The Sharblog

A Global Credential?

I talked in my last blog about the changes that are taking place to the CPA exam. Among those changes is a move to offer the exam internationally. That movement will start next year when the exam is offered in a few international sites on a test basis. If all goes well, it is likely that will lead to an expansion to other international sites. Currently, about 10 percent of the CPA exam takers are foreigners who travel to a U.S. exam location to take the test. So this change will make it easier and less expensive for these types of candidates.

Some U.S. CPAs may be saying - why do I care? I already have my CPA license, and why should we make it easier for foreigners to take the exam? Well, I don’t think this is just a case of AICPA and NASBA trying to be altruistic and helpful to foreign exam takers. I think it is also a matter of trying to make sure that the CPA credential maintains its elevated status in the international marketplace. And that is why all CPAs should care about this matter.

Historically, the U.S. CPA exam has been the “gold standard” of accounting exams, and the CPA credential has been recognized as the most prestigious of accounting designations. But just because a person or business is successful today does not guarantee future success, and that is also true for the CPA credential.

Over the past few decades, there has been a growing competition among accounting credentials around the world. One of the main competitors is the Association of Certified Chartered Accountants, a British accountancy organization which offers the Chartered Certified Accountant qualification (ACCA) and has been working aggressively to promote it and get it accepted in countries around the world. It is currently estimated to have around 140,000 members and 404,000 affiliates and students in 170 countries. If you wound the clock back about 20 years, most CPAs who knew about the ACCA would have laughed if you told them it would become competitive with the CPA. Well, they would not be laughing now.

So a major part of this evolution on the CPA exam relates to making sure that the CPA credential is not marginalized in the international marketplace. Like it or not, we are operating in a global marketplace for goods and services. And that marketplace also includes accounting credentials and knowledge workers. AICPA and NASBA are to be commended for taking this matter seriously and for adopting strategies to maintain the elevated status of the CPA worldwide. Providing the CPA exam in international locations and establishing a means for successful foreign candidates to obtain their CPA credential are important steps to help maintain the dominance of the CPA in the world market.

CPA Exam Evolving and Going Global

In case you missed it, there are some significant changes in the works for the CPA exam that will go into effect next year. Part of the change relates to the content, skills and research aspects of the exam. The other major change will be offering the CPA exam in some international locations on a pilot basis in 2011.

It might be good to overview the organizations involved in the CPA exam as I find that when I talk to members, not all of them are aware of the players and their roles. There are three groups –AICPA,  the National Association of State Boards of Accountancy (NASBA) and Prometric.

First, AICPA is the organization responsible for developing and scoring the exam. Next, NASBA provides oversight to the exam development process and also is responsible for the National Candidate Database. NASBA helps assure that the licensing boards in the U.S. can rely on the exam, and it also helps the state boards in the administration and issuance of grades to candidates. Finally, there is Prometric. Prometric is a wholly owned subsidiary of ETS (Educational Testing Service – the SAT folks) that is responsible for the delivery of the exam at authorized test centers across the U.S.

So those are the players.  What are the changes that will soon be occurring?

Well, there will be new content and skill specification outlines used, a new question format and a greater use of “simulations” versus multiple choice questions. There will also be an increase in the testing of writing skills by adding essays to the Business Environment and Concepts (BEC) section of the exam.  The move to the computerized exam nearly six years ago has now provided over a million test administration’s worth of data that are being used to improve the exam and make it more relevant to testing the knowledge and skills that CPAs need in today’s world.

In addition, starting next year the exam will begin to test candidates on IFRS. Initially, the IFRS questions will be small in number and they will appear in the various sections of the exam. Over time, they could grow if the shift to IFRS evolves. Research shows that increasingly new CPAs need to be familiar with IFRS because of preparing financial reports for foreign owned companies in the U.S., auditing companies that report in IFRS, and working for U.S. companies that need to convert IFRS financials into U.S. GAAP.

Finally, the exam will be offered on a test basis in a few international sites next year. Currently, about 10 percent of the total exam takers are foreigners who travel to a U.S. exam location to take the test. Guam (a U.S. jurisdiction and an exam location) currently tests more candidates than any other U.S. location. Offering the exam internationally will make it easier and less expensive for these candidates. It will also help the CPA profession respond to the global marketplace for accounting credentials. But that is a subject for another blog!

 

La Familia – We are Family!

The TSCPA Annual Meeting was held in San Diego last week. One thing that happened at the meeting has really stuck in my mind. During our final Open Forum (this is where members can talk about anything or raise any issue they like), one of our Board members – David Acosta, who is also the current president of the Houston Chapter – said that he enjoyed the meeting, and what he enjoyed most was the opportunity to interact, communicate and share with other members from around the state. He said that TSCPA was – La Familia.

