CPA Success

Firm leaders chime in on legislative priorities, critical skills, innovation

bill@macpa.org(Bill Sheridan) — Tue, 31 May 2016 12:00:00 GMT

More than ever, managing partners at Maryland CPA firms say they need someone to scan the horizon for them — to identify future trends before they happen, to monitor and affect change on legislation and regulations, to train their people and help them grow their businesses in an era of great change and complexity.

To make them future-ready, in other words.

That much was clear during the MACPA’s most recent meeting of key managing partners. With the help of a virtual collaboration aid called ThinkTank, the firm leaders offered eye-opening insights about the issues that are keeping them up at night and how they believe the MACPA can help.

Here’s what they had to say:

Legislation / regulation
Managing partners offered strong support for the MACPA’s legislative agenda. Their top five legislative priorities mirrored many of the MACPA’s top issues in recent years. They include:

Firm liability: Stopping comparative fault
Stopping sales taxes on professional services 
Stopping the nullification of non-compete and non-disclosure agreements
Passing CPA firm license mobility
Stopping excessive mandatory paid leave

Managing partners also encouraged the MACPA to continue its opposition to the Department of Labor’s new overtime rule, which increases the salary threshold for overtime exemption from $23,600 per year to $47,476 per year.

Innovation and firm growth
Maryland’s managing partners aligned closely with the result of a nationwide AICPA survey on innovation priorities for CPA firms. Maryland’s firm leaders said they are focused most intently on the following innovation activities:

Realizing value to the firm from existing innovation investments
Updating current offerings to be more competitive
Developing new offerings that expand the value we provide to our existing clients
Implementing a new offering for a specific market segment we believe has growth
Implementing a cloud-based accounting system

Each of those priorities also appears on the AICPA’s list of nationwide firm innovation activities. In fact, the move toward innovative new business models is well under way, with firms nationwide reporting a 91 percent increase in advisory services and outsourced business process work. Such advisory services accounts for nearly one-third of revenue at the top 100 accounting firms.

Professional development
It’s a new era for talent development. The proof is in the list of skills that Maryland managing partners say are most important at today’s CPA firms. Topping that list are:

Communication
Critical and strategic thinking
Technology skills
Inspiring and motivating others
Anticipating and serving evolving needs
Collaboration and mobilizing consent
Everyday innovation
Influencing and persuading
Change leadership

What the MACPA is doing
Here are just of a few of the ways in which the MACPA is helping its members meet these challenges.

Legislation: Planning for the 2017 edition of CPA Day in Annapolis is already under way. Mark your calendars for Jan. 26 and plan to join our efforts to protect the profession.
Critical skills: The critical soft skills (we like to think of them as “success skills”) identified by firm leaders are at the heart of the Business Learning Institute’s curriculum. They also will be covered in depth during the MACPA’s annual Leadership Academy, which is designed to foster CPAs’ leadership and strategic skills and move their careers forward faster. This year’s Leadership Academy will be held Aug. 24-26. Get details and register here.
Becoming future-ready: We have partnered with acclaimed futurist Daniel Burrus to build the Anticipatory Organization: Accounting and Finance Edition. This award-winning new product teaches accounting and finance pros how to identify future trends and take advantage of them before they arrive. It features an innovative e-learning format with rapid application tools to give your team the critical future-focused skills they need in less time than traditional CPE. Visit BLIonline.org/AO for more information or contact us to learn how to bring it to your firm.
Technology / cyber security: Our preferred providers at Aon have provided an update on cyber security and other tech-related risks to CPA firms.

The message is clear: As CPAs stay focused on the important work of today, the MACPA will keep looking out for the next critical issues that will impact their businesses.

Regulatory roundup

edith@macpa.org(Edith Orenstein) — Thu, 19 May 2016 17:56:00 GMT

Accounting- and auditing-related standard-setting activity has heated up recently. Here's a rundown of recent rulemaking from the Financial Accounting Standards Board, the Securities and Exchange Commission, and the Public Company Accounting Oversight Board, worth taking a look at as we approach the Summer of '16.

