Here is a link from the California State Controller's office tracking tax collection:
http://www.sco.ca.gov/taxtracker.html
Monday, April 20, 2009
Untangling our taxes
Here is a Los Angeles Times editorial from April 17, 2009:
http://list.calcpa.org/t/26453/12397877/12853/0/
Obama's vow to simplify the rules will be stymied by a thicket of credits, deductions and exclusions.
April 17, 2009
On Tax Day, the most beguiling promise an American president can make to the millions of people rushing to complete their Internal Revenue Service forms is to pursue a simpler tax code. So it wasn't surprising to hear President Obama make that pledge Wednesday, a little more than four years after President Bush announced a similar plan to study tax simplification. But coming up with a less-convoluted way to finance the federal government is the easy part, relatively speaking. As Bush discovered when his task force came up with an actual plan, the hard part is persuading anyone to give up the subsidies that make the code so complex.
Obama's gesture came as "Tea Party" protesters held rallies across the country to complain that the administration's fiscal plans will force taxpayers up and down the economic ladder to part with more of their earnings. In response, the president touted the tax cuts already adopted for students, businesses and taxpayers making less than $250,000 a year. He also announced that his Economic Recovery Board, led by former Federal Reserve Chairman Paul Volcker, will "do a thorough review of how to simplify our tax code.” The board's report is due by the end of the year.
The president failed to point out, though, that the tax cuts he promoted are part of the problem Volcker was asked to solve. Taxpayers face a thicket of potential deductions, credits and exclusions because Congress and the White House use the tax code instead of direct subsidies to promote certain types of behavior. For example, to boost sales of cars and homes, this year Congress added a temporary deduction for automobile sales taxes and expanded the credit for first-time home buyers. Over the years, lawmakers piled on layer after layer of benefits for social aims, along with a dizzying array of incentives for businesses and investors. Meanwhile, they played a cat-and-mouse game with tax accountants, tweaking the code to deter the gimmicks that shifted income into less-taxed categories.
The credits, deductions and other subsidies all have devoted constituencies now, which makes it difficult for Washington to eliminate them unless it also cuts tax rates dramatically, as it did in 1986. Unfortunately, Obama has tied the hands of Volcker's group by declaring that no one earning less than $250,000 will pay "a dime" more in taxes. It's hard enough to find a way to reform the tax code that keeps revenues roughly even with where they are today, but it's well-nigh impossible to avoid creating some winners and losers in each bracket -- with the losers sure to throw more tea parties. Although we welcome Obama's push for a simpler tax code, we wish he were giving it a better chance to succeed.
http://list.calcpa.org/t/26453/12397877/12853/0/
Obama's vow to simplify the rules will be stymied by a thicket of credits, deductions and exclusions.
April 17, 2009
On Tax Day, the most beguiling promise an American president can make to the millions of people rushing to complete their Internal Revenue Service forms is to pursue a simpler tax code. So it wasn't surprising to hear President Obama make that pledge Wednesday, a little more than four years after President Bush announced a similar plan to study tax simplification. But coming up with a less-convoluted way to finance the federal government is the easy part, relatively speaking. As Bush discovered when his task force came up with an actual plan, the hard part is persuading anyone to give up the subsidies that make the code so complex.
Obama's gesture came as "Tea Party" protesters held rallies across the country to complain that the administration's fiscal plans will force taxpayers up and down the economic ladder to part with more of their earnings. In response, the president touted the tax cuts already adopted for students, businesses and taxpayers making less than $250,000 a year. He also announced that his Economic Recovery Board, led by former Federal Reserve Chairman Paul Volcker, will "do a thorough review of how to simplify our tax code.” The board's report is due by the end of the year.
The president failed to point out, though, that the tax cuts he promoted are part of the problem Volcker was asked to solve. Taxpayers face a thicket of potential deductions, credits and exclusions because Congress and the White House use the tax code instead of direct subsidies to promote certain types of behavior. For example, to boost sales of cars and homes, this year Congress added a temporary deduction for automobile sales taxes and expanded the credit for first-time home buyers. Over the years, lawmakers piled on layer after layer of benefits for social aims, along with a dizzying array of incentives for businesses and investors. Meanwhile, they played a cat-and-mouse game with tax accountants, tweaking the code to deter the gimmicks that shifted income into less-taxed categories.
