The Profession’s Problem with Parents

While the profession still has a lot of work to do to get women into leadership positions, at least they have a pipeline full of women candidates for leadership all the way back to those choosing accounting as their major in college. Unfortunately the same can’t be said about other diversity groups like African-Americans and Hispanics. Those two groups make up 30% of the population in the U.S today, but only 10% of the new accounting hires in 2011-2012 (the last year available) according to AICPA data.

The problem isn’t that CPA firms won’t hire such candidates as much as it is that there simply aren’t enough minority candidates to hire from out of college. Parents of these minorities definitely want their children to become professionals – doctors, lawyers and teachers – but they simply don’t have the same view of the accounting profession. They don’t understand our profession and therefore don’t value it.

It is important that we change that perception. Whites will be a declining portion of our population, becoming a minority in this country sometime in the twenty-first century. While we have done an admirable job filling the pipeline with women, that simply won’t be enough in the future. We need the best and the brightest minorities to join our profession as well, or we will be a second class profession unable to fulfill its mandate as time marches on.

The AICPA is working with a number of groups to change the opinions about the profession. You can read more in this Journal of Accountancy article. But there is one simple thing you can do. Every time you meet with a minority friend, coworker or client, make sure they know how good the accounting profession is and what a great place it would be for their child to have a long and rewarding career.

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Global Management Accounting Principles

The AICPA and CIMA recently released a document which they hope will lead to the creation of a set of Global Management Accounting Principles.  You can find the document along with other information on the effort here. The Principles are expected to help organizations make the best decisions and at the same time improve the understanding of the professionalism of the management accountant.

 The document defines three overarching principles:

  1. Preparing relevant information
  2. Modelling value creation
  3. Communicating with impact

 It talks about how they are relevant in the performance management cycle and business model and then focuses on how they apply to 12 management accounting practice areas which are:

  1. Budgeting
  2. Cost transformation and management
  3. External reporting
  4. Financial controls
  5. Investment appraisal
  6. Price and product decisions
  7. Project management
  8. Regulatory adherence and compliance
  9. Resource allocation
  10. Risk management
  11. Strategic tax management
  12. Treasury and cash management

 The AICPA and CIMA are asking for feedback, so if you have something to say on this topic they would love to hear from you by May 10, 2014.


Fall 2013 AICPA Council Meeting

The AICPA held is Fall Council meeting in Los Angeles last week. In addition to electing Bill Balhoff Chairman for 2013-2014, a number of information and business items were discussed. We heard from the David Morgan on the release of the Financial Reporting Framework for Small and Medium-Sized Enterprises as a non-GAAP solution for reporting as well as from Billy Atkinson on the progress the Private Company Council for help to private companies in GAAP reporting. Finally, 40 years after the creation of the FASB, the profession is addressing the unique reporting needs of private companies.

There was an overview and breakout session on the future of learning commission. I addressed much of what was discussed in an earlier blog, but we also heard from Sal Kahn on the Kahn Academy. The Kahn Academy is a not for profit organization that may change the world. It all started when Sal Kahn wanted to help his cousin who was having trouble with math. It was inspiring to hear the success the Kahn Academy is having while at the same time realizing how humble Sal Kahn was and still is.

There has been a lot written about what the Kahn Academy is doing, but I think Sal put it best when he explained the real difference between how they taught through the Kahn Academy versus the traditional approach. In the traditional approach students spend a fixed amount of time on a subject with the variable being how much they learn as measured on a test – 100%, 90%, 70% etc. No matter how much or how little a person learns they move on to the next topic because they are following a strict time schedule. The Kahn Academy turns that paradigm on its head. They make the variable in the equation the time spent learning and the fixed measure the required knowledge before they can go on to the next topic. If you think about it this makes a lot more sense. In fact, it was the way things were done for centuries when students were taught in a one-on-one fashion. That model went out of fashion when we entered the industrial style of education putting dozens of kids in front of one teacher. The mass production model was more efficient in teaching the thousands of students to a basic level, but was not as effective in helping each student achieve their best result. Technology now let’s us combine the efficiency of the mass education model with the effectiveness of the one-on-one approach, and that is what the Kahn Academy is doing.

Finally we heard from the national commission on Diversity and Inclusion. One of the key deliverables from the commission will be a series of “play books” that firms and businesses of all sizes can use to become more diverse. The first will be delivered in the Spring of 2014 and will cover retention and advancement. If you are not on board with the imperative to become more diverse, then you need to research the coming demographic changes in U.S. In our lifetimes, the U.S. will become a majority minority nation. Even if you set aside client’s desire to work with diverse suppliers, you simply won’t have enough employees to successfully run your business if your staff does not become much more diverse – at all levels – than it is today. And its not immigration driving this – its birthrates – so even if you completely closed the boarder (which would do much more harm than good to the US economically) the demographic trends will still happen.

