Week of Nov. 26, 2019
Fed approves biggest bank merger since 2008 financial crisis, Goldman Sachs’ data modeling software to become open source for Wall Street, and more accounting news.
Sage Group to sell payment software for $296 million. Sage Group PLC plans to sell its payment processing unit, Sage Pay, to Elavon Financial Services, a payment company and unit of U.S. Bancorp. The deal will likely complete by Q1 2020. The sell-off is driven by a shift in Sage’s business strategy to increase focus on subscription-driven cloud-based services. For Elavon, the deal offers an opportunity to expand into the U.K. and Ireland where Sage Pay is widely trusted and has a loyal customer base.
IRSAC releases annual report for FY 2019. The Internal Revenue Service Advisory Council (IRSAC), a federal committee that fosters discussions between IRS officials and public representatives on tax administration issues, released its annual public report on Nov. 20. The report covers recommendations on topics and concerns such as promoting the use of e-signatures in tax administration, establishing safe harbors by relying on independent party conclusions, and improving self-correction programs for tax-exempt bonds.
Payment processing company files for $100 million IPO. Palo Alto-based fintech unicorn Bill.com has filed for a $100 million initial public offering. The company plans to trade on New York Stock Exchange under the ticker “BILL.” Bill.com is known for its cloud-based, SMB-focused business payments and software platform.
Biggest bank merger since 2008 financial crisis gets go-ahead from Fed. The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) approved the merger of SunTrust and BB&T on Nov. 19. The merger, which is expected to complete by Dec. 6, 2019, will replace the BB&T and SunTrust brands with a new brand, Truist, which will serve about 10 million U.S. consumers with deposits of $330 billion. Since the 2008 financial crisis worsened because of large bank mergers, this merger earlier raised concerns among FDIC members and senators over financial stability risks and the scarcity of buyers in case the new bank fails.
Goldman Sachs to make its data modeling software open source for Wall Street. Goldman Sachs plans to make its data modeling platform, Alloy, and its underlying language accessible to Wall Street as open source software. The program currently allows the bank to clear transactions, handle regulatory reporting, and assess and manage risks. Making Alloy available as open source, the bank hopes, will reduce the costs of working with trading counterparties—banks and asset managers—and handling regulatory compliance requests.
Week of Nov. 19, 2019
The IRS is hunting down land donation abusers, big banks are breaking up with big tech, and more accounting and finance news
IRS targets land donation abusers. Anyone looking to take advantage of a land conservation donation deal that seems to be too good to be true should probably think again. The IRS recently announced increased enforcement of abusive syndicated conservation easement transactions. This abuse happens when a landowner donates land for conservation purposes, then uses a pass-through entity to sell off shares of the inflated tax deduction. It’s illegal for both the landowner and the investors, and the IRS is cracking down.
FASB issues new standards to simplify share-based payments. The Financial Accounting Standards Board (FASB) recently issued new guidance and standards to help businesses streamline the process of making share-based payments (e.g., options, warrants) to customers. According to the FASB, the new standard will result in less complex and more consistent accounting when it comes to share-based payments.
Governments and banks are looking to wean off of big tech. It seems inevitable that big tech will increasingly factor into every aspect of modern life, but governments and banks are attempting to pump the brakes on that dependency, according to Fintech Focus. Rather than shun technology altogether, the article predicts that more governments and financial institutions will build their own proprietary clouds to improve compliance and governance while reducing the risk of security breaches.
S Corp, or LLC? Accountex Report recently published an article to help small businesses decide which tax entity—an S Corp or LLC—is the best choice for lowering their self-employment taxes. In general, S Corps offer more tax savings for eligible businesses but are more heavily scrutinized by the IRS, while LLCs require more setup and fees.
Week of Nov. 12, 2019
Under Armour faces investigation over accounting practices, IRS increases tax deductions for 2020, and more accounting news.
