PERSPECTIVE--Accounting topics usually do not show up on the radar, especially in times when other news topics are red hot. There is, however, a conceptual transition worth noting with wide ramifications.

Good accounting is not just desirable; it is vital. Business and the general public require the best possible financial information in order to transact and invest in confidence.

Regardless, it makes sense for the cost of accounting changes to favorably correlate with the benefits.  For example, spending a fortune to analyze or report on an obscure, immaterial activity is hardly a sound course of action.  A cost vs. benefits standard should be applied when a widespread accounting change is entertained.

The largest accounting change in the last 10 years (perhaps one of the largest ever) is underway. It’s ASC 606. ASC stands for Accounting Standards Codification and is the source for what is commonly known as Generally Accepted Accounting Principles (GAAP).  666 might be a more appropriate code number.

The key objective of 606 is to create consistency for reporting revenue across all industries for customer contracts. Current GAAP is more industry specific. This amounts to a transition to  a one-size-fits-all approach from one which recognizes unique business practices.

There is much to say about the benefits of consistency, but plain vanilla does not necessarily deliver the disclosure the public needs in an increasingly complex world.

If anything, ASC 606 increases the complexity of evaluating customer contracts by requiring revenue determination at various points in time. Basically, the economic substance of the affected contracts remains the same, so it is mainly a matter of timing of when the revenue hits the books.

OK, not so bad, but the current method has been working well for a long time. (A side note: the Enron-type disasters of the past were due to lax compliance with internal controls.  No change in revenue recognition principles will prevent a recurrence. The objectives of ASC 606, as well as any other accounting change, are not intended to address fraud, abuse or lack of due diligence).

Is 606 worth it? The benefits are arguable. And for all the talk about consistency, some industries are exempt from the scope! Eventually, it is likely other exemptions will be made.  After all, industries and products are not static.

Companies have and will incur significant costs to implement it.  The sad part is no one really knows how much. There is no national tracking tool in place.

My guesstimate of the price tag is based on the ratio of accounting, IT and auditing costs to revenue, roughly 5%.  The aggregate revenue for S&P 1500 companies is $13 Trillion, so it works out to around $65 Billion, or about $43 Million per company, if you figure that major conversion efforts require an equivalent of around 10% of the  5%.  The cost will be disproportionately worse for smaller companies, and probably even worse for nonpublic firms.

Companies can make substantial improvements to reporting and control systems for that kind of money, improvements which can provide greater protection and quality of information to the shareholders and stakeholders than playing with the timeline for revenue recognition.

The Financial Accounting Standards Board (FASB) purports to consider the cost to the private sector of its decisions, but it missed the boat here. One author even suggested that ASC 606 was pushed forward to justify FASB’s efforts in the wake of its failed attempt to converge US GAAP with International Financial Reporting Standards – an objective that grew out of the Norwalk Agreement of 2002, the inspiration for 606. 

Fourteen years of futility comes at a pretty high price…and difficult to explain when you have little to show for it!  Reminds me of DWP’s decision to implement its new billing system rather than man up to the public and admit it would be a disaster.

The conversion, which for the largest companies started ramping up in earnest a couple of years ago, will run through 2017.  The implementation date is in 2018 (2019 for nonpublic companies).

Afterwards, addressing post-implementation glitches will undoubtedly cost a bundle. As cousin Eddy told Clark Griswald in Christmas Vacation about the Jelly-of-the-Month Club, “Clark, it’s the gift that keeps on giving the whole year through.”

In this case, years to come … and as useful a gift as fruit cake.

(Paul Hatfield is a CPA and serves as President of the Valley Village Homeowners Association. He blogs at Village to Village and contributes to CityWatch. The views presented are those of Mr. Hatfield and his alone and do not represent the opinions of Valley Village Homeowners Association or CityWatch. He can be reached at: [email protected].)

-cw

CORRUPTION WATCH-A grand assemblage of knaves, fools and moral Lilliputians rule the city Los Angeles. Do not expect that to change. 

Recently, a few Americans have shown concern for Fake News. They realize that Fake News has real consequences as when a fool shows up at a pizza shop with an automatic weapon to “self-investigate” Hillary Clinton’s role in a child abuse ring in Washington D.C. 