It is inspiring to see how seriously the Profession takes the need to change. I for one am very glad we are trying to proactively address the changing future rather than waiting for it to happen to us and be too late impact the results.


Going Global

The past week really brought home to me how international the profession of accounting is becoming.  I attended the International Federation of Accountants, Professional Accountants in Business committee meeting in New York and the Regional AICPA Council meeting in Atlanta.

The IFAC meeting really brought home that no matter where you work in the world, the U.S., Canada, Europe, India or Australia, the issues we are dealing with as PAIBs are the same.  We are dealing with investor demands for more information being fulfilled through standard setters and regulators.  We are dealing with risk management and internal control and the realization that as a business we have been organized to take risks – but as PAIBs we are being asked to monitor that risk taking to make sure the risks are known and within the corporate plans.  PAIBs across the world are being asked to be more than just good accountants; we are being asked to be strategic leaders in the business to deliver on business plans and ultimately the return to all stakeholders in the business.

The internationalization of the issues facing the profession was made even more apparent at the AICPA Regional Council meeting.  We spent half the meeting hearing updates about and talking about potential implications to the AICPA and our members of the various impacts of Internationalization.  Mandatory auditor rotation is just one such issue.  It is a purported solution to all the ills related to audits around the world.  Some areas see it as the solution to an apparent lack of competition among the audit firms.  Others see it as the way to give auditors backbones to stand up to unreasonable requests from the companies they audit – the theory is it is easier to say no if you know your going to lose the relationship after a few years anyway.  But whatever the problem, mandatory auditor rotation as the solution is gaining momentum due to an interesting dynamic – that everyone else is “doing it” so it must be good and we need to do it too.

This last point brings out the reason why it is important to talk with an be part of the international professional accountant community.  Some solutions are good and worth emulating.  Others, however, are not good at all and the misinformation being spread can only be combated by hearing the real story from our fellow professionals in those countries. I for one am glad the AICPA is focused on the internationalization of the profession and opening the lines of communications around the world.


October 2012 AICPA Council Meeting

I attended my last AICPA Council meeting as a member of the Board of Directors last week. While it was not quite as eventful as my first Council meeting it definitely had its moments.  The first Council meeting I attended was highlighted by the proposed move of the AICPA operations from New Jersey to North Carolina.  The Fall 2013 meeting covered issues from Private Company Financial Reporting to the National Debt Crisis to the AICPA’s pension fund impact on its finances.  I will discuss each of those in a little more detail below.

The Council heard from Billy Atkinson, Chairman of the newly formed Private Company Council (PCC). Billy has a long career serving private companies as a member in public practice, but also was one of two dissenting votes on the Blue Ribbon Panel recommendations.  FAF recently named him Chairman and Billy provided insight into his view of the work ahead for the PCC.  Billy pointed out that work on the framework for when differential standards should exist is a critical first step for both the FASB and the PCC.  When pressed on what types of differences he supports, Billy suggested that when it comes to measurement and recognition, any suggested changes may need to be made for all entities and it would be his inclination to first seek for the FASB to review the recognition and measurement issues overall.

We then heard from David Morgan, Chairman of the AICPA Financial Reporting Framework (FRF) Task Force which is creating a standards framework for Small and Medium enterprises.  The framework is essentially an enhancement of OCBOA, and will not be considered GAAP, but should offer a comprehensive reporting alternative for small private businesses that do not intend to go public someday.  Success of the FRF will depend on educating users – business owners and their bankers – of small business reporting on the higher usefulness of the FRF for small businesses.  You can expect to see an exposure draft covering the entire FRF in the next month.

Paul Stebbins reported on the escalating crisis around our national debt.  Did you know we are already on a trajectory that is worse than Spain, second only to Greece in the debt crisis triage center? Only record low interest rates are keeping our interest payments somewhat in check.  If we return to anything close to normal interest rates our interest payments will explode and we will quickly be paying over a trillion dollars a year in interest alone which doesn’t pay for a single program. 

There was also a discussion on AICPA finances that was focused mainly on the impact of the pension plan on AICPA’s reported results.  Like every organization with a defined benefit pension plan, declining interest rates have significantly increased the liability, and therefore deficit, reported by the AICPA.  This is a non-cash charge and even if interest rates never go back up, the ERISA required cash funding will be paid in over a number of years at a rate the AICPA can afford without negatively impacting the ability to serve its members.  The AICPA has already taken a number of proactive steps including freezing the pension plan starting in 2017, and will continue to look at additional alternatives to “de-risk” its pension plan in the future.

While this was my last Council meeting as a member of the AICPA Board of Directors, I was asked to serve an additional year on Council, filling the last year of a three year term ending in October 2013.  It was a privilege to serve on the Board of Directors and I am honored the AICPA wants me to stay involved at the Council level.  I look forward to continuing to update you on Council activities as well as the many issues impacting our profession into 2013.


