1. Accounting & Tax Update FEI NE Wisconsin Chapter November 16, 2009

2. 1 Agenda SFAS No. 141R - Business Combinations New and Proposed Tax Changes FIN 48 – Accounting for Uncertainty in Income Taxes Roth Conversions Alternative Minimum Tax Planning SFAS No. 157 - Fair Value Measurements & Disclosures Gifting Opportunities IRS & Wisconsin Audit Update Other Accounting Updates Other Tax Updates

3. 2 Presenters Christopher J. Handrick, CPA Audit Shareholder, Schenck SC –920-455-4203 –chris.handrick@schencksc.com James A. Olson, CPA Tax Shareholder, Schenck SC –920-455-4160 –jim.olson@schencksc.com

4. 3 Presenters Christopher J. Handrick, CPA Audit Shareholder, Schenck SC –920-455-4203 –chris.handrick@schencksc.com James A. Olson, CPA Tax Shareholder, Schenck SC –920-455-4160 –jim.olson@schencksc.com

5. 4 SFAS No. 141R - Business Combinations

6. 5 Effective Date Fiscal years beginning after December 15, 2008 (i.e. 1/1/09 for calendar-year companies) –Acquisition date on or after –Early adoption prohibited

7. 6 Overview SFAS 141R requires measuring and recognizing the business acquired at full acquisition date fair value Highlights of changes from previous guidance follows.

8. 7 Direct External Acquisition Costs Old: Added to purchase price New: Expensed as incurred –Exception: Cost associated with issuing debt or securities are still accounted for in accordance with applicable GAAP rules

9. 8 Recording of an Acquisition Old: Cost accumulation approach –Cost is allocated to acquired assets and assumed liabilities at estimated fair values with numerous exceptions, excess is goodwill. New: Total value of the acquiree is the acquisition date fair value of (generally): –Consideration transferred –Any entity interest held in the acquiree by the acquirer immediately before the acquisition date (step acquisition) –Non-controlling interest in the acquiree recognized at fair value

10. 9 Contingent Consideration Old: Not recorded until earned and recognized as additional purchase price. New: Recorded at its fair value at acquisition date –Subsequent adjustments of contingent consideration classified as a liability recognized through earnings

11. 10 Bargain Purchases Old: Negative goodwill allocated as prorata reduction to other fair value adjustments (i.e. intangibles or fixed assets), any excess to income statements as extraordinary item. New: Recognized by acquirer as a gain (not extraordinary) on income statement at date of acquisition.

12. 11 Restructuring Activities Old: Restructuring plans of acquirer related to “target,” generally incorporated into purchase accounting. New: Acquirer’s restructuring plan accounted for separate from business combination accounting.

13. 12 Purchase Price Allocation Uncertainties Old: Generally one-year period from acquisition date to make adjustments. New: Provisional accounting created at acquisition date and disclosed. –Revisions of initial estimates require retrospective application.

14. 13 Income Tax Accounting Changes Old: Decreases in acquirer’s valuation allowance part of purchase accounting New: Changes in valuation allowance generally reflected in the income statement.

15. 14 Income Tax Accounting Changes Old: Subsequent changes to valuation allowance related to target recorded at acquisition would first reduce goodwill to zero, then other intangibles, finally income tax expense. New: For changes not considered measurement period adjustments, change would generally be reflected in income statement.

16. 15 Tax Changes New & Proposed

17. 16 The Worker, Homeownership, and Business Assistance Act of 2009 Signed into law on November 6, 2009 Expanded ability to carry back NOL’s Expanded credits for purchase of new homes

18. 17 NOL Carrybacks For “eligible small businesses” (under $15 million gross receipts), the ability to carry back losses 3, 4 or 5 years is extended to 2009 tax years also For larger companies, the longer carry back periods are available for 2008 OR 2009, but not both

19. 18 NOL Carrybacks For large and small companies, carry backs to the 5 th prior year are limited to 50% of the income in the carry back year, the balance rolling to the 4 th prior in full, and so on. However, this limitation does not apply to 2008 NOL’s for eligible small businesses The 90% income limitation on the use of NOL’s for AMT purposes is suspended for an extended carry back year