In Los Angeles, Judge Alan Goodman warned the public about our own form of Fake News: Information from the City of Los Angeles. In January 2014, Judge Goodman ruled that Eric Garcetti’s update to the Hollywood Community Plan was based on lies and myths, which Judge Goodman described in polite legalese, saying that the city’s planning was based on “fatally flawed data” and “wishful thinking.” 

When the City published stories about how Hollywood has been revitalized and that its population is growing at a robust rate, when in fact is was deteriorating and rapidly shrinking, this was Fake News. Based on the continuing Fake News that Hollywood is still the center of the universe and hordes of people are descending up the town, one huge mega-project after another is being unanimously approved the LA City Council. And the approvals are justified by the endless Fake News emanating from City Hall. 

Hollywood’s “official” population fluctuates as frequently as Donald Trump tweets. Just as no one can find the millions of illegal votes that were cast for Hillary Clinton to disguise the “fact” that Trump won the popular vote, no one can find the real Hollywood population. In its April 2006 Notice of Preparation for its latest Update to the Hollywood Community Plan, the Garcetti Administration claimed that the population was 206,000 people, citing “SCAG’s 2016 RTP” (that is, the 2016 Southern California Association of Government’s Regional Transportation Plan.) Fake News. The SCAG 2016 RTP has no data at all for Hollywood. The only “Hollywood” which the RTP mentioned is West Hollywood. 

Upon investigation, we discovered that SCAG had done some other demographic analysis for Hollywood’s population, but never found that Hollywood’s population was as high as 206,000 people. The highest number that can be extrapolated from the SCAG data was 204,700. When this Fake News was shared with the City, the Garcetti Administration chose to stick with the fake numbers. We know the reason. This Fake News supports the false need to construct all the mega-projects. 

Then in November 2016, mirabile dictu, the Garcetti Administration announced that Hollywood’s 2015 population was 210,511 people. Does that mean that the April 2016 NOP had missed 4,500 people or that between December 2015 and April 2016, Hollywood’s population had declined by 4,500? Don’t bother asking…it’s all Fake News! 

People are accustomed to Fake News. In fact, people prefer it. Megyn Kelley hit the nail on the head in 2012, when she doubted Karl Rove’s insistence that Mitt Romney was winning the presidential election by asking, "Is this just math that you do as a Republican to make yourself feel better, or is this real?" 

Megyn Kelley’s diagnosis was correct – people invent the news that makes them feel better, or in the case of Los Angeles, justifies the perpetuation of a criminal enterprise which we call the Los Angeles City Council. Oh, that LA had Megyn Kelly instead of the LA Times, whose motto is “All the news that the elite wants you to believe.” 

Poor Edgar Maddison Welch from Salisbury, North Carolina, who drove all the way to Washington to self-investigate the pizza parlor. At least Mr. Welch’s “self-investigation” placed him far ahead of the Angelenos who merely accept whatever Fake News gushes forth from City Hall. 

Fake News Has Real Consequences. 

While the false story about child-molesting at the pizza parlor was an extreme aggravation for its owner, the Fake News from LA City Hall has had a devastating impact on all of Los Angeles. In a report the Garcetti Administration never thought the public would find, the City admitted in November 2015, that in 2013, the last year for which it had data (why the 2 year lag?), it had constructed “150% [of the] units needed by above moderate income earners,” adding to the 12% vacancy rate of such apartments constructed in the last decade. The City said that a 5% vacancy rate was equilibrium. Generally, when the vacancy is 2.5 times equilibrium, one does not push ahead with plans to construct even more vacant housing. 

Why is LA City Hall so committed to Fake News? The main reason is that the City is run as a criminal enterprise whose function is to siphon off public money to make a few landowners very wealthy while everyone else suffers. 

This phenomenon is not new. Over 100 years ago in its 1915 Study of Street Traffic Conditions in the City of Los Angeles, civil engineers warned that a few land owners would want to restrict office and industrial usage to the core of the city in order to make themselves wealthy. But the engineers explained, with sound mathematics related to Los Angeles geography, that the city had to allow all segments of the community, offices, homes, industry, community and civic center to expand outwards in unison. In other words, decentralization was essential. 

