June 23, 2018

Accounting News Roundup: Prolonged Disputes and Allergan’s Adjusted Earnings Per Share | 02.13.17

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Prolonged disputes

Late on Friday, the news broke that two former AIG executives, including the company’s founder Hank Greenberg, settled a 12-year accounting fraud case with the New York Attorney General. The New York Times report gives the distinct impression that both sides were equally satisfied with result but also reveling in their spite for each other:

In a statement on Friday, [NYAG Eric] Schneiderman said, “Today’s agreement settles the indisputable fact that Mr. Greenberg has denied for 12 years: that Mr. Greenberg orchestrated two transactions that fundamentally misrepresented A.I.G.’s finances.”

In his statement, Mr. Greenberg said he “initiated, participated in and approved these two transactions”; as a result, A.I.G.’s public filings “inaccurately portrayed the accounting, and thus the financial condition and performance for A.I.G.’s loss reserves and underwriting income.”

In an interview, David Boies, Mr. Greenberg’s lawyer, called the agreement a “nuisance settlement,” noting that Mr. Greenberg had avoided two penalties sought by the state that would have barred him from working in the securities industry or as an officer of a public company.

It’s a shame that such wonderful bickering was all over insurance accounting.

Adventures in non-GAAP accounting

Here’s a Wall Street Journal story about comments the SEC sent to pharmaceutical company Allergan PLC about its non-GAAP reporting. On the one hand, it’s certainly newsworthy that the SEC suggested that it will “consider whether additional comprehensive non-GAAP staff guidance is appropriate.” However, my favorite part of the letter where they make note that the “adjusted” in “adjusted earnings per share” is a bit generous:

[T]he title should be consistent with the fact that you typically exclude more than half of all operating expenses.

I have to agree that excluding half of all operating expenses would require a new title, but what do you call an EPS that excludes half of all operating expenses? “Uber adjusted earnings per share”? “Not-really earnings per share”? “Are-we-there-yet earnings per share”?  “Somewhere-between-here-and-there earnings per share”? I don’t love any of of those, so send your best ideas to Allergan’s accounting department.

Grant Thornton cuts a ribbon

Grant Thornton officially opened a new Rosslyn, Virginia office last week:

The office, located on the 14th floor of 1000 Wilson Blvd, can hold about 1,500 staffers. Grant Thornton is moving around 1,000 of its employees to the office and will be hiring 348 additional staffers as part of the opening.

Does 1,000 (soon to be 1,300+) people on one floor seem like a lot? Will they need bunk-cubicles in some areas?  I’m no fire code expert; just genuinely concerned about the welfare of our GT friends.

Previously, on Going Concern…

Rachel Andujar wrote about busy season burnout. I asked if any CPAs want to work in Hawaii. In Open Items, someone’s wondering about the tax practices of the Big 4 in Atlanta.

In other news:

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Non-Profits Are Feeling the Pain

WSJ has a Monday piece “Once-Robust Charity Sector Hit With Mergers, Closings” (the Recession Forces Nonprofits to Consolidate) that may be found here. It tells the story of a “homeless” woman with terminal lung cancer and a charity no longer able to afford to help her out. Sad.

When one charity’s COO says “we’ve had funding cut after funding cut, and we never know when the next shoe is going to drop,” that is a bad sign.

Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings.

“Like in the animal kingdom, at some point, the weaker organizations will not be able to survive,” says Diana Aviv, chief executive of Independent Sector, a coalition of 600 nonprofits.

I saw that on the Discovery Channel and it wasn’t pretty.

Note: the Service says the value of your blood is not deductible as a charitable donation but cars are. As of 2005, cars are only deductible at FMV, not Blue Book. Damn you, fair value, foiled by the free market again!

Blame the Service for tightening its charitable donation rules at the worst possible time? Not sure on that one. While you’re reluctant to donate your $200 Toyota (ha) to charity because you could have claimed $2,000 under old rules, find some comfort in the fact that (alleged) terrorist “non profits” can not file for 2 years and somehow get away with it. You wonder why I advocate fixing the system from the ground up?

You can text $10 to Haiti but what about the “Economic Homeless” here in America? asks Young Money.

If this were a survey and you asked me “What do you think the IRS could do to encourage charitable donations?” I would answer “Tax breaks. It isn’t the Treasury’s job to distribute bailouts.” Yet they continue to behave as though it is their duty.

See the problem yet?

Hallelujah! Church Accounting Miracles!

I had no idea how much a minister can make but now I do. Wait a minute, this just tells me how to bypass Service rules by writing checks in the church’s name. I might totally be in the wrong line of work.

Free Church Accounting (I’m not kidding) brings us a question from “Sharon” of Corsicana, Texas:

How much money does a minister have to make in order for money to be reported?

I started my church back up after 12 years vacancy. I do not have very many members. Right now we are 3 active members and other people stop in from time to time. I do not actually receive money. Since the church is striving I use the money to pay the light bill, get the grass moved.


Answer:

According to the IRS website, “Earnings of $400 or more are subject to self-employment taxes.” (that includes qualifying ministers)

If you are a church employee, income of $108.28 or more is subject to SE tax.

It would be better for you, if you opened a checking account in the church’s name and paid expenses out of it. If that’s not possible, just make sure and keep all of the receipts that show where the church funds are going.

Fascinating! I took the preliminary “Are You a Tax-Exempt Church” quiz on their website and failed miserably so I guess I’d make an awful 501(c)(3) but that’s probably for the best.

There are ways to fail at this of course, like the Spokane, WA priest who couldn’t keep his arms and legs (and other parts) inside of the vehicle at all times, financial mismanagement in the University of North Carolina system, and JDA favorite the University of Colorado’s wild credit card user with horrible hair.

I would never imply that more regulation is the answer; I’m merely pointing out that there’s a bit of work to be done in identifying non-profit fraud. Seriously, how can one detect fraud when the core basis of fund accounting is an imbalance between “expenses” and expenditures?

The Church of Jr Deputy Accountant Scientist? I’m down.