Thursday, December 6, 2012
Accounting Firm Mergers & Acquisitions
The activity in the mergers and acquisitions market has heated up at the end of the year. There have been some significant accounting firms
that are joining forces around the country. Here are three that were announced this week alone.
- The largest firm based in the Pacific Northwest, Moss Adams, has acquired Mohler, Nixon & Williams. Mohler was based in the Campbell, California with offices throughout the Silicon Valley. Moss Adams is ranked as the twelfth largest CPA firm in the country. They have 22 offices from Kansas City, Missouri to Bellingham, Washington. Mohler was the ninth biggest firm in California and 94th largest in the country.The 25 partners of the firm are expected to join Moss Adams. The move strengthens Moss Adams' presence in California and especially in the tech rich Silicon Valley area.
- Witt Mares of Newport News, Virginia and PBGH of Harrisonburg, Virginia have agreed to merge their firms. It is unclear what the name of the combined firm will be but Alan Witt will be the CEO and have offices in Newport News.Keith Wampler will remain in Fredericksburg and be the chairman. The merger will strengthens both organizations reach in Virginia. The plan is to continue to expand the firm throughout the mid-Atlantic region.
- Patrick & Robinson of Jacksonville, Florida has acquired Petherbridge, Davis & Co also based in Jacksonville, Florida. The firm will continue to operate under the Patrick & Robinson name. Deals of the acquisition were not released.
So as we head into a new year a number of accountants will be representing different companies. Congratulations to everyone involved and good luck to the three bigger and better accounting firms.
Labels: acquisition, Davis and Co, mergers, Mohler, Moss Adams, Nixon and Williams, Patrick and Robinson, PBGH, Petherbridge, Witt Mares
Tuesday, December 4, 2012
Accounting Standards for Small Business
The American Institute of CPAs is proposing an accounting framework for small and medium sized businesses. These are companies who are not public and don't need to pay the expense to be GAAP compliant. They are calling this the Financial Reporting Framework
They have issued a draft proposal and are soliciting comments from certified accountants
, small business owners, and users of financial statements. The comment period is open until February 2013. They are hoping to release a final framework later in the spring of 2013.
The goal of the FRF is to set a standard for smaller businesses. These companies are not required to use GAAP when preparing financial statements. They don't use GAAP to reduce the cost of preparing the statements. The new standard is supposed to make it easier to prepare but still provide the information required by users of financial statements. These includes companies offering credit to businesses and those in the mergers and acquisitions markets.
The FRF has a couple of differences over GAAP. It uses historical costs over fair value where reasonable. It uses reporting of costs when they occur and revenue when it is invoiced. The plan for the FRF is to make is easier to reconcile the tax returns with the companies financial reports.
Another goal for the framework is to help business owners better understand their cash flow. This is more difficult for owners without a financial or accounting background. Since owners are a primary user of the financial statement and cash flow is so crucial to the health of a business this seem like a great objective.
Since these business are under no regulatory requirement the FRF will be voluntary. So the first step will be to sell the FRF to accountant who will then need to sell it to their clients. It is expected to be a process that takes a few years to gain general acceptance.
Labels: AICPA, Financial Reporting Framework, FRF
Friday, November 30, 2012
US Tax Burden
As we approach the fiscal cliff
the PR machine will be running on both sides about the best solutions to reduce the budget deficit. If you are not familiar then in a nutshell, the Republicans say it is a spending problem and the solution is to overhaul entitlements to bring the budget back in balance. The Democrats believe it is a revenue problem and the solution is to increase taxes.
The solution on an appropriate tax level is beyond the scope of this blog; it is interesting to look at current tax levels and see how they compare to historical levels. Everyone feels like their taxes are increasing. Many people say they are paying an unfair burden of the total. The opposite being Warren Buffet but we should all be so lucky as to have enough money to want to pay more in taxes.
The New York Times
has done a study on tax rates in the United States. In general it found the most people pay less in taxes today than they did in 1980. This is a carefully chosen point as the tax rates were reduced under the Reagan administration. So 1980 was a taxation peak that was only outstripped by the peak in 1990. Overall the rates for everyone are now below their 1980 levels.
The biggest tax reductions came to the highest income earners, those above $250,000. That is not to say they were too high before or too low now but the numbers do show their tax rates as declining more than other income brackets.
Some of the benefit comes from where the taxes were levied. The federal tax code is more progressive than state income tax codes. So the total paid by all income brackets by the state is much closer. So the relative burden to lower incomes is higher for state taxes. This explains some of the reason why higher income earners have seen the biggest decline in overall tax burden. For half a dozen states the income tax rate rose fast enough to outpace the reductions in federal tax rate.
This is all interesting but in the end what really matters is what your business and family have to pay in taxes. That is something that we can help you out with. As you prepare to do your 2012 income taxes
then give us a call.
Labels: income tax rates
Tuesday, November 27, 2012
2013 Mileage Rates Posted
The IRS has issued the standard mileage deduction for 2013. Starting on January 1st of 2013 the rate will be $0.565 per mile for business travel. The rate for moving moving purposes is $0.24. The deduction rate for miles driven in the service of charity is $0.14. This represents an increase of $0.01 per mile over the 2012 rates.
