In the world of material weaknesses, taxes are emerging as one of Corporate America’s weakest spots in the financial-reporting process. In a Compliance Week analysis of 400 companies that reported material weaknesses in their most recent annual reports, one-third attributed problems at least in part to taxes. They get sympathy from tax experts who say […]
Tammy Whitehouse
Posted inAccounting & Auditing
Fair-Value Puzzle Finally Answered
The trek toward a fair-value system of accounting—which critics have said sometimes feels like a forced march—took another step forward last week, as accounting rulemakers finally approved a way to establish fair value where it’s already required or permitted in existing accounting literature. The Financial Accounting Standards Board has issued Financial Accounting Standard No. 157, […]
Posted inFrom the Archive
SEC Gives Roadmap For Backdating Solution
In an apparent attempt to quiet the frenzy over stock option accounting problems, the chief accountant of the Securities and Exchange Commission issued an open letter last week to address a variety of issues companies are hitting as they cull through their historical records. Foremost, the guidance points out that Accounting Principles Board Opinion No. […]
Posted inEthics & Culture
Liability Waiver Revived; Big 4 Not So Big
A key committee of the American Institute of Certified Public Accountants has concluded that liability waivers will not necessarily weaken an auditing firm’s independence, so long as the firm promises to conform to Generally Accepted Auditing Standards. The AICPA’s Professional Ethics Executive Committee recently re-exposed a draft document outlining its views on factors that could […]
Posted inAccounting & Auditing
‘Liability’ Debate Ends; More Ethics Training
The Financial Accounting Standards Board has finalized its position and its rationale for barring companies from using the accrue-in-advance method of accounting for future major maintenance costs. In its staff position, AUG AIR-1: Accounting for Planned Major Maintenance Activities, FASB says companies are prohibited from using the accrue-in-advance method—where companies project when a particular asset […]
Posted inInternal Controls
How ‘Tone At The Top’ Still Dogs Companies
Whether the fault lies with poor attitude or poor execution, four years after Sarbanes-Oxley was passed to galvanize the spirit of corporate governance, some companies are still painfully out of tune on that point. In a Compliance Week analysis of 2005 material weakness disclosures, 20 of the 400 companies surveyed confessed to internal control problems […]
Posted inAccounting & Auditing
SEC: Cos. Must Clean Up Old Errors
The Securities and Exchange Commission has decided it’s time for companies to clean up their financial statements this fall, shoring up errors that have been hiding like dust bunnies under the sofa for years. Under the leadership of newly appointed Chief Accountant Conrad Hewitt, the SEC staff has issued Staff Accounting Bulletin No. 108 to […]
Posted inAccounting & Auditing
Defining ‘ROI’ Correctly; IMA Updates; More
You invest money, and eventually—if it was a good investment—you get money back. Do you call that return on investment, or return of investment? A potentially huge difference exists for accounting purposes, and some companies apparently have been getting it wrong. That’s according to a recent study, “The Cash Flow Classification of Distributions Received from […]
Posted inAccounting & Auditing
The Elusive World Of ‘Nonfinancial’ Fraud
Now that Sarbanes-Oxley has made big progress buttoning down internal controls over financial reporting, the next great frontier for potential abuse is emerging: nonfinancial fraud. That’s the lesson, at least, from companies like BP and State Farm, both caught up in accusations that employees manipulated nonfinancial information in ways that seemed to achieve some immediate […]
Posted inAccounting & Auditing
FASB Puts ‘Liability’ Definition In Limbo
In the complex world of accounting standards-setting and rulemaking, even a bedrock concept can become the subject of debate and analysis. Take, for example, the term “liability.” Practically any student of Accounting 101 could come up with the most basic principle behind a liability: It’s something you gotta pay. But in its decision to eliminate […]