20. 19 First Time Homebuyer Credit The November 30, 2009 expiration is extended to April 30, 2010 If a binding contract to close is done by April 30, closing can take place up to June 30, 2010 and still be eligible for the credit For purchases in 2010, an election can be made to claim the credit on the 2009 return (similar to the current rule) AGI phase out raised to $125K single and $225K joint

21. 20 First Time Homebuyer Credit Effective November 6, 2009 purchase price of residence cannot exceed $800,000 Effective November 6, 2009 the credit is expanded to “long time residents of the same principal residence” –Owned or used the same principal residence for any 5 consecutive years of the past 8 –Maximum credit is $6,500, vs. the $8,000 for first time buyers

22. 21 Proposed Tax Increases Automatic Restoration of 2001 tax rates in 2011 Present Rates 2011 Rates 10% - 15% 15% 25% 28% 28% 31% 33% 36% 35% 39.6%

23. 22 Proposed Tax Increases Capital Gain and Qualified Dividend rates automatically restored to 2001 Present Rates 2011 Rates Cap Gains 0% 10% 15% 20% Qualified Dividends 0% ordinary 15% income rates

24. 23 Proposed Tax Increases The Obama Administration has proposed extending the 0% and 15% rates for dividends and capital gains for taxpayers with income up to $250K joint or $200K single. For taxpayers above these limits, the capital gain rate would go back to 20%, and dividends would be taxed at the same rate, under the proposal. STAY TUNED!!!

25. 24 Proposed Tax Increases Strategies in anticipation of higher rates –Defer capital losses –Extract excess liquidity via dividends or partial redemptions of stock –Accelerate installment sale gains elect out of installment reporting in ‘09 and ‘10 “dispose” of pre-’09 installment contracts create new installment sales and lock in the current low interest rates

26. 25 FIN 48 Accounting for Uncertainty in Income Taxes

27. 26 Overview Effective for private companies & NFPs fiscal years beginning after 12/15/08 (originally 12/15/06 but the FASB delayed implementation for private companies via FASB Staff Position No. FIN 48-3) Applies to all entities that prepare GAAP financials (i.e., C-corps, pass-through entities, NFPs, etc.) including all subsidiaries in consolidation. OCBOA f/s are not GAAP (i.e., cash basis, income tax basis, modified cash, etc.). Further interpretation of SFAS No. 109 (effective since 1992)

28. 27 Overview Most tax positions are not “controversial”…but tax law is subject to varied interpretation and whether that tax position will be sustained can be uncertain FAS 109 didn’t contain guidance on how to address “uncertainty” in income taxes FIN 48 requires a detailed review, documentation and recording of any potential income tax exposures from tax positions related to all open tax years Private companies generally will have fewer number of uncertain tax positions than public companies due to size and volume of transactions.

29. 28 Overview Income tax only…taxes such as payroll, sales, use & property are not covered Materiality is used…which is a matter of professional judgment 1 st year will be toughest/most time consuming…update thereafter Primarily a documentation “exercise” Topic 740 income taxes in ASC

30. 29

31. 30 Potential exposure under FIN 48: State nexus positions Transfer pricing (international operations). Little or no support Travel and entertainment Inventory BIG (Built-In Gains) Tax – transaction recognized that will trigger tax

32. 31 FIN 48 Possible Applications to Flow-Thru’s and Nonprofits S Corporations S Corp election validation Any violation of S Corp status Ineligible shareholder Second class of stock Passive income test Built-in-gains taxes Entity level state income taxes (generally Texas and Michigan) Likely individual Partnerships/LLC’s Entity level state income taxes (generally Texas and Michigan) Nonprofits Exempt application validation Any violations of exempt status? Any unrelated business taxable income? If have UBTI, are expense allocations correct?

33. 32 Mechanics of FIN 48 Step 1: Establish Materiality Level Step 2: Identify any Tax Positions Step 3: Determine Optimal/Appropriate Unit of Account for each Tax Position Step 4: Apply the “More–Likely–Than–Not” Test to each Tax Position Step 5: Measure the Recognized Tax Benefit for each Uncertain Tax Position Step 6: Calculate the FIN 48 Liability Step 7: Record and Disclose the FIN 48 Liabilities

34. 33 Step 1: Establish Materiality Level Specific to each company Consult with auditors’ materiality thresholds

