All GLG News Analyses Filed Under: Tax Issues

Increasing “Buzz” Relating to FIN 48 and Potential “Higher-Risk” Companies

September 12, 2007

Analysis by: GLG Expert Contributor

Analysis of:The Uncertainty Principles | www.cfo.com

The increased disclosures required by FIN 48 are clearly uncovering some notable “red flags” and could potentially result in material cash ramifications for certain companies. As a result, I believe the new standard is an important one for investors to understand and assess for potential risks on companies of interest. When considering the increased “buzz” surrounding FIN 48 created by recent articles published in the financial press, I thought it would be helpful to give my perspective on which types of companies may be at “higher-risk” of being materially impacted by FIN 48 (which is discussed in the Analysis section below).

FIN 48 Exposes Notable Red Flags for Certain Companies

September 12, 2007

Analysis by: GLG Expert Contributor

Analysis of:How Accounting Rule Led to Probe | online.wsj.com

A recent article in the WSJ discusses that a subcommittee of the U.S. Senate is probing at least 30 companies regarding past tax-cutting transactions – with the author commenting the investigation appears to have been sparked by the new accounting rule known as FIN 48. Three companies are specifically identified to have received letters – Merck & Co. (MRK), Johnson & Johnson (JNJ) and Wyeth (WYE). The increased disclosures required by FIN 48 is clearly uncovering some notable “red flags” and could potentially result in material cash ramifications for certain companies. Although FIN 48 was primarily intended to incrementally inform investors on a company’s tax situation, the required increased disclosure is essentially resulting in “low-hanging fruit” for government taxing authorities. It is guiding them to certain companies that may have been overly aggressive in taking material levels of questionable tax deductions in the past.

PE Firms Unfair Tax Treatment

September 4, 2007

Analysis by: GLG Expert Contributor

Analysis of:Fear of Taxation by Association | online.wsj.com

PE Firms are under scrutiny for a barrage of reasons.  Now, Congress is reviewing how the entities are taxed.  Many feel that PE firms have an unfair advantage by being taxed at the 15% long-term tax rates used for investments, which is unfair since the fees generated are short-term in nature and are determined by the PE firm rather than the company receiving the investment. For WSJ article, please read: http://online.wsj.com/public/article/SB118411051694462654.html

Jose TrevinoPrincipalAmeriCompass

Can we expect reforms to the Mexican fiscal reform?

July 17, 2007

Analysis of:Rechaza Hacienda bajar tasa de la CETU | www.eluniversal.com.mx

One month after the new fiscal reform was submitted to Congress, the debate has centered on changes to the flat tax (CETU) that will eventually substitute the revenue-based tax regime. Business organizations are lobbying to reduce the CETU from 19 percent to 12 percent. Ironically, the key to the final outcome may lay in the hands of PRI senators.

equal treatment for all companies

July 17, 2007

Analysis by: GLG Expert Contributor

Analysis of:Fear of Taxation by Association | online.wsj.com

The actual situation of the M&A market becomes more and more diffiuclt for industrial players as the advantages and term investment of PE firms are completly disconnected from the reality. Based on their actual tax rate the PE firm can pay more betting on the selling price Financial stability is questionable as they have more and more recourse to bullet debt, everybody knowing that the target cannot pay the leverage increased tax rate will force them to change strategy and also think to make money through dividends paid by the target instead of only profit on sale We will gain consider stratégic investment and indusctrial strategy

PWC, scapecoat of Russia political agenda.

July 13, 2007

Analysis by: GLG Expert Contributor

Analysis of:Russian court hands victory to PricewaterhouseCoopers in tax evasion case | www.iht.com

PWC, a international audit firm shouldn't be that easy falling into tax evation. Moscow's higher Arbitration Court  give foreign firms confidence to stay in Russia. Russia government in the background to nationalised the oil business.

Australian Tax Office - on Private Equity

April 20, 2007

Analysis by: GLG Expert Contributor

Analysis of:Increasing certainty in uncertain times | www.ato.gov.au

Private equity deals are being probed by the Australian Tax Office.

The Commissioner has signaled his key concerns in a speech intended for maximum coverage.

There are some surprises, given recent Australian law changes intended to free up capital gains for non-residents of Australia.

 

Gil ManzonAssociate ProfessorTRUSTEES OF BOSTON COLLEGE

FIN 48: What it does and what it will do

February 12, 2007

Analysis of:FIN 48: Accounting for Uncertain Tax Benefits | www.fasb.org

FIN 48 potentially throws firms' tax positions into sharp relief.  Relatively modest preemptive actions and changes in internal control can significantly blunt the extent to which firms are subject to undesired disclosure with respect to their tax positions.

Kraft: Good FIN 48 News

February 7, 2007

Analysis by: GLG Expert Contributor

Analysis of:Altria Ready to Consider Next Breakup: Tobacco | online.wsj.com

Kraft goes against the grain when it comes to FIN 48: it reports a benefit from its application, not a writedown of assets.

George PughPresidentGeorge Pugh & Co

FIN 48: What and Why?

January 31, 2007

Analysis of:FASB to Implement Tax Changes Without Delay | www.msnbc.msn.com

Many companies and others are making strong arguments that the implementation of FIN 48 which modifies SFAS No. 109 be delayed. On January 17, 2007 the FASB said that implementation would not be delayed, but better guidance would be available in time for the first quarter 2007 filing date. See the following CFO article for more information:

http://www.cfo.com/article.cfm/8547954/c_8552964?f=TodayInFinance011807_h

It seems that everyone, the FASB and the SEC are in a hurry to begin implementation but the targets are not. Robert Herz, FASB chairman, said: "Investors we've talked to say this is needed information and it's needed now. The overall benefit to investors and the capital market of getting this done and getting it done in the time frame we've talked about is the overriding objective."

The speed in which this rule has been written and imposed will result in the need for much clarification, and evidence that any investors want this information in this way seems to very scant indeed.

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