Category Archives: sccm

A New Way of Identity Theft

Category : Blog , sccm

How is Facebook now using Social Security numbers (SSNs)? Members of Congress are seeking answers about Facebook’s new policy of collecting the last 4 digits of political advertisers’ SSNs. The House Ways and Means Social Security Subcommittee sent a letter to Facebook CEO Mark Zuckerberg about the policy. The bipartisan group, which has jurisdiction over SSNs, cited “concerns about the problem of identity theft, including the risk associated with SSNs being stolen,” given the massive data breaches of recent years. To read the letter click here:

ABLE Accounts

Category : Blog , sccm

People with disabilities have more incentives to save. Due to the recent tax law, those with disabilities can now put more money into tax-favored Achieving a Better Life Experience (ABLE) accounts. And they may, for the first time, qualify for the Saver’s Credit (for low- and moderate-income workers) as well as roll money from 529 plans (qualified tuition programs) into their ABLE accounts. ABLE accounts enable people with disabilities and their families to save for and pay disability-related expenses. Contact us and visit for more details.

Which intangibles should private firms report following a merger?

Category : Blog , sccm

2018 is expected to be a hot year for mergers and acquisitions. But accounting for these transactions under U.S. Generally Accepted Accounting Principles (GAAP) can be complicated, especially if the deal involves intangible assets. Fortunately, the Financial Accounting Standards Board (FASB) offers a reporting alternative for private companies that simplifies accounting for new business combinations, avoiding a lot of red tape.

Private performance metrics

Companies that merge with or acquire another business must identify and recognize — separately from goodwill — the fair value of intangible assets that are separable or arise from contractual or other legal rights. Valuing intangibles can be costly, subjective and complex, often requiring the use of third-party appraisers and increasing audit costs.

When it comes to private business combinations, however, investors, lenders and other stakeholders question whether the benefits of reporting the values of all of these intangibles outweigh the costs. Private company stakeholders are primarily interested in tangible assets, cash flows, and earnings before interest, taxes, depreciation and amortization (EBITDA). Such metrics are unrelated to how companies report intangible assets in M&As.

Moreover, buyers in private business combinations generally evaluate a for-sale business based on its expected earnings and cash flows. They don’t customarily assign specific values to all of the seller’s intangible assets, especially not those that can’t be sold or licensed independently.

Exception to the rules

Since 2015, the FASB has allowed private companies to elect an accounting alternative that exempts noncompetes and certain customer-related intangibles from being identified and reported separately on the balance sheet after a business combination. This guidance requires no new disclosures for companies that elect this alternative accounting treatment.

Private companies that elect this alternative report fewer intangible assets in business combinations, thereby simplifying accounting for intangibles on the acquisition date and amortization in future periods. But the alternative doesn’t eliminate the requirement under GAAP to recognize and separately value other intangible assets acquired in business combinations, such as trade names and patents.

In addition, private companies with noncompetes and other customer-related intangibles that were acquired before the adoption of the alternative must continue to amortize those intangibles over the expected life that was set when the business combination occurred.
Although the reporting alternative simplifies matters, private companies will in most cases continue to need third-party appraisals for other separable and contract-based intangibles. Outside appraisals can be costly, but auditors typically won’t rely on fair value estimates made by management for these items.

Get it right

Accounting for business combinations can be complicated. And mistakes can lead to restatements and write-offs in future periods that may alarm stakeholders. We can help take the guesswork out of postacquisition accounting, including deciding whether to elect private company reporting alternatives and allocating the purchase price among acquired assets and liabilities. Contact us for more information.

© 2018

How will the Tax Cuts and Jobs Act affect state income taxes?

Category : Blog , sccm

State legislatures have been busy formulating responses to changes brought by the TCJA. Many have already passed conformity statutes. Others have issued preliminary reports to clarify for the public how the TCJA impacts their state income taxes, including changes to standard and itemized deductions, personal exemptions and more. Still other states have enacted laws to decouple from specific changes. For example, the state of Nebraska has reinstated the personal exemption eliminated by the TCJA.

Tax Benefit

Category : Blog , sccm

Taxpayers who itemize deductions on their tax returns may get a tax benefit by donating money and items to qualified organizations, if they can prove the donations. In one case, the IRS denied some of the charitable deductions claimed by an aerospace engineer and his consultant wife due to inadequate proof, and the U.S. Tax Court agreed. The couple donated money to their church, but instead of receipts, they submitted calendar entries with few details. They also donated household items but failed to adequately address the condition of the items. (TC Memo 2018-75)