What I Am Thankful For 2018

It’s the beginning of the holiday season and one of my traditions at Thanksgiving is a blog on the things I am thankful for, so here it goes for 2018.

My Colleagues
I’m in awe at the brilliance, dedication and integrity of everyone I meet in our profession.  I know why there aren’t more CPA politicians; we just don’t fit in.

My Employer, AT&T
I was given another amazing opportunity to do something different that still was right in the middle of what we do as CPAs.  In a few short months my new team has reinforced why I have stayed at AT&T for 25 years – the people are second to none.

My Professional Association, the TSCPA
I am humbled that the TSCPA has put its faith in me to serve our profession.  I only hope I can live up to that trust.

My Wife and Family
They have been there and supported me every step of my life.  My kids put up with the Society annual meeting being our summer vacation and my wife has attended so many events I’ve lost count.  I would not be anywhere close to the person I am today if it wasn’t for them.

My God
I only hope I have used all the gifts he has given me for the betterment of mankind and to reflect his glory.

What are you thankful for in 2018?

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Pet Peeve Phrases

Sometimes I wonder if people really think about what they are saying.  Certain phrases have become so common people don’t even think about how they might be perceived negatively.  Here are a few phrases that make me cringe when people say them to me.

I’ll be honest with you

So you’re not usually honest when you talk to me?  I do understand that the person is trying to communicate that they aren’t going to gloss over negative or potentially devise issues in what they are saying; but I do wonder if they feel they are being dishonest about their feelings or what is really going on during other conversations they have with me.  This phrase immediately reduces the trust factor I have in someone, and that is the exact opposite of what the person is trying to accomplish.

Our people are our most important asset

OK, I’m biased because I’m an accountant, but to me asset equals property (think a computer) or rights (think a patent or copyright), so is this phrase saying that the business owns their employees?  I thought we got rid of slavery 150 years ago in this country. Its fine to say our people are what makes this company valuable, but to say they’re an asset takes the ownership aspect to a different level that just drives me crazy.

They won’t respond to my email/text/instant message

Do you know that phone in your hand can call people too?  Maybe the email never got through; maybe the person doesn’t understand what is being requested or misunderstands and thinks it is a much bigger ask than intended.  It’s amazing how much can be accomplished if you just pick up the phone or get up from the desk and actually talk to someone.

No Problem

I guess you didn’t do anything special for me after all.  When someone says ‘thank you’ they are pointing out their appreciation for doing something for them, for putting them above other things that the person needed to do or could have done.  Saying no problem tells the person they weren’t actually all that important.  Even if the action wasn’t important or wasn’t inconvenient, why is it necessary to tell the person that.  Let them have their moment that someone else in the world showed they mattered.  ‘You’re welcome’ communicates all that and more.

So what phrases do you hear regularly that drive you crazy?


It’s That Time of Year

From the number of discussions I’ve been having with my staff and my own children, I have come to realize that savings methods CPAs think of as second nature aren’t second nature to many people out there.  My discussions this year have focused on traditional versus Roth 401(k) contributions, HSA versus FSA contributions, and HSA versus 401(k) contributions.

Let’s start with the last item first.  My advice is always to contribute enough to your 401(k) to get all the company match you are entitled to (if one is provided) before considering an HSA contribution.  Not taking advantage of the match is like giving an employer a discount for your services.  They’re willing to pay you more, but you say, nah, I’ll do the work for less than you are willing to pay me.  I have one word for that: Stupid!  Once you get the full 401(k) match, however, the answer on which to contribute to moves decidedly in favor of the HSA.   While the traditional 401(k) includes a tax benefit for the initial contribution, and taxes are deferred on investment earnings, you do have to eventually pay taxes when the money is withdrawn (which is required by law after a certain age).  The Roth 401(k) has the benefit of never paying taxes on investment earnings even upon withdrawal, but you don’t get a tax benefit against your current taxes for the amounts contributed currently.  The HSA combines all three benefits – a current tax benefit for contributions, deferral of taxes on earnings, and no taxes on amounts withdrawn as long as they are used for medical expenses.  With the way medical expenses are going, young people today will need all the money they can get for those costs when they grow old.  The HSA has two added benefits – if you have a medical emergency before you retire and need to get to the money, you can withdraw it to pay those costs with no penalties; and if you need the money in retirement, you can withdrawal it and just pay taxes on the withdrawn amount like a traditional 401(k).  That is a deal you don’t see every day from our government.

