Kent Brockman’s accountant Myron

There have been scant references in the best animated comedies of our time – The Simpsons, Family Guy, South Park – to accountants. One that stands out was in the episode of The Simpsons when the April 15th tax deadline rolled around.

Ned Flanders did his taxes on January 1st and mailed them out the same day. Due to his own internal audits performed throughout the year whenever time was available, we can be reasonably assured that his taxes were assessed as filed.

Simpsons accountantHowever, everyone else in Springfield was lined up at the post office trying to get their returns in before midnight on April 15th. (In Canada our deadline is April 30.)

Kent Brockman is doing a newscast live on location at the post office, interviewing Springfieldians in line and asking them why they waited so long to take care of their taxes.

Kent is secure in the knowledge that he gave his tax information to his accountant months ago, he notes to his viewers. Just then, a bald man with semi-circle glasses and clutching a sheaf of disorganized papers appears on screen imploring anyone nearby: “Does anyone have a calculator?”

Kent recognizes his accountant. “Myron…?”

Classic. In all likelihood though if you give us your stuff months ahead of the deadline, it’ll be done on time. The earlier the better though, especially if you’ve got multiple sources of income and other complications.

Do you know of any other accountant references from other animated shows like The Simpsons? If so, let me know in the comments!

Accountant convicted over hit on client

HitmanIn Sydney, Australia, an accountant was convicted of hiring a hitman to kill a client who he had stolen almost $84,000 from. He had failed to remit those amounts to the government for taxes owed by the victim. The motive was, unsurprisingly, to “stop Mr Williams from bringing the fraud to light.”

This is pretty crazy stuff. Seems like a tragically low amount of money to get someone killed over. I mean, how much do you pay a hitman to do the job? $10-20K? He was convicted of the fraud as well.

Here’s a New Zealander that spread $300,000 across over 80 different clients – an average of $3,750 per client. Diversifying the revenue streams allowed the enterprising chap to make much more than $84K.

Regardless, the old maxim is still holding: If you’re committing a fraud, you will get caught. Then you’ll have to decide if you want to contract the killing of the person who caught you or just face the music.

Options backdating investigation not making the SEC any friends

Tech companies are the primary focus of the SEC’s recently announced and currently ongoing investigation into options dating irregularities, which makes sense given their proclivity for awarding stock options as part of compensation packages with employees.

An article in BusinessWeek documents what tech company executives have recently termed a “witch hunt”:

Many executives are surprised by the breadth of the government’s probe, which has resulted in SEC investigations into 80 companies and criminal indictments against former executives at Brocade Communications and Comverse Technology.

I think that speaks to the rampant abuse we’re going to see coming out into the open as a result of the probe. The SEC wouldn’t investigate unless they were reasonably certain there was wrongdoing to be found.

One tech company executive, Daniel Warmenhoven of Network Appliance, is interviewed for the article. The exec spoke out publicly because the company has just performed a comprehensive review of their options practices and deemed themselves in the clear.

“I thought the SEC’s role was to build investor confidence. What they’re doing right now is destroying it, and I don’t see the purpose.”

Applying a statute of limitations to this sort of white collar crime (let’s call it what it is) would send an even worse message to investors and their brittle confidence than all this pesky investigating.

Improving compliance with regulations and GAAP will do more to inspire confidence in the markets than sweeping all this under the rug.

Google the mutual fund company

No, Google isn’t managing investments. They’re still devoted to “organizing the world’s information,” but that doesn’t matter to the SEC. A rule enacted in 1940 could cause increased regulatory headaches for the company.

Companies whose securities make up more than 40 percent of their assets can fall under restrictions that govern the mutual fund industry.

Google apparently is still awash in IPO cash, prompting the question – why did they have it if they weren’t raising funds for something? They’ve got nothing better to do than sit on $9.8-billion, which makes up nearly 70% of their total assets?

It would be “extremely onerous” for a company whose main business involves anything other than managing money to be regulated as a mutual fund, said Kenneth Berman, a former associate director in the SEC’s investment management division. For example, the 1940 law restricts companies’ ability to borrow money as well as issue stock options.

This is kind of telling, now isn’t it? Stock options are bread-and-butter compensation for tech companies, including Google. Case in point, Microsoft and Yahoo had to apply for the exemption from the rule that Google is now applying for.

The SEC will provide an exemption to companies that can show their primary business is other than investing, owning and trading securities. Google’s application said the company’s Internet, advertising and new media operations accounted for 92 percent of net income in 2005.

I don’t think there’s much of a chance that Google isn’t going to be granted the exemption. It sounds like the threshold is pretty low for justifying that the business doesn’t qualify for the regs. And the numbers back it up.

Google has a problem though, and that is what to do with all that cash. Some have already begun speculating what would happen if Google wasn’t exempted from the rules:

Google would be more likely to expand its infrastructure than spring for a large company… Google’s acquisition history shows that the company sticks to smaller companies… They’re going to continue to focus on smaller acquisitions that are predicated on proprietary technology and talented developers and engineers.

Dividends are out of the question strategically, although they are technically an option. Once dividends are paid, the expectation is they will continue to be paid in the future and the market does not look favourably on companies that buck the trend. But then, there was this about a week earlier:

On its India web site, Google has invited applications from people who can “identify and evaluate acquisition opportunities across existing and future market opportunities, drive management team decisions, lead deal execution, and help manage post-acquisition integration and performance evaluation in the South Asia Region.”

So it looks like Google might have some takers for that cash after all. Investing in India is a smart move as well. What do you think Google should do about its abundance of cash?

Accounting change results in magic surplus for Ontario government

Sometimes when I’m looking for inspiration for a blog post I’ll scan the news sites for mentions of accounting, in the hopes that there’ll be some new development I can write about. Unfortunately, in accounting, new developments aren’t frequent and usually are pretty boring. It’s the nature of the beast.

So when I found this story in the Toronto Star about how the provincial government was able to “create” a surplus this fiscal year by adjusting some of their accounting, I knew this juicy little nugget was gold.

The province also attributed the abrupt fiscal turnaround to higher-than-expected tax revenues and expenses that were lower than projected because of the new accounting procedures.

Expenses in health care were $681-million lower than planned because of the accounting changes, even though spending on health increased seven per cent year over year.

The province came in with a modest $298-million surplus, so the loss without the accounting change details above would’ve been $383-million. The government’s original budgeted deficit was $2.8-billion.

So it seems the always unexpected increase in tax revenues of approximately $2.4-billion caused the sharp fiscal improvement. The comparatively smaller accounting change nudged Ontario into the black.

I guess once they got that close to a surplus they needed something to push them over the edge, since overall it was an immaterial change. The political victory was too sweet to pass up.