Final and near-final rules
The FASB has published three final Accounting Standards Updates in the past month, all related to revenue recognition:

ASU 2016-10: Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
ASU 2016-11: Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 [the new standard on Revenue from Contracts with Customers (Topic 606)] and 2014-16 Pursuant to Staff Accouncements at the March 3, 2016 EITF Meeting (SEC Update)
ASU 2016-12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients

On May 17, the SEC published an update to its Compliance and Disclosure Interpretations (CDI) series, providing the SEC staff's views on non-GAAP financial measures. Publication of the update is just one of a number of actions and potential actions the SEC has said it has taken or will take to stem an increase in what SEC staff believe to be misleading non-GAAP disclosures. The non-GAAP CDI and related links to recent speeches and interviews of SEC staff on this hot topic appear below.

Compliance and Disclosure Interpretations: Non-GAAP Financial Measures (SEC, May 17)
Non-GAAP Revenue Driving Comments from SEC's Division of Corporation Finance (CPA Success, May 5)
SEC Tightens 'Crackdown' on Adjusted Accounting Measures: (Wall Street Journal, May 19)

On May 10, the PCAOB announced that its final rule requiring disclosure of the name of the audit engagement partner and certain other firms involved in an audit had received the approval of the SEC. The provision in the rule pertaining to disclosure of the name of the engagement partner (on PCAOB Form AP) becomes effective for all public company audits issued on or after Jan. 31, 2017. The provision pertaining to disclosure of certain other participants in the audit is effecive for all public company audits issued on or after June 17, 2017. See:

PCAOB press release (May 10)
Improving Transparency Through Disclosure of Engagement Partner and Certain Other Participants in the Audit (Rulemaking Docket No. 29)

In the category of "near-final" rules, as previously reported, the FASB announced at the end of April that it expects to issue its final rule on financial instruments − impairment (a.k.a. credit losses − impairment) by the end of June. See "FASB Approves Final Credit Loss Standard, Defers Effective Date."

Proposed rules / requests for comment

The above-noted rules represent a sea-change in accounting and auditing practice.

As your firm or business come to grips with implementing these and other new standards, it's worth keeping in mind that the regulators, as part of their due process, seek your views through the public comment period on rule proposals. Don't just wait for the "regulatory roundup" of final rules like these. Check out the proposed rules below and consider filing comments to support (or provide constructive criticism) on the proposals before the horses have left the barn.

Recent rule proposals released by the FASB address the presentation of restricted cash in the statement of cash flows, a proposed simplification of goodwill impairment, and technical corrections to the new revenue recognition standard. See:

Proposed ASU: Statement of Cash Flows (Topic 230) - Restricted Cash (comment deadline June 27)
Proposed ASU: Technical Corrections and Improvements to Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (comment deadline July 2)
Proposed ASU: Intangibles—Goodwill and Other (Topic 350) Simplifying the Accounting for Goodwill Impairment (comment deadline July 11)

The PCAOB, having considered comments on its original proposal on the auditor's reporting model, recently issued a revised proposal for public comment. A central feature of the reproposal is that the auditor's report would still follow what has been described as the traditional "pass-fail" model (i.e., it would provide an unqualified or "clean' opinion vs. a qualified audit opinion), but a major change would be the auditor's discussion of "critical audit matters," akin to the issuer's discussion of critical accounting policies. See:

PCAOB press release (May 11)
Proposed Auditing Standard: The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards (comment deadline Aug. 15)

The SEC has a number of proposals currently out for public comment. The most recent item, pertaining to incentive compensation for financial institutions, is a joint proposal issued by the SEC and the federal banking agencies. The item further below, a Concept Release on Reg S-K, is part of the SEC's project on disclosure effectiveness.

Joint agency press release on incentive comp rule for financial institutions (May 16)
Joint agency proposed rule: Incentive-Based Compensation Arrangements (comment deadline July 22)
SEC Issues Concept Release on Disclosure Effectiveness (CPA Success, April 13)
SEC Concept Release: Business and Financial Disclosure Required by Regulation S-K (comment deadline July 21)

DOL issues final rule raising overtime pay threshold

edith@macpa.org(Edith Orenstein) — Wed, 18 May 2016 14:25:00 GMT

UPDATE: See the AICPA's press release: AICPA Responds to Department of Labor's Overtime Rule.

The Department of Labor has published its final rule significantly raising the threshold level for salaried employees entitled to overtime pay. The rule, "Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees," set to be published in the Federal Register May 23, carries an effective date of Dec. 1, 2016.

