The ObamaCare Writedowns

the check's in the mail.

...that's public (some are privately owned) must be disclosed within a certain time frame of when it's known to the public. In fact, the funny thing is, a lot of the disclosures that were added to the list came about under a law called Sarbanes-Oxley, a liberal, Democrat initiated law. Here's what's required on a Form K, which is the one filed each quarter with the SEC. The new health insurance law and it's anticipated effect is what's known as a "direct financial obligation" and the bill's passage became a "triggering event".

how devastating this bill would be to businesses and the economy. If they had, they could have raised the alarm and stopped this legislation from being passed. I know the Obama Administration would have paid attention and done the right thing...

Uuuhhh, wouldn't they?

...so that makes you a "somebody".

They intend to take it to the Supreme Court, sort of like FDR was stopped by the Court in his day. I believe the Florida attorney general is currently the one heading up the preparation for the lawsuit. This war over health care is not over yet, just one battle has been past and many more to come.

You think the SEC would require this type of "disclosure" (as if anyone can guess the weather, lol) and miss not having health care costs being reported by a company and any significant change in such requiring special and timely reporting?

No, what you see are Democrats tripping over each other as usual. It's like watching circus clowns trying to run a country. "Bring in the clowns".

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201001271217dowjonesdjonline000554&title=sec-votes-for-more-disclosure-about-risks-of-climate-change


A divided U.S. Securities and Exchange Commission on Wednesday voted to encourage companies to disclose the effects of climate change on their business and the potential for climate regulations to affect business models.

The 3-2 vote brings an intensely partisan debate over climate change into the sphere of securities regulation. Democrats, who dominate the commission, supported the guidance and cited the need for greater consistency in climate disclosures. Republicans said that the SEC appeared to be more interested in supporting an environmental agenda than in addressing more pressing issues stemming from the aftermath of a financial crisis.

If you did, you would not have said;

Present value OR Future value?

Although I am sure that you will still fail to understand, a "present value" IS the present value of future cash flows. In other words, it IS the future value. It DOES NOT refer to ANY historical payments, and it is not retroactive.

Most people would be challenged to get it any more wrong than you have.

you still do not understand even after it is explained to you. Thank you for confirming my prediction. There is no point in offering further explanations to those who cannot, or will not, understand.

I agree that it sounds disingenuous for the companies to announce 1st quarter write-offs related to the bill when most of the provisions haven't even taken effect, but the 1st quarter actually is not over for most businesses (It's still March) so changes in tax law that affect the deductibility of expenses could legitimately generate a loss this quarter if they take effect immediately.

Also, when you own a stock, part of the value of it is the dividends it might pay in the future. People buy stocks as an investment for the dividends it will pay. If something happens that would alter the value of these dividends, they have to report it.

reporting requirements force corporations to recognize costs as soon as those costs are known. It is not optional. It is required by law. As soon as Obama signed heath care into law, corporations were required to recognize the future costs/liabilities entailed by the legislation. The provisions do not need to take affect. The costs must be recognized NOW. You cannot fault companies for doing what they are required to do.

A failure to recognize all of this goes a long way towards explaining why the bank meltdown of 2009 occurred. What is truly scary is that Congress apparently does NOT understand any of this. Either that, or they are playing dumb. How can they function as legislators if they do not understand the requirements imposed by their legislation?

(1) When the rules take effect IS important because one of the causes of the write-offs is a change in which deductions are allowable. Those deductions do not have ANY impact on profits until they are no longer allowed. Are those rules effective this quarter? I don't know. If they ARE effective during the 1st quarter of this year then write-offs related to those rules are appropriate. If the deductions are not disallowed immediately, though, it would be unreasonable to list them for this quarter. As noted, I don't know the answer to that.
(2) The main reason I regard the timing as curious is the way it came just days after signing. If they were announced that quickly then obviously the companies knew about the expected changes BEFORE the rules were ratified. There is no way they reviewed legislation that massive thoroughly enough to make such an announcement between the time the laws were passed and the announcements were made.

