Two committees of the American Institute of CPAs (AICPA) – the Professional Ethics Executive Committee (PEEC) and the Accounting and Review Services Committee (ARSC) – have extended deadlines on exposure drafts of proposed revisions of existing requirements for nonattest services and of requirements for compilation services.
Requirements of Nonattest Services
The PEEC has agreed to extend the deadline from August 30, 2012, to November 30, 2012, for comments on an exposure draft dated June 29, 2012, of proposed revisions to Interpretation 101-3, “Nonattest Services.”
The committee is proposing that financial statement preparation and cash-to-accrual conversions performed by a CPA member for a client should be considered nonattest services and subject to the revised requirements.
Under the proposed revisions, the preparer is no longer required to perform a compilation with respect to those statements unless engaged to do so.
The exposure draft also considers the cumulative effect that providing multiple nonattest services can have on independence.
“We have extended the deadline because we want to give people additional time to understand the impact of these changes,” said Ellen Goria, senior technical manager of AICPA’s Professional Ethics Division. “We expect the major impact to be experienced by individuals who are preparing financial statements for attest clients. Their systems and processes may need to be modified so that they can be in compliance. We will be providing additional documents to explain this further,” she said.
Requirements for Compilation Services
The ARSC has extended its deadline for comment on proposed revisions to Statements on Standards for Accounting and Review Services (SSARS) to November 30, 2012. The proposed revised SSARS are AR section 70, Association with Unaudited Financial Statements, and AR section 80, Compilation of Financial Statements (Revised).
Existing SSARS require the accountant to perform a compilation engagement whenever the accountant prepares and presents financial statements to a client or third parties. Proposed revisions to SSARS would remove the preparation of financial statements from the attest function, the exposure draft says.
The AICPA stated in its announcement that the proposed SSARS would also “revise the objective of the compilation engagement and provide requirements and guidance when an accountant is associated with financial statements that were not subjected to a compilation, review, or audit engagement.”
The Exposure Draft, Association with Unaudited Financial Statements, includes the following requirements if an accountant is requested to be associated with unaudited financial statements.
The accountant should:
- Read the unaudited financial statements.
- Consider whether the unaudited financial statements appear free from material inconsistencies with other knowledge or information of which the accountant may be aware.
- If after performing the procedures in paragraphs 6a and 6b, the accountant decides to permit the use of the accountant’s name in a report, document, or written communication containing the statements, the accountant should request that the entity clearly indicate that the financial statements were not compiled, reviewed, or audited.
The proposed SSARS also addresses the accountant’s responsibilities when engaged to compile financial statements. The proposed revisions state that the objectives of a compilation engagement provide definitions and enumerate specific requirements that apply to compilation engagements.
The ARSC stated in its exposure draft that it “is supportive of proposed revisions of Interpretation 101-3 because it is in harmony with how the 2011 edition of Government Auditing Standards (the Yellow Book) treats the preparation of financial statements. The proposed clarification would also be consistent with the views of many practitioners who believe that the preparation of financial statements is a responsibility of management and an essential part of an entity’s system of internal control.”
Nearly three years ago, the IRS launched the tax return preparer oversight program and seeds were planted in the landscape of tax return preparation services. Today, those seeds are starting to sprout.
In June, the IRS estimated there are 717,161 PTIN holders, many of which (212,975, or 29.7%) are CPAs, outnumbering Enrolled Agents (42,895) and attorneys (31,189) combined. While CPAs have dominated the regulated tax preparation arena, that landscape is about to change. More and more people are completing the final step to becoming a Registered Tax Return Preparer, or RTRP (they have until 12/31/13 to pass the competency exam). Currently, there are 4,893 RTRPs. That leaves an estimated 338,127 “provisional preparers” who may join the RTRP ranks.
That means more competition is coming and it will influence the public perception of tax return preparers. Unfortunately, the public doesn’t really understand the difference between a CPA and other tax return preparers. We have all seen the advertisements by the big box tax preparation and software chains that inflate the qualifications of their employees. They often compare them to CPAs or perhaps they feature a CPA in the ad, implying that every customer representative will have similar qualifications.
