The Sharblog

New Year Prognostications

Well, it is a new year and I have been delinquent in blogging. A combination of the holidays, some vacation, a conference out of town and preparing for upcoming meetings got the better of me. Those are my excuses – legitimate or not. I have found in writing a blog for a few years now that it is a lot like exercising. You can always find an excuse as to why you are too busy to exercise. Or you can claim you don’t feel good or you are not in the mood to do it. The same is true of writing a blog. So I am climbing back on the wagon for my blog and, hopefully, I will get back into my routine.  

As we start a new year, it is a common time to make predictions and prognostications about various things. I thought I would go out on a limb and make some calls – professional, political and otherwise – just for the fun of it. Fortunately, my predictive powers are of no consequence other than how foolish I may look if most or none of them end up coming true. So here goes:

• The Financial Accounting Foundation (FAF) will end up adopting its proposal for a Private Company Standards Improvement Council (PCSIC) that will be subject to FASB. So there will not be a new independent board to establish standards or exceptions to GAAP for private companies. While this is not the outcome many wanted, it is still an improvement over the current situation and I am hopeful that with the increased focus and interest in this issue, some meaningful changes will actually start to occur for private companies.
• The SEC will not adopt IFRS for all U.S. companies, but will allow certain companies to use IFRS in making their filings. They will continue to encourage FASB and IASB to work on converging their standards, but they will support the U.S. maintaining its own standard-setting process.
• The Bush (actually they should now be the Bush/Obama) tax cuts/rates will not be renewed when they expire at year end. If Congress votes to extend them, the President will veto the legislation.
• President Obama will be re-elected with less than 50 percent of the vote. A third-party candidate will enter the race and affect the outcome.
• The Republicans will maintain their majority in the U.S. House of Representatives, but with a smaller margin.
• The Republicans will gain control of the U.S. Senate.
• The Texas Rangers will not make it back to the World Series. I really hope I am wrong about this one. But in the last 30 years, a team has gone to the World Series three consecutive years only four times. And only two teams have done it – Athletics and Yankees.
• The world will not end when the Mayan calendar does.
• Charles Barkley will regain some of the weight he has lost. Is anyone else tired of those Weight Watchers’ ads? And I like Charles!

Now on to exercising.

The Giving Season

Tis the season to be jolly – and to give gifts. The tradition of giving gifts at Christmas goes back centuries. Because gift-giving and many other aspects of the Christmas season involve heightened economic activity, among both Christians and non-Christians, the holiday has become a significant event and a key sales period for retailers and businesses. So Christmas is way beyond a religious holiday and has been for some time.

When I was a kid, the marketing for Christmas never started until after Thanksgiving. Now, you start to see Christmas advertisements and marketing right after Halloween, and Thanksgiving has been transformed into a major “kick-off” of the Christmas blitz. This year, there were a number of “Black Friday” events where shoppers went crazy. The economic impact of Christmas is a factor that has grown steadily over the past few centuries in many regions of the world. In the United States, it has been calculated that a quarter of all personal spending takes place during the Christmas/holiday shopping season.

While I personally do not care for the over-commercialization of Christmas that has occurred during my lifetime, the idea of gift giving is something I do like. I just think we have taken it “over the top” as we Americans seem to do with a lot of things.

It seems like giving is a human characteristic. We like to give gifts to others – those we know and those we don’t – because we like to make those we know and love feel good and we want to help those who are less fortunate than we are. Research shows that generosity directly benefits the well-being of those who give too, so maybe to some extent we also give to make ourselves feel good.

Research seems to confirm that proposition. One study from the University of British Columbia shows that people who give are happier than those who don’t. Even donating as little as $5 helped people feel better. A University of Oregon study showed that giving activates the same pleasure centers of the brain as receiving. And people who leave money to charity in their wills live three years longer than those who don’t, according to a U.K. study. (Our TSCPA Accounting Education Foundation would be happy to help you extend your life if you have an interest!) Other studies show a correlation between generosity and popularity. The more generous participants received more gifts back from others. So being generous and giving helps bring happiness, longevity and popularity if you believe the research.

But maybe we really didn’t need to do all that research. We could have just remembered what the fellow the holiday is named after said, “It is more blessed to give than to receive.”

In Good Hands

It has been a busy few weeks of meetings. First, I attended the AICPA Leadership Conference and Council Meeting in Phoenix and then closer to home, I attended a session of our Young and Emerging Professionals Committee where they strategized about future direction and activities for TSCPA to serve this growing and important member segment.

