Ungar Cover - Joel M. Ungar, CPA, CFE

If you wound up here from reading Michelle Golden's book...

noreply@blogger.com (Joel Ungar) — Mon, 29 Nov 2010 20:47:00 +0000

I am quite thankful to be the subject of a case study in Michelle Golden's excellent new book Social Media Strategies for Professionals and Their Firms: The Guide to Establishing Credibility and Accelerating Relationships. And perhaps you wound up here as a result of the case study.

When Michelle interviewed me for the case study, this was my primary blog; I had only been blogging on AccountingWeb for a couple of weeks at that time. Since then, I have shifted my blogging from here to a combination of AccountingWeb and my new blog - The SEC Auditor. I post to AccountingWeb generally once a week; if I have a lot on my mind I post more. The SEC Auditor I'm still working on getting right but that will soon be the main blog.

Why? I like the flexibility of a self-hosted blog using WordPress has over this one. Plain and simple.

When I remember I will cross post here, but I hope you go to the other blogs, especially The SEC Auditor, subscribe and share your comments!

Joel

10 Ways to Know You Were Born to Be an Accountant

noreply@blogger.com (Joel Ungar) — Thu, 12 Aug 2010 16:48:00 +0000

The nice people at Best Online Colleges Online.Net sent me their posting called 10 Ways to Know You Were Born to Be an Accountant

I didn't match all of them - I don't have an abnormal passion for tax law for one. But still kind of describes me pretty well.

Note On Blog Comments - English Only Please

noreply@blogger.com (Joel Ungar) — Sun, 04 Jul 2010 13:34:00 +0000

I have been receiving comments on some of my blog posts in languages other than English, generally I think in Chinese. While I like to think of myself as worldly, this blog is just me and I only speak English.

Please be advised ALL blog comments that are made in a language other than English will be rejected. I have no way of knowing what they say or if they are spam posts. Any spam posts in English will also be rejected.

iPhone App Coming From My Firm's Association

noreply@blogger.com (Joel Ungar) — Fri, 02 Jul 2010 14:13:00 +0000

We at Silberstein Ungar, PLLC are a proud member firm of MSI Global Alliance of independent legal and accounting firms. MSI recently announced they are coming out with an iPhone app called Advisors2Go. According to Giles Brake, MSI's Marketing & Business Development Manager and I think technology guru, the application "will take advantage of the iPhone's great features to allow you to find and connect with your MSI colleagues around the world, and will also put our worldwide directory into the hands of businesses for the first time." MSI is the first association to develop such an application.

Kudos to Giles and MSI. I think this is a fabulous idea and just a further indication of how much more power there is in the palm of our hands. I only wish I had an iPhone so I could use it! I really like my BlackBerry Tour. But I'd switch to an iPhone if it was available on Verizon Wireless. That is a conversation for another day.

CCH's Idea of a Hot Topic

noreply@blogger.com (Joel Ungar) — Wed, 24 Mar 2010 18:21:00 +0000

I just got my daily CCH Accounting Research Manager email and the lead item starts off: "Accounting Research Manager has published a Hot Topic, Foreign Currency Issues Related to Investments in Venezuela - SEC Staff Views."

My biggest client's 10K is being Edgarized tomorrow. We've got a bunch more due by the end of the month. 1040s are coming in every day, and there are the various reviews and audits of private companies that I'm trying to complete. And CCH thinks that Foreign Currency Issues Related to Investments in Venezuela is a hot topic.

Did I miss something here? Because I don't see how this is earth shattering news to about 99% of accountants.

