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IRS issues 2016 and revised 2015 vehicle depreciation limits

Published on May 03, 2016

The IRS issued guidance providing revised limits for the amount of depreciation taxpayers can take for the first year they use a passenger automobile (including a truck or van) for business in 2015 and the new depreciation limits for 2015. The guidance also includes the lease inclusion amounts that vehicle lessees must include in income for 2016 (Rev. Proc. 2016-23). 

The revisions apply to passenger vehicles that were placed in service during 2015 and to which 50% bonus depreciation applies. They were necessitated by retroactive extension of bonus depreciation for 2015 by the Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113. Accordingly, the first-year depreciation limitation for 2015 is increased by $8,000. For passenger automobiles (other than trucks or vans) placed in service during calendar 2015 to which 50% bonus depreciation applies, the depreciation limit under Sec. 280F(d)(7) is $11,160 for the first year. The corresponding figure for trucks and vans is $11,460. 

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New credit impairment standard, hedge accounting proposal on the way

Published on May 03, 2016

The FASB hopes to issue a new credit impairment standard in the second quarter of 2016 that would require entities to estimate and recognize an allowance for lifetime expected credit losses for loans, trade receivables, held-to-maturity debt securities and certain other financial assets measured at amortized cost. Estimating an allowance for lifetime expected losses would likely require changes in the processes, systems and controls entities use to estimate incurred losses today. The FASB recently held a public meeting with community bank preparers, auditors and banking regulators to discuss the banks’ concerns about the potential complexity in measuring expected losses on loans.

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New Leasing Standard Could Benefit Companies

Published on April 05, 2016

The Financial Accounting Standards Board’s new lease accounting standard could have some positive payoffs for companies if they take a careful approach to implementing it.

FASB released the long-awaited standard after a decade of work with the International Accounting Standards Board as one of their major convergence projects. 

The standard will add operating leases to the balance sheet for the first time for many companies, and they will need to begin tracking down all of their leases. Companies today are required to disclose their leasing commitments. With the new standard and the prominence on the balance sheet, they need to ensure that the information they have is complete and accurate. While we tend to find companies tend to have a relatively good arm around their real estate portfolio, the equipment leases are probably a category of assets where they may be a bit more disbursed across an organization. Even though it might not be the most significant part of what they’re putting on the balance sheet, it may be one of the more significant efforts in order to get there. 

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FASB Streamlines Move to Equity Method of Accounting

Published on April 05, 2016

The Financial Accounting Standards Board has issued an accounting standards update making it easier for companies to transition to the equity method of accounting. 

Stakeholders told FASB that the requirement to retroactively adopt the equity method of accounting is costly and time consuming when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence. They said the requirement does not provide a clear benefit to users of financial statements. 

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How Cooperatives Measure Earnings Affects Patronage Refunds

Published on April 05, 2016

Patronage refunds are one of the main differentiating factors between a cooperative business and a regular corporation or other business entity. One of the major parts of the statutory definition of a patronage refund is that it is determined by the net earnings of the cooperative. The statutory definition, does not, however, state whether those net earnings are determined by federal income tax or financial accounting rules. 

Based on experience, the method used to determine net earnings has been based on the region of the country that the cooperative is located and size of the cooperative. In recent years, cooperatives have begun to review their method for determining net earnings in the hopes of taking full advantage of tax breaks and still providing a fair and equitable return to their members. 

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FASB Releases Lease Accounting Standard

Published on April 05, 2016

The Financial Accounting Standards Board issued its long-awaited Lease Accounting Standard, one of the major convergence projects on which it has collaborated for a decade with the International Accounting Standards Board.

The accounting standards update aims to improve financial reporting about leasing transactions and will affect all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment, in many cases putting their operating leases on the balance sheet for the first time.

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The Expanding View of Expense Management

Published on March 29, 2016

With its origins in paper trails and manual processes, travel and entertainment expense reporting historically has been more of a black box for accounting professionals than a source of financial insight. 

But by changing the expense management process, companies today are able to gain valuable insight into spend management trends and leverage their data in ways they didn’t necessarily anticipate. The benefits of which can reach beyond traditional expense reporting functions and result in an overall better experience, including increased employee satisfaction, greater compliance, and reduced spending. 

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Financial Execs Concerned about Internal Controls

Published on March 29, 2016

Nearly a third of financial reporting executives in a new poll said internal control over financial reporting was their highest concern beyond their financial reporting responsibilities. 

KPMG surveyed nearly 400 financial executives during the firm’s 25th Annual Accounting & Financial Reporting Symposium and 31 percent cited internal controls as their biggest concern. Approximately 26 percent of the respondents said they were most worried about data infiltration and IT security, a sharp contrast from a similar survey that KPMG conducted at last year’s symposium, when those concerns ranked at the bottom of the list. 

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Financial Performance Reporting Among Priorities as FASB Sets Agenda

Published on March 29, 2016

FASB decided to perform research on six topics for consideration of possible accounting standard setting, according to a news release from the board. 

Four issues will be added to its research agenda and included in an agenda discussion paper that will be issued to the public in the first half of this year: 

Financial performance reporting.

Pensions and other post-retirement employee benefit plans.

Intangible assets.

Distinguishing liabilities from equity. 

The board also will place two additional projects on its research agenda on consolidations and on inventory and cost of sales. 

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FASB Proposes Amendments on Classification of Certain Cash Flows

Published on March 29, 2016

The FASB issued a proposal that aims to reduce diversity in practice in reporting on the following types of cash flows: 

Cash payments for debt prepayment or extinguishment costs would be classified as financing cash outflows. 

Cash payments made to settle a zero-coupon bond attributable to accreted interest would be classified as an operating outflow, and the portion attributable to principal would be classified as a financing outflow. 

Contingent consideration payments made after a business combination would be classified as financing outflows if they don’t exceed the acquisition-date fair value of the contingent consideration liability, and any payments that exceed the liability would be classified as operating outflows. 

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