35. 34 Step 2 : Identify any Tax Positions A tax position refers to a position in a tax return or future return if affecting realizability of current or deferred tax asset liability. A tax position includes a permanent or deferred reduction in income taxes. A tax position includes a change in the realizability of a deferred tax asset. –Also includes: Decision not to file an income tax return Allocation or shift of income between jurisdictions (i.e. states, countries) Characterization of income (i.e. ordinary income to capital gain) Entity status

36. 35 Step 3: Determine Optimal/Appropriate Unit of Account for each Tax Position Matter of judgment based on the individual facts and circumstances of that position –Examples R&D credits –Project by project basis, versus functional expenditures (wages, department, materials, etc.) T&E expenses –Group into officer and non-officer groups, or all T&E as one group Transfer pricing –By transaction, product line, country, etc. Must consider how company prepares and supports its income tax return, and manner in which tax authorities would examine the issue. Should be consistently applied, but can change if supportable.

37. 36 Step 4: Apply the “More–Likely– Than–Not” Test to each Tax Position The tax benefits of a tax position may be recognized only if it is “more–likely–than–not” that the tax position would be sustained upon examination. It is presumed that the tax return will be examined, and the tax authority has full knowledge of all the relevant information. Prior tax audits of the company should be considered No offset of tax position’s against each other If a tax position does not meet the “more–likely–than–not” threshold, then zero recognition of the tax position in the financial statements.

38. 37 Step 4: Apply the “More–Likely– Than–Not” Test to each Tax Position cont. If the tax position meets the “more–likely–than–not” threshold, then the recognized tax benefit must be measured. If do not meet the “more–likely–than–not” threshold for the period the tax position is taken, a company shall recognize the benefit in the first period that meets any one of the following 3 conditions: –The “more–likely–than–not” threshold is met by the reporting date, –The tax matter is settled, or –The statute of limitations has expired Subsequent changes of judgment resulting from new information may lead to changes in recognition.

39. 38 Step 5: Measure the Recognized Tax Benefit for each Uncertain Tax Position Only need to measure if the tax position meets the “more–likely–than–not” threshold, and only if less than 100% certain of tax position (an “uncertain tax position”, or “UTP”) Probable outcomes measurement –Purpose is to estimate the largest amount of benefit that is greater than 50% likely of being realized upon settlement. This measured amount of tax benefit is recognized in the financial statements

40. 39 Step 5: Measure the Recognized Tax Benefit for each Uncertain Tax Position cont. Example Because $60 is the largest amount of benefit that is greater than 50% likely of being realized upon settlement, the company would recognize a tax benefit of $60 in the financial statement. May consider recent tax audit results.

41. 40 Step 6: Calculate the FIN 48 Liability Liability includes tax, interest and penalties Applied to unrecognized portion of UTP Record as a current or noncurrent liability (based on management’s assessment) Reduce the deferred tax asset or increase deferred tax liability if applicable

42. 41 Step 7: Record and Disclose the FIN 48 Liabilities Footnote in Financial Statement Disclose FIN 48 tax interest and penalties recognized in financial statements Disclose any significant changes to unrecognized tax benefits expected within 12 months

43. 42 Getting Started Begin now! Examples: –Entity status –State Nexus –Transfer pricing Meet with auditors to identify potential tax issues First year requires a review of all open tax years

44. 43 Roth Conversions

45. 44 Roth IRA Conversion General Rules –Convert all or part of traditional IRA to Roth IRA –Pay the tax on the amount converted, typically from funds outside the IRA –Thereafter, obtain benefits of Roth IRA: No RMD’s at age 70 ½ Non-taxable withdrawals

46. 45 Roth IRA Conversion 2010 Opportunity –The $100,000 AGI limit is repealed, now anyone can convert to a Roth –The tax due on the conversion can be deferred to 2011 and 2012

47. 46 Roth IRA Conversion What should I do?? –Current v. Future tax brackets? –When will I need the money? –How much will I need in retirement? –Do I have outside funds to pay the tax? –What are my estate planning objectives? –What is Wisconsin going to do? –Run the numbers!!!

