COCPA NewsAccount - 2014 - November/December Issue by Colorado Society of Certified Public Accountants

NewsAccount Colorado Society of CPAs

November/December 2014

Change Meet Bob Poley CPA and Farmer

GASB 67 & 68 Guidance from PERA

Revenue Recognition: Time to Implement?

PostRecession Financial Habits

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Contents Features

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Revenue Recognition Coming The new standard will affect all entities. Now's the time to plan for implementation.

DOMA

and State Filing Requirements

Filing status at the state level continues to be complicated in many jurisdictions.

Compatible: CPA and Farmer The Hoot 'n' Howl Farm is a dream come true for Boulder CPA Robert Poley and his wife Janet.

14 Before You Say Yes

In thinking about becoming a trustee for your client, consider the risks, responsibilities, and rewards.

16 Spending and Saving

Americans' financial habits have changed postrecession. Here is a look at the numbers and trends as they stand today.

Departments

The COCPA office will be closed for the holidays: Nov. 27 & 28 Dec. 25 & 26 Jan. 1 & 2

}

2 Chair Column 21 Movers & Shakers 21 Classifieds

For information 24/7/365, visit www.cocpa.org.

Nov/Dec 2014 â&#x20AC;˘ www.cocpa.org â&#x20AC;˘

Chair Column

NewsAccount A bi-monthly publication of the Colorado Society of Certified Public Accountants Vol. 60, No. 4 November| December 2014 Board of Directors Sheila M. Balzer Chair Steven R. Corder, Vice Chair Tawnya R. Ramirez, Treasurer Marc C. Hendrikson, Immediate Past Chair Mary E. Medley, Secretary Directors Victor A. Amaya, Craig A. Arfsten, Christine Benero, Kelly G. Boggs, Sharon S. Lassar, Mark J. Smith Editorial Board Jack Allgood, Kay R. Dragon, Patrick A. Lytle, Georgia Z. Phillips, Laura J. Theiss, Barbara J. Tedesko, R. Stephen Van Meter, Michael D. West Mary E. Medley, President/CEO Elizabeth M. Julin, Deputy Director Krista Flynt, Editor/Publisher Natalie G. Rooney, Contributing Writer NewsAccount (ISSN #10899952) is published bimonthly by the Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111. NewsAccount is published in January, March, May, July, September, and November and reports information, news, and trends in the accounting profession. The Colorado Society of CPAs assumes no liability for readers’ business decisions in reference to advertisements or other information included in this publication. Membership dues include a $9.90 one-year subscription to NewsAccount. Periodical postage paid in Denver, CO, and additional mailing offices. POSTMASTER: Send address changes to NewsAccount, Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111 Net press run = 8,550 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 8,450; free distribution by mail = 50; free distribution outside the mail = 0; total free distribution = 50; total distribution = 8,500; office use, leftovers, spoiled = 350; returns from news agents = 0; total sum = 8,850; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344 • cpa-staff@cocpa.org

NewsAccount is available online at www.cocpa.org.

• NewsAccount • Nov/Dec 2014

BY SHEILA BALZER

What Makes a Great CPA?

his column marks the halfway point in my term as COCPA chair. Ironically, at the six-month mark, I found myself back out on the road for repeat visits to several locations on my summer Chair Tour itinerary. I had the pleasure of meeting several professors from CSU Pueblo, Fort Lewis College, and Colorado Mesa University who invited me to address accounting students about what I think makes a good accountant. As I worked on my notes for the presentations, I decided I would focus on what makes a great accountant, not just a good one. I wanted the students to know what will help them stand out from the crowd. Ultimately, I think my audiences were a little surprised because “good with numbers” wasn’t even on my list. Take a look at mine, and think about what would be on your list for greatness as a CPA.

Focus on Effective Communication It’s possibly one of the most important skills a successful CPA needs, and it’s probably the one the outside world would least likely associate with the profession. When I spoke to the students, I emphasized the importance of both written and oral communication and the importance of being able to explain complicated information to non-CPAs. We’re not dumbing down the information by any means, but being able to share our points in a way that the boss, clients, boards, and audit committees can understand is a critical skill. Plus, how we communicate continues to change, so be open to it. However people want to receive their information — written, oral, e-mail, social media — you need to be comfortable communicating in that format.

See the Big Picture

Be Genuine

Over the course of my career, my mentor always reminded me that I needed to be able to see the forest for the trees. A great CPA can do that, regardless of whether she’s working in industry or he’s working in public accounting. Don’t get so tied into the details that you can’t see the path and find a solution to a problem. Being able to see the big picture and think strategically will set you apart. At the end of the day, ask yourself why someone would pay a premium for your advice or choose to pay you a salary over someone else. What do you bring to the table that makes you special?

Treat people well. As a supervisor, how you treat clients, and how you interact with your co-workers, speaks volumes about you, and both are important to your success. Treat people how you would want to be treated and actually care about them. Be genuine and sincere — both actually contribute to your overall success.

Be Adaptable Great CPAs are flexible and respond well in difficult situations, regardless of whether they involve different personalities, accounting systems, or technical situations. No matter what life throws at you, you need to be able to adapt. Be open to understanding different cultures and environments.

Have a Passion and Commitment for What You Do You’ll spend so much of your life at work you should love and enjoy what you’re doing. Bring enthusiasm to it! Enjoying what you do will actually help you move up the ladder. When you’re supervising people, you become a motivator. And if you have a passion for your work, it’s contagious. For me, being a CPA is special. It’s an important responsibility: We’re protecting the public interest no matter where we work. Never lose sight of that. CPAs commit to abide by

professional standards and the code of professional conduct. Beyond that, it’s important for us to take our passion for what we do and our skills and share them with society, whether it’s through a nonprofit board, supporting the COCPA, or getting involved with government. It’s all a part of the commitment CPAs make, and it’s one of the reasons the COCPA holds the CPAs Make a Difference celebration every year — and this year on November 6.

One More Thought Speaking of passion for and commitment to the profession, I congratulate COCPA CEO Mary E. Medley who recently celebrated her 40th anniversary with the Society. She brings such grace, honor, integrity, and yes, passion and commitment, to this organization and to the accounting profession. We are fortunate to have her at the helm. s Email your comments and suggestions to Balzer at sbalzer@hhlbcpa.com.

Nov/Dec 2014 • www.cocpa.org •

In Memoriam

William T. Diss, CPA

Sept. 28, 1928 — Oct. 2, 2014

Bill Diss was a man of intellectual prowess, gentlemanly grace, and unwavering dedication to his family, his faith, and his professions — accounting and law — as well as devotee of classical music, the Colorado mountains, and travel — especially by train, although plane, car, and ship were acceptable, too. A Colorado Society of CPAs (COCPA) member for 58 years, COCPA president in 1967-68, retired Army Colonel, and avid hiker, Bill made his mark in countless ways. He already is missed. Former COCPA Executive Director Gordon Scheer remembers Bill as “one of the brightest and most thoughtful people I’ve ever known.” He, along with hundreds of family members, friends, and business col-

leagues, composed the standing-room-only crowd at Bill’s funeral Mass, Oct. 8, 2014, at St. Francis de Sales, Denver, the Diss’s home parish for over 50 years. Read the obituary and the collection of remembrances distributed at his service (The Bill Diss We Knew), and you learn so much more about the man you thought you knew by his brilliant mind and unassuming demeanor, the elegant cut of his three-piece suits, his ubiquitous and proper hat, and those highly polished Brooks Brothers shoes. You wouldn’t be surprised to learn he was valedictorian of his high school class, but you might not have guessed he grew up in Wray, Colorado, or that he played and taught clarinet, or that during his college summers he was a timekeeper for the Burlington Railroad Track Gangs in Colorado, Nebraska, and Wyoming — having worked his way up from shovel and spike boy. A graduate of Regis University and the University of Denver (DU) College of Law, Bill passed the CPA examination in 1950 with the second highest grades in the U.S. Co-founder of the Denver Estate Planning Council and the DU Graduate Tax Program, Bill also was an adjunct professor, teaching tax and law courses for over 30 years.