The rule, backed by the Obama administration, received strong objections from business groups, including the AICPA and the MACPA, due to the negative impact of the cost and complexity of the proposal. (See MACPA Warns of Overtime Rule's Unintended Consequences.) These advocacy efforts resulted in some relief provided in the final rule. As reported by the Associated Press, Secretary of Labor Tom Perez said "the administration took several steps in the final rule to address business concerns: The (salary) threshhold was lowered (to $47,476) from the original proposal of $50,440; bonus payments can count toward the threshhold; and the rule will have a long phase-in before taking effect Dec. 1."

One change which moved in the more onerous direction vs. the proposed rule was that the threshold defining "highly compensated employees," above which an exemption from overtime rules applies, was raised (thereby sweeping many more employees below the exempt level and subject to the overtime rules) from the level set in 2004 of $100,000 to a new level of $134,004. The level that had been proposed was $122,148.

Highlights of final rule
Here are some key points from the DOL's final rule on overtime pay:

Salary threshold: The final rule will raise the salary level for the first time since 2004. This increase will go into effect on Dec. 1, 2016.
Standard salary level: The final rule will raise the standard salary threshold to equal the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region, currently the South. This will raise it from $455 a week to $913 a week ($47,476 for a full-year worker). This means that 35 percent of full-time salaried workers will be automatically entitled to overtime, based solely on their salary.
Highly compensated employees salary (HCE) level: The rule also updates the total annual compensation level above which most white collar workers will be ineligible for overtime. The final rule raises this level to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 to $134,004 a year.
Automatic updates. Every year that the threshold remains unchanged, it covers fewer and fewer workers as wages overall increase over time. The final rule will fix this by automatically updating the salary threshold every three years, beginning Jan. 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020. The HCE threshold will increase to the 90th percentile of full-time salaried workers nationally, estimated to be $147,524 in 2020. The DOL will post new salary levels 150 days in advance of their effective date, beginning Aug. 1, 2019.
Bonuses, incentive payments, and commissions. The final rule will allow up to 10 percent of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis. This recognizes the importance these forms of pay have in many companies’ compensation arrangements, particularly for managerial employees affected by the final rule. This is a new policy that responds to robust comments received from the business community on this matter.
Duties test. The final rule does not make any changes to the “duties test” that determines whether white-collar salaried workers earning more than the salary threshold are ineligible for overtime pay. But fewer employers and workers will have to worry about its application because the higher salary threshold means more workers’ entitlement to overtime pay will be clear just from their salaries. For workers with salaries above the updated salary level, employers will continue to use the same duties test to determine whether or not the worker is entitled to overtime pay.

Learn more
Additional information on the overtime rule can be found on the DOL's website.

The MACPA will update its members on the DOL rule and other significant regulatory developments at our upcoming Town Hall Meetings / Professional Issues Updates led by Tom Hood, executive director and CEO of MACPA, on May 20 and June 21. Both sessions are offered in-person or via simulcast. Watch MACPA's website for announcements of webcasts focused on implementing the new DOL rule.

Further analysis and perspectives can be found here:

DOL issues final overtime rule doubling exemption thresshold (from BloombergBNA)
White House increases overtime eligibility by millions (from the New York Times)
Retailers react to DOL overtime rule (Retail Industry Leaders Association press release)

Why take the CPA exam? Each hour of prep time is worth $324. Start here

rebekah@macpa.org(Rebekah Brown) — Tue, 17 May 2016 22:10:00 GMT

It's that time of year again ... graduation season. And if you're a graduating accounting major, it shouldn't mean you're done taking exams.

The CPA credential is one of the business world’s most respected and recognizable accreditations. It says you are competent, trustworthy, and hardworking. The AICPA's brand research in 2011 found that the CPA brand was as recognizable as Apple and Disney. Think about that for a second. Think of the loyal fan bases those organizations have. The CPA is a powerful differentiator.

Professors Gregory Krippel and Sheila Mitchell of Coastal Carolina University and Associate Dean and Professor Janette Moody of The Citadel recently wondered if the time, money, and effort it takes to obtain and retain the license really paid off in the long run. As any good accounting professors would, they decided to put their number-crunching savvy to use and find out. Calculating the net present value of CPA earnings premium in total and per study hour, they found that each hour of studying for the CPA exam was worth an additional $324. You can learn more about the study here.

