Tax Proposals and Reforms

Tax Reform Proposals

                This paper lays out a series of proposals which have been made at the Federal level for tax reforms to the current federal taxation system. The sources of these reforms are pre-existing proposals. The proposals were chosen to be used for this proposal to promote a tax environment that is friendlier to business needs while still fulfilling the goals of the regulatory and taxation system.

Reform Options for Business Investment and Innovation:[i]

1.       The elimination of the requirement of depreciation and amortization of investments by small businesses.

A.      Under §179 the qualifying property that can be expended by small businesses should be increased permanently and with that amount adjusted for inflation.

B.      Under §179 qualified property should be allowed to be expensed in an unlimited amount by small businesses.

C.      The definition of real qualified property under §179 should include “off-the-shelf” software.

2.       Small business tax accounting simplification.

A.      The cash method of accounting should be expanded. Some options include the following:

i.                     A “business cash flow tax” model, which is a system where the cash receipts of the business are included in income immediately and all cash disbursements of the business are deductible expenses immediately, should be allowed for small businesses. This system would allow for the immediate deduction of land, buildings, equipment and inventory therefore eliminating the need to depreciated business property and account for inventories.

ii.                   Another option would be the same as the previous example, but without the immediate expense of buildings and land.

iii.                  Allow small businesses that do not have inventory to use the cash method of accounting for revenues and expenses.

B.      Inventory cost rules could be simplified by one of the following methods:

i.                     Direct and indirect costs of inventory should be allowed to be expensed by small businesses.

ii.                   Continue to require the capitalization of direct costs of inventory, but allow for the exemption of small businesses from uniform capitalization rules which require indirect costs involved in the production of goods to be capitalized.

3.       Research and Development.

A.      Allow research and development credits to be used against the payroll tax liability. This would result in the credit being partially refundable.

4.       Expenditures for starting and organizing a business.

A.      The deduction of expenditures for starting up a business and the deduction of expenditures for organizing a business should be merged into one rule. The proposal suggested would increase the threshold from $5,000 to $10,000 with a phase-out starting at $60,000.

5.       “Qualified small business” stock sale exclusion.

A.      The temporary exclusion for 100% of the sale qualified small business stock should be made permanent. The AMT preference item associated with the sale of qualified small business stock should be eliminated.

B.      §1202 (partial exclusion of gain from certain small business stock) should increase the eligibility requirements from the $50 million size restriction. The proposals uses as an example up to $75 million.[ii]

C.      §1202 should also include S corporations and limited liability corporations.

6.       Start-up Business which concentrate in research and Development should be exempt from passive activity loss rules which require passive losses greater than passive income to be carried forward to the next year.

A.      Pass through entities or only ones in certain industries should be allowed to deduct a percentage of the income from their business.

II. Depreciation and Amortization

1.       Depreciation rules should be more accurately matched with the economic life of intangible assets.

A.      Alternative depreciation System (ADS) allows for a longer depreciation period using straight line depreciation instead of MACRS. ADS could be required to be used for businesses.

B.      Revise the modifications and lives of new technologies for the Alternative Depreciation System and require their use by businesses.

C.      Under MACRS equipment recovery time should be extended because inflation has decreased.

D.      Publicly traded and large audited companies should depreciated using “book depreciation” in accordance with GAAP.

2.       The lives of intangible assets should be more accurately matched with the amortization rules.

A.      The useful life of intangible assets could be extended. An example of 20 years was suggested.

B.      Certain expenses should be amortized. An example of “advertising expenses” was suggested.

3.       Expensing should be allowed at 100%

A.      Businesses should be allowed to have their alternative minimum tax (AMT) credits accelerated instead of expensing at 100%.

III. Manufacturing

§199 Income attributable to domestic production activities allows for the deduction of 9% of the income of businesses involved in manufacturing and production (Oil and Gas is allowed 6%). §199 reduces the marginal and average tax rates for the business for which it applies to.

1.       Allow for larger deductions for certain activities.

A.      When the research and development is performed in the United States allow for a greater deduction or R&D credit.

B.      Advanced forms of manufacturing activities should be allowed a larger deduction for income. All forms of domestic production activity should have the same deduction percentage. This includes oil and gas.[iii]

IV. Innovation

Businesses currently have the option of expensing research and development costs or to amortize research and development costs over five or more years. Businesses involved in research and development are also allowed a credit for incremental spending on supplier and labor used in research and development activities. This credit can be used by businesses in one of two ways. The first is the “traditional” credit. Under this form of the credit the research and development expenses are compared with the research and development expenses from 1984 to 1988. The second is the “alternative simplified credit” which determined from looking at the last three years of research and development expenses.

