CPA Success

The key to recovery? Make 'em laugh

There's a charming Halloween tradition in St. Louis unlike any other I've come across. When St. Louis kids come to your door on Oct. 31, they're expected to tell you a joke before they get any candy.

Younger kids usually stick with something simple like, "Why did the chicken cross the playground? (Answer: "To get to the other slide!")

Older kids, meanwhile, like to try more sophisticated variations. Here's one of my favorites: "Why did the man cross the road?" (Answer: "Why do men do anything?")

What's cool is that the kids are as excited about telling their jokes as they are about getting another handful of chocolate. Usually, the jokes end up producing more Halloween smiles than the candy. In the end, everybody wins.

Who says the best things in life are free?

When we give something of value and get something of value in return, that's gold. That goes way beyond mere commerce. That, in fact, is how trusted relationships are built.

So why haven't more companies battled the recession that way?

It seems as though many businesses think they can coast into economic recovery simply by cutting costs -- slashing jobs, payroll, benefits, services. They're basically thrusting their hands into the economic candy bowl and coming out with as much sugary goodness as they can hold ... and they're not giving their clients or customers anything in return. Not even a joke.

I think the St. Louis kids have it right. As the recovery starts, the businessess that get the most candy will be the ones that make their customers smile most often. That might mean focusing not on short-term economic survival, but on long-term economic growth.

At the same time, sharing a good joke or two can't hurt.

Is it time to pay attention to social media?

I know you are not looking for one more thing to add to your plate, but this could be an investment that can save you time and help you or your firm or company actually make money.

How, you ask?

1. Getting you found via SEO (that's search engine optimization).
2. Getting you noticed: Clients and prospects will recognize you easier and know what you are about.
3. Reinforcing your culture and training your team via powerful communications.

I am finding many examples of sole practitioners, small firms and large firms making effective use of social media tools to get noticed, build their brands and find new ways of getting clients. If you aren't at least looking at these tools, you may be falling behind.

In the chart above, you will see that these tools are now amplifiers and accelerators of the savvy firm or small business marketing strategy (the number one issues facing CPA firms now).

My top three tools to get started:

1. Blogs: Start reading with a blog reader (Bloglines or Google Reader, for example) and set up a blog.
2. Twitter
3. Facebook and / or Linked in to build your community

Come to our Technology Conference on Dec. 7, 2009 to see our next live session on social media or ask about our Social Media Quick Start: Developing and Implementing a Social Media Strategy for Firms. (Send an e-mail to pam@macpa.org for info about this hands-on coaching program.)

Check out my presentation that I just made to our Maryland managing partner group at their request, and from my two sessions at the CCH User Conference. The presentation is also online here.

CPAs & Social Media - Passing Fad or Valuable Tool?

View more documents from Tom Hood.

So, what do you think: Is social media a passing fad or valuable tool?

New FAQs examine IFRS for small, mid-size companies

IFRS is hot again, and public companies aren't the only ones getting in on the act.

Equally hot of late is IFRS for Small and Medium-Size Entities, a 230-page standard from the International Accounting Standards Board designed to meet the reporting needs of smaller businesses.

Released in July 2009, IFRS for SMEs is generating a lot of buzz lately and resurrecting the debate over whether there should be a separate set of reporting standards for private companies.

I spoke with Judy O'Dell recently about this issue. Judy, an MACPA member and chair of the FASB's Private Company Financial Reporting Committee, has been on the IFRS frontlines recently, speaking with private-company CPAs and AICPA leaders alike about their needs and concerns. I'm working on turning that conversation into a podcast, which will be ready soon and will definitely be worth a listen. Stay tuned.

In the meantime, the AICPA has prepared a list of FAQs and answers about IFRS for SMEs. It addresses some of the biggest challenges, headaches and opportunities facing small businesses that decide to adopt IFRS.

Read the FAQs here, then tell us: Is IFRS ready for prime time in the United States?

Want to learn more? Check out these IFRS-related resources and programs:

Related CPE:

• Nov. 11 webcast: IFRS for Small and Medium-Size Entities
• Dec. 17: The Impact of IFRS and Other Global Standards on Private Entities
• Dec. 18: International versus U.S. Accounting: What in the World is the Difference?