The credits, deductions and other subsidies all have devoted constituencies now, which makes it difficult for Washington to eliminate them unless it also cuts tax rates dramatically, as it did in 1986. Unfortunately, Obama has tied the hands of Volcker's group by declaring that no one earning less than $250,000 will pay "a dime" more in taxes. It's hard enough to find a way to reform the tax code that keeps revenues roughly even with where they are today, but it's well-nigh impossible to avoid creating some winners and losers in each bracket -- with the losers sure to throw more tea parties. Although we welcome Obama's push for a simpler tax code, we wish he were giving it a better chance to succeed.
Sunday, April 19, 2009
Taxes: Have You Paid Your Fair Share?
http://www.cbsnews.com/stories/2009/04/17/60minutes/rooney/main4952140.shtml
Andy Rooney Has A Solution For Dealing With Tax Cheaters
I guess we've all paid - or avoided paying - our taxes by now and it feels good to have it over with. It didn't hurt much, did it? I made more money last year than I made the year before, but of course my taxes were higher too - the most I ever paid.
To tell you the truth, I have a feeling I paid more than my share of taxes. I guess everyone feels that way.
I have an idea how the IRS could get more money out of the tax cheaters and it wouldn't cost the government a nickel: they would make tax records open to all of us. The figures would be available to anyone who wanted to look them up. This would be a good way to get everyone to pay what they owe. I'd be willing to do it if everyone else did it.
Some people wouldn't dream of cheating anywhere else but they don't worry about cheating on their tax returns if they think they could get away with it.
I've always thought that Uncle Sam goes about trying to get us to pay our taxes the wrong way.
The IRS never appeals to us as patriotic Americans. I think what everyone pays should be public information. Americans would be happier to pay their income tax if they thought that everyone was paying what they were supposed to pay.
Maybe people would be proud of what they pay instead of hiding their income.
I don't know why our tax returns are secret, anyway. What we earn isn't usually much of a secret to anyone who knows us or to anyone who wants to find out what we make.
About 45 percent of what the federal government gets comes from individual income taxes.
Forbes magazine did a piece that said that rich people hide more of their income than poor people hide. Well, of course they have more to hide but generally speaking I think Americans are willing to pay their income taxes. They just want to be damn sure they paid their share - not their share and part of someone else's.
Written by Andy Rooney
© MMIX, CBS Interactive Inc. All Rights Reserved.
Andy Rooney Has A Solution For Dealing With Tax Cheaters
I guess we've all paid - or avoided paying - our taxes by now and it feels good to have it over with. It didn't hurt much, did it? I made more money last year than I made the year before, but of course my taxes were higher too - the most I ever paid.
To tell you the truth, I have a feeling I paid more than my share of taxes. I guess everyone feels that way.
I have an idea how the IRS could get more money out of the tax cheaters and it wouldn't cost the government a nickel: they would make tax records open to all of us. The figures would be available to anyone who wanted to look them up. This would be a good way to get everyone to pay what they owe. I'd be willing to do it if everyone else did it.
Some people wouldn't dream of cheating anywhere else but they don't worry about cheating on their tax returns if they think they could get away with it.
I've always thought that Uncle Sam goes about trying to get us to pay our taxes the wrong way.
The IRS never appeals to us as patriotic Americans. I think what everyone pays should be public information. Americans would be happier to pay their income tax if they thought that everyone was paying what they were supposed to pay.
Maybe people would be proud of what they pay instead of hiding their income.
I don't know why our tax returns are secret, anyway. What we earn isn't usually much of a secret to anyone who knows us or to anyone who wants to find out what we make.
About 45 percent of what the federal government gets comes from individual income taxes.
Forbes magazine did a piece that said that rich people hide more of their income than poor people hide. Well, of course they have more to hide but generally speaking I think Americans are willing to pay their income taxes. They just want to be damn sure they paid their share - not their share and part of someone else's.
Written by Andy Rooney
© MMIX, CBS Interactive Inc. All Rights Reserved.
Thursday, April 9, 2009
Lousy Dell & HP Policies
http://www.windowssecrets.com/2009/04/09/01-Dell-and-HP-balk-at-replacing-bad-Nvidia-chip
Dell and HP balk at replacing bad Nvidia chip
Michael Lasky By Michael Lasky
An old urban myth claims that the microprocessors used in PCs and other consumer electronics are designed to fail within days or weeks of their warranty expiration.
