Weinberg & Company

              Certified Public Accountants

SIMPLY STATED

APRIL 2017

ACCOUNTING

Implementing the new Revenue Recognition Standard 

A recent survey by our friends at PwC and the Financial Executives Research Foundation has found no shortage of apprehension among financial executives as companies prepare for the new revenue accounting standard that begins in 2018.

The survey asked over 700 accounting and finance executives to rank the difficulty of different revenue recognition implementation issues. Although a majority of respondents named all of the issues as somewhat or very difficult, the challenge involved in conducting contract reviews topped the list of concerns. The survey found, “many companies are surprised by their volume of nonstandard contracts, leading to more effort than expected as well as challenges determining the right amount of ‘coverage’ for documentation and audit purposes.”

Other high ranking challenges include: developing and implementing new accounting policies, documentation of the conversion process and associated auditability.

In related news, the Internal Revenue Service is proposing accommodative procedures for how a taxpayer might request automatic consent from the IRS to change a method of accounting for recognizing income when the change is made for the same taxable year as the taxpayer adopts the new revenue recognition standard.

Related reading: Get ready – The New Revenue Recognition Rules are Here by Weinberg Managing Partner, Corey Fischer.
 

Companies not ready for new Lease Accounting Standard

The Financial Accounting Standards Board issued its long-awaited standard on lease accounting in February 2016, giving public companies until 2019 and private companies until 2020 to adopt it. The main change in the standard is putting operating leases on the balance sheet. However, a survey released last week by Robert Half Management Resources found most companies procrastinating on the transition citing eighty percent of CFOs at U.S. companies have not yet begun the transition.  
Related reading: Are You Ready for Lease Accounting? by Weinberg Managing Partner, Corey Fischer.

PCAOB disciplinary proceedings may become more public

Legislation reintroduced by U.S. Senators Jack Reed, D-R.I, and Chuck Grassley, R-Iowa would make the disciplinary proceedings by the Public Company Accounting Oversight Board against auditors more transparent to the public.  

The PCAOB Enforcement Transparency Act is intended to further expose the auditing deficiencies found at firms or the companies they audit. It would make PCAOB hearings and the related notices, orders, and motions open and available to the public, making PCAOB procedure similar to the SEC Rules of Practice.

Senate takes aim at corporate penalties write-offs

New legislation, called The Government Settlement Transparency & Reform Act, has been introduced in the U.S. Senate that would prevent businesses from deducting the money they pay to government agencies like the SEC to settle allegations of company wrongdoing. 

Though federal law does not allow the deduction of public fines and penalties from taxable income, companies are frequently able to write off any part of a settlement that is not paid directly to the government as a penalty or fine for breaking the law. The bi-partisan bill would change the tax code to require the federal government and the settling party to reach clear agreements on how to treat settlement payments for tax purposes.

IRS enforcement drops

The IRS reported several large drops in its enforcement activities in fiscal year 2016, including a 16% drop in audits, a 40% drop in levies, and a 9% drop in liens compared to the prior year.

These figures were revealed in the IRS’s 2016 Data Book, which reports on the agency’s activities for the fiscal year beginning Oct. 1, 2015, and ending Sept. 30, 2016.

The IRS collected more than $3.3 trillion in gross taxes in this period and refunded more than $426.1 billion. It collected almost $1.8 trillion before refunds of individual income tax and nearly $345.6 billion in income taxes from businesses before re­funds for FY 2016.

California Estate Tax Proposed

Some tax reform plans circulating on Capitol Hill call for the repeal of the federal Estate Tax. Simply stated, the current federal Estate Tax is set at 40% for all assets above $5.49 million passed on after death.

While the tax is the subject of spirited political debate, according to the Tax Foundation, it accounts for less than 1% of federal revenue and it applies to only a few thousand households annually. If repealed, however, many believe that the lost revenue would be more than made up by eliminating the “step-up” basis of a decedent’s assets at death.

The step-up allows beneficiaries to inherit appreciated property, reset the value as of the date of death, and thus avoid capital gains tax upon resale. Think of inheriting the Apple stock your parents bought for $1 per share that you can now sell for around $142 per share – and pay no capital gains tax.

