Highlights



Barry Melancon, president and CEO of the AICPA, speaking at a forum on international accounting, called for the U.S. accounting profession to adopt IFRS within three to five years.

“Awareness is growing among U.S. accountants that IFRS is coming for public companies and most believe it will take three to five years to get ready,” Melancon said at the FASB conference on IFRS held at Baruch College in New York on June 16.

“The overwhelming feedback we get from people who focus on this issue is, ‘Let’s get it done,’ ” he said. “Let’s get a date certain for public companies. Let’s put that date out there so the momentum can build, all of the proper steps can be put in place, and work groups that need to be in a whole variety of different areas can follow.”

The SEC last year allowed foreign public companies to issue financial statements in the U.S. using IFRS, instead of U.S. GAAP. The SEC is now weighing whether to issue a proposed rule that would allow U.S. firms to use IFRS.

A majority of AICPA members polled in a survey conducted between April 24 and May 12 said they believed it would take three to five years to prepare for IFRS. Thirty-four percent said they would need three years and 31% said they would need four or five years.

Forty-two percent of AICPA members in business and industry who responded to the survey had a “great deal of awareness” regarding the SEC’s consideration of whether U.S. companies could file using IFRS.

When asked to what extent their companies or firms were preparing for potential IFRS adoption, 17% of survey respondents said they were actively preparing, 24% were in preliminary discussions, and 59% had not begun to prepare for the transition.

The online survey of 1,240 members had a margin of error of less than 3 percentage points.

The PCAOB adopted rules for annual and special reporting by accounting firms registered with the board. The reporting framework, the first such requirements adopted by the board, includes two types of reporting obligations. Each registered firm must annually provide basic information about the firm and its issuer-related practice over the most recent 12-month period. Such reporting would include, among other things, information about audit reports the firm issues during the year, certain disciplinary history information about individuals who have joined the firm, and information about fees billed to issuer audit clients, in various categories of services, as a percentage of the firm’s total fees billed.

The rules and forms the board adopted also identify certain events that registered firms must report within 30 days. The reportable events include the institution of certain types of legal, administrative or disciplinary proceedings against a firm or certain categories of individuals.

The PCAOB will make the annual and special reports public on its Web site, subject to exceptions for information that satisfies criteria for confidential treatment.

The rules will take effect 60 days after SEC approval. The earliest potential special reporting deadline for any firm is 90 days after commission approval. For all firms, the first annual report will be due by June 30, 2009, for the 12-month period ending March 31, 2009. Go to www.pcaobus.org for more information.

The SEC proposed a series of credit rating agency reforms to increase transparency of the ratings process and curb practices that contributed to recent turmoil in the credit markets. The proposed rules, which are organized in three parts, continue the implementation of new regulatory authority that the SEC received in the 2007 Credit Rating Agency Reform Act to register and oversee nationally recognized statistical rating organizations.

Among other provisions, the first part of the proposal would prohibit credit rating agencies from structuring the same products they rate and would require them to make a number of public disclosures including an annual report of the number of ratings actions they took in each ratings class. It would also require the maintenance of an XBRL database of all rating actions on the rating agency’s Web site.

The second part of the SEC’s proposal would require credit rating agencies to differentiate the ratings they issue on structured products from those they issue on bonds, either through the use of different symbols, such as attaching an identifier to the rating, or by issuing a report disclosing the differences between ratings of structured products and other securities.

The third part is designed to ensure that the role the SEC has assigned to ratings in its rules is consistent with the objective of having investors make an independent judgment of risks and of making clear to investors the limits and purposes of credit ratings for structured products.

For more information, visit www.sec.gov/rules/proposed.shtml.

John Reich, the director of the Office of Thrift Supervision, called for stronger federal oversight for mortgage brokers and mortgage bankers in a May 29 speech to the New Jersey League of Community Bankers. He said the current housing crisis shows that the mortgage industry needs consistent regulation much like the uniform standards that federally supervised banks and thrifts must follow.

“Federal oversight of the entities that fund the mortgage process is crucial,” Reich said. “Establishing a partnership between the states and a federal regulator to set and enforce minimum mortgage funding standards would ensure accountability, consistency and transparency throughout the mortgage lending process.”

Based on its expertise in mortgage lending and its nationwide examination work force, he said the OTS would be uniquely qualified to fill that federal role. Reich’s full remarks are available at www.ots.treas.gov/docs/8/87165.pdf.