Related on-site learning options:

• Are You Ready for IFRS? Moving Beyond the Basics
• IFRS vs. GAAP: The Differences That You Need to Know
• International Financial Reporting Standards (IFRS)
• International Financial Reporting Standards (IFRS) From 5,000 Feet
• IFRS: An Overview of the Looming Change to Global Standards
• International versus U.S. Accounting: What in the World is the Difference?
• The Coming IFRS Conversion: Preparing for the Ultimate GAAP Makeover
• The Impact of IFRS and Other Global Standards on Private Entities

Relate books:

• IFRS: Practical Implementation Guide and Workbook
• IFRS 2009: Interpretation and Application CD

Protect your data ... or pay the price

We took a closer look recently at the Federal Trade Commission's "Red Flag Rule," which requires many businesses to enact plans to, in the FTC's words, "detect the warning signs –- or 'red flags' –- of identity theft in their day-to-day operations."

• UPDATE: The FTC has delayed the enforcement deadline for its "Red Flags Rule" until June 1, 2010. Get details here.

When it comes to privacy protection, though, that's just the beginning.

I recorded a podcast recently with Marilyn Prosch, an associate professor in the Department of Information Systems Management at Arizona State University, She has written articles and done research on privacy, electronic commerce, information security, accounting information systems ... in short, she knows her stuff, and she offered some insight into the privacy issues that are impacting CPAs and their clients these days.

For instance:

At CPA firms: High-profile examples of data breeches -- employees of large firms who lose laptops that contain sensitive data, for example -- drive home the importance of privacy protection at CPA firms. "CPAs are supposed to be their clients' trusted advisors," Prosch said. "They really need to go the extra mile and do whatever it takes to secure the data that they put on their own personal computers and laptops about their clients."

In corporate America: Data breeches do more than expose flaws in a company's internal controls; they also hit CFOs and other finance executives where they hurt -- right on the bottom line. According to Prosch, a breech costs a company an average of $200 per record. If hundreds or thousands of records are compromised, we start talking about real money. And we haven't even brought the regulators into the picture yet. If the FTC decides to sanction a company because of a data breech, that company could face a security audit every two years for the next 20 years. "Having to throw resources out to do damage control in a data breech is something that no CFO wants to go through," Prosch said. "Plus, it's a signal that the company just doesn't have good controls."

In cloud computing: "The vendors in the cloud need to provide some assurances to their clients that their systems are secure and that they will process their data," Prosch said. "We're going to see a lot of cloud computing vendors getting (privacy) audits so that the rest of the business community can make their customers feel comfortable."

On social networks: Loose-lipped employees and malicious code embedded in third-party applications can make social networking a risky endeavor for businesses. That's where a clear set of policies and procedures come into play. "First, you have to decide what your business can achieve by allowing social networking to go on," Prosch said. "In many cases, it may be a great fit. If so, you need to have some guidelines about what employees can and can't do on these social networks as it relates to the business."

Prosch also offered her thoughts on the Red Flag Rule and what it means for CPAs. Listen to our conversation in its entirety.

• Subscribe to our podcast here, or search for "CPA Spotlight" in iTunes.

Want to learn more?
Here are a few other resources that offer expanded looks at security and privacy:

• Security for Accountants: New Legal Requirements and Practical Solutions, Nov. 5 at the Columbia Center
• 2009 MACPA Technology Conference, Dec. 7 at the Sheraton Columbia Hotel
• FTC "Red Flag Rule" resources
• AICPA "Red Flag Rule" guidance
• "Preventing identity theft throughout the data life cycle," a JofA article written by Prosch
• "Outsourcing and privacy: 10 critical questions top management should ask," a Statement article written by Prosch

Self-study CPE: No more limits

Maryland's State Board of Public Accountancy has spoken, and here's its verdict:

CPE equals CPE.

Under new State Board regulations, self-study program credits are now calculated in the same way as classroom credits, thus removing the limitations formerly imposed on self-study. This means self-study credits are now considered equal and subject to the 80-hour CPE carryover allowance.

There are two effective dates to keep in mind: 

• May 18, 2009 for previously named "interactive" self-study, and 
• Oct. 10, 2009 for previously named "regular self-study."

This new regulation is not retroactive.

Questions? Contact the MACPA's Member Service Center at (800) 782-2036 or check out our online self-study resource center.

Then be sure to check out CPExpress Select, the MACPA's best-selling self-study offering. Earn up to 80 hours of CPE credit for $165 while choosing from more than 200 programs in one- and two-hour formats. Get details and order here.

Hot college courses? Make room for personal finance

Every college has one.

I'm talking about that one course that's so quirky and popular that almost nobody gets to actually take it. Once those precious few seats are filled and registration closes, the course almost becomes an urban legend. We all know someone who has a friend whose roommate took the course, and rumors fly about the content, but that's as close as must of us ever come.