Bill’s professional achievements were legendary, in the CPA profession, in law, and in the legislative and regulatory environments, both locally and in Washington, DC. In 2001, the COCPA recognized him with the Distinguished Service Award for his significant and lasting contributions to the CPA profession in Colorado and nationally. Daughter Theresa summed up her father’s legacy this way: “Over a period of nearly six decades, these are the most important things my father taught me: Everyone has a story, so do not rush to judgment. Laugh at yourself, not at others. Try; you never know what you can do. Be direct, be honest, be fair. Accept responsibility. Appreciate beauty, and respect nature. Do not seek credit or bear grudges. Put family first.” Words to live by, indeed. s Donations in Bill Diss’s memory may be made to The Bill Diss Tax Law Studies Fund, University of Denver, 2255 E. Evans Ave., Denver, 80208; Regis University, 3333 Regis Blvd, B-16, Denver, 80221, for a scholarship in his name; and Rocky Mountain Children’s Health Foundation, 2055 High St., Ste 240, Denver, 80205, in memory of his daughter, Eleanor Diss Sabin, MD.

Regulatory News

AICPA Pushes for Relief in Tangible Property Regs Implementation On Oct. 8, 2014, the American Institute of CPAs (AICPA) Tax Advocacy Team submitted a comprehensive comment letter to the Internal Revenue Service regarding the Final Tangible Property Regulations (T.D. 9636) for Small Businesses and the $500 de minimis safe harbor threshold and retrospective application of the regulations. Commonly referred to as the “Repair Regulations,” these requirements, which became effective, Jan. 1, 2014, have created significant administrative burdens for small businesses and their CPAs. In its letter, the AICPA “…urges the IRS and Treasury to immediately address the concerns of small businesses and their tax prac-

• NewsAccount • Nov/Dec 2014

titioners. Specifically, increasing the $500 de minimis safe harbor threshold to $2,500 (plus inflation adjustments) would offer additional relief to small business taxpayers related to the implementation of the Repair Regulations. In addition, permitting small businesses to comply prospectively, with the option of filing Form 3115, would result in reduced administrative burdens and compliance costs for small businesses.” For additional information, go to http://tinyurl.com/ Tangibleproperty. For a copy of the AICPA’s letter, contact Mary E. Medley, mmedley@cocpa.org. s

DISTINGUISHED SERVICE AWARD Gaylen R. Hansen, CPA, ABV EKS&H LLLP, Denver

2014 CPAS MAKE A DIFFERENCE

HEROES & HEROINES

On Nov. 6, Gaylen R. Hansen, CPA, ABV, Audit Partner and Director of Quality Assurance for EKS&H LLLP, Denver, will receive the 2014 Distinguished Service Award for his significant and lasting contributions to the CPA profession. Chair of the National Association of State Boards of Accountancy in 2012-2013, Hansen also has served on the IFAC International Auditing and Assurance Standards Board and International Ethics Standards Board for Accountants, Consultative Advisory Group; the AICPA Professional Ethics Executive Committee; the PCAOB Standing Advisory Group; and the U.S. Treasury Committee on the Auditing Profession. He was named to Accounting Today magazine’s 100 Most Influential People in 2013. Hansen joins the prestigious group of past recipients: former AICPA Chair Gregory J. Anton and past AICPA Presidents Marvin Stone and A. Marvin Strait; former U.S. Senator Hank Brown; past NASBA Chair Michael D. Weatherwax; Dr. Jerome Kesselman; William T. Diss; R. Calvin Bennett; Philip E. Doty; former Colorado Representative Michael O. May; and retired COCPA Executive Director Gordon Scheer.

David L. Berezin, CPA Grant Thornton LLP

Craig Choun, CPA EKS&H LLLP

Support the Ed Foundation Dec. 9 Peggy E. Jennings, CPA Eide Bailly LLP

R. Sean Manning, CPA Manning & Company PC

Adam Pyzdrowski, CPA CliftonLarsonAllen LLP

Colorado Gives Day is an initiative to increase philanthropy in Colorado through online giving. The Educational Foundation of the Colorado Society of CPAs is a participating 501c(3) organization. Presented by Community First Foundation and FirstBank, Colorado Gives Day will take place during a 24-hour period on Dec. 9, 2014. Donations will be accepted through www.ColoradoGives.org. You can donate as little as $10 with a Visa, MasterCard, Discover, or American Express, or by using the information from a personal checking, business checking, or savings account. Your contribution is tax deductible to the full extent permitted by law. Plus, thanks to the generous contributions of Community First Foundation, FirstBank, and other organizations, all third-party processing fees will be covered. Please give, and support Colorado accounting students. Nov/Dec 2014 • www.cocpa.org •

Member Resources

Revenue Recognition: What’s The Big Deal?

he Financial Accounting Standards Board’s new revenue recognition standard touches every entity (public and private, including not-for-profit entities) that reports under U.S. GAAP. It applies to most transactions and contracts with customers except for leases, insurance contracts, most financial instruments, and guarantees other than product or service warranties. The implementation period for Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, might seem adequate if not generous. Public companies, for whom early adoption is not permitted, are required to adopt the standard in 2017 (for reporting periods beginning after Dec. 15, 2016). Private companies have an additional year — starting with 2018 for their annual reports — and two more years, beginning in 2019—to start applying the standard to interim reports. Private companies may choose to adopt the standard on the public company schedule. Many issues need to be addressed, including how the standard will affect operational and performance metrics; what IT changes will be needed; and how you will retrospectively adopt the standard. If a public company chooses full retrospective adoption, revenue and the direct effects of change in accounting principle to all contracts must be restated for 2015 and 2016 to show comparative financial statements with a cumulative adjustment as of Jan. 1, 2015. Use the following key tasks based on the AICPA’s New Revenue Recognition Accounting Standard — Learning and Implementation Plan as a high-level road map to begin organizing your organization’s implementation.

1. For completed contracts, an entity need not restate contracts that begin and end within the same annual reporting period. 2. For completed contracts that have variable consideration, an entity may use the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods. 3. For reporting periods presented before the date of initial application, an entity need not disclose the amount of the transaction price allocated to remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue. • Retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. If an entity elects this transition method, it also should provide the additional disclosures in reporting periods that include the date of initial application of the following items: 1. The amount by which each financial statement line item is affected in the current reporting period by the application of the standard as compared to the guidance that was in effect before the change. 2. An explanation of the reasons for significant change. In September 2014, the Securities and Exchange Commission determined that companies electing full retrospective adoption will only be required to apply the new standard for three years rather than the expected five years.

Task 1: Form a task force (2014-2015)

Task 4: Determine IT changes needed (2014)

The standard replaces most transaction- and industry-specific guidance with a principle-based approach, making it difficult for CPAs to estimate the implementation effort required in a specific organization without first conducting a detailed assessment. In all but the very smallest private companies, this assessment will require substantial collaboration with most major business functions including sales and marketing, IT, legal, and human resources.