Possible reforms with regards to research and development expensing and credits.

1.       The research and development credit should be allowed to expire.

2.       Instead of having businesses expense research and development immediately the businesses should be allowed to amortize the expenses. An example given suggested a three years period.

3.       Create a permanent, simplified research and development credit that is more focused. The following options have been suggested:

A.      The permanent credit should completely replace the “traditional” credit with the “alternative simplified” credit. The “alternative simplified” credit should be increased. A suggested example was 17-20%.

B.      The allowed credit amount should be increased with regards to specific activities. A suggested example was innovative or life science research.

C.      The credit should apply to all qualified research by terminating the incremental clause of the credit.

4.       Allow for a patent box

A.      A “patent box” is a method of taxing revenue derived from products produced through research and development. Under this method of taxing the revenue streams would be taxed a lower rates if the research and development for patented product was performed in the United States.[iv]

V. Other Tax Accounting

Inventory: Inventory accounting has improved dramatically due to changes in technology which should allow for changes in inventory accounting methods. The following are suggestion changes for taxation accounting as it relates to inventory.

1.       Last-in, First-out (LIFO) inventory accounting should be repealed and replaced with one of the following suggested methods:

A.      Businesses should be required to change their method of accounting for inventories to one of the other method. The Businesses recognize gains from the recapture of LIFO reserves. Businesses should be given enough advanced warning as to the date of change that they can minimize their tax liability from the change in methods.

B.      Businesses may continue to use LIFO with their previously acquired inventory, but future inventory should be recorded using a method of inventory of accounting other than LIFO.

Reform Options for International Competitiveness:[v]

1.       The treatment of Non-Subpart F earnings should be reformed and anti-base erosion rules should be stricter. The following suggestion has been made:

A.      Sub-part F earnings subject to immediate taxation should include the following:

i.                     Low-taxed “controlled-foreign-corporations” (CFCs) should have all their income taxed with the exception of income that is derived from substantial activities in foreign markets.

B.      Controlled Foreign Corporation earnings should be subject to a minimum tax rate. The following Suggestions have been made:

i.                     A minimum U.S. tax should be applied to the income of controlled-foreign-corporations that is taxed at a rate lower than the minimum foreign effective tax rate.

1.       An exception should be allowed for income derived in the controlled-foreign-corporations country of incorporation.

ii.                   Income from intangibles of controlled-foreign-corporations sales from the U.S. parent in foreign markets should be taxed immediately, with no U.S. tax on the income when it is repatriated into the U.S. A rate of 15% was used as an example.

iii.                  Except for tangible capital assets in the home country of the controlled foreign corporation all income from the controlled foreign corporation should be taxed. A tax rate of 15% was suggested.

C.      Exemptions should be allowed together with the above examples. Suggested examples include:

i.                     A suggested example would be a 95% dividend received exemption by U.S. corporations for dividends from controlled-foreign-corporations. An exemption for 95% of the gains from the sale of stock of a controlled-foreign-corporation. Allow deductions for expenses due to the exempt dividends and gains.

1.       The suggested example also states that the 5% remaining could be tax immediately, but the tax would be reduced by the taxes from (A) and (B) above.

ii.                   A suggested example was a 100% dividends received exemptions for U.S. corporations receiving dividends from a controlled-foreign-corporation, but not allow U.S. corporations to take deductions for expenses due to exempt dividends.

iii.                  Combined with (i) or (ii) above, the following could be applied to the operations of foreign branches:

A.      Foreign branch profits could be covered by a 95% or 100% exemption.

B.      Foreign branches could be classified as controlled-foreign-corporations to which the exemptions would apply.

2.    The Subpart F rules could be reinforced by using one or more of the following methods:

A.      Income from services in the U.S. or the sale of property in the U.S. by controlled-foreign-corporations taxed at a relatively low rate should be should be taxed immediately.

B.      Income from Intangible property transferred from a related U.S. party to a controlled-foreign-corporation should be taxed to the extent the income exceeds a reasonable return.

3.     Inclusion of controlled-foreign-corporation income

                A.    The U.S. parent business should include all the earnings of controlled-foreign-corporation with foreign tax credits.

4.     Reinforce thin-capitalization rules to prevent excessive debt financing which. This would limit based erosion.

A.    A U.S. business should not be allowed interest expense deduction if the interest expense is greater than a percentage of adjusted taxable income. An example percentage of 25% was suggested.