Some believe that RTRPs will leverage their new designation as some form of implied association with or endorsement by the IRS, thus giving them an advantage in the marketplace. While the IRS has put in restrictions on advertising that leverage the RTRP designation (thanks to AICPA advocacy), they cannot possibly enforce them completely. And they can’t police informal or non-commercial promotions. If CPAs wait to counter such marketing efforts, they may find themselves in the same position as a political candidate trying to counteract a negative ad: while the ad may be false, it is hard to change someone’s mind after the fact.
That’s why it is important for CPAs to start telling their stories better, more often and everywhere they can think of. And they need to start now. Clients need to hear messages about the value of a CPA directly from their CPA. They also need to understand how they are more than just a tax return, that their CPA is available year-round and can help them plan for life’s significant milestones such as buying a house, planning for retirement, saving for college and much, much more. If we don’t start tooting our own value horn louder and longer, who will?
When do you need to start building your new value proposition? Yesterday. And how do you do this? Start by developing a value-centric firm culture, then educating your staff on the importance of value based client communications.
The AICPA has developed the Tax Practitioner Toolkit (available free) to help members better define their value and communicate it to current and prospective clients. A Toolkit Implementation Checklist is included, so you can get started right away.
Once your firm masters its story so it is infused in every client contact, networking presentation, or prospective client meeting, it will become part of who you are and what your firm represents for its clients. Once you know your value and live it every day, clients will never have to guess. They’ll automatically know that their CPA is the premier provider of tax services and they would never trust their finances to anyone else.
Many American families are struggling to make ends meet and save for their future needs, according to a report from the Consumer Federation of America (CFA) and Certified Financial Planner Board of Standards, Inc. (CFP Board), but those with a financial plan do better and are more confident about meeting their goals.
But only 36 percent of the 1,508 household financial decision makers who participated in the CFA/CFP Board 2012 Household Financial Planning Survey have ever prepared a comprehensive financial plan. Respondents with higher annual incomes and older respondents were more likely than middle-income families to have a financial plan.
Survey responses reflected the effects of the recession that began in 2008. Nearly 38 percent of households said they live paycheck to paycheck. Less than 30 percent indicated they felt comfortable financially, and only 34 percent think they can afford to retire by age 65. The survey was conducted by Princeton Survey Research Associates International (PSRAI).
Regardless of income, decision makers with a financial plan, whether it is one they have prepared on their own or with a professional, are more likely to feel they are on pace to meet all of their financial goals by a margin of 50 percent to 32 percent. By an even larger margin (52 percent to 30 percent), and across all income brackets, families with a financial plan are more likely to feel “very confident” about managing money, savings and investments.
What Is a Comprehensive Financial Plan?
The survey assumes that a comprehensive financial plan will identify a family’s financial goals, and a plan for savings and investments that will help them meet those goals. For most families, those goals will be income in retirement, college education for children, insurance needs, emergencies, and other expenses (e.g., assisting parents). The plan should include paying off credit card debt.
Most Americans have spending plans, the report says, but few have savings plans except for employer-sponsored retirement plans. Many respondents say that they do not earn enough money to save. “Advances in technology have made accessing and analyzing financial information much easier, but a lack of understanding about savings and investment options and how to best manage household finances remains a serious obstacle to Americans’ financial preparedness,” the survey reported.
Comparison with 1997 Survey
The CFA/CFP Board survey utilized a number of questions asked by a 1997 CFA-NationsBank survey, also developed with and administered by PSRAI. This made possible a comparison of consumer attitudes and habits in the more optimistic, low unemployment year of 1997, with attitudes and habits in 2012, in the aftermath of the recent severe recession.
The number of Americans who reported living paycheck to paycheck rose from 31 percent to 38 percent from 1997 to 2012, and the percentage who indicated they felt comfortable financially fell from 38 percent in 1997 to 30 percent in 2012.
Other comparisons include:
- In 1997, only 38 percent felt [they were] behind in saving for retirement compared to 51 percent this year.
- In 1997, half (50 percent) said they thought they could retire by age 65 compared to only 34 percent this year.
- In 1997, more families with college-bound children were saving for higher education (56 percent) compared to this year (48 percent).