The rates are determined by the IRS from a calculation of fixed and variable costs of owning and operating a vehicle. The rate is released annually by the IRS per Rev. Proc. 2010-51.
Taxpayers may still use the actual costs of operating the vehicle as opposed to the standard mileage deduction. The exception is if the business has used a depreciation method on the vehicle. In this case they must use the actual costs of operating the vehicle.
Along with the IRS many companies use the standard mileage deduction for employee expense report. If you have any questions on the impact to your businesses accounting
then we are here to help.
Labels: 2013, IRS, mileage rate
Tuesday, November 20, 2012
Accounting Executives Found Guilty
The Chief Accounting Officer and Global Controller formerly executives at Stanford International Bank have been found guilty
of nine counts of wire fraud. The charges stem from the ponzi scheme that cost investors $7 billion. The two are now facing prison for the next 20 years. The exact term will be decided by District Judge David Hittner. The sentencing is scheduled for February 14, 2013.
Prosecutors said the accounting staff at the bank had inside knowledge of what R. Allen Stanford was really doing with the bank. The bank was losing money and loaning much of it to Stanford to feed a lavish lifestyle and his other businesses.
Lawyers for Gilbert Lopez and Mark Kuhrt said they were unaware of the fraud at the company. They claim it was all the work of Stanford. The jury did not agree and found the two guilty on 9 of the 10 counts of wire fraud.
A Ponzi scheme is one where investors are paid returns from future investors. They get investors by promising better returns than other investments. The problem is eventually there are not enough new investors to cover the returns for the past investors and the scheme collapses.
The scheme is named after Charles Ponzi who used it in 1920. However, he did not invent it and descriptions of the scheme can be found in literature in the mid nineteenth century. Most ponzi schemes are discovered by authorities before they reach the tipping point and collapse.
The old advice from your mother applies to every investment. If it sounds too good to be true than it probably isn't. If you ever have questions then talk to your accountant
to get a neutral perspective.
Labels: ponzi scheme, Stanford, wire fraud
Wednesday, November 14, 2012
Revenge of the AMT
Steven Miller, the Acting Commissioner of the IRS has sent a letter
to congress warning about the chaos that will be caused if congress doesn't pass an extension to the AMT exemption. AMT is the Alternative Minimum Tax.
The AMT was first passed in 1982. It is a law that sets the minimum tax that can be paid for specified income levels. The AMT limits the amount of deductions that a taxpayer can take. The taxpayer must pay the higher of either that taxes calculated using standard deductions or the AMT. The idea behind the law is to set a threshold for taxes paid by high income individuals. This would eliminate some loopholes that allow high income earners to pay a lower tax rate. Filers below the "exemption" do not have to pay the AMT.
A problem with the AMT law is that it does not include an inflation rate. So thirty years after the law was enacted the levels do not correspond with income levels. Every year the congress must raise the exemption level. The current one expired the last day of 2011. This is another part of the financial cliff
that is looming at the end of the year.
If nothing is done then the exemption will go from its current level of $75,450 for married filers back to $45,000. For individuals the exemption falls from $48,450 to $33,750. This would impact 28 million filers for the 2012 tax period. There would still be 5 million filers who will be impacted by the AMT if an exemption for inflation is passed.
Commissioner Miller has instructed his agency to plan on another exemption this year since that has happened every year. Some years it has come 11 months late so he expects the same. this year. Interestingly the other two times it was fixed so late was 2007 and 2010. He did warn that if changes were not made it would throw the IRS into chaos. It would also impact tax prepares
scrambling to help people file their 2012 taxes.
Labels: alternative means tax, AMT, fiscal cliff, IRS
Monday, November 12, 2012
CPA Caucus Grows After Election
In 2011 Brad Sherman and Mike Conaway created the Bipartisan Congressional CPA Caucus. The two representatives created the caucus to discuss and propose policy for issues affecting CPAs. These include tax laws, accounting standards, and auditing standards.
Prior to last week there were 8 accountants in the House of Representatives and two more in the Senate. Two new accountants were elected last Tuesday. Tom Rice of South Carolina and Patrick Murphy of Florida are two of the freshman representatives. The other 8 were reelected and the two senators were not up for re-election.
This may speak to the public perception of accountants. They are seen as trustworthy and pragmatic leaders. Most accountants are detail oriented and understand the financial aspects that congress must wrestle. Lets hope that these 12 accountants can help
navigate the issues of the fiscal cliff
over the next month and a half.
Here are the accountants in congress:
- John Campbell of California
- Mike Conaway of Texas
- Bill Flores of Texas
- >Lynn Jenkins of Kansas
- Patrick Murphy of Florida
- Steven Palazzo of Mississippi
- Collin Peterson of Minnisota
- James Renacci of Ohio
- Tom Rice of South Carolina
Labels: accountants, congress, CPAs