48. 47 Alternative Minimum Tax Planning

49. 48 Alternative Minimum Tax Similar to a flat tax, with only a few deductions allowed Many normal write-offs not allowed – –Personal exemptions –Standard deduction –State and local taxes –Unreimbursed business expenses 2 Rates apply - –26% on the first $175K of AMT income –28% thereafter Pay the greater of the 2 taxes calculated

50. 49 Alternative Minimum Tax Individuals (and Businesses) – depending on your AMT exposure –Payment of state income taxes & local property taxes –Spread out capital gains or move capital gains to a potentially non-AMT tax year –Sell capital loss assets to offset capital gains causing AMT –Exercise of Incentive Stock Options –Postpone charitable contributions –Use any AMT credits, if applicable

51. 50 Alternative Minimum Tax Personal Credits that offset AMT –child and dependent care credit –credit for the elderly and disabled –adoption expense credit –child tax credit –mortgage credit certificate [MCC] credit –American Opportunity credit and the Lifetime Learning credit –saver's credit –non-business energy property credit –residential energy efficient property credit –credit for hybrid vehicles

52. 51 SFAS No. 157 - Fair Value Measurements & Disclosures

53. 52 Effective Dates Fiscal years beginning after November 15, 2007 (i.e. 12/31/08 year ends): –FINANCIAL assets and liabilities which are recognized or disclosed at fair value –NONFINANCIAL A/L measured at Fair Market Value (FMV) on a recurring basis Fiscal years beginning after November 15, 2008 (i.e. 12/31/09 year ends) for NONFINANCIAL assets and liabilities which are recognized or disclosed at fair value on a non-recurring basis.

54. 53 Summary Consolidated current information related to this Statement is now contained in ASC Topic 820. This statement applies to assets and liabilities that are measured on the balance sheet at FMV.

55. 54 Summary It does not: –Stipulate what should be reported at FMV or when. –Change the way most of the assets/liabilities that have historically been valued at fair value will be valued going forward. For some of the more complicated valuation scenarios, such as hard to value assets and liabilities, there is new guidance within SFAS 157 (now ASC 820) that should be consulted.

56. 55 Summary The Statement does: –Clarify the definition of fair value and establish a framework for measuring fair value –Expand the disclosures related to fair value measurements.

57. 56 Hierarchy SFAS No. 157 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

58. 57 Hierarchy Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair value hierarchy specified by SFAS No. 157 is as follows: Level 1 - Quoted prices in active markets for identical assets and liabilities.

59. 58 Hierarchy Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

60. 59 Financial Assets & Liability The definition of financial asset is: –Cash, evidence of ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity Examples of financial assets which could be reported at FMV: –equity and debt investments –certain derivatives (such as commodity futures contracts )

61. 60 Financial Assets & Liability The definition of a financial liability is: –A contract that imposes on one entity an obligation to do either of the following: Deliver cash or another financial instrument to a second entity, Exchange other financial instruments on potentially unfavorable terms with the second entity Examples of financial liability which could be reported at FMV: –certain derivatives (such as interest rate swap contracts)

62. 61 Financial Assets & Liability Recall that an entity which is either a public company, has assets over $100M at the date of the financial statements, OR has derivatives is required to follow the disclosure guidance under what is now ASC825. –This requires the disclosure of the FMV of ALL financial instruments (it does not require that they be adjusted to FMV.) –Typical financial instruments which are not recorded at FMV include notes payable. ASU 2009-05 was issued to help determine the FMV of certain liabilities, including notes payable.

63. 62 Nonfinancial Assets and Liabilities All other assets and liabilities are considered “nonfinancial.” Although inventory is often reported at LCM, SFAS157, 3b, specifically excludes inventory from this statement.

64. 63 Nonfinancial Assets and Liabilities Most nonfinancial assets and liabilities are considered nonrecurring as far as fair value measurements. Nonrecurring means that you will continue to account for an asset using traditional GAAP (i.e. depreciate PP&E, amortize intangibles other than GW, etc.) until such time that you deem the asset to be impaired (FMV is below book value).

65. 64 Nonfinancial Assets and Liabilities Examples of non-financial assets which could be reported at FMV: –items acquired in a business combination; assets for which an “impairment assessment” is performed, such as: goodwill other indefinite-lived intangible assets long-lived assets such as property and equipment (either held and used or held for sale)

66. 65 Disclosures For Assets/Liabilities measured at FMV, required to disclose for each period presented: –The fair value measurements at the reporting date –The level within the fair value hierarchy in which the fair value measurements fall, segregated between Level 1, Level 2 and Level 3. –The valuation techniques used to measure fair value and a discussion of the changes, if any, in the valuation techniques, if any, during the period

67. 66 Disclosures For recurring measurements of assets or liabilities that are measured at fair value in a given period, the reporting entity must disclose for Level 3 measurements, –a rollforward presenting changes during the period attributable to G/L –purchases, sales, issuance, settlements –transfers in and out of Level 3.

