General Accounting, General Business
Last week we covered the Financial Accounting Foundation decision to establish a “Private Company Standards Improvement Council” (PSCIC).
Now the AICPA has weighed in, and this from Barry Melancom, AICPA President and CEO:
“On Oct. 4, FAF released its proposal creating a new Private Company Standards Improvement Council. While the PCSIC would report into the FAF (through a subgroup of the Board of Trustees) and not the Financial Accounting Standards Board, its decisions would be subject to ratification by the FASB. That is unacceptable to us.”
You can find the full AICPA response at http://blog.aicpa.org/2011/10/aicpa-tells-faf-independent-board-is-needed-for-private-company-reporting.html
The PSCIC may be a small step in the right direction.
But private companies – and the users of their financial statements – would be best served by an independent board – separate from FASB.
We encourage everyone to contact the FAF to comment on this important issue.
The AICPA has provided an easy-to-use sample letter assistant which you can find at https://apps.aicpa.org/pcfr/
General Accounting, General Business
We’ve asked this question before:
Should there be one set of financial reporting standards for large publicly traded companies (“Big GAAP”) and a separate set for smaller privately held companies (“Little GAAP”)?
Our answer, which is widely shared, is a definitive Yes!
The Financial Accounting Standards Board (FASB) has long held the belief that “one size fits all” for financial statement reporting and accounting standards.
But the needs of financial statement users are often different for public companies than for private companies. And the complexities of financial reporting standards have grown dramatically in the post Enron era.
Recently the AICPA endorsed the recommendations of a Blue Ribbon Panel to create a new private companies board (separate from FASB) and modify financial reporting and accounting standards where warranted for private companies.
The Financial Accounting Foundation (FAF) – which oversees FASB – has reviewed this important issue and made its decision.
FAF plans to establish a “Private Company Standards Improvement Council” (PSCIC) to improve the standard-setting process for private companies.
The PSCIC, under the oversight of the FAF, will identify and vote on standards that require modifications to or exceptions from GAAP, that will then be subject to public comment and ratification by the FASB.
A step in the right direction.
You can find out more about the new PSCIC, including a News Release and Executive Summary, at http://www.accountingfoundation.org/cs/ContentServer?site=Foundation&c=Page&pagename=Foundation%2FPage%2FFAFSectionPage&cid=1176158985794
General Business, Tax Planning
The tax filing deadline for 2010 Form 1040s is a week from today. And we still have some clients that haven’t filed their returns yet.
Why? They’re waiting for K-1’s.
Google “Waiting for K-1” and you get “About 4,170,000 results in (0.27 seconds).”
I don’t think 4 million people are still waiting for a K-1. But quite a few are.
In the 70s and 80s real estate limited partnerships were the rage. These days its hedge funds and master limited partnerships.
And that means late K-1’s and some unique tax return reporting.
I wonder how many investors are well versed in “Mark to Market Elections”, “Section 1256 Contracts and Straddles”, “Original Issue Discount, “DPGR Gross Receipts ” or “Oil, Gas & Geothermal Gross Income (AMT)”?
And then there are state filing requirements: “The Partnership operates in various states, some of which impose an income tax on a Partner’s share of income allocable to such state.”
“I have to file a return in how many states?!?”
Of course, just about all K-1’s say ‘Please consult your tax advisor.”
But if you’re doing your own returns, you may want to check out the IRS instructions on K-1 reporting at http://www.irs.gov/pub/irs-pdf/i1065sk1.pdf . From there, you’ll find references to a hundred other forms, publications and code sections.
To learn more about tax reporting for master limited partnerships, check out http://blogs.duganlopatka.com/general/2010/08/23/tax-reporting-for-master-limited-partnerships/ .
A week to go!
Tax Planning
Yesterday Illinois Congressman Peter Roskam introduced legislation to permanently cap the capital gains and dividends tax rate at 15%. Under current law, the rates are set to expire at the end of 2012.
The favorable rates apply to everyone – not just high income taxpayers. And that means tax planning applies to everyone – not just high income taxpayers.
For someone in the 10% or 15% regular tax bracket, the tax rate on long term capital gains and qualifying dividends is 0%. No tax at all.
Millions of Americans own stock directly or indirectly through mutual funds. So the favorable rates apply equally to middle income taxpayers, small investors and retirees.
In fact, the average tax rate for many in this group can range between 5% to 15%, depending upon the mix of wages, investment income and retirement income.
Remember – tax planning applies to everyone – not just high income taxpayers.
You can find the current tax rate tables – including the rates on capital gains and qualifying dividends – on our website at http://www.duganlopatka.com/images/PDF/2011_tax_guide.pdf
General Business
While President Obama continues to lobby for the American Jobs Act, passage anytime soon seems unlikely. So far the votes aren’t there- either in the Republican controlled House or the Democrat controlled Senate.
The non-partisan Tax Foundation, a D.C. based tax research organization, has released a report which concludes that the jobs proposals would have little impact on job creation.
Here are some observations from the Report:
Temporary jobs credits do little to change behavior in private sector hiring. As the report notes, “Businesses must weigh the short-term benefits of any tax incentives against the long-term costs of hiring a new employee.”
Temporary tax cuts do little to stimulate consumer spending. “People are not likely to purchase a big-ticket item or make a long-term commitment because of a one-time cash windfall.”
And here’s the bottom line:
“Lawmakers should stop trying to jump-start the economy in the short run and begin crafting policies that set the country on a long-term growth path.”
You can find the full Report at http://taxfoundation.org/publications/show/27632.html
