SEC’s Investor Advisory Committee Objects to FASB Materiality Proposals

FASB SEC RULESThe Security and Exchange Commission’s (SEC) Investor Advisory Committee (IAC), in a January 21, 2016 letter to the Financial Accounting Standards Board (FASB), objected to two recent FASB proposals that would give companies more control over what does and does not get disclosed in financial statement footnotes by letting management and auditors determine materiality based on a subjective legal test rather than a mathematical percentage test.

The two proposals were issued in September 2015 as Proposed Amendments to Statement of Financial Accounting Concepts (CON) No. 2015-300, Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics of Useful Financial Information, and Proposed Accounting Standards Update (ASU) No. 2015-310, Notes to Financial Statements (Topic 235): Assessing Whether Disclosures Are Material. The proposals call materiality “an entity-specific aspect of relevance based on the nature or magnitude or both of the items to which the information relates in the context of an individual entity’s financial report.” Information is material “if there is a substantial likelihood that the omitted or misstated item would have been viewed by a reasonable resource provider as having significantly altered the total mix of information.”

The IAC’s concerns are that these proposals would give management too much discretion about the information investors get. They are concerned that this test could be used to give even less information than is currently required… and there are many who believe the current standard does not require enough disclosure as it is.

The FASB plans to hold a roundtable that will discuss all of its disclosure projects, including the guidance for footnote disclosures for fair value measurements, pension liabilities, and income taxes in mid-2016.

Must See- Once I Was a Beehive

Last night was a rare night for me. For nearly two hours I forgot about emails, I forgot about assignments, I forgot about all the day-to-day frustrations of life–  Because for nearly two hours I was too busy laughing and crying to even be able to think about them. I owe that break to the movie Once I Was a Beehive.Once I Was A Beehive FB Cover FINALThis movie is brilliantly written. The humor is actually funny (not some overworked formula or shock humor). The opposite happens as well. I cried because it touched true emotions. And amazingly, the timing between the two (laughing and crying) was directed/edited with such phenomenal timing that I just sat back, relaxed and enjoyed the phenomenal ride.

In the current world of re-packaged, formulaic, repeat copy after copy of the same idea movies, Once I Was a Beehive stands out as a “must see” movie.

Once I was a Beehive is showing this weekend at the Laie Palms Cinema. If you can’t find it at a theater near you, contact your theater manager and ask them to get it. You’ll be glad you did. Then you too can spend two hours laughing and crying, instead of thinking about everything else going on in your life.

 

New Hawaii Tax Credits for Film Production

With such epic failures as the solar tax credits getting stuck in committee earlier this year, we were not expecting much to happen with film tax credits in Hawaii either. But that didn’t stop the State and County Film Offices and the Hawaii film industry from trying. The clear data and testimony that was continuously submitted by industry experts and companies affected by film tax credits were impossible even for legislators to ignore. The film industry is good for the State of Hawai’i and tax credits are an essential part of the mix. With all the evidence securely supporting it, the legislature approved and the governor signed a bill, now known as Act 88/89 that increases and adjusts Hawai’i’s film tax credit.

The new law, which went into effect July 1st, creates a refundable tax credit based on the amount of money actually spent in Hawaii producing qualified film, television, commercial, or digital media projects. The law increases the tax credit from 15% under prior law to 20% of qualified production costs spent in Oahu and from 20% under prior law to 25% if spent in the neighbor islands of Hawai’i, Kauai, Lanai, Maui and/or Molokai.

The specifics of Act 88/89 include additional key elements. It increases the limit per production from the previous $8,000,000 cap to $15,000,000. It allows productions to qualify for the tax credit even if their work is scheduled only for Internet distribution. It includes State and County location and facilities fees to be included as qualified expenditures and it locks everything up until December 31, 2018.

The importance of the fact that Act 88/89 goes out 5½ years into the future without needing to be renewed cannot be understated. The majority of states, including believe it or not California, have consistently been tinkering with the formulas on an annual basis and as a result they have been losing film business. Big productions are like big ships. They are hard to get moving and take time to do so and once they get moving they are hard to stop. As a result, producers look to long term stability of tax credit programs when making the decision on where projects will be filmed. Don’t believe me? Just take a look at Georgia.

Georgia put together a stable film tax credit program a decade ago and has pretty much left it alone. The result, after California in the number 1 spot and New York in the number 2 spot, Georgia comes in at the number 3 spot, creating an annual $3,100,000,000 (yes…that is billions) industry. Georgia’s legislature has put one interesting twist on their credits. Their credit is 20%, but they will add an additional 10% if you put the state’s peach logo, not just a standard film credit, in the credits thereby ensuring a very visible promotion of Georgia tourism as part of every production.

The Hawaii film industry generated roughly $250 million in direct spending in the islands in 2012, according to the Hawaii Film Office. Because dollars spent by a production require other dollars to be spent (for example, when a production orders catering from a local company, the caterer needs to spend money to other businesses to acquire food, etc.) the total economic impact is greater than the actual spend. The State Film Office estimates the actual economic impact of the $250 million spent by production companies in Hawaii to be $398 million dollars. According to the state film commissioner, Hawai’i’s film tax credits also created 2,500 new full time equivalent jobs last year. Now that’s good for Hawai’i.