A major impression I was left with after participating in these various sessions was that the accounting profession is in good hands (apologies to Allstate) and is preparing well for its future. Sure, everyone is sort of down right now because of the bad state of the economy and fear of what the future might bring. But while we can’t absolutely predict or shape our future, we can certainly try to be prepared for it, and that preparation is taking place on several levels within the profession.

At the AICPA meeting, we were updated on the AICPA Horizons 2025 Project. This effort was designed to look out into the future (15 years) and provide a roadmap for the profession to help maintain and achieve success. The Horizons Project, with input from thousands of CPAs from around the country, identified the core values and core competencies of the profession.

Core Values: integrity, competence, lifelong learning, objectivity, commitment to excellence, and relevance in the global marketplace.

Core Competencies for CPAs to thrive in the future: communication skills, leadership skills, critical thinking and problem-solving, anticipating and serving evolving needs, synthesizing intelligence to insight, and integration and collaboration.

Some of the key learning points from the Horizons Project are:

• It is a small world after all – every business is becoming global.
• The future is here – embracing the future now will ensure viability in the long run.
• Change is inevitable – technology already is changing the way we work – and will continue to do so.
• Generations are working side by side – Baby Boomers are not retiring and Millennials are bringing a new set of skills and ideals to the workplace.

I got to see some of these Millennials in action at a strategic planning session of TSCPA’s Young and Emerging Professionals Committee this week. They spent a day talking about the strengths and weaknesses of this generation and how TSCPA could utilize their talents to make the Society a better organization that more appropriately serves their needs. The dialogue and brainstorming that took place at this session was impressive. It is clear that this generation is bright and motivated to succeed.

In sports, you need to have a good game plan and good players to win. I think the same applies to the profession. The Horizons Project is the game plan for the profession and our young CPAs are the players we will have to execute it. In looking at both, I like our odds for the future.

(As I write this blog, it is the afternoon before game six of the World Series. So I would be remiss if I did not give a shout out to the American League Champions. Go Rangers!)

One Size Syndrome

Last week, the Financial Accounting Foundation (FAF) issued a proposal to create a new Private Company Standards Improvement Council (PCSIC) responsible for determining whether exceptions to GAAP should be allowed for private companies in appropriate situations. Any recommendations from this new PCSIC would have to be ratified by FASB before they would become effective. 

This proposal runs counter to what was recommended by a Blue-Ribbon Panel on Private Company Financial Reporting (BRP), sponsored by AICPA, NASBA and FAF. The BRP recommended a separate board be established under the auspices of FAF, but with standard-setting authority independent of FASB. TSCPA was also supportive of a separate board and along with thousands of CPAs and financial statement users, encouraged FAF to adopt the BRP’s recommendations.

In issuing the proposal, the FAF trustees concluded that “creating a separate standard-setting board for private companies would likely lead to the establishment of two separate sets of U.S. accounting standards—a so-called “little GAAP” for private companies and a “big GAAP” for public companies, which is not a desired outcome.”

So let me see if I have this right. If we create a new PCSIC under the control of FAF to recommend to FASB when and where there should be exceptions to GAAP for private companies, then we will preserve the purity of GAAP. But if we have a separate board under the control of FAF, do the same thing without getting FASB approval, then all bets are off; GAAP will be diminished and the world will end as we know it?

Talk about form over substance. It is hard not to read this proposal and think anything other than “politics and turf protection for FASB.” The logic is otherwise elusive.

FASB has always had the authority to allow exceptions to GAAP for private companies, but they have chosen not to do so – in the name of uniform GAAP purity I presume. So why would I think a lot is going to change under this proposal, especially if the driving motivator is to avoid the appearance of different standards?

One size rarely fits all. And to force all companies – public and private – to use the same standards, whether they make sense or not, is myopic thinking. The focus should be on developing the best and most appropriate standards for the different types of business entities and the users of their financial information. Likewise, it is difficult to serve more than one master. In the case of FASB, the primary focus should be on public companies. It will be a challenge for them to do that well and also give fair consideration and attention to private companies. A separate board with a separate focus could. It’s too bad that FAF did not see it that way. 

FAF is accepting comments on this proposal until Jan. 14, 2012. If you are interested, please provide your input. You can get a copy of the full report by going to the FAF website at:  www.accountingfoundation.org.

