Why B&I CPAs should care about legislation

One of the key benefits provided to you by the AICPA and your state society is representing your interests in front of Congress and state legislatures. I was recently at the TSCPA Midyear Board of Directors Meeting in Austin and was reminded why such connections are so important. Many B&I CPAs would prefer not to deal with the political end of our profession and when I ask them why, they say it does not affect or interest them. I always recall the quote “just because you aren’t interested in politics doesn’t mean politics won’t be interested in you” when I hear such a response. So this week I thought I would suggest a few reasons why all CPAS, including B&I CPAs, should be interested in what goes on in their state legislature and why you should be thankful your state society works to protect your interests.

The first and most important reason is to protect the value of your CPA license. Because you are still a CPA, I assume you see some value in holding that license. The reality is that a lot of other groups also see value in the CPA license and they want to get some of that value for themselves. Whether they want to call themselves registered accountants, or any of a dozen other terms, their desire is to benefit from public confusion over their purported license while not adhering to the educational, professional and ethical requirements of being a CPA. Your state society makes sure the legislators understand these distinctions and stop efforts to confuse the public.

A second important focus is to keep the tax laws as efficient as possible. One example in Texas are the principles on franchise tax reform that TSCPA has distributed to the legislators. Instead of supporting a specific bill, the TSCPA has recommended several principles for the legislators to consider in any changes to the franchise tax. If we have to have a tax, then we need to keep the process of calculating that tax as efficient as possible. In the case of the franchise tax one significant simplification would be to use the same cost of goods sold calculation as is required for federal income taxes. This would cut in half the work businesses have to complete. Instead of two separate calculations, a business could develop one calculation and use it twice. Paying a tax can be painful, but necessary. Paying excess cost to calculated the tax owed is just like rubbing salt in a wound. When a change can be made that makes the calculation less painful with little change in the actual tax, we all benefit.

I could cite additional examples, but brevity like efficiency has a luster all its own. The AICPA puts out a monthly newsletter on its activities and you can find out more about what is going on in your state from your state society website. Check it out; you might even be surprised to find an issue or two important to you.

Different States

One common theme for many business and industry (B&I) CPAs is that their CPA license is from a state different from where they currently reside. While CPA license mobility has helped ease the burdens on the need to get a license from any state where they may perform work, CPAs that work for public accounting firms generally must obtain a license from the state in which they reside in order to legally “hold out” as offering CPA services to the public. Because most B&I CPAs do not provide services to the public, but instead provide services only to their private employer, the same rules requiring licensure in the state in which they reside do not apply to B&I CPAs. Instead many B&I CPAs simply maintain their license in the state from which they originally were granted the license.

This makes perfect sense. Why go through the bureaucratic paperwork of getting reciprocity, and why pay for multiple licenses across multiple states if it is unnecessary? As a result of being licensed in a different state, many B&I CPAs also mistakenly believe that they are not eligible for membership in the CPA society of the state in which they reside. Nothing could be further from the truth.

Almost all state CPA societies allow a licensed CPA from another state to be a full member of their organization with all of the same rights and privileges of a CPA from their home state. And joining your local state CPA society provides B&I CPAs with enormous benefits. Being involved in a state CPA society is a great way to meet and network with CPAs from all parts of the profession including fellow B&I members that may be a great resource as they are dealing with the very same issues you are dealing with every day.

So if you’re a B&I CPA living and working in a state different from the one on your CPA license, check out your local state CPA society. They all have websites with information on the benefits of membership and what it takes to join. You might just find that your local state CPA society provides a great way to feel more at home in your new state.

You Get What You Put In

When I tell talk to business and industry people about their professional organizations I often get the same reaction – “they don’t do anything for me.” I used to try to convince them they were wrong and their professional organizations did plenty for them.

