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FASB Clarifies Aspects of Lease Accounting Standard

Published on March 25, 2019

The Financial Accounting Standards Board issued an accounting standards update clarifying some of the disclosure and implementation requirements of the new leasing standard.

The new leases standard will put operating leases on the balance sheet of many companies for the first time. The standard takes effect for public companies this year and for private companies next year.

The update deals with two lessor implementation issues. It clarifies that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new leases standard. It also aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers with some of FASB’s existing guidance. That means the fair value of the underlying asset at the commencement of a lease is its cost, reflecting any volume or trade discounts that may apply. But if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied.

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How AI Is Transforming the Jobs of Accountants

Published on February 22, 2019

Artificial intelligence has become a buzz-phrase of sorts in recent years, and while it's become hard to separate the hype from its practical potential, AI is rooted in a very realistic notion. Put simply, AI is one of the most advanced concepts in intelligent systems and decision-making in years, and the initial wave of academic research and early engagements with consumer electronics have evolved into real, practical methods and technologies that are positioned to change the way humans make decisions, and eliminate the risk of human error altogether. 

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Controllers Feel Pressure to Cook the Books

Published on February 22, 2019

Nearly two-thirds of corporate controllers feel pressure to "cook the books," according to a new international survey, and many of them feel that misrepresenting their company's performance is just part of their job. 

The survey, by FloQast, a provider of close management software for corporate accounting departments, found that 64 percent of controllers feel pressure to "cook the books," with 10 percent of them stating it's just part of their job. 

The respondents were asked if they have ever felt pressure, either directly or indirectly, for financial reporting to be less accurate in order to produce a better view of company performance. Only 36 percent of the controllers surveyed by FloQast and Dimensional Research indicated they have never felt such pressure. Among the 64 percent who said they have felt pressure to misrepresent their company's performance, 10 percent reported this is a regular part of their job. For 32 percent of the respondents, it does happen but is an exception. The remaining 22 percent indicated they are in a position where there is never direct pressure that they might be able to respond to head on, but instead there are unspoken expectations about a desired outcome.

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New Safe-Harbor Guidance for First-year Depreciation Deduction for Cars

Published on February 22, 2019

The Treasury Department and the IRS have issued guidance that provides a safe harbor method for determining depreciation deductions for passenger automobiles that qualify for the 100-percent additional first-year depreciation deduction. Affected vehicles must also be subject to the depreciation limitations for passenger automobiles. 

Under the Tax Cuts and Jobs Act, the additional first-year depreciation deduction applies to qualified property, including passenger automobiles, acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2027. Generally, the Sec. 179 and depreciation deductions for passenger automobiles are subject to dollar limitations for the year the taxpayer places the passenger automobile in service and for each succeeding year. For a passenger automobile that qualifies for the 100-percent additional first-year depreciation deduction, the TCJA increased the first-year limitation $8,000. 

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The Eternal Question: What Are a Taxpayer's Chances of an IRS Audit?

Published on February 22, 2019

As IRS budgets and audit staff continue to diminish, audit numbers are at an all-time low. But when you file your clients' returns, the most common question persists: "How likely am I to be audited?"

Taxpayers whose returns stray far away from the norm or have “large, unusual or questionable items” can always be singled out for audit. But overall, as the statistics bear out, the IRS likes to audit taxpayers with certain characteristics.

To start, individuals get more audits than business and specialty taxpayers. In 2017, the IRS reported a 1 in 184 (0.542 percent) chance of being audited for all taxpayers. For taxpayers filing individual returns, the likelihood of audit is 1 in 161 (0.623 percent). Corporations (1120, 1120-S) and partnerships are audited less than individuals – with an audit rate of 1 in 224 (0.445 percent). In 2017, the IRS audited only 1 in every 568 (0.176 percent) employment tax returns (Forms 940/941).

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No Delay in Lease Accounting Standard Effective Date

Published on December 20, 2018

FASB will not be providing a last-minute reprieve on its lease accounting standard effective date, despite the concerns of financial statement preparers about the difficulty of implementing the new rules.

The lease accounting standard takes effect for public companies in 2019 and for most other entities in 2020. It is designed to provide investors with more information by bringing lease assets and obligations onto lessee balance sheets.

Preparers have had difficulty implementing the standard for several reasons:
• Locating all the lease contracts that exist throughout an organization and extracting the information needed from them has been a significant challenge for company finance and accounting staffs.

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Common Depreciation Missteps and Misconceptions: Demolition of Structures

Published on December 20, 2018

In most cases, the demolition of a structure to facilitate construction of a new building increases the land value. Not only does the cost of demolition increase the value of the land, but also the remaining basis of the building must be added to the land value at the time of demolition.

There are limited exceptions to this. Under section 280B of the U.S. Code, an abandonment loss that is unrelated to demolition is allowed. If a property owned by a taxpayer is deemed condemned due to latent defects, it may be abandoned. The taxpayer could then abandon the property and take an abandonment loss to avoid increasing the land value.

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IRS Points to New Limits on Like-kind Exchanges

Published on December 20, 2018

The Internal Revenue Service is reminding taxpayers Monday about a change under the new tax law that limits like-kind exchanges to exchanges of real estate and similar property.

Under last December’s tax overhaul, starting Jan. 1, 2018, any exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents and other intellectual property generally won’t qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock will still be eligible.

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4 Steps to Prepare for the Future of Accounting

Published on December 20, 2018

Time is running out to start getting ready for the technology-transformed, new-world accounting profession that is evolving at an increasing pace.

What changes are coming? What steps should be taken to prepare? What should I be doing now? Is it too late?

As with all major evolutions, the change within accounting will not happen all at once, so it's not too late. However, the pace of change will continue to accelerate so you need to get moving so you don't fall behind. Here are a few steps you can take to ensure you are ready when the technology is.

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AICPA Drafts Guidance on Inventory Valuation

Published on December 20, 2018

The American Institute of CPAs' Financial Reporting Executive Committee has posted an early working draft of guidance on inventory valuation guidance, with a goal of eventually publishing a broader Business Combinations Accounting and Valuation Guide.

The goal of the guidance is to describe the various considerations for estimating the fair value of inventory, in keeping with a requirement from the Financial Accounting Standards Board that inventory acquired in a business combination should be recognized and measured at fair value as of the acquisition date. 

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