Now That You Are A Financial Expert–What Next?

I wrote in a previous blog how as a CPA you are the default personal financial planning expert in your office.  Once you get comfortable answering the occasional question from your coworkers about why they should invest in the company 401(k) plan to get the company match or how, unless they are the CEO or CFO, they probably won’t have to pay any taxes when they sell their house, you may be ready to move to the next level.

The AICPA launched its 360 Degrees of Financial Literacy campaign over five years ago and it has provided the public great information to help educate them on a variety of financial topics from insurance to buying a house to paying for college education to planning for retirement.  The public website can be found at www.360financialliteracy.org (or at www.valueyourmoney.org with a Texas bent for my colleagues in the TSCPA).  This is a great website to share with your coworkers, but maybe you want to do even more.

One thing you could do is hold a lunch and learn, but, besides being scary presenting to that many people, it would be a lot of work to put together a presentation.  The AICPA is here to help.  We can’t make your nerves go away, but we can reduce the work load by supplying you with ready to go financial literacy presentations which can be found here. You have to be an AICPA member to access this site, but if you are, it will supply you with ready to go presentations set up by life stage just like the 360 Degrees of Financial Literacy website.  These presentations can be especially effective in smaller companies and locations that don’t have access to big corporate training programs. 

In addition to providing a valuable service to your fellow employees you can also use the presentation as an opportunity to enhance your skills.  And that is even easier to do when the audience is eager to learn which is always the case with financial literacy presentations; so check out the website and see if there is a presentation that might be especially relevant to your co-workers.  You might also want to check with the HR department (or whoever is in charge of such things) to make sure you do the right things to make it clear the company is not offering specific financial advice.  This really isn’t an issue with the AICPA presentations, but it’s better to make sure you clear the program with the right people up front.

Finally, there is one more site I want to mention to you that you can share with your co-workers. Total Tax Insights  is the most recent addition to the AICPA family to financial literacy tools.  It is a calculator that will show you the total tax – federal, state and local – that you pay in a year.  It goes way beyond income tax and includes things like property tax, tax on your phone bill, tax on the gas you purchase, even the tax on that glass of wine you will enjoy this evening.  The tool is customized to calculate the tax based on where you live across the more than 3,000 counties in the U.S.  The most important thing it does is peal back the layers of complexity and transparently show the facts.  What you or your co-workers do with those facts is up to you, but at least with the AICPA’s help, everyone can now get to the real facts as a place to start the debate.


Pathways Commission Report

I had the privilege of being on a panel at the American Accounting Association (AAA – the professional organization for Academia in Accounting) annual meeting held in Washington DC last week.  As usual there were dozens of breakout sessions covering a wide-range of topics over the three days, but one area of particular interest to everyone in the CPA profession were the sessions on the new Pathways Commission Report.

The Pathways Commission was formed based on a recommendation from the U.S. Department of Treasury Advisory Committee on the Auditing Profession (ACAP) delivered in 2008.  Specifically the recommendation was to encourage the AICPA and the AAA jointly to form a commission to provide a timely study of the possible future structure of higher education for the accounting profession.  The results of the commission’s effort is an extensive report that can be utilized by Accounting Educators, academic Institutions and the entire profession to ensure that our Universities continue to respond to the market demands for students and research in accounting.

The report can be found on the Pathways commission website at http://commons.aaahq.org/groups/2d690969a3/summary.

The report makes seven key recommendations including:

  1. Build a learned profession for the future by purposeful integration of accounting research, education, and practice for students, accounting practitioners and educators.
  2. Develop mechanisms to meet future demand for faculty by unlocking doctoral education via flexible pedagogies in existing programs and by exploring alternative pathways to terminal degrees that align with institutional missions and accounting education and research goals.
  3. Reform accounting education so that teaching is respected and rewarded as a critical component in achieving each institution’s mission.
  4. Develop curriculum models, engaging learning resources, and mechanisms for easily sharing them as well as enhancing faculty development opportunities in support of sustaining a robust curriculum.
  5. Improve the ability to attract high-potential, diverse entrants into the profession.
  6. Create mechanisms for collecting, analyzing, and disseminating information about the current and future markets for accounting professionals and accounting faculty.
  1. Convert thought to action by establishing an implementation process to address these and future recommendations by creating structures and mechanisms to transition accounting change efforts from episodic events to a more continuous, sustainable process.

But the report does more than make summary recommendations.  It has extensive details about actions that need to be taken, why these actions need to be taken and possible impediments to accomplishing these critical objectives.  If you are in Academia, this report is a must read and it is just as important to the rest of us in the profession because if we truly want CPAs to be seen on the same professional level as Doctor and Lawyers (OK, maybe not the lawyers), then we need to continue to make progress in conjunction with our Academic colleagues to be seen as a truly learned profession.