- However, the proportion of those who say they have a retirement investment plan in place is about the same (51 percent in 1997 and 49 percent this year).
Getting Help When Preparing a Financial Plan
The 2012 survey revealed that slightly more than half of respondents said “it’s hard for me to know who to trust for financial advice” (55 percent); “to me, investing seems complicated” (52 percent); and “I’m worried about losing my money if I invest it” (55 percent), a significant increase from the 45 percent who expressed this worry in 1997.
Kevin R. Keller, CEO of CFP Board said, “Consumers understandably are more nervous about investing their money given recent revelations about financial fraud, manipulation, and abuse of clients. This doesn’t mean that people shouldn’t create a financial plan and be prepared. We encourage consumers to do their homework and find a financial professional who always puts the clients’ best interests first and abides by a fiduciary standard of care.”
Both the CFA and CFP Board recommend that consumers begin by assessing their own financial condition and develop a plan. One useful tool is the website LetsMakeaPlan.org, where interested consumers can learn more about preparing a financial plan. The site also lists questions an individual might ask of a financial planner and some red flags.
CFA executive director Stephen Brobeck said that financial planning is an important component of financial literacy. Financial planners need to get the message out.
Full Article: http://www.accountingweb.com/article/personal-financial-plans-saving-future/219569
The true cost of public employee pensions will become clearer under changes approved June 25 by the accounting standards-setter for state and local governments ? the Governmental Accounting Standards Board (GASB).
The GASB has approved two new standards that mark a major departure in the way pension costs are accounted for and described in financial statements today.
The major difference is that liabilities will be reported on the balance sheet for the first time. The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair value) set aside to pay current employees, retirees, and beneficiaries. Currently, governments must only report as a liability the difference between the contributions they are required to make to a pension plan in a given year versus what is actually funded.
Many states and municipal governments have not fully funded their pensions. In fact, the gap between the promises states have made for public employees’ retirement benefits and the money they have set aside to pay these bills was at least $1.38 trillion in fiscal year 2010, according to the Pew Center on the States.
Some observers believe the changes will help users of financial statements more clearly see the consequences of future proposed benefit increases.
Note Disclosures and Supplementary Information
Governments must also “comprehensively and comparably” measure the annual costs of pension benefits under the new standards.
The new statements are:
Statement No. 67, Financial Reporting for Pension Plans, which changes the existing guidance for the financial reports of most pension plans. The standard is effective for periods beginning after June 15, 2013.
Statement No. 68, Accounting and Financial Reporting for Pensions, establishes new financial reporting requirements for most governments that provide their employees with pension benefits. Provisions are effective for fiscal years beginning after June 15, 2014.
Early implementation is encouraged for both statements.
The American Institute of CPAs (AICPA) came out in favor of the new rules. AICPA President and CEO Barry C. Melancon said in a statement, “The new GASB standards will benefit users of these financial statements as well as taxpayers, since state and local governments for the first time will have to report unfunded pension liabilities on their balance sheets providing a clearer view of pension obligations.”
Statements 67 and 68 can be downloaded from the GASB website early August. Bound copies of the statements and a plain-language description of the new requirements also will be available.
Full Article: http://www.accountingweb.com/article/new-accounting-standards-pension-costs/219421
In response to the new requirements imposed by the Foreign Account Taxpayer Compliance Act (FATCA) and the proposed regulations promulgated thereunder, the IRS has prepared two new withholding certificates:
Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (Individual).
Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding (Entities).
While the withholding forms provide a first look at the actual new reporting requirements that FATCA ultimately will impose on virtually all non-US persons receiving passive income from US sources, the IRS has not yet published draft instructions for the new certificates. As a result, certain important implementation issues raised under the Proposed Regulations and FATCA generally remain unanswered.
For now . . .
Until the new withholding forms are released in final form by the IRS in December, you should continue to use the existing Form W-8BEN where required under current law.
The new withholding certificates effectively divide the information reporting requirements between two classes of payees: nonresident alien individuals and all foreign entities other than individuals.
New W-8BEN will simplify the declarations required to be made by foreign individuals. It will only require basic identifying information, declarations with respect to treaty status (as relevant), and a general certification as to foreign status.