Strength in Numbers

This week, I began a one-year term as chairman of the Texas Society of Association Executives (TSAE). I am honored to have been selected for this leadership position and proud that it will allow me to represent TSCPA to the larger association community and world as a result. My service and participation in TSAE over the past several years has provided me with a wealth of knowledge and contacts with other association professionals that I firmly believe makes me a better CEO for TSCPA and a better person. In this blog, I thought I would share the three key message points I delivered to the TSAE members at our recent meeting. 

Be Proud You Work for an Association

 First, I told TSAE members that they should be proud to be working in the field of association management because of the important role that associations play in our society. And it is not a new role. Associations are part of the fabric of America. Forming associations is in our DNA as Americans. This has been true since the formation of our country.

Our founding fathers were brilliant when they embedded into our constitution the right of association of the people. And Americans have taken that right and used it to create what I think is one of the central strengths of our democracy – where the power is with the multitude and not a powerful elite. That is the central theory of association – the synergy that joining forces provides – allowing the group the ability to accomplish things that no one individual could. Simply put, it is “strength in numbers.”

Work to Make Associations Better

Next, I reminded my colleagues that we must strive to make our associations better. Sometimes we (myself included) who work in the association and non-profit community lapse into a mentality that because we are “non-profit” or “tax exempt” organizations that the rules are different for us. We feel we can’t compete with the rest of the profit-making world, or we don’t have to care about how we operate or try to be on the cutting edge or look for best practices to emulate.

That was never true and in today’s fast-paced world, it is a recipe and a mentality for disaster. Non-profit/tax exempt is just a tax status. It is not an excuse for poor performance or customer service. While we are not businesses, we need to operate in a business-like way, evaluating our programs and services on a regular basis – dropping those that are outdated and no longer worthwhile, eliminating “sacred cows”  and maximizing the use of the resources available to us to make our organizations best serve the needs of our constituencies.

Look to Your Professional Organization

 

To help on that front, I told my audience to look to TSAE, their professional association. That would be my same advice to CPAs and members of TSCPA – look to TSCPA, your professional association, for help. TSCPA is there to assist you in becoming a better professional, and you can obtain ideas and solutions for the day-to-day challenges you face in your own employment position and organization.

Lastly, let us know what you want from TSCPA. How can we serve your needs as members? Provide your input so we can help shape TSCPA to be the best association possible. TSCPA belongs to you – we want to make TSCPA the best it can be. We need your input and direction to achieve that goal.

Failing Fast

I recently completed an interesting book called Flash Foresight by Daniel Burris. Much of the book talks about how to predict the future and techniques for doing so effectively. Burris explains the difference between “hard” and “soft” trends and being able to recognize the difference between the two.

Hard trends are projections based on measurable, tangible and predictable events or facts. Soft trends are predictions based on statistics that have the appearance of being tangible, predictable facts, but they really are not. Hard trends are things that will happen – a future fact. Soft trends are things that might happen – a future maybe. The key to predicting the future is the ability to differentiate between these types of trends and learning to focus on the hard trends to make our future plans.

Another point Burris makes in the book, and one which I particularly like, is the fact that the biggest problem with failure is not the actual failure. Rather, it is our tendency to ignore failure or respond to it in slow motion, dragging it out for years. He notes that if we can learn to fail fast, that is to recognize failure quickly and respond to it immediately, we can shift failure from being a liability to being an asset. As someone who has a relative amount of experience with failure, this was an uplifting concept for me!

I think one example of what Burris is talking about was the downturn in the real estate market a few years ago. The market got hyper-inflated and people assumed that real estate values would always go up. So they were taking a soft trend and treating it like a hard trend and making investment decisions based on that bad assumption. Then when the housing bubble burst, rather than accepting their failure and learning from it, they continued to ignore/deny/hope it wasn’t true. And in some cases, our leaders implemented public policy decisions to try and postpone the pain that was inevitable from the failure. So rather than learning fast from our failure, we have been dragging it out and probably delaying the economic recovery we would all like to see. 

 In today’s rapidly changing world, failure is not an option. It is going to happen to everyone – sooner or later. So rather than trying to avoid failure, we need to redefine it and work to identify it as soon as possible. The challenge is to recognize failure quickly and regroup. Burris notes that “our biggest lessons come from our biggest mistakes. The organizations (and I would also include people) that are succeeding today are those that have learned how to fail fast – and who do not fail to learn.”

So fear of failure and an unwillingness to accept and learn from it are not great traits for success. The lesson here is that in today’s fast-paced world, if you are going to fail – fail fast!

