Political Crossfire Forums

[ubikk]

Quicksurf wrote: I definatley agree with the first option.

What's interesting is that you would think the IRS would catch on, and notice the difference between the financial reports sent to the share holders and the reports sent to them. :think:

I don't think that legally, they have any authority over what a corporation reports to shareholders. They only care about what is sent to them for tax purposes.

[Quicksurf]

ubikk wrote: Quicksurf wrote: I definatley agree with the first option.

What's interesting is that you would think the IRS would catch on, and notice the difference between the financial reports sent to the share holders and the reports sent to them. :think:

I don't think that legally, they have any authority over what a corporation reports to shareholders. They only care about what is sent to them for tax purposes.

I guess so. But it doesn't make any sense that they wouldn't care that the reports were different.

[Winchester]

Quicksurf wrote: I definatley agree with the first option.

What's interesting is that you would think the IRS would catch on, and notice the difference between the financial reports sent to the share holders and the reports sent to them. :think:

There is almost always a difference. Tax basis financial reporting is not the same type of financial reporting that the SEC requires companies to report their shareholders.

There is nothing for the IRS to catch on about. As part of the companies tax return, the company is required to reconcile the differences between the "book" financial reports that are required by the SEC and the "tax" financial reporting that is required by the IRS.

This whole thread seems to be implying that because a company needs to keep two sets of books to comply with two different regulatory entities that the company is somehow commiting fraud. This is not the case.

The vast majority of taxpayers only need to keep their books on the cash/tax basis of accounting to comply with the tax law, they have no need for a "second" set of books for financial reporting. So in fact one set of books is adequate for most people, but most people don't have to deal with SEC requirements either.

As I said earlier I would have no problems with the corps tax return(s) being released to the shareholders, but most of the information is already in the companies financial statements if a person were to read the financial statements.

[LetsGetReal]

Winchester I'm in complete agreement with you. I don't think you people understand accounting and the principles used in its functions.

Books sent to IRS=Time constraint on the tax liabilities of certain assets given by the tax code.

Books sent to Shareholders=Time constraint is determinant on the length of the fixed assets abilitiy to be used.

Here is an example from my work. We bought a GE 3T MRI machine and it costs a around 2 million dollars. Now to the IRS its only able to be a deduction of profits for lets say 2 years, but the length of our loan is 5 yrs. So if we were to show the shareholders the same report as the IRS they would be expecting the machine to be over and done with in 2 years when it actuallity it will be 5. I didn't really get in to deep to the accounting behind it, I tried to put in as general terms as possible.


Books to IRS= Debt Increased due to shortened time frame.

Books to Shareholders= Debt Decreased due to legitimate terms for fixed assets.

[Winchester]

LetsGetReal wrote: Winchester I'm in complete agreement with you. I don't think you people understand accounting and the principles used in its functions.

No I don't think they understand completely either, I'm doing my best to explain it as simply as I can, but if I started going into Assets, Liablities, Equity, Income, Expenses, Debits, Credits, Balance Sheets, Income Statements, Statement of cash flows, footnotes, estimated useful lives, income recognition principles, Cash basis of accounting, tax basis of accounting, GAAP basis of acctg, and other comprehensive basis's of acctg., etc. and then through in tax law, everyone's eyes would glaze over.

[LetsGetReal]

I tried to make it as simple as possible with the limited knowledge I have I'm only an assistant, not a full blow accountant. :D

[Quicksurf]

LetsGetReal wrote: I tried to make it as simple as possible with the limited knowledge I have I'm only an assistant, not a full blow accountant. :D

Are you trying to be a CPA?

[LetsGetReal]

Quicksurf wrote: LetsGetReal wrote: I tried to make it as simple as possible with the limited knowledge I have I'm only an assistant, not a full blow accountant. :D

Are you trying to be a CPA? Oh God no, they do a lot of work and don't get paid that well. Plus our CPA has to deal with our directors and half the time they don't get what he's saying. Doesn't look like a fun job... :?

[Winchester]

LetsGetReal wrote: I tried to make it as simple as possible with the limited knowledge I have I'm only an assistant, not a full blow accountant. :D

In your example I would have said under tax law after 2 years you show a piece of equipment with $0 value on the books but still show approximately $1.2 million in debt. Also earnings would have been understated to shareholders by the same $1.2 millon over those first two years and over the following 3 years the company would overstate its earning by $1.2 million.

I'm probably still talking Greek though.

People need to keep in mind that tax basis of accounting for large publically traded companies is probably the least accurate way of financial reporting. These companies have lots of money and influence and are able to lobby congress to pass very specific tax laws that will give them accelerated write offs for tax purposes.

My current favorite tax bill that snuck through last year actully allows certain companies to write off more expense than they have had to pay for. Say for example a company has $100,000 in legitamate expenses, certain companies can take a dedution for $106,000 even though they will never have to pay cash for that extra $6000 deduction. What congress did was actually give favored tax cuts to certain industries (who I assume payed off key congressment to get the bill). Congress then wrote the bill in such a way that hardly anyone understood what they were really doing. If people understood that manufactures and producers (yes I'm pretty sure this includes oil and gas producers such as Exxon) got a tax rate decrease while no other corporations did, people might get mad.

[gavnook]

LostSoul3412 wrote: I wasn't aware of this... American law should be the same as British law in this case. Anything else is fraud and lying to the owners of the corporation (the shareholders).

Bookkeeping is not an exact science. For instance, there is no way to accurately keep track of the cost of awarding stock options. The actual cost depends on the future success of the company, a difficult thing to predict. One method may be better than another for a certain purpose, and a different method might make more sense for another.