New W-8BEN-E will require each foreign entity to make two distinct declarations:
The foreign entity’s status for purposes of the US outbound withholding tax regime (e.g., the 30 percent withholding tax generally imposed on US-source dividends paid to non-US persons unless reduced by an applicable income tax treaty). This will be the same as the declaration required in the current IRS Form W-8BEN, as last revised in 2006.
The FATCA-related declaration, which will require an entity to provide substantial detail by declaring its overall status for FATCA purposes from among twenty-four different categories (all described in detail in the Proposed Regulations).
In addition, new W-8BEN-E will require a foreign entity to provide its Foreign Financial Institution Employer Identification Number and FATCA ID, as applicable (both are discussed in the Proposed Regulations).
Full Article: http://www.accountingweb.com/article/irs-posts-draft-revised-withholding-forms-conforming-fatca/219273
Most businesses these days are looking to cut spending. Accounting firms are in a unique position to not only help their small business clients trim the fat and manage their money, but to do the same for themselves.
Before any company can delve into strategic ways to save money, it must first set aside time to devote to money management. Even if a company is small, this step is crucial to a company’s success – no other advice is more important.
“You have to be focused enough to dedicate the necessary time weekly, if not more frequently,” said Robin Bell, CPA, member in Brown Smith Wallace (BSM) Tax Services group. “Bill frequently, collect often, and stay on top of billing and receivables. Pay attention to it.”
Set up a budget, then each month, compare the actual to the budget to see where improvements need to be made, suggests Patricia Schreiber, a New Orleans-based CPA.
And if you don’t have the time, delegate.
Look at what you need to have versus what you want to have when determining cash outflow, whether for your clients or your own firm. Once you have what you need, don’t pay more for it than is necessary to effectively operate your business.
“Segregation of duties: Learn it love it. Otherwise, stuff walks out the door,” says Chris Spivey, who has worked as a consultant to the accounting profession for several years.
If you’re an entrepreneur with tons of action items on your plate and collections isn’t your competency, refer it to someone else.
Bell’s longtime retail clients, who are used to bulk-buying seasonal products, have recently experienced difficulties managing their cash flow. Instead of stocking up on the “hot trends” for the season, Bell teaches its retail clients not to purchase more than they need. That way, they don’t have spend money to house products in a warehouse. However, when retail companies do this, they also must pay attention to what their customers might need in the near future. This ensures the retailers’ customers won’t have to wait too long if a product is out of stock.
According to Bell, some retail companies survey their clients to gauge what they’ll want to buy, or they beef up their marketing campaigns. This could put them at an advantage because most companies tend to trim their advertising and marketing dollars when times are tough. It’s not a matter of spending more, it’s just reallocating dollars to draw in more prospects, she said.
Do You Really Need That?
Look at what you need to have versus what you want to have when determining cash outflow, whether for your clients or your own firm, Bell said.
For example, look at telephone costs. If you’ve been using the same telephone provider for years, you might not think about changing vendors. But what about calling your provider to talk about your plan and whether it still makes sense given your current needs. You could also contact other providers to see what they offer.
Ask, “Do I have what I need, and am I paying for what I need versus paying more than what I need to operate my business,” Bell says.
Other potential areas to trim include:
Employee benefits. Can you save money without raising premiums if you have a group of employees who are healthy? “Especially in really small companies, it’s very easy to assess your pool and ask, ‘If I raise my deductible, how much can I save on my premium?’,” Bell said.
Mileage reimbursement. Encourage employees to travel less by visiting several clients on the same day who are based in the same area. Ask employees if they really need to fly nonstop or if they can fly on off hours or off days, Bell added.
While discussing money management is clearly a way to help your clients better manage their money, if they don’t ask you about it, how can you broach the subject?
BSW took a proactive approach by offering its clients a “health checkup,” which included a five-page questionnaire that asked some thought-provoking questions. It also provided BSW financial data that allowed the firm to see client trends and to learn what keeps business owners up at night, Bell said.
“Most clients were interested in seeing what we can do for them,” she said.
Clients want the help, so why not broach the subject?
Full Article: http://www.accountingweb.com/topic/accounting-auditing/money-management-possible-even-todays-economy