B.     An exception should be allowed for a U.S. business that is leveraged at an amount not greater than the foreign entities with which it is involved.

C.     A carry forward should be allowed to take deductions in future years for interest that is not deductible in the current year.

5.      Reinforce rules that prevent base erosion in the U.S. by foreign businesses.

A.     Reinsurance premiums paid to offshore affiliates which were not taxed should have deductions for such premiums limited.

B.     Royalties paid to offshore affiliates which were not taxed should have deductions for such royalties limited.

II.            Foreign Tax Credit and Sourcing Rules

1.       Increase the limitation on cross-crediting, which is when an entity exploits the rules of the U.S. and foreign tax systems to generate credits that have no correlation to any real economic activity.

A.      There are two forms of foreign tax credit limitation groupings (referred to as “baskets”): Passive and general income. Limitation groupings could be expanded for the purpose of creating greater limitations. Suggested examples are Subpart F income groupings and dividends groupings from foreign corporations which are not CFCs.[vi]

i.                     Limitation groupings (“baskets”) could also be based on country of origin.

B.      The foreign tax credit limitation grouping could include rents and royalties from related parties.

C.      All foreign subsidiaries should be treated as one entity when determining the foreign tax credit from U.S. subsidiaries in foreign countries.

2.       The rules for determining the source of income should be modified.

A.      The global “allocation of interest expense” adoption should be accelerated.

i.                     A suggested example is that the fair-market-value method could be repealed for the apportionment of interest expense.

B.      Sales of inventory rule should be replaced with a place-of-business rule, which is used to determine how much foreign tax credit is available, the title passage.

C.      The rules for the limitation of U.S. taxpayer elections for the creation of foreign source income should be expanded in scope.

III.           Non-Resident U.S. Citizens

1.       Long term non-resident U.S. citizens should be allowed an election to be taxed as non-resident aliens under the following conditions:

A.      The individual must live abroad for a specified period of time.

B.      At the time of the election the taxpayer will be taxed as if he or she sold all his or her assets.

References

26 U.S. Code §199 – Income Attributable to Domestic Production Activities. Cornell University Law School Legal Information Institute. Retrieved Dec 1, 2014 from http://www.law.cornell.edu/uscode/text/26/199

26 U.S. Code §1202 – Partial Exclusion for Gain from Certain Small Business Stock. Cornell University Law School Legal Information Institute. Retrieved Dec 1, 2014 from http://www.law.cornell.edu/uscode/text/26/1202

26 U.S. Code §863 – Special Rules for Determining Source. Cornell University Law School Legal Information Institute. Retrieved Dec 1, 2014 From http://www.law.cornell.edu/uscode/text/26/863

26 U.S. Code §865 – Source Rules for Personal Property Sales. Cornell University School Legal Information Institute. Retrieved Dec 1, 2014 from http://www.law.cornell.edu/uscode/text/26/865

Business Investment and Innovation. (April 2013). The United States Senate Committee on Finance. Retrieved Dec 1, 2014 from http://www.finance.senate.gov/issue/?id=72355fe8-b834-467e-bae8-79a77f7517f8

International Competitiveness. (May 2013). The United States Senate Committee on Finance. Retrieved Dec 1, 2014 from http://www.finance.senate.gov/issue/?id=72355fe8-b834-467e-bae8-79a77f7517f8

Wood, Robert W. Patent Boxes Come to Ireland & U.K., Why Not U.S. (Oct 2014). Forbes. Retrieved Dec 1, 2014 from http://www.forbes.com/sites/robertwood/2014/10/16/patent-boxes-come-to-ireland-uk-why-not-u-s/

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[i] Business Investment and Innovation. (April 2013). The United States Senate Committee on Finance. Retrieved Dec 1, 2014 from http://www.finance.senate.gov/issue/?id=72355fe8-b834-467e-bae8-79a77f7517f8

[ii] 26 U.S. Code §1202 – Partial Exclusion for Gain from Certain Small Business Stock. Cornell University Law School Legal Information Institute. Retrieved Dec 1, 2014 from http://www.law.cornell.edu/uscode/text/26/1202

[iii] 26 U.S. Code §199 – Income Attributable to Domestic Production Activities. Cornell University Law School Legal Information Institute. Retrieved Dec 1, 2014 from http://www.law.cornell.edu/uscode/text/26/199

[iv] Wood, Robert W. Patent Boxes Come to Ireland & U.K., Why Not U.S. (Oct 2014). Forbes. Retrieved Dec 1, 2014 from http://www.forbes.com/sites/robertwood/2014/10/16/patent-boxes-come-to-ireland-uk-why-not-u-s/

