What’s on International Treasurers’ radar this week.
This week’s editorial meeting brought forth several topics of concern for treasurers, one of which International Treasurer has written about often. That topic, HIA 2.0 or a repatriation holiday for corporate overseas profits, continues to haunt national headlines. Other topics included a further refinement of what companies need to do to get their end-user exemption and also a look at the convergence roadmap as it relates to hedge accounting.
HIA 2.0. Allowing another tax holiday for corporate to bring home cash held overseas has been a fairly hot topic recently, likely the result of a large lobbying effort by a group pushing for the break (see related story here). That lobbying campaign, called Working to Invest Now (WIN) in America, includes the backing of companies such as Apple, Cisco, Google and Pfizer, among more than dozen others. It also describes itself as a “broad and growing non-partisan campaign” working to bring back to the US the estimated $1.2tn to invest in America and jobs.
But it seems the harder the group pushes the more resistance it gets. The New York Times wrote a somewhat balanced article on it but overall seemed to be against it; and entirely against it is liberal flag bearer and Times columnist Paul Krugman, who inveighed against a tax holiday in a blog post entitled, “Repatriation is the Last Refuge of Scoundrels.” And now this week we see reports of a letter from a Treasury acting assistant secretary of tax policy in response to North Carolina Governor Bev Perdue saying that the last repatriation holiday in 2004 did nothing to boost the economy. Gov. Perdue had written a letter to President Obama in April stating that bringing corporate cash back to the US “could be a pragmatic and efficient way to encourage innovation, research and development and, of course, hiring.”
It seems any one step forward for the tax holiday effort receives a giant two- or even three-steps-back response.
Convergence roadmap. IT will take a look at the convergence roadmap and what it means for treasurers from a hedge accounting perspective. Back in December 2010, the IASB issued an ED proposing big changes that would replace IAS 39 Financial Instruments: Recognition and Measurement upon approval. The proposed changes are different from those proposed under US GAAP in FASB’s comprehensive hedge accounting ED published in May 2010. Currently, the SEC is conducting a “Roundtable on International Financial Reporting Standards in the United States” discussing investor understanding of IFRS, the impact on smaller public companies and the benefits and challenges of incorporating IFRS into US public company accounting. The two accounting frameworks differ vastly on hedge accounting, according to WSJ.com. For instance, FASB has proposed dropping its stringent testing requirement, part of Financial Accounting Standard 133, to determine whether a hedge is “highly effective” before a company can ignore an earnings loss on a derivative to the extent it is offset by a gain on the item being hedged.
Dodd-Frank exemption checklist. A subject we referenced several weeks ago was the misconception some end-users have as it regards their exemption from central clearing. Some seem to think it is automatic. However, beyond the required board approval to pursue the exemption, companies must submit possibly reams of information to the SEC and the CFTC regarding how it expects to meet financial obligations associated with using security-based swaps. In further refining this story, IT will come up with a checklist – sourced from a variety of experts – on all that is needed to get that exemption.