For tens of thousands of people who bought Dell and HP notebooks whose motherboards fried — often a few weeks after their warranty expired — there's nothing mythical about it.
The cause of the machines' fried motherboards is an overheating Nvidia graphics chip. The failure rate is so huge that Nvidia had to take a $196 million charge against earnings in the second quarter of its 2008 fiscal year in anticipation of the reimbursements that would result from the faulty GPU (more info).
What's particularly scandalous, though, is how HP and Dell first handled the deluge of complaints from customers with notebooks that failed after their warranties expired. The companies either charged the customers (victims?) for repairs or refused service because the systems were past the warranty period.
Even worse, HP and Dell continued to sell notebooks with the same Nvidia chip long after the companies were aware of the problem. (Ultimately, Nvidia released a new version of the GPU that didn't cause overheating.)
Unwary consumers who purchased the affected notebooks — no doubt based in part on the heady reputations of the vendors — were left in the lurch when their PCs failed, which usually occurred after 18 months or so. The purchasers had no recourse except to yell and scream at clueless tech-support reps.
When the heat from consumer complaints became as hot as the faulty Nvidia chip, HP and Dell relented and published a list of defective model numbers on their Web sites. Dell extended the standard one-year warranty to two years for the systems they identified as having the problem. HP offered a 24-month warranty extension for the specific issue.
However, instead of issuing a recall — as you would expect in such a clear case of a defective part — the vendors instead merely offered a BIOS upgrade. The "patch" for the affected notebooks made their fans run continuously in an attempt to lower the GPU-induced heat, which was cooking the motherboards onto which the chips were soldered.
This "fix" merely extended the time before the motherboards finally burned out while simultaneously devouring the machines' battery life — sort of like putting a Band-Aid on a coronary. Of course, notebook purchasers became further inflamed by the power drain on their systems due to the constantly running fan.
(Unlike Dell and HP, Apple quickly acknowledged the presence of the defective Nvidia chip in some MacBook Pro notebooks and offered repairs or replacements to its customers.)
How to get vendors to respond to your gripes
There ought to be a PC lemon law, like the lemon laws enacted in many states that protect purchasers of defective automobiles. Those laws came about because legions of consumers complained after they got stuck with cars — new and used — that were clunkers. Until such protections are available, you can take the following steps to get redress for your grievances:
* Post a description of your gripe on consumer-complaint blogs. People who bought the defective HP and Dell notebooks would have been out of luck if it hadn't been for the rising power of Internet communities and blogs — ironically, some of which were on the vendor's very own sites. These grass-roots efforts demonstrate that consumers are not powerless when they own a lemon PC, even in the absence of a lemon law to back them up.
As the number of postings about the problem on gripe sites rose, HP and Dell could no longer hide from their customers. For example, the site HP Lies was created specifically for consumers to fight back against what the site calls "HP's cover-up of the Nvidia defect." A massive number of people who had bought now-dead HP notebooks that fried due to the overheated Nvidia chip not only spewed their venom at the company but also offered legal and logistical advice to others who shared their misfortune.
Surprisingly, many burned customers discovered the HP Lies site through links on HP's own Business Support Forum. Likewise, news of Dell's offer of a limited warranty enhancement with a list of affected units was reported at Dell's Direct2Dell user-community blog as a response to the thermonuclear anger expressed by unhappy customers at the site.
* Take it to court. Many customers went the legal route and filed lawsuits that were consolidated into a class-action complaint against Nvidia, Dell, and HP last September. While less effective in getting a full reimbursement or replacement, lawsuits serve as a wake-up call to corporations and produce corresponding action to mollify the plaintiffs.
* Skip low-level tech support and go directly to the top. If you have a PC problem that's been proven to result from a defect, ask to speak to a high-level tech-support representative, who will be more empowered to address your complaint — and likely more knowledgeable about the issue as well.
Be persistent, but keep your cool (which may be more than your PC is doing). Advice at the HP Lies site suggests going the corporate route and obtaining a case manager to get free repairs or a replacement, which standard tech support might not provide.