Our professional organizations defend the value of the CPA license through work with state boards of accountancy and state legislatures. The number of less than intelligent ideas by well-meaning but uniformed non-professionals can sometimes be amazing. The simple act of informing and educating such people about how the profession works can have significant results. Our professional organizations work to keep the tax code and other laws and regulations rational and sane. I would agree that success in this area hasn’t been the greatest, but if you look at all of the crazy ideas proposed that didn’t make it due to the profession’s involvement, I think you would agree things would be much worse without our professional organizations.

I could add a dozen other things to that list but I quickly get that look of, “but none of that is FOR ME, what are they doing FOR ME.”

So I can talk about the great benefits like insurance, life and disability for example, but they can get that from other sources at rates and terms that are not quite as good, but not bad either. I can talk about CPE, but then they say it’s just a racket by the profession to get more money out of them for something they don’t have time for in the first place. I can talk about the ability to create a network of their peers to have for asking questions and seeking help and I get a blank stare.

I have come to realize there are many people that don’t get anything out of the profession because they don’t want to get anything out of the profession. I find that the saddest moment of all. Here are people that worked through five years of college, extensive days and nights studying to pass the CPA exam and at least a year of relevant work experience to finally get that CPA license and now they decide it isn’t worth another second of their time.

There are two realities about any time humans gather in groups of more than one. The first is that we do so to get something out of it, and the second is that you only get out of it what you put into it. The CPA profession is no different. Now when people tell me their professional organizations haven’t done anything for them I ask them, what have they done for their professional organizations? When the answer is “I paid my dues” I tell them anyone can do that. If you really want your professional organization to do something for you, then pay with some time. You’ll be amazed at how much more you get back.

Filing Taxes

Every CPA in business and Industry has faced the same questions as soon as someone finds out they are a CPA.  The question can take a hundred different forms, but they are all about the same; someone wants to have a question about income taxes answered.  I generally try to keep up with the latest tax issue just so I know enough to send them in the right direction.  Today, the hot tax topics are around the Affordable Care Act.  From the additional 0.9% Medicare tax on wages over certain limits to the 3.8% Medicare tax on investment income (once again over certain limits) to the penalties for not obtaining medical insurance, there sure seems to be a lot of questions and even more misinformation out there.

It seems, however, more people are beginning to understand CPAs do many things other than taxes so more often than not, when I tell people I’m a CPA, they then ask what I do instead of immediately going into their tax question.  Once I tell them what I do instead of asking me tax questions, because they realize I don’t do taxes for a living, they do on occasion ask me if I file my own taxes.  I am proud to say I do file my own taxes, at least if you can say using tax software to fill out the forms and file them is doing your own taxes.  I say that because I recently met a CPA who takes pride in still filing out their tax forms by hand.

While I think that is a little extreme, there are many people, many CPAs, who wouldn’t think of filing their own taxes.  I consider my personal taxes just short of too complicated for me to handle.  I don’t have passive income, partnership income or complex investments, but I do buy and sell stock every year and I do file a schedule C for the work I do as a referee.  Of course that is about as simple a schedule C as you can get.  There is no home office deduction because my workspace is the pitch and there is no place in my house dedicated to my work as a referee.  Of course, I am very careful to record all of my earnings throughout the year and declare all of them on my taxes.  Beyond a simple a matter of integrity, putting my CPA license on the line to save a few hundred dollars in tax by committing fraud and not declaring all of my referee earnings would seem to be about as stupid as it could get.

Being a home owner and charitable contributor, it is worth the effort to itemize my deductions, and of course I have some interest and dividend income.  All of that is fairly straight forward.  The part that starts to concern me is calculating the credits and deductions for college tuition for my two girls. Come to think of it, without the software help, I don’t know if I would feel comfortable taking on that complex part of the tax code and then the Alternative Minimum Tax is always fun.  If that wasn’t mostly automated I would really hate have to manually calculate my taxes twice each year.  Talk about unreasonable punishment!

So, do you still file your own return?  Or have you given up and turned it over to someone else?  If the tax code has become so complex that even CPAs are giving up on filing their own tax returns, then maybe it really is time for some serious simplification of our tax code.


