Accounting standards

With a planned overhaul of Social Security and pressing budget issues occupying center stage during the onset of the second Bush administration term, the president's planned reform of the tax code would most likely be pushed back at least one year. According to the Washington Post, the president plans to name a panel to examine the current tax policy but reportedly will assign the Treasury Department to monitor the panel's progress. The report said that Treasury Secretary John Snow would most likely recommend incremental changes to the tax code, rather than more dramatic reforms such as supplanting it with a "flat tax" or national sales tax. A White House spokeswoman, however, maintained that overhauling the tax code remains a priority.

Douglas Hill, managing general partner of embattled brokerage house Edward D. Jones & Co., intends to leave the company roughly one week after the firm agreed to pay $75 million to settle charges of improper disclosure of revenue-sharing payments. Hill, 60, will retire as managing general partner Dec. 31, but would remain as managing partner through 2005. In addition, Hill is expected to pay $3 million of the agreed-upon fine, while the firm's general partners are expected to shoulder an aggregate of $44 million. Last week, the brokerage firm reached a settlement with the SEC, the New York Stock Exchange and the National Association of Securities Dealers as a result of arrangements that Edward Jones entered into with seven fund groups. The firm had not disclosed the fact that it received millions from the fund families each year for selling their respective products.

The International Public Sector Accounting Standards Board of the International Federation of Accountants has issued IPAS 21, 'Impairment of Non-Cash-Generating Assets', a guideline which prescribes the basis to help a government entity determine whether a non-cash-generating asset is impaired and whether a loss should be recognized. This new standard applies to governments and other public sector entities preparing general purpose financial statements under the accrual basis of accounting and requires that an asset not be carried at an amount in excess of its recoverable service amount. The entity would subsequently have to determine whether there is any indication that a non-cash generating asset may be impaired. IPAS 21 includes: Definitions of cash-generating assets and impairment. Guidance on identifying an asset that may be impaired. Guidance on measuring an asset's recoverable service amount. Guidance on measuring an impairment loss. Requirements for the recognition and reversal of an impairment loss. The standard may be downloaded from the IFAC Web site at www.ifac.org. The IFAC is a global accounting organization comprised of 163 professional accounting bodies in 119 countries.

Two top executives and auditor KPMG are out this week at Fannie Mae, following the Securities and Exchange Commission's decision that the mortgage giant violated accounting rules, leaving it faced with a massive restatement.

The Internal Revenue Service is allowing limited exceptions from coverage of the new deferred compensation rules for certain stock appreciation rights, or SARs, that "do not present potential for abuse or intentional circumvention of the purposes" of Section 409A.

H&R Block Financial Advisors, the investment arm of the tax prep giant, agreed to pay a $500,000 fine and to return $325,000 in clients' mutual fund trading profits to settle charges brought against it by the National Association of Securities Dealers related to the market-timing of mutual fund shares by two of its former financial advisors.

As the renowned Baby Boomer generation inches its way into the retirement years, employers are beginning to consider how this vast purge of experienced workers is going to affect the workplace.

Depreciation would be a joke if it weren't such a disgrace ... but that's precisely what happens when accountants calculate depreciation expense in advance and then report it on future income statements. There is no valid justification for reporting assumed depreciation instead of actual observed amounts (including appreciation)."

Tax reform under the second Bush administration will most likely take the form of piecemeal tax cuts, according to participants in a tax panel sponsored by the Council for Electronic Revenue Communication Advancement, a government-private industry trade association. President Bush has said that he would appoint a panel to recommend changes to the tax code that would make it simpler, fairer and less burdensome.

The Council of the International Federation of Accountants, a group that sets international standards on ethics, auditing and assurance, education, and public sector accounting, has named PricewaterhouseCoopers partner Graham Ward, CBE, MA, FCA, as its new president for a two-year term.

More than half of U.S. and European multinational companies will increase their compliance spending by an average of 23 percent over the next 12 to 24 months, according to a recent survey from Big Four firm PricewaterhouseCoopers.According to PwC's Management Barometer Survey, about 51 percent of those polled said that they would raise spending on compliance, while some 44 percent of senior executives revealed that their companies do not have a clear view of their total compliance spending.

The Financial Accounting Standards Board has begun to deliberate again on one of its most far-reaching and controversial projects - that of fair value measurement.

The Financial Accounting Standards Board and its overseas counterpart, the International Accounting Standards Board, have formed a new joint working group on performance reporting.

The Public Company Accounting Oversight Board has reportedly opened an investigation into KPMG's audits of mortgage finance company Fannie Mae.

As part of efforts to tighten ethical standards for tax professionals and curb abusive tax shelters, the Treasury has issued final regulations amending Treasury Circular 230, which governs the practice of attorneys, accountants and other tax professionals before the Internal Revenue Service.

The Securities and Exchange Commission has established an advisory committee to gauge the impact of the Sarbanes-Oxley Act and other aspects of the federal securities laws on the nation's smaller public companies.

Thanks to some fast footwork by regulators at the Securities and Exchange Commission and the Public Company Accounting Oversight Board, accounting firms and many of their smaller audit clients gained an additional 45 days of breathing room to comply with complex new Sarbanes-Oxley Act internal control reporting rules.

Officials at the Public Company Oversight Board unveiled an aggressive agenda for the coming year that may result in as many as 11 new standards for auditors in areas ranging from corporate fraud detection and reporting, to wrestling with related-party transactions.

The Governmental Accounting Standards Board is wrapping up a year in which it has been simultaneously returning to basics and promulgating specifics - both of which include projects of long-term significance to government financial operations.

Following a review of Fannie Mae's accounting practices, the Securities and Exchange Commission said that the mortgage concern didn't comply with two major accounting rules and asked it to restate past earnings.