Based on the determinations made in Tasks 2 and 3, the new standard may require modifications to IT systems to capture the appropriate level of information related to data used to make estimates on

Task 2: Evaluate the impact (2014-2016)

Evaluate the changes from current GAAP to the new revenue recognition standard, and evaluate the impact on how your company accounts for existing revenue streams and the results to your company’s financial statements. In addition, evaluate how the standard will affect operational and performance metrics, company contracts, compensation plans, accounting policies, internal controls, and tax matters. Work with your auditor to ensure that your approach to implementing the new revenue recognition standard and any changes in accounting for revenue recognition are documented completely and accurately. Task 3: Choose how to retrospectively adopt (2014)

The standard should be applied using one of these two methods: • Retrospectively to each prior reporting period presented, and the entity may elect any of the following practical expedients:

• NewsAccount • Nov/Dec 2014

revenue recognition and new disclosures. Determine whether any changes will need to be made to IT systems or software applications to capture information needed for the new revenue recognition standard, including the following retrospective adoption and the additional qualitative and quantitative disclosures required. Task 5: Determine interim disclosures needed for public companies (2014-2016)

Public companies should consider the guidance in SEC Staff Accounting Bulletin (SAB) No. 74 (Topic 11:M), Disclosure of the Impact that Recently Issued Accounting Standards Will Have on the Financial Statements of the Registrant When Adopted in a Future Period, to determine the appropriate interim disclosures to be made prior to the adoption of the new standard. Task 6: Develop the project plan (2014–2016)

Develop an evolving project plan for implementation considering all of the tasks outlined here, and facilitate training for your staff. Task 7: Educate key stakeholders (2015-2016)

The new standard may result in changes in timing of revenue recognized as well as new qualitative and quantitative disclosures that will need to be explained to stakeholders. Educate key stakeholders such as your audit committee, board of directors, investors, and lenders on the new revenue recognition standard and what changes they should expect in your company’s financial statements. For comprehensive resources on the new standard, go to www. aicpa.org/revenue recognition. s

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Nov/Dec 2014 • www.cocpa.org •

Tax Update

Defense of Marriage Act – Where We Are Now BY BRUCE M. NELSON, CPA

he IRS issued guidance on the filing status of same-sex marriages more than a year ago. While leaving some pockets of confusion here and there, it did provide some much-needed clarification and uniformity at the federal level. Unfortunately, same-sex filing status at the state level is far from uniform or particularly clear. First, a little context. In 1996, President Bill Clinton signed into law the Defense of Marriage Act (DOMA), which defined marriage for federal purposes as “a legal union between one man and one woman as husband and wife.” A “spouse” was defined as “a person of the opposite sex who is a husband or wife.” The U.S. Supreme Court ruled in 2013 that those definitions violated the rights of a same-sex couple, Edith Windsor and Thea Spyer. The two were lawfully married in Canada in 2007, but when Thea died in 2009, Edith did not qualify as a surviving spouse for estate tax purposes. [U.S. v. Windsor, 133 S.Ct. 2675 (2013)] Two months after the Windsor decision, the IRS issued Revenue Ruling 2013-17, which provided that the terms “spouse” and “husband and wife” included individuals of the same sex “lawfully married under state law.” In short, same-sex marital status will be decided not by the state of domicile or residency but by the “state of celebration.” If a same-sex couple is legally married in any state, the couple can file a joint federal return no matter what the law is in the current state of residency. Effective Sept. 16, 2013, legally married same-sex couples must

• NewsAccount • Nov/Dec 2014

Freedom to Marry Pro-marriage court ruling; pending further action Marriage ban, lawsuit filed awaiting ruling

file either married filing jointly or separately on their federal returns. They may also, but are not required to, file amended returns for any years open under statute (normally three). More than 200 Internal Revenue Code sections reference marriage, so filing status, as was evident in the Windsor case, is only one area of the Code affected by the Supreme Court’s decision. For example, employees who had to pay taxes on the fair market value of healthcare coverage for their same-sex spouses under DOMA may now file amended joint returns, if beneficial, and receive refunds of those taxes paid. The IRS guidance clarified same-sex filing status at the federal level but left things just as complicated at the state level. For example, married same-sex couples under DOMA could file jointly in certain states such as Maryland and Massachusetts that recognized same-sex marriage but had to file as single on their federal returns. The situation is now reversed in states such as Virginia that do not recognize same-sex marriages. Couples may file jointly on their federal return but will continue to file single (or head of household, if they qualify) on their state returns. According to the U.S. Census Bureau, there are roughly 650,000 same-sex households, only half of which are in states that

allow legally married same-sex couples to file joint or married filing separate returns. The District of Columbia and nineteen states currently follow federal status for filing purposes. They are California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, and Vermont. Twenty-four states ban same-sex marriages for filing purposes: Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Montana, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Utah, Virginia, West Virginia, and Wisconsin. Obviously, this is not an income tax issue in the seven states that do not have an individual income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. But, even in these states, other areas of the law can be affected. What has furthered complicated state filings is that the ban on same-sex marriages has been successfully challenged in the lower courts of several states and continues to be a matter of litigation in states such as Michigan and Texas. Simplification may be closer, however, because on Oct. 6, 2014,

States

the U.S. Supreme Court declined to review successful challenges to bans on same-sex marriage in Indiana, Oklahoma, Utah, Virginia, and Wisconsin. This may indicate that the Court believes the Windsor decision has settled the issue, or the Court may be waiting for a case with a specific set of facts and law that will allow the question of same-sex marriage to be more fully addressed. What is clear is that the challenges and the filing confusion they trigger will continue. Note that the Windsor decision does not apply to civil unions or registered domestic partnerships, which are not recognized by the federal government as marriages for filing purposes. Several states, including Connecticut, Delaware, and New Hampshire, automatically converted their civil unions to marriages. However, taxpayers in Illinois, New Jersey, and Rhode Island may choose to stay in a civil union. As a consequence, those taxpayers remaining in a civil union in those three states will not be able to file jointly on their federal return but will be able to file jointly on their state returns. As for Colorado, despite the ban on same-sex marriage, the Department of Revenue issued an emergency regulation in November 2013 reiterating the Department’s belief that a taxpayer’s filing status for Colorado is determined by their filing status on their federal return. [Colo. Code Regs. 39-22104(1.7)] In 2014, the Colorado General Assembly changed the definitions in the Colorado statute, replacing “husband and wife” with “two taxpayers” and “spouse” with “taxpayer,” to clarify that the filing status for state income tax purposes must be the same as that for federal income tax purposes. [Colo. Rev. Stat. §39-22-109(3)]. s Bruce M. Nelson, CPA, is Director of State and Local Tax at EKS&H LLLP. Contact him at 970-282-5446 or bnelson@eksh.com.

*On Oct. 6, 2014 the U.S. Supreme Court declined to review lower court cases in these states overturning the states’ bans on same-sex marriage. At the time we went to press, there was no reaction from the states. (States marked N/A have no individual income tax.)

