Cost Accounting – Berning CPA http://berningcpa.com/ Wed, 05 Oct 2022 07:24:16 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://berningcpa.com/wp-content/uploads/2021/05/default-150x150.png Cost Accounting – Berning CPA http://berningcpa.com/ 32 32 Why F1 faces a risk of ‘game over’ on D-Day https://berningcpa.com/why-f1-faces-a-risk-of-game-over-on-d-day/ Wed, 05 Oct 2022 07:24:16 +0000 https://berningcpa.com/why-f1-faces-a-risk-of-game-over-on-d-day/ Formula 1 prepares for what could be a critical test of its long-term future on Wednesday, as one wrong step could signal a “game over” for the cost cap. After months of analysis and a number of delays, the FIA ​​must finally announce the results of its audit of F1 team finances for the 2021 […]]]>

Formula 1 prepares for what could be a critical test of its long-term future on Wednesday, as one wrong step could signal a “game over” for the cost cap.

After months of analysis and a number of delays, the FIA ​​must finally announce the results of its audit of F1 team finances for the 2021 world championship.

This moment will determine whether or not they each met the budget cap of approximately $145 million that was in place.

Authorized persons will obtain their certificates of compliance. Anything that didn’t risk a cost and penalty cap hearing.

But rather than it being just a moment of standard procedure, whispers from the paddock in Singapore that two teams may have broken the rules have left the sport on edge for what could be a hugely significant announcement.

With cost caps having been a central part of F1’s plans to deliver a tighter grid over the long term by leveling out spending across all competitors, the FIA ​​faces an extremely difficult balancing act in dealing with the potential problems.

Take down teams that have overstepped the limits of incredibly new rules hard, and it risks causing huge controversy over a 2021 campaign that still remains a sore topic for many.

But sweep all potential infractions under the rug by letting them go, or give too small a penalty to any rule breakers, and it risks opening the floodgates by making other teams feel that overspending is not something they really need to worry.

It’s no surprise that Ferrari was so open in Singapore last weekend about the significance of this moment for F1’s cost cap era.

Race director Laurent Mekies said: “It’s a very important test for cost capping. And if we don’t pass that test, it’s probably game over, because the implications are huge.”

Charles Leclerc, Ferrari F1-75, George Russell, Mercedes W13

Photo by: Mark Sutton / Motorsport Images

What has left top teams like Mercedes and Ferrari so worried about others’ potential overspending is that they know how much performance is left on the table by strictly adhering to the cost cap limit.

Their fear is that if other teams have found ways around spending limits but are sticking to the letter of the law, or are happy to overspend and take penalties on the chin, then they will be forced to change tact. .

Red Bull Submission

Despite all the spotlight in Singapore on Red Bull and suspicions that its upgrade spending was out of step with others, team boss Christian Horner made it clear that its 2021 bid was below the limit.

In fact, insiders suggested his audited accounts were several million dollars below the $145 million limit and were unaffected by the spending clarifications the FIA ​​has released in recent months as it unfolds. as each team audits.

“It’s significantly below,” said team boss Christian Horner. “With the details, we should be even lower…”

The final judgment rests of course with the FIA, just as the tax authorities may not always agree with an individual’s self-assessment.

Only the FIA ​​can decide the fair value of the expenditure made by Red Bull and the amount of work that offshoots like Red Bull Technology should be allocated to the F1 budget.

In addition, the FIA ​​must make a call on the outings that are designated for the 2021 campaign and those around 2022.

And that’s why there’s such interest in what Wednesday’s result will be from teams who feel that not all teams are operating under the same restrictions.

As Mekies said: “I think the concern comes from the fact that if you think about the level of constraints that have (been) imposed on the big teams, then you realize how long the lap will be if you don’t not strictly apply.

“We were massively constrained and so any million, any leak that you allow in the budget cap, is going to turn into tenths of a second on the car.

Max Verstappen, Red Bull Racing RB18

Photo by: Erik Junius

But the situation isn’t just important for big teams, because if the cost cap situation evolves into a Wild West scenario – where all teams decide they can now be fast and loose with it – then that undermines everything. the leveling goal. up to the grid.

The risk then is that the bigger teams simply accelerate their spending – and take future penalties on the chin – knowing full well that the end result is a much faster car.

That’s why the FIA’s handling of cost caps and its transparency in judging each team’s business is of interest to smaller teams as well as larger ones.

Memories of the secret deal the FIA ​​struck with Ferrari over its 2019 engine remain a sore point for many in the paddock.

The FIA ​​will not have the easy task of finding an answer that makes all parties happy if the teams are found to have exceeded the limit. And if that gives the green light to all 10 teams, it will also serve to trigger concern in the paddock if there is no explanation.

As Haas boss Gunther Steiner said, “If there’s a breach, I would say we need to make sure we’re informed: if there were any flaws, what we think they are , that everyone understands them. And obviously, flaws mean different opinions of settlement. So to clarify what it is.

Stick to the plan

Whatever the outcome of Wednesday’s announcement, the message from teams up and down the grid is clear: F1 shouldn’t drop the cost cap just because it ran into trouble at its first hurdle. .

Alfa Romeo boss Fred Vasseur said: “We knew from the start, when we voted for the cost cap, that it would be difficult, first to put in place for the big teams and then to put it in place. control.

“But now we’ve made the decision, we have to go. There’s no turning back and we can’t stop it.”

Despite the pain this caused top teams, who had to fire to stay below the limits, they also agree that cost capping was the right thing to do. The key is just to make sure it works fairly for everyone.

Mercedes boss Toto Wolff said: “We have decided to go the cost cap route and we want to give the small teams the opportunity to compete with the big ones.

“So we were forced to restructure our business and take out tens and tens of millions of dollars in order to meet the cost cap, to make the small teams competitive.

