Insight Magazine - May / June 2009

30 Where are the Top Jobs?

B y D er r i c k Li l l y

The job market may be stuck in a rut, but top finance spots can still be won

34 Crossed Cultures

B y Ju d y Gi a n n et t o

Did you give your Russian colleagues the thumbs up after that impressive presentation? Yeah, well, you might as well have told them to “%@$#-$@#!”

38 A Guide for Rough Weather

B y C a r o l yn Ta n g

Climate changes are bringing on a tidal wave of natural disasters, with a huge social and economic impact

42 Are We Saved?

B y K r i st i n e B l en k h o r n Ro d r i g u ez

What used to be a hopeful question now sounds naive in the face of an economic stimulus that has yet to take off

8 Career Crisis? What Crisis?

B y Sel en a C h a vi s

Ironically enough, the current credit crunch could mean an upswing in your career options

10 Economy Cutting Room

B y C h r i st i n e B o c k el m a n

Cut costs in a bad economy but don’t go overboard with the shears.

12

Diversity X Factor

B y Ren ee B ec k m a n , C PA

Now more than ever, Gen X women are a valuable commodity in the executive suite

14

IFRS IFRS Guru

B y Sel en a C h a vi s

Position yourself as an expert in all things IFRS

18 Strategy Public Exposure

B y Sh er yl N a n c e - N a sh

Is it worth taking your business public when the economy ’ s down?

22 Technology On the Move

T h er esa C a sey

WiFi is everywhere; mobile technologies are it But are you putting yourself at risk by using them?

24

Wealth Love & Money

B y Ja n et H a n ey

Protecting your client ’ s assets before they tie the knot goes beyond traditional prenups

26 Tax Talking Points

B y H a r vey C o u st a n , C PA

The end of tax season doesn’t mean the end of tax talk Here, three developments you should know about

48 Students Find Money Now

B y D er r i c k Li l l y

Higher education costs are a drag, but finding financial aid doesn’t have to be

4

I C P A S O F F I C E R S

Chairperson, Sheldon P Holzman, CPA Virchow Krause & Company LLP

Senior Vice Chairperson, Lee A Gould, CPA Gould & Pakter Associates LLC

Vice Chairperson, James P Jones, CPA Edward Don & Company

Vice Chairperson, Michael J Pierce, CPA RSM McGladrey Inc

Vice Chairperson, Ray Whittington, CPA College of Commerce Depaul University

Secretary, Charles F G Kuyk III, CPA Crowe Horwath and Company LLP

Treasurer, Sara J Mikuta, CPA The Leaders Bank

Immediate Past Chairperson, Debra R Hopkins, CPA Northern Illinois University CPA Review

I

Brent A. Baccus, CPA Washington Pittman & McKeever

Therese M. Bobek, CPA PricewaterhouseCoopers LLP

Robert E. Cameron, CPA Cameron Smith & Company PC

William J Cernugel, CPA Alberto-Culver Company (Retired)

Anthony Fuller Grant Thornton LLP

William P Graf, CPA Deloitte & Touche LLP

Cara C Hoffman, CPA Blackman Kallick LLP

Charlotte A Montgomery, CPA Illinois State Museum

Gerald A Olsen, CPA Illinois Wesleyan University

Annette M O’Connor, CPA RR Donnelley & Sons Company

Mary Lou Pier, CPA Pier & Associates Ltd

Marian Powers, PhD Northwestern University

Daniel F Rahill, CPA KPMG LLP

Lawrence H Shanker, CPA Shanker Valleau Accountants Inc

Th e r e a r e m a n y w a y s t o d e s c r i b e t h e s e times. Historic. Life changing. Uncertain. S c a r y B u t w o r d s w e ’ r e p u t t i n g i n t o p l a y h e r e a t t h e S o c i e t y p r o a c t i v e , r e s p o n s i v e a n d motivated just might help counter the daily dose o f u n e a s i n e s s w e g e t f r o m t h e m e d i a , o u r w o r kplaces and even our friends and family

The Society is striving to be as proactive as possible, reaching out to members through email mess a g e s a n d m a i l i n g s , a n d a t m e m b e r t o w n h a l l forums, to find out what you need. We’ve heard that you want to sharpen your skills and find ways to boost your career, and that you want us to keep c o s t s d o w n , p a r t i c u l a r l y w h e n t r y i n g t o g e t C P E credits in a reporting year

