IFRS – To bury or praise
International Financial Reporting Standards (IFRS) — established and maintained by the International Accounting Standards Board (IASB) — are designed as a common global language for business affairs so that company financial statements are understandable and comparable across international boundaries. Many countries have adopted or are in the process of converging on the IFRS. Though the U.S. has been working on convergence with its international counterparts, progress has slowed; frustration and criticism have been high. Just last year, in a keynote address to the Annual SEC and Financial Reporting Institute Conference, the former SEC Chairman, Christopher Cox, grabbed headlines by telling the group we should “bury IFRS.”
“Today there is a real risk that the continuing increase in global trading and investing has gotten far ahead of the accounting standards that are necessary to make it all work,” Cox said last year. “That is why, when I was SEC chairman, I worked to ensure that the United States was doing everything necessary to make financial information from companies in different countries both comparable and reliable. But that was several years ago. And a great deal has changed since then. Paraphrasing Shakespeare’s Julius Caesar, Cox said, “Today, I come to bury IFRS, not to praise them.”
Not so fast. This year’s keynote speaker was the SEC’s Chief Accountant, James Schnurr who might just as well have paraphrased Mark Twain: “The reports of IFRS death have been greatly exaggerated.”
Schnurr said he believes there may be a role for IFRS and has suggested in previous speeches that the SEC might allow companies to use some IFRS numbers as a supplement to their U.S. GAAP financial statements. He has heard negative feedback from stakeholders about allowing an option for U.S. public companies to prepare their financials in IFRS, although the SEC may propose allowing financial institutions to provide supplemental information on loan impairments and credit losses in IFRS to allow for differences in the new financial instruments standards that the U.S. Financial Accounting Standards Board and the International Accounting Standards Board have been working to converge.
“The staff has recently heard from a number of different constituents about IFRS,” said Schnurr. “We heard three key themes through those discussions: There is virtually no support to have the SEC mandate IFRS for all registrants. There is little support for the SEC to provide an option allowing domestic registrants to prepare their financial statements under IFRS. There is continued support for the objective of a single set of high-quality, globally accepted accounting standards. So, while full-scale adoption or an option does not appear to have support, it does not mean we ‘bury’ the underlying objective of a single set of high-quality, globally accepted accounting standards. On the contrary, constituents continue to support that idea. So, the real questions are: what is the path to achieve that objective and how do we get there?”
Schnurr believes the two standard-setting boards and the foundations that oversee them should continue to cooperate on trying to eliminate differences between IFRS and U.S. GAAP.
FitBit – In good shape
San Francisco-based fitness device-maker FitBit raised $732 million in its IPO, after pricing at $20 per share, giving the company a market value of over $4 billion. Fox Business reported that “unlike many venture-backed companies going public, Fitbit is profitable.” The company posted $132 million in net income last year, compared to the $52 million net loss from the year prior. The NPD Group noted that Fitbit has acquired 68% of the market share for U.S. activity trackers last year. Facing increasing competition from the likes of Jawbone, Garamin, and now Apple, the eight-year old company will be watched carefully as an indicator for the emerging “wearable tech” category.
One way to increase employment
After an adverse ruling against Uber by the California Labor Commission, you may be using your FitBit to count the extra steps you’ll be taking to walk home.
The commission concluded that a San Francisco-based driver for ride-hailing service Uber is an employee since the firm is “involved in every aspect of the operation.” Uber had argued that its drivers are independent contractors, not employees, and that it is “nothing more than a neutral technology platform.”
Classifying Uber drivers as employees opens the company up to considerably higher costs, including Social Security, workers’ compensation, unemployment insurance and ObamaCare. That could affect its valuation, currently above $40 billion, and the valuation of other companies that rely on large networks of individuals to provide rides, clean houses and other services.
“The California Labor Commission’s ruling is non-binding and applies to a single driver,” Uber told CNBC in a statement. “Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’” Uber plans to challenge the ruling in state court, but unions and plaintiff attorneys hope that the decision will bolster class-action lawsuits by Uber and Lyft drivers seeking reclassification as employees, which would entitle them to additional benefits.
TROUBLES WITH UNCLE SAM
Lost and found…and lost?
J. Russell George, the Treasury inspector general for tax administration, testified to the House Oversight and Government Reform Committee that IRS employees erased computer backup tapes shortly after officials discovered that thousands of emails related to the tax agency’s Tea Party scandal had been lost. George said those tapes “likely contained” 2010 and 2011 emails to and from former IRS official Lois Lerner, who has emerged as a central figure in congressional investigations. He said they will “most likely never be recovered.”
Fox News reported that the evidence was destroyed 10 months after a preservation order for the emails; seven months after a subpoena; and one month after IRS officials realized there were potential problems locating certain emails; and, the destruction of evidence occurred about three weeks before the IRS Commissioner testified to Congress that they would provide documents to Congress.
The IRS granted 57 contracts worth $18.8 million to corporations with unpaid back taxes from 2012 to 2013, according to a March 26 Treasury Inspector General for Tax Administration (TIGTA) report.
TIGTA found the IRS granted 17 corporations these lucrative contracts over the two year period despite a federal ban on the IRS contracting with corporations with tax debts. The Consolidated Appropriations Act of 2012 also prohibits agencies, including the IRS, from granting contracts to corporations convicted of a felony within the past 24 months. According to the report, the IRS also violated this provision.
Sometimes it pays to be dead
The Social Security Administration (SSA) paid individuals acting as representatives for disabled beneficiaries nearly $50 million even though they were dead. An audit from the Office of Inspector General (OIG) is just the latest example of the SSA’s inability to figure out who on their rolls is still alive.
“SSA did not ensure new representative payees were selected when current payees died,” the OIG said. “Based on our sample results, we estimated 2,548 deceased payees received approximately $46.8 million in Old-Age, Survivors, and Disability Insurance benefits and Supplemental Security Income payments.”
“A billion here, a billion there – pretty soon it adds up to real money.”
Senator Everett Dirksen – U.S. politician (1896-1969)
“America is a land of taxation that was founded to avoid taxation.”
Laurence J. Peter – Educator and Hierarchiologist, (1919-1990) best known for his 1968 formation of The Peter Principle, a concept in management theory in which he states, “In a hierarchy every employee tends to rise to his level of incompetence.” Peter was also well known for several other quotes, including: “Lead, follow, or get out of the way” and “The noblest of all dogs is the hot-dog; it feeds the hand that bites it.”
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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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