“I think the point of the exercise was for us all to be under the same umbrella and for it not to become an accounting championship that we’re trying to put holes in. It’s against what we all signed up for. “

Toto Wolff, Team Principal and CEO, Mercedes AMG

Photo by: Simon Galloway / Motorsport Images

Even for Red Bull, which has been angered by finger-pointing rivals, how the process unfolds from here is something it is intrigued to find out, as it also fully supports the cost cap despite the sacrifices it makes. he had to do.

Horner said: “I think it’s a positive thing happening in Formula 1, and it has had a direct impact on costs.

“I have heard that up to 40 people were made redundant at one of our rival teams. At Red Bull we have made over 90 people redundant, and the cost control that has continued has been absolutely strict in whole organization.”

He added: “I think it’s something the FIA ​​can control, but inevitably there will be learnings and we see clarifications coming out, even after the time the submission has been made, which could have a material impact on the actual submissions that were made in March.

“So, of course, there will always be a learning curve process, both for regulators and for participants.”

That’s why F1 is so eager to find out what’s coming out of the FIA’s Paris headquarters on Wednesday.

Read also :

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Tetra Tech acquires environmental consultancy RPS Group https://berningcpa.com/tetra-tech-acquires-environmental-consultancy-rps-group/ Mon, 26 Sep 2022 09:32:41 +0000 https://berningcpa.com/tetra-tech-acquires-environmental-consultancy-rps-group/ Posted by Daniel Gleeson on September 26, 2022 Tetra Tech Inc appears to have won the battle for environmental and social engagement consultancy specialist RPS Group plc after the two companies’ boards agreed terms on a recommended cash takeover whereby a subsidiary of Tetra Tech will acquire RPS. The all-cash acquisition price of […]]]>

Posted by Daniel Gleeson on September 26, 2022

Tetra Tech Inc appears to have won the battle for environmental and social engagement consultancy specialist RPS Group plc after the two companies’ boards agreed terms on a recommended cash takeover whereby a subsidiary of Tetra Tech will acquire RPS.

The all-cash acquisition price of £2.22/share ($2.39/share) outweighs the price of £2.06/share offered by WSP in August and also represents an increase of 109.5 % to volume weighted average price of £1.06/share for the 90s. -day period ending 8 August 2022.

Tetra Tech and RPS combined will represent a leading international consulting, engineering and program management company, and will leave RPS well positioned to provide a strong platform to drive long-term growth within the broader group. said Tetra Tech. The acquisition is also expected to be 1-10% accretive to Tetra Tech’s adjusted earnings per share after realizing the full benefit of approximately £21 million of cost and integration synergies in Tetra Tech.

On August 8, 2022, the Boards of Directors of WSP Global, WSP Holdings and RPS announced that they had reached agreement on the terms of a recommended cash offer under which WSP Holdings, or another subsidiary in wholly owned by WSP Global, would acquire all of the issued and to be issued share capital of RPS. However, Tetra Tech’s new proposal has now been deemed superior by RPS directors and advisors.

As of the date of this announcement, Tetra Tech has received irrevocable undertakings and letters of intent representing approximately 27.53% of the issued share capital of RPS.

Tetra Tech is a global consulting and engineering company, providing high-end services for projects around the world in multiple sectors, including mining.

RPS, on the other hand, claims that it solves the problems that matter in a complex, urbanized and resource-poor world and focuses its expertise on the parts of the project life cycle that have the greatest impact on project results, with a strong sustainability program.

John Douglas, Managing Director of RPS, said, “Joining Tetra Tech represents a very attractive combination of two industry-leading companies for our customers and provides an ideal opportunity for our employees to realize RPS’s goals of contributing meaningfully. to the toughest challenges in the world. problems of energy transformation and water management in the world. I am very excited about the future of our combined company and the benefits for our employees and customers.

Dan Batrack, President and CEO of Tetra Tech Inc, added: “The RPS Group advances our long-term strategy to strengthen our position as the world’s leading premium consulting firm in water, environment, sustainable infrastructure and energy transformation. We invite RPS Group associates to join us and collectively leverage our long-term client relationships and project experience. As a global consulting firm committed to high-end solutions, we can offer our extended team of associates even greater professional opportunities.

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Do adults have to take an allowance? 3 experts weigh in https://berningcpa.com/do-adults-have-to-take-an-allowance-3-experts-weigh-in/ Tue, 20 Sep 2022 22:25:05 +0000 https://berningcpa.com/do-adults-have-to-take-an-allowance-3-experts-weigh-in/ Money / Financial Planning RyanJLane/Getty Images If you’ve ever wondered if an adult is too old to give themselves an allowance, you have permission to stop asking questions now. GOBankingRates spoke to several finance professionals who unanimously agreed that every adult should pay themselves a personal allowance. Here are the biggest benefits that come from […]]]>

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If you’ve ever wondered if an adult is too old to give themselves an allowance, you have permission to stop asking questions now.

GOBankingRates spoke to several finance professionals who unanimously agreed that every adult should pay themselves a personal allowance. Here are the biggest benefits that come from setting aside an allowance to take advantage of it.

Discover: 9 bills you should never put on automatic payment
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A personal allowance is good for budgeting

Bruce McClary is Senior Vice President of Membership and Communications at the National Foundation for Credit Counseling. McClary, who has worked in the financial services industry since 1995, said giving yourself an allowance goes hand in hand with best budgeting practices.

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“Leaving room in your budget for a personal allowance supports your financial and emotional well-being,” McClary says. “While using your savings as a motivating reward system, you also reduce your reliance on credit when it comes time to use what you’ve saved.”

Those considering paying themselves a personal allowance should be able to create a plan that prioritizes their needs and keeps debt in check. McClary uses the example of the popular 50/30/20 rule. In this rule, an allowance may be part of the 30% covering discretionary expenses such as dining out and entertainment.

Remember, however, that this is a reference to a part of this category. Depending on how you prioritize the allocation, McClary said 5 or 10% can be a reasonable benchmark. The recommended 20% for savings would be for emergency funds and retirement.

Take part in our survey: do you think you can retire at 65?

