Weinberg & Company

              Certified Public Accountants

SIMPLY STATED

JULY 2017

ACCOUNTING

FASB staff busy with Lease Accounting questions

The new Leasing Standard, issued by the Financial Accounting Standards Board (FASB) earlier this year takes effect in 2019. The new standard brings virtually all leases onto corporate balance sheets, which will produce big changes in the financial metrics for many companies, reports Compliance Week.

The FASB staff reports receiving lots of technical questions on how to apply the new standard. Most inquiries relate to: the definition of a lease, lessee accounting, lessor accounting, and discount rate.

In response, the FASB offered the following:

First, consider whether a contract has been accounted for as a lease under existing accounting guidance. Addressing this question is a good starting point because most contracts that are accounted for as leases today will continue to be accounted for as leases under the new guidance.

Second, lessor accounting was not significantly changed. However, some subtle changes were made to ensure it is aligned with the control principle under the upcoming revenue recognition guidance. For example, stakeholders should consider whether the new standards may change their current accounting for lease receivables.

Third, because lessees will now be recognizing operating leases on the balance sheet, those lessees should spend additional time understanding the guidance for lease and non-lease components and the discount rate.

The FASB says it may hold public discussion or dialogue “on key issues and next steps before the end of the year.”

Expensive SOX

The 2017 Sarbanes-Oxley Compliance Survey by consulting firm Protiviti found that more than half of the 468 public companies surveyed said they devoted more time to complying with the Sarbanes-Oxley Act in 2016 than in 2015. Overall, about two-thirds of responding companies said the increase in time devoted to SOX compliance rose by more than 10%. 

Three factors were cited that significantly increased time:

  • PCAOB requirements– External auditors faced increasing inspection report requirements from the PCAOB; 64% said their external auditors are placing more focus on evaluating deficiencies.
  • Revenue recognition– Companies are updating controls documentation to comply with FASB’s new revenue recognition standard; 26% said extensive or substantial increases in testing of controls over application of revenue recognition policies.
  • Cybersecurity– Companies reported significant growth in the number of cybersecurity disclosures made in 2016.

Financial Restatements decline

Last year financial restatements among U.S public companies hit their lowest level in years, according to the updated annual report of Audit Analytics. As a result of heightened standards as well as the decreased numbers of listed companies, the number of U.S. companies restating their prior financial statements hit their lowest level since 2010 and the number of companies restating their financials is at its lowest level since at least 2002.

CFO Survey

Well, that explains the red eyes.

Turns out that CFOs are not out partying all night. According to a recent survey by the financial reporting technology company Workiva, the financial reporting process keeps 97% of CFOs awake at night. Oddly, the survey found 3% of senior finance execs did not lose any sleep whatsoever over their organization’s reporting processes or deadlines — we suspect that most of those probably never woke up at all.

A few other survey results: 55% reported being concerned if their internal controls were working, questioning the integrity of the data they were using; and 50% indicated they don’t remove redundant information from their reporting packs, with 41% not removing reports that are no longer used.

Auditor rotation: Mid-term Blues

A new study by U.K.-based Source Global Research indicates that the U.S. may not want to follow Europe’s lead on mandatory audit firm rotation. The researchers surveyed 200 senior executives at U.S. corporations involved in the audit process and found a third of those who retendered audit services around two years ago were not satisfied with their auditor. They are now suffering from what the researchers call the “mid-term blues.”

More fake news

It’s not just the cable news networks.

Fake news has apparently spread beyond political reporting to financial news, drawing the attention of the SEC. The regulator recently announced enforcement actions against 27 individuals and entities that it said were misleading investors into thinking they were reading unbiased, independent analyses on investing websites. Instead, the SEC said, writers were being secretly compensated for touting company stocks.

A recent survey by the American Institute of CPAs found that 58% of respondents said that fake financial news is a serious threat to their financial decision-making.

SEC: Filling the seats

Bloomberg news is reporting that the White House is very close to naming its nominees for the Securities and Exchange Commission. The five-member Commission has for some time been run with just three members.

MONEY TALKS 

It doesn’t pay to work for Trump

Although we are certain that some would say they couldn’t be paid enough to work in the Trump Administration, we found a new list of White House salaries that may surprise you.

At the top of the annual salary list at $179,700 are Chief of Staff Reince Priebus, Press Secretary Sean Spicer (who has since been promoted), and Advisors Stephen Bannon and Kellyanne Conway.

On the low end of the list are a former Goldman Sachs chief executive, Christopher Liddell and a Baltimore developer, Reed Cordish, who each score $30,000 a year. The list of those not taking any salary at all include daughter Ivanka and her husband Jared.