* Buy an extended-service warranty. HP and Dell customers who had extended warranties got no-charge repairs and/or replacements for their Nvidia-murdered systems. Because cheaper components are used in most of today's low-cost computers, chances are those components will fail sooner than in the past. Extended warranties generally offer no- or low-hassle tech support and repairs for up to three years beyond the standard warranty.
PCs may be unreliable and vendors unresponsive to customer complaints, so it pays to know your options.
Dell and HP balk at replacing bad Nvidia chip
Michael Lasky By Michael Lasky
An old urban myth claims that the microprocessors used in PCs and other consumer electronics are designed to fail within days or weeks of their warranty expiration.
For tens of thousands of people who bought Dell and HP notebooks whose motherboards fried — often a few weeks after their warranty expired — there's nothing mythical about it.
The cause of the machines' fried motherboards is an overheating Nvidia graphics chip. The failure rate is so huge that Nvidia had to take a $196 million charge against earnings in the second quarter of its 2008 fiscal year in anticipation of the reimbursements that would result from the faulty GPU (more info).
What's particularly scandalous, though, is how HP and Dell first handled the deluge of complaints from customers with notebooks that failed after their warranties expired. The companies either charged the customers (victims?) for repairs or refused service because the systems were past the warranty period.
Even worse, HP and Dell continued to sell notebooks with the same Nvidia chip long after the companies were aware of the problem. (Ultimately, Nvidia released a new version of the GPU that didn't cause overheating.)
Unwary consumers who purchased the affected notebooks — no doubt based in part on the heady reputations of the vendors — were left in the lurch when their PCs failed, which usually occurred after 18 months or so. The purchasers had no recourse except to yell and scream at clueless tech-support reps.
When the heat from consumer complaints became as hot as the faulty Nvidia chip, HP and Dell relented and published a list of defective model numbers on their Web sites. Dell extended the standard one-year warranty to two years for the systems they identified as having the problem. HP offered a 24-month warranty extension for the specific issue.
However, instead of issuing a recall — as you would expect in such a clear case of a defective part — the vendors instead merely offered a BIOS upgrade. The "patch" for the affected notebooks made their fans run continuously in an attempt to lower the GPU-induced heat, which was cooking the motherboards onto which the chips were soldered.
This "fix" merely extended the time before the motherboards finally burned out while simultaneously devouring the machines' battery life — sort of like putting a Band-Aid on a coronary. Of course, notebook purchasers became further inflamed by the power drain on their systems due to the constantly running fan.
(Unlike Dell and HP, Apple quickly acknowledged the presence of the defective Nvidia chip in some MacBook Pro notebooks and offered repairs or replacements to its customers.)
How to get vendors to respond to your gripes
There ought to be a PC lemon law, like the lemon laws enacted in many states that protect purchasers of defective automobiles. Those laws came about because legions of consumers complained after they got stuck with cars — new and used — that were clunkers. Until such protections are available, you can take the following steps to get redress for your grievances:
* Post a description of your gripe on consumer-complaint blogs. People who bought the defective HP and Dell notebooks would have been out of luck if it hadn't been for the rising power of Internet communities and blogs — ironically, some of which were on the vendor's very own sites. These grass-roots efforts demonstrate that consumers are not powerless when they own a lemon PC, even in the absence of a lemon law to back them up.
As the number of postings about the problem on gripe sites rose, HP and Dell could no longer hide from their customers. For example, the site HP Lies was created specifically for consumers to fight back against what the site calls "HP's cover-up of the Nvidia defect." A massive number of people who had bought now-dead HP notebooks that fried due to the overheated Nvidia chip not only spewed their venom at the company but also offered legal and logistical advice to others who shared their misfortune.
Surprisingly, many burned customers discovered the HP Lies site through links on HP's own Business Support Forum. Likewise, news of Dell's offer of a limited warranty enhancement with a list of affected units was reported at Dell's Direct2Dell user-community blog as a response to the thermonuclear anger expressed by unhappy customers at the site.
* Take it to court. Many customers went the legal route and filed lawsuits that were consolidated into a class-action complaint against Nvidia, Dell, and HP last September. While less effective in getting a full reimbursement or replacement, lawsuits serve as a wake-up call to corporations and produce corresponding action to mollify the plaintiffs.
