Colorado Springs Financial Briefs: December 14, 2007

Money has more than face value -- it has time value. Keep this in mind when paying taxes.

Mark Patterson, tax partner at Stockman Kast Ryan, said one of the main areas he considers for clients needing to accelerate deductions is the alternative minimum tax.

"In a two-year projection, if a client will not be eligible for the AMT in 2007, but will be in 2008, we will recommend that they pay state taxes in 2007," Patterson said.

To accelerate deductions, charitable donations normally made during 2008 can be made at the end of 2007. The contribution can be charged on a credit card, since it is deductible during the year it was charged, not when the payment is made.

Another option is to pay mortgage interest early, since it's a cash basis, it can be deducted in the year it is paid.

"Businesses that are cash-based can manage their taxable income better by prepayment of expenses -- such as repairs, maintenance and office supplies -- prior to Dec. 31, rather than in January," Patterson said.

Sales of property can be set up as installment sales, so sellers can recognize gain as they receive cash. Installments also can prevent the seller from being kicked into a higher tax bracket.

For investments, income from short-term obligations, such as treasury bills and certificates of deposits, is not recognized until maturity. Income from investments straddling year-end is deferred to the following year.

Bankers Association releases digest

The Colorado Bankers Association has released its "Digest of Colorado 2007 Enacted Laws Relevant to Banks."

The publication provides details about bills that were enacted into law.

The digest is organized by subject: ATM's, bankruptcy, eminent domain, employment, mortgages/foreclosures, etc. Each law is summarized and includes a link to the actual bill. High priority bills are in red.

To access the 21-page report, visit www.coloradobankers.org. Under "Current Focus," click on "What's New," and then scroll down to the link.

Wells Fargo leads small business lending

Wells Fargo held steady as America's No. 1 small business lender for the fifth consecutive year. In Colorado, Wells Fargo loaned more than $997 million to 40,400 small business owners.

In addition, Wells Fargo ranked No. 1 for loans of less than $100,000 in Colorado Springs, with more than 4,100 loans totaling $101 million.

Wells Fargo also was the leading lender for loans of less than $100,000 to small businesses in low- and moderate-income neighborhoods throughout Colorado, with more than 8,110 loans totaling about $212 million dollars.

Wells Fargo is a Small Business Administration preferred lender in 28 states and the District of Columbia, and has $549 billion in assets.

Merger and acquisition accounting rules approved

Merger and acquisition rules issued last week are intended to align U.S. accounting practices more closely with international standards, but many business owners say they're simply a headache.

The Financial Accounting Standards Board approved rules 141R and 160, which cover accounting for business combination and the consolidation of subsidiaries. The rules become effective for U.S. companies during fiscal years beginning after Dec. 15, 2008.

FASB officials said the changes will "improve, simplify and converge internationally" the accounting rules at issue.

"The new standards represent the completion of the FASB's first major joint project with the International Accounting Standards Board, as well as a significant convergence milestone," FASB member Michael Crooch said in a news release.

But not everyone agrees, since the rules demand more valuation work and bring unwelcome volatility to earnings.

The most controversial part of the revisions, which reportedly generated hundreds of critical comment letters from businesses, is the issue of contingencies.

The value of uncertain liabilities, such as future warranty payouts, now have to be estimated at the time of acquisition. And estimates have to be revalued on a quarterly basis, with changes flowing through the income statement.

Previously such liabilities did not have to be recorded until their dollar amount was known.

Other changes include:

The measurement date for valuation purposes is now the closing date of the deal, not the date the agreement was made.

Acquisition costs are expensed. Costs such as fees paid to investment bankers and accountants that were formerly capitalized and amortized will now have to be expensed immediately.

Copyright 2007 Dolan Media Newswires
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