April 2018 TSCPA Executive Board Meeting

Texas Society of CPAs (TSCPA) leadership is focusing on how the organization needs to change to continue the Society’s superior support of the profession and members. Numerous topics were discussed including:

  • Branding
  • Committee Restructuring
  • Peer Review
  • State-Chapter Coordination
  • Sunset Review of the Texas State Board of Professional Accountants
  • Legislative Plans for the 2019 session
  • Membership Dues
  • 2018-2019 Budget

Many of us are rightly proud of our local chapter and the services and opportunities the chapters provide us as members. We are also pleased to be part of a state level organization that can provide benefits and advocacy a local chapter could never provide on its own. Because TSCPA members are all members of both a local chapter and the state organization, finding the best way for the two organizations to work together to better serve our joint members is in the best interest of everyone. We don’t have all the answers, but the executive board looks forward to working with chapter leadership to develop those answers together.

The need for CPA licensure may seem obvious to all of us in the profession. Such state level licenses are even required by some federal agencies such as the Securities and Exchange Commission. So asking the legislature to support the continued existence of the Texas State Board of Public Accountancy would seem an easy thing to get accomplished. But just ask the doctors in the state about how obvious licensing requirements can get caught up in politics unrelated to anything to do with the licensing process. The TSCPA is working for you to see that such a thing doesn’t happen so our 26,000 members don’t have to worry about such events in the middle of our busiest time of year.

Finally, we wouldn’t be CPAs if we didn’t think about the numbers. Our budget is the result of well-considered decisions on how to spend the dues trusted to us to provide important benefits you can’t get anywhere else. If there is more we can do, we would love to hear from you.

I would love to see my Texas readers at the TSCPA annual meeting this year in late June.  The meeting is taking place right here in San Antonio. Check out the TSCPA website for details on dates, times and how to register.


Afraid to Provide Feedback

I recently read an article that talked about how ratings for gig economy service providers are at an all-time high, but the high ratings are not necessarily because service levels are at an all-time high.  The conclusion of the article is that ratings are inflated because customers don’t want to say negative things about other people.  In some ways this goes back to one of the golden rules which is if you can’t say something nice, don’t say anything at all.  I think rating inflation also points to another issue.  People don’t want to do the hard work of helping someone improve.

I see the same effect in personnel evaluations.  Supervisors want to take the easy road and tell an employee that their performance during the past year was not just fine, but increasingly, that the performance was exemplary.  Educators have talked for years about grade inflation, and the same phenomenon is going on in work evaluations.  Some companies fight the trend by creating rules that force distributions across all ratings.  The problem with such a requirement is that it can force managers to give undeserved ratings on both the high and low end of the scale.

The real solution to rating inflation is in the mirror.  We supervisors must take giving ratings seriously and embrace the hard work of telling our staff about their actual performance – the good and the bad.  I think one of the reasons that mentorship programs are all the rage today is because people are starved for actual feedback on how to improve.  Supervisors are not doing their employees any good by sugar coating feedback.  Here are three thoughts on how to get started in giving better feedback.

Take the time to give feedback – this means taking the time to really observe what your employees are doing, and then making the time to give feedback, both good and bad, constantly.  I know we are all busy and have a thousand deadlines, but if you aren’t observing and providing feedback then you aren’t supervising, and you need to find another job, probably at lower pay, where no one reports to you.

Truly be constructive – criticizing someone is easy.  Finding a way to help someone improve is much harder.  Start with eliminating the word ‘but’ from all your evaluations and discussions.  From there, think about what advice you would want your employee to embrace if you ended up working for them some day.  Who knows, such an event might occur.

Extraordinary ratings deserve extraordinary performance – if you can’t point to what the person did that was unusual and far above expectations, then maybe the person should just get a solid good performer rating.  I’ve been working for thirty years and have done some extraordinary things on occasion, but most days I show up and do the work expected of me.  Yes, I’ve deserved some extraordinary ratings, but I’ve also deserved a lot of good solid, job well done ratings.  As supervisors we shouldn’t be afraid to tell someone they did a good job.  What is so bad about that?

