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.

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.

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.

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.

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.

I had the opportunity to attend the AICPA National Conference on Current SEC and PCAOB Developments recently.  If you work in the public company reporting or auditing world and didn’t attend this conference, you missed a great opportunity to get caught up on the latest developments and areas of focus from the IASB, FASB, FinREC, SEC Division of Corporate Finance, SEC, Office of Chief Accountant, SEC Enforcement Division, and the PCAOB.  And the updates aren’t by some low level staff member.  They are presented by Board Chairmen and Division Chiefs.  The best part is the extensive question and answer sessions throughout the conference.  Most speakers answer questions at the end of each of their sessions, but, in addition, at the end of each of the first two days of the conference, key speakers from the day spend over an hour just answering questions.

There is no way to give the conference justice in a short blog, but I did want to highlight a few things I found interesting.  For the ninth time the SEC Division of Corporate Finance spent time talking about the requirements around segment disclosures.  If you have not received a comment letter from the SEC on your segment reporting, just wait, you will.  In addition, you better have your reasons for your segments well documented and they better align with the reports your Chief Operating Decision Maker is using.

One interesting point was made by a member of the SEC Office of Chief Accountant related to the PCAOB release on independence and mandatory auditor rotation.  He raised the question “does the growth of consulting practices at audit forms represent a greater risk to audit quality (and independence) than tenure of the auditor?“  It’s an interesting point and one that my auditor colleagues should think about as they consider where the PCAOB may go in developing proposed rules based on the feedback received on the concept release.

Another area of emphasis that was brought up several times by the SEC representatives was the use of pricing services to develop level 2 fair value information.  While there is nothing wrong with using the services, if management and the company auditors do not understand the assumptions and models used by the services, the SEC and PCAOB are of the opinion that a control deficiency and an audit deficiency is likely to exist.  I guess the days of saying we are CPAs, not valuation specialists are over.  Like it or not, accounting standard setters have embraced fair value and if you are not proficient in the language and techniques of valuation, then you no longer have adequate knowledge to be a preparer or auditor of financial statements in the modern world.

There is so much more I could talk about like the SEC views on IFRS and the fact that any word for the SEC on adoption of IFRS by the U.S. is not likely to come until well into 2012 or the stated desire to frame the “audit” requirement around conflict minerals certification so that it won’t be limited to CPAs, but I only have room for so much.  If you regret not attending this year and don’t want to be left behind by the over 2,000 of your colleagues that attended this year, but sure leave a reminder to yourself to attend the 2012 conference next year.  I’m sure it will be another great one.

When I started writing this blog a little over two years ago I didn’t know what to expect.  My initial thought was that I would write about AICPA Board and Council meetings.  I had served on Council for three years and was about to embark on a three year stint on the Board of Directors.  Having come through Chapter and State leadership I knew many CPAs that were active in the profession, but many of these even most active CPAs didn’t have a complete picture of what the AICPA did or why they did it.  I thought a blog would be a good way to help people understand the AICPA.

So I started off writing my blogs about Council and Board meetings.  I also wrote a series of eight blogs on the eight elements of the AICPA strategic plan.  Then I started expanding my topics to cover other issues like accounting standards development and legislative and regulatory efforts such as tax patents and the tax preparer identification process from the IRS.  After that the topics expanded to cover everything from why I became a CPA to my philosophy on work and what it means to be a member of this outstanding profession.

So here I am at Blog #100. Of course I’ve tracked how many Blogs I have written.  I am a CPA after all. First off, to those who wonder, yes, I have written all 100 myself.  I haven’t had some PR staff person write them and then put my name on them.  Some blogs were reviewed by others for facts, but my main reviewer has been my wife.  When I review something I’ve written, I have a tendency to fill in any missing words.  I know what I meant to say so my brain just fills in the missing pieces, and anyone who writes on the computer much can tell you the fallacy of over relying on spell check and auto correction.  I have to laugh at some of the things that came off my keyboard.  Fortunately you never saw them or I might not be on Blog # 100.

The second question I get is how do you come up with topics for 100 blogs? First off, there is so much going on in the profession that I can honestly say there is never a shortage of things to write about, but if all I wrote about as the latest exposure draft issued by the FASB, this blog would get boring so I write about whatever is on my mind at the time.  Sometimes it is something serious like FAF’s attempt to subvert the recommendations of the Blue Ribbon Panel on Private Company Financial Reporting, but other times it is little more fun like speculating on what was going on in the back office of the Minnesota Vikings when they had to trade out tickets for one stadium with those of a different stadium when the Metrodome roof tore open in a snowstorm.

The final question I get is why do I do it?  I do it for two reasons.  First, because you, my readers, seem to value it.  I love my profession and the whole reason I got involved in it in the first place was to give something back to everyone in the profession.  This Blog is just the latest iteration of that effort. The second reason is because it is an outlet for me.  This is my blog.  If I want to be a little politically incorrect, I can.  If I want to rant a little I can. I’m sure most of you have wanted to do that from time to time.  I guess what I am telling you is my Blog is my own little therapy session to keep me sane in this crazy world. So to end Blog # 100 I want to thank you, my readers.  Thanks for not crucifying me over the occasional typo.  Thanks for saving me a ton of money on therapy sessions and most of all, thanks for caring enough about the profession to read these Blogs.

