Like the month of March, FAS 157 came in like a lion but appears to be going out like a lamb. Despite being one of the most controversial directives ever issued by the FASB, proposed changes seem to be attracting little discussion or debate.

When first implemented, the standard was widely unpopular among the Wall Street set already reeling from a liquidity crisis. Bankers were naturally wary of anything that might depress their assets’ value while the markets were still struggling to recover.

FAS 157 is now known and proposed as Topic 820, but curiously the army of lawyers and lobbyists that came out to oppose its predecessor have largely been silent. As a result, it appears that Topic 820, which is really just a clarification of existing rules on fair value, will be approved as currently written.

The clarifications, which will mainly impact valuations of often difficult to assess Level 3 assets and liabilities, come as we are seeing an uptick in deal activity. A number of valuations - preferably in a chart format - for Level 3’s may now have to be reported if using another “reasonable” input would produce a significantly different value. As the M&A activity levels rise with an improving economy, so will the utility of the clarifications in Topic 820.

On that note, last month Will Andronico wrote about how these early stages of increased deal making are a good time for small businesses to consider whether a strategic acquisition might be right for them. He expanded on those thoughts yesterday in an excellent guest column on Xconomy, which is worth a read.

President Obama ushered in a new era for American health care this past March when he signed the Patient Protection and Affordable Care Act. A hefty price tag is inevitably attached to such sweeping changes, and to pay for it, Congress has instituted a number of new taxes, fees, cuts, and cost-saving measures. Some high-income taxpayers can expect to see their taxes go up as a result of the law, but there are ways to offset the burden.

A new 3.8% Medicare tax, for example, is being imposed on the lesser of either (a) net investment income or (b) the excess of Modified Adjusted Gross Income (MAGI) over the threshold amount (for married couples filing jointly -$250,000; for married individuals who file separately - $125,000, and for single taxpayers - $200,000). For purposes of the 3.8% tax, “net investment income” includes:

- Interest, Dividends and Capital gains
- Annuities
- Rents, royalties and passive activity income

Though the new Medicare tax won’t take effect until 2013, the time to begin planning is now. Certain investments such as municipal bonds, tax-deferred non-qualified annuities, and life insurance can be utilized to reduce an individual’s MAGI, and thus their tax liability under the new law. Contributions to retirement plans such as a 401(k), 403(b), or IRAs can also assist with reducing one’s MAGI.

With the Bush-era tax cuts expected to expire (at least for the wealthiest Americans) at the end of 2010, the role Roth IRAs can play in reducing liability with the new tax will be even greater. Minimum Required Distributions (MRD) from traditional IRAs, due to the tax-deferred component of the distribution, will increase MAGI, possibly above the threshold amount. Roth IRA distributions, on the other hand, will not count towards MAGI, making a Roth conversion an attractive option for some.

Unless Congress takes action, those in the 35% tax bracket for 2010 could see their top tax rate rise to 39.6% beginning in 2011. In 2013, the 3.8% surtax will create a bubble in which investment income could be taxed as high as 43.4%. Appropriately planning to mitigate or eliminate this new tax could save individuals as much as 8.3% in additional tax.

For example: “Sally is a single taxpayer with $200,000 in annual investment income. This income alone, being below the threshold, is not subject to the surtax. If in the following year, Sally receives an additional $100,000 distribution from her traditional IRA account, her MAGI would rise above the threshold and that additional income would subject her to an additional $3,800 of tax. However, if that distributions came from a Roth IRA, her MAGI would remain at $200,000 thus negating the potential impact of the additional 3.8% surtax for that year.”

A multi-year projection of expected taxable income can help determine whether or not a conversion in 2010, or even 2011 or 2012, may help. The first step is to determine how much any future projected minimum required distribution would put you above the MAGI threshold. If you expect your traditional IRA distribution to subject your investment income to the 3.8% surtax, you may want to further consider a Roth conversion.

When doing these projections, the guidance of a trusted advisor is invaluable. There are numerous factors and variables to consider when performing income tax projections, especially when the tax projections encompass more than one year. It is a challenging exercise and one that can be best performed by a seasoned tax professional.

Barrels of ink have been spilled over the past two years chronicling the precipitous decline in the M&A marketplace. While the struggles brought on by the global economic slowdown are given constant attention by the business press, far less time has been devoted to those who have the potential to take advantage of this (hopefully) once-in-a-lifetime economic environment.

Yes, despite the most difficult economic climate this country has seen in generations, some firms are in an excellent position to come out ahead. Some small to mid-sized businesses in particular have - for the time being - a competitive advantage when it comes to growing via strategic acquisition.

These strategic acquirers find themselves with a leg up since private equity, their primary competition for target companies, has been forced to the sidelines as a result of the credit crunch. As banks loosen the purse strings, though, private equity is finding their way back to the pitch. As they do, the window of opportunity for small businesses gets a little bit smaller every day (read more on this in Time to shine: three crucial questions about strategic acquisitions.)

For now it’s open, and every small business executive should be asking three questions:

First, are you a buyer? Many business leaders may not normally consider themselves to be a strategic acquirer, but in light of the current situation each should reassess their position. A smart, synergistic deal can vault a company ahead of the competition, even if the plan had previously only been for organic growth.

Secondly, can you stay true to your strategic motivation for acquiring? The due diligence process may prove that an otherwise great company can’t provide what you need, or for some other reason is a poor fit. Don’t become so enamored with the idea of a deal that you can’t walk away if it turns out the potential acquisition doesn’t align as nicely as originally anticipated.

Finally, how can you most effectively manage risk? Even the most synergistic merger will still bring a fair amount of risk with it. To mitigate this, the use of seller paper and earnouts are popular tools. Both structure the deal so that payments are spread out over a period of time, and the latter requires certain benchmarks be reached before payouts are dispersed. Acquiring businesses can also make use of Net Operating Losses for the tax benefits, which Craig described last year.

The tea leaves in the marketplace and surveys from executives indicate that competition for the best deals is only going to increase as the economy improves. There is still time to act, but the window is closing. A well-structured deal now could place a small business in a better position to meet short term goals and to prosper over the long term as well.

That said, no deal should ever be rushed through. A full review and analysis, including of corporate cultures, management style, business process, and other factors should all be examined carefully. Only after the review is complete, and once it is clear the deal still makes sense and is being pursued for the right reasons, will it be time to close it.