David’s comments were spot on and heartfelt. La Familia – family – that really is a great analogy to what TSCPA is about. TSCPA is the family for the CPA profession. While all CPAs are individuals of course, they are also all part of a family of professionals. Like members of any family, they all share the same “genetic code.” They all followed a similar path in terms of education, examination and experience to earn the same professional credential.

TSCPA is the place where the family all started, nearly 100 years ago, when a small group of accountants met in Galveston, Texas in May of 1911 to form the Texas Society of Public Accountants, the predecessor organization to TSCPA. While much has changed since that time, some things have also remained consistent.

TSCPA continues to be the organization that focuses on the needs of Texas CPAs and tries to represent their interests with the Texas legislature, the U.S. Congress and other regulatory bodies. TSCPA continues to speak to the public about the profession and how CPAs serve the needs of our larger society as trusted business advisors. And TSCPA continues to be the organization that focuses on assisting CPAs in maintaining their technical competence and adherence to standards through continuing professional education, peer review and professional ethics.

TSCPA is where CPAs can find and meet other CPAs who share their interests and can help solve their problems. There are always other members you can lean on and count on for support – just like in a family. So my hat is off to David for reminding us that TSCPA is the family for CPAs. La Familia. We are Family!

 

Vive la Retirement

I recently had the television on, but wasn’t really paying attention to it and then I caught out of the corner of my eye something on the news about major demonstrations in France. I was curious and wanted to find out the details. Why and what were they protesting? The war in Afghanistan? Genocide in Darfur? The gulf oil spill? Climate change?

No, when I finally was able to determine what these folks were upset about, it seems it was because the French President, Nicolas Sarkozy, proposed raising the retirement age in France from 60 to 62 years of age. The French pay-as-you-go retirement system is forecast to register a deficit of $32 billion this year and by 2050, with people living longer, the shortfall is expected to rise above $100 billion. So they are looking at ways to help curb the costs, and increasing the retirement age is part of their solution.

Even with the proposed change, France would still have one of the lowest retirement ages in the industrialized world. Germany is moving from 65 today to 67 in 2029 and Britain to 68 by 2046. Here in the U.S., we have a sliding scale that increases full retirement age under Social Security depending on your year of birth. For those born in 1937 and earlier, full retirement is 65, but then increases gradually and for those born in 1960 it is 67. This change was made back in 1983 during the Reagan administration to try and solve the fiscal challenges of our Social Security program.

Increasing the official retirement age seems to make sense, since we are living longer. In the U.S., the current life expectancy is 78.24 years of age. In France, it is actually higher coming in at 81.09. This is according to the CIA website! Who knew they were interested in life expectancy other than for their own agents?

Of course, this is the overall life expectancy of the total population. Women actually live longer on average than men. And the older you get, the higher your life expectancy goes. Each year you live means that you have survived all sorts of potential causes of death. If you were born in 1942, your life expectancy at birth was about 68 years. But the good news is that you didn't die of disease, a car accident, or anything else. The average 65-year-old today can expect to live roughly another 18 years.

So what did the protesters in France have to say about the Sarkozy proposal? France’s largest labor group, the CGT union said in its statement: “This is brutal reform. For the CGT, this pension reform will obviously have to be fought.” Brutal? Really? Asking people to work an additional two years before full retirement at 62 is brutal – which is defined as savage, cruel and inhumane?

I obviously don’t understand the French way of thinking. But then again, they awarded Jerry Lewis the French Legion of Honor and voted his The Nutty Professor movie of the year. So you gotta wonder about how they see things.

Computer Conundrum

Seems we have a debate raging on the effects of the use of technology on the human brain. And as in most debates, there are two sides to this argument. On one side, there are those who think that the increase in the use of computers – the Internet, Google, FaceBook, Twitter, PowerPoint, etc. – is making us all morons who are losing our ability to do critical thinking and properly interact with each other in person. And on the other side, there are those who think that technology has actually made us smarter or at least is helping us better manage an explosion of information in a fast-paced and changing world.

So who is right? Well, my guess is that both sides have some valid arguments.

If you spend all your time sitting at a computer (please do not shut yours down right now!), you probably are not going to develop personal relationship skills and benefit from live interaction. The ability to read body language and develop other face-to-face human contact skills actually involves being with other people. You can’t do it through a computer screen. This is a concern today about young people who, it is estimated, spend on average around nine hours a day with their technology in some form or fashion. They are calling these folks “digital natives.” They have grown up with technology, are very comfortable with it and they don’t know anything different.

On the other hand, you have older generations (that would be me). They call them “digital immigrants” who have come to technology at a later stage in their lives and usually more reluctantly. But even these folks are using technology, just not at the same level of intensity as younger generations. Even these digital immigrants have recognized that technology is not inherently bad and in many ways can enhance the learning experience. 

