Cost of new accounting standardsFrom the makers of the new “lease accounting” and “revenue recognition” standards comes this from Financial Accounting Standards Board (FASB) member Marc Siegel: “Reducing the cost of financial reporting without significantly reducing the relevance of financial reports simply benefits investors. So we have been reviewing existing standards to look for costly provisions that result in information of limited utility to investors.”
Simply stated: The FASB has come to realize that some of its actions may increase the cost of compliance beyond the intended benefit derived from such change. FASB says it is upping its cost/benefit analyses for all new changes.
Short extension for “Extenders”
With the clock winding down, Congress finally got around to addressing a host of personal and business tax breaks and incentives that expired at the end of 2013 and has passed the Tax Increase Prevention Act of 2014 (Act), or more simply “Tax Extenders Legislation,” which President Obama is expected to sign. If Congress had done this last January, it could have helped a sluggish economy, not to mention making investment and tax planning a lot easier for everyone. The Act will extend nearly all of the provisions that expired at the end of 2013 including: 50% bonus depreciation; enhanced Sec 179 rules allowing expensing of $500,000 of qualified property; exclusion from capital gains of 100% of qualified small business stock by an individual; Work Opportunity Tax credit; Research credit, New Markets Tax credit; Enhanced Deduction for charitable contributions of food inventory; Energy Tax Extenders; exclusion from taxable income of forgiven mortgage debt; and retention of all current individual marginal tax rates. The bad news – all these only apply (retroactively) for 2014.
With the average U.S. price of gasoline now below $3 a gallon (a four year low and about a dollar less than last year at this time) many economists think the extra $40 billion dollars in the hands of consumers will find its way to retail cash registers this holiday spending season. But few CFOs at the major retailers have raised their year-end earnings forecasts. With early holiday shopping off 11% compared to last year, they may have made the right call. If there is a retail boost, it will likely benefit the big-box, discount, and lower priced stores because lower-wage earners spend a greater proportion of their pay on gasoline and if they do spend that savings it would likely be at lower-priced retailers. WSJ reports Target Corp. shares up 18% and Costco Wholesale up 14% this quarter.
If not at the mall, one has to wonder what consumers are doing with all those extra petro dollars. Well, for one thing, they’re buying large trucks and SUVs. U.S. Auto sales revved up to its highest November sales rate in 11 years driven mostly by not so MPG-friendly vehicles. After all, gas is cheap for now.
If there is another reason for lackluster consumer spending, it may be that middle-income American families are living with stagnant incomes while the cost for such basics as food, rent, education, and digital communications is on the rise. Healthcare costs alone went up 24% over the last six years according to a Wall Street Journal survey, and that’s before ObamaCare. “With income growth sluggish, discretionary spending on things like clothing and movies, live shows and amusement parks has given way,” reports the Journal.
Russia’s Economy Ministry reported that the country was likely to slip into recession next year. Though predicted by outside economists who attribute it to the negative effects of Western sanctions and dropping oil prices, it was indeed an unusual bad news forecast from an official Russian agency. The report quickly came under fire from Russia’s Finance Ministry for being “too gloomy” and within hours it disappeared completely from the Economy Ministry’s website. We suspect the Economy Ministry’s next forecast will be a little different – perhaps a weather forecast direct from Siberia?
Dealogic reported a 7% increase year over year in the value of first follow-on offerings, the first issuance of additional stock by an existing publicly traded company. Led by Hilton Worldwide Holdings and Plains GP Holdings, over $31 billion of newly issued stock in U.S. listed companies was bought by investors. Sector leaders: Technology for highest values; Healthcare for most offerings.
A fast ride
Just last year ridesharing service UBer Technologies Inc. was valued at $3.5 billion. Earlier this year, when it raised $1.2 billion it was valued at $18.2 billion. A fresh round of funding just completed raised an additional $1.2 billion based on a valuation of over $41 billion – the highest valuation by far of any private company and about equal to the market cap of Time Warner Cable Inc.
Not to mention the tax savings
This year’s winner for largest corporate bond sale goes to Medtronic for raising $17 billion to finance its inversion deal with Ireland-based Covidien.
More than idle chatter
We’d say anonymous messaging app Yik Yak had a pretty good year, having just received its third round of funding. Sequoia Capital led a $62 million investment that values the company at well over $300 million. The bulletin board app allows local users in the same area or campus to post up to 200 characters without identifying themselves. Despite controversy over such apps facilitating cyber-bullying, investors rushed to get a piece of a company that may follow the likes of WhatsApp ($22 Billion sale to Google), and rising star Snapchat (valued at $10 Billion).
A new high
The family of the late Bob Marley (1945-1981), Jamaican reggae singer-songwriter, musician, guitarist and outspoken advocate for the benefits of smoking marijuana, has struck a deal with private equity firm Privateer Holdings. As reported by NBC and the WSJ, Privateer entered into a 30-year licensing agreement to launch the first global cannabis brand. The Marley Natural line of products includes heirloom Jamaican cannabis strains, cannabis-infused lotions and accessories. Sales begin next year where permitted. Privateer exclusively invests in the legal cannabis industry and values the U.S. cannabis market at $50 billion, and up to $200 billion globally.
Not so funny
The IRS hit Comedian Chris Tucker with an additional $2.5 million lien on top of the already $12 million lien claiming that he ran up additional back taxes for 7 years totaling over $14 million. It was reported that the comedian has reached a settlement with the IRS.
Boxing champ Manny Pacquiao is fighting with the IRS. He is neither a U.S. citizen nor resident and does not pay U.S. taxes. But the IRS placed an $18.3 million lien for unpaid taxes based on his earnings for U.S. bouts from 2006 through 2010. Mr. Pacquiao is also in a $75 million tax evasion case in his home country, the Philippines.
There she goes…
Singer, actress and short-reigned former Miss America, Vanessa Williams owes Uncle Sam $369,249 according to a federal tax lien filed against her last August. The IRS says it is based on her 2011 earnings. Reporting on the story, Forbes contributor Robert W. Wood notes that “it could just be a kerfuffle between [IRS] notices and her advisers, but it’s still serious,” noting that Lindsay Lohan missed IRS notices and bills that led to a $94,000 tax lien.
Don’t lien on me
Pop singer Dionne Warwick had a $2.2 million federal tax lien filed against her in 2009 for unpaid taxes going back to her earnings in the 1990s. It apparently didn’t help that she was Wishin’ and Hopin’ that Anyone that Had a Heart would just Walk on By, because the IRS maintained its Close to You enforcement lien. But, sometimes, Love Will Find a Way, and surprisingly the IRS revoked its lien because of an accounting mistake… its mistake, not hers. Some say this was truly a miracle. Maybe so. It can’t hurt to Say a Little Prayer.
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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