Allows joint filing for same-sex married couples

Start with pro forma federal return

Alabama

Alaska

N/A

Arizona

Arkansas

California

Yes

Colorado

Yes

Connecticut

Yes

Delaware

Yes

District of Columbia

Yes

Florida

N/A

Georgia

Hawaii

Yes

Idaho

Illinois

Yes

Indiana

No*

Iowa

Yes

Kansas

Kentucky

Louisiana

Maine

Yes

Maryland

Yes

Massachusetts

Yes

Michigan

Minnesota

Yes

Mississippi

Missouri

Yes

Montana

Nebraska

Nevada

N/A

New Hampshire

Yes

New Jersey

Yes

New Mexico

Yes

New York

Yes

North Carolina

North Dakota

Ohio

Oklahoma

No*

Oregon

Yes

Pennsylvania

Rhode Island

Yes

South Carolina

South Dakota

N/A

Tennessee

Texas

N/A

Utah

No*

Vermont

Yes

Virginia

No*

Washington

N/A

West Virginia

Wisconsin

No*

Wyoming

N/A

Separate allocation schedule X X

X X X X

X X X

Nov/Dec 2014 • www.cocpa.org •

Member Spotlight

Compatible Occupations: CPA and Farmer BY NATALIE ROONEY

robably few CPAs say they want to farm as well as practice their profession, but Robert L. Poley, CPA, Boulder, is one of them. A garden that began as a simple tool to provide homegrown produce for his family grew into a passion for working with the soil. Now, as the owners of Hoot ‘n’ Howl Farm in Boulder, Poley and his wife, Janet, balance accounting and life on the farm. Poley comes by his love of the land — and food — naturally. His father, an Army officer and livestock veterinarian, inspected food bound for overseas soldiers during WWII. His wife’s father was a farmer, irrigation engineer, and professor. Together the two of them raised their kids on food grown at home — no matter how small their plot of land might have been at any given time. Even though Poley wasn’t born in Colorado, his roots here run deep. And every time life took him away — for education or career — he made it a point to return as soon as he could. While he spent most of his early years in Colorado Springs and Denver, his family moved to Kansas for his senior year of high school. Poley attended the University of Kansas and was a member of the ROTC. He learned about accounting in the Army. “I did some accounting work for the Army and thought, ‘they pay people to do this?’” he laughs. “I found it fun and easy.” He originally envisioned himself as a career Army man, but Poley and his wife

• NewsAccount • Nov/Dec 2014

decided it wasn’t the life for them. When his service was completed, they packed their bags and returned to Colorado. Poley went back to school at the University of Denver and received his Master’s in Accountancy. After working in and out of the oil and gas industry for many years, enduring several economic downturns, and taking as much as a 50 percent pay cut, Poley decided it was time to try his hand in telecommunications. Unfortunately, the job meant relocating the family from Colorado to Iowa. “That was a hard adjustment,” Poley says. “It’s tough to live in other places after Denver.” So he kept his ear to the ground, and when a job opportunity in Boulder came up, he jumped at the

chance to move the family back to Colorado. This time, it was for good.

From Garden to Farm The Poleys were happy to be back in Colorado, but they still felt constrained by their suburban lifestyle. “We’ve always loved agriculture,” Poley explains. “We’d talk about how much we enjoyed working with the soil. We wanted to flex our wings and have more space.” Over a five-year period, the Poleys searched Boulder County for a property they could afford and offered the elements they were seeking. “…we weren’t quite sure what

those things were,” Poley laughs. But they knew what they wanted when they saw it. And when the property that would eventually become Hoot ‘n’ Howl Farm went on the market, they jumped at the opportunity to occupy the one acre, surrounded by 73 acres of Boulder County open space agricultural land. Not content with the single acre, the Poleys kept their eyes on the prize: the 73 acres next door which included a hay field and a colony of about 10,000 prairie dogs. As luck would have it — for the Poleys, not the prairie dogs — plague wiped out the colony. That got the Poleys wondering what could be done with the land. Boulder County wanted a tenant for it so the Poleys threw their hat into the ring. In May, 2009, they got the lease and started growing raspberries. “We grow berries because we love to eat berries,” Poley says. “We also found a lot of other people do, too. Every year we’ve grown the farm a little.” Now, the Poleys run Boulder County’s largest berry farm, named after the hooters — great horned owls that live in the cottonwood trees next door and are frequently heard as they fly over the farm — and the howlers — coyotes that roam the area.

Balancing Act Running a farm is not easy or lucrative, but it is spiritual, Poley says. He continues his CPA practice because “that’s the money maker. We just make it all work. Growing food is a rewarding thing to do. When you

have it in your blood, it’s a real joy to be able to do it.” The farm employs two farm hands to help Janet tend to the land while Poley tends to his CPA practice. He works as a consultant, assisting companies with capital formation, SEC compliance, complex financial transactions, and GAAP compliance. The farm’s busy season begins in early April when the bare-root plant starts arrive. Then life becomes a non-stop whirlwind of activity from planting all the way through to the first hard frost in the fall. Strawberries are the first berries to appear in early summer. The Poleys also grow blackberries, gooseberries, elderberries, currants, and ten different varieties of raspberries. Berries of some type are usually available for picking from early June until late October. They also grow flowers and tomatoes. The farm includes a young orchard which isn’t yet bearing fruit. Eventually, it will produce cherries, pears, plums, and apples. Currently, the Poleys have an arrangement to sell tree fruit and 100 percent grass-fed beef from outside vendors. They sell eggs from their own chickens. On any given summer day, you can find people rolling up in their cars to pick whatever berries are ripe. “Summer days are chaotic,” Poley says of the crowds who come to enjoy some time on the farm picking berries. He is there to greet them and explain the rules: Don’t trample the plants. Be careful around the ponds. Have fun. The farm uses the honor system for payment. Poley says a key goal is that Hoot ‘n’ Howl Farm be beautiful. “We work hard to

make it as beautiful as we can,” he says. “People come and wander around because it’s a really pretty place.” When fall comes, the conflict between Poley’s CPA practice and the farm eases. Demands fall off after the first hard frost. “There’s still work to be done, but it’s not nearly the intensity of the summer months,” Poley says. He and Janet shift into planning mode, determining what they’ll plant next year and ordering the necessary plants and seeds.

What the Future Holds With five kids and eight grandchildren, Poley says his dream is that one of them will want to keep the farm going. “So far, none of them has said that!” he laughs. “There’s a good reason: they’re five bright people, and they’re all making a good living doing what they do. We’ve been open with them about the profitability of the farm, which is minimal.” For now, Poley says while he doesn’t have to work sixty hours a week as a CPA anymore, he does work forty hours as a CPA and forty hours as a farmer. “It’s hard, demanding work. One can’t do it without having a real love of the soil. My body says, ‘Robert, you might be able to slow the aging process a little but only so much.’” Despite the hard work, sacrifices, and long hours, Poley wouldn’t have it any other way. “We went into this with our eyes open. We knew how difficult it would be, but it’s something we truly love doing.” s

Nov/Dec 2014 • www.cocpa.org •

Financial Reporting

PERA Offers GASB 67 & 68 Implementation Resources I

n June 2012, the Governmental Accounting Standards Board (GASB) approved a pair of related statements substantially changing accounting reporting procedures by pension plans and state and local governments which participate in such plans. Statement No. 67, Financial Reporting for Pension Plans, addresses financial reporting for state and local government pension plans. Statement No. 68, Accounting and Financial Reporting for Pensions, establishes new accounting and financial reporting requirements for governments that provide their employees with pensions. The new guidance significantly alters how governments calculate and report the costs and obligations associated with pensions. GASB’s purpose for these changes is to improve the decision-usefulness of reported pension information and increase the transparency, consistency, and comparability of pension information across governments. GASB Statement No. 67 changes how government pension plans measure and report the costs and obligations of a pension fund. The most noteworthy changes relate to the discount rate and the allowable actuarial cost method used to measure the present value of the pension fund’s long-term obligation, as well as to determine the collective pension expense for a reporting period. GASB Statement No. 68 requires employers participating in a pension fund to report their share of the unfunded long-term obligation for pension benefits and the period’s pension expense on the face of their financial statements. This is a substantial change for employers in a pension plan, especially those participating in cost-sharing multiple employer plans, says Chris Telli, CPA, BKD, LLP, Denver, and co-chair of the COCPA Governmental Issues Forum. “GASB 68 addresses how employers who are in a pension plan will

• NewsAccount • Nov/Dec 2014

account for the liability that will be recorded on the employer’s books,” Telli notes. “It’s a big issue. Governments which have been in cost-sharing plans before don’t have a liability recorded for the future benefit obligation that PERA will pay out. GASB 68 will require employers to record a liability for the proportionate share of the future obligation for the benefits that will be paid. It’s potentially a big number, and people are rightfully concerned. It’s a complicated issue with many nuances and exceptions.”