One could argue that the companies knew quite well IN ADVANCE what the write-offs would be but chose not to specifically comment on them until AFTER the legislation was passed. What their agenda was in that process I do not know. Maybe they did not want to comment until the rules were finalized. Maybe they did not want their announcement to influence the political games being played. Again, I don't know. I just find it curious.

One of the other interesting things about this is that few companies have made comments on how the changes will affect their performance in future quarters. The impact will change over time as various components of the legislation take effect. I don't think that the current announcements of write-offs are the end of the story. Whether the future adjustments will be positive or negative remains to be seen.

That helps explain why the country does not understand its problems.

Saying that corporations have the option to wait until the rules take effect is equivalent to saying that Bernie Madoff had no obligation to disclose his Ponzi scheme as long as he made the payments required for the current period. It's equivalent to saying that pensions do not have to be funded until someone actually retires and begins collecting benefits. After all, he or she might quit or die before the pension can actually be collected.

Once the law was passed, corporations are REQUIRED to make provisions for the costs that they will incur. This is NOT optional. That is precisely why banks were in such trouble in 2009. They were REQUIRED to write down the value of their mortgages because the value of those mortgages was close to zero. Had 100% of their mortgages defaulted? No, of course not! In fact, the betting was that 70-80% of the mortages would be good. That did not matter. The banks were required to write them off (mark to market) IMMEDIATELY, and charge the loss to their capital.

You cannot argue, or reason, through such things without being VERY knowledgeable about the accounting rules that the government has mandated. To do so can quickly make one look foolish as Congress is now finding out.

Perhaps the companies should have issued advance warnings through third parties, but remember that corporations may be sued if they speculate about the financial effects of possible future events. That is something that is also part of the law, and corporations are required to be very circumspect with regard to speculating about future events.

My impression is that you either didn't read my posts OR you are just being argumentative. Or maybe both.

Either way, I'm not going to waste my time.

Before the end of the year, just to anticipate how much more you might owe, or get a general idea of any refund coming? You take into account all that is known, then make qualified conjectures on what is expected by year's end regarding income, deductions, etc. For the most part you are not far off the mark then when the end of year comes, especially if doing this about a month before that year's end. What's then required? You have to get the full report of your income and taxes paid to have the exact figures, which may differ by a few hundred, if even that. Corporations do this all the time, keeping a constant tally of known but also expected expenses while moving toward end of quarter and end of fiscal year.

Yes, not all changes in the bill was made, but corporations were already adjusting for possibility of it's passage. They would have done figures based on it's failure and it's passage. Once it was passed those figures could be quickly updated to reflect any changes that occurred. This goes on all the time and shouldn't be surprise.

Having those figures, once the bill was passed, it would take only a short while to firm them up and announce them in a timely fashion, which they did.

Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.
Underpayment penalty. If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. The penalty is figured separately for each installment due date. The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. This is true even if the corporation is due a refund when its return is filed.
Refiguring required installments. If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments.
So I would think that after the new law passed, they would quickly recalculate to keep themselves O.K. with their estimated tax payments.

I won't get into a discussion of the arcane aspects of accounting. I had more than my fill of that kind of stuff years ago, but as I understand it the quarterly payments of estimated taxes are not necessarily 'expenses' for the purpose of stating profit and loss precisely because (as you pointed out) their payment does not necessarily mirror the expected profit/loss for the quarter.

I don't think you can argue that the 1st quarter charges are due to that sort of weirdness in the tax code.

But as noted elsewhere I don't have the desire or energy to pursue the discussion. It might be useful if a CPA commented on some of the details but I don't know if we have one in the forum now or not.

Perhaps if you hadn't made it so obvious, by stressing the Lie I could give you the benefit of the doubt, but the deliberate stress by bolding the word "Previous" shows that you KNEW it was a Lie, and you told it anyway.

The article concerns current into future earnings. There is no word "Previous" in the entire article. Your actions in doing so are unconscionable!

IF they can do a writedown on a quarter that hasn't ended , then I can call it Previous.


Their pants were on fire first.