Banks raise standards for credit card approvals. The federal Senior Loan Officer Opinion Survey on Bank Lending Practices conducted throughout late September and early October reveals that banks raised the bar for approving credit card applications in Q3 2019. Compared to the beginning of the year, banks were less likely to approve applications of borrowers with a 620 FICO score and remained about as likely to approve applicants with a 720 FICO score as the beginning of the year.
Under Armour faces investigation over accounting practices. The U.S. Department of Justice and the Securities Exchange Commission are conducting investigations into sports apparel company Under Armour’s misrepresentation of sales to make its financial position appear healthier. Under Armour’s sales in North America have also taken a dip, dropping 4% in Q3, as the company struggles to compete with the likes of Nike, Adidas, and Lululemon while being entangled in several unrelated controversies.
IRS increases tax deductions for 2020. On Nov. 6, the IRS announced its annual inflation adjustments for tax schedules and tables and cost-of-living adjustments for the 2020 tax year. The applicable tax rates for this period are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%, and there is also a zero rate. Taxpayers can use these adjustments to estimate their liability and prepare their 2020 tax returns, which will be filed in 2021.
Week of Nov. 5, 2019
Less than half of British small businesses use accounting software, what accountants can learn from Iron Maiden, and more accounting and finance news
Less than half of British small businesses use accounting software. A recent Capterra survey of more than 400 British small to midsize enterprises (1-250 employees) found that only 42% use accounting software to manage their business finances. Slightly more (47%) still use spreadsheets to keep their books. Not surprisingly, lack of time (45%) was by far the biggest accounting challenge these businesses reported, outdistancing new laws and regulations (20%) and lack of knowledge (19%). What do these numbers tell us? More British small businesses could be benefiting from accounting software.
Proposed bill would offer tax credits to women-owned businesses. Sen. Ron Wyden (D-Ore.) introduced legislation on October 30 to create two new tax credits for women-owned businesses. The first, called the “First Employee Credit,” aims to stimulate business growth and hiring, while the “Investor Credit” is designed to encourage capital investment in women-owned businesses.
What accountants can learn from Iron Maiden. It turns out that Iron Maiden frontman Bruce Dickinson knows more about numbers than just “The Number of the Beast.” AccountingWEB editor Tom Herbert recently listened to Dickinson speak at NetSuite’s London conference, SuiteConnect, and learned about how business accounting is all about communication, integrity, and creativity.
IRS releases fresh tax filing tips. The IRS wants taxpayers to file their taxes accurately and on time without any tricks. To help them do so, the agency treated taxpayers to a fresh set of tips on Halloween. The tips include making estimated payments early, gathering documents, renewing expired tax ID numbers, and filing electronically.
Week of Oct. 28, 2019
U.S. House passes bill that would require shell companies to disclose ownership, analysts say repo market stress could get worse, and more accounting news.
FinCEN director brands shell companies national security threat. Kenneth Blanco, the director of the Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence center—has said that shell companies have become a national threat. In his comments, made at a fintech forum, Blanco points to instances in which shell companies have been used to fund activities such as terrorism and human trafficking.
U.S. House passes bill requiring shell companies to disclose ownership—a big win for banks. On Oct. 22, the U.S. House of Representatives advanced legislation that would require companies to disclose their ownership, which is an update to anti-money laundering rules banks have long demanded. The White House supports the bill, saying it would help to police financial wrongdoing; however, it did ask for some adjustments to the bill to make the requirements easier for small businesses to adhere to. Financial institutions support the bill as it reduces their work and facilitates the exchange of data between regulators and law enforcement agencies.
Analysts predict repo market stress to worsen. Fixed-income analysts at J.P. Morgan Chase, led by Joshua Younger, said in a note that with the end of the year approaching, the situation in the repo market—where banks can borrow cash in exchange for securities—is likely to get worse before resolving. Jim Bianco, head of Bianco Research, said that the repo market has been “drugged into submission by the Fed” about the Federal Reserve’s intervention and expressed concern over the lack of a long-term fix.
