How to Spin Off a Controlling Stake in Another Company Tax Free

When a corporation that owns less than 80 percent of the stock of another corporation seeks, nonetheless, to accomplish a tax-free spin- off of that stake, certain preliminary, “tailoring” steps must be accomplished. Most notably, the owning company must gain control of the subsidiary and, in add...

By Robert Willens • June 26, 2001

Big Tax Cut for Business Said Unlikely

Congress is unlikely to approve a significant tax cut for U.S. businesses this year, the chairman of the Senate Finance Committee said on Tuesday.Because of a shortage of funds following the recently passed $1.35 billion tax cut, “any business tax provision this year is going to be modest,” Sen. ...

By CFO Editorial Staff • June 26, 2001

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

SEC’s Unger Calls Andersen Fraud Case ‘Smoking Gun’

Dow Jones Newswires reports that acting Securities and Exchange Commission Chairwoman Laura Unger said conflicts of interest may be greater than regulators suspected.“The problems may be larger than we originally thought,” Unger said Monday in a speech to the Center For Professional Education Inc...

By CFO Editorial Staff • June 25, 2001

GAO Report Raises Concerns Over SEC Reviews

Amid a flurry of examinations for accounting improprieties, the Securities and Exchange Commission is coming under some scrutiny itself. A report released last week by the General Accounting Office criticizes the agency’s method for handling reviews of accounting issues for being vague and incons...

By Lisa Yoon • June 21, 2001

Dividends are Immune from Rescission Doctrine

In Rev. Rul. 80-58, the I.R.S. acknowledged that a sale of property that was, due to the failure of the buyer to secure the desired re- zoning of such property, rescinded, within the same year in which the original sale took place, would, in effect, be ignored for tax purposes. More specifically,...

By Robert Willens • June 21, 2001

Revenue Recognition: The Subsidiary Made Me Do It

Conagra, IBP, SunBeam, PurchasePro, Xerox. The list of companies getting burned for improperly booking revenue is long, and has been getting longer ever since the SEC made revenue recognition a hot button enforcement issue in 1999.And if you look closely, there is often a common denominator– subs...

By Jennifer Caplan • June 19, 2001

BREAKING NEWS: Andersen Settles With SEC

The Securities and Exchange Commission on Tuesday settled charges against Arthur Andersen LLP and four of its current or former partners, resulting in the largest-ever civil penalty–$7 million–in an SEC enforcement action against a Big Five accounting firm. The settlement stems from Andersen’s au...

By Stephen Taub • June 19, 2001

Cendant’s “Reverse Triangular” Merger With Galileo

Cendant Corp.’s acquisition of Galileo International will be structured as a “reverse triangular” merger. A wholly-owned, newly-created, subsidiary of CD will merge into GLC (Galileo) and the latter will be the surviving entity and become a wholly-subsidiary of CD.This is the principal advantage ...

By Robert Willens • June 19, 2001

Senate Bill Could Give U.S. Governments More Power to Tax Internet, Phone Sales

According to the Wall Street Journal, Congress would consider granting state and local governments more power to tax E-commerce if at least 25 states simplify their sales-tax codes, under a bill being negotiated by Senate Democrats and Republicans.The proposal, an attempt to break the deadlock ov...

By CFO Editorial Staff • June 18, 2001

Nexus Perplexus

Paging Wile E. Coyote.For decades, executives at The Risk Management Association (badus stuffus limitus) have been doing what they’ve always done: devising and selling training materials for credit- and risk-management lending professionals. The goal of the RMA (www.rmahq.org), which has been aro...

By Esther Shein • June 15, 2001

Auditing the Audit Committee

No fireworks went off to herald the effective date of the Securities and Exchange Commission’s new rules for corporate audit committees. Nevertheless, June 14 marks a new era in financial disclosure—one that involves rigorous reporting and has the potential to bring more lawsuits. As of this date...

By Lisa Yoon • June 15, 2001

IRS Reverses Longstanding Rule Regarding Spin-offs

In order for a spin-off to qualify for tax-free treatment, both the distributing corporation and the controlled (the spun-off) corporation must be seen as engaged in the “active conduct” of a trade or business. This business, in addition, must have been actively conducted throughout the five-year...

By Robert Willens • June 12, 2001

Report Details Bad Bookkeeping at Rent-Way

The Wall Street Journal reports today that according to people close to the company, an internal investigation by two law firms has determined that Rent-Way Inc.’s financials were off by far more than previously announced.The law firms, retained separately by the rent-to-own company and its audit...