In the end, you will sleep better knowing you were honest in your assessments, and your employees will eventually appreciate the help you provided in enhancing their performance which will open more, not fewer, career opportunities.

Why A Generation Z’er Chose Accounting by TXCPA2B Blogger Liz Wood

I still have family friends ask me about my career path with a response similar to this: “Accounting, huh?  That seems…interesting.”  It is hard for people to try and act excited about my college path, especially when they still think of my generation as the technological savvy, entrepreneurial, adventurous type.  However, I think a lot of individuals confuse Millennials with Generation Z; furthermore, there are actually a lot of Gen Z’ers that are interested in fields like accounting.  Here is a list of reasons why I, as a fellow Gen Z’er, chose accounting:

Diverse Opportunities

“Accountants are boring.”  Some of my friends continue to joke with me about this idea, but I laugh it off!  I think a lot of non-accounting majors do not understand the vast routes you can take.  For instance, by the time I graduate, I will have engaged in three internships—all of them will be based on accounting but are completely different at the same time.  My first internship was in corporate accounting for a private company in an office-like environment.  My second internship will be in internal audit with a lead producing company.  I will be able to visit multiple facilities in France, California and New York and assist with conducting audits.  Finally, my third internship will be in external audit with a Big Four firm.  This will allow me to engage with different clients and review their financial records and documents.

And it doesn’t just end there.  There are SO many other different pathways to take in an accounting career, and each one will help you develop a new skill set.  Accounting is great for the indecisive but also for those who want to work the same job until retirement.

Stability and Growth

I am personally not a huge risk-taker. In fact, I have already started a Roth IRA to save up for my retirement because I like having a cushion to fall back on.  With an accounting career (especially public accounting) I can feel safe knowing that I probably won’t be laid off any time soon.  Also, a public accounting career provides almost guaranteed promotions after a certain timeframe.  “Hmm, I wonder if I will ever get promoted to senior associate?” is not a question new auditors typically have to worry about.  It certainly takes a heavy weight off my shoulders!

Accounting is not Always Forever

But what if you end up hating accounting?  This is a question I receive a LOT, and here’s my take on it:

As I mentioned earlier, there are different routes to take, so I could always try a different accounting sector.  Even then, if I still did not enjoy my career, I am not forced to stay in accounting just because that is what my degree is in.  I know many individuals who have switched from accounting to marketing or human resources and are currently executives at a company.  Accounting provides such a strong foundation that is integral in all parts of a business and can allow you to branch out to new departments.  That’s why I personally think accounting is a strong degree to pick for undecisive business majors.

I’ll be honest, accounting is typically not the first major that comes to a student’s mind in terms of studies (it may be a last choice for some, in fact).  However, the benefits, learning experience and ability to grow, and even travel, are just a few of the factors that attract Generation Z’ers to this field.  I think accounting is a hidden gem that not many young students think about, so I consider myself lucky to have discovered it so early!

Blogger: Liz Wood








TXCPA2B is a blog written by Texas students in pursuit of the CPA certificate. The views expressed here are those of the authors and not necessarily held by TSCPA or our members.

Being Prepared

I write this blog after witnessing a bench player lead Villanova to the NCAA Basketball National Championship last night. I realize Donte DiVincenzo was the third leading scorer for Villanova during the past season, but he still had to come off the bench, which meant being mentally ready to provide whatever his team needed when he came into the game. Professionals could learn a lot by thinking about DiVincenzo’s attitude and work ethic he displayed during the game. You never know when the moment to shine will come, but if you are prepared you can show the world your best. If you are not; if you are pouting because you weren’t given the top project or the starting role, you’ll never be ready when the moment hits.