[v] International Competitiveness. (May 2013). The United States Senate Committee on Finance. Retrieved Dec 1, 2014 from http://www.finance.senate.gov/issue/?id=72355fe8-b834-467e-bae8-79a77f7517f8

[vi] 26 U.S. Code §863 – Special Rules for Determining Source. Cornell University Law School Legal Information Institute. Retrieved Dec 1, 2014 From http://www.law.cornell.edu/uscode/text/26/863

and

26 U.S. Code §865 – Source Rules for Personal Property Sales. Cornell University School Legal Information Institute. Retrieved Dec 1, 2014 from http://www.law.cornell.edu/uscode/text/26/865

Management of Information and Technology - Apple's Ecosystem.

Apple’s Ecosystem

Part of the co-innovation strategy is how an organization utilizes its ecosystem. In order to fully realize the advantage of co-innovation the organization must utilize it partners. An ecosystem is defined as “a network of organizations and individuals that co-evolve their capabilities and roles and align their investments so as to create additional value and/or improve efficiency.”[1]

Apple has managed to be as successful as it is in large part due to its ecosystem. By giving their stakeholders more input and freedom to contribute to Apple the stakeholders. The ecosystem is made up of hardware, software and online services. These include Apps, Operating Systems, software, music, movies, books, games, add-ons and peripheral devices that connect to Apples devices. Money is made by getting you to buy products that only interact with each other.[2] The contributors to the Apple ecosystem interact more flawlessly with Apple devices than Android does with devices it operates on. Some these ecosystem is tied to Apple staples like iTunes, and include well known Apps that first appear to Apple users. Apples also has dedicated stores that Apples users can go to that deal only with Apple products.[3]  

The biggest competitors of Apple include Google, Amazon, and Microsoft. Microsoft and Apple are the older companies with deep roots in computer hardware and software industry. Google rose from the internet as a search engine and expanded its presence when it became to primary search engine of most online users. Amazon had an ecosystem from the beginning with its partners in Amazon’s shopping network. [4]

Apple started developing an ecosystems with iMovies in 1999, iTunes in 2001 and iPhoto in 2002. However, it was the introduction of the iPod in 2001 which really launched the Apple ecosystem. Using iTunes as the intermediary for the device that was dependent on software only provided by Apple the music players than was able to sell to the public digital music and albums. In 2007 Apple introduced the iPhone and in 2010 the iPad. Both of these devices expanded on the idea of the iPod allowing users to download Apps and software that interacted with these devices delivered by Apple and its partners. There are 119 countries that iTunes is available. Each country has at least 20 million tracks available on iTunes. In the U.S. alone there are 35 million tracks available for sale. 25 billion music tracks have been sold through iTunes. [5]

There are other music apps available on for Apple devices as well such as Spotify, Pandora, Shazam and SoundHound. Music can delivered to an Apple TV or an AirPlay receiver. Apple is also offering a cloud service for music called iTunes Match which stores up to 25,000 songs for $25 per year. A recently announced iTunes Radio will allow for a streaming radio service from over 200 radio stations which is either free while supported by ads or for $25 per year ad free.[6]

One app that is part of the Apple ecosystem is the iBookstore. The iBookstore carries over 1.75 million books in 155 countries. It include many free titles and rarely goes above $14.99. The number of computers and devices you can put the books on is limited to five computers with iTunes, but an unlimited number of iOS devices that are synced with these computers.[7]

In addition to iBookstore are Apps from other book providers that are available to users of the Apple ecosystem. This includes Newsstand which allows for subscriptions to magazines and newspapers that can be accessed by users. However, Apple came under scrutiny by the U.S. Justice Department for antitrust violations by conspiring to price fix with publishers to keep the price of books artificially high. [8]

Apple has a large number of apps dedicated to gaming in its Apps Store. There are over 144,000 gaming apps available through Apple. The quality of these games vary greatly, but there is a vast amount to choose from. Gaming on Apple devices has spawned a large number of accessory devices such as wireless controllers and other devices that interact with iOS devices. There are even third party devices that can be controlled by iOS devices such as remote controlled vehicles. However, Apple has not been as successful in desktop gaming largely due to not producing a console such as Playstation or Xbox.[9]

The iTunes store also sells movies with over 60,000 titles available in 109 countries. In 2012 there 65% of movie downloads and 67% of television show downloads were through iTunes. Many movies are available the same time as DVDs and videos can be rented from the service as well. These videos can be streamed to any iOS device and up to five computers with iTunes. Netflix and Hulu can also be streamed through Apple devices and Apple TV. There are also video apps available in the Apps Store and other streaming services from Networks such as HBO that can be accessed for a service fee.[10]