A n d w e ’ v e a l r e a d y t a k e n s t e p s t o r e s p o n d t o y o u r c o m m e n t s . E a r l i e r t h i s y e a r m e m b e r s received a special $25 gift certificate for a CPE program Society members continue to receive $70 off full-day conferences and classes, as well as discounts on publications, office products and insurance through our Member Buying Advantage Program At the Midwest Accounting & Finance Showcase on August 25 and 26, you’ll be able to get 17 hours of CPE credit for just $270 You can also stay closer to home and take advantage of local educational opportunities, including expanded downstate CPE offerings, to save money on gas and travel

Free or low-cost monthly career events on topics such as using social media in your job search and free career coach advice are now available through our Career Center, which already includes job listings, free resume posting and search firm directories. If you find yourself unemployed, call us to find out how you can maintain your membership and all of its benefits, including the Career Center, at a time when you need them most

Underlying these efforts is the wonderful sense of motivation you have to help each other through the growing number of members who volunteer for the Military Service Tax Preparation Project and others whose donations make scholarships possible and to help the profession by talking to the media or the community. In doing so, you carry out our mission of enhancing the value of the CPA profession

For the Society to continue to work effectively for you and with you, communication is key. Write, call or email Help us find the best ways to help you Together we can put meaningful actions behind the words that define our times

ICPAS President &

CEO

Publisher

ICPAS President & CEO

Elaine Weiss

Editor-in-Chief

Publications Director

Judy Giannetto

Creative Services Director

Gene Levitan

Creative Services Manager

Rosa Garcia

Publications Specialist

Derrick Lilly

National Sales & Advertising

Derrick Lilly 312 993 0407 ex t 227

l i l l yd@ i cpas org

Information Systems Manager

Jim Jarocki

j arocki j @ i cpas org

Editorial Office

550 W Jackson Blvd , Suite 900, Chicago, IL 60661

INSIGHT is the official magazine of the Illinois CPA Society, 550 W Jackson, Suite 900, Chicago, IL 60661, USA Its purpose is to serve as the primary news and information vehicle for some 23,000 CPA members and professional affiliates Statements or articles of opinion appearing in INSIGHT are not necessarily the views of the Illinois CPA Society The materials and information contained within INSIGHT are offered as information only and not as practice, financial, accounting, legal or other professional advice Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication It is INSIGHT’s policy not to knowingly accept advertising that discriminates on the basis of race,religion, sex, age or origin The Illinois CPA Society reserves the right to reject paid advertising that does not meet INSIGHT’s qualifications or that may detract from its professional and ethical standards The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within INSIGHT, and makes no representation or warranties about the products or services they may provide or their accuracy or claims The Illinois CPA Society does not guarantee delivery dates for INSIGHT The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering INSIGHT INSIGHT (ISSN-1053-8542) is published bimonthly except monthly in July and August by the Illinois CPA Society, 550 W Jackson, Suite 900, Chicago, IL 60661, USA , 312-993-0393 or 800-993-0393, fax 312-993-0307 Subscription price for non-members: $30 U S , $40 Canada and International addresses, $42 Mexico Copyright © 2008 No part of the contents may be reproduced by any means without the written consent of INSIGHT Permission requests may be sent to: Editorial Director, at the address above Periodicals postage paid at Chicago, IL and at additional mailing offices POSTMASTER: Send address changes to: INSIGHT, I l l i n o i s C PA S o c i e t y, 550 W Jackson, Suite 900, Chicago, IL 60661, U S A

SEEN H E A R D

$2.3

tril lion

Assets managed by hedge funds worldwide.

Source: Cayman Islands Monetary Authority, www cimoney com ky

How ’ s Your Morale?

As recession doldrums continue to weigh on employee morale, companies are taking action to dissipate the storm clouds In a recent Accountemps survey, 68 percent of the CFOs interviewed said they are implementing strategies to buoy the mood of their teams Thirty-seven percent cited increased and improved communication as the most common method Financial rewards, professional development opportunities and team-building activities are also popular options, each being cited by 18 percent of respondents.

percent, in fact, said their firms aren’t doing anything to improve morale

Is Your Firm Built for Success?

