRL is a technology that tags financial information through disparate applications and carries it through the business reporting chain. Software that can actually manipulate the data into usable form is only just beginning to be introduced on a broad base.

The International Accounting Education Standards Board is seeking comment on an exposure draft of its strategic plan for 2007-09.

Scott Taub, the longest serving of the Securities and Exchange Commission’s deputy chief accountants, will leave the commission later this year.Taub, 38, had served as acting chief accountant for nine months beginning in late 2005 until Conrad Hewitt started in the position in mid-August. Prior to serving as a deputy, Taub spent most of career with Arthur Andersen and as a professional accounting fellow in the Office of the Chief Accountant between 1999 and 2001. He returned to the office in September 2002.

The two organizations that police stock brokers and others working in the securities industry will form a new, single self-regulatory body.

With the close of 2006 approaching, we asked industry leaders to share their ideas of what the accounting profession will look like in five years: What will be its major concerns? Challenges? Hot new service areas? What will shape will the firm landscape have taken?In the final part of the series, among others, managing director of research for research firm Glass Lewis & Co. Lynn Turner, Information Technology Group Inc. principal David Cieslak and Internal Federation of Accountants chief executive Ian Ball take a stab at forecasting what the future holds for the profession. The managing partner of Beckstead and Watts, Brad Beckstead, the firm involved in the legal challenge over the constitutionality of the Public Company Accounting Oversight Board, wraps things up.

The Public Company Accounting Oversight Board will meet Thursday, Nov. 30, to consider adoption of its budget for the 2007 fiscal year.As outlined under the Sarbanes-Oxley Act, the board -- which sets its fiscal year according to the calendar -- must set a budget for the upcoming year no later than one month before the end of the current fiscal year. Once approved by the board, the budget will be submitted to the Securities and Exchange Commission for approval.

After years of sounding the fiscal imbalance bell, Comptroller General David Walker, the head of the Government Accountability Office, has committed a to-do list to paper for the 110th Congress.In a letter dated Nov. 17, Walker outlines a number of areas his federal watchdog agency, says the newly-elected politicians should consider in getting a “jump-start” on legislative planning.

The Securities and Exchange Commission is closing in on an early Christmas present for corporate critics of the Sarbanes-Oxley Act - a new plan that would reduce the compliance problems associated with the legislation's prickly Section 404 auditing requirements.But the expected reforms - which are scheduled for public consideration at an SEC meeting in mid-December - are not likely to quiet the chorus of criticism from Congress and the wider business community that blames SOX for making American capital markets uncompetitive, driving stock listings overseas and creating massive new costs for small companies.

In an effort to improve consistency in the application of standards relating to audits of the fair value of options granted to employees, the Public Company Accounting Oversight Board staff has issued a set of guidelines.Presented in a question-and-answer format, the guidelines point out risk factors that auditors should be aware of in their consideration of the process for developing a fair value estimate, significant assumptions used in option-pricing models, and the role of specialists in fair value measurement.

Business tax reform needs a bipartisan, national consensus, but is absolutely necessary for the country to remain competitive in a global economy, according to Senate Finance Committee chair Chuck Grassley, R-Iowa."I think the consensus is there that the business tax system is in desperate need of reform," he told a recent hearing on the business tax system. "But we need to start building consensus on how to do it."

The use of private annuities to shelter gain on appreciated property has come to an abrupt halt, if the Internal Revenue Service has its way.Whether the IRS can withstand pressure to withdraw or substantially amend new proposed regs before they are made final, or whether the final regs can withstand judicial challenge, remains to be seen. For now, however, effective for annuity transactions after Oct. 18, 2006 (subject to a relatively brief six-month "estate planning" exception), the division between "old rule" and "new rule" is dramatic.

The Financial Accounting Standards Board has voted to propose changes to a derivatives rule issued earlier this year affecting the financial statements of asset-backed and mortgage-backed securities investors.The proposal would affect FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments, and allow companies not to account for embedded derivatives that are associated with prepayment risks. Community banks, insurance companies and others may be exempted from having to recognize interest-rate-driven gains and losses on their income statements. Many of those groups had said that without such an exemption, their earnings might be more volatile.

The Securities and Exchange Commission announced that thousands of individual investors who made financial claims in the wake of the $11 billion WorldCom accounting fraud will soon receive up to $150 million from a commission fund set up to help compensate investors for their losses.The SEC's ability to return penalty money directly to fraud victims is a new authority granted under the Sarbanes-Oxley Act. The entire $750 million penalty that the SEC obtained from WorldCom was paid into a "Fair Fund" when the reorganized telecommunications company emerged from bankruptcy protection in April 2004. All of that money is earmarked for return to injured investors.

The Committee of Sponsoring Organizations of the Treadway Commission issued a request for proposals to develop guidance to help organizations monitor the quality of their internal control systems.The end product is meant to serve as a tool for effectively monitoring internal controls, as well as complying with the Sarbanes-Oxley Act.

Speaking to a group of financial executives, a Securities and Exchange Commission accountant said research from his office has revealed that most restatements are due to basic accounting mistakes.Speaking at the annual conference of Financial Executives International, SEC deputy chief accountants Scott Taub said that about 55 percent of recent company restatements were due to the misapplication of basic accounting rules or to problems with the actual data used in the original calculation.

While he didn't call for any new regulations, or outright suggest the overturning of any existing rules, in a speech this week Treasury Secretary Henry Paulson urged federal regulators to take a more hands-off approach when it comes to dealing with the markets.Speaking on the competitiveness of the capital markets at the Economic Club of New York, Paulson told the audience that U.S. accounting and securities regulators should consider adopting flexible accounting rules that outline principles, but don’t set strict rules.

Vice president of taxation for the American Institute of CPAs Tom Ochsenschlager listed the top 10 provisions in recent tax legislation in his keynote speech at the New York State Society of CPAs’ Annual Tax/Plenary Conference on Nov. 16.Provisions folded into the Tax Increase Prevention and Reconciliation Act Ochsenschlager outlined included:

The Securities and Exchange Commission announced that 1st Global Capital Corp., a Dallas-based broker-dealer, will pay a $100,000 penalty and consent to findings that it made unsuitable recommendations and sales of Section 529 College Savings Plans.According to the order, between 2001 and 2004 1st Global recommended and sold investments in 529 plan units without understanding and evaluating the comparative costs for its customers.

Beard Miller Co. LLP will sell its Financial Outsourcing Solutions practice to McKonly & Asbury LLP in a deal effective Jan. 1.