Journal of Accountancy

A monthly publication of the American Institute of Certified Public Accountants focusing on the latest news and developments related to the field of accounting, and written for CPAs and other accounting professionals.

Articles from Vol. 180, No. 1, July

Benchmarking against the Best
Using the best possible industry practices to establish targets or goals is a critical cal component in the success of every business. For CPA firms, one of the most difficult aspects of the process is obtaining information about other firms' results...
CPAs Recommend Simplifying Earned Income Tax Credit
The Republican majority has stepped up pressure to find ways to revamp the tax system, cut social spending and reduce government, and CPAs are making contributions to the debate. At a Senate Governmental Affairs Committee hearing in April, scrutiny focused...
David Solomons (1912-1995)
Last February, the international accounting community lost one of its true giants with the death of Professor David Solomons at age 82. His accounting career spanned more than 60 years, from his 1932 graduation from the London School of Economics (LSE),...
Deductible? Maybe Not
The Internal Revenue Code does not specifically allow deductions for legal and accounting fees. In seeking to deduct such expenses, taxpayers must use the rationale in IRC sections 162, 165 and 212. The Internal Revenue Service, however, has erected...
Disclaimers
Estate planning does not stop with the death of a taxpayer. There are many postmortem techniques that can be used to further the objectives of the decedent and his or her advisers. One technique that may provide a great deal of flexibility is the use...
Dodd Commends Profession's Efforts in Championing Litigation Reform
Senator Christopher J. Dodd (D-Conn.) said members of the American Institute of CPAs deserve a great deal of credit for gains achieved in bipartisan support for litigation reform legislation in the Senate. In an informal meeting in May with members of...
FASB Proposes Statement on Not-for-Profits' Investments
The Financial Accounting Standards board has issued an exposure draft of a proposed Statement of Financial Accounting Standards, Accounting for Certain Investments Held by Not-for-Profit Organizations. The proposal is the fourth in the board's five-part...
Financial Accounting: EITF Update: Normal Servicing Fee Rates for SBA Loans
Statement on Auditing Standards no. 69, The Meaning of "Present Fairly in Conformity With Generally Accepted Accounting Principles" in the Independent Auditor's Report, identifies Financial Accounting Standards Board emerging issues task force (EITF)...
GAO Urges Better Government Financial Reports
Charles A. Bowsher, comptroller general of the United States, said standard setting for state and local governments has failed to meet the needs of potential users of government financial reports. In a letter to Earle E. Morris Jr., chairman of the Governmental...
GASB's New Pensions Package
The Governmental Accounting Standards Board has changed the way state and local governments account for pensions. Three new GASB statements will affect all governments, including public benefit corporations and authorities, utilities, hospitals and other...
IRS to Consolidate Regional and District Offices
The Internal Revenue Service will reduce the number of regional offices from seven to four on October 1, 1995, and cut the number of district headquarters from 63 to 33 by September 30, 1996. The IRS said it is consolidating to reduce executive, managerial...
Limited Liability CPA Firms: An Attractive Choice
Nearly every state has passed legislation allowing businesses the choice of operating as limited liability companies (LLCs) or limited liability partnerships (LLPs). LLCs combine the characteristics of corporations and partnerships, making their a viable...
Marketing Clinic: How One CPA Firm's Gutsy Decision to Use Billboard Advertising Boosted Its Visibility
Mass media advertising generally is not recommended for accounting firms. It is expensive, it reaches too many people who will never be clients, and it is too hard to track the results. Marketing advisers usually suggest other tools, such as seminars...
Materiality Guidelines for Modifying Audit Reports
A change in accounting principle, as defined in Accounting Principles Board Opinion no. 20, Accounting Changes, is a change from one generally accepted accounting principle to another. The cumulative effect usually is disclosed on the face of the income...
Never Fear Change
Barry C. Melancon, the new president of the American Institute of CPAs, believes member service should be the Institute's top priority as it heads into the twenty-first century. In taking over the reins from outgoing president Philip B. Chenok this month,...
Only the Client Is Entitled to Accountant's Reports
A Massachusetts superior court ruled that an accounting firm is required to provide its work product only to its actual client. This case arose from a divorce proceeding between Vanda Cacciola and her estranged husband, Luciano Manganella. Each of them...
Positioning the Audit Function for Growth
In the fall of 1994, the board of directors of the American Institute of CPAs appointed the special committee on assurance services (SCAS) to reinvigorate the audit function and stake out new economic territory for the CPA profession. The committee expects...
Quasi Reorganization: Fresh or False Start
This article looks at quasi reorganizations by summarizing current generally accepted accounting principles, evaluating the theoretical underpinnings and reporting on a survey of quasi reorganizations in practice. It is our conclusion that the quasi...
Reporting for Household Employers
Section 2 of the Social Security Domestic Employment Reform Act of 1994 made two major changes in the rules for household employers: (1) for wages paid after December 31, 1994, reporting and payment of FICA (Social Security and Medicare) and FUTA (unemployment)...
Retirement Plan Options
CPAs often receive inquiries from clients who are considering adopting a retirement plan. The two simplest and most obvious options are the simplified employee pension plan (SEP/IRA) and the qualified profit-sharing plan (PSP). This article compares...
SAB Issued on Accounting for Extinguishment of Debt
The Securities and Exchange Commission has released Staff Accounting Bulletin no. 94, which expresses the SEC staff views about when a gain or loss should be recognized on the early extinguishment of debt. The SEC staff analyzed a number of companies...
SEC Chairman Reviews the Commission's 1995 Agenda
"The goals of the Securities and Exchange Commission reflect its absolute commitment to the interests of America's investors," said Arthur Levitt, chairman of the SEC. The chairman told a group of business editors and writers that the SEC's three major...
SEC Seeks Closer Regulatory Relationship with GASB
Since the enactment of the Securities Exchange Act of 1934, the Securities and Exchange Commission has maintained the authority to establish financial accounting and reporting standards for publicly held companies. Now, the SEC is interested in acquiring...
Small Business Tax Solutions
This series is based on questions from AICPA tax certificate of educational achievement (CEA) courses. Q. When an S corporation redeems its own stock, what effect might the redemption have on the corporation's accumulated adjustments account (AAA),...
Software That Speaks Your Language
Until recently only the Goliaths of business had the financial prowess to survive as world merchants. Today, with trade barriers crumbling and new welcome mats on the doorsteps of many nations, midsized and even small businesses are quickly extending...
Supreme Court Nixes IRS Attempt to Limit Refund Suits to "taxpayers."(Williams case)(Brief Article)
Lori Williams and her then husband Jerrold Rabin owned a home jointly. Rabin, part owner of a business, failed to pay employment taxes. In 1987 and 1988, the Internal Revenue Service assessed the unpaid employment taxes against Rabin, resulting in an...
Texas Adopts Rules on CPA Designation; AICPA to Seek Broad Resolution
In the midst of a growing controversy over the proper use of the CPA designation, one state has come to a resolution. The Texas State Board of Public Accountancy (TSBPA) has adopted licensing requirements it says will clarify regulations for the state's...
The Upper-Ladder Salary Gap
can turn to the definitive authority on the subject, Internal Control-Integrated Framework, published by COSO in 1992. That standard defines and describes internal controls and provides substantial guidance, including a comprehensive set of evaluation...
Watching Windows: Accountants Are Watching for Windows 95 - but They Shouldn't Be Too Quick to Buy It
Should accountants jump to upgrade to the forthcoming Windows 95? The profession was slow to buy into the current version of Microsoft's Windows--Windows 3.1--because it felt the product was not stable enough for mission-critical tasks and too few applications...
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