The GSCPA House of Blogs
For the members. By the membersMaking Horizons 2025 Real
Written by: Bill Schneider
The AICPA held a special meeting bringing together about a dozen committee chairs in order to bring to life the vision brought forth in the Horizons 2025 initiative. We started the day with an overview of the Horizons 2025 results. As noted in other articles and blogs, the Core Purpose of the profession has withstood the test of time and remains unchanged. In case you never heard of the core purpose it is “CPAs…making sense of a changing and complex world.” The core values also remained substantially unchanged. The core values are:
Integrity
Competence
Lifelong learning
Objectivity
Commitment to excellence
Relevance in global marketplace
The core competencies have evolved and include:
Communication skills
Leadership skills
Critical thinking and problem solving skills
Anticipating and meeting needs
Synthesizing intelligence to insight
Integration and collaboration
Most interesting is that Technology is no longer listed as a discrete core competency. This is not because understanding and using technology is necessary for CPAs. The change is because it no longer is considered a significant differentiator. We live and work in a world where using cutting edge technology is the norm and not being able to do that means you never even make it through the door anymore.
The meeting focused on the key insights and what the AICPA is doing and needs to do to make sure we are delivering the future for our members. The key insights included:
Technology
Pre-Certification and Lifelong Learning
Worldwide Profession
Market Permission
Trusted Attester
Pride in the Profession
Demographic Shifts
Trusted Advisor
Marketplace
Value Proposition
We came up with a list of concerns, ideas and actions around each of these areas. Now the AICPA staff will incorporate this feedback into their plans to provide services and support to the profession. One of many examples is around the impact of outsourcing. This is enabled by changes in technology and creates challenges and opportunities around controls (the entity outsourcing the work is still responsible for the controls) and our role as trusted attester (through SOC reports). It also creates a role for the CPA as trusted advisor in determining what makes sense to outsource and what does not. Some initiatives already exist in these areas and others we be developed as we go forward. This is just one example of many that were developed in the meeting. The point is that at the AICPA, the strategic plan is not some document that sits on a shelf and gathers dust until the next time someone wants to update it. The strategic plan is a living process that impacts everything the AICPA does through the volunteers to the staff, and that is the way it should be.
Unbalanced On Purpose
Written by: Bill Schneider
If the title of this blog looked familiar it’s because there is a book out there by this title. I recently had the privilege of hearing the author speak and given the time of year the idea of never being able to achieve balance really hit home. For those of us in the reporting world with calendar year-ends our busy time is upon us. Our tax brethren are waiting for the numbers before they start up in earnest and the budget people are taking a slight breather before they start working on updated forecasts and projections and if you are in a small business with a small finance staff you are probably doing or at least coordinating all of these efforts. The point is, no matter what you do there are times that are busier than others.
In this world, the idea of constant compartmentalized balance – work gets 50 hours a week, family 40, God 5 and personal interests 15 – is a fantasy that sets you up for failure. The reality is that your life is always unbalanced. Sometimes family gets priority – can we say vacation? Sometimes it’s the church and sometimes you get to steal a few extra hours for that personal interest – like watching LSU get destroyed in football – and sometimes, maybe more often then the others, its work that gets extra hours. Whatever it is, life is never in balance.
I find this perspective truly refreshing and liberating. Refreshing because it is so contrary to the accepted “people of have balance in life are happier” mentality that is such an urban legend these days. Liberating, because as soon as you stop trying to achieve perfect balance you can stop feeling guilty about never getting it done in the first place.
But if we stop trying to achieve balance, what is it we should try to achieve. That answer will be different for each person. There are lots of answers and none of them are wrong (and none of them a right for everyone). The first priority is to earn enough money to provide the basics – food, clothing, shelter – after that it’s up for grabs. Maybe your desire is to be CFO, maybe your desire is to have a work schedule that allows you to see the kids off to school and be at home when they return, and maybe your desire is to set the all time record score for angry birds. Whatever it is is up to you.
The great thing about being a CPA is that our profession has such a diversity of opportunities in ways to earn a living that you can fit a work schedule to just about any unbalanced life you want. Even better, our profession is great at allowing you to change the way you are unbalanced at different times during the year as well as different times during your career. So my advice is to lose the guilt, stop trying to achieve balance and really think about where you want to unbalance your life. You may have to make changes in your life and your job to get there, but as a CPA, you have a better than average shot at actually being able to do it.
Intellectual Property
Written by: Bill Schneider
The FASB and IASB are taking time to look at their future agendas once the convergence efforts around revenue recognition, leasing and financial instruments are complete. I cringe at the thought of the Boards once again taking up the subject of financial statement presentation, but I am pleased to see the FASB dusting off their long dormant disclosure framework project. Although, I do have to wonder if it’s just one more attempt to put on the show that they now “get” private company issues while in the end not really doing anything for private company reporting.
Cynicism aside, there is one project I wish the Boards would add to their agenda – accounting for intangible assets. Some want to expand it even more and go after intellectual property, but I disagree. intellectual property would seem to include things like the value of a company’s workforce which I do not believe are accounting assets of a company. One of the most important qualities of an asset is the ability of the company to control it. Control includes the concept of selling it to someone else. That idea simply doesn’t apply to employees, at least not in this or any other country that bans slavery.