Sustainability reporting is possibly the most misunderstood process by CPAs today. When you bring up the subject, far too many CPAs immediately react with indignation.  They think its all about carbon footprints and dealing with irrational environmentalist demands.  That has resulted in the finance department of many public companies having nothing to do with the official sustainability report issued by their company.  Instead, PR departments, compliance organizations or other groups are taking the lead in producing this new external report.

This is unfortunate because sustainability reporting today has nothing to do with global warming and everything to do with the future of reporting by public entities. CPAs need to take a closer look at today’s sustainability report.  Yes, there is information on a company’s carbon footprint and fresh water usage.  There is also information on community support, employee training and benefits, and a myriad of other topics showing how the company does more than just make money. Simply put, sustainability reports do for other stakeholders what financial reports do for one group of those stakeholders – the shareholders.

It’s not like sustainability reports are all fluff either.  They are full of quantitative information.  Information that begs for the same rigor a finance department brings to the reporting of financial results.  Quantitative information can include items such as the number of volunteer hours contributed to the community by a company’s employees or the number of people including dependents and retirees supported by a company’s benefit programs.

Now, users are starting to seek assurance on all of the numbers included in sustainability reports.  This truly gets to the heart of a CPA’s competence.  CPAs provide assurance on financial reports; who better to supply that same level of assurance on sustainability reports.  Based on work back in the 1930’s CPAs became the exclusive providers of assurance on financial reports.  That is not the case today on sustainability reports.  Some audit firms are getting into the field, but a variety of other for profit and not-for-profit organizations are also positioning themselves to provide this assurance.  The non-CPA organizations are getting increased traction in part because so many finance departments are not involved in sustainability reporting.

As a profession, we are at a critical juncture when it comes to sustainability reporting.  Are we going to let this potential expansion of our role in providing information and assurance on company results pass us by or are we going to step up to the challenge of being the preeminent provider of information about all of the results of the company?

‘Tis the season for being thankful and for many giving and receiving gifts…  I recall when I was very young I had a huge list of “things” to be purchased; just in case someone needed a suggestion or two.  I was under what I called the spell of the “sisters.”  You know the two sisters:  IWanta and INeeda?  I want a fancy watch or was it I need a new IPhone.  Several years ago I found a quote entitled “Christmas Gift Suggestions” by Oren Arnold (Novelist, journalist, and humorist).  Every year I read it and come up with some additions of my own.

“Christmas Gift Suggestions:

To your enemy, forgiveness;

To an opponent, tolerance;

To a friend, your heart;

To a customer, service;

To all, charity;

To every child, a good example;

To yourself, respect.”

I have some 2011 additions to the list to consider:

• To your family and loved ones, especially young children, your time, attention and love;
• To people facing serious health issues especially young people and family, your prayers, concern, and understanding;
• To someone that hurt or disappointed you, forgiveness and compassion;
• To your business partners, your trust, respect and support;
• To people that work with and for you, respect, guidance and encouragement;
• To the less fortunate, your help and assistance;
• To your parents, compassion and gratitude;
• To friends, your time and understanding;
• To veterans, respect and gratitude for their service;
• To charitable organizations, your financial support and if possible your involvement;
• To teachers, appreciation for their dedication and passion for teaching;
• To yourself, exercise, personal time, and acceptance of who your are;
• To your profession, your time, effort, and support.

“There’s more, much more, to Christmas than candlelight and cheer;

It’s the spirit of sweet friendship that brightens all year;

Its thoughtfulness and kindness;

Its hope reborn again,

For peace, for understanding,

And for goodwill to men!” ~ John Greenleaf

We should all pause and think about how blessed we are, focusing on being thankful for our lives and understanding what wonderful gifts we have.  It will make cold days warmer, dark days sunnier, and sad days merrier. ~Colin

This is my Christmas gift to you.  Please share additions you make to your list.

Merry Christmas and Happy New Year! ~ Colin

If you have kids you’ve probably heard the statement, “I can’t wait until I’m done with school and won’t have any homework any more.”  I’m sure there are some of you in college thinking that once you are done your studies, you’ll get to do your 9-5 and then the rest of the time is yours.  That will work if you want to be a staff accountant the rest of your life, but if you want to go further than that, it takes a little more than the simple 9-5.

According to my official time record, I was on vacation all of last week.  Indeed, I didn’t set foot in the office and I did travel 870 miles with my family back to Athens to spend Thanksgiving with my Dad and my sister’s family.  We had a great time eating turkey, watching football and going out at midnight to hit those early sales and pick up a few bargains. But having fun with the family wasn’t the only thing I did.

First off, I had two conference calls early in the week that I had to attend, including one, while I was in the middle of Mississippi on I-20.  Fortunately, I didn’t have any follow up work from those calls.  More time was spent reading to large exposure drafts.  The first was the revised revenue recognition exposure draft from the FASB.  At 218 pages, it took several hours to get through the document and list some initial thoughts about what works and what doesn’t.  The second document was the preliminary draft of the Internal Control over External Financial Reporting guidance document.

The guidance document is the second of two documents that will be issued by COSO in the coming months.  It’s a companion document to the revised Internal Control Integrated Framework which will be issued as an exposure draft in December.  At 171 pages it was a shorter than the revenue recognition exposure draft, but it still took a long time to read considering I was providing editorial comments throughout the document as well.

Fortunately I made it through both documents, but as I looked up from my review and saw my daughter working on her U.S. History homework, I realized that the homework never really ends.  It just changes form.