It’s a life hack to have an adult allowance

Yes really. Erin Papworth, MPH, is a behavioral scientist, financial coach, and founder of Nav.it. Papworth said people who have trouble keeping track of their spending habits or sticking to their budget get Adult Allowance through a phenomenon called mental accounting.

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Mental accounting explains how we categorize financial information to make decisions and how our brains tend to process different sources of money differently. This can lead to good and bad financial decisions.

Papworth uses the example of someone with $100 in their checking account. The same person also has $100 in savings. They are generally more reluctant to spend money in their savings account because that money is earmarked for a specific purpose like retirement. However, the full picture of your spending is not discussed, as you may be more likely to spend everything money in your current account. This money is not allocated like savings. Therefore, it can be considered disposable income that you think you can use without consequence. The only problem is that you might need money from your checking account to cover expenses that you haven’t accounted for yet.

This is where an allowance comes in. Papworth said an allocation from your checking account allows you to increase your mental accounting for your money by earmarking a portion of your check.

In this example, you keep $100 in your checking account, but only give yourself a $20 allowance. This means you increase your savings rate and your financial resilience.

“The key to making this work is knowing how your brain is wired and making sure your mental accounting helps you achieve your financial goals,” Papworth said.

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How to give yourself an allowance

Ready to give yourself an allowance? Rivka Schreiber, CFP and founder of Flexible Finances, explains how to proceed.

  • Decide in advance how much you want to spend and what you plan to spend that money on.
  • Go to the bank and withdraw the money in cash.
  • Spend your allowance over a designated period, such as weekends.

What if you want to pay yourself an allowance by credit or debit card? Schreiber recommends using real money. Bills will remind you how much money things cost. You will also be more likely to notice when the money starts to go down. This acts as a reminder of the exact amount you have left to spend, while you may lose track of credit card charges.

“Adults should definitely give themselves an allowance for certain things, especially fun weekend expenses that we can control,” Schreiber said.

“Out of control expenses like unexpected car repairs, skyrocketing grocery prices, and insurance rate hikes are out of our control, but we can always spend more consciously on the things that relax us and bring us joy. .”

More from GOBankingRates

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US SEC crypto guidelines drive up costs for lenders, disrupting projects https://berningcpa.com/us-sec-crypto-guidelines-drive-up-costs-for-lenders-disrupting-projects/ Fri, 16 Sep 2022 06:34:00 +0000 https://berningcpa.com/us-sec-crypto-guidelines-drive-up-costs-for-lenders-disrupting-projects/ WASHINGTON, Sept 16 (Reuters) – Banks’ cryptocurrency projects have been upended by accounting guidelines from the U.S. Securities and Exchange Commission (SEC), which would make it too capital for lenders to hold crypto tokens for the account of customers, according to more than half a dozen people familiar with the subject. A large number of […]]]>

WASHINGTON, Sept 16 (Reuters) – Banks’ cryptocurrency projects have been upended by accounting guidelines from the U.S. Securities and Exchange Commission (SEC), which would make it too capital for lenders to hold crypto tokens for the account of customers, according to more than half a dozen people familiar with the subject.

A large number of lenders, including US Bancorp (USB.N), Goldman Sachs Group Inc, JPMorgan Chase & Co, BNY Mellon, Wells Fargo & Co, Deutsche Bank (DBKGn.DE), BNP Paribas (BNPP.PA) and State Street Corp (STT.N) offers or is working on crypto products and services for clients in an effort to access the $1 trillion crypto market, according to their public statements and media reports.

But on March 31, the SEC said public companies that hold crypto assets on behalf of clients or others must recognize them as liabilities on their balance sheets because of their technological, legal, and regulatory risks. Read more

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Although the guidelines apply to all public companies, they are particularly problematic for banks because their strict capital rules, overseen by banking regulators, require them to hold cash against balance sheet liabilities. The SEC did not consult with banking regulators when issuing the guidance, according to four of the people.

The SEC’s decision complicates banks’ efforts to jump on the digital asset bandwagon and could keep them out even as they signal increased demand from customers looking to access the booming market.

“It threw a huge spanner into the mix,” one of the sources said. Lenders building crypto offerings have had to “stop moving forward with these plans pending further action from the SEC and banking regulators,” they added.

Custodian banks State Street and BNY Mellon, which have built digital asset offerings, are among those whose plans have been disrupted, according to three people with knowledge of the matter.

While accounting guidelines don’t prevent State Street from offering crypto custodial services, it would make it unprofitable, said Nadine Chakar, head of State Street Digital. “We have a problem with the premise of doing this because it’s not our assets. It shouldn’t be on our balance sheet,” Chakar said.

A spokesperson for BNY Mellon declined to comment on the status of its crypto custody project. “BNY Mellon believes that digital assets are here to stay and increasingly part of the mainstream of finance,” he added.

Asked about the SEC guidelines, a spokesperson for US Bancorp said it was still serving existing customers for whom it offered bitcoin custodial services. “However, we are suspending the admission of additional customers to this service while we assess the evolving regulatory environment.”

A European bank executive looking to launch crypto custody services said it would now be prohibitively expensive for the bank to do so in the United States due to SEC guidelines.

Spokespersons for the SEC and other banks declined to comment.

The problems the SEC guidelines are causing for banks, which have not previously been reported, underscore the broader challenges facing lenders trying to capitalize on the growing crypto market amid confusion and skepticism. persistent regulations.

“We heard from a wide variety of stakeholders, including banks, how difficult this new staff accounting bulletin would be for them to be able to enter the crypto asset custody space,” said U.S. Representative Trey Hollingsworth, who sent SEC Chairman Gary Gensler a letter in July expressing concern about the guidance, said in an interview.

“This edict fell without guidance, without input, without feedback, without conversation with industry.”

CAPITAL PUNISHMENT?

As the cryptocurrency market exploded in 2020, financial institutions were eager to cash in. Despite the significant contraction in the cryptocurrency market this year, lenders still see an opportunity for their services.