68. 67 Disclosures For nonrecurring measurements of nonfinancial assets or liabilities that are measured at fair value in a given period, the reporting entity must disclose for Level 3 measurements, a description of the inputs and the information used to develop the inputs

69. 68 Gifting Opportunities

70. 69 Gifting Annual Exclusion for 2009 and 2010 is $13,000 per person Due to the economic downturn, values are probably at historic lows now Gift the future appreciation now, to maximize the annual exclusion

71. 70 IRS & Wisconsin Audit Update

72. 71 IRS Audit Update Personal use of cell phones Passive losses/material participation S-Corp reasonable compensation 2010 employment tax audits Other issues??

73. 72 Wisconsin Audit Update Transportation company compliance Sales/Use tax compliance Other issues??

74. 73 Other Accounting Items

75. 74 IFRS International Financial Reporting Standards

76. 75 IFRS International Financial Reporting Standards Goal: To make financial reporting the same world wide Who’s Effected: All public and private companies When: World wide by 2011, EXCEPT for U.S. –2014 is projected compliance date for large accelerated filers –2015 for accelerated filers –2016 for non-accelerated filers –private companies TBD

77. 76 IFRS International Financial Reporting Standards Main difference is IFRS is “principles” based vs. US GAAP is “rules” based Several accounting differences are identified Many multinational companies are dealing with 3+ sets of accounting guidelines –US GAAP –IFRS –Local Country GAAP

78. 77 IFRS Transition Ongoing convergence project will reduce the number of US GAAP vs. IFRS differences Many new accounting pronouncements relate to convergence Be aware of differences between IFRS, US GAAP and local country GAAP Keep abreast of potential adoption dates

79. 78 IFRS International Financial Reporting Standards How is IFRS different from US GAAP? –Good news: More similarities than differences between IFRS and US GAAP. –If you place US GAAP rules side-by-side with IFRS rules, the result is 9 inches of pages of US GAAP versus 2 inches under IFRS.

80. 79 IFRS International Financial Reporting Standards Some of the “highlights” of IFRS are as follows: –Property, plant and equipment – under IFRS, you have the option to report your fixed assets at fair value –Inventory – LIFO (last-in, first-out) costing is prohibited under IFRS, which also creates tax implications. The IRS has a conformance rule stating that a taxpayer cannot use LIFO for tax unless it also uses LIFO for financial reporting. –Leases – under IFRS, there are no “bright line” rules in classifying leases as operating or capital, such as the 90% or 75% rules.

81. 80 IFRS International Financial Reporting Standards Some of the “highlights” of IFRS are as follows (cont.): –Business combinations – unlike US GAAP, IFRS doesn’t have special treatment for combinations under common control. –Revenue recognition – IFRS guidance regarding revenue recognition is less extensive than US GAAP. –Debt violations – IFRS doesn’t permit curing debt violations after year-end. –Long-term construction contracts – IFRS does not permit completed contract method –Impairment – IFRS uses single step method vs. two-step method for U.S. GAAP, likely generating more impairment write-down

82. 81 Accounting Standards Codification

83. 82 Overview Single source of authoritative nongovernmental U.S. GAAP All other literature not included in Codification is non-authoritative Effective for periods ending after September 15, 2009 Result of a 5 year project which simplifies organization of U.S. GAAP (formerly APB, FASB, SOP, EITF, FIN, FSP, etc.) into one searchable database

84. 83 Overview Eliminates redundant content No longer appropriate to refer to FASB Statement No. 13, Accounting for Leases in footnotes (which is now Codification Topic 840 Leases) Doesn’t change US GAAP

85. 84 Structure Organized into about 90 accounting topics Consistent structure of XXX-YY-ZZ-PP –XXX is the Topic –YY is the Subtopic –ZZ is the Section –PP is the Paragraph

86. 85 Accounting Standards Codification – Updates Results of on-going standard-setting activity will be an Accounting Standard Update Title will be Accounting Standard Update YYYY- XXX –YYYY is year issued –XXX sequential number for each update Serves to provide background information about the issue, update the Codification and provide the basis for conclusions on changes in the Codification