The HSA versus FSA decision usually is hands down in favor of the HSA because of the ability to carryover the HSA balance from one year to the next; but there are two situations where the FSA should get serious consideration.  The most obvious is if you are not eligible for an HSA contribution.  In order to contribute to an HSA, you must be covered by a high deductible health plan ($1,300 for an individual or $2,600 for a family).  If you are covered by an HMO or a low deductible plan, then an FSA is your only option.  The second circumstance is if you need access to the money early in the year and don’t have other financial means to cover the expense.  An FSA allows you to get the entire amount you plan to put in the account on the first day of the year, while an HSA only allows you to get at the money already in the account.

The last topic is whether to make contributions to a traditional 401(k) or a Roth 401(k).  Generally speaking, the younger you are the more a Roth makes sense, but there a lot of questions to consider.  Will your tax rate at retirement be higher or lower than your current tax rate?  Can you afford to put enough into the plan to get the full company match without the reduced taxes afforded by the traditional 401(k) contribution?  And do you believe the tax structure (primarily an income tax) will be the same when you retire as it is today?  Because I can’t predict the future, and don’t trust the government to keep their paws off my money, my advice is hedge your bets.  If possible, put half in a traditional and half in a Roth 401(k).  Whatever happens you got the answer half right and are better off than if you had picked the wrong one; but if you think you can predict the future, go for whatever fits your expected outcome better.

There is a lot more that can be said on this subject, but that would make this blog into a term paper and we don’t want to do that.  And because people think they can sue over anything, please note that all the above advice is based on laws at the time of the writing of this blog and is worth what you paid for it – nothing.  Any decisions you make about contributions to any of the above plans is a personal decision you, or you and your financial advisor should make based on your specific situation.

 

 

 


New Ethics Rule on Leases Proposed

The AICPA Professional Ethics Executive Committee (PEEC) has proposed revisions to the code of ethics around how leases between an auditor and their client impacts independence.  The changes were precipitated by the new FASB standard on leases because the current ethics interpretation on leases focuses on whether the lease is an operating lease or a capital lease.  Currently, if the leases is an operating lease with comparable terms to similar leases, then independence is not considered to be impaired.  On the other hand, if the lease is a capital lease, then independence would be considered impaired because a capital lease is like debt and, generally speaking, an auditor cannot borrow from a client.

As you are aware, the new leasing standard has changed the importance of the operating versus capital lease distinction now that either type of lease will show up on the balance sheet and either type of lease results in a liability (akin to debt) for the lessee.   The PEEC therefore decided to take a ‘threats and safeguards’ approach that focuses on the terms and significance of the lease.  If the terms are not market terms for similar leases, then independence is threatened, and the auditor is in violation of the code of ethics.  Similarly, if the lease is material to the firm, an individual on the engagement team or someone who can influence the engagement, then independence is threatened, and the auditor would find themselves in violation of the code of ethics.

Like the new lease standard, the new ethics rules are no longer cut and dry based on the predefined criteria of an operating versus a capital lease.  This means auditors are going to have to take more time to understand the leasing arrangements that exist and then use judgment to determine if those leases impair independence.

While the change does not directly impact CPAs in business and industry because independence is not an ethical issue we focus on since we aren’t independent to begin with; that doesn’t mean we should just ignore this interpretation.  If you are in the business of leasing then these rules could make finding an auditor who is independent more difficult.  The new accounting rules also increase the likelihood that service business might also be in the leasing business if it uses PP&E in providing service, so service companies might also have a similar issue in finding an auditor.  Even if you have plenty of auditors to choose from, the new rules will likely add some additional administration to the auditor independence process and that might require the client (you) to provide more information about potential arrangements with individuals that work for the audit firm on an ongoing basis.

If you are interested in learning more about the proposed revision to the ethics code the exposure draft can be found here, and if you wish to comment, comments are due by December 20, 2017.


Cyber-security is about the basics

When you read about nations and sophisticated hacking organizations being responsible for computer hacks, it’s easy to throw up your hands and say how can I possibly prevent such things; but the reality is a lot more nuanced than that.  While the Equifax hack was quite sophisticated once the hackers got inside Equifax’s systems, the reality was that the hackers took advantage of a known vulnerability that could have been patched to prevent the hackers from getting inside in the first place.  Wannacry is another example that took a patchable vulnerability and the weakest link, users clicking on a link in an email, to cause havoc.  Here are four inexpensive and easy things anyone can do to reduce the risk of succumbing to a cyber-security incident.