By CFO Editorial Staff • June 8, 2001

Restatements Rise on SEC Initiative

The Wall Street Journal reports that, according to a study to be released this week, the number of corporate earnings restatements skyrocketed during the past three years, driven in large part by stepped-up enforcement efforts at the Securities and Exchange Commission.The study by the research ar...

By CFO Editorial Staff • June 7, 2001

FASB 140 Extension to Rescue Bank Balance Sheets

Banks hoping to keep securitized credit card balances off their balance sheets expect to get a major break from FASB, when the standards-setting body issues a ruling giving them as much as four more years to comply with a recent FASB statement.FAS 140, which took effect March 31, deals with asset...

By Ed Zwirn • June 6, 2001

Tax Court Rejects Third Circuit’s Holding in PNC Bancorp

The hopelessly muddled issue of whether expenses may be currently deducted, or must be capitalized (and amortized over the life of the asset to which they relate), once again arose (in the context of a financial institution) in the recently-decided Lychuk v. Commissioner case. The Tax Court–in ma...

By Robert Willens • June 5, 2001

Tax Hikes Could Appear In US Senate

Revenue raising measures of one sort or another – such as initiatives aimed at clamping down on corporate tax shelters – could soon appear in the U.S. Senate as Democrats take control next week in the wake of Vermont Senator Jim Jeffords’ decision to leave the Republican party and become an Indep...

By CFO Editorial Staff • June 1, 2001

EU OKs Modernized Accounting Rules, Introduces Fair Value

Dow Jones Newswires reports in the Wall Street Journal that European Union industry ministers Thursday agreed to introduce modernized accounting rules aimed at bringing E.U. companies in line with international capital markets.The rules introduce the “fair value” accounting method and are meant t...

By CFO Editorial Staff • May 31, 2001

Accounting Change Could Curb Stock Buyback Derivatives

According to Dow Jones Newswires, U.S. corporations and investment banks are protesting a proposed accounting change that could effectively curtail the use of equity derivatives to hedge stock buyback programs.In a barrage of letters to the Financial Accounting Standards Board, says Dow Jones, co...

By CFO Editorial Staff • May 31, 2001

Shareholder Lawsuits Alleging Financial Fraud Continue to Rise

According to the PricewaterhouseCoopers 2000 Securities Litigation Study, more than half of the 201 shareholder class action lawsuits filed in federal courts last year contained allegations of financial fraud. Fifty-three percent of all cases filed in 2000 contained financial fraud allegations, a...

By CFO Editorial Staff • May 31, 2001

Canadian Regulators Unveil Disclosure Guidelines

Canadian Securities Administrators (CSA), at the behest of the Ontario Securities Commission (OSC), unveiled guidelines on Friday governing the disclosure of corporate information to investors, Reuters reported Friday. The goal of the guidelines were to ensure the general public is put on a level...

By CFO Editorial Staff • May 29, 2001

P&G’s Clairol Purchase Gets a Double Dose of Savings

It is not every day that a company gets to tout that its acquisition offers savings of $1 billion. Yet, Procter & Gamble gets to do just that with its purchase of Clairol on Monday. It is taking advantage of a tax code benefit for buying subsidiaries and benefits from the anticipated new acco...

By Craig Schneider • May 24, 2001

FASB Shows Unanimous Support for Business Combinations Project

The Financial Accounting Standards Board on Tuesday unanimously supported the issuance of two final statements that detail the proposed new M&A accounting standards. The vote signals the conclusion of months of redeliberations on the subject. A formal vote over the final approval of the state...

By Craig Schneider • May 23, 2001

SEC Task Force Says Investors Need More ‘Soft’ Data

Dow Jones Newswires reports that a new Securities and Exchange Commission task force calls for an overhaul of U.S. accounting rules, saying financial statements currently don’t reflect the true value of public companies.The task force, chaired by Jeffrey Garten, dean of Yale University’s School o...

By CFO Editorial Staff • May 23, 2001

Cisco Braces for New Rule on Treatment of Goodwill

Last quarter Cisco Systems Inc. took $3.37 billion in accounting charges. One of the charges may speak of things to come, according to Peter Loftus of Dow Jonews Newswires in the Wall Street Journal.The San Jose network-equipment giant took an asset-impairment charge of $289 million, most of whic...

By CFO Editorial Staff • May 22, 2001