Restricting the distribution of all segments of the community, however, resulted in massive projects to be built in areas like Bunker Hill, Century City, and Westwood while at the same time turning the Valleys into bedroom communities. Separating those dense office areas from the residential communities would then require expensive transportation projects to convey so many people from the 5,000 square mile county to a few tenths of square miles of the Bunker Hills, Century, City, Westwood, and now to DTLA and Hollywood. 

Like the serfs of the 1400s, Angelenos have come to accept this arrangement as the natural order of life. Should it be brought to the attention of Angelenos that their city leads in all the negative indicators and lags in all the positive indicators for quality of urban life, we have endless Fake News from City Hall to falsely assure us that we’re still the premier destination city. 

Will Angelenos Act Before it is too late? 

No. It already is too late. Besides, the criminal enterprise is firmly established and everyone wants it to continue. Look at the people throwing their hats in the ring to run of City Council in March 2017. How many are willing to give up the chance to become the Lord of their Council Fiefdom? None. 

Is there any City Council candidate who will relinquish the power to have each and every item he or she places on the City Council agenda unanimously passed? If so, please step forward. 

Nor is there any danger that the criminal enterprise where every developer gets unanimous approval for projects will go away soon. Judge David Fruin has declared that the City is above the law. 

According to this learned jurist, Penal Code 86, which criminalized the vote trading agreement that is the glue that holds the LA City Council together, is Non-Justiciable – beyond the power of the courts. It does not matter what laws the California State Legislature passes; the Los Angeles City Council does not have to follow any law unless it voluntarily chooses to do so. 

The Law May be Pernicious, but it is not Fake. 

The problem with placing the City Council above the law is more serious than a lone self-investigator showing up with an automatic rifle. Our infrastructure has crumbled, the homeless rate has escalated, the crime rate is out of control no matter how much Garcetti tries to have the LAPD fudge the data, the Family Millennials and the high-end employers are fleeing the city for places like the Texas Triangle. 

Alea jacta est.  The die has been cast for our future tax base which, for a generation going forward, will have lower skilled wage earners and a higher percent of children and elderly retired. Just as Julius Caesar’s crossing the Rubicon sealed the fate of the Roman Republic, Judge Fruin is sealing LA’s fate of being ruled by a criminal enterprise.

(Richard Lee Abrams is a Los Angeles attorney. He can be reached at: [email protected]. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.

GUEST WORDS--Under Lee Baca’s leadership people were racially profiled, women were molested, immigrants were deported, and there were many walls built to keep specific people away. Sound like a certain President-Elect? He also married someone who emigrated from Asia, had a self-proclaimed law-and-order reputation, gave celebrities special treatment, served with a second-in-command who was just as corrupt, and condoned a historically violent, racist organization without specifically admitting to personal acts of violence or racism. This organization was not the Ku Klux Klan, but the Los Angeles County Sheriff’s Department. 

So how did Los Angeles topple the oppressive power of former Sheriff Lee Baca after electing him to hold it? And how were we able to simultaneously form a Civilian Oversight Commission to put power in the hands of the people? Leaders emerged. 

On December 6, 2016, exactly 151 years to the day the 13th Amendment was ratified, former Sheriff Lee Baca is scheduled to face a federal judge and the prospect of 20 years in prison for obstruction of justice. Organizations like Dignity and Power Now are largely responsible for this, due to their uplifting the dialogue of formerly incarcerated people and building social and political pressure. 

Five years ago, a year before I put a hashtag in front of Black Lives Matter and sparked a global movement, I began leading a movement in Los Angeles. My brother had suffered a concussion after being severely beaten by deputies in the county jail, so I developed a performance art piece that sparked a coalition that shaped an organization, called Dignity and Power Now (DPN.) We would stand for hours outside the county jails and talk to people, a majority of them Black and Brown. Their stories of abuse were not being reported on the news, so we held press conferences. Solutions were not on the politicians’ agendas, so we showed up until they were. People wanted to end sheriff violence and implement accountability, so we demanded civilian oversight of the sheriff’s department. 

