Two CPAs in Washington D.C. have filed a class action lawsuit against the IRS for requiring a yearly registration and related fee in order to maintain a preparer tax identification number (PTIN). The suit, which involves 700,000 practitioners, seeks to recover $150 million in fees that the IRS has collected since the regulation passed in 2010. Four years ago, the IRS put the new rule into effect as a way to dramatically expand its oversight of CPAs, attorneys and other tax preparers who prepare tax returns for financial compensation. The plaintiffs have high hopes for a favorable ruling, as…
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Because the economic recovery we’ve all been told is happening never really arrived, dollar stores across the United States are doing big business these days. Because of that, there’s a huge takeover battle going on between the nation’s three largest dollar store retailers. Apparently, there’s billions to be made, one dollar at a time. Family Dollar Stores (FDS) originally rebuffed an unsolicited $9.1 billion offer from its larger competitor, Dollar General Corp. (DGC), citing anti-trust risks. Ironically, it already had a deal to sell to Dollar Tree Inc. (DTI) for $8.5 billion. DGC is now taking hostile action in its…
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This past summer, the firm of Pluris Valuation Advisors LLC released a detailed white paper on the valuation of life insurance. According to the authors, when valuing life insurance or life insurance-linked instruments such as split-dollar collateral assignment receivables or split-dollar promissory notes, there are only three elements of Fair Market Value. These include: Illustrations from the insurance company projecting expenses, premiums and cash values The mortality rates applicable to the insured life as of the valuation date The discount rates applicable to the cash flows from the policy as of any given year. The full report, Life Insurance: Mortality…
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In the early days of the scandal surrounding LA Clippers owner, Donald Sterling, certain terms of his punishment by the NBA were a given. What no one was sure of was whether or not he would be forced to sell the team. As speculation turned into fact, it seemed as if valuation estimates for the team were coming out of the woodwork. Some said the team price tag could go as high as $1 billion. Earlier in the year, Forbes set an estimate at $575 million. Incredibly, the team was sold to former Microsoft CEO, Steve Ballmer, for $2…
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Netflix is the latest company to join a petition asking the Federal Communications Commission (FCC) to deny the pending $45 billion Comcast / Time Warner merger. In a 256-page report, Netflix details how the merger will give the new entity too much control over the internet, and that this new power will enable it to stifle online video distributors that it sees as competition. Comcast continues to argue that because it does not overlap geographically with Time Warner, there are no major anti-trust concerns. Netflix was quick to point out that in 2000, the FCC required AT&T and MediaOne…
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Among many legal challenges to the validity of the Affordable Care Act (ACA), is Halbig vs. Burwell. The challenge concerns a passage in the statute, when literally read as worded, makes federal tax credits for insurance programs available only to those enrollees in states that have created a state-designed and operated healthcare exchange. Read as it currently exists, the statute does not allow for such tax credits in states that did not set up their own exchanges, but instead chose to allow residents to purchase insurance through a system created by the federal government. This distinction was part of…
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It was a shock to most people when the news hit that actor and comedian, Robin Williams, had suddenly passed away earlier this month at the age of 63. While most were aware of Mr. Williams’ hard-won 20-year sobriety milestone, what they didn’t know was the financial struggle he was facing in recent years. Forbes.com takes a respectful and detailed look at the estate planning of Mr. Williams, and shows how taking the right steps early on can secure the future of loved ones, even in the face of financial hardship and unexpected sudden loss. [button color=”blue” link=”http://www.forbes.com/sites/trialandheirs/2014/08/12/whats-next-for-robin-williams-family-and-estate/” target=”_blank”…
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Now that we’re six years into the Great Recession, financial experts tell us that the stock market is booming, and the economy is once again robust. Strangely, the vast majority of Americans aren’t sharing in this so-called recovery and the benefits of it are virtually non-existent, unless you look at the top 0.1% of wage-earners in the country, namely the CEOs of major corporations. Profitability and stock price increases are going through the roof and yet, none of this largesse is filtering down to employees or translating into product innovation or improved quality. How can that be? In an…
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In spite of the current economic climate, a recent survey from the American Institute of CPAs (AICPA) showed that 54 percent of valuation professionals expected a 10 to 50 percent increase in the demand for their services over the next two to five years. These results are part of the 2014 AICPA Survey on International Trends in Forensic and Valuation Services. Forensic experts were even more optimistic about their future as 76 percent expected a healthy increase in business, mostly due to a rise in litigation and regulatory oversight. Electronic data analysis was voted the number one issue facing…
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Nathan J. Mueller embezzled $8.5 million in barely four years from financial giant, ING through a series of corporate incompetence, “happy” accidents and missteps inside the company. His case is unique in the amount of money he stole and the length of time it went undetected. The breach of controls at ING was astonishing, but not nearly as incredible as hearing Mueller describe how easy it was in his own words. The Journal of Accountancy provides an in-depth look into the Mueller/ING case and publishes much of Mueller’s own account of the operation. The authors round out the piece…