The Daily Beast has found 10 great examples of courses like this. They include Middlebury College's "The Economics of Sin," Auburn University's "Dave Letterman Physics," Kansas State's "Harry Potter's Library" and Yale's "Amazon Rain Forest Expedition and Laboratory," which includes an actual spring break expedition to an Ecuadorian rain forest.

A list like that is the last place you'd expect to find a course titled "Personal Finance," but at Wellesley College, it's all the rage.

Taught by Professor Ann Witte, the course teaches students how to master some of life's most important skills -- using credit cards wisely, making the most of a 401(k), how to invest for retirement, getting adequate life and health insurance, and more.

"It's not exactly sexy stuff," National Public Radio's Tovia Smith reports, "but this is the course at Wellesley that fills up minutes after registration opens."

"It's dry," student Fatima Burney agreed in an interview with Smith, "but this is what you need to know before you go out into the real world." Another student, Noelle Fogg, told The Daily Beast that the class "should be renamed ‘life skills’ and be mandatory.”

And you thought nobody wanted to learn this stuff.

Listen to the NPR report in its entirety.

For CPAs who have spent years spreading the financial literacy message, this is the Holy Grail: Students who actually crave financial know-how.

We know how important it is. Heck, Maryland itself is considering making it mandatory. Now we know there's a demand for this knowledge. Here's our opportunity to make a difference.

• Check out our financial literacy resources and find out how you can get involved.
• Find out what's new on the national scene at 360 Degrees of Financial Literacy and Feed the Pig.
• Don't miss our 24th Advanced Personal Financial Planning Conference on Oct. 30 in Baltimore.

Identity theft: Do you know the 'red flags?'

It's time to get serious about identify theft.

That's the take of the Federal Trade Commission, anyway. The FTC has implemented what's commonly know as the "Red Flag Rule." The rule requires many businesses -- and yes, for the time being, that includes CPA firms -- to enact policies that will, in the FTC's own words, "detect the warning signs –- or 'red flags' –- of identity theft in their day-to-day operations."

The rule isn't new; the federal legislation that led to the rule was passed in 2003. But there are a few pieces of timely information that you need to know.

The first is the implementation date: The deadline to comply currently stands at Nov. 1, 2009.

• UPDATE: The FTC has delayed the enforcement deadline for its "Red Flags Rule" until June 1, 2010. Get details here.

The second is this: The profession is working to convince regulators that CPAs should be exempt from the rule "based on the fact that CPAs are already required, through state laws, professional codes of conduct and IRS regulations, to maintain client confidentiality such that identity theft is very unlikely." That's a direct quote from the AICPA's Information Technology Center. Details on that effort will be made available as warranted.

The third piece of information is ... well, information.

The AICPA has put together an impressive set of resources related to the rule and identity theft in general. It includes:

• a template for creating a written identity theft prevention program;
• a privacy checklist for CPA firms;
• frequently asked questions from the FTC; and
• "Identity Theft: What CPAs Need to Know," an article from the IRS.

Particularly interesting is "A CPA's Guide to Creating an Identity Theft Prevention Program," which outlines "the four basic steps to designing a program" to comply with the rule:

1. Identify relevant red flags.
2. Detect red flags.
3. Prevent and mitigate identity theft.
4. Update the program periodically.

The guide offers advice on how to complete each step. Read it in its entirety, then check out the rest of the information in the AICPA's identity theft resource center.

I'm working on a related podcast that features an interview with Dr. Marilyn Prosch, an associate professor in the Department of Information Systems Management at Arizona State University. Technical glitches and scheduling SNAFUs have delayed that podcast a bit, but keep an eye on this space; I'll be posting a link to the podcast soon.

In the meantime, keep your other eye peeled for those red flags. The FTC expects nothing less.

Debate over 'outdated' tax system on horizon

If you thought the fireworks over health care reform have been fun, you'll probably love the coming debate over tax reform.

To me, the issues are remarkably similar: Everyone agrees that changes are needed, but nobody agrees on which changes to make. Cue the partisan lightshow.

Word is that lawmakers could start talking about possible changes to our tax system as early as January, but the AICPA isn't waiting that long.

In testimony before the President’s Economic Recovery Advisory Board, AICPA President Barry Melancon called for impactful reforms that include simplifying the alternative minimum tax and comprehensive changes to the estate and gift tax system. The MACPA offered similar testimony to the Maryland Business Tax Reform Commission earlier this year.