Through the iPad and iPhone a user can easily shop for merchandise. There are apps dedicated to specific merchants such as amazon, E-bay and many others. Food can be ordered through apps for specific restaurants and delivery services. There are even apps that allow the user to scan an item at certain brick and mortar stores, pay on-line and walk out without having to go to a cashier. One weakness, though, is that Apple does not have a central payment application that stores user information for payment.[11]

Apple also had iCloud which is online storage which stores the data on your devices automatically and synchronizes them to your other Apple devices. Apple devices are designed to work seamlessly with other Apple products. The theory is that because the Apple products work so well together as opposed to different products from different manufacturers that are not as seamless the users will stay within the Apple ecosystem and not look to outside manufacturers. This creates brand loyalty and is known as the “Halo Effect”.[12]

Apple Supplier Responsibility

Apple’s supply chain is dependent on more than a million people and hundreds of manufacturing partners worldwide. Apple promotes a safe working environment and audits it supply chain to hold its suppliers accountable. Apple performed 451 supply chain audits in 2013 and trained 1.5 million workers in their rights. 3.8 million workers have been trained on their rights since 2008. The suppliers have a 95% compliance with Apple’s rule of a maximum 60 hour work week for its employees. 18 factories offer free education and development programs. In 2013 over 280,000 took courses in these programs which included accounting, English, web design and even flower arranging. Apple started the Apple Supplier EHS Academy to develop qualified environment, health and safety (EHS) personnel. This is a formal 18 month program and one of the most comprehensive for any global supply chain. This program enrolled 240 personnel in 2013 representing 270,000 workers.[13]

Apple has 12,000 student interns from 130 vocational schools. Apple has actively sought to improve the quality of education and the legitimacy of on the job training at supplier facilities. 33 audits were performed in 2013 specifically for the purpose of preventing the abuse of migrant workers. Apple required US$3.9 million in labor fees charged by labor brokers to be paid back to contract workers. Apple has made a code of conduct publicly available since 2005 for the improvement of workers and has third party auditors verify compliance with this code of conduct.[14]

Future Innovation for Apples on Going Success

Apples strategy includes its third party distribution network to reach more customers and provide high quality sales and support services. Apple intends to increase market demand through differentiation. Apple sells most of its products and third party supplier products directly to customers. Apple prohibits resellers and dealers from selling Apple products below a “Minimum Advertised Price” (MAP) and does so by offering subsidies to its retailers. This prevents retailers from competing with Apple stores.[15]

Apple CEO Tim Cook stated that Apple is distinguishable from other companies in the vertical integration in it three fields of expertise: software, hardware and services and continued to say “Apple has the ability on all three of these spheres to innovate like crazy and cause magic. People are trying desperately to catch up and they are finding it’s not so easy to do.”[16]

Vertical integration has given the company more control over its value chain and the cost of its components. Apples devices are synchronized and work well with each other. When Apple expanded its product line Apple leveraged its existing relationships to create enhanced offerings. In 2013 Tim Cook stated that Apple has 6 million developers and added an additional 1.5 million developers since 2012. Additionally, 80% of Apples devices run iOS 7 which makes it the most used operating system in the world as Android’s latest operating system was adopted only in the single digits. The research firm GfK found that 84% of iPhone users intended to purchase another iPhone in the future when replacing the current phone they have. Over 70% of respondents in the study stated that the reason for their continuing with Apple being the seamless integration of access and content being significant reasons for their remaining with Apple. Apple Maps has increased in popularity resulting in a decrease in Google Maps market share from 81 million users in September 2012 to 58.7 million users in November 2013.[17]

The ecosystem of Apple allows it to maintain quality control of its products and ensure seamless integration. The accountability and education of its labor force empowers its partners and employees to contribute more to the company and be valuable resources beyond their current roles. This empowerment of employees and stakeholders gives Apple the opportunity to innovate while maintaining higher product standards and integration that Apple is known for.

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[1] “Ecosystem Advantage: How to Successfully Harness the Power of Partners”. California Management Review, Peter James Williamson and Arnoud De Meyer, Vol 55, No. 1, University of California, Berkeley, Fall 2012, p. 24, pp 24-46, Retrieved March 14, 2014.

