Following are a few important issues our accounting professionals wanted to briefly share with you. As always, should you desire more in-depth information please feel free to contact us.
NEW AND PROPOSED RULE CHANGES COULD BRING FINANCIAL REPORTING RELIEF TO PRIVATE COMPANIES
Current accounting and disclosure rules are for the most part the same for public and privately held companies. These rules are often complicated and expensive to implement and maintain. For years, many private companies have raised concerns that these rules may not be applicable, or useful, to the readers of their financial statements.
Recently, the accounting regulatory bodies have taken two significant steps to address these concerns.
Financial Accounting Standards Board (FASB) Proposes GAAP Changes for Privately Held Companies
The FASB earlier this month formally proposed changes to Generally Accepted Accounting Principles (GAAP) applicable only for private companies with the intent to make financial reporting less complex and less burdensome. The proposed changes include:
* Relieving private companies from having to separately recognize certain intangible assets acquired in a business combination.
* Permitting amortization of goodwill and the option to utilize a simplified goodwill impairment model.
* Providing simpler approaches to accounting for certain types of interest rate swaps.
The FASB is currently in the “comments” period. This will be followed by a final decision on endorsement which is expected to occur by year end.
The FASB is also analyzing whether their proposals should be extended for public and not-for-profit companies as well.
New Financial Reporting Framework for Small/Medium Companies
Last month, the American Institute of Certified Public Accountants (AICPA) introduced the Financial Reporting Framework for Small and Medium Sized Entities – or simply: FRF for SMEs TM.
The FRF for SMEs is a new accounting option for preparing streamlined, relevant financial statements for privately held owner-managed businesses that are not required to use GAAP. The framework’s requirements are based on traditional but streamlined accounting methods to ensure consistent application including:
* Using historical cost instead of complicated fair value measurements
* Allowing businesses to tailor the presentation of statements to their users
* Targeted disclosure requirements
* Reduction of book-to-tax differences
* The production of reliable financial statements that can be compiled, reviewed or audited
Many privately held companies may now use the framework to prepare financial statements that clearly and concisely report what a business owns, what it owes and its cash flow. Lenders, insurers and other financial statement users will find this new accounting framework helps them clearly understand key measures of a business and its creditworthiness.
Though not suitable for every private company, such as one contemplating going public, this new financial reporting framework promises a simplified reporting solution that could rapidly become familiar and more acceptable to third parties.
STRATEGIC DIALOGUE YIELDS NO BREAKTHROUGHS ON PCAOB QUEST FOR INSPECTIONS
In the June issue of Simple Stated we reported on a Memorandum of Understanding (MOU) reached between the U.S. Public Company Accounting Oversight Board (PCAOB) and the China Securities Regulatory Commission and the Ministry of Finance involving the audits of U.S.-listed Chinese companies.
Though a good first step on enforcement cooperation, we noted that no agreement was reached that would allow regulatory inspections which are the most important function of the PCAOB to verify the performance and compliance with accounting rules.
Hopes were high last week that the inspections issue might be resolved when the two countries met in Washington D.C. for the U.S.-China Strategic and Economic Dialogue (S&ED). Unfortunately no such breakthroughs have been reported.
As for the PCAOB’s quest for inspections – it is noteworthy that China is not the only country not allowing inspection access. Other countries where the PCAOB is being denied access to the information necessary to conduct inspections of registered firms on the basis of asserted restrictions under local law or objection based on national sovereignty include: Austria, Belgium, Cyprus, Czech Republic, Denmark, Greece, Hong Kong, Hungary, Ireland, Italy, Luxembourg, Poland, Portugal, Sweden, and Venezuela. Until this year, France and Finland were also on the list.
For summary of outcomes from the S&ED:
SUPREME COURT RULING IN DOMA MAY RESULT IN TAX OPPORTUNITIES AND REFUNDS
Last month the U.S. Supreme Court ruling in United States v. Windsor (Windsor) struck down key portions of the Defense of Marriage Act (DOMA) as unconstitutional. The decision will allow many same-sex spouses to enjoy federal tax and survivor benefits previously available only to those in opposite-sex marriages.
Administrators of retirement and group health plans should also be aware of the effects of Windsor on their plans and review the plan documents to identify provisions and practices that will require amendment.
There may also be an opportunity for employers, for themselves, and their affected employees to seek tax refunds for amounts previously withheld on qualified benefits provided to same-sex spouses back to 2010 and possibly 2009 in certain instances.
|THE AUTOFILL ACT OF 2013 or The Just Sign and Send Us Your Money Act
Congress is considering legislation that would allow the Internal Revenue Service (IRS) to provide taxpayers with tax forms already filled in with figures the IRS received from employers and banks.
Two Illinois Democrats, Rep. Bill Foster and Mike Quigley say they introduced the Autofill Act of 2013 to simplify the process of filling out federal income tax forms and to save taxpayers time and money.
“Our Tax Code is complicated enough. We shouldn’t be asking taxpayers to submit information the IRS already has,” said Foster.
Critics cite the complication of the Tax Code as a reason they oppose the legislation, arguing that the Tax Code is far too complicated for this to work and that the information the IRS already has could be wrong.
Beyond the substantive arguments, there is cynical opposition as well; if the IRS is going to autofill tax returns, eventually they’ll skip the form and just send a bill.
Though interesting and perhaps entertaining to observe, this is not the first time this legislation has been introduced in Congress. The chances of it passing this time is equally nil. H.R. 1532 was assigned to the Ways and Means Committee where the Autofill Act will likely meet its auto-death.
WEINBERG & COMPANY NEWS:
Accounting Today recently named Weinberg & Company as one of the fastest growing CPA firms in the nation. New engagements, coupled with our commitment to client service, require that we seek additional accounting professionals to join our firm.
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
1925 Century Park East, Suite 1120
Los Angeles, CA 90067
6100 Glades Road, Suite 205
Boca Raton, FL 33434
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.
Firm Managing Partner
Director of Tax,
Assurance & Audit
Tax & Accounting
Leisure Time Industries
Media & Entertainment