Accounting and Tax Updates

1. Accounting and Tax Updates

2. Topics

3. Introduction Highlights from the 2012 AICPA National Conference Jeff Skaggs, CPA Principal Jeff began with Baker Newman Noyes when the firm was founded in 1995 having previously worked at KPMG, one of our predecessor companies since 1990. He is a Principal in the firm's Audit Division specializing in financial institutions.

4. Economy and trends • Negative effects • European Union, “fiscal cliff” in the US

5. Economy and trends • Public opinion • GDP • Europe • China • Consumers • Housing market • 2013 predictions

6. Regulatory

7. Regulatory

8. Regulatory

9. FASB • Convergence with international standards • Private Company Council • Non-public banks • Impairment • Expected loss model • Classification & Measurement • FV-NI • FV-OCI • Amortized cost • Liquidity risk & interest rate risk disclosures • FV accounting • Leases

10. Uncertainty

11. Introduction Tax Update Roger D. Poulin, CPA, MBA Principal Roger began at Baker Newman Noyes when the firm was founded in 1995 having previously worked for KPMG, one of the firm’s predecessor companies since 1987. He is a Principal in the Tax Division specializing in financial services, corporations, individual taxation and tax advocacy.

12. Income Tax Rates – “Taxmageddon”

13. Income Tax Rates – “Taxmageddon”

14. Income Tax Rates – “Taxmageddon”

15. Income Tax Rates – “Taxmageddon” • Top marginal federal tax rate on dividend income:

16. Income Tax Rates – “Taxmageddon” • Top marginal federal tax rate on dividend income:

17. Income Tax Rates – “Taxmageddon” • Top investment tax rates: Source: Internal Revenue Code; M.A. Co.

18. Income Tax Rates – “Taxmageddon”

19. Income Tax Rates – “Taxmageddon”

20. Income Tax Rates – “Taxmageddon” • Example:

21. Bad Debts and Non-Performing Loans

22. Bad Debts and Non-Performing Loans

23. Bad Debts and Non-Performing Loans

24. Bad Debts and Non-Performing Loans

25. Express Determination Letter

26. Losses on Worthless Debt Securities

27. Loss on Worthless Debt Securities

28. Loss on Worthless Debt Securities • What is a loss/impairment?

29. Losses on Worthless Debt Securities • The timing of the tax deduction is a frequent source of disagreement with the IRS because: • The bad debt conformity election is limited to loans, so there is no safe harbor election available to protect the bad debt losses and claimed on worthless securities

30. Deducting OREO Carrying Costs

31. Deducting OREO Carrying Costs

32. Information Reporting

33. Information Reporting Penalty Amounts Note: The maximum penalty for all failures in a calendar year is $1,500,000, or $500,000 for small businesses, i.e. gross receipts of $5,000,000 average over the last three years. The penalty for intentional disregard of the filing requirements is $250 per occurrence with no maximum amount.

34. Questions on Tax Update

35. Introduction Accounting Update Carl Chatto, CPA Principal Carl Chatto has been with Baker Newman Noyes since it was formed in 1995, having previously worked with KPMG, one of our predecessor organizations since 1983. Carl is a Principal in BNN's Audit Division specializing in financial institutions, higher education, and quasi-governmental agencies. He is certified in Maine, New Hampshire and Vermont.

36. Other comprehensive income

37. OCI continued

38. OCI continued • To address implementation issues • FASB is still reviewing

39. Leases

40. Leases continued

41. Leases continued

42. Allowance for loan losses

43. ALL continued

44. ALL continued

45. ALL continued

46. Other changes

47. One more change

48. Questions on Accounting Update

49. Contact Information for the Presenters Jeff Skaggs, CPA Principal www.bnncpa.com / jskaggs@bnncpa.com 207-879-2100 / 207-774-1793 Roger D. Poulin, CPA, MBA Principal www.bnncpa.com / rpoulin@bnncpa.com 207-879-2100 / 207-774-1793 Carl Chatto, CPA Principal www.bnncpa.com / cchatto@bnncpa.com 207-879-2100 / 207-774-1793