Accounting standards

Complying with the federal tax code costs American taxpayers at least $100 billion annually, and lost economic efficiency associated with the tax system may top half a trillion dollars, auditors for the Government Accountability Office told Congress.In a report likely to add fuel to the campaign for an easy-to-administer national consumption tax, the GAO said that the lowest available estimates of the cost of complying with federal income, payroll and excise taxes is $107 billion - a whopping 1 percent of the nation's total gross domestic product. Other studies suggest that compliance costs may be 50 percent higher than these estimates.

The Governmental Accounting Standards Board has proposed a new standard that would clarify accounting for sales and pledges of receivables and future revenues, including those arising from tobacco settlement agreements.The proposal addresses whether certain transactions should be regarded as collateralized borrowing, or as a sale.

The workload for financial advisors in Seattle and Austin lessened somewhat over the last few years, as big employers such as Microsoft and Dell curtailed their use of stock options.Across the nation, an increasing number of companies have moved toward alternative forms of employee incentive compensation in response to the sweeping changes in accounting rules regarding options expensing dictated by the Financial Accounting Standards Board.

Since Section 404 of the Sarbanes-Oxley Act went into effect, both external and internal auditors have been unsure exactly how to treat "the work of others," not to mention "each other."The Securities and Exchange Commission and the Public Company Accounting Oversight Board have made it clear that public auditors need to scrutinize companies more carefully, including their internal controls over financial reporting, but at a PCAOB roundtable discussion in April, auditors and corporate financial officers complained of the increased cost of these intensified audits.

Weak financial management at the Securities and Exchange Commission has led to budget overruns of nearly $50 million in two years, according to a report issued by the Government Accountability Office.

The Securities and Exchange Commission's Advisory Committee on Smaller Public Companies has announced plans for a two-day meeting in Washington, D.C., on Oct. 24 and 25.

The independence of auditors was the focus of an international forum hosted by the Ethics Committee of the International Federation of Accountants in Brussels on Oct. 11

The Supreme Court voted to let stand a ruling against two former executives of Gemstar-TV Guide International, supporting the ability of the Securities and Exchange Commission to freeze payments to executives under federal accounting fraud law.

Refco Inc., the futures broker that removed chairman and chief executive Phillip R. Bennett this week after discovering that a company he controlled owed Refco $430 million, is the target of a Securities and Exchange Commission investigation, according to published reports.

The Securities and Exchange Commission said the former KPMG accountant who oversaw audits of Xerox Corp. will pay a $100,000 fine to settle charges that he failed to disclose accounting violations that came to his attention.

The Streamlined Sales Tax Project, in labor since 2000, officially gave birth on Oct. 1, 2005, when the threshold of 10 states representing at least 20 percent of the population was crossed."There are now 13 full-member states and five more associate states," said SSTP co-chair Scott Peterson, of the South Dakota Department of Revenue and Regulations. The associate-member states are those that have passed the requisite implementing legislation, but where the legislation had not yet gone into effect by October 1.

Following the inevitable rounds of infighting, European Union countries are taking the final steps to enact legislation to bring their auditing standards into line with best international practices as set out by the International Auditing and Assurance Standards Board.At press time, the European Parliament was expected to rubber-stamp an upgraded version of the EU's Eighth Directive on statutory auditing, which got through the committee stage in September. The agreed-upon package will be published before the end of the year, leading on to official enactment by the EU national governments.

Repealing the federal estate tax could end up choking off billions of dollars in contributions to charities whose resources have been stretched thin by the Hurricane Katrina relief effort, a top tax policy researcher warned Congress.Testifying on behalf of the Brookings Institution's Tax Policy Center, economist William Gale cited a variety of studies suggesting that "estate tax repeal would reduce charitable bequests by between 22 and 37 percent" - a drop that would drain between $3.6 billion and $6 billion each year from the nation's charities.

Calling the proposal for a "return-free" filing system "flawed" and "dangerous to taxpayers," 14 groups have written the President's Advisory Panel on Tax Reform to urge that it be taken off the table in any final report.While the timetable for a final report has been delayed by Hurricane Katrina relief efforts, with the final two scheduled meetings postponed, the return-free concept is one of the proposals under consideration by the panel.

New guidance from Securities and Exchange Commission regulators sets limits on ways to determine the cost of stock options, though the new SEC chairman said that the report was "tentative."Chief accountant Donald Nicolaisen, who will leave the SEC in October, wrote in a statement that he had doubts as to whether the creation of a financial instrument to mimic employee stock options would be an accurate tool. And chief economist Chester Spatt wrote in a memo from the SEC's Office of Economic Analysis that such an instrument would face the inherent difficulty of reconciling market price with the fair value of stock options.

Environmentalism has arrived, and it's here to stay. And apparently the time to account for it has also come. The question is how.Many corporations have seen real, market-driven reasons to report on their environmental impact and sustainability. Consumers are paying attention. Investors are worried about what they're investing in and how environmental liabilities could impact their investments. In many countries, environmental regulation agencies are requiring some degree of reporting.

BearingPoint Inc., a spinoff of Big Four firm KPMG's former consulting business, said that the Securities and Exchange Commission has launched a formal investigation of the company.Along with providing an update to the progress of the company's plans to release its 2004 financial statements, BearingPoint said that the SEC has issued a formal order of investigation into the company. In a statement, BearingPoint said that it believes the matters involved are the same as the informal investigation that it announced in March.

The Securities and Exchange Commission released a request for information on interactive financial data as part of its ongoing efforts to make financial disclosure more useful and accessible to investors.

The Securities and Exchange Commission charged two accountants in connection with auditing the financial statements of bankrupt cable company Adelphia Communications Corp.

The Financial Accounting Standards Board said that it would assemble an investor task force -- a group comprised of top-level asset managers who will help advise the standard-setter on accounting issues relevant to Wall Street.