Offering to hold customers’ digital assets has emerged as the safest way to enter the market. Banks generally offer custody of a variety of financial instruments and have generally not been required to reflect them on their balance sheet unless they are commingled with the bank’s own assets. Read more

The SEC guidelines deviated from this practice. At a conference last week, the SEC’s acting chief accountant said that crypto-asset holdings present “unique” risks that meet the definition of a liability under US accounting standards.

In a June letter to banking regulators, the Securities Industry and Financial Markets Association, the American Bankers Association and the Bank Policy Institute, however, said those risks were already mitigated by strong banking supervision and rules.

Taking into account the international capital rules set out in Basel, the guidelines could cost more than $1 of capital for every $1 of digital assets held, the groups estimated, meaning crypto custody “would effectively be prohibited. “.

SEC guidelines also appear to apply when lenders outsource the custody function to a third party, such as Anchorage Digital, the sources said.

Diogo Mónica, president of Anchorage Digital, said the cost of capital was “completely unbearable” and that “every bank” Anchorage works with is now waiting on regulators before working with Anchorage on crypto custody solutions.

Industry groups have lobbied the SEC to exclude banks from the guidelines, according to four of the sources and industry letters, although the agency appears unconvinced, one such person said. Some lenders are asking for individual exemptions instead, two people said.

The industry is also pushing banking regulators to issue guidelines that would neutralize the capital impact of SEC guidelines, although changing capital rules would be a major undertaking that seems unlikely in the near term. , the people said.

The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp declined to comment.

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Reporting by Hannah Lang and Michelle Price in Washington Additional reporting by Pete Schroeder in Washington Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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Climate change and public investments https://berningcpa.com/climate-change-and-public-investments/ Mon, 12 Sep 2022 22:46:28 +0000 https://berningcpa.com/climate-change-and-public-investments/ Review Editor’s Note: Editorials represent the views of the Star Tribune Editorial Board, which operates independently of the newsroom. ••• Minnesota Auditor Julie Blaha is pushing for the state to adopt what’s known as ESG investing guidelines, short for Environmental, Social, Governance. Slowly, more companies of all sizes have begun to adopt these same principles […]]]>

Review Editor’s Note: Editorials represent the views of the Star Tribune Editorial Board, which operates independently of the newsroom.

•••

Minnesota Auditor Julie Blaha is pushing for the state to adopt what’s known as ESG investing guidelines, short for Environmental, Social, Governance. Slowly, more companies of all sizes have begun to adopt these same principles to guide their investment portfolios. This is a welcome development.

So what does ESG investing mean? Like all investments, it is a matter of calculating risk and return. Increasingly, especially when it comes to climate, companies view fossil fuel investments as higher risk.

“Investors are moving away from polluters,” Blaha told a columnist. “The evidence is clear that it makes sense to factor climate into investments, move away from fossil fuels and achieve net zero carbon impact. Polluters are going to be more heavily regulated and pose greater risk . sense as the market changes.”

The State Board of Investment (SBI) manages state assets and is also responsible for several statewide pension systems and other investment plans. Recently, the council presented formal recommendations that respond to climate change.

A three-part SBI report on climate change presents evidence that rising global temperatures are changing the level of risk of some investments and recommends that factoring in climate change is a key long-term strategy to protect investment funds. ‘investment.

“We have the data, we have options and now is the time to choose a course of action,” Blaha said. “We have an obligation to protect state investments and the pension funds of government employees, teachers, nurses and others who depend on us to make sound decisions.”

The roll call of companies that have adopted ESG guidelines includes some of the biggest names: Microsoft, Nike, Accenture, Texas Instruments, Motorola, Hewlett-Packard, Adobe, Apple, Eli Lilly and thousands more. It is not limited to one sector or one type of business. These are all companies looking for strong stock market performance and growth. They found that focusing on ethical, environmental and socially responsible values ​​can be an improvement, not a disadvantage.

Billionaire Michael Bloomberg has become a champion of investments that take into account climate change. He founded the Task Force on Climate-Related Financial Disclosures, which has led thousands of companies to voluntarily provide data on emissions and exposure to climate risks.

“These companies and others want to be able to incorporate climate risk into their investment decisions, and without accurate and reliable data, they cannot,” Bloomberg wrote in an article for Bloomberg News. He added that the Securities and Exchange Commission is in the process of adopting reporting requirements based on the framework his task force created. He estimates the cost of weather events linked to climate change at more than $100 billion a year. “Accounting these and other losses is not social policy,” he wrote. “It’s a smart investment. Refusing to allow companies to do so comes at significant cost to taxpayers.”

But the growing popularity of ESG has triggered a violent backlash. States with large fossil fuel interests, especially Republican-led states like Texas, Oklahoma and Florida, have called the practices “woke investing” and aim to punish these companies.

In Texas, this has resulted in a law prohibiting local governments from doing business with banks that have ESG policies against fossil fuels and, for good measure, guns. (Why guns? It’s in Texas.) According to a Wharton Business School study, it’s already cost taxpayers $532 million in additional costs. Why? Cities are now restricted as to who can underwrite their municipal bonds. This situation was exacerbated after some of the country’s biggest underwriters left the Texas market, including JPMorgan Chase, Goldman Sachs, Bank of America and Fidelity.

Blaha, a Democrat running for re-election against Republican Ryan Wilson, says companies aren’t weighing the impact of climate change because they’re particularly “woke,” but rather because it “makes good financial sense.”

Blaha welcomes the nuanced recommendations of the report commissioned by the SIB. “It comes down to three simple things,” she said. “Take a climate-conscious investment approach, ultimately aim for a net-zero carbon portfolio and, as a last resort, the divestment approach.”

There are no guarantees in the stock market, ever. But the growing awareness that ignoring climate change carries considerable risks is long overdue.