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The Financial Accounting Standards Board (FASB) has issued two standards updates with the intention of simplifying the measurement of inventory and eliminating the requirement for extraordinary items. Inventory (Topic 330): Simplifying the Measurement of Inventory would eliminate existing requirements to consider the replacement cost of inventory and the net realizable value of inventory less an approximately normal profit margin. This change is intended to reduce the cost and complexity of the subsequent measurement of inventory and increase consistency. Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items would remove the…
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Eventually, everyone who works with or around money professionally comes across a particular transaction that just doesn’t look right. Lots of these eyebrow raisers turn out to be false alarms, and some even have odd, albeit legitimate and legal explanations. Still, there are those that defy explanation of any kind. If you’re not in the business of looking for fraud on a daily basis, will you be able to recognize it when it presents itself to you? Statistically speaking, it will…sooner or later. Visit the Journal of Accountancy to test how savvy your fraud sense is. [button color=”blue” link=”http://www.journalofaccountancy.com/Issues/2014/Aug/fraud-IQ-20149743.htm#”…
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The valuation of customer relationships can be somewhat of a gray area for valuators. In many cases, the common valuation methodologies don’t apply, and the professional neglects to consider whether the determined value is consistent with a market participant’s perspective. While it’s become routine to assume customer relationships are a primary asset, this is not the case across all industries. In a short, but informative report by Valuation Research Corporation, valuators are encouraged to approach customer relationship valuation from a new perspective and cautioned to not overlook the fact that customers often purchase products because of the presence of intellectual…
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The PCAOB recently issued Auditing Standard (AS) No. 18, Related Parties to strengthen auditor performance in the high-risk areas of significant unusual transactions and financial relationships, and transactions with executive officers. The change comes as the result of an internal review where the PCAOB felt the existing protocol did not contain sufficient procedures and was not properly risk-based. Auditors are now required to perform specific procedures to determine the nature of a company’s relationships and transactions with the related parties. How a company identifies these relationships and transactions, including authorization and approval, is now seen as a significant aspect…
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According to a recent article in The Appraisal Journal, industry sales among the 616,098 restaurants in the U.S. totaled $425.6 billion in 2012. Chain restaurants make up nearly 45% of the industry population in the U.S., and at a growth rate of 2.2% are expected to overtake independent establishments by 2023. Between 2010 and 2012, 22,000 restaurants were sold for a total of almost $11 billion. The article examines the projected growth rate for the restaurant sector, as well as the valuation methods that need to be employed based on whether the establishment is part of a chain, a…
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A Fitch Ratings report has shared serious doubts that the practice principles of the International Financial Reporting Standards (IFRS) would be fully implemented in the U.S. anytime in the near future, as the Financial Accounting Standards Board (FASB) turns colder on the idea. Three sticking points to the merger of the methods remain financial instruments, insurance and leasing. Financial products with U.S. institutions and those following IFRS protocol present many differences, including approaches in application. These fundamental conflicts mean that a one-size-fits-all approach may simply be impossible. U.S. constituents have also raised concerns that the insurance proposal would not only…
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In case you missed it, Z. Christopher Mercer, ASA, CFA, ABAR, founder and CEO of Mercer Capital, was the keynote speaker at the American Academy of Matrimonial Lawyers (AAML) and the American Institute of CPAs (AICPA) 2014 bi-annual joint conference this year. His presentation concerned The Five Really Big Valuation Issues. They included: 1.) discount rates, 2.) control premiums and minority interest discounts, 3.) adjustments to the income statement, 4.) the Guideline Public Company Method and the Guideline Transaction Method, and 5.) fundamental adjustments. The presentation also touched on marketability discounts. You can visit Mercer Capital at the link…
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Reimbursements from insurers, made to healthcare facilities for the care they administer, are an essential part of the valuation of hospitals, clinics, outpatient care centers and other facilities. As if that exchange wasn’t complicated enough, it’s about to go through another transition that very well may impact the valuation of all healthcare institutions. According to a new white paper released by McKesson, the existing fee-for-service model will be phased out by a new “value-based” payment model within five years. The survey, commissioned by McKesson and conducted by ORC International, estimates that by 2020, nearly 70 percent of reimbursements will…
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The American Institute of CPAs (AICPA) recently sent a letter to the IRS calling a proposed “voluntary” certification program for unenrolled tax return preparers “unlawful and improper”. In a recent ruling, Loving, No. 13-5061 (D.C. Cir. 2/11/14), it was held that the IRS does not have the statutory authority to regulate tax return preparers. In the aftermath, IRS Commissioner, John Koskinen, stated that while the agency may look to Congress to grant the authority it seeks, it was considering implementing a “voluntary certification program” in the meantime, calling it “continuing education”. In a strongly-worded response to the IRS, the…
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Intellectual Property Valuation Principles—Part 1 This article examines the types of intellectual property analyses, different standards of value that may apply in valuation as well as the alternative types of intellectual property ownership interests and the alternative terms of intellectual property ownership interests.