Are You “Reasonable”?

More than halfway through its year-long project to cut complexity in financial reporting, a Securities and Exchange Commission advisory committee plans to rethink some of the recommendations it has sent to the regulator. At its Friday meeting, the SEC’s Advisory Committee on Improvements to Finan...

By Sarah Johnson and Marie Leone • May 1, 2008

E&Y Mortgage Audits Faulted by PCAOB

When the Public Company Accounting Oversight Board’s auditors scrutinized Ernst & Young’s work in their latest annual inspection — zeroing in on its national office and 26 field offices — the mortgage-lending market had already begun to unravel. So when one of the four E&Y clients for wh...

By Sarah Johnson • May 1, 2008

Explore the Trendline➔

Tax policy shifts: What CFOs need to know to stay ahead

Discover how evolving tax policies are creating new opportunities and challenges for CFOs.

By CFO.com staff

Cigna Pins 80 Percent Dip on Fair Value

Cigna has partly attributed an 80 percent loss in its net income to a new accounting rule. For the first time, the health insurer valued the assets and liabilities of one of its businesses using FAS 157, the guidelines companies use to measure the fair value of financial instruments. On Thursday,...

By Sarah Johnson • May 1, 2008

Interpublic Settles SEC Fraud Charges

Interpublic Group agreed to pay $12 million to settle Securities and Exchange Commission charges of accounting fraud. A separate consent decree was signed by two former executives of IPG’s McCann-Erickson Worldwide unit, including a one-time CFO.In the first case, the SEC alleged that McCann-Eric...

By Alan Rappeport • May 1, 2008

Did CFO’s Tax Scheme Drive HR Firm Under?

A former finance chief was charged with tax conspiracy stemming from a scheme that may have driven North Carolina human resources firm Castleton Group out of business.James O. McLamb Jr., ex-CFO and ex-COO of Raleigh-based Castleton Group, faces up to five years in prison, three years supervised ...

By Stephen Taub • May 1, 2008

To Err Is Human, and Common

The Sarbox era has seen a surge in both financial restatements and the finger-pointing associated with them. The two most commonly blamed villains are confusing regulations and overly conservative auditors, but new research challenges that conventional wisdom.Marlene Plumlee, of the University of...

By Kate Plourd • May 1, 2008

Auditor Angst

Want to drive your auditors crazy? Try this: First, meet with them ahead of the annual audit and agree on a date when your work papers will be ready. Then, when they arrive for the audit, tell them you’re “almost ready” and hand over just enough material to keep them busy until lunch. Repeat as n...

By Alix Stuart • May 1, 2008

Can This Relationship Be Saved?

The healing has begun. It’s been six years since the passage of the Sarbanes-Oxley Act, and four years since companies faced their first Sarbox audits. After a painful start, compliance with the act has become more or less routine for many businesses and their external auditors.But what about the...

By Kate O'Sullivan • May 1, 2008

Let the Games Continue

Last year, when we first took a look at the corporate propensity to prop up fourth-quarter results at the potential expense of the following quarter’s performance (see“Fourth and Goal,” November 2007), recession loomed on the horizon. Today everyone from Warren Buffett to a bevy of economists to,...

By Karen M. Kroll • May 1, 2008

Tax Goof Scrambles Chip Maker

A niche semiconductor maker said it will restate its results for the past two years to correct an error in its tax provision. At issue is erroneous recording of the tax effect of stock-based compensation expense related to a cost-share agreement with a foreign subsidiary, said the company, Monol...

By Stephen Taub • April 30, 2008

Will Americans Foul Up Global Standards?

The idea of forcing American companies to file results using international financial reporting standards makes preparers and auditors in other countries edgy. “The world is very nervous about a U.S. move to IFRS because they are afraid [the standards] will turn into 25,000 pages of rules,” assert...

By Marie Leone • April 30, 2008

IFRS Fueled Much of Chrysler’s Huge Loss

International accounting standards helped cause Daimler AG’s Chrysler unit to report its huge loss last year.According to the Detroit Free Press, Daimler’s latest financial report indicated that Chrysler LLC, now majority-owned by private equity firm Cerberus Capital Management, lost about $6.8 b...