A preliminary report from an ongoing Bay Street Group LLC and Capstone Marketing survey reveals seven factors that lead CPA firms to success in the marketplace:

1 Clear company goals and managerial leadership

2 Enhancement or adoption of technology

3 Consistent staff training and development opportunities

4 Enactment of precise marketing and business development plans

5 A positive workplace environment

6 Strong client relationships

7 Team strategy accountability, collaboration and execution

To participate in this survey, visit cpatrendlines com/seven-keys-research

Data Analysis Just Got Easier

To simplify and improve the quality of data analysis work, CaseWare IDEA Inc and Audimation Services Inc have made enhancements to their new release of IDEA Version Eight This data analysis tool now includes a Project Overview, which provides a graphical representation of the entire audit or investigation process By recording all performed actions, auditors and accountants can independently share and review workflows The new release also features a Visual Script that allows users to build their own analysis and monitoring scripts without any programming Added features include the ability to create custom “@Functions,” which can be easily shared with others, faster drag-and- drop document import and extraction, calendar pop -ups and data- sorting abilities

Audimation Services is hosting training groups and walkthroughs of IDEA Version Eight For a schedule of User Groups, visit www audimation com/idea user groups cfm For a complete list of the new features, visit www audimation com

$170,000

Estimated average total compensation for a first-year investment banking associate hired in 2009

Source: www careers-in-finance com

Unlucky Seven

2008’s worst performing retail industries include:

1 Automobile Dealers: -11 77%

2 Furniture Stores: -6 36%

3 Home Furnishings Stores: -5 93%

4 Other Motor Vehicle Dealers: -5 08%

5 Building Material / Supplies Dealers: -4 97%

6 Clothing Stores: -3 19%

7 Automotive Parts, Accessories, Tires: -0 42%

Source: Sageworks, Inc

7 Management Mistakes to Avoid

Managing employees is never easy, and a challenging economy makes it even harder Here are seven of the most common mistakes and the best ways to avoid them

1 T h i n k i n g y o u r s t a f f c a n ’ t h a n d l e t h e t r u t h Talk openly about the effects of the downturn on your firm, and collaborate on techniques to turn things around

2 B l a m i n g t h o s e a t t h e t o p If you ’ re a middle manager who has to deliver bad news, don’t tell employees that you would have done things differently Instead, explain the reasons behind the news, including how your firm will persevere

3 F e e l i n g p e o p l e a r e l u c k y j u s t t o h a v e a j o b Give your employees the attention they deserve, especially the top performers; not only are their contributions critical now, but they are also attractive targets for competitors

4 N o t a s k i n g f o r e m p l o y e e s ’ h e l p i n e x p a n d i n g c l i e n t r e l a t i o n s h i p s Ask your staff to think about initiatives to help to achieve business goals without sacrificing productivity When appropriate, involve your team in efforts to generate new business

5 M a k i n g w o r k “ m i s s i o n i m p o s s i b l e ” If one person is doing the work of two or more, identify which projects are mission-critical Put the other tasks on hold, delegate remaining tasks or bring in temporary professionals to avoid overwhelming your staff

6 . S h i f t i n g t h e f o c u s f r o m t h e f r o n t l i n e s . Client service matters even more when times are tough Employees that come across as indifferent or inexperienced could lose you both prospective and existing customers

7 W a i t i n g t o t r y n e w t h i n g s If you have a promising new service offering or client niche you want to pursue, don’t wait to act Well- calculated risks can separate you from competitors and possibly carve out an additional revenue stream

Source: Robert Half International, abstract from “The 30 Most Common Mistakes Managers Make in an Uncertain Economy ”

Boomers Boosting Social Networks

If you think that it ’ s the 20- and 30-somethings that are blogging, Twittering and Facebooking their way across the World Wide Web, then think again According to the latest Consumer Electronics Usage Survey from Accenture, Baby Boomers “ are the fastest growing users of social networking sites and are also increasingly reading blogs ” Surprisingly enough, Generation Y’s interest in these social networking tools has, in fact, plateaued Visit www micropersuasion com/2009/03/social-networking-demographics html for more

Twitterverse Codes of Conduct

While Twitter is still emerging as a communication outlet for individuals and businesses alike, users already are establishing some form of Twitter etiquette Here are five tips to guide you

1 D o n ' t s p a m : If you ’ re constantly sending out tweets that say things like: "I've just put up a new blog post Check it out" or "Sign up for my RSS feed," then you ’ re a culprit of spamming As a marketing method, you'd probably be better off flying paper airplanes out of your office window

2 F o l l o w s t y l e r u l e s : Twitter isn't text messaging, which means words should be words and not abbreviations

3 G i v e c r e d i t f o r r e t w e e t s : When one person spots a good tweet, he or she can pass it along, and soon it will spread across the Twitterverse But always give credit to the source

4 S t i c k t o 1 4 0 c h a r a c t e r s : This number is the max that can fit through SMS systems

Don’t separate your thoughts into three or four tweets keep them succinct

5 F o l l o w p e o p l e w h o f o l l o w y o u : Follow thousands of people and reading tweets will become a full-time job. Follow only close friends, and you’ll defeat the object of this communications tool

Source: Twitter Power: How to Dominate Your Market One Tweet at a Time, ” by Joel Comm, with Ken Burge

The Illinois CPA Society has made it easier than ever to identify the up and comers in the accounting profession. Just visit the Illinois CPA Society’s Career Center and search student resumes to fill your next internship.