Colorado PERA Can Help As the 21st largest public pension plan in the U.S., Colorado PERA (COPERA) provides retirement and other benefits to the employees of more than 500 government agencies and public entities in the state. Colorado PERA’s Board determined COPERA should have a role in providing employers with GASB-related education, communications, and training. To accomplish this, COPERA Executive Director Greg Smith established a cross-functional work team which is being led by Karl Greve, CPA, COPERA’s CFO. “This is a radical change in how information is presented on the financial statements of employers affiliated with COPERA. In addition to reporting the share of collective pension liability, the employer’s note disclosures will expand from a couple of general paragraphs to extensive disclosures about all aspects of the pension plan(s) they participate in,” Greve says. The changes put a burden on pension plans to provide information to employers, which is where Greve is focusing his efforts. “Pension accounting is unique, and this information is new to our employers,” he explains. “The information is new to many auditors of these plans, as well.”

Greve and the team have created an educational series to cover all aspects of the new standards. It includes a broad overview fact sheet about GASB Statements 67 and 68 and individual videos detailing each aspect of the new reporting standards. Go to www.copera.org to view a 25-minute overview video and five videos between 5 to 15 minutes in length which provide more indepth information on particular areas of the new reporting standards applying to participating employers. Why online videos versus in-person educational sessions? “Early in this process, we conducted in-person feedback sessions. Some of our affiliated employers’ finance staff told us it’s most helpful to have unlimited access since it usually requires hearing the information two or even three times to begin understanding the complex aspects of the new reporting standards,” Greve says. And, “Videos are the easiest way for us to reach more than 500 employers at the same time.” s

COPERA GASB 68 Implementation Resources Videos www.copera.org/pera/ employer/gasb.htm#Videos Fact Sheet for Employer’s Governing Board www.copera.org/pdf/Misc/ GASBFactsheet.pdf Frequently Asked Questions www.copera.org/pera/ employer/gasb.htm#qa COPERA’s GASB Pension Reporting Information www.copera.org/pera/ employer/gasb.htm

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Client Services

Balancing Responsibilities: Should I Serve As My Client’s Trustee? BY MICHAEL M. EISENBERG, CPA/PFS

s CPAs, we often know more about our clients than anyone else — sometimes including the clients themselves. They value our opinions and as such, there are times when they will ask: • Who would you suggest to serve as trustee of my affairs? • What are the duties and responsibilities of a trustee? • Would you be willing to act as my trustee? Many clients ask this final question because they understand that family members may be ill-prepared to undertake the complex role of trustee or have personal interests that could cloud their decisions. And while CPAs may fit the fiduciary role best because of their tax, accounting, and financial planning backgrounds, as well as their judgment, there are considerations to make before taking on the trustee role.

Before Saying Yes Consider a variation of the three R’s (reading, writing, and arithmetic) you learned when you were young. As you think about being a trustee, those R’s become risk, responsibility, and reward. Consider, as well, why this trust was created and why you were asked to serve as trustee. Before accepting the role of trustee, know that: • You must have an understanding of and appreciation for the duties and responsibilities of a trustee. • The probate code provides that a trustee must administer the trust with the reasonable care, skill, and caution that a “prudent person” acting in a like capacity would do. • The trustee must act in good faith, and actions must be consistent with the trust’s purposes. • If the trust is irrevocable, it must be registered with the court. • The trustee has a duty to account to the beneficiaries. • The trustee has a duty to deal impartially with all beneficiaries. • Trustees do not reward one beneficiary for his/her cooperation with the trustee. • Your duty is to avoid conflicts and to avoid self-dealing. A CPA using his firm to provide accounting services could be self-dealing. To avoid potential issues, follow the trust instrument, keep a paper trail for all transactions and discretionary acts, communicate with beneficiaries, and delegate when appropriate. Also, be aware of any dysfunctional relationships among beneficiaries and the nature of trust assets. For example, are there specific investments required by the trust? Are there illiquid assets (limited

• NewsAccount • Nov/Dec 2014

partnerships) or assets with negative cash flow? Is there an operating business? These are issues that increase the complexity of the trustee’s work. Some scenarios you could encounter as a trustee include: • The client has problems with a child. Do you want to get involved? • The sale of a business had to be re-negotiated after the buyer stopped making payments to the client’s estate. • There are issues with mold in the decedent’s condo that have caused the sale to fall through numerous times. • The client had investments in limited partnerships that need to be re-assigned to the beneficiaries since they are not salable. • As trustee, you are contacted by the decedent’s insurance company about a car accident that may involve litigation. • The decedent had been running a business for a friend who passed away. What are the next steps?

Getting Started If, after weighing the pros and cons, you decide to take on the role of trustee, here are a number of steps to take: • Notify your insurance carrier about your new role so you can have liability protection — just in case.

• Gather information, and take possession of all the trustor’s/ decedent’s estate planning documents. Read them carefully. Do you know the estate attorney who drafted the documents? Once you agree to act as trustee, you should meet with the estate attorney, which makes for a better working relationship. • Notify agencies, including Social Security, pensions, utility companies, credit card companies, health insurers, and post office (and have mail forwarded to your address or a P.O. Box). • Notify all beneficiaries. • Gather all financial and non-financial information, including life insurance, real estate, retirement plans, mutual funds/stocks/ bonds, auto insurance, and ownership papers. • Make a list of all assets, and begin to determine values. • What will be the step-up in basis values? • Before transferring assets, make sure all insurance (auto, home), property taxes, and HOA fees have been paid, along with any federal or state taxes. Determine if any prior gifts were made or if any gift tax returns were filed. Obtain appraisals for real estate, partnership interests, closely held businesses, works of art, and jewelry, among other items.

procedures the trustee is using in the management of these assets is a must. Remember that your primary duty as a trustee is owed to beneficiaries. Trustees must remain impartial with all beneficiaries and keep them all reasonably informed about trust administration. This means you must talk with beneficiaries about asset transfers and what is involved; educate them, as needed, on the issues associated with transferring assets; and keep them in the loop on the sale of assets. Being a trustee is a serious, complex, and sometimes timeconsuming undertaking. Make sure you want to do this. Additional information is available through the Colorado Bar Association, which has published two brochures, So Now You Are A Personal Representative and So Now You Are A Trustee. Both are available online at www.cobra.org under For the Public/Public Legal Education/Educational materials. s Michael M. Eisenberg, CPA/PFS, is president of Michael M. Eisenberg Accountancy Corp., Los Angeles. Contact him at Michael@ Eisenbergcpa.com. This article originally appeared in California CPA (August 2014) and is reprinted with permission from the California Society of CPAs.

