EXECUTIVE SUMMARY SARBANES-OXLEY REQUIRES MANAGEMENT to include an assessment of internal controls over financial reporting, using a suitable framework, in the annual report. While a number of frameworks are available, some do not adequately assess technology controls. SEC RULES SAY MANAGEMENT MUST BASE its evaluation of the effectiveness of internal
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TOPICS
Tax
Firm-and-Fixed-Plan Rule Reaffirmed
The Second Circuit Court of Appeals affirmed the Tax Court’s decision in a case involving Merrill Lynch. Although the actual transactions were complicated and involved consolidated returns, the court’s conclusion is applicable to many stock redemptions outside of affiliated groups. Merrill Lynch’s board had approved the sale of a subsidiary,
Accounting
FASB issued Statement no. 151 , Inventory Costs ( www.fasb.org/st/index.shtml ), an amendment of Accounting Research Bulletin (ARB) no. 43, chapter 4. The statement clarifies that abnormal amounts of idle facility expense, freight and/or handling costs and wasted materials (that is, spoilage) should be recognized as current-period charges, and it
“In the Public Interest, Part Two”
If you feel like the world is changing faster than you can keep track of it all, you’re not alone. The JofA recently spent a day at the Office of the Chief Accountant of the SEC, talking about changes at the SEC, the world of regulation, the global marketplace and
Technology
XBRL International launched a public, Web-based repository ( www.xbrl.org/showcase ) of feasibility studies and XBRL implementation reports, a resource center containing white papers and other reference materials, and a guide to XBRL products and services. Founding sponsors included Ernst & Young LLP, software developer Universal Business Matrix LLC and XBRL
Are Substitute Payments Alimony?
Alimony payments are deductible for adjusted gross income for the payor spouse; however the payee spouse must include the alimony in gross income. IRC section 71(b) provides specific criteria that must be satisfied if payments from one ex-spouse to another are to qualify as alimony. The payments must be under
Double the Trouble
Source: IRS, www.irs.gov .
Is Division of an IRA a Taxable Event?
Generally the transfer of property from one spouse to another due to a divorce is a nontaxable exchange under IRC section 1041. IRC section 408(d)(6) further states that the transfer of an individual’s interest in an individual retirement account (IRA) to a former spouse also is a nontaxable event. Norma
XBRL Revisited
XBRL: A Structure for Business Data This month the JofA begins a series of articles exploring how XBRL can help CPAs, their clients and employers, financial institutions, regulators, rating agencies and individual and institutional investors issue or obtain business information in a standardized format for sharing and viewing in any
Government Accounting
The Governmental Accounting Standards Board (GASB) issued an exposure draft, Accounting for Termination Benefits, that would require employers to recognize—in financial statements they prepare on the accrual basis of accounting—the cost of voluntary termination benefits when employees accept a termination offer, and the cost of involuntary termination benefits when an
Smart Stops On The Web
Keep Abreast of New Rules www.sarbanes-oxley.com CPAs and compliance officers can find a link at this PCAOB Web site to a free Sarbanes-Oxley section 202 audit fee disclosure calculator, as well to the latest SEC rules and regulations cross-referenced to other specific sections of Sarbanes-Oxley, such as section 208 for
Ethics
The PCAOB proposed rules that identify specific circumstances in which providing tax services impairs auditors’ independence; increase auditors’ responsibility for obtaining audit committee preapproval of tax services rendered to audit clients; prohibit persons associated with an audit firm from causing it to violate relevant laws, rules and regulations; and include
Tax Notes
EITC Assistant Available Online The IRS has developed a new tool to help tax professionals determine the eligibility of their clients for the earned income tax credit (EITC) ( www.irs.gov/newsroom/article/0,,id=129991,00.html ). The EITC Assistant helps determine eligibility for the credit, filing status and whether the taxpayers’ children meet the definition
Good News for Business
Source: IRS, www.irs.gov .
Audit Committee Article Ranks First
AICPA President and CEO Barry C. Melancon presented the Journal of Accountancy’s 2003 Lawler Award for best article of the year to Stephen A. Scarpati, CPA for “CPAs as Audit Committee Members” (Sep.03, page 32; www.aicpa.org/pubs/jofa/sep2003/scarpati.htm ). In his article Scarpati, president of 180 Management LLC in New York, explained
Financial Reporting
The Securities and Exchange Commission amended its rules to allow certain larger companies an additional year to comply with internal control requirements mandated by section 404 of the Sarbanes-Oxley Act of 2002 (www.sec.gov/rules/final/33-8507.htm). Such entities, known as “accelerated filers,” must begin to include in the annual report for their first
Auditing
The Public Company Accounting Oversight Board (PCAOB) issued a third set of questions and answers on Auditing Standard no. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements ( www.pcaobus.org/standards/staff_questions_and_answers/index.asp ). The board published the first two in June and December
Personal Financial Planning
In response to a Treasury Department request for comments, the AICPA National CPA Financial Literacy Commission encouraged the development of an education strategy for promoting universal financial literacy in the United States ( www.aicpa.org/financialliteracy/download/aicpa_comment_letter_11_04.pdf ) and emphasized the skills CPAs can contribute to such an effort. The Institute established the
FYI
Through May 1, 2005, the Institute is accepting applications for committee service from October 2005 through October 2006. Members interested in contributing to the profession and networking with their peers can apply online at http://volunteers.aicpa.org. Volunteers are particularly needed for several new committees and panels. Additional information is available from
Lottery Winnings Taxable Under Foreign Treaties
Nonresident aliens are subject to tax in the United States on their U.S. source income. Taxation of that income is governed by U.S. tax law and subject to a tax treaty, if one exists, with the taxpayer’s resident country. The Tax Court recently decided the U.S./Israel Tax Treaty did not
Features
FROM THIS MONTH'S ISSUE
4 ways solo practitioners can stand out
Five years ago, a grieving Angel Zhen started his own CPA firm with no clients and no revenue. Today, he has 300 clients, $600,000 in revenue and 12 weeks of annual vacation. In this JofA article, he shares how he set up his firm and how you could do the same.
From The Tax Adviser
April 30, 2026
Current developments in taxation of individuals: Part 2
April 30, 2026
