A tale of two issues
Washington News Bureau:
In ancient times, I’m told, religious scholars passed the time by debating such arcane esoterica as how many angels could ;t on the head of a pin. Fast forward a few centuries and you would likely unearth CPAs engaged in furious debate as to what concept has been kicked around longer — tax
reform or ;nancial standards for privately held companies. Truth is, both issues probably deserve to
be carbon-dated. Both are rooted somewhere about the time that televisions stations used to end their
daily programming with the playing of ;e Star-Spangled Banner.
But I digress. Last month, President Obama devoted a more than ;eeting mention to tax reform during
his State of the Union Address, which piggybacked on the 11th-hour agreement to extend the Bush tax
cuts for another two years and, in the process, at least projected a veneer of bipartisanship. In reality he
had little choice in the aftermath of the pasting his party took in the November elections.
Obama urged congressional leaders to traverse party lines and work on an overhaul of both corporate
and individual taxes to reduce tax loopholes. But tradition has dictated that tax reform has primarily
consisted of temporary patches and extensions in lieu of real reform, so despite the president’s exhorting Democrats and Republicans to “simplify the system and get rid of the loopholes,” we’ve all been
through this exercise before.
Nearly six years ago, Obama’s predecessor in the Oval O;ce established the President’s Advisory
Panel on Federal Tax Reform, a bipartisan panel formed “to advise on options to reform the Tax Code to
make it simpler, fairer and more pro-growth to bene;t all Americans.” After a year of meetings across the
country and a report to the Treasury Secretary, exactly nothing happened. More recently, in August, the
President’s Economic Recovery Advisory Board issued a report on tax reform options, which included
broader-based recommendations such as simplifying the Tax Code; raising the standard deduction and
reducing itemized deductions; simplifying or eliminating the Alternative Minimum Tax; broadening
the corporate tax base; and reducing tax expenditures. But delivering melli;uous oratory before both
houses of Congress amidst standing ovations is the easy part. Enacting reform is not.
While tax reform garnered prime-time coverage in the Capitol Rotunda, about 250 miles north, the
Financial Accounting Foundation, amid far less fanfare and media glare, submitted the recommendations of the Blue Ribbon Panel on Standard-Setting on the decades-old debate of whether private
companies need a separate set of reporting standards in lieu of U.S GAAP. ;e panel recommended
establishing a separate board to determine private company standards that would be overseen by the
FAF. ;e report also proposed creating a di;erential framework to facilitate a standard-setter’s ability to
“make appropriate, justi;able exceptions and modi;cations.” It did not, however, advocate a separate
GAAP for private companies, or a top-down re-organization of GAAP.
As with tax reform, there are bound to be hurdles and critics.
Our columnists Paul Miller and Paul Bahnson pointed out in our last issue that the 18-member panel
is comprised of eight preparers, four CPAs, two regulators, a lobbyist, an academic and two venture
capitalists — their argument being that a majority of preparers and auditors would advocate making
statements easier to prepare and audit, as opposed to giving users the information they need.
Either way, this year may well be the go or no-go signal for each initiative or both.
Because, as everyone knows, after all is said and done, there is usually more said than done.
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