• Apply for a new trust tax ID number. • Set up a new bank account to handle bills. When paying the bills, make sure the trust has enough current cash, or determine what should be sold to pay for ongoing expenses. • Check whether a retirement plan distribution has been taken by the decedent before passing away or if the beneficiaries need to take it before the end of the year. • Determine whether you or someone you hire will be filing tax returns. • Is there a need to set up any sub-trusts and fund them? Calendar the time for filing tax returns for them. • If there are investable assets (stocks/bonds/mutual funds), what will happen with them? Will you need to sell the assets or distribute them to the beneficiaries? What will you do about reinvesting dividends? • Are you going to be making the investment decisions, or will you hire an investment professional, such as a CPA/PFS.

Compensation

Trustee Do’s and Don’ts • Do read the trust document. It sets out the rules under which you will operate. • Do create a checking account for the trust. All income and expenses should go through this account. While you can and should invest the money, a checking account will enable you to make distributions and payments and keep track of them. • Do keep the best interests of the beneficiaries in mind at all times and keep in regular contact with them. • Do provide the beneficiaries and anyone else indicated in the trust with an annual account of trust activity. This can be a copy of the checking and investment account statements or a more formal trust account report prepared by an accountant or attorney.

As the trustee, you will need to be paid for your services. Reasonable compensation includes hourly rates (which may not be the same as your CPA rate for accounting services) or a percentage of the estate value (typically between .8 and 1.25 percent).

• Do invest trust funds prudently and productively. You cannot simply leave the trust funds in a savings account. And, you can’t put them all into a promising new company. You need to diversify the trust portfolio among stocks and fixed income securities. It is wise to get professional investment advice.

Additional Responsibilities

• Do file annual income tax returns for the trust.

The trustee is required to provide each trust beneficiary who requests it all relevant information as to the administration of the trust, such as a home sale or large asset sale. This means a detailed accounting of the trust assets and what processes and

• Don’t have any personal financial dealings with the trust. For instance, you cannot borrow money from the trust, or lend the trust money to anyone. • Don’t fly solo. Get professional advice to make sure you are correctly fulfilling your role. Nov/Dec 2014 • www.cocpa.org •

The Economy

Spending and Saving Post-Recession

he Great Recession was a wake-up call for many across the state, nation, and world in late 2008. An unfortunate number learned that the financial balancing act they had been maintaining was unsustainable in the face of a job loss, housing market upset, or unforeseen expense. And with one variable changed, the house of cards would tumble. Since then consumers have made strides to pay down debt, reduce monthly expenses, and maintain an emergency fund. It will be a few more years yet, until we can tell if American spending and savings habits have changed permanently or only temporarily, but here is a look at the numbers and trends as they stand today.

according to Principal Financial. This a change from pre-recession reporting when people were more likely to cite vacations or large purchases as ways to utilize tax refunds. Pre-recession savings levels bottomed out at .8% in April 2005, compared to the average of 6.82% from 1959-2014, according to the U.S. Bureau of Economic Analysis. The rate currently stands at 5.3% However, Americans are saving less these days than four years ago, when the economy was first beginning to stabilize. The America Saves Survey, created by the Consumer Federation of America, found that one in four Americans put aside zero savings in 2010. In 2014, that number is up to one in three.

Credit Card Debt

Housing Market

It took consumers over two years to pay down their debt from an average of $8,431 at the end of 2008 to roughly $6,600 in 2011, a number that has held steady in subsequent years. However, the recovery has been long enough for those tough lessons to fade from memory for some, and the pay down debt trend is reversing. In Q2 of 2014, consumers racked up credit card debt twice as fast as in any quarter since the recession. That trend brought the average household’s credit card balance to $6,802 in September 2014, and the average is expected to rise above $7,000 by the end of this year. For a benchmark, Cardhub.com reports that $8,300 is the “tipping point” for credit card debt — when minimum payments become unsustainable and delinquencies skyrocket. Experts point to this increased credit card debt as a sign that consumers have confidence in their job security and the economy in general.

Nationally, the housing market looks to have returned to balance with housing inventories the highest they have been in four years. The picture is not so rosy in Colorado where a continued influx of new residents, a dearth of available new construction, and rising rents have created a perfect storm of low inventory. Less than six months of available inventory is considered a seller’s market, and the state currently stands at less than one month of available inventory. Says Denver buys-agent Jaccie Geiger "Demand has gone up as buyers feel more confident both in the housing market and in the overall economy. Mortgage rates, meanwhile, are holding near historic lows, giving buyers an extra jolt of motivation." However, this is not the frenzy of 2007 however, where consumers would purchase just about any home in any condition in order to enter a market that was viewed as unstoppably upward bound. A home that is overpriced or has severe defects will sit on the market without any takers until the sellers address the problem. Still, "two years ago buyers were dictating to sellers. Now those tables have turned," says Geiger. "Most sellers are finding themselves with multiple offers on the first weekend on the MLS."

Savings Rates In regards to federal and state tax refunds from 2013, 51% of those surveyed planned to save or invest the money, and 62% intended to pay down short-term or long-term debt,

• NewsAccount • Nov/Dec 2014

Generational Differences The recession hit each generation differently and because of that, each has altered financial behaviors in different ways. The Principal Financial Well-Being Index reports that while only 35% of baby boomers say they feel stressed about their current financial situation, over 51% of Gen Y feels stressed. Bankrate also released a study reporting that more than six in ten millennials do not have a credit card. "Many millennials are already battling with student loans, which likely makes them even more wary of the potential for debt," says Jeanine Skowronski, Bankrate’s credit card analyst. Faith in the stock market has been obliterated among millenials as well. Of people ages 22-32 surveyed by Wells Fargo, 52% stated they were not confident in the stock market as a place to invest for retirement. On the other side of the generational divide, a new survey from TransUnion found consumers ages 60 and older have seen loan growth in all major lending categories, including mortgage, auto, home equity lines of credit, and even student loans between 2009 and 2014. "Traditionally, you would have expected to see that consumers in their 60s would start to pay down their debts," says Charlie Wise, vice president in TransUnion's Innovative Solutions Group. Clearly, times have changed.s

m.j. smith & associates offers institutional investment management services to the individual investor Many of you may be aware that large pension plans, endowments and foundations employ a very rigorous due diligence process to having their money managed. It includes creating a customized investment policy and thoroughly going through the due diligence on hiring the best asset managers available at the lowest cost, to help allow the organization to reach its goals. At M.J. Smith & associates we apply our energy and intellect the same way, where we provide institutional levels of investment consulting to the individual investor. In addition to this, we also are very proactive in helping our clients minimize taxes, coordinate their estate planning and quantifying their retirement objectives all while working with their other trusted advisors including their CPA and Attorney. As an Independent firm, we strive to provide our clients with the highest quality of service at the lowest cost.