The President recently commented on his hiring of wealthy advisers: “Somebody said, ‘Why did you appoint a rich person to be in charge of the economy?’ I said: ‘Because that’s the kind of thinking we want.’” Trump said. “They had to give up a lot to take those jobs.” 

“And I love all people, rich or poor, but in those particular positions I just don’t want a poor person. Does that make sense?” he added.

Mayweather spars with IRS

The IRS says boxer Floyd Mayweather Jr. owes them money. We think he owes us money too! 

Not just us, but all those in attendance and the millions around the world that paid to watch the Mayweather/Pacquiao fight on pay-per-view back in 2015. It was his second to last fight before he retired with an undefeated record of 49-0. He was said to have made $220 million for that fight – not bad for about an hour’s worth of slow dancing.

Dating back to 2001, the IRS has filed several liens against Mayweather for unpaid income tax. Over the years he has paid some of that back, but he still owes a bunch for that 2015 windfall that we all contributed to.

Now, it’s been announced that he is coming out of retirement to face UFC superstar Conor McGregor on August 26 in Las Vegas. Showtime PPV will again stream the “mega-bout” for about $100; Mayweather will pocket around $100 million.

According to legal website Law360, Mayweather has filed a petition with the U.S. Tax Court claiming his funds are not accessible and asking for an installment agreement. “Although the taxpayer has substantial assets, those assets are restricted and primarily illiquid, his attorneys wrote. “The taxpayer has a significant liquidity event scheduled in about 60 days from which he intends to pay the balance of the tax liability due and outstanding, 

“Let’s see –$100 million less expenses: Trainer, Cosmetologist, Manicurist, Esthetician, Choreographer — hope this time there’s something left for the tax man.

You wanna pay more taxes?

To listen to Warren Buffett constantly complain that he doesn’t pay enough taxes, one might conclude that there is a bunch of rich folk that would jump at the chance to voluntarily pay more taxes.

That idea is currently being tested in, of all places, Norway, where the country’s 5.3 million people are already well accustomed to paying high taxes – the top rate of income tax is 46.7%.

Hammered by the opposition party for slashing taxes during the recession and being accused of going on a spending spree with the country’s oil money, the center-right government has hit back with a bold proposal: voluntary contributions, reports Bloomberg.

“The tax scheme was set up to allow those who want to pay more taxes to do so in a simple and straightforward way,” Finance Minister Siv Jensen said in an emailed comment. “If anyone thinks the tax level is too low, they now have the chance to pay more.”

So far, the voluntary tax contribution program is generating less than stellar returns. Launched in June, the government has received the equivalent of $1,325.

You see, that’s what we love about our country. In America, anyone who really wants to write a bigger check to the government can already do so. The U.S. Treasury will accommodate. As for the rest of us, we’ll just cling to the promise: “If you like your high tax rate, you can keep your high tax rate.”

Whistling past the courthouse

The U.S. Supreme Court announced that it will weigh-in on whether corporate whistleblowers who don’t report wrongdoing to federal authorities are protected by anti-retaliation laws.

San Francisco-based Digital Realty Trust is appealing a lower court ruling that it violated federal whistleblower protections in the Dodd-Frank Wall Street Reform Act when it fired an employee who reported to higher-ups that a manager was hiding excessive spending. A ruling in favor of the company could force future whistleblowers to contact federal authorities before they internally report the illegal activity to be eligible for federal protections.

Being a whistleblower pays well. Just last year (fiscal 2016) the SEC set a record by awarding more that $57 million to 13 individuals who exposed wrongdoing within their own firms.

QUOTABLE

STUPID QUOTES

We are all born ignorant, but one must work hard to remain stupid.
Benjamin Franklin

The wise are instructed by reason, average minds by experience, the stupid by necessity, and the brute by instinct.
Marcus Tullius CiceroThe trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.
Bertrand Russell

There is nothing so stupid as the educated man if you get him off the thing he was educated in.
Will Rogers

WEINBERG & COMPANY

Simply the right choice

 

Weinberg & Company is a leading, international, full service, multi-office CPA firm serving clients throughout the United States and the Pacific Rim. Founded over two decades ago, the practice groups include: Assurance and Audit, Tax and Accounting, and Advisory Services. Weinberg has a depth of knowledge and experience to meet the needs of both public and privately held companies, high net worth individuals, entrepreneurs, family offices, and can provide customized business management services. www.weinbergla.com

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DISCLAIMER:
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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Corey Fischer
Firm Managing Partner

310-601-2200

CoreyF@weinbergla.com

Jeffrey B. Engler
Director of Tax,
Los Angeles 

310-601-2200
JeffreyE@weinbergla.com

Bruce Weinberg
Florida Managing Partner

561-487-5765

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