If you watched the game, the 31 points that DiVincenzo scored wasn’t the only feature of his game that was impressive. He also made several key defensive plays. As professionals, we need to be prepared to do the hard, sometimes dull work that makes our companies successful. There may not be much glory in the scorebook for such work, but it is noticed by those around you. Your co-workers then want to get you more involved, and just as Villanova fed off Donte’s energy, your coworkers can feed off yours.

Finally, when Michigan realized he was going to make those three-point shots, he changed his game and drove to the basket. As professionals we must be prepared to change our game. The needs of our company are constantly changing, and the expectations they have of you are constantly changing as well. It’s up to you to change to help yourself and your company continue to be successful.

While DiVincenzo’s performance cost me winning our office bracket, he was still a wonder to watch. Do your co-workers think you are a wonder to watch?

SEC on Cybersecurity

Many people may have missed a big release by the SEC on cybersecurity reporting. It’s easy to understand why. First off, many people are getting ready for the initial quarter of reporting under the new revenue standard. Second, others probably thought the SEC made some statements on reporting about cybersecurity several years ago and nothing was said about new disclosure requirements, so the news must not be a big deal. That would be a mistake.

The new interpretive guidance came from the Commission, not the SEC staff as was the case in 2011. With the Commission adding its weight behind the new guidance, companies need to pay attention because ignoring the advice can come with much more serious consequences to registrants.

Much of the guidance is like the guidance the staff provided back in 2011, but there are some key additions. The first is around controls being in place to adequately and timely report about cyber-attacks. Legal and accounting groups with SEC reporting responsibility need to start talking to whatever group in the company is responsible for monitoring and managing threats from cyber-attacks. Sox compliance organizations also need to seriously consider adding a new disclosure control specifically about such incidents.

The second addition is around discussion of trading in the company’s stock with knowledge of cyber breaches. The SEC provided specific warnings about trading by Directors, Officers or other corporate insiders in advance of disclosures about a breach. If those disclosures prove to be material, then such trading would be deemed illegal. Given that materiality is in the eye of the beholder, or in this case regulators, judges, and juries of your non-peers, anyone with such knowledge should probably refrain from any trading until 24 hours after the disclosure is made by the company.

The Commission has graciously provided examples of potential disclosures, so there is no excuse for not knowing what the SEC expects to see in 8-Ks, 10-Qs and 10-Ks. The release was made after calendar year 10-Ks were due, so the first time the new guidance will be effective for recurring reporting is in the next quarterly filing for most companies. You might want to consider taking a breather from putting together those new revenue disclosures and consider what cybersecurity disclosures are now also necessary.


Deferred Tax Assets and Liabilities By Guest Blogger William R. Stromsem, JD, CPA

The Tax Cuts and Jobs Act of 2017 lowered the corporate income tax rate to a flat 21 percent and provided a one-time deemed repatriation tax on controlled foreign corporations’ current earnings and prior untaxed earnings back to 1986. The repatriation rate is 15.5 percent on liquid assets and 8 percent on illiquid assets instead of the prior 35 percent rate. Many large corporations are reporting radical changes to their bottom line from adjustments to their deferred tax assets and liabilities.

It is difficult to estimate the book income effect of the repatriation tax because we do not know how management may have initially accounted the deferred tax, with many companies assuming that earnings would be perpetually reinvested overseas and not booking deferred tax liabilities. Also, there is uncertainty as to when repatriation will be recognized with the new tax law allowing the tax to be paid over up to eight years. Some companies will pick up the tax expense immediately, with Apple announcing that it will pay $38 billion to repatriate its foreign earnings of $252.3 billion that have not been previously taxed in the U.S. It is estimated that more than $2.6 trillion in corporate profits are sitting in foreign bank accounts.

