Accounting News Roundup: Complicated Simplification; McLaren Dumps KPMG for Deloitte | 05.15.17

By | 4 months ago

Accounting is complicated

Here’s a New York Times column by William Cohan on FASB’s Accounting Standards Update 2016-01, aka “Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” This rule, besides having an awful name, will change how fluctuations in equity investments valuations will be reported. My favorite sentence is this one:

Like much of what the accounting standards board tries to do, the new rule is intended to provide investors and creditors with better information and more clarity around a company’s financial statements, with the lofty goal of helping them make more informed decisions when providing capital to a company or business.

The subtext here, I think, is that FASB rarely achieves its goal of providing investors with better information or more clarity around financial statements. The new rule would require companies with small equity investments to write them up every quarter or whenever something major happens. In some cases, those write-ups could “[cause] fluctuations to earnings per share from something that is not even a core business.” And there’s a fun non-GAAP twist, too:

It would force corporate executives to remind listeners on every quarterly conference call that the fluctuations in the value of these investments have nothing to do with their core business and should be ignored, and that something like “adjusted net income” without these fluctuations is the way to look at their earnings.

No one uncomplicates things by complicating them further quite like accountants.

Break-ups

Awhile back, McLaren Applied Technologies inked a deal with KPMG to “develop analytics and technology-based projects.” It was supposed to be a 10-year partnership, but Sky News reports that it’s over, and McLaren is partnering with Deloitte instead. KPMG is playing it cool, though:

A KPMG spokeswoman told Sky News: “Our alliance with McLaren has been very successful and achieved its objectives.

“Together we have developed predictive analytics tools unmatched anywhere else in the market, which allow KPMG to offer enhanced audit and advisory services to our clients.

“KPMG will now continue the development of these in-house and will be unveiling an additional audit tool later in the year.

“Now that development of these tools has completed, we have taken the mutual decision with McLaren to end our formal alliance.

“We intend to continue to work with McLaren on a range of client engagements across 2017 and beyond.”

It’s mildly amusing how much that statement sounds like someone who just got dumped: “I got what I wanted out of that relationship. I’m just going to be by myself for awhile. Plus, I want to play the field, you know? I’ve got some too much going on anyway. It was mutual. We’ll still be friends.”

Yeah, sure. Whatever you say.

Accountants behaving badly

In many states, a person who steals something of value of $1,000 or more can be charged with a felony and thus, be sentenced to at least a year in prison if found guilty. That’s something to keep in mind if you’re an accountant, money’s tight, and an old roommate isn’t around to help you make good on back rent:

Ashlee Ryanne Thompson, 24, of Monteview was charged Thursday in Twin Falls County Magistrate Court with a felony count of grand theft.

Prosecutors say Thompson stole $1,090 from Rob Green Auto Group in January that she used to pay back rent to her landlord.

Thompson told police she had prepared a deposit for $1,090 and locked it away in the safe, but then her landlord called asking that she pay November and December rent, court documents said. When Thompson couldn’t contact her ex-roommate to help her pay, she decided to take the cash from the safe.

It’s terrifying that a person a couple months behind on her rent can wind up being charged with a felony because of one stupid decision, but there you have it.  One of these days, I’m going to develop a decision flowchart for accountants who are considering embezzlement.

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