Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
|
The Department of Housing and Urban Development (HUD) has made several changes to the reporting requirements for supervised mortgagees. Beginning with HUD Mortgagee Letter 2009-31, supervised lenders were required to submit annual audited financial statements electronically through HUD’s LASS on-line system.
In January 2011, HUD issued Mortgagee Letter 2011-05 that revised the audit reporting requirements for supervised lenders. The revised reporting requirements allow a supervised lender in a parent-subsidiary structure to submit audited consolidated financial statements of the parent company if the parent company executes a written guarantee of the on-going net worth and liquidity compliance of the FHA approved subsidiary. The FHA approved lender is also required to submit their fourth quarter Call Report, a Compliance Report and an Internal Control Report. This Mortgagee Letter still requires submission of audit reports on the LASS system.
In July 2011, HUD issued Mortgagee Letter 2011-25 that further revised the reporting requirements for small supervised lenders and provided a reprieve from the audited financial statements requirement. Supervised lenders with assets of less than $500 million are not required to submit audited financial statements nor an audited computation of net worth. This new exemption for audited financial statements will expire on April 7, 2012 and there has been no guidance regarding what will happen after the expiration date. The lender must still submit their fourth quarter Call Report and Compliance and Internal Control Reports issued by an independent auditor.
HUD has issued Frequently Asked Questions for Mortgagee Letter 2011-25 in which HUD states that supervised lenders with less than $500 million in assets may mail hard copies of the required reports rather than submitting them on the LASS system. This is because the LASS system has not yet been updated to accept submissions under these revised reporting requirements. There are specific requirements for mailed hard copies such as
1) you must submit two copies of each report,
2) you must include a cover letter with the FHA lender/mortgagee identification number that claims the exemption for supervised lenders under the April 7, 2011 waiver, and
3) the FHA lender/mortgagee identification number must be written on the upper right-hand corner of each separate document.
Financial institutions need to engage a CPA firm to perform the necessary compliance and internal control audit procedures and to issue the compliance and internal control reports. The procedures to be performed by the CPA firm and report examples are outlined in chapters 1, 2 and 7 of the HUD Handbook Consolidated Audit Guide for Audits of HUD Programs.
In summary, as it stands right now, if you are an FHA Supervised Lender with total assets under $500 million, there is no financial statement audit requirement for 2011. You are required to submit your fourth quarter call report and both the Compliance and Internal Control Reports as previously discussed. These reports may be submitted via mail which is a significant reprieve from the challenges of the LASS system.
If you have any questions on these reporting requirements, please feel free to contact Ellen Fisher at any time by phone at (719) 630-1186 or email efisher@skrco.com.
|
|
November 14, 2011
Colorado's Enterprise Zone program provides tax incentives to encourage businesses to locate and expand in designated economically distressed areas of the state. There are 16 Enterprise Zones and 2 sub-zones in Colorado. The taxpayer must be located in an enterprise zone to take advantage of many of these credits. To view the EZ Map, Click Here.
Here are the available credits:
TAX CREDIT |
CREDIT AMOUNT |
FORM |
FACT SHEETS |
Investment Tax Credit |
3% of equipment purchases |
||
Job Training Tax Credit |
10% of qualified training expenses |
||
New Business Facility (NBF) Jobs Credit |
$500 per new job |
||
NBF Ag Processing Jobs Credit |
$1,000 total per new a.p. job |
||
NBF Health Insurance Credit |
$200 x 2 years per new h.i. job |
||
R&D Increase Tax Credit |
3% of increased R&D expenditures |
||
Vacant Building Rehabilitation Tax Credit |
25% of rehabilitation expenditures |
||
Manufacturing / Mining Sales and Use |
Expanded S&U tax exemption in EZ |
||
Commercial Vehicle Investment Tax |
1.5% of commercial vehicle |
||
Contribution Tax Credit |
25% of cash (12.5% in-kind) donations |
If your business will perform an activity on or after January 1, 2012 that will earn an EZ business tax credit, Colorado Revised Statute 39-30-103(7)(a) requires that your business receive pre-certification prior to commencing the activity that will earn the credit. Pre-certification is not required for the Contribution Tax Credit or the Manufacturing/Mining Sales and Use Tax Exemption.