Week of Oct. 22, 2019
Italy’s bold move to get tech giants to pay up, two ways procurement can uncover the cause behind rising costs, and more accounting and finance news.
Italy to levy web tax on tech giants. Starting in 2020, Italy will levy a 3% web tax on digital transactions, as outlined in the country’s new draft budget. The tax is expected to fetch Italy around $661 million per year (600 million euros), with much of that figure coming from U.S. tech giants like Amazon, Facebook, and Google.
Facebook’s cryptocurrency, Libra, faces increasing G7 scrutiny. Last week, the Group of Seven said that “stablecoins” like Facebook’s yet-to-be-released Libra should be kept out of the global market until their risks to the international economy are fully addressed. The G7 reported that a wide-scale release of stablecoin (cryptocurrency backed by cash and other traditional financial assets) could destabilize the world economy. Mastercard, Visa, Stripe, eBay, and PayPal have all recently pulled out of the Libra project, citing regulatory uncertainty.
And the worst position in public accounting is … Accounting Today recently released its opinion on the worst position in the public accounting sector, and the winner (loser?) is chief accountability officer. “Nobody likes to be told what to do, especially partners in accounting firms,” writes CPA Edward Mendlowitz. “Many firms, even very small ones, have set up corporate-like structures and accountability oversight seems to be a position that has fallen through the cracks.”
Two ways your procurement department can uncover hidden cost overrun drivers. Gartner’s Jessica Kranish recently wrote that procurement departments can use overlooked, imperfect data (such as estimates) and scrutinize inefficient business practices to get to the bottom of the cost overrun mystery.
Crypto Ratings Council nudges regulators to get to work. The Crypto Ratings Council—a recently formed self-regulatory committee of eight leading U.S. crypto exchange members—is on a mission to provide “a system that simplifies U.S. federal securities laws for the benefit of retail investors,” according to their website. The move is seen (by The Fintech Times, anyway) as an attempt to circumvent slow-moving government regulations by using simplified regulatory language and ratings to attract further investment.
Week of Oct. 14, 2019
U.S. trade deficit surpasses expectation, EU official proposes taxing foreign polluting firms, and more accounting news.
U.S. billionaires pay less tax than working class for first time. According to a study by economists Emmanuel Saez and Gabriel Zucman, for the first time in the U.S. history, the wealthiest 400 families paid an effective tax rate (23%) that was lower than that of the bottom half of households (24.2%). The tax rate of the wealthiest 400 families dropped from 56% in 1960 to 47% in 1980, while the rates for the working class have changed little over time.
Treasury Department and IRS release guidance for IBOR transition. On Oct. 9, the U.S. Treasury Department and Internal Revenue Service released guidance to help taxpayers avoid negative tax consequences while transitioning from an Interbank Offered Rate (IBOR) to other reference rates. The proposed regulations state that modifying the terms of financial contracts to replace IBOR with new reference rates could lead to deductions, gain, or loss for income tax purposes.
U.S. trade deficit surpasses expectations. At the end of August, the U.S. trade deficit stood at $54.9 billion—more than the $54.5 billion predicted by a Dow survey. The deficit, which was at $54 billion in July, increased due to a record level of consumer goods imports. However, the deficit with China decreased, falling 3.1% in August.
EU climate official proposes tax on polluting foreign firms. Frans Timmermans, set to take office as the EU’s commissioner for its Green Deal on Nov. 1, said that the EU will work to tax foreign polluting firms to level the playing field for EU businesses trying to become carbon neutral by 2050. Timmermans said that the EU should consider instruments such as a Carbon Tax if non-EU countries are not as dedicated to mitigating climate change as EU members.