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How much does the destruction of a nuclear power plant cost? Not as much as it cost to build – Orange County Register https://berningcpa.com/how-much-does-the-destruction-of-a-nuclear-power-plant-cost-not-as-much-as-it-cost-to-build-orange-county-register/ Sat, 10 Sep 2022 14:30:05 +0000 https://berningcpa.com/how-much-does-the-destruction-of-a-nuclear-power-plant-cost-not-as-much-as-it-cost-to-build-orange-county-register/ San Onofre crumbles, piece by piece, as Diablo Canyon’s life is extended. Amid flexible warnings and blackouts, “green nuclear” fans are urging California to embrace next-generation reactors, even if permanent disposal of radioactive waste remains a distant dream. People who worked at the San Onofre nuclear plant report tones of longing and regret: Would San […]]]>

San Onofre crumbles, piece by piece, as Diablo Canyon’s life is extended.

Amid flexible warnings and blackouts, “green nuclear” fans are urging California to embrace next-generation reactors, even if permanent disposal of radioactive waste remains a distant dream.

People who worked at the San Onofre nuclear plant report tones of longing and regret: Would San O get a big bear hug from the governor if it was still producing kilowatts? Ah, whatever: it’s been cold for a whole decade now. Billions have been spent dismantling it – brought on by an expensive new pair of steam generators gone bad – and billions more will be spent before this scenic cliff on the blue Pacific returns to the US Navy.

It’s a matter of hammers, chisels and torches — pretty much pure brute force, Edison said. And as we have seen over the years, demolishing a nuclear plant is expensive!

The latest accounting from operator Southern California Edison’s “decommissioning fund” was approved by the Nuclear Regulatory Commission on August 29 and shows that more than $2.5 billion was spent to ship the three reactors that produced electricity in San Onofre until the end. of 2021 – and that there is still $3.3 billion of work to be done.

The good news is that there’s still some $4 billion left in the decommissioning trust funds—yes, power users, you contributed to that fund to make all of this possible—while the Not so good news is that the cost assumptions are based on the somewhat fanciful idea that the federal government will begin accepting nuclear waste for permanent disposal in 2031.

That’s, uh, nine years from now. Try not to burst out laughing or crying.

“This assumption may be updated periodically due to continuing uncertainties regarding the availability of a permanent repository for spent fuel,” Edison explains in the footnotes.

Fun fact of the day: It costs about $11 billion in 2020 dollars to build San Onofre, and it will cost about half that to make it go away.

The San Onofre Nuclear Generating Station is seen from Trail 1 at San Onofre State Beach south of San Clemente on Tuesday, August 27, 2019. (File photo by Leonard Ortiz, Orange County Register/SCNG)
The San Onofre Nuclear Generating Station as seen from San Onofre State Beach in 2019. (File photo by Leonard Ortiz, Orange County Register/SCNG)

Waste: the final frontier

San Onofre’s iconic twin domes are set to fall in 2025, attacked from below, growing shorter and shorter until what remains collapses.

When the dismantling is complete towards the end of this decade, all that will be left is the switching yard connecting San Diego Gas & Electric’s system to Edison’s, the seawall and the public walkway along the beach and, uh , nuclear waste dry storage systems.

They hold approximately 3.6 million pounds of radioactive material. By the sea. Along a major highway. In an active seismic zone. Nearly 8 million people.

  • What remains of the original reactor, long decommissioned, are 395 fuel assemblies distributed in 17 containers, and a container of low-level waste (substances containing more short-lived radionuclides). Edison assumes the last will be gone by 2037.
  • From new Unit 2, there are 1,726 fuel assemblies in 53 canisters in dry storage; and from new Unit 3, there are 1,734 fuel assemblies in 53 canisters in dry storage.
  • Low-level waste from Units 2 and 3 is expected to be stored in dry containers this year and next year, and the last waste is expected to be gone from San Onofre by 2051.

The plan is for the dry storage systems themselves to be decommissioned, and the land returned to the Navy for unrestricted use, by 2053.

This Google Earth image shows how close the extended dry storage area for spent nuclear waste will be to shore at the San Onofre nuclear power plant.  (Image courtesy of Google Earth)
This Google Earth image shows the expanded dry storage area for spent nuclear waste and the shoreline of the San Onofre nuclear power plant. (Image courtesy of Google Earth)

What if it takes longer than that? Well, the US Department of Energy is on the hook. He signed contracts with the country’s utilities more than a quarter century ago, promising to accept commercial nuclear waste for permanent disposal from 1998, in exchange for payments to a waste management fund nuclear to pay for everything. Taxpayers like you and me contributed some $50 billion to this fund, of which more than $40 billion remains after the Yucca Mountain fiasco (Nevada has no nuclear power plants and does not want the nuclear waste of any everyone, thank you very much).

Of course, the DOE accepted exactly zero ounces of commercial nuclear waste for permanent disposal, payments to the Nuclear Waste Fund were halted nearly a decade ago, and the United States continues to dither on this. Edison “will continue to seek recovery from the judgment fund for spent fuel costs incurred as a result of the partial breach of federal government contract. We will also work through the Action for Spent Fuel Solutions Now coalition to encourage the federal government to fully meet its obligations in this area,” spokesman John Dobken said.

Some people say we get the kind of government we deserve. If the people want this waste out, they will have to demand that their legislators finally act. It’s not a technical problem: the nation’s high-level defense nuclear waste has a permanent grave in an underground salt bed more than 2,000 feet below the earth’s surface at the Nuclear Isolation Pilot Plant. trash in New Mexico.

We know what to do. Let’s do it already.