I think this current debate is similar to ones that have raged in the past. Every time a new technology is rolled out, there are the adopters and the detractors. The key issue in the case of technology, as with most things, is to establish some sense of moderation in its use. I know from my experience that it is easy to get swept up into a 24/7 world where we never can put down our handheld or stop reading e-mails or surfing the Internet. That is why it is important to establish some boundaries and ground rules for how you use technology. Otherwise, it can end up controlling you, instead of the other way around. 

There is no turning back the clock. For better or worse, technology is here and it isn’t going away. We need to use it to our advantage while maintaining that which makes us uniquely human – the ability to communicate and interact with others and to appreciate the world in which we live. So once in a while, turn off the computer, take a walk and enjoy the company of family and friends. And leave your PDA at home when you do it.

Hidden Messages

Many of the things we learn in life do not occur from overt actions or communications. Rather, they come from subtle messages that we pick up along the way. The message is sort of hidden, but eventually you find it – or more likely, it finds you.

I recently had one of those moments while attending a gathering of CPAs at the annual “Sagamar Challenge” in Seymour, Texas. This is a get together to help raise scholarship money for the TSCPA Accounting Education Foundation (AEF). This year’s event was hosted by our current TSCPA Chairman Jeff Gregg, CPA-Wichita Falls, and his lovely wife Becky, who started this tradition seven years ago as part of our Silent Auction to assist the AEF.

Those in attendance were having a fun time consuming adult beverages and great steaks grilled by our wonderful host and hostess. During the course of the evening, the conversation among a few attendees turned to music and various rock groups that we liked and have enjoyed during our time on this earth. At one point, I made a comment about seeing Janis Joplin perform live while I attended college, except at that time it was actually the band “Big Brother and the Holding Company” with whom Janis Joplin sang as lead singer. This was shortly before her career really took off and also before her tragic death. I said that this would have been something like 1968 or 1969, which elicited a comment from another attendee of, “I would have been eight years old at that time.”

For some reason that comment really hit me, driving home the point that I was – for heaven’s sake – OLD! It was a stark realization that I was officially a “geezer” compared to most of the people with whom I was having the conversation. Funny, I don’t really feel older, but this was one of those subtle reminders that while you may think you are part of the group, you really are not. Anyway, this reminder about my aging condition did sort of zing me. Not that I spend a lot of time worrying about my advancing years. I have learned if I don’t look in the mirror very often or try to engage in highly physical activity, I can continue to con myself into believing that I am really as young as I feel.

The following day as I was driving back to Dallas from Seymour, we slowed down as we were driving through a small town along the way (I believe it may have been Olney) and as I looked at the side of this one building, there was a big poster/message painted on it. It looked like it may have been painted by schoolchildren. Anyway, the message said,“Once you accept the concept of hope, then anything is possible.”

It brought a smile to my face. It was sort of a Simon & Garfunkel moment – “the words of the prophets are written on the subway walls and tenement halls.”  And apparently on the sides of buildings in small towns in Texas. I like it. If I have hope, then anything is possible. Even for an aging geezer!

Remember Those Who Died In Service

Memorial Day was this past Monday. Initially, it was called Decoration Day and was started after the Civil War to honor the Union soldiers who died in that conflict. After WWI, it was expanded to include soldiers who died in other wars and finally in the late 1960s, Congress passed a law declaring the official name of “Memorial Day” and also moved the observance to the last Monday of May from its traditional May 30 date.

I recently finished watching the multi-part series The Pacific on HBO. This Tom Hanks/Steven Spielberg production was a vividly realistic portrait of the incredible bravery of our fighting men and women who served in the Pacific theatre during WWII and the abject horror of that period. Prior to each episode, there were brief interviews with real veterans from WWII who clearly still had strong memories of that time even after 65 years. A common theme in these interviews and in the story-line of the series was the soldiers asking – why me? Why did I survive when so many of my comrades died? Their feelings of guilt over surviving were very strong, and many veterans do not like to talk about that time period as they do not want to bring back the memories.

It made me think of a CPA I knew when I was the Executive Director of the North Carolina Association of CPAs about 25 years ago. His name was Ken Spruill, and he was as fine a man as I have ever known – a true southern gentleman. Ken served as President of the NCACPA and I knew him for several years as he worked his way up in the leadership of the organization. Yet, I never knew he had fought in the Pacific until his wife mentioned it in passing when we were having dinner one night. It got my attention and I started asking Ken about it. Quickly, I recognized that he did not want to talk about it after he made some comment about it being the most horrible experience of his life and the fact that a lot of his friends did not make it back. Ken is no longer with us having passed away in 1995, but his comments and his reaction to my questioning are still clear to me today. It is understandable when you realize that according to experts, there were around 100,000 U.S. military casualties in the Pacific during WWII.