“The dynamic American economy is rebounding slowly and, we believe, is burdened by an unnecessarily cumbersome and somewhat outdated income tax system," Melancon told the committee. "In particular, we see significant problems for small businesses arising from the increasing complexity of the tax law."

In a report titled Tax Reform Alternatives for the 21st Century, the AICPA says any meaningful tax reform has to take into consideration the following issues:

1. The financial impact that the coming wave of baby boomer retirements will have on our economy.
2. The expiration of the 2001 and 2003 Bush tax cuts.
3. The increasingly unfair impact of the AMT on America's middle class.
4. The recession's negative impact on federal tax revenue.

Read the AICPA's report in its entirety.

This debate is going to be interesting, to say the least. We've said it before, but it's worth repeating: Tax reform is an area in which CPAs have a certain amount of expertise. Sharing that knowledge with lawmakers will help them make informed decisions ... and keep unintended negative consequences to a minimum.

Learn more
Follow the latest tax-related developments at our 2009 Advanced Tax Institute, slated for Nov. 2-6 at Martin's West in Baltimore. Get details and register here: Day 1 | Day 2 | Day 3 | Day 4 | Day 5

You'll also get a debriefing on recent tax developments at Tom Hood's professional issues updates. Get details and register for an update here.

Roth IRA conversion: Everyone into the pool!

Heads up, financial planners: You've got more than a hangover to look forward to on New Year's Day.

Jan. 1, 2010 will bring with it new rules that will govern who is eligible to convert their retirement assets to Roth IRAs.

And what, precisely, is a Roth IRA? Here's what the IRS has to say:

Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements, qualified distributions (defined in Publication 590) are tax free. Contributions can be made to your Roth IRA after you reach age 70 1/2 and you can leave amounts in your Roth IRA as long as you live.

Traditionally, only those with modified adjusted gross incomes of $100,000 or less were allowed to make those conversations.

When 2010 dawns, though, that restriction will be lifted ... and according to WebCPA, that will mean a slew of potential new clients for finanical planners.

According to the WebCPA article, the folks at Charles Schwab recently interviewed 400 Americans who make more than $100,000 annually. Here's what they found:

"Only 14 percent indicate that they are extremely confident in explaining the Roth IRA conversion rule changes set to take effect, but 71 percent say they would be likely to consult with a financial advisor. Forty-nine percent say they would consult a tax planner."

"Nearly two-thirds (61 percent) of high-income Americans surveyed are unaware of the 2010 Roth conversion rule changes. Twenty-six percent of those who are aware of the conversion opportunity find it more confusing than health care reform."

"Thirty-four percent of respondents say that they are unsure of the general benefits of a Roth IRA versus a traditional IRA."

In short, there are a bunch of folks out there who want answers ... or any information at all.

And that's where all of you talented retirement planners come in.

Speaking of talented retirement planners, Natalie Choate, one of the nation's leading speakers on retirement planning, recently wrote an article about Roth IRA conversation for The Statement, the MACPA's member magazine. In it, she outlined four scenarios that illustrate how CPAs might be able to guide their clients through the conversion process.

She also suggests making the conversion early.

"The individual has until Oct. 15, 2011, to recharacterize (undo the Roth conversion) if he changes his mind, so there is little risk to converting early," Choate writes. "And the individual has until Oct. 15, 2011 (if he gets an extension on his 2010 income tax return) to decide whether to defer the income resulting from the conversion into 2011 and 2012 (an option available only for 2010 conversions) or to take it into income in 2010."

• Read Choate's article in its entirety.

Learn more at our Advanced PFP Conference
Choate will lead a two-part session titled "Your Client's Retirement Benefits: Planning Opportunities and Compliance Pitfalls" as part of the MACPA's annual Advanced Personal Financial Planning Conference, slated for 8 a.m. to 4:35 p.m. on Oct. 30 at Martin's West in Baltimore. Get details and register here.

We're No. 4! We're No. 4!

... and we're darned proud of it, too.

Thanks to your support, CPA Success was voted the fourth most popular blog in the "Business + Technology" category in "The Mobbies" competition. ("Mobbies" is short for "Maryland's Outstanding Blogs.")

And while fourth place might not sound that impressive to you, consider this: The three blogs that finished ahead of us also finished in the top five in the "Best Overall Blog" standings.

So there.

Our thanks to everyone who voted. Most of all, our sincere thanks for your continued readership and support. You are the reason why we write this blog. Our goal is to give you quality, informative, though-provoking content ... and to have you join in the conversation as well.

Let's keep that conversation going. And next year, let's shoot for No. 1.