Dry storage of spent fuel rods at the San Onofre Nuclear Generating Station in Camp Pendleton, Calif., on Thursday, Dec. 16, 2021. (Photo by Jeff Gritchen, Orange County Register/SCNG)
Dry storage of spent fuel rods at the San Onofre Nuclear Generating Station in 2021. (Photo by Jeff Gritchen, Orange County Register/SCNG)

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Jim Chanos tackles data centers and their high valuations https://berningcpa.com/jim-chanos-tackles-data-centers-and-their-high-valuations/ Tue, 06 Sep 2022 05:03:30 +0000 https://berningcpa.com/jim-chanos-tackles-data-centers-and-their-high-valuations/ Comment this story Comment The famously upsetting Jim Chanos has a mixed record. Although his prediction of Enron’s demise brought fame, his bet against Tesla Inc. proved painful. When it comes to data centers — the gigantic hangars that house racks of computer servers for large corporations — he issues a believable challenge. The case […]]]>

Comment

The famously upsetting Jim Chanos has a mixed record. Although his prediction of Enron’s demise brought fame, his bet against Tesla Inc. proved painful. When it comes to data centers — the gigantic hangars that house racks of computer servers for large corporations — he issues a believable challenge.

The case of the bear is not immediately obvious. We are always creating more data. And since private equity funds have made rich bids for these assets, listed players are risky to “sell” (sell borrowed shares in the hope of buying them back for less). Only industry giants are viable targets – Equinix Inc., capitalized at $57 billion, and Digital Realty Trust Inc., with a market value of $35 billion. Most major Wall Street brokerages rate them “buy” or “neutral.”

But investors are right to have doubts. The stocks were already underperforming the real estate investment trust sector in the United States this year before the Financial Times revealed Chanos’ negative opinion in June. Morgan Stanley analysts summarized the concerns: demand and price prospects, low capital returns, competition, cost inflation, rising financial costs and the risk of “obsolescence”.

This corresponds to Chanos’ reported thought. The major cloud computing companies – Amazon.com Inc., Alphabet Inc.’s Google and Microsoft Corp. – are the largest customers in the sector, but they also build their own facilities. Chanos takes this to mean they are truly competitors. In other words, cloud providers will capture future growth at the expense of data centers.

Certainly, REITs have a future. Many businesses will want to maintain their own servers in data centers, rather than relying exclusively on the cloud. Facilities located in cities close to end users offer fast connection speeds, which is essential in many cases. Cloud companies will continue to lease data centers as they enter new markets. Equinix boss Charles Meyers says he’s not in a “zero-sum game” with the cloud majors.

The catch is that none of this guarantees that REITs are destined to grow as fast as their market valuations imply.

The harsh reality is that the long-term trend is intense competition that is putting deflationary pressure on rents. Things may be looking up today, but it could be a blow. Pandemic disruptions hampered new developments as demand accelerated. Vacancy rates in major US markets fell to 4% from 10% in 2019, according to analysts at UBS Group AG. In the second quarter, Digital Realty re-leased sites at 3% above existing rents and Equinix saw record bookings.

It is difficult to be sure that this marks a decisive break with history. In addition, construction, maintenance and energy costs increase; higher rent renewals may not compensate for them. Cloud giants could slow investment next year as they shift from expansion to “digestion”, Morgan Stanley analysts say.

Many investors value these companies on multiples of funds from operations (FFO, a real estate industry measure of cash flow generated by the business) after deducting so-called maintenance capital expenditures. These capital expenditures are, according to companies, necessary to maintain revenue rather than to win business (accounting standard setters make no such distinction, making it an opaque measure). The concern is that this load might need to increase.

Maintenance investment at Equinix has been low as a percentage of revenue, providing a tailwind that may not last, according to research from Barclays Plc. According to forecasts compiled by Bloomberg, Equinix’s adjusted FFO is expected to grow about 9% compounded annually from 2021 to 2024. This is roughly in line with Morgan Stanley’s expectations for the REIT industry as a whole. For Digital Realty, the comparable figure is only 6%.

Meanwhile, the financial environment is deteriorating. REITs pay most of their taxable income in the form of dividends to benefit from tax breaks. To fund expansion, data center companies are going into debt and selling stocks. Even leaving aside the absurdity of a business model that pays out massive dividends and then asks shareholders to provide cash, debt and equity are getting more and more expensive. This increases the reliance on asset sales to fund growth.

Despite all these uncertainties, valuations look high. Digital Realty is trading at 16.3 times expected FFO per share in 2023, and Equinix at 27.6 times, versus just under 16 times its peers, according to Bloomberg data. When it comes to enterprise values ​​versus expected earnings before interest, taxes, depreciation and amortization next year, multiples are also still above the REIT average despite the decline in stocks.

Signs of a slowdown in cloud investment, or a cost and capex shock, would surely accelerate the sector’s ongoing devaluation by undermining the narrative that the industry is in a positive cycle. The challenge remains: why do these stocks deserve higher valuations given increasing cost pressures and intense competition?

More from Bloomberg Opinion:

• Real estate is the crisis risk to watch now: John Authers

• Microsoft roller coaster exposes cloud risks: Conor Sen

• Alibaba shows how hard it is to kick a habit: Tim Culpan

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering the deals. Previously, he worked for Reuters Breakingviews, the Financial Times and the Independent newspaper.

More stories like this are available at bloomberg.com/opinion

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New luxury and pop sales taxes and more Canadian accounting news https://berningcpa.com/new-luxury-and-pop-sales-taxes-and-more-canadian-accounting-news/ Sun, 04 Sep 2022 13:42:10 +0000 https://berningcpa.com/new-luxury-and-pop-sales-taxes-and-more-canadian-accounting-news/ Subscribe to our weekly newsletter and receive all the stories of the week. Click here to join. TORONTO, September 04, 2022 – The past week has seen the introduction of two new sales taxes — one national, one provincial — and significant kickbacks from retailers. Nationally, the Select Luxury Items Tax Act took effect on […]]]>

Subscribe to our weekly newsletter and receive all the stories of the week. Click here to join.

TORONTO, September 04, 2022 – The past week has seen the introduction of two new sales taxes — one national, one provincial — and significant kickbacks from retailers. Nationally, the Select Luxury Items Tax Act took effect on September 1, driving up the price of luxury cars, planes and boats. If you plan to buy a Beamer or a Benz or the nautical or air equivalents, expect to pay 10% of the total taxable amount or 20% of the amount above the price threshold, whichever is lower.

