Accounting News Roundup: Ernst & Young and Groupon; Convergence's Futility; Obama's Buffett Rule Road Show; | 04.09.12

Groupon: Where Were The Auditors? [Forbes]
Francine McKenna: "Management made the assessment of the material weakness in internal controls over financial reporting that caused disclosure controls to be ineffective, not auditor Ernst & Young. Ernst & Young deserves no credit for the announcement, nor any blame, just yet, for the fact that the weaknesses had to be finally admitted. There is no transparency regarding the auditor’s agreement or disagreement previously with Groupon, any public documentation of their discussions or any reason to believe Ernst & Young either encouraged or discouraged Groupon to get their act together sooner."

The “Beauty” of Internet Company Accounting [GOA]
The internet company balance sheet is generally dominated by intangible assets whose values are based on assumptions that are works of art themselves.  And then there’s revenue recognition in these companies with management making all kinds of assumptions about primary obligors, selling price hierarchies, and virtual sales.  Yes, what makes internet company accounting “special” is that so many of the applicable accounting rules require major assumptions, many of which could be better characterized as “giant leaps of faith.” 
 
Groupon grapples for control [CT]
"Our main focus is trying to figure out how this model evolves and not consistently falling on our face in the public," Eric Lefkofsky told the Northbrook Chamber of Commerce shortly after the first of the investor lawsuits had been filed, according to Northbrook Patch. "It's like giving a 7-year-old a Ferrari; you're going to get a certain amount of chaos." Assuming a 7-year-old doesn't have enough respect for a Ferrari (or any motor vehicle) to enlist adult assistance before reducing it to a high-performance battering ram, one would like to think it would require only an accident or two for the kid to grasp the value of grown-up supervision. Mason, 31, Lefkofsky, 42, and their 3-year-old company, on the other hand, keep plowing into trouble without appearing to pull over to assess the damage, let alone repair it.
 
Unification of Global Accounting Standards? It's Time to Call Time [Re:Balance]
Jim Peterson: "Even if, by whatever name, “convergence” were desirable [...], it is not achievable. The entire effort is massively distracting and a colossal waste of time, energy and resources."
 
Jobs Act doesn't mean Wild West for companies [Reuters]
The Act, signed into law by President Barack Obama on Thursday, may allow smaller companies new to the markets to reduce their financial regulation, and it removes the requirement for an expensive internal audit. It does not protect CEOs and CFOs from being sued by regulators and investors for fraud. So-called emerging growth companies - those with less than $1 billion in revenue - will be exempt from an outside audit of internal controls for up to five years. Yet senior management must continue to hold its accounting systems to the same standards introduced in 2002 under Sarbanes Oxley. 
 
Obama takes 'Buffett Rule' on the road [OTM/The Hill]
President Obama is set to hit the road on Tuesday to talk up his “Buffett Rule,” as Democrats push an election year message of tax fairness and economic equality. Obama is scheduled to travel to Florida, a swing state that pulled the lever for him in 2008, to press the case for ensuring that those making more than $1 million a year pay a higher tax rate than middle class families.
 
UBS Faces Billionaire Olenicoff in Lawsuit Over His Tax Felony [Bloomberg]
UBS AG (UBSN) and billionaire Igor Olenicoff are scheduled to clash in court today over his claim that the bank bears blame for his failure to declare $200 million in offshore accounts on U.S. tax returns. Olenicoff, 69, a real-estate developer, pleaded guilty in 2007 to filing a false tax return, admitting he didn’t tell the Internal Revenue Service about his offshore accounts for seven years. He was sentenced to two years’ probation and ordered to pay $52 million in back taxes, fines and penalties. In 2008, he sued Zurich-based UBS, the largest Swiss bank, claiming it traded excessively in his accounts, engaged in racketeering and committed fraud by not telling him he owed U.S. taxes. He seeks as much as $1.7 billion in damages. Arguments on the bank’s motion to dismiss the case are set for today before U.S. District Judge Andrew Guilford in Santa Ana, California.
 
My Colleague, My Paymaster [WSJ]
Coffee & Power, a San Francisco odd-jobs start-up, granted each of its 15 full- and part-time employees 1,200 stock options this past January, to distribute among co-workers in whatever way they chose. A worker can plunk all his options onto one colleague or split them among the group, so individual bonuses are tied to how co-workers perceive each other's work. "It lets me reward people that management may not always recognize," says Becky Neil, who works in marketing and product management. "This person who has a big title—maybe he didn't actually contribute that much."

 

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