David Kirkpatrick

February 5, 2010

White House looking to end LIFO

Ending last-in/first-out accounting would be a very, very bad idea and would punch businesses — particularly small businesses — in the gut at a time when a drastic tax hit is something no business needs. The economy is still rough sledding all around and unemployment isn’t abating. The Obama administration has been making good noises about helping Main Street. Ending LIFO would do anything but.

From the link:

House Ways and Means members crossed party lines in Feb. 3 budget hearings to criticize the Obama administration’s proposal to raise an additional $59 billion in tax revenues by eliminating firms’ ability to use the last-in, first-out accounting method.

“If we do this, if we end it, what’s going to happen is U.S. small businesses are going to take a big tax hit and their competitors overseas are going to have a terrific advantage over us in the marketplace,” Rep. Mike Thompson (D-Calif.) told Treasury Secretary Timothy Geithner. “There’re some industries that have to hold their inventory for a long time; this is a fair and reasonable way to recognize that and I would strongly urge you to go back and revisit that.”

The practice can reduce a business’s tax liability, particularly in times of rising inflation, because it takes into account the higher costs of replacing inventories. The LIFO method is especially important to companies that maintain large inventories over a period of years, such as wineries and distilleries that need to age their inventories. As a result, shifting to a first-in, first-out accounting practice would have the effect of giving those producers income on which they would have to pay taxes, even though the products they have put into inventory may not be available for sale for several years.

November 24, 2009

Is the Sarbanes-Oxley Act on its last legs?

Looks like it. In this topsy-turvy political world Sarbox was ushered in by a GOP-controlled Congress and is being systematically gutted by a Democratic Congress. Of course one the unintended consequences of Sarbox was an untenable burden on small business. Wall Street was going to motor along, accounting firms were going to bank and Main Street was going to take it on the chin once again.

From the link:

The House Financial Services Committee has approved an amendment to the Investor Protection Act of 2009 to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional companies as well.

Some veterans of past reform efforts were left sputtering with rage. “That the Democratic Party is the vehicle for overturning the most pro-investor legislation in the past 25 years is deeply disturbing,” said Arthur Levitt, a Democrat who was chairman of the Securities and Exchange Commission under former President Clinton. “Anyone who votes for this will bear the investors’ mark of Cain.”

Those who favored the amendment saw it differently. They were simply out to help small businesses, which would be burdened by having to report on whether they maintained acceptable financial controls, and to have auditors check on whether those controls worked.

There are other threats to Sarbanes-Oxley as well.

October 1, 2009

In the red FDIC …

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:53 pm

… turns to accounting trickery to get above the water line.

June 19, 2009

Cloud computing and accounting

Filed under: Business, Technology — Tags: , , , , — David Kirkpatrick @ 1:04 pm

Now there’s a header I didn’t expect to be typing anytime soon. A coupling of one of the buzziest of tech buzzwords going and bean counting. Who knows, maybe the two go together like butter and toast. It’s going to be interesting to watch and see how much of cloud computing is just a lot of hot (and in this case opaque) air, and how much turns into real world applications. For the record, I’m not certain some of the actual applications cited in this article truly relate to current concept of cloud computing.

From the link:

Cloud-based computing is an extension of SaaS. Rather than hosting the client and their data on a specific fixed server, the application provider often has multiple servers in multiple locations, and a user can be actually operating on different computers every time they call.

According to Dr. Chandra Bhansali, chief executive of Hauppauge, N.Y.-based AccountantsWorld, one of the earliest providers of Web-based accountant-oriented applications, “This is the time where accountants are starting to see the promise of cloud computing. The most important benefit the Internet brings is collaboration. There is no other profession where the client works so closely with the service provider.”

A FIT FOR SMALL BIZ

The burgeoning remote trend has become especially appealing to small businesses that often lack the IT resources of their larger counterparts.

For Penny Banker-Mertz, EA, proprietor of Penny Banker Tax & Financial in Bay City, Texas, being able to work remotely, and with clients that also sometimes need the same remote capability, is a big plus. She uses AccountantsWorld’s Accounting Relief product. “I can review accounting from anywhere I have a high-speed connection. I don’t have to be tied to my office. Some of my clients who are also self-employed like this feature as well.”