All across the state, Illinois CPA Society student members have uploaded their resumes for you to view online. These students represent the future of the profession and your guidance as a seasoned member of the profession can put them on the right track. These students are available for summer, fall or spring internships.

Search by various criteria, including:

Geographic Location

Timeframe

Paid or College

Credit Internships

The best and brightest interns are at your fingertips.

Crisis? What Crisis?

By Selena Chavis

As banks continue to tighten their belts and businesses try to protect their interests going forward, many finance industry experts believe that a specialization in credit risk and areas aligned with the credit industry will place finance pros in the land of opportunity

“Credit is emerging as a significant part of every company’s accounting function,” says Mike Cwiok, managing director of the Financial Risk Management group for KPMG in Chicago. “We’ve been continuing to enlist more people with credit experience to assist our audit teams in this environment of heightened credit exposures I think it’s a really hot area right now ”

In the present economic downturn, companies are focusing on the changes needed to effectively evaluate loss reserves. “We’ve been operating in such a strong economy for so long that many accountants have never had to analyze loss reserves in an environment filled with this level of uncertainty,” Cwiok explains, pointing out that market-savvy companies will be looking for a broader, more holistic approach to credit risk management “Companies will be looking for resources and tools to assist them in evaluating how market conditions impact value as investments are marked to market Today, the analysis may require going beyond traditional sources such as Bloomberg or looking up prices in the W al l Street Journal . ”

The demand won’t rest with public firms, Cwiok adds. He expects the need for this type of specialization to filter over to large and small enterprises alike He notes that even those

industries considered the last to be impacted by economic turmoil such as utilities are facing uncertainties with reserving for losses.

“When people can’t pay their bills, utili t y c o m p a n i e s h a v e t o s e t a s i d e r e s e r v e s T h e y n e e d m e t h o d o l o g i e s f o r w h a t t h o s e reserves should be,” he says. “The manufacturing companies that offer terms of 60 t o 9 0 d a y s a r e a l s o f i n d i n g t h e m s e l v e s e x p o s e d b e c a u s e p a y m e n t s a r e b e i n g delayed or not paid at all ”

And since much of the credit industry revolves around accounting principles, professionals in the field who have experience with credit risk will be in high demand in the coming years, says Tim Moritz, partner with Illinois-based McGladrey and Pullen

“CPAs understand financial statements,” he says. “The accounting profession provides a good stepping stone to careers in such areas as credit risk and credit analysis

“Accounting professionals have the skill s e t s t o m a k e s o u n d d e t e r m i n a t i o n s a b o u t the feasibility of borrowing,” Moritz adds, “a role that is certain to become a high-prof i l e a g e n d a w i t h i n t h e b a n k i n g i n d u s t r y going forward I think credit analysts will have added importance even when things are cruising along better in the economy. I t h i n k t h e r e w i l l b e i n c r e a s e d m o n i t o r i n g even in good times as opposed to what was done previously ”

Since history tends to repeat itself, Moritz also points out that past financial crises and economic downturns on the national level have often meant a move towards increased government regulation

“ T h e f i n a n c i a l a c c o u n t i n g p r o f e s s i o n a l h a s g o o d s k i l l s t h a t c a n h e l p f r o m t h a t s t a n d p o i n t , ” h e s a y s , r e f e r e n c i n g t h e d e m a n d c r e a t e d f o r p u b l i c a c c o u n t i n g f i r m s f o l l o w i n g S a r b a n e s - O x l e y i n 2 0 0 2 “When there’s more regulation, it typically m e a n s m o r e w o r k f o r a c c o u n t i n g f i r m s because we’re called in to assist. There will

be some good opportunities that will come out of economic cycles.”