Week of Oct. 7, 2019
Sage acquires AutoEntry, robotic process automation can save your business 25,000 hours of work per year, and more accounting news
Sage acquires data entry automation tool AutoEntry. Sage, one of the world’s largest accounting software providers, has acquired AutoEntry, a leading provider of data entry automation for accountants and bookkeepers. The bigger picture, according to AccountingWEB’s John Stokdyk, is that “pre-accounting” tools are becoming more essential to accounting software. Industry leader Intuit QuickBooks, which already integrates with AutoEntry and dozens of other data entry automation tools, is likely to acquire its own tool next.
IRS may provide relief for U.S. stock owners of some foreign corps. The IRS issued proposed regulations last week that U.S. stock owners of some CFCs (controlled foreign corporations) may benefit from safe harbors when it comes to determining whether or not a corporation is a CFC, as well as protection from penalties for resulting income. According to the Journal of Accountancy, “a U.S. person may now be treated as a U.S. shareholder of a CFC who was not formerly, and foreign corporations that were not previously treated as a CFC may be so treated.”
Robotic process automation can save finance departments 25,000 work hours per year. A recent Gartner report reveals that while finance departments can save up to 25,000 hours of avoidable rework per year for a staff of 40 by using RPA (robotic process automation), only 29% of RPA adopters are taking advantage of this technology for financial reporting. The research found that, in addition to reducing mistakes, RPA also allows teams to work on higher-value work, increasing employee engagement and reducing turnover.
Is Instagram the key to growing your firm? Firm of the Future’s Tyler McBroom suggests that accounting and financial services firms should seriously consider using Instagram for promotion. Why? Premium brand recognition, pre-qualified prospects, streamlined online networking, and connecting with a younger demographic for recruiting purposes.
Week of Sept. 30, 2019
U.K.’s accountancy regulator considers an investigation into irregularities at Thomas Cook, 40 U.S. states struggle to pay bills, and more accounting news.
U.S. Department of Labor announces finalized rule for overtime pay. The updated rule increases thresholds for exempting administrative, executive, and professional employees from overtime pay and minimum wage requirements under the Fair Labor Standards Act. In a press release, the department says it is raising the standard weekly salary level to $684 from $455 and the annual compensation for “highly compensated employees” to $107,432 from $100,000. The rule takes effect Jan. 1, 2020.
IRS releases second draft of Form 1040-SR, U.S. Tax Return for Seniors. The form seeks to simplify tax filing for the 15 million seniors and their households expected to file taxes in 2020. Unlike the now-defunct Form 1040EZ, it doesn’t place restrictions on the types of reportable income. However, senior taxpayers filing Form 1040-SR must take the standard deduction, which is $12,200 for individuals, $18,350 for heads of households, and $24,400 for surviving spouses and married couples that file jointly.
Oil prices fall 2% on Sept. 24, amid continued U.S.-China trade tensions. Brent crude futures fell to $63.42 a barrel, a 2% drop, while U.S. West Texas Intermediate futures fell to $57.52 a barrel, a 1.9% drop. Analysts also point to weak economic data in Japan and major European economies as factors in the dropping oil prices. Andy Lipow, president of Lipow Oil Associates, says that, despite the Saudi oil plant attack, the market felt oversupplied because of new production in Norway and Brazil and increased production in the United States.
U.K.’s accounting regulator (FRC) considers investigating Thomas Cook for accounting irregularities. The Financial Reporting Council’s (FRC’s) enforcement division can prosecute auditors, accountants, and actuaries if found guilty of misconduct or breaching professional accounting standards. The regulatory body announced it is “urgently” considering conducting an investigation into travel firm Thomas Cook after the government sped up Insolvency Service’s investigation into the company’s collapse.
40 U.S. states lack funds to pay their bills, Truth in Accounting’s annual report says. The report states that, despite national economic growth, states have failed to reduce liabilities, such as unfunded pensions and Other-Post-Employment Benefits (OPEB). Further, despite that each state except Vermont has a balanced budget requirement in place, states have accumulated $1.5 trillion in debt.
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