Heat Hysteria

I can’t help myself.  Yes, this blog is about our current heat wave.  Sorry.  Blame it on the heat.  Or better yet, blame it on the coverage of the heat.

The only thing worse than the current heat wave is the incessant talking about the heat wave.  Especially on the T.V.   Hey, did you know it is hotter than blazes out?  No, really?    I have no nerve endings in my body.  Thank goodness I have the news to let me know that it is hot outside.  Otherwise it would have escaped my attention - not.

Normally, when you have something bad going on you are best off to try and ignore it.  For example, if you are seated next to a screaming baby on a plane and you can’t get off, you work on trying to ignore it.  When you focus on negative stuff, it only feels that much worse. But that is sort of hard to do when you are constantly being reminded that – IT’S HOT OUT!  It’s like you are seated next to a screaming baby and on the other side you have someone screaming at you that you have a screaming baby sitting next to you on the other side.  Thank you – I needed you to tell me that.

And I especially like the fact that every day there is a report on the potential to set a new heat record.  We are now in Day whatever (last count 24) of continuous triple digit heat and folks it looks like we may be heading for a record in the near future!  Maybe the strategy is to make us feel good by making it a competition of some kind.   We are being fried, but hey, we are on our way to setting a record!  We can all be proud.  Why do they even bother to have a weather report?  And does the person really need to be a meteorologist?  Heck just copy the ten day forecast and keep handing it out for the next several weeks.  Nothing is changing.

Recently, much of the rest of the country was also enveloped in the heat wave.  That led to the national media joining the local chorus of heat bloviating.  And when New York and Washington, D.C. have to endure heat – well then, let the whining begin. 

I am sure our forefathers would look at all of this and laugh about what wimps we are.  I can’t imagine the folks who settled this country enduring this kind of weather without air conditioning and the other creature comforts that we have.  They were obviously a lot tougher lot than we are.

And I feel especially sorry for all the farmers and ranchers whose livelihoods have been most affected by the heat and drought and all those folks who have to work outside.  They are the ones that really are bearing the brunt of this terrible heat.  I hope for their sake it ends soon. 

Don't Do it Charlie Brown

I am sure you all remember the Charlie Brown comic strip and one of its reoccurring themes of Charlie Brown going to kick the football, only to have Lucy pull it away at the last second, thus causing poor Charlie to miss and fall flat on his back. I thought of Charlie Brown this past week when I got an e-mail from FASB announcing that it had launched a web portal dedicated to providing information pertaining to its activities that focus on issues related to nonpublic entities. The e-mail said it was part of the board’s efforts “to better serve the private company and not-for-profit sectors.”

Funny, it seems to me that FASB has not been real focused on serving the needs of private companies. They, and the CPAs who serve them, have been clamoring for years that an alternative to GAAP was needed for private companies. And the FASB response to that has been a long history of completely ignoring the issue or merely paying lip service to it. Every time FASB says they understand and the profession thinks that maybe this time it will be different, it ends up being the old “Lucy pulls the football” routine and we never see any change.

But things are finally looking different. Over the past year, through the efforts of a Blue Ribbon Panel (BRP) developed by AICPA, NASBA and FAF, there is the most concerted effort ever to get action on this issue of standards for private companies. The idea is to use GAAP as the base standard and allow exceptions to GAAP where they make sense for private companies. A separate board – apart from FASB – would be appointed to make the decisions on these standards. The board would be made up of individuals with knowledge and experience in the private company world. The new board would be responsible to, and receive oversight from, the FAF.

Clearly the efforts of the BRP have aroused the attention of FASB. They are not keen on a new board coming into existence. Now they are suddenly taking an interest to act like they care about the private companies that have been complaining and asking for relief for decades. It’s sort of like now that Charlie Brown has picked up his football and is heading for home, Lucy is crying out – no Charlie; this time I will let you kick it!

All I can say is – don’t do it Charlie! Don’t be fooled again. This time stay the course – AICPA, NASBA and FAF. Carry the football across the goal line and get a new system in place that can adequately serve the needs of private companies. Members who feel likewise and support this cause can weigh in and write to the FAF to express their support. Here is a link to information on ways you can do that: http://www.tscpa.org/Content/51861.aspx.

This is the moment. The time to act is now. Go Charlie Go!