The International Accounting Standards Board formed an expert advisory panel to discuss the valuation of financial instruments in inactive markets. The panel will assist the IASB in reviewing best practices in the area of valuation techniques, and formulating any necessary additional practice guidance on valuation methods for financial instruments and related disclosures when markets are no longer active, according to an IASB news release. The panel’s discussions will provide input for the IASB’s work on financial instruments and fair value measurement. For a summary of the panel’s first meeting in June, visit www.iasb.org.

The Financial Crimes Enforcement Network released a pair of rulings on whether certain businesses fit the definition of “money transmitter.” Businesses that fit the definition must register with FinCEN as money services businesses and comply with the Bank Secrecy Act and all applicable regulations.

The first case involved a business that contracts with various utility companies as an authorized agent to receive payments from customers of those utilities. After receiving the payments, the merchant deposits them in a bank account, from which each utility withdraws funds via ACH transaction. FinCEN said the business is not a money transmitter so long as it limits itself to accepting payments on behalf of the utilities with whom it contracts and declines to accept and transmit funds for any other purpose. The ruling is FIN-2008-R006.

The second case involved a company that issues customers single-use virtual credit cards with a credit limit equal to the full price of items involved in a single transaction. The virtual card cannot be reloaded and expires after one use. The virtual card acts as a shield between the customer and online merchant. It masks the customer’s personal and financial information and replaces it with company-generated information.

The customer pays for virtual card purchases with an existing debit or credit card or by authorizing an ACH debit from a bank account. FinCEN said the company is a money transmitter and must register as a money services business because it is in the business of offering secure money transmission, rather than security to which money transmission is ancillary. The ruling is FIN-2008-R007.

The full rulings are available at www.fincen.gov.

The European Commission, the European Union’s executive body, has recommended that its member states consider developing limits for auditor civil liability.

The recommendation suggests member states should individually decide on the appropriate method for limiting liability in their jurisdiction and introduces a set of principles to ensure that any limitation is fair for auditors, audited companies, investors and other stakeholders. The limitation of liability should not apply in cases of intentional misconduct on the part of the auditor, according to the principles outlined by the commission.

Three methods of limiting liability already used by member states—caps, proportionate liability and contractual limitations— are given as possible examples, but the commission said that any other equivalent method might be used.

The commission hired London Economics International to conduct an independent study of the insurability of major audit firms and the economic impact of auditors’ liability regimes. The study showed that large claims may put at risk an entire auditing network, which could lead to difficult consequences for the wider economy, such as a significant reduction in statutory audit capacity for large companies. According to the study, the Big Four accounting firms conduct 85% of audits of listed companies in the EU.

The recommendation is available at http://ec.europa.eu/internal_market/auditing/liability/index_en.htm.

The AICPA submitted comments to the IRS on draft instructions for the 2008 Form 990, Return of Organization Exempt From Income Tax, used by most tax-exempt organizations to report operational information.The revised form, released in December, was redesigned in an effort to enhance transparency, promote tax compliance, and minimize burden. Comments were requested on the draft instructions to ensure that the needs of the tax-exempt community were addressed in using the form. The IRS is considering all comments and anticipates releasing the final instructions by the end of 2008.

For an overview of the Form 990 changes and the draft instructions, go to www.irs.gov/pub/irs-tege/990_instructions_overview040608.pdf.

To view all submitted comments on the draft instructions, go to www.irs.gov/pub/irs-tege/comments_0519_0529.pdf.

The Form 990 and full draft instructions are available at www.irs.gov/pub/irs-pdf/f990.pdf and www.irs.gov/instructions/i990-ez/index.html.

A report released by the Small Business Administration’s Office of Advocacy found that borrowing and lending in small business markets was stronger in 2006–2007 than in the previous year. Small Business and Micro Business Lending in the United States for Data Years 2006–2007 examines small business lending by all U.S. lenders and gives “small businesses and financial institutions the hard data they need about the availability and use of credit in their markets,” Chad Moutray, chief economist for the Office of Advocacy, said in a press release. Lenders in each state and territory are ranked according to their overall small business lending activities, as are large national financial institutions, and not by lending under SBA programs.

The complete report is available at www.sba.gov/advo/research/sbl_07study.pdf.

A complete ranking of lenders, including prior annual reports, is available at www.sba.gov/advo/research/lending.html.

 

SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

QUIZ

News quiz: Scam email plagues tax professionals—again

Even as the IRS reported on success in reducing tax return identity theft in the 2016 season, the Service also warned tax professionals about yet another email phishing scam. See how much you know about recent news with this short quiz.