The first time the county supervisors voted on implementing a civilian oversight commission we showed up with 300 formerly incarcerated people who shared their stories of oppression and resilience. The supervisors voted 3-2 against it. We didn’t stop. We continued organizing, holding events, and meeting with supervisors and candidates. Four months later, on December 9, 2014, the Los Angeles County Board of Supervisors voted in favor of civilian oversight. 

The commission will be functional by January, and although it’s a huge step in the right direction, it is not perfect. They still need the power to subpoena the sheriff’s department and other agencies involved in custody operations. That would require a change to the county charter and a public vote.

The fact that there is former law enforcement, including a former LA County sheriff’s lieutenant, appointed to the commission raises serious concerns about whether it will protect incarcerated Black and Brown people, which is what the community and I have urgently fought for. And while we succeeded in electing a new sheriff, last year use of force in the jails went up 40%. We just elected Janice Hahn and Kathryn Barger to the LA County Board of Supervisors, giving it its first female majority and democratic supermajority, but just before that the board approved a new women’s jail and a new mental health jail, ignoring the research that has proven that jails can never be effective sites of care. 

There is more ground to cover that could have grave impacts for those criminalized and incarcerated under a law-and-order presidency. Every day the choices that Donald Trump makes stirs the country’s attention, but the leadership worth looking to isn’t that of high-ranking political figures -- it’s that of the people on the ground. If you look to Los Angeles you will find leaders creating law enforcement accountability and fighting for Black lives. If you look to Oakland, Minneapolis, Chicago, St. Louis, Baltimore, and Toronto you will find the same. 

This year people can associate December 6 as the day Lee Baca will go to trial, or the anniversary of the 13th Amendment, or as another day closer to when we will be subjected to a Trump presidency. Or, collectively, as a movement, we can choose to see it as another day that we will show up in our communities and we will lead.

(Patrisse Cullors is a Los Angeles-based artist, organizer, and freedom fighter. She is also the co-founder of #BlackLivesMatter. This piece first appeared at HuffingtonPost.com. Prepped for CityWatch by Linda Abrams.

ANIMAL WATCH--A marauding California mountain lion has clawed his way back from almost certain execution thanks to a kind-hearted alpaca owner. (See CityWatch story: ‘America’s Favorite Cat’.) [[

Los Angeles wildlife authorities suspect that the big cat, known as P-45, killed 11 alpacas and injured others in an attack near Mulholland Highway in Malibu in November. The beast ate only one of the animals.

“It seems to enjoy killing things,” noted alpaca owner Victoria Vaughn-Perling.

Neighbors believe P-45 may be responsible for the death of up to 65 pets and other domesticated animals in the area over the past year.

The California Department of Fish and Wildlife and the National Park Service had granted her permission to kill the 5-year-old mountain lion. 

But word of the permit angered environmentalists and triggered heartfelt appeals from animal lovers across the nation.

“Eliminating P-45 does not solve the problem, especially given there are at least four mountain lions in the Santa Monica Mountains that have killed livestock over the past year,” said Kate Kuykendall, acting deputy superintendent for the Santa Monica Mountains National Recreation Area. “Nor is P-45’s behavior abnormal or aberrant in any way. If animals are stuck in an unsecured pen, a mountain lion’s natural response can be to prey upon all available animals.”

Vaughn-Perling has now changed her mind about killing P-45 and agreed to let wildlife officials capture the male animal. They will decide whether to relocate the cat to a more remote location in the Santa Monica mountains or place him in captivity, her attorney told the Los Angeles Times.

Relocation may not be successful, however, because P-45 could seek out his old territory especially now that he “knows where the restaurant is,” said one of Vaughn-Perling’s neighbors.

Los Angeles County Supervisor Sheila Kuehl issued a statement thanking Vaughn-Perling for her decision to “spare the life of one of the precious few mountain lions left in our Santa Monica Mountains.”

But the clash between area residents and the cats won’t likely disappear any time soon.

Up to 15 mountain lions live in the Santa Monica Mountains between Highway 101 and the Pacific Ocean, according to a federal study.