In a CBC interview, Don Drummond called the tax a “loaded approach” that could spawn “cottage industries” around people who try to circumvent it. And indeed, in 2017, the International Consortium of Investigative Journalists arrested both Appleby, a Bermuda-based law firm, and the Big Four accounting firm Ernst & Young for some clever tax avoidance strategies for wealthy plane owners.

And in Newfoundland and Labrador, anyone drinking sugary drinks (soda, iced tea, energy drinks) will pay 20 cents more per pop per liter… of pop. According to the National Post, Newfoundlanders are the highest consumers of sugary drinks in the country and also drink the least amount of water. Small business owners and bottlers are unconvinced, according to the CBC, by the confusion surrounding the tax.

While one tax is national and the other provincial, the national tax has received much more attention, with Sun Media calling the luxury tax another example of “class warfare”, when the same argument could be advanced against the sugar tax. And now, on to the rest of last week’s news in Canadian accounting.

BC auditor general criticizes provincial surplus

It must have been a slow news week because BC Auditor General Michael Pickup got a lot of coverage for questioning a provincial government surplus…because it was too low. Pickup has had a 10-year battle with the province over how it does its accounting and, of course, British Columbia is unusual in its deviations from Canadian public sector accounting standards. (Alberta, Ontario and Quebec all follow generally accepted accounting principles, as do many smaller provinces.)

Pickup says the $1.3 billion surplus announced by the government should have been about six times larger. Opposition critics allege the province is bolstering its record while ignoring much-needed social services.

And speaking of public sector accounting standards, the Public Sector Accounting Board (PSAB) is seeking your input in determining priorities for projects it should undertake with its remaining resources. They released a consultation document outlining future projects that PSAB might consider.

CRA class action lawsuit launched over 2020 hack

Canadian Lawyer magazine reported last week that a class action lawsuit has been certified by the Federal Court of Canada against the Canada Revenue Agency for its data breach. Canadian accountants may remember the two cyberattacks that caused headaches about locked accounts and lost hours trying to contact the CRA.

The National Post also covered the class action lawsuit, led by Rice Harbut Elliott LLP, and reported the CRA’s response: “No organization is immune to cyber incidents or fraudulent activity. That’s why the CRA has robust systems and tools to quickly monitor, detect, investigate and neutralize potential threats. As scammers adapt their practices, so does the CRA. We regularly adjust and improve our security measures in response to this ever-changing threat environment and ongoing intrusion attempts.

CPA PD podcast platform secures $5 million in funding

Betakit, the Canadian startup news platform, announced this week that LumiQ plans to expand its PD podcast platform into the United States. LumiQ was formerly known as Luminari and was launched in 2016 as a sort of career management and online job site for Canadian accountants. (Full disclosure: Canadian Accountant and Luminari discussed cross-promotional activities when Canadian Accountant launched in 2017.) Its professional development courses on venture capital investing were popular with CPAs.

LumiQ has “pivoted” to a podcast platform that provides mandatory professional development opportunities (“compliance learning”) to more than 200,000 chartered professional accountants in Canada. Its financing of $5 million, apparently coming from private investors, will be used to fund its subscription growth strategy south of the border.

Quick Hits: Articles of Interest

CRA doesn’t have to tell people how to run their business, judge in corporate tax case says (Financial Post)
Most doctors took a financial hit in first year of COVID, but top earners did very well (CBC)
Taxes and spending: The fight against carbon pricing heads east (Globe and Mail)
Friday footnotes: EY Split lags; A consulting firm defrauds clients; Student loan forgiveness and taxes (continuity)

By Canadian accounting staff.

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What is the resale price method for estimating transfer price? – New https://berningcpa.com/what-is-the-resale-price-method-for-estimating-transfer-price-new/ Sun, 28 Aug 2022 12:37:31 +0000 https://berningcpa.com/what-is-the-resale-price-method-for-estimating-transfer-price-new/ When the reseller buys and sells goods and services without added value, it would be quite easy to assess the resale margin. AFP archive photo By Mahar Afzal Published: Sun 28 August 2022, 16:37 As we have seen in our previous articles, there are five methods to assess the transfer price, and the resale price […]]]>

When the reseller buys and sells goods and services without added value, it would be quite easy to assess the resale margin.



AFP archive photo

By Mahar Afzal

Published: Sun 28 August 2022, 16:37

As we have seen in our previous articles, there are five methods to assess the transfer price, and the resale price method (RPM) is one of them. In RPM, we determine the transfer price by doing the reverse work.

In the transfer pricing guidelines published by the Organization for Economic Co-operation and Development (OECD), RPM has been defined as follows:

“Transfer pricing method based on the price at which a product purchased from an associated enterprise is resold to an independent enterprise. The resale price is reduced by the resale price margin. What remains after subtracting the margin on the resale price can be considered, after adjusting for other costs associated with the purchase of the product (for example, customs duties), to be an arm’s length price of the initial transfer of ownership between the associated companies”

Under this method, the price at which the same product is resold to an independent buyer is adjusted to arrive at the transfer price between related parties or with related persons. The adjustment factors are the resale price margin and other costs directly associated with the purchase and sale price of the product. In simple terms, we can say that the transfer price under the RPM is the resale price minus the resale profit margin minus the costs directly associated with buying and selling the goods and services.

If the reseller resells the products in a controlled environment, we would be required to apply the “internal comparable” and/or the “external comparable”, and if applicable, we would be able to make the adjustment to assess the price of resale.

It would be easy to assess the resale price, but it would be difficult to determine the margin on the resale price. When evaluating the resale price margin, we must consider the cost of operation, selling expenses and an appropriate profit based on the business and functions performed by the reseller. If the reseller performs more business and functions, the resale price margin would be higher for that reseller and vice versa.

When the reseller buys and sells goods and services without added value, it would be quite easy to assess the resale margin. However, if the reseller adds value, such as the reseller takes the semi-finished goods and then adds material, labor, and overhead to convert them into finished goods and resell the finished goods, the margin that reseller’s resale profit would be higher, and it would take more time and calculations to assess the resale price margin.