 

 

Scare Tactics

Have you seen the new warning labels for cigarettes that the FDA is rolling out? You can’t get any more graphic than some of these. They will go into effect next year.

I remember when the first warning labels on cigarettes came out in the 1960s. They were a rather mild statement of “Cigarettes may be hazardous to your health.” Then in the 1980s, the warning got upgraded to “Smoking can cause lung cancer, heart disease and other illnesses.” These warnings took up a tiny portion on each pack of cigarettes. You really had to look hard to see them. 

Now the FDA has taken the warning labels to Def Con Level 5. First, these new warning labels are big – they take up the entire top half, both front and back – of each pack of cigarettes. And they are not just a written phrase. They are actual pictures of things like rotting teeth and gums, diseased lungs, smoke coming out of the tracheotomy of a man’s neck, and a sewn-up corpse of a smoker. You would have to be pretty dense to not get the message “Smoking will kill you.”

I am not opposed to trying to make sure people understand the dangers of smoking. But do you really think the majority of people don’t know that smoking is bad for them? I think our schools have worked pretty hard at delivering that message to kids. Talk to any young children about smoking and they will immediately repeat a mantra to you about its ill effects.

These new warning labels remind me of those films they used to make us watch in high school that showed all the graphic pictures of car wrecks, trying to convince us that we should not speed and drive like crazy people on the highways. Based on my experience, I don’t think they worked very well. Most teenagers – especially boys – think they are invincible, and we convinced ourselves that the dead people in the films probably were not as good a driver as we were.

Most people who still smoke are probably not going to be deterred by these warning labels. They are either physically addicted to cigarettes/nicotine, or they have convinced themselves that dying of cancer isn’t going to happen to them. Let’s be serious, if you are willing to pay the going rate for a pack of cigarettes (in New York City, it is around $11 a pack) you must really enjoy them or be hooked. And for full disclosure, I did smoke when I was in my 20s and the cost is what did me in – thank goodness.

I won’t hold my breath that these warning labels are going to work. But if it would deter just a few people, it is worth a try since it is estimated that smoking is the leading cause of preventable and premature death in the U.S. (one in every five deaths) and costs us around $200 billion annually in diminished productivity and medical costs, according to the Centers for Disease Control and Prevention. Those are sobering and scary facts in themselves. 

Nearing the Finish Line

This weekend marks the start of spring.  Each year this change in the season provides a belief that we will shake off the effects of winter and find better days ahead.  And after the winter we had this year in Texas, it will be especially sweet to see the flowers and trees in bloom and hear a chorus of birds in the air.

This spring also provides us with a sense of renewed hope that we may see progress on the issue of financial reporting for private companies.  I wrote about this issue in a blog post about a year ago (“Groundhog Day for Standards”) when the announcement was made that the AICPA , Financial Accounting Foundation (FAF), and the National Association of State Boards of Accountancy (NASBA) had collectively appointed a Blue Ribbon Panel (BRP)to study the issue.

The BRP has done a lot of work and held a lot of meetings over the past year, and it issued a report and recommendations in January.  The FAF reviewed the BRP’s report, and, at a meeting earlier this month, announced it was forming a Trustee Working Group to address standard setting for private companies as well as nonprofit organizations, which were not part of the BRP’s charge.  This new Working Group will conduct outreach to stakeholders in various ways over the upcoming months, so be on the lookout for news and your opportunity to weigh in.

In case you missed the BRP’s report, they are making two major recommendations.  First, that a separate standard setting board be created for private companies that would operate under the oversight of the FAF, similar to the FASB.   Second, that there be changes and modifications to existing GAAP, where appropriate, for private companies to reflect the needs of their financial statement users.   There would not be an entirely new GAAP for private companies, but rather appropriate exceptions from GAAP in areas that do not make sense or provide value for users of financial statements.

It is critical that CPAs and the clients/users of financial statements for private companies (and now nonprofit organizations) let the FAF and this new Trustee Working Group know how they feel about this issue.  TSCPA did that back in January when our Executive Board adopted a resolution saluting the work of the Blue Ribbon Panel and encouraging a new approach to standards for private companies that better serve their needs.  You can read the resolution here.

 The FAF Trustee Working Group will be seeking input over the upcoming months.  If you or your clients have an opinion on this issue, you need to take the time to write to the FAF and share it.  We are getting close to the finish line now, and it will require a grassroots effort to carry this issue to fruition.  This is your opportunity to make a difference and help secure a new approach to financial reporting for private companies.  Please make your voice heard.