* Skip low-level tech support and go directly to the top. If you have a PC problem that's been proven to result from a defect, ask to speak to a high-level tech-support representative, who will be more empowered to address your complaint — and likely more knowledgeable about the issue as well.
Be persistent, but keep your cool (which may be more than your PC is doing). Advice at the HP Lies site suggests going the corporate route and obtaining a case manager to get free repairs or a replacement, which standard tech support might not provide.
* Buy an extended-service warranty. HP and Dell customers who had extended warranties got no-charge repairs and/or replacements for their Nvidia-murdered systems. Because cheaper components are used in most of today's low-cost computers, chances are those components will fail sooner than in the past. Extended warranties generally offer no- or low-hassle tech support and repairs for up to three years beyond the standard warranty.
PCs may be unreliable and vendors unresponsive to customer complaints, so it pays to know your options.
Wednesday, April 8, 2009
Filing Extensions
http://www.webcpa.com/article.cfm?ARTICLEID=31256
Washington, D.C. (April 8, 2009)
By WebCPA staff
This year, the Internal Revenue Service is offering a new way to file an extension request for free.
This year, anyone, regardless of income, can e-file their extensions at no cost from a home computer using IRS’s traditional FreeFile or the new FreeFile Fillable Forms introduced this season. E-filing a request for an extension using either form of FreeFile is safe and secure, the IRS said, and taxpayers will receive a confirmation to keep with their records. However, as always, the extension requests need to be filed by April 15.
The IRS expects to receive 1.9 million extension requests electronically this year. A total of almost 10 million extension requests are expected during 2009 compared with 9.5 million extensions received during 2008.
The extension gives taxpayers until Oct. 15 to file their tax returns. An extension does not give the taxpayer an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, "Automatic Extension of Time to File."
Taxpayers can e-file the extension from a home computer or through a tax professional who uses e-file.
Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2008. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
Victims of severe flooding in Minnesota and North Dakota have an extra 30 days, until May 15, to file their 2008 individual tax returns and pay any taxes due (see IRS Grants Relief to Flood Victims). Similarly, victims of severe storms and tornadoes in three Oklahoma counties have until May 11 to file and pay.
NOTE: For taxpayers who are California residents, if they owe state tax, they need to file a Form 3519, Payment for Automatic Extension for Individuals and pay the tax due by April 15th.
Washington, D.C. (April 8, 2009)
By WebCPA staff
This year, the Internal Revenue Service is offering a new way to file an extension request for free.
This year, anyone, regardless of income, can e-file their extensions at no cost from a home computer using IRS’s traditional FreeFile or the new FreeFile Fillable Forms introduced this season. E-filing a request for an extension using either form of FreeFile is safe and secure, the IRS said, and taxpayers will receive a confirmation to keep with their records. However, as always, the extension requests need to be filed by April 15.
The IRS expects to receive 1.9 million extension requests electronically this year. A total of almost 10 million extension requests are expected during 2009 compared with 9.5 million extensions received during 2008.
The extension gives taxpayers until Oct. 15 to file their tax returns. An extension does not give the taxpayer an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, "Automatic Extension of Time to File."
Taxpayers can e-file the extension from a home computer or through a tax professional who uses e-file.
Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2008. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
Victims of severe flooding in Minnesota and North Dakota have an extra 30 days, until May 15, to file their 2008 individual tax returns and pay any taxes due (see IRS Grants Relief to Flood Victims). Similarly, victims of severe storms and tornadoes in three Oklahoma counties have until May 11 to file and pay.
NOTE: For taxpayers who are California residents, if they owe state tax, they need to file a Form 3519, Payment for Automatic Extension for Individuals and pay the tax due by April 15th.
Tuesday, April 7, 2009
Tax Guidance on Ponzi Schemes
FTB, IRS Guidance for Theft Loss Deductions from Ponzi Schemes
The IRS recently issued Revenue Ruling 2009-9 and Revenue Procedure 2009-20 providing guidance to taxpayers who are victims of losses from Ponzi-type investment schemes. The new guidelines could help victims recoup some losses by seeking reimbursement of up to five years of past tax payments.
At the state level, the FTB said it will follow the IRS lead, and in general, where California law is in substantial conformity with the Internal Revenue Code, federal regs, rulings and procedures are applicable for California purposes.
