Accounting News


Monday, April 30, 2012
Shakeup at AAOIFI

Khaled Al Fakih is the new secretary-general of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). He is proposing some great changes for the organization that oversees the accounting standards for Islamic financial assets. These assets are currently at $1.3 trillion and growing at 150% per year.

Fakih is interested in reforming how standards are established. Currently that is done by a group of Islamic scholars. There is conflict of interest in the current system because the scholars are often paid up to $1,000 per hour from the same institutions who have business before the group.

There is a great deal of resistance to Fakih's plans. While many people support the changes to more transparency and accountability, there are entrenched parties who benefit from the current system. The plan is to release several draft proposals over the next year to get widespread support.

While accountants is the United States are focused on IRFS and if the IRS will adopt the standard there is still a substantial amount of money that will not be covered even if it is adopted. It would be useful if there could be an international standard for all financing but with the challenges that the come up between just the US and Europe it might be a dream for another century.

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Accounting News


Thursday, April 26, 2012
Supreme Court Accounting Ruling

Yesterday the Supreme Court got involved in an accounting question. The question was whether the statute of limitations for a taxpayer who omits gross income that is properly includible in was in excess of 25% of gross income based on property sold. The Fourth Circuit has ruled that the extension does not apply.

In a split decision the Supreme Court upheld the Fourth Court ruling. The decision was written by Justice Breyer who based the decision on stare decisis {not overturning settled principles of law). Justice Breyer was joined in the decision by Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito, and Justice Antonin Scalia. Justice Anthony Kennedy wrote the dissenting opinion stating that the statutes had been changed since the prior ruling was issued.

While it might not make the nightly news this demonstrated the importance that accounting rules have in this country. This is a very specific case that will only matter to tax accountants. They have the yearly training and experience that help them understand what changes impact each of their clients.

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Accounting News


Tuesday, April 24, 2012
Effect of Accounting Standards

Bloomberg BNA has a good interview with Robert Laux, the senior director of financial accounting at Microsoft Corporation. He spoke about how the integration of accounting standards will affect international companies domestically and abroad.

He believes that the biggest short term impact will be what standards the SEC recognizes. The standards boards have not finished their work and even some items that have been agreed upon allow for revenue recognition to be grandfathered.

While the integration of financial standards seems a dry topic to many business owners the impact is greater than they recognize. A dual set of standards make it more difficult to raise capital on public markets in other countries. With increased business integration more and more businesses have foreign components.

But the integration brings with it a new set of problems. Will it materially impact the financial statements of multi-nationals? It is the correct direction but bumps are going to be a part of the process.

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Accounting News


Monday, April 23, 2012
Pulse of the Internal Auditor

The Institute of Internal Auditors (IIA) surveyed 461 auditors to take a pulse of the industry. The respondents came from a variety of organizations in North America.One sixth of the responses came from fortune 500 companies with the majority coming form smaller businesses.

The survey found a discrepancy  between what management saw as risks and what was being audited. The chief concerns for management are:

  1. Operation risk
  2. Compliance risk
  3. Financial risk
  4. Strategic risk
  5. Human capital risk
The problem is audit plans did not always place the same emphasis on these risks. This could lead to a divergence in expectations and reporting. Management should take more interest in the audit plan to give all stakeholders the information they need.

The top priorities for 2012 of the internal auditor are:
  1. Financial risk
  2. Operational risk
  3. Compliance risk
  4. Fraud risk
  5. Strategic risk
While many of the items are the same they are not in the same priority level. The goal of the senior auditor should be to work to align the priorities. The challenge is that not all stakeholders have the same priorities. In some cases they are even working against each other.

Over the next few days we will continue to investigate what challenges and opportunities face the internal audit staff. 


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Accounting News


Thursday, April 19, 2012
Two New Agreements on Accounting Standards

At a meeting on April 17th, the IASB and FASB and tentatively agreed on two classifying models for financial assets.

The first is agreement was on business model assessment for amortized cost classification for financial assets. The financial assets would qualify for amortized cost if the assets are held within a business model whose objective is to hold the assets in order to collect contractual cash flows.

The second agreement was on bifurcation of financial assets.The agreed that financial assets that contain cash flows that are not solely principal and interest would not be eligible for bifurcation. Rather, they would be classified and measured in their entirety at fair value through net income.

Meeting are ongoing so we expect more agreements going forward.