[2] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[3] “The Stickiness of the Apple Ecosystem” Citeworld, Matt Rosoff, Nov 11, 2013, Retrieved April 18, 2014. http://www.citeworld.com/article/2115170/mobile-byod/why-i-just-bought-my-third-iphone.html

[4] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[5] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[6] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[7] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[8] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[9] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[10] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[11] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[12] “Battle of the Media Ecosystems: Amazon, Apple, Google and Microsoft”. ComputerWorld, Michael deAgonia, Preson Gralla, JR Raphael, Aug 2, 2013, Retrieved April 18, 2014. http://www.computerworld.com/s/article/9240650/Battle_of_the_media_ecosystems_Amazon_Apple_Google_and_Microsoft

[13] Apple “Supplier Responsibility 2014 Progress Report”, p.4, Retrieved from http://www.apple.com/supplier-responsibility/

[14] Apple “Supplier Responsibility 2014 Progress Report”, p.5, Retrieved from http://www.apple.com/supplier-responsibility/

[15] Apples Premium Pricing Strategy and Product Differentiation, MarketRealist, Smita Nair, Feb 6, 2014, Retrieved April 19, 2014, http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/

[16] Why Apples Ecosystem is its biggest competitive advantage. MarketRealist, Smita Nair, Feb 6, 2014, Retrieved April 19, 2014, http://marketrealist.com/2014/02/ecosystem/

[17] Why Apples Ecosystem is its biggest competitive advantage. MarketRealist, Smita Nair, Feb 6, 2014, Retrieved April 19, 2014, http://marketrealist.com/2014/02/ecosystem/

GASB Exposure Draft for Accounting and Financial Reporting of Pension Plans Not Administered Through Trusts and Amendments to GASB Statements 67 and 68

                The Government Accounting Standards Board has released an exposure draft with regards to the accounting and financial reporting of pension plans. The purpose of the proposals would be to create a frame work for the presentation of defined benefit and defined contribution pension plans that will improve the comparability of information reported by both employer and non-employer contribution plans.[i]

                The purpose of this exposure draft is to establish a standard for employees whose pensions are not covered by GASB Statement 68 Accounting and Financial Reporting for Pensions. Additionally the exposure draft is designed to improve the reporting of state and local defined pension plans that are not covered by GASB Statement 67 Financial Reporting for Pension Plans.[ii]

                The Statement in this exposure draft establishes standards for defined benefit and defined contribution plans of state and local governments for the benefit of employees where the administration of the pension plans are not through trusts or equivalent instruments. The pensions must also meet the following criteria:

a.       Contributions to the plans and subsequent earnings must be irrevocable.

b.      Plan assets are administered by the benefit terms.

c.       Pension plan assets are legally protected from the creditors of the plan members and the employers of the plan members.[iii]

The types of pensions covered by the statement in this exposure draft includes:

a.       Retirement income;

b.      Other post-employment benefits provided by a pension plan that are not retirement income.

“Other Post-Employment Benefits” (OPEB) should be used to report post-employment benefits that are separately provided from pension plans and healthcare benefits other than retirement income.

“Defined Contribution Plans” are defined as:

a.       Having one account per employee;

b.      The contributions required to be made by an employee’s employer or non-employer entity are defined for the period that the employee is actively working;

c.       State that the pensions will be funded only by contributions, earning on those contributions less administrative costs. [iv]

“Defined Benefit Pension Plans” include the following:

a.       “Insured plans” are plans that pay pensions known as insured benefits. These plans are established when pension payments are made to an insurance company and the company contracts to pay a pension to the employees in conformity with the plan terms of the pension plan.

b.      “Single employer defined benefit pension plan” is a plan other than an insured plan. For the purpose of this definition the primary government and its units are considered a single employer.

c.       “Multiple employer defined pension plan” is a plan other than an insured plan. This plan manages the pensions of employees of multiple employers.[v]

“Special funding situation” is where a non-employer makes contributions to the pensions plans of employees of another. This does include situations where non-employer provides the employer with resources for making contributions to pension plans.[vi]

                Employers that are not in a “special funding situation” use the economic resource measurement focus and the accrual basis of accounting. The liability recognized should be the “total pension liability” measured using “actuarial present value of projected benefit plans.” The liabilities from different pension plans provided by employers may be displayed in the aggregate in the financial statements.[vii]

                Actuarial valuations for total pension liability should be measured (1) from the measurement date or (2) 30 months and 1 day earlier than the most recent fiscal year end of the employer using actuarial update procedures.