By Stephen Taub • April 30, 2008

Two Fatal Flaws in Fair Value

The subprime crisis has exposed two major deficiencies in how fair-value accounting has been implemented, senior insurance executives say: the “myth” that all securities have a market and a tendency to overlook downside risk.The current credit crunch has revealed that many financial services comp...

By David Katz • April 30, 2008

When I Think Back on All the GAAP I Learned in Grad School

Aside from listening to Buckcherry and driving Scion tCs around campus, accounting majors also are asking some pointed questions about international financial reporting standards. On the whole, a class of fifth-year graduate students polled by Securities and Exchange Commission deputy chief accou...

By Marie Leone • April 30, 2008

Did Subprime Woes Cause a Change of Heart at the IRS?

On August 7, 2006, the Treasury Department and the Internal Revenue Service published proposed rules ( Prop. Reg. Section 1.1221-1(e)) under Section 1221(a)(4) of the Internal Revenue Code. These potential regulations “sought to clarify the circumstances in which accounts or notes receivable are ...

By Robert Willens • April 29, 2008

Illiquid Markets Rock Fair-Value Accounting

The philosophy of fair-value accounting has been put through the ringer in the first few months of 2008, as turmoil in the financial markets compelled banking executives and trade groups to question its reliability.They claim the use of fair value for assessing financial instruments has led to vo...

By Sarah Johnson • April 29, 2008

Corporate Tax Audits Rise 4%

The Internal Revenue Service reviewed more corporate tax returns filed during the government’s 2007 fiscal year than it had the previous year, which contributed to a 22 percent boost in revenue from enforcement activities. One of every 75 companies had its tax filing audited, according to the Tre...

By Sarah Johnson • April 28, 2008

What’s Wrong with Subprime Accounting?

“Kill the Q,” was the Financial Accounting Standards Board’s response to a self-examination about how to prevent a future subprime mortgage crisis. During a two-day meeting held in London last week, FASB and the International Accounting Standards Board met to discuss, among other things, whether ...

By Marie Leone • April 28, 2008

Tribune’s Newsday Sell-off to Grab Tax Breaks

It has been reported that Tribune Company has reached an agreement in principle to “sell” its Long Island newspaper, Newsday to News Corp. The “selling price” would be in neighborhood of $580 million and the structure of the deal would not be an outright sale but, instead, a joint venture arrange...

By Robert Willens • April 28, 2008

How Old Are Ye, PCAOB?

Five years ago, the Securities and Exchange Commission decided the Public Company Accounting Oversight Board was organized enough to fulfill its mission under the Sarbanes-Oxley Act, officially making the PCAOB the audit firms’ new watchdog. PCAOB chairman Mark Olson has said April 25, 2008, mark...

By Sarah Johnson • April 25, 2008

Seven Tips for P&L Tax Forms

About one in seven federal tax returns includes a Schedule C, the form that shows the profit or loss of a single-owner business. Having seen more than enough mistakes, the Internal Revenue Service is planning to educate filers, particularly small-business owners who have never filled out the form...

By Sarah Johnson • April 25, 2008

SEC’s Atkins Calls for Fair-Value Guidance

The Securities and Exchange Commission needs to issue guidance on how corporations should estimate the fair value of assets and liabilities with no active markets, SEC commissioner Paul Atkins told Reuters on Thursday.“If you have no value for something because there are no market values to be re...

By David Katz • April 25, 2008

Can Textron Keep Its Secrets?

The U.S. Court of Appeals is expected to rule this summer on a case that could determine whether companies have a right to keep secret their tax accrual work papers. The appeal, being brought by the Internal Revenue Service, involves conglomerate Textron Inc., and the company’s effort to keep pro...

By Marie Leone • April 23, 2008

For the PCAOB, It’s “Independence Day”

The Public Company Accounting Oversight Board voted unanimously for two proposals aimed at better defining auditor independence and reducing the possibility of conflicts of interest.Introduced last July, the first proposal would replace an interim independence standard that helps define what inde...

By Alan Rappeport • April 22, 2008

Mercury Interactive Ex-CFO Is Indicted

The former CFO of Mercury Interactive Corp. was indicted on charges stemming from the company’s stock-option backdating scheme. Sharlene P. Abrams was charged with one count of income tax evasion and two counts of aiding and assisting in the preparation of false tax returns for two other Mercury ...

By Stephen Taub • April 22, 2008