87. 86 Accounting Standards Codification – Updates When the newly amended information is fully effective, the outdated guidance will be removed from the Codification

88. 87 Accounting Standards Codification Basic access is available for free at the FASB web-site. www.fasb.org –Professional view ($850) has more “bells and whistles” –Recommend viewing free on-line tutorial (10 to 15 minutes)

89. 88 Slide #88 Slide #87

90. 89

91. 90

92. 91 SFAS No. 167 - Accounting for Variable Interest Entities

93. 92 Effective Date Effective for interim or annual financial periods beginning after November 15, 2009 (in other words, for November 30, 2010 and subsequent year ends) –Early implementation is prohibited –Potential 1-year deferral being discussed

94. 93 Summary This statement: –Amends FASB Interpretation No. 46(R) – Consolidation of Variable Interest Entities to: Require an enterprise to perform a QUALITATIVE analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity (VIE) –The previously-utilized FIN 46R QUANTITATIVE evaluation of affiliated entities has been eliminated. The qualitative approach will result in more affiliated entities being identified as VIEs, along with more reporting entities being identified as primary beneficiaries.

95. 94 Summary This statement: –End result: more affiliated entities will be deemed to be VIEs that need to be consolidated in the financial statements of reporting entities that are deemed to be primary beneficiaries

96. 95 Summary This statement: –Identifies the primary beneficiary of a VIE as the enterprise that has the following characteristic: The obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE (par 16) “For purposes of determining whether it is the primary beneficiary of a VIE, an enterprise with a variable interest shall treat variable interests in that same entity held by its related parties as its own interests.

97. 96 Summary This statement: –Changes how an enterprise determines when an entity that is insufficiently capitalized or is not controlled through voting or similar rights should be consolidated. –Requires additional disclosures related to the enterprise’s involvement in a VIE

98. 97 SFAS No. 165 - Subsequent Events

99. 98 Effective Date Effective for interim or annual financial periods ending after June 15, 2009 (in other words, June 30, 2009 and subsequent year-ends) Previous accounting guidance was in SAS No. 1/AU section 560. Moves the guidance into the “accounting” literature, so it can be included in the FASB Codification (ASC.)

100. 99 Overview 1.Requires a disclosure of the date through which management has evaluated transactions for subsequent events 2.It does not impact the accounting for subsequent events – it simply changes the wording. –Application – this disclosure is to be included in ALL full- disclosure financial statements (audits, reviews, and compilations.)

101. 100 Summary A subsequent event is an event or transaction that occurs after the balance sheet date but before the financial statements are issued or available to be issued.

102. 101 Summary There are still two types of subsequent events (but with different names): 1.Recognized subsequent events (previously called “Type I” subsequent event) Events or transactions that provide additional evidence about conditions that existed at the balance sheet date, including estimates inherent in the process of preparing financial statements These events should be considered when determining amounts recognized in the financial statements as of the balance sheet date –Example: Settlement of litigation (the events of which took place prior to the balance sheet date) after the balance sheet date but before the financial statements are issued or available to be issued, for an amount different than the liability already recorded on the books as of the balance sheet date

103. 102 Summary There are still two types of subsequent events (but with different names): 2.Nonrecognized subsequent events (previously called “Type II” subsequent events) Events that provide evidence about conditions that did not exist at the balance sheet date, but arose after that date. These events are not recognized in the financial statements –Example: business combination that occurred after the balance sheet date.

104. 103 Summary Two different evaluation periods: –Public Companies Through the date of issuance of the financial statements –Private Companies When the financial statements are available to be issued

105. 104 Summary New disclosure requirement: –Required to disclose the date through which management evaluated subsequent events, along with the basis for that date being the appropriate date (i.e. the date financial statements were issued or available to be issued) –Example disclosure: The company has evaluated events and transactions for potential recognition or disclosure in the financial statements through (DATE), the date which the financial statements were available to be issued.

106. 105 Other Tax Updates

107. 106 Other Items Basis on sale of life insurance stock – IRS loses Business “investigation” v. Business “expansion” S Corporation debt – do it right to get basis to deduct losses Employer-owned life insurance, get the consent of the employee up front Personal goodwill still gets favorable tax treatment

108. 107 Visit our website… www.schencksc.com/FEI111609

109. 108 Questions??

110. Thank You!