In a letter to the FASB and IASB, the AICPA’s Financial Reporting Executive Committee (FinREC) suggested that a dividing line be created between Type A and Type B leases that deviates from the rule the boards have proposed. While FinREC supported the objectives calling for transparency and recognition on-balance sheet for all leases, it disagreed with the test for how leases would be classified. For details on the discrepancies in the lease classification process, visit the full story at the Journal of Accountancy. View [button link=”p://journalofaccountancy.com/News/20138910.htm” color=”silver”] Read Full Article[/button]
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In a brief but revealing article by the Wall Street Journal, auditors at the seven largest accounting firms in the U.S. were cited for deficiencies found in 37.5 percent of the audits inspected by regulators. The vast majority of the deficiencies involved evaluation of the market prices companies supplied for complex assets. Citations were also made for failure to test managers’ assertions about the methods and data used to value assets. [button link=”http://blogs.wsj.com/cfo/2013/10/01/auditors-at-big-firms-cited-for-more-deficiencies/” color=”silver”] Read Full Article [/button]
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How would you value a three-year old video game company that only has two games on the market and just 130 employees? Apparently, the answer is $3 billion. How does a valuation come up with this kind of number and more importantly, can it even be accurate? Check out this Forbes.com profile of the deal between Japanese internet giant, Softbank, mobile online gamer, Gungho and the hot property, Supercell. [button link=”http://www.forbes.com/sites/joshuakennedy/2013/10/17/how-do-you-value-a-three-year-old-company-with-a-100-year-ambition/” color=”silver”] View Full Article[/button]
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According to the Wall Street Journal, now would be a good time to sell a business. When examining the small-business-for-sale market, transactions are up significantly from this time last year. In 2012, there were 1,189 small businesses sold between July and September, while 2013 has surpassed that total with 1,685. The upswing in sales has been mostly in service companies, followed by retailers and restaurants. For more specs on the ideal business to sell right now, you can read the full story here. [button link=”http://online.wsj.com/news/articles/SB10001424052702304682504579153573588055100?tesla=y” color=”silver”] View Full Article[/button]
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In case you missed it, the Professional Standards and Guidance Committee (PSGC) of the Appraisal Institute (AI) submitted its official comments to the Appraisal Standards Board of The Appraisal Foundation regarding feedback to drafting changes to the 2016-2017 USPAP. In its candid response, AI says USPAP has a “mixed record” when it comes to addressing appraiser behavior in a way that establishes public trust with the profession. Also at issue is the USPAP definition of “bias” with AI favoring a more specific, two-part definition and test of bias. When asked if USPAP is too complex, the response also lays…
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Because of increased IRS audit procedures, multi-national corporations face great risk when it comes to transfer pricing from both a compliance and tax planning perspective. The familiar multi-nationals like Amazon or Microsoft have made headlines regarding transfer pricing disputes and adjustments that run into the billions. In an excellent article by the Journal of Accountancy, small, closely-held companies are not immune to such risks, especially when they venture into overseas expansion. Here, you’ll find a great overview of transfer pricing issues from a financial reporting and tax perspective. [button link=”http://www.journalofaccountancy.com/issues/2013/oct/20137721″ color=”silver”] View Full Article[/button]
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In its Washington Report and State News web section, the Appraisal Institute (AI) recently reported that the U.S. Small Business Administration (SBA) released an updated Standard Operating Procedure 50-10 5 F. The update institutes guidelines for SBA lenders making use of SBA credit assistance. The alteration affecting valuation involves business and intangible assets in circumstances where there is a change in ownership, a special use property, and a residual business value contribution of more than $250,000 to the loan amount. In scenarios meeting these criteria after January 2014, the SBA will require lenders to obtain a separate business appraisal from…
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Just because a corporate stock price is on the rise, is that justification enough for the huge payouts executives receive? While shareholder returns are usually the most prominent factor considered by corporations when determining executive pay, many elite business school educators and industry experts don’t think they should be. They contend that executives regularly profit off short-term bullish markets where returns had little or nothing to do with their operations, strategy or lack of innovation. In an interesting piece by The New York Times, experts suggest that executive pay should be tied more closely to what management did to increase…
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In an article titled, “PCC to Ask FASB to Endorse First Private Company GAAP Exceptions”, under the subhead, “Business combinations”, the Journal of Accountancy reveals that the Private Company Council (PCC) approved a proposal to FASB that would allow a private company to elect to amortize goodwill acquired in a business combination on a straight line basis over 10 years or less. The proposal is conditional on the fact that an entity can prove that another useful life is more fitting based on demonstrable facts. The proposal also contains simplification of the impairment test for goodwill. [button link=”http://journalofaccountancy.com/News/20138826.htm” color=”silver”] View…
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The Tax Court recently denied an IRS motion for summary judgment in an estate and gift tax case where an elderly mother made gifts to her daughters, while requiring them to pay all tax liabilities due if she happened to die within three years of making the gifts. In the calculation for gift tax purposes, the mother reduced the value of the gifts by the estimated tax liability. This reduction was denied by the IRS. For the full details on this fascinating case, visit the Journal of Accountancy website. “The Tax Court also rejected the argument that under the estate-depletion…