Since pre-certification must be completed before activities are performed (i.e. purchase of equipment), we recommend that all businesses located in an enterprise zone pre-certify by 12/31/2011.
Forms DR0074, DR0076 and DR0077 can be certified electronically through the Colorado Web Portal (Click HERE to access.) Please remember to print a copy of the form before submitting. Upon receipt, an email will be sent approving your certificate, which you also need to print. Both the applicable form(s) and approval email must be sent to the Colorado Department of Revenue upon filing your income tax return.
Once a business has received the final "certified" EZ tax credit form, a business that is claiming an EZ tax credit will be required to file their income taxes electronically, unless the business will experience an "undue hardship because the taxpayer does not have access to a computer, or does not have sufficient internet access, internet capability, or computer knowledge to file income taxes electronically.”
(Effective January 1, 2011)
Colorado House Bill 10-200 sets a temporary requirement that businesses defer claiming an EZ Investment Tax Credit (ITC) that exceeds $500,000 in years 2011, 2012, and 2013. Businesses are “allowed to claim the deferred credit as an ITC carryover for 12 income tax years following the year the credit was originally allowed plus 1 additional income tax year for each income tax year that the credit was deferred.”
Since pre-certification must be completed before activities are performed (i.e. purchase of equipment), we recommend that all businesses located in an enterprise zone pre-certify by 12/31/2011.
The Colorado Office of Economic Development and International Trade (OEDIT) oversees the EZ program as staff for the Economic Development Commission. For more information on the EZ Program, visit the Colorado Enterprise Zone website (www.advancecolorado.com/ez). As your business consultant and tax advisor, we would also be happy to discuss any questions you might have. Call us at (719) 630-1186 or through our Secure Email.
|
September 22, 2011
There have been discussions about separate private company accounting standards for years. Now standard-setters may actually do something about it. The Financial Accounting Foundation (FAF) — parent organization to the Financial Accounting Standards Board (FASB) — will soon decide whether to adopt recommendations made earlier this year by a blue-ribbon panel on standard setting for private companies.
The panel recommended that the FAF establish a separate, private company standards board to develop appropriate exceptions and modifications to U.S. Generally Accepted Accounting Principles (GAAP) that would “better respond to the needs of the private company sector.” The new board would work closely with FASB, and its standards would be incorporated into FASB’s Accounting Standards Codification (ASC).
However, the board would have final authority over all exceptions and modifications. The panel also recommended the creation of a “differential framework” to guide the new board’s standard-setting activities.
In the United States, public and private companies, for the most part, are subject to the same set of accounting standards — GAAP. Public companies are required under SEC rules to prepare audited, GAAP-compliant financial statements. Generally, private companies aren’t legally obligated to follow GAAP, but they may need to do so to satisfy lenders, sureties, venture capitalists or other stakeholders.
Preparing GAAP financial statements can be a challenge for private companies, particularly in the current environment. During the last several years, FASB has been shifting toward a fair-value-based accounting approach. In other words, GAAP increasingly requires companies to report assets and liabilities at fair value rather than historical cost. This trend is increasing the complexity and cost of complying with GAAP, which now demands periodic valuations and impairment testing for many financial statement items.
This type of information is valuable to public company investors, who use it to evaluate the price of securities traded in the stock exchanges or other public markets. But lenders and other users of private company financial statements tend to be less interested in fair value and more interested in free cash flow and a company’s ability to pay its debts. In some cases, GAAP can make it more difficult for these users to get the information they need.
Consider, for example, employee stock options. Historically, these options were reported at their “intrinsic value” — that is, the amount (usually zero) by which the underlying stock’s market value on the grant date exceeded the option exercise price. Several years ago, however, FASB modified its standards to require companies to expense employee stock options based on their grant-date fair value, using one of several option-pricing models.
Valuing options can be complex — especially for private companies with limited trading data. Plus, many lenders view stock options as a noncash expense that has little effect on a company’s ability to pay its debts. So, from their perspective, reporting options at grant-date fair value actually distorts the company’s income. For that reason, they add the expense back into net income when evaluating a company’s financial statements.