But even when you limit the discussion to intangible assets, it is clear our current accounting model is woefully underdeveloped. The Boards are making a big point in their leasing discussions that they believe it is important for economically similar transactions – lease versus a financed purchased – should be reflected in a similar manner in the financial statements. It would seem to me that current standards for Intangible Assets are at least as egregious as the leasing standards.
Take the case of two companies. Both make $1 million investments in a patent. The first company spends the money on an internally developed patent. What do they have to show for this investment? $1 million in expense. The second buys a patent from another company. What do they have to show for their deal making prowess? A $1 million asset. Assuming the patents have equal value, economically, both companies are in the same position. The same cannot be said on for current or future year financial results. The current year expense and asset differences are only the start. In future years, the companies will show different return on asset ratios, different net income margins and so forth.
Obviously there are a number of potential issues with taking on the accounting for intangible assets, the most important of which is valuing all of the intangible assets created and maintained each year. The continued evolution of fair value accounting is forcing all CPAs to become at least proficient if not highly skilled in valuation techniques. If you don’t believe me, just check out the SEC’s recent discussion on the use of pricing services – if you don’t understand the assumptions and models used by the pricing services than you have a control deficiency as a preparer and an audit deficiency as an auditor. I guess if they are going to force us to become experts in valuation of assets, we might as well use those talents for something that truly improves financial reporting like finally addressing the inconsistency in accounting for intangible assets.
CPA New Year’s Resolutions
Written by: Bill Schneider
It’s the time of year that everyone is making New Year’s resolutions so I thought it would be appropriate to come up with a list of resolutions for CPAs in Business and Industry to make for the New Year.
10. Stop distributing at least one report currently produced and see who notices.
9. Read at least one business related book during the year. You can’t advance your career if you don’t advance your knowledge.
8. Volunteer to help out a not-for-profit. They could really use your financial expertise.
7. See to it that your company comments on at least 2 exposure drafts. There are plenty to choose from in the coming year with FASB exposure drafts on revenue recognition and leasing, FAF’s proposal to (barely) change the process for private company standard setting, PCAOB exposure drafts on auditor’s reports and independence, the COSO exposure draft on the Internal Control Integrated Framework and potential SEC exposure drafts on the incorporation of IFRS.
6. Change at least one accounting process – automate it, streamline it or just plain eliminate it!
5. Vote in November or don’t complain about the results.
4. Volunteer for at least one position in a professional organization, committee or task force. This is your profession. The only way it will continue to be your profession is if you get involved.
3. Get involved in at least one social media outlet – be it Twitter, LinkedIn or your own blog – do something!
2. Do one thing to go green, and I don’t mean heading to Savannah on St. Patrick’s Day.
1. Take all your required CPE before December and make sure that it will help you do your job better.
COSO IC Framework Revision Update
Written by: Bill Schneider
The COSO Advisory Committee met again earlier this month. At this meeting we covered the final pre-exposure draft of the Internal Control Integrated Framework and the first draft of the Guidance document over Internal Control over External Financial Reporting .
The Internal Control Integrated Framework exposure draft was released last week and is now open for comment. You can access the exposure draft at www.ic.coso.org. The document is lengthy, but it will be well worth your time. Proper controls are critical to a well functioning organization and the framework update should help you ensure your organization has a proper control structure in place.
You can submit comments in two ways. Traditional letters will be accepted and published on the COSO website. You will also be able to access an online tool to submit your comments. All of the online comments will be summarized and published as a single document so there will be some level of anonymity if that is what you are looking for in submitting comments. The comment period runs through March 31 so, while it is a busy time of year, you have plenty of time to get your comments in.
The second document the COSO Advisory Committee is working on is a guidance document on how to implement the Internal Control Integrated Framework over External Financial Reporting. This document is based on the 2006 guidance document on implementing the Internal Control Framework over financial reporting for small entities, but now it will cover all sizes of companies.
As the team reviewed the 2006 guidance we realized that even though the document was designed with small companies in mind, much of the guidance was applicable to entities of all sizes. The major reason for this is that the guidance focuses on the entire Internal control process as well as the point of internal control which is managing risk. The small versus large entity differences are most often highlighted in control activities which is often view by many CPAs as “internal control.” The reality is that is only a part of an internal control system is composed of control activities. Other critical components include Control Environment, Risk Assessment, Information and Communications and Monitoring Activities.
The guidance document will include a general guidance section as well as illustrative approaches and examples covering all five of the Internal Control Components. As such it should just as useful to someone updating an entire Internal Control Process as to someone who wants to focus on just one area to make improvements. The Guidance document will also be released for public exposure during the summer of 2012 with both documents being finalized by the end of the year.
I often hear comments from people about how the FASB, SEC and now COSO are doing things that to them that don’t make sense. This is your opportunity to make sure that doesn’t happen. Get involved in the comment process. Your comments will be reviewed and considered. It’s the only way to make sure the best possible document comes out in the end.