The IRS recently issued Revenue Ruling 2009-9 and Revenue Procedure 2009-20 providing guidance to taxpayers who are victims of losses from Ponzi-type investment schemes. The new guidelines could help victims recoup some losses by seeking reimbursement of up to five years of past tax payments.
At the state level, the FTB said it will follow the IRS lead, and in general, where California law is in substantial conformity with the Internal Revenue Code, federal regs, rulings and procedures are applicable for California purposes.
California Conformity
The California Franchise Tax Board has released this Summary of Federal Income Tax Changes 2008 that explains new federal laws (with effective dates), the corresponding California law, if any, and an explanation of any changes made in response to the new federal law. The summary also includes the California revenue impact of conformity to federal changes.
http://www.ftb.ca.gov/law/legis/08FedTax.pdf
http://www.ftb.ca.gov/law/legis/08FedTax.pdf
Friday, April 3, 2009
FASB Compromises on Fair Value
This is a very sad day for the accounting profession, allowing politics to influence accounting standards.
http://www.webcpa.com/article.cfm?ARTICLEID=31223
Norwalk, Conn. (April 2, 2009)
By Michael Cohn
Under pressure from Congress to act quickly, the Financial Accounting Standards Board voted to approve substantial changes to fair value accounting.
While two of the votes on the proposed FASB Staff Positions were unanimous on the five-member board, another vote on the controversial issue of other-than-temporary impairments was opposed by two of the members, Thomas Linsmeier and Marc Siegel, who had originally voted against issuing the proposed standards a few weeks ago.
The votes came after the board received over 600 comments within just two weeks (see FASB Issues Fair Value Proposals), including many urging the board to resist pressure from Congress and the banks. “The vast majority of the preparer letters opposed this,” said Leslie Seidman.
FASB Chairman Robert Herz (pictured) was pressed by angry members of a House Financial Services Subcommittee to come up with the modifications within three weeks or face another hearing, or congressionally mandated changes to accounting standards (see Congress Presses FASB to Revise Mark-to-Market).
During the FASB board meeting, he referred to his testimony before Congress alongside SEC acting chief accountant James Kroeker as the “lovefest for Bob Herz.” He added, “One of the unfortunate things in this FSP is that we have to take this responsibility on, rather than have the regulators do it.”
Despite the rushed schedule, the board members insisted later at a press conference that they had conducted a thorough due diligence process and read through many of the comment letters they had received. One critical comment letter in particular, from the CFA Institute, had weighed heavily on at least one of the board members. They also said that they met with investor groups, including hedge funds and pension funds, as well as financial institutions.
Among the changes voted on in the proposed standards will be requirements for companies to add more disclosures to clarify the new value of the impaired assets. The disclosures will also be more frequent, coming in the quarterly financial statements, rather than only in the annual statements.
Timing was also a critical issue, as the board was under pressure to allow banks to include the changes in the quarterly statements that will be due out soon. The FASB staff recommended that all three proposed standards apply to interim and annual periods ending after June 15, 2009, but allow for early adoption for periods ending after March 15, 2009. The board agreed, and plans to issue the final FSPs by April 10, as many banks are expected to issue their quarterly statements around April 17.
“There is the impression that we’re bowing to political pressure,” said one of the board members, Lawrence Smith, who described how staff members had been working late hours to draft the FSPs and pore over the comments. “We are independent standard-setters, but how can we ignore what’s going on around us? People are recognizing that the markets seem to be in turmoil.”
Here is a link to a New York Times article on the same subject:
http://www.nytimes.com/2009/04/03/business/03fasb.html?th&emc=th
UPDATE: The following article illustrates the impact of the rule change.
http://www.webcpa.com/article.cfm?ARTICLEID=31351
Goldman, Citi Accused of Accounting Tricks
New York (April 21, 2009)
By WebCPA staff
Goldman Sachs and Citigroup reported better than expected financial results last week, but critics are complaining that the two banks bended accounting rules to boost their earnings.
Financial institutions won a major victory earlier this month when the Financial Accounting Standards Board voted to loosen the rules for fair value and mark-to-market accounting in time for them to use the revised standards in their quarterly financial statements. But Goldman and Citi also took advantage of earlier rules that allowed them to prop up the bottom line and perhaps repay their government bailout funds a little earlier.