The state Wildlife Commission approved a $7.1 million expenditure last month to purchase land in the area to provide a safe habitat for the animals. Some environmental activists are also hoping to raise funds for a bridge that wildlife could use to travel safely over the highway.

• See also, CityWatch story: ‘P-22-The Cat That Changed America’ 

(Mary Papenfuss writes for Huffington Post … where this piece originated.)

-cw

GUEST WORDS--When the Los Angeles Department of Water and Power made its case to its 1.4 million customers for its latest rate proposal, staff made more than 80 presentations to many customers in Los Angeles. In these discussions, LADWP emphasized its commitment to providing clean and reliable water and power to all customers while maintaining competitive rates. LADWP leaders and staff explained – with transparency – the Department’s goals and its need for funding to accelerate the replacement of rapidly aging infrastructure, meet mandates to green our grid and expand local water supplies, and improve customer service. In the process, LADWP also received useful and important feedback from ratepayers of all customer sectors. Ultimately, the rate proposal was approved in March 2016, strongly supported by many elected officials and customers. 

But the work only began there. Approval of the rate proposal comes with several expectations, including meeting specific milestones and benchmarks that clearly define LADWP’s organizational goals and objectives. These key performance indicators will increase LADWP’s efficiency and goals of transparency with the ratepayers. While reporting on benchmarks and achievements is common among many public agencies and utilities, LADWP is going a step further by establishing the Equity Metrics Data Initiative (EMDI) -- a first for any utility in the nation. 

The EMDI is consistent with the Mayor’s various executive directives on gender equity, workforce and affordable housing as well as the City Council’s recently-adopted instructions on LADWP reform related to low income seniors, equitable clean energy solutions and low income customer response. The initiative will also enable the Department to weave Equity throughout the enterprise, and embed it as a cornerstone of LADWP management and Board best practices. 

“Equity,” which is defined as “fairness, impartiality and justice,” is essential in all of LADWP’s operations. As a core component of this principle, the Department adopted data-driven metrics that track, measure and report on how LADWP’s programs and services are provided to all of its customers. As the largest municipal utility in the nation, LADWP has made a firm commitment to ensure that LADWP’s services and operations reach all customers fairly and to vastly enhance customer engagement and service. 

The Board of Water and Commissioners, where I serve as Vice President, adopted this initiative in August 2016, following many discussions with stakeholders and a preliminary community meeting in July. In October, staff hosted another meeting with a broad range of community stakeholders to fine-tune the metrics. In November the DWP Advocacy group, which consists of Neighborhood Council leaders, was briefed. Further Neighborhood Council briefings are expected. At the December 6 Board meeting, the Board adopted the four major categories of the Equity Metrics, covering 15 key specific metrics that will be benchmarked and monitored. LADWP derived these 15 equity metrics from a menu of 50 equity metrics, the balance of which may be addressed in the next several years by the Commission. 

1. Water and Power Infrastructure Investment. LADWP already collects considerable data on service reliability. However, to assure every customer and community in Los Angeles that LADWP is providing them with a safe, consistent supply of water and power, geographic data must be collected about water and power reliability, infrastructure improvement projects, and maintenance services. This category of metrics will track: the Power System Reliability Program, which details the replacement of critical power infrastructure like power poles, transformers and cables; the Water System and the replacement of mainlines, trunk lines and other water infrastructure; the likelihood of power failure and the duration of outages that occur, which will ensure that LADWP remains among the most reliable; and feedback about the quality of drinking water. 
2. Customer Incentive Programs and Services. LADWP offers many programs to customers to help them save on their bills. The Equity Metrics Data Initiative will collect data and evaluate the equity of impacts of the following programs in geographic regions of the city, among socioeconomic subgroups and among multi family, affordable and single family housing ratepayers: Commercial Direct Install Program, Low Income and Lifeline Programs, Electric Vehicle infrastructure, Refrigerator Exchange Program, Home Energy Improvement Program, Turf Removal Rebates, Tree Canopy Program, and the Rain Barrel, Cistern and Water Tank Rebates. 
3. LADWP will expand its existing data collection process for contracts and contractors to include more granular data that will provide information about the equity of contract allocation according to several metrics including: the number and dollar value of contracts awarded to women-owned, minority-owned, disabled veteran-owned and LGBT-owned businesses; business locations; industry category, etc. Equity in procurement can increase LADWP’s efficiency by encouraging increased competition among vendors.
4. LADWP will expand its existing data collection framework to include information that will evaluate the equity of training and hiring practices according to the following metrics: gender, ethnic background, disabled veteran status, date of hire, residential location, educational level, etc.