The International Federation of Accountants (IFAC) Professional Accountants in Business (PAIB) recently held their Fall meeting in Beijing, China. Unlike New Delhi India which I visited in 2012, China is a thoroughly modern country in every way. The infrastructure is amazing, but it is so much more than that. The professional accountants I met understand their businesses, the global economy and the important role PAIBs can play in the future of both.

The China Institute of CPAs (CICPA) has over 200,000 members and is likely to rival the AICPA for the largest professional accounting body in the world in the next 10-20 years. Currently their focus is on developing a thriving and large public accounting industry. They are doing this through the resources offered by IFAC to every professional accounting organization in the world. IFAC sets international standards for audits, education and ethics. The CICPA has translated all of these into Chinese (no small feat) and has used them to create a true profession from nothing in in 25 years.

While the CICPA is not yet focusing on PAIBs, roughly half of its members are PAIBs. Those members are much like the AICPA PAIBs until a couple of years ago, a large unheard, under-appreciated section of membership. The AICPA took decades, but has finally delivered with the CGMA. The recognition and resources now afforded to PAIBs in the AICPA are only rivaled by those offered to PAIBs in CIMA, because after all we are all CGMAs – 140,000 strong. But if China can create an accounting profession in 25 years, then I have no doubt once they put their minds to helping PAIBs, they will do so with the same speed and efficiency that has propelled them to international prominence in everything else they do.

For now we are number one, but it is going to take significant continuing efforts by staff, volunteers and every credential holder to ensure that CGMAs remain the best Professional Accountants in Business.


Today, more than ever, networking is an important part of your career development. There are many layers to networking for a B&I CPA today. First, there is the networking within your company. It is important to get to know more people than your boss and your colleagues in your silo. You need to know and be known by your boss’ peers as well as you boss’ boss’ peers. You can be the best employee in the company, but if leadership doesn’t know who you are then you will not be the person they think of when career opportunities appear. It is important that your immediate boss is willing to support you, but his/her job will be much easier if there are other voices in the room that will join in a positive chorus.

You also need to develop relationships with peers outside your organization. These relationships are useful for two purposes. First, getting anything important done in business today invariably requires a team from many disciplines. Second, it’s important that your good name is repeated to your boss’ peers by their staff as someone that is helpful and they enjoy working with when the occasion presents itself.

Networking should also go beyond your immediate employer. One of the best places to start is with your professional organization. Local chapters are a great way to meet people in all stages of their careers. Your professional organization can be a great source of guidance, development and opportunities. This kind of networking can be very useful in today’s world where a career can consist of jobs at several different employers. Studies have shown that up to 50% of jobs are filled because the applicant learned of the job from someone in the company rather than through staffing agencies or on-line sites like Monster.com.

And that brings up an important topic. Some people equate getting jobs through relationships as advancing a career through the good ‘ole boys network or something akin to nepotism, but the truth is a lot less negative than those who have such a view would have you believe. There is actually nothing evil about getting a job through someone you know. The truth is that hiring decisions are some of the most critical a business can make. Getting it right can make the difference between a thriving business and a struggling one. In making that decision, it only makes sense that the hiring manager will use every edge he or she has including previous knowledge of the candidates. So all things being equal, or even close, the hiring manager is naturally going to choose the person he or she knows and trusts.

Of course networking has gone virtual today as well. Posting your resume to LinkedIn is a start, but a true virtual network takes more than maintaining or setting up a LinkedIn account. A virtual network needs to be built over a variety of channels. You can develop a twitter network by following and being followed by others. You can get involved in conversations by commenting on blogs and questions posted on-line. Finally, you can seek to become an on-line expert by writing your own blogs and leading conversations on-line.

No matter whether your network is a new virtual one or an old fashioned one, there is one truth about networking. You need to build and sustain your network when you don’t need it so it will be there when you do. So get started on your network today and it will be there to help you throughout your career.