Counting The Ways The FASB Codification Has Improved My Life

noreply@blogger.com (Joel Ungar) — Tue, 16 Mar 2010 22:44:00 +0000

I'm working through a disclosure checklist on a small audit client (my previously mentioned franchisor that led me to great aggravation with auditing standards. Of course I'm now seeing FASB Codification references throughout, and I started to think about all the ways my life has improved as a result of it:

All of my clients, especially those that are publicly traded, have had to update the notes to their financial statements, removing references to familiar states like FASB 5, 13, 109, FIN 48, etc. without the new Codification references.
I graduated from The University of Michigan in 1984. That means I've been at this for more than 25 years. I suppose it is a good thing that FASB took away all of this familiarity I had with statement references and is making me start over from scratch.
Searching through what seems like endless levels of the codification in CCH's Accounting Research Manager (sorry not slamming CCH - I'm sure it is a similar experience in others) to get to what I'm looking for. Why spend time at home with my wife and kids when I can do that.
Why say FASB 13, paragraph 29 when you can say ASC 840-10-50-1?

Look, I'm just a simple auditor trying to do outstanding work for our valued clients. How this helps me or them is beyond me. To paraphrase Simon Cowell "I don't get it. Sorry."

Talk About Focusing on a Niche

noreply@blogger.com (Joel Ungar) — Tue, 16 Feb 2010 16:52:00 +0000

At my Firm, we focus on a few niches - SEC auditing, franchisors/franchisees, broker/dealers and increasingly restaurant groups. But we still do lots of work that doesn't fall in any of those niches.

Which made an experience I had yesterday make me think about this.

We're located in Detroit, but almost all of our niche clients are located outside of Detroit. We travel a lot. And it looks like I'm going to Russia and possibly China sometime in the next month.

I went yesterday to a place called Passport Health Michigan which I think is a franchise of Passport Health USA. My partner and one of our staff went there last year for immunizations before a trip to China, and now it was my turn.

What an incredible experience. I called to make my appointment, and they asked me where I was going. I arrived a couple of hours later, and they had a spiral bound document for me with all of the information I could possibly need for travelling to Russia and China. The document included:

Recommended immunizations
Health issues
Travel tips
General information about the countries
Visa requirements
And more

The nurse operating the office was incredibly knowledgeable and helped me make informed decisions about what shots to get. In case I go to China, I got pills to prevent malaria. They had diarrhea kits (ok unpleasant subject) but I got some pills just in case. They also had other kits and travel accessories.

Essentially, it was a one stop place to find out everything I needed to know before going on these trips.

This is giving me a lot to think about. We are very good at the niches we focus on. As auditors, can we be more "one stop" all you need to know like this business? I haven't figured that one out yet.

Aggravated with Auditing Standards

noreply@blogger.com (Joel Ungar) — Sun, 14 Feb 2010 16:57:00 +0000

I attended a PPC seminar in September 2007 on implementing the then new auditing standards. One of the highlights for me was a session led by, if my memory is correct, Harold Monk, the chair of the Auditing Standards Board. The part that really stuck with me was when he said something to like the following:

Our goal is that every company that has an audit of their financial statements will use two CPA Firms - one to help them with their year-end close, and the second to do the independent audit.

I understand their logic. I just don't agree with it. Did they think about asking the ultimate purchasers of an audit, namely the business entities, if they wanted this?

We do a lot of audits - primarily SEC audits but also a good number of audits of privately held entities. I can assure you the privately held companies were not overly excited to hear this. To their minds, two CPA Firms = a needless increase in fees.

I can't argue with them. Prior to these changes in the standards, one firm could generally help with the closing and drafting the financial statements, including the notes. Let's be realistic - there aren't many small businesses that can do this themselves. They may have a very good controller with a good knowledge of GAAP, but maybe they left public accounting and don't want to stay on top of the continuing changes in accounting standards (another sore point with me but that can wait for another day). So the auditor did the adjustments on some complex accounts and drafted the statements and notes.

The Auditing Standards Board decides this can't continue. Again, I understand their logic - the auditor shouldn't be a part of an entities system of internal controls.

But it just isn't likely that two CPA firms will do this for the same amount of fees. And how does this help the business entity? I still just don't get it.

