Don’t always believe a balance sheet

Financial Times

According to the latest data from the Bank for International Settlements, the central bankers’ central bank, the total amount of outstanding derivative contracts has declined from a 2012 peak of $700tn to about $550tn. To put this into perspective, the figure has fallen from just under three times the value of all the assets in the world to a little over twice the value. The largest element is interest rate swaps followed by foreign exchange derivatives. Credit default swaps, the instrument at the heart of the 2008 global financial crisis, are now relatively small — if you can accustom yourself to a world in which $15tn is a small number. It is only slightly less than the US gross domestic product (a little more than $18tn in the final quarter of 2015).

Trade Groups Urge Leasing-Rule Exemption for Private Firms

Bloomberg BNA

Some of the nation's trade organizations asked the Financial Accounting Standards Board to exempt private companies from applying the forthcoming lease accounting standard that's expected to be issued in late February. In a letter dated Jan. 29, the organizations also urged FASB and its Private Company Council to disclose what private company investor interest is being addressed in the leases standard, “and what private company investors were consulted” in their discussions. The organizations, which include the U.S. Chamber of Commerce and Financial Executives International, expressed concerns that application of the lease accounting standard would be harmful for private companies. 

Auditors Who Prepare Tax Returns Tend to Be More Cautious

Accounting Web

Company tax returns done by outside auditors claim almost a third fewer questionable benefits than those prepared by outside accountants or company in-house tax preparers. That’s the key finding of a new study, The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness, published in the January/February issue of the American Accounting Association journal, The Accounting Review. Why would external auditors be more cautious? Because they’ve got more to lose. By providing audit and tax services, they face greater costs compared to other preparers if an audit or court action overturns a position, the study states.

Traders Fear Intrusion into Personal Data

Wall Street Journal

Regulators face a stark problem in the fast-paced world of modern financial markets: How can you track who is trading what, and more important, how can you ensure that markets are not being abused? In proposed reporting rules within the revision of the EU’s trading rule book—the Markets in Financial Instruments Directive—regulators are demanding that personal details are recorded with every trade to monitor for market abuse. However, some in the market worry the rules go too far, particularly as personal particulars would have to be provided not only by those who executed the trade, but the representatives of the client firm that sent the order.

SEC Issues Crowdfunding Alert

ThinkAdvisor

As the May effective date for the Securities and Exchange Commission’s crowdfunding rules draws closer, the agency has released a primer for investors who wish to participate in such ventures. On Tuesday, the SEC released an Investor Alert detailing the parameters – and potential risks — associated with crowdfunding. Companies can use crowdfunding to offer and sell securities to the investing public starting May 16. Funding portals could begin registering with the Commission in late January.  The alert notes that while anyone can invest in crowdfunding, there are numerous risks involved because crowdfunded projects are early-stage ventures, and there are limits to how much a person can invest during any 12-month period in these transactions.  The SEC alert notes the limits depend on net worth and annual income.

The Plot to Kill the $100 Bill

Wall Street Journal

The $100 bill is America’s most popular currency denomination. It also could be the most endangered. The European Central Bank is considering eliminating its highest paper currency denomination, the €500 ($558) note. Now former Treasury Secretary Lawrence H. Summers is calling for a global agreement by monetary authorities to stop issuing notes worth more than $50 or $100. While Benjamin Franklin wouldn’t immediately lose his place on the face of American money, no new $100 bills would be issued under Mr. Summers’s plan. “I’d guess the idea of removing existing notes is a step too far. But a moratorium on printing new high-denomination notes would make the world a better place,” Mr. Summers wrote in an item for The Washington Post’s Wonkblog.

The Growing Importance of the Dodd-Frank Whistleblower Program in Preventing Fraud

Accounting Today

Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in response to the 2008 financial collapse and the recession that followed. Passed in 2010, the goals of the Dodd-Frank Act include promoting the financial stability of markets within the United States, ending the systemic risk generated by financial institutions that are “too big to fail,” protecting taxpayers by ending bailouts, and protecting the public from abusive financial services practices. Congress viewed whistleblowers as an integral tool for accomplishing these goals. The Dodd-Frank Act established a securities whistleblower incentives and protection program that is administered by the Securities and Exchange Commission through its Office of the Whistleblower.

The Latest Topics Topping Accounting Restatements

Bloomberg BNA

Three accounting topics companies’ management should be currently vigilant about are: debt-equity accounting, statement of cash flows classification, and income tax accounting. Staff from the Securities and Exchange Commission’s office of the chief accountant recently said that those three topics are currently the area’s most commonly identified in a restatement.  Though restatements have been down since their peak during years immediately following implementation of Sarbanes-Oxley, they’re still flourishing.  In more recent years, restatements have held at a total of 874 in 2014 and 541 through the beginning of September 2015, SEC deputy chief accountant Wesley Bricker said at a recent industry conference. All of the topics flagged by the SEC have been on the Financial Accounting Standards Board’s standard-setting radar in one way or another over the past couple of years.

Fed’s Neel Kashkari: Break Up the Big Banks

Wall Street Journal

The Federal Reserve’s newest bank president, a Republican who served as a top Treasury Department official during the financial crisis, called Tuesday for policy makers to consider breaking up big banks to prevent future government bailouts. In his first public remarks since taking over as chief of the Federal Reserve Bank of Minneapolis in January, Neel Kashkari said efforts to rein in the banks through the 2010 Dodd-Frank law “did not go far enough.” The law hasn’t ended the problem of banks so big that their collapse would endanger the financial system and economy, forcing the government to rescue them in a crisis, he said, referring to institutions considered “too big to fail.”