I hope that this Memorial Day we all paused and gave thanks to all the soldiers that have died in the service of our great country over our history. Yes, we have a great country, but freedom does have a price – it isn’t free. We should all thank and remember our soldiers who paid the ultimate price, so all of us can enjoy the freedom and benefits of being Americans. 

 

Plan to Succeed

 

One of the current hot issues in the profession is “succession planning.” While most of the discussion takes place in the public practice sphere, it is also an issue in other areas where CPAs work (industry, education, government, etc.), because it is a society wide problem. The baby-boom generation, including those who are CPAs, is heading into retirement years, and must begin planning to identify and develop people who can replace them, especially those who hold leadership positions in organizations.

A PCPS survey showed that while more than half the CPA firms surveyed (60 percent) had owners/partners in the 63-65 age range, only about a quarter had any kind of written succession plan in place for the firm. Part of this is because CPAs are busy handling the day-to-day problems of their practices, and finding time to focus on the future is difficult. But part of it is also driven by the fact that it is not something most people, including CPAs, are comfortable in confronting. It forces us to think about the fact that eventually our lives will change and we are not going to keep working forever. So there is also an “avoidance” aspect to the issue. It’s easier to just not think about the future and keep on doing what we are doing.

Fortunately for TSCPA members, we have some help on this front. TSCPA has contracted with the Succession Institute to provide members with some free advice/information/CPE in the area of succession planning. Go to the TSCPA website in the Public Practice Center and then click on the Practice Management Institute CE icon. You can also click here. There is a wealth of material and information there for you.

Succession Planning is really not much different than planning for other aspects of our jobs and our lives. By focusing on the issue and developing a plan for action, you increase the likelihood that you will be prepared to deal with it when that day arrives, and you also increase your chances of success. Whether it’s your career, your financial future or how you will replace leaders in your organization, you increase the odds you will succeed and be prepared if you have a thought-out plan for action.

So what are you doing to plan for your retirement/replacement? Do you have candidates in your organization who are currently qualified or ones that can be developed? Who are they, and what kind of support do they need to take over when you leave, or do you need to think about recruiting someone into the organization who has those skills and talent? What’s that - you say you aren’t part of the baby-boom generation, and retirement is not on your immediate horizon? That’s OK - then what are you doing to plan for the next level/step in your career? Where do you want to be in five years or 10 years and how do you plan to get there? What will it take in terms of professional development, experience,  building networks, etc?

Ben Franklin said, “by failing to prepare, you are preparing to fail.” Start your preparation today and plan to succeed!

 

Skepticism Versus Wisdom

I was recently talking with a member about the potential of “sustainability.” He asked me if I thought the concept of sustainability really had legs and could be a new practice development area for CPAs. This is an issue that AICPA has recently been promoting, and the current AICPA chairman is a big proponent for it as an opportunity for CPAs.

I paused as I was thinking about how to respond to the question, and then said that while I thought sustainability really did have potential for the future, there was a part of me that also questioned whether this was just one more fad that was being hyped by people who were either dealing from self interests or true believers.

As someone who will soon be celebrating a significant anniversary on the age scale, this is the classic dilemma that we all face as we get older. We want to be optimistic and enthusiastic for new ideas and ways of thinking, but we have the burden of all the experiences we have been through where things didn’t work out as people had claimed they would. It is the dichotomy between youthful exuberance and senior skepticism.

Of course, it is not a given that with age comes wisdom. I have met some old people who didn’t seem very wise and some young people who acted beyond their years. But I do think that in general the experiences of aging (I guess the politically correct term is maturing) do give a leg up over younger folks. As they say, experience is the greatest teacher. But the downside to that experience is if we develop an overt skepticism toward anything that comes along. If we harden ourselves to new possibilities, then we will miss the real opportunities when they do arrive. And I guess that is what wisdom is really all about – knowing the difference and keeping an open mind.

So, I am trying to keep an open mind about “sustainability.” I think it will be around for some time to come. It combines the benefits of helping improve our environment while, at the same time, saving money through the more efficient use of resources. That sounds like a winning combination to me and one that CPAs can actively participate in by helping clients understand the cost benefits of implementing sustainability programs and quantifying the savings for those programs.

Of course, I could be wrong. And if so, it certainly won’t be the first time in my life. But I would rather be an optimist and wrong at times than a permanent skeptic. It’s a better way to grow old!

Note: To read more on this topic, please see the Emerging Issues column in your May/June Today’s CPA magazine.

New: Executive Board Review

Kym and I just finished our latest Executive Board podcast, recapping our meeting that took place last weekend.  Check it out below:

Executive Board #4