There are times an audit client will ask us to adjust something like deferred taxes for them. We have to tell them to try and do so themselves. Then we audit it and fix it. This is just plain inefficient for the audit client. They waste time doing something they can't do. We have to post an adjustment that says something like "To correct error in deferred taxes" where in the past we'd have said something like "To adjust deferred taxes to actual." Do you think the client likes seeing "To correct error"? I can assure you some get irritated and don't like hearing "that is what the standards require."

All of these standards lead to a tremendous amount of checklists that need to be prepared. I have a small franchisor that I audit. It literally takes me under 30 minutes to test 100% of the transactions. The required checklists - at least 6 hours. This doesn't make sense.

I'm hoping some sanity comes in this area. Of course, if and when it does, I'm going to have to redo all of my audit documentation once again.

It just doesn't end, does it?

Announcing A Name Change

noreply@blogger.com (Joel Ungar) — Tue, 02 Feb 2010 21:19:00 +0000

Maddox Ungar Silberstein, PLLC Announces Name Change to “Silberstein Ungar, PLLC”

Nationally recognized CPA Firm Adds Staff and Expands Deeper into Audits of Public Companies, Franchise Businesses, and Broker Dealers

Bingham Farms, MI, February 2, 2010 – Maddox Ungar Silberstein, PLLC, a nationally recognized public accounting and audit firm, with services primarily focused within the publicly traded company, franchise, and broker dealer industries, announced today that it has changed its name to Silberstein Ungar, PLLC. The firm also announced recent additions of audit staff, as part of a significant investment in expanding its Public Company and Broker/Dealer practice groups. Silberstein Ungar, PLLC provides a complete range of high-level assurance, tax and consulting services to numerous clients throughout the US, Canada, Asia, and Europe.

According to Joel Ungar, Principal and 2003 firm founder, “It has long been our clear and strong vision to grow our audit practice to meet the increasing needs of our rapidly expanding client base. Our continued growth and expansion in the SEC, Broker/Dealer and Franchise sectors provides us with an ideal opportunity to carve out a distinct identity. It enables us to further become one of the prominent, “go-to” firms in the small to mid-sized business community. The name change to ‘Silberstein Ungar, PLLC’ reflects the departure of John Maddox from the Firm and reflects our dedicated commitment to charting the course for firm growth, as well as improved client service, in a more cohesive way.”

“As part of this initiative, the firm is thrilled to announce that Dave Kobylarek, CPA and Seth Gorback have each been promoted to Audit Manager, and we welcome Cary Hammond, CPA and John Chirco, both new members of our audit staff. Each has Big Four audit experience and will help us better serve our clients.”

According to Ron Silberstein, Principal and head of the firm’s SEC Audit and Franchisor Audit Practices, “Throughout our firm’s existence, we have held an unparalleled commitment to our clients - and this won't change – in fact, it will improve. Our office is still in the same location, with the same mailing address, phone and fax number. The only external change is the name on the door which will now be SILBERSTEIN UNGAR, PLLC; internally, however, we have a heightened focus on client responsiveness, and an expanded, more experienced team to serve them.”

About Silberstein Ungar, PLLC

Silberstein Ungar, PLLC is a boutique CPA firm headquartered in Bingham Farms, MI. In addition to providing a range of accounting, tax and consulting services to small and mid-sized businesses, the firm is a top 20 auditor of publicly traded companies and has extensive experience in working with Franchise businesses and broker/dealers. It is a member of the MSI Global Alliance of Independent Legal and Accounting Firms and has clients located throughout the US, Canada, Asia, and Europe.

Certain Donations for Relief in Haiti to be Deductible for 2009

noreply@blogger.com (Joel Ungar) — Tue, 26 Jan 2010 22:57:00 +0000

The Haiti Assistance Income Tax Incentive Act was enacted on Friday, January 22, 2010. It allows US taxpayers who give to charities providing earthquake relief in Haiti to claim these donations on their 2009 tax returns. Qualified contributions must be made after January 11, 2010 and before March 1, 2010. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.