                “Projected benefit payments” include benefits of active and inactive employees. Included in the “projected benefit payments” are automatic cost of living adjustments (COLAs) and automatic benefit changes after employment.[viii]

                Benefits received by employees and former employees provided by an “allocated insurance contract” are not included in the projected benefit payments if the following conditions are met:

a.       There was an irrevocable transfer to the insurer to provide the benefit payments;

b.      All payments to the insurer for the contract have already been made;

c.       There is remote chance any payments will need to be made to cover the benefits other than by the insurer.[ix]

The “discount rate” used should be that of a municipal bond with an AA/Aa rating or better. The Bond should be a tax-exempt, general obligation, 20 year bond.[x]

“Pension expense” should be used in the current period to report total pension liability changes except in the following circumstances:

a.       Pension expense should be used to recognize: (1) when economic and demographic factors differentiate in the expected and actual result when measuring total pension liability. (2) Assumptions change with regards to future economic or demographic factors.

b.      Pension expense should not recognize payments made by the employer for benefits as they come due.

c.       Revenue should be recognized when benefits come due for amounts not in a special funding situation paid by a non-employer.[xi]

Pension expense should be used to recognize administrative expenses.

Deferred outflow of resources should be reported (a) when the employer makes payments to pensions when benefits come due past the measurement date of the total pension liability, but before the reporting period ends; and (b) payments for administrative expenses made by the employer after the measurement date, but before the reporting period ends.[xii]

For total pension liabilities in financial statements that use current financial resources measurement and modified accrual basis accounting, pension expenditures should be the combined amount of (a) employer payments for pensions as they come due and (b) the difference between beginning and ending balances of amounts to be liquidated.[xiii]

Notes to the financial statements should be used to disclose amounts previously discussed if they are not already identifiable in the financial statements. Inputs and assumptions which are significant for pension liability measurement should be disclosed in the notes to the financial statements. [xiv]

A schedule for changes in pension liability should be provided in the notes to the financial statements that includes the following information:

a.       Beginning balance;

b.      The effects of

1.       Service Cost;

2.       Interest;

3.       Benefit term changes;

4.       Variance in expected and actual total pension liability;

5.       Input and assumption changes;

6.       Payments of benefits;

7.       Any significant changes.

c.       Ending Balance;

d.      For Special funding situations:

1.       The total proportionate share of the total pension liability contributed by non-employers.

2.       The total proportionate share of the total pension liability contributed by employers.[xv]

Notes to the financial statements should also include the following information:

a.       Measurement and valuation dates of the pension liabilities as well as any actuarial adjustments.

b.      Special funding situation of the employer if there is one as well as a proportion of total pension liability.

c.       Input and assumption changes which affect the measurement of the pension liability and what the effects are.

d.      The effect on the measurement of total pension liability as a result of changes of the benefit terms.

e.      The amount and effect on the total pension liability as a result of the purchase of allocated insurance contracts.

f.        The nature of changes that had a significant impact on the total pension liability.

g.       The pension expense amount recognized by the employer.

h.      The balance of outflows and inflows of resources of the employer.

i.         A five year schedule of the deferred outflows and inflows that are and are not the result of a special funding situation.

j.        Revenue as a result of non-employer contributions.[xvi]

Required supplementary information:

a.       Changes in total pension liability schedule for a ten year period.

b.      A ten year schedule of the following:

1.       For an employer without a special funding situation:

a.       Total pension liability.

b.      Payroll of covered-employees.

c.       Total pension liability as a percentage of the payroll of covered-employees.

2.       For an employer with a special funding situation:

a.       Total pension liability.

b.      The proportionate share of total pension liability of the contributing non-employer.

c.       The proportionate share of the total pension liability of the employer.

d.      Payroll of covered employees.

e.      The employer’s total proportionate share of the pension liability as a percentage of the payroll of covered employees.

C.            10 year schedule for an actuarially determined contribution presenting the following information:

1. The employer’s actuarial determined contribution.

2. The payroll of covered employees

3. The employer’s actuarial determined contribution as a percentage of the payroll of covered employees.

4. Employer payments for pensions during the year as benefits came due.[xvii]

                For the financial statements of primary governments and their component units that use the same defined benefit pension plan to provide pensions to their employees, economic resources measurement focus and accrual basis of accounting, recognition in financial statements:

1.       When non-employer benefit payments come due which are not in a special funding situation each government should recognize revenue equal to the unit’s proportionate share of the total pension liability change as a result of payments made by that unit during the period.