When dynamics are observed that disproportionately or adversely affect particular communities or groups of ratepayers, LADWP will be able to make adjustments that improve fairness and equity throughout its service area for everyone they serve.

LADWP will report on the first set of EMDI findings in February 2017. The Department will continue to fine-tune the metrics and later add more to be monitored, to help ensure equitable service delivery and access to its programs and services. We should all stay engaged and supportive of LADWP’s commitment to transparency and accountability as it advances equity for all of its customers and communities. This is a vital and transformative initiative that will be achieved amidst LADWP’s consistent success in keeping our water running and our lights on, safely and reliably, for all of us.

(William Funderburk is Vice President of the Los Angeles Board of Water & Power Commissioners.) Prepped for CityWatch by Linda Abrams.

SNAPSHOT ANALYSIS—(Here’s what David Zahniser reported in the LA Times on Thursday: ‘Spurred by years of complaints from neighborhood groups, the Los Angeles City Council voted Wednesday to seek new restrictions on “mansionization” — the practice of constructing houses that are far larger than those nearby. On a 13-0 vote, lawmakers asked City Atty. Mike Feuer to rewrite sections of two city ordinances that regulate the size of new homes in single-family neighborhoods and in hillside areas.’ We asked our ‘mansionization’ expert, Shelly Wagers, to make sense of what happened and answer the question: Is the McMansion Crisis now over? Here’s how she capsulized it:

Big picture, the Council took quick and decisive action yesterday to get amendments to the mansionization ordinances back on track.  Councilmember Koretz has shown consistent leadership on the issue, Councilmember Ryu continued to deliver on his campaign promises, and Council President Wesson, who had kept his powder dry on this one, stepped up big-time to sponsor the Motion the Council voted on yesterday. 

As they now stand, the amendments go a long way towards addressing the failures of the existing ordinances. The ratio used to set basic size limits is far more sensible, many self-defeating bonuses have been eliminated, and most hillside-specific issues like grading and hauling have been resolved. 

Only one issue remains troubling:  Front-facing attached garages.  Because they are uniquely damaging and because counting space within the walls is an eminently reasonable way to calculate the size of the structure, we would have liked to see all the square footage of front-facing garages count floor space.  Instead, 200 sq feet will remain uncounted.  The concern is not the 200 sq ft per se, it is rather that this “freebie” continues to incentivize (or at least reward) a singularly unfortunate design feature.  (For reference, I’m attaching the text of my comments on this point at yesterday’s hearing.)  It’s not clear at this time whether or not we will have an opportunity to tighten this loophole. 

BIG thanks to CityWatch, by the way, for providing the most consistent coverage of this issue of any media outlet in the region. The Council would never have taken action without strong pushback from homeowners and residents all over the city.  Activists deserve tremendous credit for forcing the issue.

+++++++ 

Here are Shelley’s comments from Council Meeting:

I’m Shelley Wagers from Council District 5, and I thank you for making mansionization a priority.  

The original Motion this Council adopted to amend the BMO identified attached garages as a uniquely damaging loophole.  Here’s why:

Attached garages add 400 square feet of bloat to a house.  

They eliminate the buffer that a driveway provides.

They use wide curb cuts that reduce street parking and destroy mature street trees.

They disrupt the look and feel of many LA neighborhoods.

Excluding attached garages is like weighing yourself with one foot off the scale.

CPC President David Ambroz put it this way:  “Square footage is square footage …”

No one is asking you to prohibit attached garages.  But they must count as floor space.

(Shelley Wagers lives in the Beverly Grove neighborhood and has been involved in anti-mansionization campaigns in Los Angeles for over a decade.)

-cw