Only cash contributions are eligible, as opposed to contributions of property. Taxpayers must keep proof of payment as typically required for charitable contributions, however, an exception was made for amounts donated via text message in that the cellular bill showing the name of the charitable organization, date, and amount will satisfy the requirements.

Taxpayers must itemize deductions in order to benefit. Qualifying contributions must be made to a US-based organization that is assisting with relief efforts. IRS Publication 78, Cumulative List of Organizations, can be used to help identify qualified organizations.

H&R Block and TurboTax Have It Wrong

noreply@blogger.com (Joel Ungar) — Sun, 10 Jan 2010 13:34:00 +0000

Driving to the office early on a Sunday January morning, you hear lots of radio commercials for H&R Block and Turbo Tax with a very common theme: We get you the maximum refund possible!

They've got it all wrong.

I can get you the maximum refund possible too. Have 100% of your paycheck withheld so that everything goes to taxes will get you the maximum refund possible. If you want to go beyond the maximum, then you can make quarterly estimated tax payments too. Come tax time you'll get all of the excess you paid in back. Which means you made an interest free loan to the government, by the way.

The idea is to pay the least amount of tax legally possible. It is actually better to pay on April 15 the largest amount possible while avoiding any penalties. That way you hold onto your money longer, and earn some interest off of it too.

You also do that through planning major transactions, ideally with the assistance of a qualified professional. The money you pay the professional will be far less than the tax savings you will realize.

Now don't get me wrong. H&R Block and Turbo Tax provide a valuable service to the American taxpayer. But they are not providing a good service when they misinform people on the real goal.

We are Hiring!

noreply@blogger.com (Joel Ungar) — Sun, 06 Sep 2009 12:57:00 +0000

Maddox Ungar Silberstein, PLLC, a rapidly growing PCAOB registered CPA Firm in Bingham Farms, MI, needs additional audit staff, both full time and seasonal/part time. Candidates should have:

CPA or CPA candidate
Recent audit experience in public accounting (SEC audit experience a plus)
Minimum of one year experience
Ability to travel
Strong computer skills, including proficiency in Microsoft Office and Excel
Working knowledge of relevant professional standards
Working knowledge of GAAP and PCAOB standards a plus
Desire to work overtime when needed to get the job done

We offer a competitive salary and benefits, including health, dental and SIMPLE IRA plan.

PCAOB Adopts New Auditing Standard

noreply@blogger.com (Joel Ungar) — Tue, 28 Jul 2009 19:32:00 +0000

Got this in an email from the PCAOB:

PCAOB Adopts New Auditing Standard On Engagement Quality Review And Issues Concept Release on Requiring
the Engagement Partner to Sign the Audit Report

Washington, DC, July 28, 2009 – The Public Company Accounting Oversight Board today voted to adopt Auditing Standard No. 7, Engagement Quality Review (EQR), and to issue a Concept Release on requiring the engagement partner to sign the audit report.

The EQR standard provides a framework for the engagement quality reviewer to objectively evaluate the significant judgments made and related conclusions reached by the engagement team in forming an overall conclusion about the engagement.

“The EQR standard focuses the engagement quality reviewer’s attention on the areas that are most likely to contain a significant engagement deficiency and increases the likelihood of identifying and correcting those deficiencies before the audit report is issued,” said PCAOB Chairman Mark W. Olson. ”The new standard goes a long way in clarifying the process."

The Sarbanes-Oxley Act of 2002 directs the Board to include in its auditing standards a requirement that each registered public accounting firm "provide a concurring or second partner review and approval of [each] audit report (and other related information), and concurring approval in its issuance, by a qualified person (as prescribed by the Board) associated with the public accounting firm, other than the person in charge of the audit, or by an independent reviewer (as prescribed by the Board)."

The Board initially proposed the auditing standard on February 26, 2008, and reproposed it on March 4, 2009.