2.       Revenue and pension expense should be recognized by the government when there is a special funding situation for the non-employer contributor’s share of the government’s collective pension expense.[xviii]

In the notes to the financial statements the following should be reported: the total of pension assets, liabilities, resources, revenues, expenses, inflows and outflows should be reported in the notes to the financial statements is the information in the financial statements does not make such information readily identifiable.

In the required supplementary information the following should be reported:

1.       A tem year schedule should be presented for each non-special funding situation pension plan that the government. The schedule should present the following:

a.       The collective total pension liability proportion (percentage) of the government.

b.      The collective total pension liability proportionate share (amount) of the government.

c.       The payroll of the government’s covered-employees.

d.      The amount of the government’s collective total pension liability as a percentage of the payroll of the government’s covered employees.

2.       A ten year schedule should be presented for each special funding situation pension plan of the government. The schedule should present the following:

a.       The collective total pension liability proportion (percentage) of the government.

b.      The collective total pension liability proportionate share (amount) of the government.

c.       The collective total pension liability proportionate share of a contributing non-employer that is associated with the government.

d.      (b) and (c) totaled.

e.      The payroll of the government’s covered-employees.

f.        The amount of the government’s collective total pension liability as a percentage of the payroll of the government’s covered employees.[xix]

Statements 67 and 68 Amendments

                GASB Statement 67 and 68 address state and local government employers’ financial accounting and reporting for pensions administered through trusts with the following characteristics:

1.       Irrevocable contributions to the pension plans and irrevocable earnings on those contributions made by government employers and contributing non-employers.

2.       Pensions are provided to plan members by plan assets in conformity with the terms of the benefit plan.

3.       Pension plan assets are legally protected from the creditors of the plan members and the employers of the plan members.[xx]

Under Statement 67 and 68 for payables to defined pension plans when an employer or non-employer contributor joins a pension plan or changes the benefit terms of that employer’s plans an increase in the total pension liability results in a specific contract liability to that employer or non-employer contributor. This liability is differentiated from payables for financing purposes that originated with total pension liability portions from two or more contributors.[xxi]

Additional revenue should be recognized, when there is a special funding situation, for a non-employer contributor’s portion of expense. Additional revenue and pension expense should be recognized when there is a cost-sharing employer with a special funding situation for the non-employer contributor’s portion of expense recognized with regards to a total pension liability change due to a separately financed liability.[xxii]

Revenue should be recognized for a non-employer contributor’s support, when that contributor is not in a special funding situation, during the reporting period when a change in net pension liability of collective net pension liability was contributed by the non-employer contributor.[xxiii]

Implementation Dates

The Governmental Accounting Standards Board believes that this Statement’s requirements should as soon as is practical be implemented. Due to the need for an actuarial valuation to comply with the Statement’s reporting requirements the Governmental Accounting Standards Board believes that the transition period of one or more years is necessary to obtain the actuarial valuations by the employers.[xxiv]

The Governmental Accounting Standards Board requires that in the first fiscal year after this Statement is issues the amendments to Statement 67 and 68 should be applied because this Statement does not require any changes to the actuarial measurements of Statements 67 and 68.[xxv]

References

Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

Summary of Statement No 68 – Accounting and Financial Reporting for Pensions an Amendment of GASB Statement No. 27 (June 2012), Governmental Accounting and Standards Board, Retrieved November 17^th, 2014 from: http://www.gasb.org/jsp/GASB/Pronouncement_C/GASBSummaryPage&cid=1176160219492

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[i] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. v, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[ii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 1, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[iii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 2, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[iv] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 4, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[v] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 5, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true p. 5

[vi] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 6, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[vii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 7, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[viii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 8, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[ix] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 8, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[x] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 8, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xi] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 10, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 10, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xiii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 10, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

 [xiv] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 11, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xv] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 12, Retrieved November 14^th, 2014 from: http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xvi] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 13, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xvii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 14, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xviii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 15 Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xix] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 17, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xx] Summary of Statement No. 68 - Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No. 27 (June 2012), Governmental Accounting and Standards Board, P. 34, Retrieved November 17^th, 2014 from:  http://www.gasb.org/jsp/GASB/Pronouncement_C/GASBSummaryPage&cid=1176160219492

[xxi]http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xxii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 34, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xxiii] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 35, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true  

[xxiv] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 53, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true

[xxv][xxv] Proposed Statement of the Governmental Accounting Standards Board - Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans that are Not Administered through Trusts That Meet Specified Criteria and Amendments to Certain Provisions of GASB Statements 67 and 68 (May 28, 2014), Governmental Accounting and Standards Board, P. 53, Retrieved November 14^th, 2014 from:  http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176164132053&acceptedDisclaimer=true