Enter California Senator Scott Wiener (D-San Francisco) who recently announced his ballot measure, Senate Bill 726, to create a California estate tax if “Congressional Republicans and President Trump follow through on their threat to repeal the federal Estate Tax,” according to his press release.

California voters in 1982 voted to repeal any state inheritance or estate tax by approving Propositions 5 and 6 by votes of 61.8% and 64.4%, respectively. Senator Wiener’s bill “asks California voters to repeal that ban and, in its place, to enact an estate tax mirroring the current federal estate tax.” Thus, if the federal Estate Tax is repealed, California would simply collect the revenue itself, estimated to be around $4.5 billion annually.

In a worst case scenario, larger estates in California would pay the same amount of Estate Tax (except they would write the check to the state of California instead of the IRS) and the step-up benefit would no longer exist.

Audits are good for you!

Financial statement audits are helping companies improve their performance, according to a new survey by our friends at Deloitte and reported in the trade publication Accounting Today.

Among the 300 C-suite executives and 100 audit committee members surveyed, nearly three-quarters of the top executives and 91 percent of the audit committee members said audits of financial statements identify opportunities to improve business performance. In addition, 70 percent of C-suite executives and 79 percent of audit committee members believe that financial statement audits provide valuable business insights.

MONEY TALKS 

Working hard or hardly working?

The Swedish city of Gothenburg has abandoned its six-hour workday experiment citing high costs for taxpayers, but some workplace experts say it could be considered for U.S. workers. 

The deputy mayor of Gothenburg, Sweden was testing a 30-hour week for the staff at a nursing home with 68 employees. The results showed that the employees felt healthier, there was less absenteeism and patients were better cared for. The upside, however, did not outweigh the extra costs. The nursing home had to take on an additional 17 extra staff.

According to a report from the London-based, left-of-center think tank New Economics Foundation, “cutting the work week roughly in half could help to address overwork, unemployment, high carbon emissions, low well-being, entrenched inequalities, and the lack of time to simply enjoy life.”

And the winner is…

The Academy of Motion Picture Arts and Sciences announced that Big 4 CPA firm PricewaterhouseCoopers (PwC) will keep its Oscar ballot counting service despite the embarrassing mistake when PwC partners accidentally handed the wrong envelope to Best Picture presenters Warren Beatty and Faye Dunaway in which the wrong Best Picture winner was announced.

The unfortunate mix-up was corrected halfway into the acceptance speech by the wrong winner. New rules: The accountants will have more staff at the event, and to avoid distraction, they will be prohibited from using their cell phones for texting or selfies.

Bean Counters

Just for the record, accountants aren’t the only bean counters. Using nine years of jelly bean sales data along with a poll of over 10,000 candy fans, CandyStore.com, SurveyMonkey, and Facebook have estimated that Americans eat more than 16 billion jelly beans just on Easter.

With National Jelly Bean Day on April 22nd, we thought you’d like to know which jelly bean flavors people love most. As reported online by AOL Lifestyle, here are the top 10 favorites: Black Licorice, Buttered Popcorn, Watermelon, Cherry, Cinnamon, Juicy Pear, Orange, Green Apple, Toasted Marshmallow, and Blueberry.

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Why Health Care reform is so difficult

Here’s what happened when Doctors initially weighed in on the proposed health care reform package:

The Allergists were in favor of scratching it, but the Dermatologists advised not to make any rash moves.

The Gastroenterologists had sort of a gut feeling about it, but the Neurologists thought the Administration had a lot of nerve.

Meanwhile, Obstetricians felt certain everyone was laboring under a misconception, while the Ophthalmologists considered the idea shortsighted. Pathologists yelled, “Over my dead body!” while the Pediatricians said, “Oh, grow up!”

The Psychiatrists thought the whole idea was madness, while the Radiologists could see right through it. Surgeons decided to wash their hands of the whole thing and the Internists claimed it would indeed be a bitter pill to swallow.

The Plastic Surgeons opined that this proposal would “put a whole new face on the matter”. The Podiatrists thought it was a step forward, but the Urologists were P.O.’d at the whole idea.

Anesthesiologists thought the whole idea was a gas, and those lofty Cardiologists didn’t have the heart to say no.

In the end, the Proctologists won out, leaving the entire decision up to the lawmakers on Capitol Hill in Washington, who consistently talk out of their rear ends!

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.
Quick Links

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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