AS No. 7 applies to all audit engagements, and engagements to review interim financial information, conducted pursuant to the standards of the PCAOB. The standard supersedes the Board’s quality control standard, SECPS Requirements of Membership, Section 1000.08(f); 1000.39, Appendix E. The standard, if approved by the U.S. Securities and Exchange Commission (SEC), will become effective for both the EQR of audits and the EQR of interim reviews for fiscal years beginning on or after December 15, 2009.

Separately, the Board also is seeking comment on a Concept Release to consider the effects of a potential requirement for the engagement partner to sign the audit report. Any such requirement would be in addition to the existing requirement for the audit firm to sign its name on the audit report.

“The PCAOB has discussed the engagement partner signature with its Standing Advisory Group three times, and taken a close look at the Treasury's Advisory Committee recommendations as well as the new signature requirements for Member States in the European Union,” said Chairman Olson. “We want to take a hard look at this issue and its potential benefits for investors, and look forward to a robust and informative comment period.”

The Board is seeking comment on the Concept Release for a 45-day period.

Deloitte Survey Finds Preference for Separate Accounting Rules for Private Firms

noreply@blogger.com (Joel Ungar) — Mon, 27 Jul 2009 13:27:00 +0000

WebCPA posted an interesting article that starts with something not surprising at all: "Slightly more than half of small and midsized businesses prefer to have a separate set of accounting standards for private companies."

Many, including myself, have addressed this topic repeatedly. The plain truth is that accounting standards are more complex than ever. Small and midsized businesses that issue GAAP financial statements have been asking for a simpler alternative. IFRS has come out with an "IFRS Light" that may win adoption in the US, but even that is still full of complex rules.

There is an alternative out there already - non GAAP statements. Many small and midsized businesses issue their financial statements on an income tax basis. This is not a perfect alternative because this makes those financial statements more difficult to compare to a GAAP statement, and lenders may not accept income tax basis financial statements.

My opinion: if something doesn't happen to ease the burden on small and midsized businesses, you are going to see more income tax basis statements because the extra cost to produce GAAP statements won't be worth it.

Accountants’ Group Calls for Single Set of International Rules - Bloomberg

noreply@blogger.com (Joel Ungar) — Fri, 24 Jul 2009 13:30:00 +0000

Bloomberg posted an interesting article on the continuing debate for a single set of international accounting standards. This is a debate that is going to on for a while.

My opinion: Theoretically a single set of international accounting standards makes sense, and I'm not going to go into all of the reasons for it.

The unsettled question is what are those standards going to be? All of the momentum is behind the International Financial Reporting Standards ("IFRS"). As I've noted previously, the Financial Accounting Standards Board has been working for several years to "converge" US standards to IFRS. Many affected parties in the US are against this process for a host of different reasons. I think ultimately this is where things are going.

The article concludes with something I strongly agree with: the politicians have to stay out of this. Leave this to the standard setters.

SEC Sues CSK Auto Ex-CEO under SOX Clawback - WebCPA

noreply@blogger.com (Joel Ungar) — Fri, 24 Jul 2009 13:20:00 +0000

Found the following on WebCPA. It was only a matter of time before the SEC used the Section 304 clawback provisions. Now that they have succeeded, expect the SEC to do more of this.

The Securities and Exchange Commission has asked a court to order the former CEO of CSK Auto Corp. to reimburse the automotive parts company and its shareholders more than $4 million he received in bonuses and stock sale profits while CSK was committing accounting fraud.

The SEC’s enforcement action charges Maynard L. Jenkins of Scottsdale, Ariz., with violations of the Sarbanes-Oxley Act. It is the first action seeking reimbursement under the SOX “clawback” provision (Section 304) from an individual who is not alleged to have otherwise violated the securities laws. The SOX “clawback” provision deprives corporate executives of money that they earned while their companies were misleading investors.