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Nov/Dec 2014 • www.cocpa.org •

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Pointers You Can Share

Preparing for an Audit In a perfect world, when auditors arrive at a client’s office, documents are ready, a plan is in place, and everyone knows what to expect. The audit runs smoothly, auditors complete their work, and they leave the client’s office in a timely manner. Is this perfect world achievable? In a word: Yes. You’re encouraged to share this article with organizations you know could benefit from the tips and pointers outlined here. Setting Expectations Not every company has the tools or expertise to have all their ducks in a row when auditors arrive on the scene, but preparation on the part of the audit firm and the client is the first key to a successful audit. “Audits can be disruptive to a company’s ongoing business,” says Steve Van Meter, CPA, CliftonLarsonAllen LLP, Greenwood Village. “When you’re hired (as the audit firm), some organizations would rather not go through the process of having an audit. So, part of our job is to make it as painless as we possibly can and also to look for ways to bring added value to the company.” Having a plan is key, agrees Mark Solomon, CPA, vice president and controller, SM Energy Company, Denver. “You want to sit down ahead of time to figure out timing and scope,” he advises. Van Meter says CLA’s approach to an audit starts by having a strong understanding of the client’s business, knowing the industry, and being organized and proactive. “Being prepared is crucial for success. Clients always appreciate it when we can spend less time on site doing audit field work,” he notes. An initial planning meeting with the company frames the timing of the project. “We discuss when audit planning will start, when field work will start, deadlines, and deliverables,” Van Meter says. “Having that meeting up front really helps set the expectations on both sides.” Checklists supplied by the audit firm help outline the parameters of the audit. And if your audit firm hasn’t sent you a list of what you need to prepare early on, ask for it, says Kay Dragon, CPA, associate executive director — finance, National Institute for Trial Advocacy, Denver. Dragon’s audit experience stems from both the client and firm side.

• NewsAccount • Nov/Dec 2014

Checklists, if developed for a specific audit and used correctly can: • Promote planning for the audit • Ensure a consistent audit approach • Act as a sampling plan and time manager • Provide a repository for notes collected during the audit process (audit field notes) • Help to ensure that an audit is conducted in a systematic and comprehensive manner and that adequate evidence is obtained • Provide structure and continuity to an audit and ensure that the audit scope is being followed • Provide a means of communication and a place to record data for future reference Dragon suggests the audit firm update its annual checklist letter for next year as it goes through the audit. “If there is a report you always need, add it to the list,” Dragon recommends. “If the list has something you never need for this client, say ‘… if applicable.’

Client Credo: Be Prepared To prepare for audits at her organization, Dragon uses a three-phase training process for her accounting staff: Phase One: Training staff on making consistent, reliable schedules. All of the logistical issues of the audit are covered in this training phase. Phase Two: Training staff to analyze risk ahead of time. “It’s a shortcoming that clients don’t consider it their job to analyze risk before the auditors come,” says Dragon. She advises not to wait and do it “by the seat of your pants. You’re going into an audit. You need to look at the risk areas of your finan-

cials. Focus on them, and think about them before the auditors come.” Phase Three: Talk with staff about the actual process. How will you behave when the auditors arrive? How will you help them? “We discuss what we’ll do to make the process go smoothly,” Dragon says. “When you have the books closed, and have your reconciliations and analysis done when the auditors get there, that’s nirvana,” Solomon says. “You’re not scrambling around playing catch up. The auditors can sit down and get their work done. It’s about being prepared.”

Communicate3 Communication between client and audit firm before, during, and after the audit is imperative. Don’t wait for your auditors to find an area and ask questions, says Dragon. “As a client, I have a responsibility to see where there are areas that could be problems,” she says. “Our team not only needs to analyze and do some prep work, but we also need to bring issues to the auditors. Don’t wait for them to ask and then say, ‘Whoops, we knew you’d ask that.’ Be proactive. Call your auditors ahead of time — don’t just spring things on them.” Solomon encourages continuous communication with the auditors, not just during the time they’re at your company. “Don’t wait until audit time. Keep the lines of communication open. Keep them up to speed, and let them know what you’re doing on the accounting side. Keep them abreast of what’s going on through the year.” Good communication includes knowing who’s going to be on the audit team at your company and their perspective. Some auditors are young and inexperienced, Solomon

says. “You need to know at what level to engage them.” Dragon agrees and says it’s the little things that can smooth the relationship once the auditors are on site. “There’s no such thing as a dumb question, especially when you’re talking to newer audit staff. We know these people are green. We need to be friendly and encourage a safe environment.” It’s important to be aware of your own internal language and use of industry-specific acronyms. Define them as you go. “The auditors may have asked you what something means three times,” Dragon says. “Tell them again with a smile. If they understand your business, they’ll provide more value.” Dragon also instructs her staff to make serving the auditors the highest priority. Otherwise, if the auditors can’t get their questions answered, they’ll have to set an issue aside. “Help the auditors keep on track,” she adds.

Getting the Most from Your Audit Being prepared is one of the best ways to get the most from your audit and potentially keep your costs down. Making sure you’ve done the necessary work beforehand can go a long way toward making the process run smoothly for both parties. Dragon believes in making the auditors as comfortable as possible on site. “I want to keep them here as long as possible,” she says. “Once they leave, everything gets harder, including communication. But if they’re on site and talking to us, we’re getting value.” Getting your staff involved is important. Dragon stays involved in the process, and she encourages her staff to ask questions and be an active part of the audit. It’s important for staff to see that you need to ask questions when necessary — you don’t want to risk an incorrect answer.

Be willing to ask for something beyond the typical management letter, which isn’t always representative of the true picture. Van Meter suggests insisting on a letter discussing the ways the company can improve its processes, not only from an accounting perspective but also in other areas. “We’re on site for a short period of time, but we do get exposed to a lot. We frequently

come across areas where we think a company can make improvements to controls, to processes, how the accounting department is set up, etc.,” Van Meter says. “A client should insist on getting that kind of feedback. Dragon encourages auditors to write more in their management letters than they normally would and to let her know what they found. “Some people try to avoid management comments because they think the comments make them look bad, but they are a good thing,” Dragon insists. “Don’t be one of those people. The auditors are coming in. They see a lot of people. They see a lot of clients. They notice a lot of things. Let’s hear everything they notice, not just the really big one. It’s a chance to learn and grow.”

Cost Control A shortage of staff in the accounting profession coupled with an increasing number of risk assessment standards contribute to

higher audit costs. Many times audits have a set fee structure says Van Meter. But even in that situation, there are things companies can do to potentially keep audit costs down. Be prepared for your auditor. Your auditor has given you a list of what is needed. Make sure you’ve produced the requested workpaper analysis and have it ready the first day the auditors are on site. “It creates huge inefficiencies when we arrive to start an audit, and the company isn’t prepared for us,” Van Meter says. “The books should be closed, the accounts should be adjusted to have final numbers, and the workpapers and documentation should be prepared for us. And we need to have an area to work in.” Develop expectations between client and auditor. “This goes back to the communication at the beginning and understanding who will do what,” Van Meter says. Delay audit time period. If it isn’t imperative to have your audit done in the first three or four months of the year, delaying the audit after that time could result in cost savings. Scale down to a review. Van Meter has seen situations where companies have negotiated with the third party requiring the audit to accept a review instead. This can result in significant savings. Maintain strong internal controls. Strong internal controls mean a strong accounting department, which results in accurate financial statements. Often less risk is associated with a company that has strong internal controls. The auditors spend less time on the audit because they’re being given accurate information in the first place. Assign a ‘go-to’ person to the audit team. Assigning someone to assist the audit team and be available to produce whatever information the auditors need saves everyone time and money. s Nov/Dec 2014 • www.cocpa.org •

CGMA

Inadequate Staffing A Primary Cause of Workplace Stress One-third of professionals frequently experience excessive pressure at work, according to a global survey by Towers Watson. This level of workplace stress can engender disengagement and absenteeism, which in turn results in reduced productivity. Inadequate staffing levels were cited as the primary cause of stress by 53% of the employees who responded to the Global Benefits Attitudes survey. The poll gathered responses from more than 22,000 employees in 12 countries. Lack of work/life balance was the second most common cause of stress among employees, cited by 40% of respondents. The research identified a lack of understanding among employers of the causes of stress in their organizations. For instance, just 15% of employers identified lack of staff as a contributing factor. The key concern among employers is the impact of technology enabling professionals to access work outside of normal business hours (34%).

