Adjusted earnings in crosshairs
The Securities and Exchange Commission is examining what has become a common practice by public companies that use non-GAAP reporting measures. “It’s something that we are really looking at – whether we need to rein that in a bit even by regulation,” SEC Chair Mary Jo White said at a Chamber of Commerce conference of finance and business lobbyists in Washington. “We have a lot of concern in that space,” she continued.Although the SEC allows companies to report profit figures that don’t comply with generally accepted accounting principles, or GAAP, regulators are concerned that some less sophisticated investors may not be able to distinguish between the adjusted numbers and GAAP results, especially when reported on websites or other venues not covered by SEC rules.Of the listed companies on the DJIA index that reported non-GAAP earnings per share last year, the adjusted metric was on average 30% above earnings per share reported under GAAP, according to data from FactSet as reported by the WSJ. It was even more pronounced for companies in the S&P 500 where fourth quarter pro forma earnings were 59% higher than under GAAP.“The SEC is very concerned about potential manipulative opportunities for non-GAAP measurements,” said Weinberg managing partner Corey Fischer, “however these non-GAAP measurements are often times crucial to understanding the financial statements of microcap companies, many of which are burdened with significant noncash charges arising from debt and equity transactions that are often times not useful to the reader.”
When the tax man cometh, companies goeth abroad
The amount of unrepatriated foreign profits reached $2.4 trillion, according to Citizens for Tax Justice, allowing companies to avoid up to $695 billion in taxes. That total for foreign profits is up from $2.2 trillion the previous year, according to the advocacy group which reviewed the Securities and Exchange Commission filings of Fortune 500 companies. Apple, Microsoft and Pfizer increased their stockpile of overseas profits the most.
Facing the highest tax rate in the developed world (35%), hundreds of U.S. companies leave the funds overseas. The Washington Post reports that these companies are waiting for Congress to lower the rate, or hoping for a window of amnesty. Others have been pursuing “inversions” in which they buy or merge with a smaller foreign company and move their headquarters overseas where they will be taxed less and can gain access to their unrepatriated foreign profits.
The U.S. Treasury Department’s fight to block inversions may have scored its biggest victory this month when Pfizer Inc. announced its withdrawal from a $150 billion takeover of Allergan PLC that would have moved the largest drug company in the United States to Ireland.
Playboy: Read it for the articles
Lots of changes at Playboy Enterprises Inc. After 60 years leading the American discourse on sex, it seems that Playboy has finally lost its mojo. Current magazine circulation stands at 800,000, down from its high of 5.6 million in 1975, according to Alliance for Audited Media. And, for those who said they subscribed to Playboy magazine for the articles, they’ll be happy to know that the just revamped magazine will no longer have distracting nude photos to get in the way of the literature.Now comes word that investment bank Moelis & Co. is advising Playboy co-owners Hugh Hefner and private-equity firm Rizvi Traverse Management in exploring a sale. The company was valued at $207 million when it went private in 2011. Sources estimate that the company now could be worth more than $500 million, especially if it is sold in pieces: brand license, media, and other assets including the famed Playboy Mansion, that already is listed for sale.
A Ferrari SUV? “Shoot me first”
Ferrari Chairman Sergio Marchionne announced that the company will continue to follow founder Enzo Ferrari’s strategy of building fewer cars than customers want, reports CNBC. Marchionne added that despite the company’s cautious sales projections for 2016, the heritage automaker has a “strong backlog of orders.” He also said that Ferrari would not release a sport utility vehicle to boost demand: “You have to shoot me first.”
IPOs: Left behind
Despite a dismal start, major stock indexes have recovered and are now in positive territory for the year. Still in the doldrums, however, are initial public offerings which clocked their slowest period since the first quarter of 2009, both in terms of number of deals and total money raised, according to data provider Dealogic. Since stock indexes and IPOs usually trend in the same direction, investors are puzzled – will IPOs catch up with the market, or will the market drop?
Recording its largest quarterly gain since 1986, gold prices leaped 16.5% in the first quarter of 2016. Gold prices have been in retreat for the past five years, when the economy improved and the dollar surged.
Millennials want to save more money, but low salaries, high living expenses, and poor financial habits get in their way, according to a new AICPA survey. Over a third of Millennials (34%) said that saving money was their top priority for the year, followed by leading a healthy lifestyle (20%), or losing weight (14%). Millennials’ spending habits may be one reason they struggle to reach their financial goals: 65% of the young adults surveyed said impulse shopping got in the way of saving.
The survey, which was conducted by the AICPA in collaboration with the Ad Council, polled 500 employed adults ages 25-34 in December 2015. Many young adults in this age bracket are preparing for major milestones, which is reflected in their savings priorities: 27% said they were saving for a house, 26% for a car, and 15% for starting a family. While 40% said they were putting money aside for an emergency fund, only 22% were saving for retirement.
Source: AICPA-Journal of Accountancy
TAX FREEDOM DAY
The Tax Foundation has announced that this year’s Tax Freedom Day® will be April 24th. Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income.In their key findings, the Tax Foundation cited that this year Americans will pay $3.34 trillion in federal taxes and $1.64 trillion in state and local taxes, for a total tax bill of $4.98 trillion, or 31 percent of national income. Americans collectively will spend more on taxes in 2016 than they will on food, clothing, and housing combined. [Full story]
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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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