Who would pass up the opportunity to earn $324 an hour? Sure, it’s hard. But...

“It's supposed to be hard. If it were easy, everyone would do it.” − A League of Their Own

“Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty. … I have never in my life envied a human being who led an easy life. I have envied a great many people who led difficult lives and led them well.” − Theodore Roosevelt

All that being said, here are some resources to get you started on the difficult but rewarding path of becoming a CPA :

CPA exam review: Discounts for MACPA members!

Becker CPA Review: $300 off the full four-part course
Contact: Lori Nazzaro at LNazzaro@becker.com
Bisk CPA Review: Discounts available for MACPA members
(800) 404-7231
Gleim CPA Review: Discounts available for MACPA members
Contact: Courtney Craft at courtney.craft@gleim.com
MDS CPA Review: 20 percent off for MACPA members
Contact MACPA Service Center for discount code, (410) 296-6250
Roger CPA Review: Discounts available for MACPA members
Contact: Karina Khadaran at KKhadaran@rogercpareview.com or (877) 764-4272
Wiley CPAexcel: Discounts available for MACPA members
Contact: Patrick Anthony at panthony@wiley.com
Yaeger CPA Review: Discounts available for MACPA members
Contact: John Pelicano at john@yaegercpareview.net or (301) 874-4900

DOL Speaker Headlines Employee Benefit Plan Event; New Certificate Offered

edith@macpa.org(Edith Orenstein) — Fri, 06 May 2016 03:15:00 GMT

In response to a highly critical inspection report issued by the Department of Labor last year, the accounting profession has been actively offering programs to enhance auditor's performance of Employee Benefit Plan audits and compliance with related DOL and industry standards. Major programs in this effort include the MACPA's Employee Benefit Plan conference being held next week, and the AICPA's new Employee Benefit Plan Audit Certificates, demonstrating advanced training.

DOL's 2015 report, "Assessing the Quality of Employee Benefit Plan Audits,” found that close to 40% of employee benefit plan audits had major deficiencies. The deficiency rate ranged from 12% of audits performed by the the largest firms (firms that perform 100 employee benefit plan audits or more), to 76% of audits performed by the smallest firms (firms that perform less than 25 employee benefit plan audits).

May 16 Conference Features DOL's Auerbach

The MACPA's conference, taking place on May 16 (offered live or via webcast) features a keynote from Michael Auerbach, CPA, Chief, Division of Accounting Services, Office of the Chief Accountant at the DOL, and Auerbach is participating in additional panels throughout at the day, together with industry experts.

Kathryn E. Petrillo, Partner in Charge of Aronson LLC's Employee Benefit Plan Services Group and a member of the planning committee for the MACPA event, observes, "This is a must-attend conference for auditors of employee benefit plans who are new to these audits and those experienced auditors who want to stay in compliance with the standards and get their audit questions answered." She notes that the event (with a simulcast option), "offers plan sponsors the chance to come together with their peers, hear from the Department of Labor, and get practical guidance on how to address compliance problems."

Attendees will also learn about specific 401(k) plan design provisions and explore employee benefit and executive compensation planning opportunities. "Anyone who has benefit plan responsibilities will gain valuable knowledge from these sessions," adds Petrillo.

June Conferences Offer AICPA Certificate Training

A series of events will be held by the MACPA in June, to prepare professionals for the AICPA's new Employee Benefit Plan Certifications. Individuals and groups can purchase training programs offered by the Business Learning Insitute, an affiliate of the MACPA, or the exam fee can be purchased separately.

The May 16 Employee Benefit Plan conference and June training events represent follow-through on the MACPA's commitment to drive improvement in employee benefit plan audits.

MACPA Executive Director and CEO Tom Hood invites employee benefit plan auditors to take advantage of these specialized training opportunities, and reiterates his message from last year, "You can help us with your continued support and, most importantly, with a 'tone at the top' that emphasizes continued and increased audit quality, a commitment to the highest standards of ethics and integrity, commitment to developing your staff to be competent and up to date on the latest standards and regulations, and active participation in peer review and the profession's quality initiatives."

For further background, see earlier posts by Bill Sheridan from the CPA Success blog: