Accounting standards

A mid-level House aide reportedly said that he was the one who added the controversial provision in last month's spending bill that would have given staffers on the House and Senate Appropriations Committees access to Americans' tax returns.

Laura L. Cox, a high-level aide to Securities and Exchange Commission Chairman William Donaldson, is departing the regulator to join Big Four firm PricewaterhouseCoopers as partner-in-charge of professional and governmental activities.

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.

The American Jobs Creation Act of 2004 will alter the rules for the contribution of used motor vehicles, boats and planes after Dec. 31, 2004, the Internal Revenue Service warned.

The Public Company Accounting Oversight Board is poised to vote Tuesday Nov. 30 on implementing Auditing Standard No. 2 and the required audits of internal control over financial reporting. In March, the oversight body adopted AS No. 2, which is titled "An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements." The standard addresses both the work that is required to audit internal control over financial reporting and the relationship of that audit to the audit of the financial statements. The requirement pertains to companies with more than $75 million in market capitalization. It is in effect for fiscal years ending on or after Nov. 15, 2004.

The Internal Revenue Service has issued proposed regulations for determining when a transfer of consideration to a partnership by a partner and a transfer of consideration from that partnership to a different partner constitute a disguised sale of a partnership interest. In response to a recommendation of the Joint Committee on Taxation in its "Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations" (February 2003), the regulations generally would extend the existing disclosure requirement for disguised sales of property from two years to seven years. The same disclosure requirement would be incorporated for disguised sales of partnership interests. "These proposed rules benefit both the taxpaying community and the Internal Revenue Service," said IRS chief counsel Don Korb. "The rules provide taxpayers and tax practitioners with guidance on how to structure partnership contributions and distributions without getting caught up in the disguised sale rules. They also provide for a longer disclosure period that will facilitate the examination of questionable transactions involving partnerships." The proposed regulations provide, generally, that where a transfer of consideration to partner A by a partnership would not have happened "but for" the transfer of consideration to the partnership by partner B, the transfers are treated as a sale of all or a portion of partner A's interest in the partnership to partner B for all purposes under the Internal Revenue Code. Where the transfers to and from the partnership do not occur on the same date, the transfers are treated as a sale only if the later transfer is not dependent on the entrepreneurial risks of partnership operations. The proposed regulations provide that these determinations are made based on all of the facts and circumstances.

With the dust finally settling on the American Jobs Creation Act of 2004, tax professionals are studying its voluminous sections and clauses to map out optimum strategies.

In an annual survey of recommended projects and priorities, the Financial Accounting Standards Advisory Council has warned the Financial Accounting Standards Board that the world is changing fast and getting riskier, and that the board's agenda will have to prepare accountancy for what's coming.

In an unheralded but potentially earthshaking move, the Financial Accounting Standards Board voted last spring to reconsider its conceptual framework, which was mostly completed in the 1970s and 1980s. In addition, the board plans to work closely with the International Accounting Standards Board to accomplish convergence with that institution's own framework.

Top-ranked accounting and consulting firm Citrin Cooperman has added corporate governance services to its roster. The New York-based firm has hired corporate governance veteran Michael Rhodes to lead the new practice, which will focus on offering Section 404 compliance and other corporate governance services to public, private and nonprofit companies. Citrin Cooperman doesn't offer attest services to publicly traded companies -- the firm gave up its Securities and Exchange Commission practice in 2002. Rhodes, who joined Citrin Cooperman as director of corporate governance, most recently worked at a large consulting firm where he focused on SOX compliance, business process reengineering, financial and accounting system implementation, and other CFO advisory services. Citrin Cooperman ranked No. 45 on the 2004 Accounting Today Top 100 Firms list with $31 million in revenue.

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 respective companies do not have a clear view of their total compliance spending. Overall, companies that responded to the survey indicated that they expect to increase their compliance spending by an average of 9.9 percent over the next 12 to 24 months. A large majority (90 percent) said that during the next 12 to 24 months, they are planning improvements to their company's compliance efforts including risk management, bolstering programs to reduce compliance costs and streamlining cost efficiency. According to the poll, 59 percent of executives surveyed admitted that their compliance programs are "somewhat inefficient," while an additional 5 percent said that their programs are inefficient and that their company spends more than it needs to. Only 32 percent considered their compliance programs "very efficient." Some 49 percent of U.S. and European multinational companies believed that their compliance programs need improvement, while a surprising 52 percent said that they don't understand clearly the value their company receives from compliance spending. The survey, as well as PDF versions of the U.S. and European findings, are available at http://www.barometersurveys.com.

The audit committee of financial services conglomerate American Express Co. approved the appointment of Big Four firm PricewaterhouseCoopers as its auditor for 2005, according to a federal filing. PwC succeeds Ernst & Young as the company's independent accountant. Ernst will remain as auditor for AmEx through Dec. 31. American Express engaged PwC following an extensive RFP process. The company's audit committee conducts a mandatory review of its outside auditor every 10 years. There were no disagreements between American Express and E&Y on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Two years ago, the Financial Accounting Standards Board announced that it would strive to write standards that depended more on principles than on specific rules or guidance.

The Financial Accounting Standards Board has issued FASB Statement No. 151, Inventory Costs. According to FASB, the new statement, an amendment to No. 43 Chapter 4, would improve financial reporting via clarification that abnormal amounts of idle facility expense -- i.e. freight, handling costs and spoilage -- should be recognized as current-period charges. The measure also requires the allocation of fixed production overheads to inventory based on a facility's normal capacity. The standard-setter, headquartered here, said in its clarification of ARB 43 that it adopted language used in International Accounting Standard No. 2 as part of its effort toward convergence to a single set of global accounting standards. FASB said that the guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The statement may be accessed from the FASB's Web site at http://www.fasb.org.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

Members of an advisory council to accounting rulemakers say that revenue recognition should be the Financial Accounting Standards Board's top priority.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

A controversial tax return inspection provision contained in a Bush administration budget bill for fiscal 2005 will be removed before the legislation is sent to the White House for the president's signature.

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