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Accounting News


Tuesday, April 17, 2012
Tax Day Schadenfreude

We have finally made it to tax day 2012. There are still about 30% of the people that are waiting till today to file. The reason is there is no benefit to file early, only a penalty if you file late. So the IRS has incented everyone to wait until the last minute if you owe taxes. But with interest rates as low as they are hopefully the money hasn't been sitting in a passbook account.

So for all the accountants great work on making it to summers. For everyone still waiting to file get that check in the mail before the post office closes tonight. And we can all enjoy the tax day specials that many businesses offer today.

For everyone writing a check today I give you a bit of schadenfreude. At least you don't owe $1.1 million like Lionel Ritchie. The 62 year old artist had a lien filed on his home for the back taxes. Ritchie blamed his last past business team for the problem. He says his new accountant is in the process of correcting the problem.

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Accounting News


Thursday, April 12, 2012
Be Careful on April 17th

Tax day  is not only a day that is dangerous to your car, it may be dangerous to your health. And we are not talking about eating the 2nd free big mac that McDonalds is giving out. According to a study by the University of Toronto, the rate of fatal car crashes increases on tax day. There are 13 more fatal car crashes on that day than any other day. This is a six percent increase over the average day.

Researchers Donald Redelmeier and Christopher Yarnell theorize that it might be a combination of factors leading to the increase. Those might be rushing to the post office or lack of sleep from completing the 1040.

Save yourself and your sanity. A good accountant can do all the heavy lifting for you. They will prepare your return, file it, and even have the refund deposited directly into your account.

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Accounting News


Tuesday, April 10, 2012
Islamic Accounting Standards

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working diligently for years to consolidate their two accounting standards. In a global economy it is much more efficient to have one accounting standard. That makes it easier to share financial data for investing or mergers and acquisitions.

It may be time for the two accounting boards to look at the third largest accounting standard. That is accountants using Islamic finance. Islamic finance is estimated to have $1.3 trillion globally in 2011. Most is in the Middle East and Malaysia.

The problem is that the integration between western accounting to Islamic ones come with several pitfalls. The most obvious is working between secular principles and ones based on religion. Another issue is a lack of a governing board. The laws are different in every country that Islamic finance is practiced.

A solution would be to have separate rules for Islamic transactions. But this works against the FASB and IASB goal of a standard system over all industries. Exceptions, even standardized ones, increase the overall complexity to the accounting.

At this time it doesn't appear as if there is any traction to tackle this issue. As the world economy continues to integrate it is likely not a question of if but how the standardization of accounting standards will take place.

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Accounting News


Thursday, April 5, 2012
Last Minute Tax Help

The tax deadline this year is April 17th. It is fast approaching for people who have not yet started. But it isn't time to panic. If you don't think you will get it done in time then you still have options. You can file a tax extension with the IRS. The easiest way to do that is with free file. This give every tax payer until October 15th the file their taxes. But don't think that you can avoid paying your taxes for an additional six months. All estimated taxes are still due on April 17th.

A second option is to hire an accountant to prepare your tax return. They have the expertise to quickly perform the work. But as with anything the better organized you are the faster it will go. It takes time to sort through a shoe box that is stuffed full of receipts that may or may not be applicable.

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Accounting News


Tuesday, April 3, 2012
CRG Partners Acquired

CRG Partners has been acquired by Deloitte. The company helps clients with turn around management and bankruptcy. They won the Turnaround Management Association's Mega Company Turnaround of the Year Award in 2010. They also helped Major League Baseball's Texas Rangers through their bankruptcy and sale.

CRG Partners will join the Reorganization Services Group at Deloitte Financial Advisory Services. The group has more then 1000 employees providing restructuring services to clients.

Deloitte is currently the largest accounting company according to 2010 revenue.

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Accounting News


Monday, April 2, 2012
Lottery Tax Burden

Since you are at work reading a blog about accountants this Monday morning it is probably safe to assume that you didn't win the $540 million lotto drawing last Friday. The three winners will each get $213 million if they take the lump sum. That would create a tax bill of $107.5 million for each winner.

We may not be able to live a life a luxury now but at least we don't have to pay the $100 million in taxes. It seems like the big winners are the stores that sold the winning tickets. Two stores got a bonus of $500,000 while the third will get a bonus of $100,000. And they didn't even have to pay the $1 for the ticket.

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