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Recently, the FASB issued exposure drafts of Accounting Standards Updates (ASUs) which propose reductions in the cost and complexity of accounting for intangible assets acquired by private companies, as well as subsequent testing for goodwill impairment. The proposed changes in the drafts involve alterations to Accounting Standards Codification (ASC) Topic 85, Business Combinations, and Topic 350, Intanbigles—Goodwill and other. Among the suggested changes to Topic 85 is the proposal that a company involved in a business combination may elect (but would not be required) to recognize only the acquired intangible assets that are the direct result of contractual rights…
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The American Institute of Certified Public Accountants (AICPA) reports that in less than five years, 75 percent of all CPAs will be at or very near retirement age. Naturally, there’s an undercurrent of panic in the profession. Small and midsize firm owners are reluctant to sell to large operations, not to mention the pain of watching what they’ve spent a lifetime to create simply disappear. There’s also the concern for long-time loyal employees and what such transactions might hold for their fate. For those looking to retire, the answer seems to be merging with firms of a similar size. Mergers…
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In 2011, after a six-year pilot program, the IRS made the Compliance Assurance Process (CAP) a permanent fixture. The intention was to give large corporate taxpayers a pre-filing period where discrepancies or contentious issues could be ironed out to simplify examination after filing. The goal was to provide each side with more confidence in the contents at the time it was officially filed. The problem: CAP agreements are taking a long, long time to settle. You can find the details in a succinct article originally posted by complianceweek.com. [button link=”http://www.complianceweek.com/irs-takes-heat-over-large-corporate-pre-filing-process/article/313664/” color=”silver”] View Full Article[/button]
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Financially-sound companies can more easily obtain lines of credit at low interest rates, as well as more easily issue debt financing or issue bonds on better terms. Companies often take advantage of loopholes to present themselves as more profitable than they are. Most do it in a way that they’re not technically breaking the law, but ethics certainly come into question. When should you be concerned and when is the line crossed between creative accounting and fraud? Rakis Christoforou examines this subjective dilemma in an overview published in the FinancialMirror. In a short but valuable look at the subject of…
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Things change because markets are not logical; markets are emotional. In an analysis featured on CNNMoney.com, Ben Horowitz lays out the specific challenges of raising capital and valuing startups in the current economic climate. In an eye-opening comparison, he looks at the price/earnings ratios (P/E) of all S&P 500 IT companies for the last 18 years. With this wide of a time span, one might expect some form of predictability or modest stability to appear. In fact, the results fluctuate so wildly that the average company with $10 million in earnings and valued at $210 million in 1995 would have…
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In their recently released Beige Book, the Board of Governors of the Federal Reserve System break down the economic performance of the nation within seven business sectors across 12 metropolitan economic districts. Prepared at the Federal Reserve Bank of San Francisco, the findings are based on all data collected on or before August 26, 2013. Business sectors covered include consumer spending & tourism, nonfinancial services, manufacturing, real estate & construction, banking & finance, agriculture & natural resources and employment, wages & prices. Participating districts include Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and…
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In the first installment of a two-part series, the AICPA reviews the most important developments affecting estate, gift and generation-skipping transfer (GST) tax and trust income tax over the last 12 months. In the period from June 2012 through May 2013, the analysis covers legislative developments, rulings, pending cases, the American Taxpayer Relief Act of 2012 and inflation adjustments for 2013. The second installment, coming in October, will focus primarily on GST and estate tax issues. [button link=”http://www.aicpa.org/Publications/TaxAdviser/2013/September/Pages/Ransome_Sep2013_2.aspx” color=”silver”] View Full Article[/button]
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According to the US Bureau of Economic Analysis, “research and development” (R&D) are now considered a fixed investment. The report, released last month, contains GDP figures categorizing R&D with this distinction. R&D now joins software in a new category labeled “intellectual property products”. While some see the change as only affecting a small number of economists, others see the move as bridging a gap between digital economy and the way analysts account for it. McKinsey & Company provide a solid review of what the change means here. “[Intangible digital capital assets] are manifold: the unique designs that engage large…
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Valuing Nokia Siemens Networks Nokia Corporation is bound to look very different after Microsoft buys its devices division. When the initial purchase was announced, most in the industry were shocked. The bigger question is: How much will the remaining parts of the company be worth once the deal is done, and how should they be valued? Analysts from JP Morgan Cazenove provide a very interesting breakdown in a feature first published by Valuewalk.com. “The analysts set Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s patent licensing business apart, calling it a “new separate business at Nokia.” As a result, they said it also…
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As corporations and their CFOs prepare to launch their 2014 budgets, Michael R. Press of M. R. Press Consulting, writing for CFO.com, points out ideal opportunities to maximize ROI through tax incentives at the state and local levels. In a tightly-detailed, three step approach, Press explains that with the right goal criteria, corporations can recoup virtually all of the initial investment capital related to these regulations. “It’s important to know that the way a company’s business units define projects for capital budgeting purposes is not the same as the way the government defines economic development “projects” supported by incentives. This…