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January 10, 1983 Vol. 63 No. 1
FASB Exposes Draft on Special Termination Benefits
Treasury Modifies Its Circular 230 Proposal
Postage Reminder to Letter Readers
The CPA Letter
A Semimonthly News Report Published by the AICPA
The Financial Accounting Standards Board recently issued an exposure draft that would require companies to recognize a liability and an expense for benefits commonly called “early retirement or termination incentives.” These particular benefits are offered to certain employees for a short period and may include either lump-sum cash payments, periodic future payments or both.
According to the draft, a company would be required to recognize a liability for termination benefits when it is probable that the benefits will be paid and the amount can be reasonably estimated. A company also would be required to recognize as an expense the sum of the cash payments, the actuarially determined present value of future payments and any accounting loss or gain (actuarial) under an existing employee benefit plan that results from the termination.
If adopted, the proposal would be effective for termination benefits offered in fiscal years ending after April 15, 1983. Comments are due by February 28. For further information, contact the FASB, High Ridge Park, Stamford, Conn. 06905.
The Treasury Department recently modified provisions of its proposed Circular 230 which sets standards for providing opinions used in tax shelter promotions. Practitioners providing tax shelter opinions must inquire into all relevant facts ensuring that they are accurate, relate the law to actual facts and ensure that all tax issues are considered, including the reasonable possibility of any issues being challenged by the IRS. Also, the opinion should include an evaluation of whether the material benefits “in the aggregate” will be realized.
While not barring the use of negative shelter opinions, the Treasury said that the substantial understatement rules in last year’s tax act (TEFRA) will “undercut” the use of such opinions. Les Shapiro, the IRS’s director of practice, speaking at the Institute’s national fall tax division meeting last month, outlined the service’s view that the use of negative opinions in promoting tax shelters “encourages taxpayers to pursue conduct that would not be allowable under the tax laws.”
The modified proposals state the view that a negative opinion is “objectionable” when there is “no reasonable basis” for the position taken in the shelter. If there is a reasonable basis for the position, but little if any likelihood that the position will be upheld if litigated, “a negative opinion is also objectionable,” concluded the Treasury.
Saul Braverman, chairman of the Institute’s tax responsibility subcommittee, said he hoped the definitions in the new proposal would be extended to the substantial understatement penalty. “Practitioners,” he added, “need guidance as soon as possible in this area.”
Comments on the proposed regulations are due by February 14, 1983.
AICPA members who have elected to receive the Letter by first-class mail, or those who wish to take advantage of this service, should send their checks for $6.50 to the AICPA’s circulation department as soon as possible. This will assure them of first-class mail delivery for the period from March 1, 1983, through February 29,
1984. Otherwise, their copies will be sent at the usual lower-class rate.
Object Description
| Title | CPA letter, 1983 |
| Author | American Institute of Certified Public Accountants |
| Subject |
Accounting -- Societies, etc. Accounting -- Periodicals |
| Date-Issued | 1983 |
| Source | Originally published by: American Institute of Certified Public Accountants |
| Rights | Copyright and permission to reprint held by: American Institute of Certified Public Accountants |
| Type | Text |
| Format | PDF page image with corrected OCR scanned at 400 dpi |
| Digital Publisher | University of Mississippi Library. Accounting Collection |
| Date-Digitally Created | 2012 |
| Language | eng |
| Identifier | cpa letter 1983 |