For tax rate changes, recent reports in the press show major companies taking hits: Amgen, $6-6.5 billion; Bank of America, $3 billion; and Credit Suisse, $2.32 billion. Fannie Mae and Freddie Mac had net operating losses from the financial meltdown and will have to adjust the value of their deferred assets downward by a combined total of $10-$20 billion. However, about two-thirds of the companies in the Dow Jones Industrial Average will have a boost in income as a result of reducing deferred tax liabilities. These include Verizon, $18.4 billion; Exxon, $12 billion; Pfizer, $17.5 billion; and Apple, $11 billion.

These valuation changes flow through the income statement, but most savvy analysts view this as not important and a distraction from real operating results. On the first page of his annual letter to shareholders, Warren Buffet commented on the $24 billion increase in Berkshire Hathaway income from adjusting its deferred taxes, saying that it distracted from operating results and, “For analytical purposes, Berkshire’s ‘bottom-line’ will be useless.”

Smaller corporations have less dramatic dollar amounts, but they still must make required valuation adjustments to their deferred taxes and be prepared to explain unexpected results to owners and lenders.

Accounting for taxes is a generally shared responsibility for financial accounting and tax experts, but often they each look at the other as having the primary responsibility. Financial accountants sometimes see tax accounting as tax, and tax experts see tax accounting as having FINs (financial interpretations). The important thing is for everyone to know what is required at this point. Accounting Standards Codification (ASC) 740, Income Taxes, requires adjustments to the beginning of the year balance of a valuation allowance if there is a change in circumstances that causes a change in management’s judgment about the realizability of the recognized deferred tax assets. A valuation allowance is required if it is more likely than not that some or all of the deferred tax asset will not be realized in the future. ASC 740 also requires analysis and disclosure of changes to deferred tax assets, which will help in seeing how corporations are managing their deferred tax assets and liabilities.

William R. Stromsem, JD, CPA, is a technical writer for TSCPA’s Federal Tax Policy Committee and an assistant professor at George Washington University School of Business.

What is FinREC up to?

I had the privilege of attending my first in-person Financial Reporting Executive Committee (FinREC) meeting last week in New York. FinREC is an AICPA committee that determines the AICPA’s technical policies regarding financial reporting standards with the ultimate purpose of serving the public interest by improving financial reporting. While the committee is not a standard setter and papers and guides are not considered official authoritative literature under GAAP, the committee’s guides and papers provide our profession with important guidance and insights on how others are interpreting GAAP with the hope of bringing consistency to various issues and topics beyond what the standard setters can provide.

At the March meeting the committee discussed three major topics including an addition to the Employee Benefit Plan guide on Multi-Employer Plans, additional revenue recognition papers for inclusion in the revenue recognition implementation guide, and some of the first papers on the Current Expected Credit Loss (CECL) model which we will all have to implement by 2020.

Multi-employer benefit plans can be pension, health and welfare or apprentice plans, which are collectively bargained and receive contributions from several different employers. A key feature of such plans is that the contributions are not made only for the benefit of the employer’s employees, but for the benefit of all participants in the plan no matter which employer the participant came from. While financial statements of such plans have many commonalities with single employer plans, there are several unique aspects to multi-employer plans which the proposed guidance addresses.

Work on revenue recognition is winding down with 130 papers already posted for comments. FinREC reviewed five papers at the meeting. Three papers covering health care and construction industry issues had already been exposed, and FinREC was reviewing and responding to the comments received. Two papers covering gaming and telecommunication industry are being prepared for exposure in the coming months.

FinREC reviewed the first two proposed topics in response to the implementation of the new CECL rules. One paper discussed whether the way an entity implemented the required reversion method in determining credit losses was considered an estimation technique or an accounting policy election. The other paper explored the potential for additional financial instruments beyond the U.S Treasury security example in the FASB standard to have zero expected credit losses under the CECL model.

The members of FinREC took their work very seriously, asked numerous questions, and discussed implications of the work throughout the day. We would love for you to do the same when these items are posted for public comment in the coming months.