“Jenkins was captain of the ship and profited during the time that CSK was misleading investors about the company's financial health,” said Rosalind R. Tyson, director of the SEC’s Los Angeles Regional Office, in a statement. “The law requires Jenkins to return those proceeds to CSK.”

According to the SEC’s complaint filed in U.S. District Court for the District of Arizona, Jenkins made $2,091,020 in bonuses and $2,018,893 in company stock sales that should have been reimbursed to CSK pursuant to SOX Section 304.

This is the third enforcement action in the SEC's investigation into CSK’s alleged accounting misconduct. In March 2009, the SEC charged four former CSK executives with securities fraud. In May 2009, the SEC brought a settled enforcement action against CSK for filing false financial statements for fiscal years 2002 through 2004.

In July 2008, CSK became a wholly owned subsidiary of O’Reilly Automotive, Inc. According to the SEC’s complaint against Jenkins, CSK was required to prepare an accounting restatement due to its fraudulent conduct. While Jenkins served as CEO, CSK filed two such restatements related to its overstated vendor allowances.

The SEC alleges that, in violation of Section 304, Jenkins failed to reimburse CSK for bonuses, or other incentive-based or equity-based compensation, and profits from the sale of CSK stock he received during the 12-month periods following the filing of each of CSK’s fraudulent financial statements. The SEC’s complaint does not allege that Jenkins engaged in the fraudulent conduct.

SEC Offers Email News Digests

noreply@blogger.com (Joel Ungar) — Wed, 22 Jul 2009 18:43:00 +0000

Thanks to Rick Telberg at CPA Trendlines whose post on Twitter pointed me to the SEC's new email service for instant, daily, weekly or monthly email digests on all things SEC. I defaulted to signing up for everything and will adjust it down overtime, and I chose the daily digest option.

Companies: New Lease Rules Mean Labor Pains - CFO.com

noreply@blogger.com (Joel Ungar) — Wed, 22 Jul 2009 12:45:00 +0000

Found an interesting article on CFO.com on the pushback from over 150 companies on indications on the direction for new lease accounting, and I encourage you to read it.

I agree with a lot of the criticisms of SFAS 13, Accounting for Leases. The brightline tests for whether a lease is operating or capital has always been susceptible to abuse.

On the other hand, I have difficulty accepting the financial calamity some predict from turning what are now off balance sheet operating leases onto the balance sheet as an asset with a corresponding liability. True, ratios will be hurt and could impact existing lending agreements. But all of this information has been (or should be) disclosed in the notes to the financial statements and should be comprehended by the readers and lenders.

This was reminding of an earlier post on mark to market accounting that wondered if that standard caused the financial market meltdown. My opinion and that of an accounting professor from Wayne State University in Detroit was no. Since publishing that post, I asked the same question to another Wayne State accounting professor who completely disagreed with me and his colleague. I am reminded of that comment about putting pig on a lipstick. That was what we were doing before the mark to market rules, and it is pretty much what we are doing with the current lease accounting rules.

Updates to SEC Regulations and Staff Interpretations

noreply@blogger.com (Joel Ungar) — Wed, 22 Jul 2009 00:33:00 +0000

Thanks to the good folks at The SEC Institute for the following:

SEC Issues SAB 112

In early June the SEC Staff issued SAB 112 to update the codification of SABs, (the Staff Accounting Bulletin Series), in order to make the interpretive guidance consistent with current U.S. GAAP. Most of the revisions deal with material made unnecessary because of SFAS 141R, Business Combinations and SFAS 160, Noncontrolling Interests in Consolidated Financial Statements.

The new SAB and the SAB codification can be found at:

www.sec.gov/interps/account.shtml

SEC Issues Technical Amendments, including to Regulations S‑X and S‑K

In the same vein, in April the SEC adopted a final rule, Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies, in order to conform them to SFAS 141R and 160.

The final rule can be found at:

www.sec.gov/rules/final/2009/33-9026.pdf

SEC Issues new C&DIs on Executive Compensation

In May the SEC staff added new Regulation S‑K C&DI’s related to questions they have received on executive compensation disclosure.