Performance Evaluations

It’s that time of year for many in business and industry – time for those annual performance reviews.  After completing these reviews for 20 years at AT&T I have learned a few things that work and a few things that don’t.  Rather than talk about the whole theory and strategy of evaluations, I’m going to cover what I consider the more tactical things that have worked for me over the years.  For many of you reading this blog it may be too late to incorporate these ideas for your 2012 evaluations, but it is a great time to start doing them so that 2013 will be a much easier year for you.

  1. Take notes regularly.  Twenty years ago I had a file set up for each of my direct reports and I added hand written notes to the file each week.  Now I maintain my notes electronically, but it is the same idea.  I set up a reminder in outlook for me to write up notes on my staff each week.  Sometimes it occurs in the middle of the week when I get a great email complimenting one of my staff on something they did, or maybe something didn’t go right and I write it up after discussing it with my staff member.  Other times it is just something I think of on a Friday afternoon.  With eight direct reports I don’t write something about ever person every week, but I write something about someone each week, and if I haven’t written anything down in a month for a person then I need to think about why that has happened. When it comes time to fill out the evaluations you have a treasure trove of real examples to use in the evaluation from your notes.  Believe me, your staff will notice the difference – and so will your colleagues and boss if you have to defend your ratings to them.
  2. Complete the evaluations before the end of the year.  If your financial year-end occurs at the same time as your performance year-end it is imperative to get those evaluations done before the end of the year.  Once year-end hits you will (and should) be spending all of your time on the annual financial statements, completing tax filings, issuing W-2’s, loading budgets, or whatever else you need to do.  You won’t have time to do a decent job on the evaluations once that happens so the best thing to do is complete them before the end of the year.  I make it a policy for my staff to complete their self-evaluations before they leave for the holidays.  I then complete my evaluations of their performance as they come in.
  3. Set a meeting with yourself before the meeting with your employee to go over the evaluation.  As I already said, this time of year is extremely busy.  You don’t want to be fumbling through the evaluation as you go over it with your employee.  The best way to prevent this is to be prepared.  I do that by setting aside some time to review the evaluations I am covering during the day before the evaluations occur.  It works best if I can do it immediately before the performance review, but it also works if I do it any time that day before the review.  I find it most effective to set a ½ hour meeting with myself, if it is an especially busy day I might even take a paper copy of the evaluation to a conference room somewhere so I can concentrate on it without interruption.

Those are my three tips.  There are many others, but these basic steps have stood the test of time in making the evaluation process a success for me.

Who Says We’re Waiting

The long awaited SEC staff report on IFRS was finally released on 7/13.  Somehow releasing the report on Friday the 13th seemed appropriate.  There are those that believe IFRS is like Jason ready to cut key appendages off of critical accounting rules.  Then there are those who believe all of the blood curdling screams are really just a bunch of hype for a make believe issue.  Of course all of this horror depends on buying into the theme that the SEC Commissioners decision on the use of IFRS (which has not come yet and is likely not to come for some time) is the point at which the U.S. will start using IFRS, but like the people living on Elm Street, those people need to wake up because IFRS is already here.

While the few thousand U.S. public companies cannot file IFRS financial statements to meet their SEC reporting requirements, with the addition of Canada to the IFRS hold, several hundred foreign issuers already do file IFRS financial statements with the SEC.  In addition, thousands more subsidiaries of foreign companies operating in the U.S. use IFRS for their day to day accounting.  That means your colleagues working for Siemens, BMW, Mercedes Benz, and T Mobile are already using IFRS as their accounting standards and the number of such companies grows every day. 

The public side of the profession as well as academia has also adopted IFRS in mass.  It’s not just the big 4 or even the top ten national firms that have significant IFRS practices; regional and local firms are finding thriving practice niches around IFRS accounting.  Colleges and Universities are offering and requiring courses in IFRS as well as U.S. GAAP because they realize their graduates need to know IFRS;  not five or ten year from now, but the day they graduate.

