Accounting standards

J.J. Pickle, former Congressman, tax writer and an ardent reformer of Social Security, died last week here at the age of 91. While serving as chair of the Ways and Means Committee Social Security Subcommittee, Pickle was a key figure in Social Security legislation to keep the system from becoming insolvent and was, according to reports, responsible for the provision that gradually raised the age of eligibility for benefits from 65 to 67. Pickle also served as chair of the Ways and Means Oversight Subcommittee, where he promoted research incentives and investigated a host of tax issues. He retired from Congress 10 years ago, after serving more than three decades.

While lawmakers on Capitol Hill were embroiled in a heated filibuster debate, not far away, members of the ruling Council of the American Institute of CPAs passed a much less contentious vote, agreeing to support the development of standards for private and nonprofit entities.

The Governmental Accounting Standards Board has issued a preliminary views document on accounting for pollution remediation obligations, and though the board hopes to hammer it into a proposed accounting standard by the end of the year, some are predicting a heated debate over an estimated cash flow technique for recording costs.

Since its first meeting in February, the president's Advisory Panel on Federal Tax Reform has heard testimony and statements from more than 80 witnesses, and examined everything from the philosophical underpinnings and history of our current tax system, to the economic impact of potential tax systems.

Section 404 of the Sarbanes-Oxley Act, which deals with auditing internal controls, has brought widespread agreement with the act's intentions and equally widespread complaints of increased costs and a disturbing lack of specificity on some aspects of the rules.

While corporate scandals in the U.S. have received a great deal of attention, Europe has its own versions of Enron and WorldCom. Parmalat, the Italian agribusiness giant, and Ahold, the Dutch retailer, are two recent examples. The scandals and the resulting loss of investor confidence have increased global efforts to create a regulatory framework that improves transparency in financial reporting for both publicly traded companies and government agencies.

The Securities and Exchange Commission has released a report recommending that the Financial Accounting Standards Board reform accounting standards for such front-burner issues as pension and lease accounting.

Mortgage finance giant Freddie Mac said that it expects to post a loss because of anticipated claims likely to stem from various lawsuits and enforcement actions related to its multi-billion-dollar earnings restatement.

The Securities and Exchange Commission has opened a formal investigation into OfficeMax Inc.'s accounting for vendor income, the company disclosed.

HealthSouth Corp. will pay $100 million to settle charges brought against it by the Securities and Exchange Commission alleging that it cooked its books by more than $2 billion over several years.

Tax and accounting software provider CCH has added Securities and Exchange Commission comment letters to its Accounting Research Manager 10-K Lookup tool.

Hiring ceilings at the Securities and Exchange Commission have reportedly been cut by 10 percent across the board amid facility cost overruns and an anticipated lower budget for fiscal 2006.

Overseas accounting rule makers are kicking off the summer with a series of road shows across Europe to talk with members of the business community there about International Financial Reporting Standards, which are now mandatory for listed companies in all 25 member states of the European Union.

Almost overnight, lease accounting has morphed into one of the profession's biggest headaches, as more than 300 companies have had to restate their financials, citing, among other issues, corrections to lease accounting errors.

Doubts are hovering over the timely implementation of the Basel II capital adequacy mandate in Europe, as the possibility lingers that the European Parliament will fail to clear the ruling smoothly.

With its role in standard-setting now clearly defined, the Auditing Standards Board has been making up for lost time as it moves toward a series of new proposed standards.

The Internal Revenue Service has been shifting its priorities from taxpayer service to enforcement and its management of the Business Systems Modernization program - an ongoing umbrella program of upgrades - from contractors to IRS staff.

The next few months should pump a little excitement into the profession as the Financial Accounting Standards Board moves to issue as many as 20 new documents - most of them exposure drafts - with some proposing significant changes to financial reporting.

In addition to its ongoing work on the implementation of Auditing Standard No. 2, the Public Company Accounting Oversight Board will focus on rules related to auditor independence and tax services and strengthening its enforcement staff during the second half of the year, according to its chairman.

The Securities and Exchange Commission Advisory Committee on Smaller Public Companies will hold its second meeting next week in New York to finalize its agenda, to consider suggestions on defining the term "smaller public company" and to hear testimony on methods to scale securities regulations for smaller public companies.