Companies are allowed to use non-GAAP metrics along with GAAP metrics when reporting results, but under new guidelines issued by the Securities and Exchange Commission in June, they must give equal prominence to each and explain how they are reconciled.
Brian Block, the former finance head of real estate investment company American Realty Capital Partners, was arrested at his home and charged with accounting fraud when he used a metric that didn’t comply with Generally Accepted Accounting Principles (GAAP) and inflated the company’s results, according to authorities, reports MarketWatch.
The metric in question was adjusted funds from operations (AFFO), which aims more to reflect cash flow by excluding noncash depreciation and amortization costs and other one-time items or expenses. Real estate investment trusts (REITs) commonly use AFFO to supplement numbers presented using methodology that conforms to GAAP.
American Realty Capital, which changed its name to Vereit last year, was one of the largest creators of REITs. Block has been charged with one count of conspiracy to commit securities fraud, one count of securities fraud, two counts of making false filing with the SEC, and two counts of submitting false certifications along with required filings with the SEC, according to the government’s statement.
The securities fraud, false filings charges, and false certification charges each carry a maximum prison term of 20 years. The charge of conspiracy carries a maximum prison term of five years.
Related reading: MicroCaps in SEC Crosshairs on NonGaap Measurement Debate
(Source: MarketWatch, NYT Dealbook)
CAQ Tool Helps Examine Use of Non-GAAP Measures
The Center for Audit Quality (CAQ) has released a new tool to help audit committees continue to assess management’s presentation, outside the audited financial statements, of performance metrics that do not conform to GAAP. The publication, Questions on Non-GAAP Measures: A Tool for Audit Committees, can assist in the determination of whether non-GAAP indicators provide investors with meaningful financial information.
Questions on Non-GAAP Measures groups its questions under three core categories:
* Transparency: The tool offers audit committees ways to consider the purpose, prominence, and labeling of non-GAAP information, specifically in relation to traditional GAAP measurements. For example, has the non-GAAP measure been given more prominence than the most directly comparable GAAP measure?
* Consistency: The tool suggests ways that audit committees can question management to determine whether non-GAAP measures are consistent and balanced. For example, do the measures eliminate similar items that affect both revenue and expense, or do they only eliminate one or the other?
* Comparability: The tool provides questions to promote the comparability of non-GAAP measures presented. For example, do other companies present this particular measure or similar measures? If not, why is this measure important for this company but not its peers?
Source: Center for Audit Quality
Record low bond yields are spurring more companies to deliver higher dividends. Over the past 12 months, companies in the S&P 500 reported dividend payouts amounting to almost 38% of net income, the highest since early 2009, according to FactSet.
“Companies have long spent large sums on dividends and share repurchases to boost their share prices. Investors now are clamoring more for dividends as a result of plunging interest rates, and companies are loath to disappoint them, despite slow growth that is pressuring earnings at many firms,” reports the WSJ.
Apple Inc. is the biggest annual dividend payer in the S&P 500 in dollar terms, paying out roughly $12.5 billion, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Exxon Mobil Corp. is second, at $12.4 billion.
Untaxed offshore earnings
The European Commission’s push to force Apple to pay $14.5 billion in back taxes has put a spotlight on the fact that US companies hold some $2.43 trillion in untaxed earnings offshore, according to Audit Analytics. The top10 companies with the largest offshore earnings are: Microsoft $108.3 billion; General Electric $104.0 billion; Apple $91.5 billion; Pfizer $80.0 billion; IBM $68.1 billion; Merck & Co. $59.2 billion; Alphabet (Google) $58.3 billion; Johnson & Johnson $58.0 billion; Cisco Systems $58.0 billion; and Exxon Mobil $51.0 billion.
(Source: Audit Analytics)
According to the latest report (2012) by document-management services company Pitney Bowes, the average savings account balance in the U.S. was $5,923, a 3 percent increase from the $5,753 balance in 2010. New Jersey residents saved the most, with average savings account balances of $7,872, and New Mexico came in at the bottom, averaging just $4,119.
A Porsche Station Wagon? Say it ain’t so.
Porsche, the maker of the iconic 911 sports car, will introduce its first station wagon at the Geneva Motor Show in March 2017. Scheduled to go on sale later that year, the car, still to be named, will be a wagon version of Porsche’s Panamera four-door coupe, reports Bloomberg.
This marks a continuing branching out from the German automaker’s sports car roots, having introduced the Cayenne SUV in 2002. Porsche also plans to unveil a Panamera electric hybrid at this September’s Paris Motor Show. Porsche is finding sales success in targeting buyers who want luxury, practicality and vehicles better suited to everyday driving.
But a Porsche station wagon? Let’s hope faux wood exterior panels aren’t an option.
Not so fast
Congressman John Fleming, M.D. (R-LA), a member of the conservative House Freedom Caucus, last week pushed for a “privileged resolution” that would have short circuited the committee process and required the full House to quickly vote on the potential impeachment of IRS Commissioner John Koskinen.Republicans remain angry at Koskinen, who they accuse of impeding an investigation into whether the tax agency improperly targeted conservative non-profits. Their allegations include failing to prevent the IRS from destroying evidence and providing false and misleading information to Congress. Koskinen and the Treasury Department have said the allegations are meritless.“For years the IRS has abused its power to target people based on their political views. Commissioner John Koskinen not only did nothing about it, but continued the trend of deception by deliberately keeping Congress and the American people in the dark,” Fleming said in a statement. To date no one has been held accountable and no one will unless we move forward with a resolution to require a vote on his impeachment. The Department of Justice won’t do its job so it’s essential Congress step in,” he said.The impeachment process involves two steps: 1) the House passes articles of impeachment, and 2) the Senate conducts a trial to convict and possibly remove from office. The House Judiciary Committee conducted a hearing on the allegations on May 24, 2016, which Commissioner Koskinen declined to attend.
It should be noted that the House has not impeached a cabinet official since the mid-1870s and has never impeached an executive branch official such as Koskinen, who doesn’t hold cabinet rank.
But instead of moving forward on the privileged resolution, House Republicans reached agreement late Wednesday to avoid a potentially divisive floor vote – scrapping the resolution, and sending the matter back to the House Judiciary Committee for hearing. The detour makes it unlikely that any vote by the full House will take place before the November election.
So, it is safe to say that the IRS Commissioner will not be fired immediately. You might say he got an extension.
(Source: Bloomberg, UPI)
Half of the American people have never read a newspaper. Half never voted for president. One hopes it is the same half.
It is inaccurate to say that I hate everything. I am strongly in favor of common sense, common honesty, and common decency. This makes me forever ineligible for public office.
No man who ever held the office of president would congratulate a friend on obtaining it.
A doctor gave a man six months to live. The man couldn’t pay his bill, so he gave him another six months.
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