The reality is that if you are in B&I and following the typical job path of today by working for multiple companies over your career, you will probably end up working for a company that uses IFRS at some point.  The use of IFRS in the CPA profession is not something the SEC will decide.  It is something the market has already decided and at some point the politicians in Washington and rest of the world focused solely on the SEC will figure that out.

The Inner Turmoil of Financial Statement Preparers

A number of CPAs in B&I have been fighting mixed feelings since last Thursday.  That was the day the Supreme Court came out with its historic ruling on the Patient Protection and Affordable Care Act – better known as Obamacare.  I say mixed feelings because, like most CPAs, a significant majority of CPA Financial Statement preparers are conservative in nature and in politics and probably had a particular viewpoint on whether the court should have struck down the law or not.  The mixed feelings come in when one considers what those same financial statement preparers – at least any that work for companies that provide retiree health care and therefore have an Other Post Retirement Benefit (OPRB) liability on their books – were looking at having to do if the law was overturned.

First off, the change in the tax effect on any company participating in providing drugs to retirees under the retiree drug subsidy portion of Medicare Part D would have had to be recorded immediately.  Striking down the law could have been considered a tax law change and the many charges taken by companies when Obamacare first passed would have to have been reversed.

Second, there were many changes in the law that could impact the assumptions used to develop the OPRB liability.  Since these changes were not the result of a change in the company benefit plans they would be considered changes in actuarial assumptions. Usually assumption changes only impact a preparer during the annual update of the OPRB liability, but buried in the standard is a requirement to remeasure the whole liability if the assumption change was significant enough to the company.

And that is where the inner turmoil really started for public company Financial Statement preparers.  With the decision coming down on June 28, they would have had a little more than a month to measure the event, determine if it was indeed significant to the company, get the auditors to agree with your judgment (or revisit it if agreement cannot be reached), and then remeasure the liability if the impact was deemed significant.  That is a short time to cram in work that normally takes about three months at year-end. 

So while the radio show pundits were giving their critique of the Supreme Court and Chief Justice Roberts, many financial statements were secretly breathing a sigh a of relief that this would be a relatively normal quarter-end.

Decision Time on CGMA

It is now time to decide if you really want to be a CGMA or not.  Since the roll-out on January 31, CPAs who met the experience requirements were able to try out all of the benefits of being a CGMA. From all of information on the CGMA website at www.cgma.org  to weekly newsletters (you can sign up here) to an assortment of resources including white papers, research studies and specialized tools, there are a lot of tangible benefits to being a CGMA.

But time is running out on the free trial of being a CGMA.  With the 2012-13 dues statement you now have a choice to make.  Do you want to be a CGMA bad enough to be willing to pay for it?  Like all of the other credentials offered by the AICPA, the CGMA credential offered by the AICPA-CIMA joint venture now has annual dues.  If you are a member of a State Society of CPAs it will only cost you $100 (it’s an extra $50 if you are only a member of the AICPA).     

But deciding if the CGMA is worth it to you is more than deciding if the information, tools and resources are worth $100 a year. The question is do you also see the intangible benefits of being part of a specialized group within the profession.  Thousands have already started referring to themselves as CGMAs because it already means something to those that matter most (their co-workers, colleagues and employers).  It means they have a unique and valuable skill set.  Every day I meet people who express gratitude that they are finally being recognized by their profession for the important work they do to help businesses succeed while still embracing the professional responsibilities to the public whether it is to the stockholder of the company, their fellow employee stakeholders or the local banker making the loan to a privately held company.  These people are proud to be CGMAs. The certificate itself, and what it strands for, has more worth to them than any website, paper or tool could ever deliver.

I for one have already made the decision that the CGMA is worth it and proudly display my CGMA certificate on the wall in my office along with my CPA certificate.  Now its time for you to decide.  What are you going to do?