However, just 8% of employees agreed. One of the impacts of excessive stress is an increase in the number of sick days taken, according to the research. Those who describe themselves as highly stressed take an average of 4.6 sick days per year, compared with 2.6 days for those reporting low levels of stress. Similarly, presenteeism is more prevalent among the highly stressed, with respondents saying they had attended work while ill and unproductive 16 days per year, compared with ten for those experiencing low levels of stress. The survey also found that employee engagement decreases as stress increases. Of those reporting high stress levels, 57% said they were disengaged. The figure for less stressed workers was just 10%. Only 29% of respondents said their employer promoted a healthy working environment. “Companies could take more responsibility for educating employees about the

benefits of better sleep, physical activity, good nutrition, and work/life balance in order to keep employees healthy, happy, and productive,” Rebekah Haymes, a senior consultant at Towers Watson, said in a news release. From a company perspective, effective wellbeing programs can lead to reduced health insurance claims, as well as increased engagement and talent retention. However, the immediate priority for employers should be identifying the real causes of stress in the organization. Establishing good communication and feedback structures throughout the company is an important step in achieving this, Haymes said. s

Why Investors Target the Executive Pay Gap An analysis of global survey data is offering companies a better understanding of the mindset of investors who object to executive pay packages. Based on data from more than 55,000 survey participants in 40 countries, the analysis by Harvard Business School and Chulalongkorn University in Bangkok suggests that people believe the pay gap between executives and unskilled workers is too wide — and many of the respondents underestimated actual pay inequalities. The analysis found that across the full sample, the estimated pay gap between chief executive and unskilled workers was about twice as large as respondents around the world considered ideal. The median ratio respondents worldwide considered ideal was CEO pay that was 4.6 times larger than unskilled workers’ pay. The

• NewsAccount • Nov/Dec 2014

median estimated ratio was that CEOs are getting paid 10 times as much as unskilled workers. The gap between estimated and ideal pay was largest in South Korea, Australia, Taiwan, Chile, and the U.S. In the U.S., for example, respondents would consider it ideal if CEOs got paid about eight times as much as unskilled workers. They estimated that CEO compensation is 29.6 times larger, but that was much less than U.S. labor union research suggested it actually is. According to the AFL-CIO’s 2014 Executive Paywatch, the annual compensation of a CEO of a Standard & Poor’s 500 company is 331 times a worker’s annual wages. The analysis by Harvard and Chulalongkorn researchers went beyond the U.S., comparing estimated and actual pay gaps in 16 countries where data on CEO

compensation and average worker wages were available. The difference between estimated and actual pay was largest in the U.S., Germany, Switzerland, and Spain. With increasing transparency of pay gaps in U.S. Securities and Exchange Commission filings, U.S. shareholders have begun to notice and object by voting down executive compensation packages and filing lawsuits. A recent example is Cheniere Energy, a natural gas export company based in Houston. At Cheniere’s annual shareholder meeting on Sept. 11, shareholders rejected the $142 million compensation package for Cheniere’s CEO in an advisory, nonbinding vote. “No” votes made up 54% of the ballots cast. s

Movers & Shakers

Classifieds Office Space Available Office Share — Colorado Springs (11/01/2014). Office in a CPA (4 sole practitioners) office suite available. Location is close to Academy Blvd. and I-25. Share conference room and secretarial assistance. Call for details, Mark or Karen, 719-884-2000. Executive park at S. Quebec St. and Peakview Ave. (Near I-25 and Arapahoe Rd.) Windowed office, conference room, kitchen, receptionist, copier, fax, telephone system, DSL line, tax library, free parking, great environment. Arlyn or Neil, 303-771-7377. Practices for Sale, Purchase, or Merger Turn-key practice opportunity. Established North West Metro Area CPA firm wishes to transition clients via a sale over a 1-3 year period. The optimal individuals would be interested in continuing to grow this full service firm in the bookkeeping, tax, and audit areas. This is the perfect fit for an audit and tax manager weary of a big firm, ready to move into a medium-sized firm, with the additional opportunity to purchase a business condo. Send replies to kflynt@cocpa.org with Box #100116 in the subject line. Fred Mehring, Select Business Group, Inc., specializes in the sale, merger, and acquisition of accounting and tax practices. Over 25 years of experience. Confidentiality stressed! Call Fred Mehring at 303-771-3100, fax 303-477-6010, or fmehring@selectbg.com.

Scott K. Sprinkle, CPA, Sprinkle & Associates LLC, Littleton, has been appointed Chair of the AICPA Investment Committee for a three-year term, beginning Nov. 1, 2014. EKS&H LLLP promoted Dan Foote, CPA, CM&AA; Nate Gordon, CPA; and Lucky Heggs, CPA, to partner. CU Denver is now accepting applications for its new MS in Taxation program which will begin in spring 2015. For more information, visit the program page at www.ucdenver.edu/academics.

CPA firms or partners. We represent a number of quality CPA firms which are looking to merge, acquire, or sell their practices to other CPA firms or partners with business. Locations are in the Denver area.This is an opportunity to ensure your future as well as help your clients by expanding your services to them. Why settle when you can select? Established in 1939. For further information, please contact: Phil Rubeck at D&R Associates of Colo., 720-446-7020, or email: dandrassociatesofco@aol.com.

Selling Your Practice? Ready to Start Now? Unparalleled resources. Marketing superiority. Results beyond expectations! We are North America’s largest marketer and seller of accounting and tax practices. That’s because we understand your business and the value of your firm, know how to market it and have thousands of buyers who are looking to acquire a practice. With our proven success system we can bring this marketing and resource advantage to your unique situation. We are different because we can deliver the best results for YOU.

Call A Practice Sales Pro Today! Bill Anecelle, CPA, MBA (303) 670-3623 Colorado (512) 864-2864 Texas (866) 809-8705 Toll-Free Bill@AccountingPracticeSales.com

Kate Mahrholz, Broker Support Associate (303) 524-9736 Office (512) 532-0963 Fax Kate@AccountingPracticeSales.com

We’ll work diligently to help you obtain the goal you desire.

www.AccountingPracticeSales.com

Nov/Dec 2014 • www.cocpa.org •

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Sharpen Your Skills with COCPA CPE Yellow Book: Government Auditing Standards Nov. 4 (COCPA) • $355 / $507

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Excel Financial Projection Model for Business Plans, Acquisitions, New Product Launches, Annual Budgets, and Cash Flow Forecasts Nov. 11 (COCPA) • $375 / $536

Individual Income Tax Workshop Nov. 24-25 (Denver) • $800 / $1143

Annual Update for Controllers Nov. 13 (COCPA or Webcast) • $355 / $507

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A Practical Guide to Small Business Health Insurance and Fringe Benefits: 2014 and Beyond Dec. 12 (COCPA) • $355 / $536 2014 SEC and PCAOB Conference Dec. 16 (Denver or Webcast) • $345 / $493 Excel Best Practices Dec. 19 (COCPA) • $345 / $493 • Denotes Member/Nonmember Course Fees

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