Goldman reported a first-quarter profit of $1.81 billion last Monday, even as it announced a new $5 billion stock offering. However, the bank was able to avoid including $2.7 billion worth of “fair value losses” on commercial real estate loans and other illiquid assets that it wrote down in December within the first-quarter results it reported. The firm was moving from a fiscal year ending in November to a fiscal year beginning in January as part of its decision in September to become a bank-holding company instead of an investment bank.
In the case of Citigroup, which reported its first-quarter results Friday, the revisions to the fair value measurement standard allowed the bank to report a $1.6 billion profit instead of a $900 million loss, as well as swing from a $6.8 billion loss to a $3.8 billion gain in trading profits. Citi was able to book just a portion of the loss on the value of some of its impaired assets, as opposed to the full loss, thanks to the new rules, giving it an extra $413 million in after-tax profits.
A credit value adjustment on its debt also enabled the bank to add $2.5 billion in unrealized gain to its net income. Although Citi’s debt declined in the bond market, the bank was able to book a one-time gain approximately equal to the decline, on the theory that it could buy back its own debt at a discount on the open market, even though it has not actually bought back its own debt.
http://www.webcpa.com/article.cfm?ARTICLEID=31223
Norwalk, Conn. (April 2, 2009)
By Michael Cohn
Under pressure from Congress to act quickly, the Financial Accounting Standards Board voted to approve substantial changes to fair value accounting.
While two of the votes on the proposed FASB Staff Positions were unanimous on the five-member board, another vote on the controversial issue of other-than-temporary impairments was opposed by two of the members, Thomas Linsmeier and Marc Siegel, who had originally voted against issuing the proposed standards a few weeks ago.
The votes came after the board received over 600 comments within just two weeks (see FASB Issues Fair Value Proposals), including many urging the board to resist pressure from Congress and the banks. “The vast majority of the preparer letters opposed this,” said Leslie Seidman.
FASB Chairman Robert Herz (pictured) was pressed by angry members of a House Financial Services Subcommittee to come up with the modifications within three weeks or face another hearing, or congressionally mandated changes to accounting standards (see Congress Presses FASB to Revise Mark-to-Market).
During the FASB board meeting, he referred to his testimony before Congress alongside SEC acting chief accountant James Kroeker as the “lovefest for Bob Herz.” He added, “One of the unfortunate things in this FSP is that we have to take this responsibility on, rather than have the regulators do it.”
Despite the rushed schedule, the board members insisted later at a press conference that they had conducted a thorough due diligence process and read through many of the comment letters they had received. One critical comment letter in particular, from the CFA Institute, had weighed heavily on at least one of the board members. They also said that they met with investor groups, including hedge funds and pension funds, as well as financial institutions.
Among the changes voted on in the proposed standards will be requirements for companies to add more disclosures to clarify the new value of the impaired assets. The disclosures will also be more frequent, coming in the quarterly financial statements, rather than only in the annual statements.
Timing was also a critical issue, as the board was under pressure to allow banks to include the changes in the quarterly statements that will be due out soon. The FASB staff recommended that all three proposed standards apply to interim and annual periods ending after June 15, 2009, but allow for early adoption for periods ending after March 15, 2009. The board agreed, and plans to issue the final FSPs by April 10, as many banks are expected to issue their quarterly statements around April 17.
“There is the impression that we’re bowing to political pressure,” said one of the board members, Lawrence Smith, who described how staff members had been working late hours to draft the FSPs and pore over the comments. “We are independent standard-setters, but how can we ignore what’s going on around us? People are recognizing that the markets seem to be in turmoil.”
Here is a link to a New York Times article on the same subject:
http://www.nytimes.com/2009/04/03/business/03fasb.html?th&emc=th
UPDATE: The following article illustrates the impact of the rule change.
http://www.webcpa.com/article.cfm?ARTICLEID=31351
Goldman, Citi Accused of Accounting Tricks
New York (April 21, 2009)
By WebCPA staff
Goldman Sachs and Citigroup reported better than expected financial results last week, but critics are complaining that the two banks bended accounting rules to boost their earnings.