Proponents of separate private company accounting standards point to fair value reporting as well as other GAAP provisions that may be irrelevant at best and counterproductive at worst in a nonpublic setting. They include:
As a result, many private companies prepare non-GAAP financial statements — on a cash or income tax basis, for example — while others opt to receive “qualified” opinions from their auditors. Many lenders accept these financial statements or waive certain GAAP requirements because they recognize that compliance can be burdensome and that many GAAP standards lack relevance for private companies.
The concept of separate standards for private companies isn’t without its critics, however. Some opponents argue that financial statements are either correct or they aren’t, and that separate standards will lead to inconsistency and lack of comparability.
They advocate a single set of standards that can be modified, if appropriate, on a case-by-case basis by agreement between a company and its financial statement users. They also contend that, if GAAP standards are overly complex or burdensome, they should be simplified for all companies, both public and private.
The blue-ribbon panel considered several models for addressing the needs of private companies, including a standalone GAAP built from the ground up and several versions of International Financial Reporting Standards (IFRS), including IFRS for Small and Medium Entities.
In settling on U.S. GAAP with exceptions and modifications for private companies, the panel explained that a standalone set of standards could take a significant amount of time to create and could be significantly different from current U.S. GAAP. It also rejected the various IFRS options, noting that “U.S. private companies should not be leading the charge, en masse, to an IFRS-based set of standards before the SEC makes a decision on U.S. public companies…”
The panel concluded that a new board with standard-setting power would be the most effective approach. In the panel’s view, FASB is too focused on public company financial reporting to address the needs of private companies.
The panel noted that FASB’s Private Company Financial Reporting Committee (PCFRC) has submitted approximately 40 recommendation letters since it was formed in 2007. Although FASB has modified some standards, generally by changing effective dates or disclosure requirements for private companies, the panel concluded that many private company stakeholders view the PCFRC’s work as “not being wholly successful because the FASB has not also shown a willingness to consider carefully and approve, where appropriate, the possibility of measurement, recognition, or presentation differences.”
It’s not yet certain how the FAF will respond to the blue-ribbon panel’s recommendations. But there’s widespread support for the panel’s approach among accountants and finance executives, as reflected in the vast majority of nearly 2,000 letters the FAF has received. Keep in mind that the FAF’s decision and ultimate approach may be affected by the SEC’s decision, expected later this year, on whether to adopt IFRS for U.S. companies.
If you own a private company and have questions about how the blue-ribbon panel’s proposed recommendations might affect how you prepare your financial statements, please give us a call. We would be happy to answer your questions.
DATE: Tuesday, December 6, 2011
TIME: 3:00-4:30 p.m.
LOCATION: The FIne Arts Center, Music Room
PRESENTERS:
Judy Kaltenbacher, CPA, Managing Tax Partner
Doreen Merz, CPA,Tax Manager
Jordan Empey, CPA, Supervising Senior Tax Consultant
For more information on this seminar, CLICK HERE
Date and location to be determined.
For more information on this seminar, check back with us.
|
June 29, 2011
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provided many answers regarding the estate tax, but, unfortunately, the act created additional questions as well. With certain estate tax law provisions scheduled to expire after 2012, estate planning uncertainty remains. This article explains how making lifetime gifts can take advantage of the current high exemption amount and low tax rate and details ways to add flexibility to an estate plan to prepare for potentially lower exemptions and higher rates in 2013.
In response to rising gasoline prices, the IRS has raised the standard mileage rate for business use of an automobile from 51 cents per mile to 55½ per mile, effective July 1. The medical and moving standard mileage rate is increasing to 23½ per mile, also on July 1.
The new optional standard mileage rates will apply until superseded by future guidance and can be used by taxpayers to calculate the deductible costs of operating an automobile. Alternatively, taxpayers can instead use their actual costs, but must maintain adequate records and be able to substantiate their expenses.
The standard mileage rate for services to charitable organizations is set by statute at 14 cents per mile and remains unchanged.