Some resellers engage in significant business activities such as advertising, marketing, distribution, issuing warranties, financing goods, etc. in addition to the resale activity, and they expect a reasonable resale margin which should be taken into account when assessing the resale price margin.

If there is a chain of distribution of goods through intermediary parties, then it would be important to consider resale price, activities, functions, etc. of all intermediaries instead of the resale price and other activities and functions of the immediate reseller.

Wherever the reseller has exclusive territorial rights, that reseller would expect a slightly higher price margin. The accounting practices (R&D capitalized by one party while the other reseller expensed it) adopted by the reseller would be another key factor that may need to be adjusted to arrive at the resale price margin.

For example, the UAE subsidiary (XYZ) of a Japanese parent company (ABC) sells high quality products in the UAE, which are manufactured by ABC in Japan. The cost of products purchased from ABC is Dhs 100 per unit, while the selling price to the independent party is Dhs. 150 per unit. ABC also sells the same quality of products to an Independent Distributor (PQR) in the UAE. Functional analysis shows that XYZ and PQR perform similar functions. PQR’s gross margin ratio was found to be 10%. XYZ bears the warranty risk costing Dhs 10 per unit, while for products sold by QPR, the warranty risk is borne by ABC. Additionally, ABC provides marketing materials to PQR while XYZ bears its marketing and promotion expenses which cost them Dhs 20 per unit.

From the example above, it is clear that XYZ and PQR perform similar functions, so we can assume their same resale price margin of 10%. If PQR earns 10% of the resale price, we can assume that XYZ will earn the same, i.e. 15 Dhs (150*10%) per unit. XYZ bears additional promotional and warranty risk, so XYZ will charge a premium for this, which will lead to a total resale price margin of XYZ at 45 Dhs [15 (fair market margin)+10 (warranty risk premium+20(promotional cost premium]. If the uncontrolled resale price is 150 Dhs and the fair resale margin price is 45 Dhs, then the purchase price would have been 105 Dhs per unit instead of 100 Dhs per unit (controlled price) at which the goods were purchased from ABC.

RPM is generally more appropriate for distributors and resellers. However, it is information from third parties, such as the 10% margin in the example above, that is difficult to obtain. Also, if the parties have functions, activities, etc. divergent, it is particularly difficult to assess the margin on the resale price.

Mahar Afzal is Managing Partner at Kress Cooper Management Consultants. The above is not an official opinion but a personal opinion of the author based on the Public Consultation Paper on Corporate Tax and the OECD Transfer Pricing Guidelines. For any questions/clarifications, please write to him at compliance@kresscooper.com.

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Xero Announces New Initiatives and Partnerships at Xerocon User Conference https://berningcpa.com/xero-announces-new-initiatives-and-partnerships-at-xerocon-user-conference/ Fri, 26 Aug 2022 18:17:00 +0000 https://berningcpa.com/xero-announces-new-initiatives-and-partnerships-at-xerocon-user-conference/ Global small business accounting and finance software provider Xero announced a number of new initiatives, partnerships and upcoming products at its annual user conference this week. In a keynote at Xerocon – held live in New Orleans this year after a COVID pandemic hiatus – Anna Curzon, Product Manager, made several major announcements of interest […]]]>

Global small business accounting and finance software provider Xero announced a number of new initiatives, partnerships and upcoming products at its annual user conference this week.

In a keynote at Xerocon – held live in New Orleans this year after a COVID pandemic hiatus – Anna Curzon, Product Manager, made several major announcements of interest to Xero Partners. and their customers, including plans to launch a new inventory solution that will hit the US market first. More than a thousand participants were able to apply to be part of the beta testing program which is expected to launch later this year.

In his keynote, Chris O’Neill, Chief Growth Officer, announced the availability of Xero Small Business Insights, a quarterly report prepared by research firm Accenture on business economics in the United States and Canada. , based on aggregated and anonymized data from tens of thousands of Xero customers. It is also launching with a special report “Small business snapshot — United States and Canada”, which provides information on business performance and the impact of inflation on small US businesses. These reports are available free of charge at xero.com/xerosbi.

“We are laser-focused on bringing beautiful, simple and seamless experiences to small businesses, bookkeepers and bookkeepers across the United States,” Curzon told attendees. “With our new inventory management and bank reconciliation tools, they can spend less time on back office administration and continue to grow their business.”

And a new partnership announced at Xerocon with sales tax compliance software provider Avalara, aimed at providing customers of accounting firms using Xero with better workflows in this critical practice area (see our full article).

The new Hubdoc Bank Statement Extraction tool was also announced and demonstrated by Hamish Cook, US VP of Product. This allows accounting firm partners and their clients to import and reconcile data from bank statements. This tool currently works with the four largest banks in the United States and Canada; Xero expects more banks to participate in the future.

Attendees at Xerocon 2022 in New Orleans.

Additionally, Curzon detailed enhanced reporting capabilities for US customers: “Our new reports include updated features that will help accountants and bookkeepers quickly access answers and streamline their financial analysis. to an updated design, we continue to deliver enhanced functionality.” A feature was also announced that will universally set reporting preferences, such as cash-based reporting, making it faster and easier to report on a company’s performance.

And, in a one-on-one interview with Curzon and Cook later that day, the two doubled down on Xero’s commitment to small business. “It’s always been a small business and Xero’s intention to make their lives better,” Cook said. “So you know we’re steadfast in our continued commitment to small business. Small businesses everywhere employ the lion’s share of people. They contribute a huge amount to GDP. And our founder used to say, if we’re successful , this will lead to better schools and eventually better hospitals in our communities.”

Curzon made a similar comment in his opening remarks: “We believe deeply with your conviction, and with your passion and our shared interest in improving the lives of small businesses here in North America. There are no limits to what we can collectively enable through Xero And we have a bold plan to harness change and drive innovation and a strong partnership with [accountants] is essential to making this vision a reality.”

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