Financial institutions won a major victory earlier this month when the Financial Accounting Standards Board voted to loosen the rules for fair value and mark-to-market accounting in time for them to use the revised standards in their quarterly financial statements. But Goldman and Citi also took advantage of earlier rules that allowed them to prop up the bottom line and perhaps repay their government bailout funds a little earlier.
Goldman reported a first-quarter profit of $1.81 billion last Monday, even as it announced a new $5 billion stock offering. However, the bank was able to avoid including $2.7 billion worth of “fair value losses” on commercial real estate loans and other illiquid assets that it wrote down in December within the first-quarter results it reported. The firm was moving from a fiscal year ending in November to a fiscal year beginning in January as part of its decision in September to become a bank-holding company instead of an investment bank.
In the case of Citigroup, which reported its first-quarter results Friday, the revisions to the fair value measurement standard allowed the bank to report a $1.6 billion profit instead of a $900 million loss, as well as swing from a $6.8 billion loss to a $3.8 billion gain in trading profits. Citi was able to book just a portion of the loss on the value of some of its impaired assets, as opposed to the full loss, thanks to the new rules, giving it an extra $413 million in after-tax profits.
A credit value adjustment on its debt also enabled the bank to add $2.5 billion in unrealized gain to its net income. Although Citi’s debt declined in the bond market, the bank was able to book a one-time gain approximately equal to the decline, on the theory that it could buy back its own debt at a discount on the open market, even though it has not actually bought back its own debt.
Wednesday, April 1, 2009
HHS Nominee Pays $7,040 in Back Taxes
http://www.webcpa.com/article.cfm?ARTICLEID=31208
Washington, D.C. (April 1, 2009)
By WebCPA staff
Secretary of Health and Human Services nominee Kathleen Sebelius became the latest prospective Cabinet member to run afoul of the Tax Code after she admitted to recently paying $7,040 in back taxes and $878 in interest.
Sebelius said the errors were unintentional and were discovered by an accountant who went through her tax returns after she was nominated for the job. The CPA reviewed her 2005, 2006 and 2007 tax returns and corrected the errors by filing amended returns.
The Kansas governor is the second HHS Secretary nominee who has been forced to admit to tax problems. Former Senate Majority Leader Tom Daschle withdrew from consideration after he admitted to owing $140,000 in back taxes and interest (see Daschle Bows Out After Tax Problems).
Sebelius’s errors included three charitable deductions for which she lacked documentation, and a deduction for mortgage interest on a home that she and her husband had already sold. "We continued paying off the loan, including interest we mistakenly believe continued to be deductible mortgage interest," she explained in a letter to the Senate. Sebelius also lacked sufficient documentation for some business expenses.
Senate Finance Committee Chairman Max Baucus, D-Mont., who will preside over Sebelius’s confirmation hearing on Thursday, expressed his support for the nominee. “Congress is going to need a strong partner at the Department of Health and Human Services to achieve comprehensive health reform this year, and we have that partner in Governor Sebelius,” he said in a statement.
Washington, D.C. (April 1, 2009)
By WebCPA staff
Secretary of Health and Human Services nominee Kathleen Sebelius became the latest prospective Cabinet member to run afoul of the Tax Code after she admitted to recently paying $7,040 in back taxes and $878 in interest.
Sebelius said the errors were unintentional and were discovered by an accountant who went through her tax returns after she was nominated for the job. The CPA reviewed her 2005, 2006 and 2007 tax returns and corrected the errors by filing amended returns.
The Kansas governor is the second HHS Secretary nominee who has been forced to admit to tax problems. Former Senate Majority Leader Tom Daschle withdrew from consideration after he admitted to owing $140,000 in back taxes and interest (see Daschle Bows Out After Tax Problems).
Sebelius’s errors included three charitable deductions for which she lacked documentation, and a deduction for mortgage interest on a home that she and her husband had already sold. "We continued paying off the loan, including interest we mistakenly believe continued to be deductible mortgage interest," she explained in a letter to the Senate. Sebelius also lacked sufficient documentation for some business expenses.
Senate Finance Committee Chairman Max Baucus, D-Mont., who will preside over Sebelius’s confirmation hearing on Thursday, expressed his support for the nominee. “Congress is going to need a strong partner at the Department of Health and Human Services to achieve comprehensive health reform this year, and we have that partner in Governor Sebelius,” he said in a statement.
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