August 2020 Article Archives

Top 10 Ways Companies Cook the Books

Published on August 20, 2020

With the recent economic slowdown, companies are under increased pressure to show stability, or even growth, and paint a rosy picture for investors. That pressure will undoubtedly cause some companies to engage in accounting fraud to distort their financial results, thereby misleading investors. As with most accounting scandals, companies are usually unable to sustain the deception, and the house of cards eventually collapses.

The following are 10 of the primary accounting schemes that we regularly see in our practice representing whistleblowers at the Securities and Exchange Commission. Under the SEC whistleblower program, individuals are eligible to receive monetary awards for bringing such frauds to light. In certain circumstances, compliance personnel, including auditors, accountants, officers and directors, may be eligible for awards under the program. Since 2012, the SEC has awarded more than $500 million to whistleblowers, which includes three awards to compliance officers. 

1. Improper timing of revenue recognition

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3 Steps to Building Strong Risk Management

Published on August 20, 2020

The coronavirus pandemic has already resulted in a significant business downturn around the globe. Even though during this wide-scale crisis with its catastrophic consequences some winners have emerged, over all, the pandemic has had an extremely negative economic impact.

What lessons can be learned from this type of event for the future? And how should management accountants prepare for it in terms of risk management systems, to mitigate possible negative consequences or to achieve some gain from these types of situations?

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New FAQs Address PPP Loan Forgiveness Issues

Published on August 20, 2020

The U.S. Small Business Administration (SBA), in consultation with Treasury, released guidance Tuesday answering 23 frequently asked questions regarding the forgiveness of Paycheck Protection Program loans.

The FAQs, published in a new 10-page document, are divided into four sections addressing different aspects of the process and calculations PPP borrowers should use to determine how much of their loan is forgivable. Following is a brief description of each section and highlights from the guidance provided.

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IRS to Allow Faxing of Automatic Method Change Requests

Published on August 20, 2020

In response to the coronavirus pandemic, beginning July 31, the IRS is allowing taxpayers that file Form 3115, Application for Change in Accounting Method, to fax the duplicate copy of the request, instead of mailing a paper copy. Usually the duplicate copy is mailed to the Ogden, Utah, IRS office, but now taxpayers can fax it to 844-249-8134. Taxpayers should still file the original copy with their tax return. The new procedure does not apply to nonautomatic accounting method changes, which are governed by separate procedures during the pandemic under Rev. Proc. 2020-29.

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IRS Finalizes Rules on Business Interest Expense Deduction Limits

Published on August 20, 2020

The Internal Revenue Service released the final regulations and other guidance on the limitation on the deduction for business interest expenses under the Tax Cuts and Jobs Act of 2017, which was amended by the CARES Act earlier this year.

The 2017 tax overhaul limited the business deduction as a way of helping pay for the $1.5 trillion set of tax cuts, but the $2 trillion legislative package approved in March by Congress temporarily eliminated some of the restrictions as a way to help businesses cope with the impact of the novel coronavirus pandemic.

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An Update on Like-Kind Exchanges

Published on August 20, 2020

The recently released proposed regulations on Sec. 1031 like-kind exchanges (REG-117589-18) provide much needed clarification for taxpayers who have conducted cost segregation studies on exchanged properties. The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, removed personal property from part of the preferential deferred tax treatment for like-kind exchanges.

While most people understood the intent of that edict, it created some unintended consequences when property owners exchange real estate. Unless the exchange involved raw land, it was highly likely that some level of personal property would be “embedded” in a building — something that might have been identified in a cost segregation study. Note: Usually Sec. 1245 property (tangible personal property that may be depreciated) is broken out in a cost segregation study — not furniture, fixtures, and equipment.

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