 Train your staff – make sure your staff knows to ask questions about emails, and be suspicious about phone calls.  Never go to a website directly from an email.  If your bank wants you to do something go directly to the site from your favorites list.  See who the email is really from; most email programs allow you to hover over the email address and see if it is really from the person or organization it appears to be from. And make sure everyone understand that it is not offensive to call someone to ask if they really sent you the email before you click on any links in the email.  Finally reinforce the training constantly at monthly staff meetings and with new employees.

 Patch your software – you should be updating your operating systems and other software as soon as the patches are available, or at least on a regular scheduled that is no longer than a month. The patches don’t cost you any money, so there is simply no excuse for not patching software regularly. If your IT department tells you they need to make sure the patches don’t interfere with the operations of other software, then tell them that is fine, but they must do it fast.

 Keep up with access – make sure you delete all access for employees that leave the company.  You also need to make sure that access rights are changed when employees job duties change.  The most likely hacker isn’t a nation or some rogue operation, but a disgruntled current or former employee.  Leaving people with access to systems they no longer need is like giving the robber the keys to your house and telling them when you’ll be away. STUPID!

 Check on vendor compliance – Just as you are responsible for internal controls performed by vendors, your business will be held accountable for cyber-security hacks that come through or happen to vendors.  The famous Target hack started through a vendor that was completely unrelated to the point- of-sale system that was ultimately hacked.  You need to make sure your contracts say vendors are responsible for maintaining your standards for cyber-security and then make sure they are following the contract.

While none of these steps will eliminate cyber-security hacking risk, they are like common sense things we do every day such as locking your car when you go inside a store.  The point is not to be invulnerable.  The point is to make your business harder to get into so the criminal will go looking for an easier target.  The old adage of not having to outrun the bear, just having to outrun the other people in your group applies here.  Don’t be the most vulnerable one in the group or the bear will take you down.


Quotes When Things Seem Out of Control

 

Given all the disasters and destruction that make us feel like life is out of control and there is nothing we can do about it, I thought I would be a good time to turn to turn to some famous people to make us realize that there are things we can and should do.

 

John D Rockefeller:

“The secret of success is to do the common things uncommonly well.”

 

Mark Twain:

Don’t go around saying the world owes you a living.  The world owes you nothing.  It was here first.”

 

Winston Churchill:

“We make a living by what we get.  We make a life by what we give.”

 

Mahatma Gandhi:

“Live as if you were to die tomorrow. Learn as it you were to live forever.”

 

Charles Swindoll:

Life is 10% what happens to you and 90% ho you react to it.”

 

J.K. Rowling:

“It is our choices that show what we truly are, far more than our abilities.”

 

Helen Keller:

“I cannot do everything, but I can do something.  I must not fail to do the something I can do.”

 

Thomas Edison:

“I have not failed.  I’ve just found 10,000 ways that won’t work.”

 

Carol Burnett:

“Only I can change my life.  No one can do it for me.”

 

Eleanor Roosevelt:

“No one can make you feel inferior without your consent.”


Fall Top 10 List

It’s October.  While fall officially started a couple of weeks ago, October is when it starts feeling a little more like the actual season, at least here in Texas.  The turn of the season seems to be an opportune time for another top 10 list.  This time it is the top 10 things I look forward to doing in the fall.

10. Cook out on the grill for fun, not to just avoid heating up the house.

9. Talk smack with my friends in our fantasy football league and reminisce about how we had to compute the scores manually when we started a couple of decades ago.

8. Take a trip to a college campus to visit my daughter and remember what it was like when I was in college.

7. Roll the windows down in the car and watch my dog enjoy the wind on her face.

6. Put out the Halloween decorations including the tree filled with plastic pumpkins lights.

5. Relax in the hammock while reading the weekend paper and enjoying a beverage of choice.

4. Go camping and sit around the fire at night watching the flames change color.

3. Enjoy the break between the end of extension tax season and third quarter reporting before year-end reporting and the next tax year work starts up.

2. Walk outside without feeling like I’m walking into an oven.

1.  Take my grandson to his first college football game.

I hope you find a few things to enjoy as well.