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IRS “Dragnet” Must Now Be Based On “Just The Facts"

October 29, 2007

Analysis of:IRS Is Denied Work Papers Of Textron in Pivotal Case | online.wsj.com

In the pivotal Textron case[1]the court held that requested tax accrual workpapers are protected by the work product privilege and are therefore not discoverable by the IRS in their audits due their “non-factual” status. As a result, any IRS "dragnet" must be based on "just the facts" as the court succinctly stated: "The determination of any tax owed by Textron must be based on factual information, none of which is contained in the workpapers ..." Textron p. 33 [1]District Court for Rhode Island in United States v. Textron Inc. and Subsidiaries, D R.I. No. 06-198T, Aug. 29, 2007

Wal-Mart’s “Ominous” Invisible Banking-Hand

October 23, 2007

Analysis of:At Wal-Mart, a Back Door Into Banking | www.nytimes.com

This article ominously brings Adam Smith’s “invisible-hand” into the 21st Century and Third Millennium. In the creditless society of pay-check-to-paycheck and hand-to-mouth working-class, Wal-Mart stands as the paternal care-giver, and now care-taker, of us whose daily-budget needs now includes the ability to “finance” our requisite low-budget purchases. In giving us “today” our Daily-Bread, Wal-Mart will inadvertently create an alternative cash-based monetary-system akin to Shariah Compliantones found in non-western countries, strategically positioning itself to become a truly global-based marketer, and potential Shariah Compliant non-interest-bearingbanking vehicle; to truly expand well beyond the limited parameters of the western hemisphere – whilst concurrently replacing the US Dollar, Euro, and Riyalwith “Wal-Mart-Cash.”

GAAP: An Historical Reflection of the Future & The Politics of Accounting

October 23, 2007

Analysis of:Seeking Clarity - The Battle against Complexity Heats Up | www.aicpa.org

Since FASB itself is now attempting to “codify” GAAP, perhaps in the same fashion as the tax-code, or even the Uniform Commercial Code (UCC), the role of pre-application and rules-determination will approach the practice of law - as distinguished from the practice of accounting – to preliminarily ward-off potential future Enrons, WorldComs, etc. As historical review is applied proforma to GAAP itself, we may see a world where the practice of accounting will take-on a quasi-legal element as has been the general practice of such in tax-accounting. Attorneys will begin to interpret the rules and determine “how” to categorize and the accountants will merely fill-in the numbers. The roles of FASB (rules promulgator), the SEC (rules enforcer) and PCAOB (umpire) will require PCAOB to become a stronger participant in the process, or cease to give-way to another entity that will.

Hedging Sub-Prime Mortgage Markets

October 19, 2007

Analysis of:The More Hedges the Better, Right? | online.wsj.com

With the 20th anniversary of the October 19, 1987 "Black-Monday" 22% single-day stock-market drop lessons learned apply much the same today. Since Sept. 18, 2007, the day the Federal Reserve cut interest rates by 50 basis points, a group of big banks have combined to create structured investment vehicles, or SIVs, to try to form a new fund to help avoid potential big losses from a part of the market that remains largely frozen since 2007 summer's debt-market turmoil. As the title of this article implies, more hedging and more sophisticated hedging is not the answer.

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