The C&DIs can be accessed at:

www.sec.gov/divisions/corpfin/cfnew/cfnew0509.shtml

Help for New Cover Page Check Box For XBRL

noreply@blogger.com (Joel Ungar) — Wed, 22 Jul 2009 00:26:00 +0000

Thanks to the good folks at The SEC Institute for this:

As you likely know, the SEC added a check box on the cover pages of Forms 10‑K and 10‑Q concerning the filing and posting of XBRL (interactive data) files. The wording in the check box is a bit ambiguous, so the staff issued this C&DI to clarify how to complete the check box:

Question 105.04

Question: If a company is not yet required to submit Interactive Data Files with its Exchange Act reports, should it check the box on the cover pages of the reports relating to compliance with Interactive Data File submission requirements?

Answer: No. A company should not start checking the cover page box relating to Interactive Data File compliance until it is required to submit those files. For example, if a company is first required to include an Interactive Data File with its second quarter Form 10‑Q and, as permitted by the grace period rules, includes such file in a Form 10‑Q amendment 30 days after the date the report is due and filed, the company should not check the Interactive Data File box on the cover page of its initial Form 10‑Q. Rather, it should check the box once the first Interactive Data File is submitted — in this case, with the Form 10‑Q amendment. Companies that have been voluntarily submitting Interactive Data Files should not check the box until they are required to submit the files. [Apr. 30, 2009]

You can find this C&DI at:

www.sec.gov/divisions/corpfin/guidance/interactivedatainterp.htm

A Commentary on the Madoff Fraud

noreply@blogger.com (Joel Ungar) — Mon, 13 Jul 2009 15:03:00 +0000

This sadly says a lot.

New Option for Private Companies in Streamlined IFRS

noreply@blogger.com (Joel Ungar) — Fri, 10 Jul 2009 15:04:00 +0000

Very interesting article in The Journal of Accountancy that might be a very attractive option for companies: use a slimmed down version of International Financial Reporting Standards ("IFRS") as the basis for accounting instead of US GAAP.

This would be very interesting. Many privately held companies continue to complain, rightfully so, about the complications of US GAAP. Much of the accounting pronouncements coming out these days seem pointed at larger, publicly held companies and can be very difficult and expensive to implement. Privately held companies have been asking for an alternative, essentially a GAAP Lite.

This might be it.

I encourage you to read the article. But I am going to copy one key paragraph:

Private companies in the United States can prepare their financial statements in accordance with U.S. GAAP, an “other comprehensive basis of accounting” (OCBOA), such as cash- or tax-basis; or full IFRS, among others. The governing Council of the AICPA recognizes the IASB as an accounting body for purposes of establishing international financial accounting and reporting principles. Full IFRS and IFRS for SMEs are generally accepted accounting principles.

"SME" stands for small- and medium-size entities.

I admit I have not read these standards yet, but on the surface I can see two potential problems:

Loan agreements often specify US GAAP be used in financial reports provided to the lender. It could take time for banks and other lenders to understand this different basis of accounting and accept it.
Accountants - both those in public accounting and those inside of small- and medium-sized entities don't know this basis of accounting and it will take time to learn how to use it.

That being said, I look forward to following this option.

Considering BusinessWeek's Article: How Good Is Your Audit Firm?

noreply@blogger.com (Joel Ungar) — Thu, 09 Jul 2009 13:48:00 +0000

BusinessWeek recently published an article titled How Good is Your Audit Firm? The Public Company Accounting Oversight Board ("PCAOB"), at the request of the SEC, has been requested "to examine the feasibility of requiring audit firms to periodically report on key indicators of audit quality", and this article explores the subject.

One of the authors is a retired partner at KPMG, and is now, along with the other two authors, a college professor. This explains the looking at the world with rose colored glasses approach suggested in this article.

