Michigan Business Tax Nails Trucking Companies Who Use Contract Haulers

The new Michigan Business Tax ("MBT") is really good. At getting bad press, that is. And unfairly penalizing various industries.

Specifically, under the MBT, payments to contract haulers are not deductible. You can deduct costs paid for the hauling you do yourself, but not to contact haulers. Why? Who knows. Maybe the trucking lobbyists didn't get their two cents in. But this is just another part of the fine print that is really hurting businesses throughout Michigan.

To the best of my knowledge, most Michigan ready mix producers do their own hauling. But if you are using any brokers or guys that own their own mixers, it is going to cost you. And if you are thinking about starting to use brokers, think twice until this gets cleaned up.

New Document - Managing the Business Risk of Fraud

The Association of Certified Fraud Examiners (yours truly is a proud member) has a new document you can download on its website: Managing the Business Risk of Fraud: A Practical Guide. The guide is a good overview of what every business, small and large, should consider doing to reduce the risk of fraud occurring.

The guide is 80 pages long, and for me at least there wasn't a tremendous amount new in the main part of the document. However, several of the appendixes are very good and potentially very useful to the small businesses I usually work with:

• Appendix C: Sample Fraud Policy - This appendix is about 4 pages long and can be used as the starting point for a business fraud policy.
• Appendix D: Fraud Risk Assessment Framework Example - the example focuses on potential revenue recognition risks for a business. What I like about it is you often read that you should do something like this, but finding a good example of one is hard to find.
• Appendix E: Fraud Risk Exposures - the material notes it is a sample from an anonymous entity and isn't necessarily complete. It is though a solid listing of potential fraud risks.
• Appendix F: Fraud Prevention Scorecard and Appendix G: Fraud Detection Scorecard - concise tests a business can take to see how they are doing on prevention and detection.
  80 pages is a lot of material.

If you are serious about reducing your fraud risks, this is a good place to start

More Pension Accounting Changes Coming - Watch Out Multiemployer Plans

Just read a good analysis of what may be coming in pension accounting changes. The FASB issued Statement 158 in 2006, which put net benefit plan balances on the balance sheet. This is supposed to be the start of more changes.

Which we didn't hear much about until yesterday's meetings. One thing that may change in the future is the institution of some accounting standards and disclosure requirements for multiemployer plans. This could be a significant issue for producers in union environments, as the union plans are almost always multiemployer plans.

While it uncertain what will happen, something will happen.

Fair Value Accounting

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. The new rule affects over 40 existing accounting standards — including those used to value stock options (FAS 123) and derivatives (FAS 133). And, for calendar year companies, it’s scheduled for implementation beginning the first quarter of 2008.

Advocates say that fair-value accounting will assist users of financial statements in obtaining a far clearer picture of the true economic state of a company. Achieving this “clearer picture,” however, is not without its difficulties. Concepts like exit price, highest and best use, in-use and in-exchange valuation premises, principal or most advantageous market, and the perspectives of market participants...; these are just a few of the concepts that must be understood and are introduced by Statement 157.

What does it mean for a concrete producer? More confusion. I'm a CPA and it is already confusing me.

IRS To Demand More Detailed Data Next Year

Per the Kiplinger Washington Letter, the IRS is expected to require additional detailed data from larger businesses in 2008:

• Form 1120 (C Corporations): Corporations will have to list entities that are at least 10% owners and any individuals who own more than 50%. Corporations will also have to disclose more details about foreign firms they own. New Schedule B for corporations with $10 million or more in assets will ask a variety of questions related to Schedule M-3, changes in accounting method and more; see a draft here.
• Form 1065 (Partnerships and LLCs): Expect this form to be revamped to get more details about cancelled debt, like-kind exchanges and more. A new Schedule C will have questions about majority owners and related-arty transactions.

The IRS though cut a break for small partnerships - those with assets under $1 million won't be required to file several other schedules. This is an increase from $600,000.

It will be pretty easy for producers with large asset bases to be subject to these new disclosures.

Accounting for Emission Credits - Part II

I happened to see an accounting professor from Detroit's Wayne State University this morning so I naturally took advantage of the situation to ask him his thoughts on accounting for emission credits. He reached the same conclusion I did in my earlier post on the subject - there isn't really a way under current generally accepted accounting principles.

One possible way to do so would be to recognize some kind of a deferred revenue/liability that would offset the value of the credits, but that doesn't accomplish much. The professor also brought up that the credit may only have value based on future events. He recognized that this result is a shortcoming of the current accounting model.

IRS Will No Longer Challenge Negative Additional Sec. 263A Costs

Section 263A is the Uniform Capitalization Rules relating to inventory. Enacted about 1986, it essentially requires companies that fall under its requirements to include more costs in inventory than they would otherwise do for financial accounting purposes. In other words, it was a revenue raiser - keep more costs in inventory and off the income statement.

Section 263A isn't usually a major problem for the typical producer who only has a few days inventory on hand. But producers with quarries, block operations or anything else that qualifies as finished goods can be subject to it.

Just read an article in CPA2Biz on that provides a pretty good summary on the subject.