I agree 100% that audit quality is important. The suggestion to report on input and processes isn't going to change a thing.

The article suggests audit firms, which mind you in the US are privately held, report things like:

Years of experience of professional staff by partner, manager and staff level
Areas of expertise
Relative time spent on client service, administration, training and nonchargeable time
Number of public clients per partner
Audit firm personnel-retention rates by professional level
Specific types of industry relevant training

Most firms already disclose information such as years of experience and areas of expertise. I submit that years of experience is overrated. Yes, generally speaking someone with 20 years of experience knows a lot more than someone with 2 years of experience. But 20 years isn't necessarily better than 10. I have unfortunately seen people with far more experience than me not get it right.

I am very bothered by the notion of disclosing "relative time" because it suggests that hours are an important input in this equation. I don't track my hours. It is not relevant to my clients. My experience and ongoing growth and training is important to them.

The market place drives competition and audit quality. An artificial set of criteria imposed on audit firms isn't going to make things better.

Mark to Market Accounting - Did it Cause the Meltdown

noreply@blogger.com (Joel Ungar) — Tue, 07 Jul 2009 12:40:00 +0000

I was involved in an interesting discussion last week on "mark to market" accounting. For those not up on the subject (at least 99% of the population falls in that category!), the mark to market rules required banks and other entities to adjust the carrying value of various assets to current market values. That is what they mean by mark to market - as in marking it down.

Most GAAP financial reporting is done on a historical cost basis. There has been an ongoing trend to more fair value reporting, especially as the US account principles start to converge with international standards. One area that has been switched to market value was investments in marketable securities - stocks, bonds, mutual funds, etc. Depending on how you classify these assets impacts how the gain or loss on them is recognized - unrealized gains and losses on securities held for trading purposes directly hit the income statement, while those on available for sale securities go through comprehensive income, a component of the equity section of the balance sheet.

The mark to market rules have gotten a lot of criticism and taken heat as being a cause of the financial market meltdown. Why? Because subprime loans and other financial assets had to be marked down to current value. And that made the companies holding these assets look bad! The argument was that if these rules were done away with then the companies would look better and none of this would have happened.

A large number of members of Congress have written the Securities and Exchange Commission asking that these rules be rescinded for public companies. That alone should tell you the rules are not the problem.

The truth here is that these companies were holding a lot of bad assets. The mark to market rules made this clear. Not having the rules in place would have hidden this information, but either way the companies were holding bad assets.

Did the mark to market rules create the financial meltdown? No. That was going to happen. Did it help accelerate it? Maybe, but that is ok.

Any contrary thoughts?

Benchmarking: More Similar Between Industries Than I Realized

noreply@blogger.com (Joel Ungar) — Mon, 29 Jun 2009 14:14:00 +0000

I attended Restaurant CFO Boot Camp in Las Vegas, sponsored by SS&G Financial Services, last week and learned a lot more about the restaurant industry. Glad I went.

SS&G does an annual benchmarking survey of the restaurant industry, and I was struck by how similar the issues they encountered were to the experiences I had in a past life. Prior to founding Maddox Ungar Silberstein, PLLC, I worked for 4 years in the ready-mixed concrete industry, and I still am a member of the National Ready Mixed Concrete Association. For several years, I was on the committee that did the annual benchmarking survey of concrete producers - financial results and various operating statistics.

The industries are very different, yet the issues were the same:

How do you normalize for excess owner compensation in privately held industries?
How do you make sure you are looking at apples and apples - in concrete where are the benefits for the loader operator going - variable or fixed costs? And in restaurants, where is all the expense for paper that touches the product going? Same, but different.
And more.

Both industries are focused on controlling costs. Restaurants and concrete companies generally have fixed pricing for their products - restaurants sell based on menu price, and concrete generally sells based on fairly standard pricing for the different mixes. Keeping an eye on your costs is critical as improvements in costs essentially drop right to the bottom line.

Intuitively, I knew this, but it took this seminar to make it clear.