Financial transactions and investments will require more scrutiny going forward And while current investment strategies have slowed to nearly a standstill, the expectation is that larger banks and investor groups eventually will look at the economy’s problem areas as opportunities

“Part of that decision-making process is due diligence. CPAs and financial professionals have a nice, well-rounded business knowledge for this area,” says Moritz “Businesses will seek out that expertise to ensure investments are sound especially since many investments have proven to rest on shaky ground due to mortgage industry mishaps ”

Other specialties likely to emerge from the credit crisis are pricing and treasury management, says Cwiok. “The price is reflecting the margin you want to get as well as the risk,” he explains, adding that effectively assessing risk as a component of the cost in relation to the cost of goods and services will be critical to companies that need to succeed in an uncertain economy “That piece from a risk management and accounting perspective is very valuable,” he says

“The current elevation of credit risk management complements an ongoing trend emphasizing the larger objective of better enterprise-wide risk management strategies,” says Marv Gordon, a CPA with Illinois-based Frost, Ruttenberg and Rothblatt P C , and a professor at Illinois universities, including Loyola University, Chicago

“At Loyola, I’m teaching a course that focuses on the role of the internal auditor The company’s internal auditor will become a line of defense going forward,” he explains. “If there are problems, they should be able to find those before external auditors do That’s one profession I would recommend to those who are not interested in public accounting ”

To s p e c i a l i z e i n c r e d i t r i s k m a n a g e m e n t , C w i o k s a y s t h a t a c c o u n t i n g p r o f e s s i o n a l s need to spend time in the field, with a focus o n c r e d i t A l o n g s i d e h a n d s - o n e x p e r i e n c e , M o r i t z i s a “ b i g b e l i e v e r t h a t a p u b l i c accounting start is a good one,” due in large part to the variety of industries and roles an accounting professional experiences “ T h e t i m e y o u s p e n d t h e r e t r a n s l a t e s s o well to various job opportunities,” he says “The experience could form a path to credit analyst or CFO There’s a lot of diversity to what you do ”

Cutting Room

Cut costs in a bad economy but don’t go overboard with the shears

By Christine Bockelman

Wi t h t h e U n i t e d S t a t e s s t r u g g l i n g through a recession, scaling back has become somewhat de ri geur

“ S o m e t i m e s , i t t a k e s a g o o d r e c e s s i o n t o kick us in the head,” says Jay Forte, CPA, a speaker, employee performance consultant and author of Fi re Up Y our Empl oyees and Smoke Y our Competi ti on “It’s a reason to examine almost everything ”

W h i l e d u m p i n g f a n c y t r a v e l a n d c l i e n t dinners is a bit of a no-brainer, there’s a right way and a wrong way to cut costs, especially when you put people and places into the equation

People Power

When the economy heads south, the kneej e r k r e a c t i o n i s t o s t a r t c u t t i n g t h e h e a dcount. Layoffs are sticky situations though. W h o d o y o u l e t g o ? T h e m o s t e x p e n s i v e staffers? The ones who have been there the least amount of time?

Three Cost-cutting Lessons

1 D o n ’ t b e c h e a p w i t h y o u r p e o p l e “Cutbacks can negatively affect employee morale,” says Forte “ You can let people have a longer lunch every once in awhile or be a little flexible about letting them leave earlier ”

2 D o n ’ t i n s u l a t e y o u r e m p l o y e e s “ You’re better off involving your people in your decision-making,” says Boswell “They can raise ideas you haven’t thought of or confirm ideas that you already considered They might surprise you with their creativity or their willingness to swallow tough medicine for the greater good ”

3 D o n ’ t g o l a y o f f c r a z y

“ Very often layoffs have unintended consequences, ” says Boswell “ You could end up cutting the things your customers value most. Or you could leave your best performers exposed to burn- out...Some of the companies that emerged from past recessions in a position to grow were the best at keeping layoffs to a minimum ”

“First and foremost, since your customers a r e u l t i m a t e l y f u n d i n g y o u r p a y r o l l , a s k yourself, ‘If my customers were making the decisions about what and who to cut, what decisions might they make?’” recommends E d B o s w e l l , C E O o f T h e F o r u m C o r p , a B o s t o n M a s s - b a s e d c o n s u l t i n g c o m p a n y “It might surprise you what you come up with from a customer ’s point of view ”

What about your superstars the people on your team who consistently perform the best and bring in the most business? Perhaps surprisingly to some, there are two schools of thought on how to handle your top performers during times of financial crisis

First, the cut ‘em argument: “I would start t h e c u t t i n g p r o c e s s w i t h t h e s t a r s , ” F o r t e s t a t e s “ T h e i d e a i s t h a t s t a r s k n o w t h e i r value, and that someone is willing to pay for them. I generally find that high performers...say, ‘Thanks for the paycheck, but I’ve found someone willing to give me more.’

S o m e t i m e s t h e b e n e f i t y o u g e t f r o m a star doesn’t make sense. Should you keep a star if they’re hard to get along with, or if they don’t fit in long-term?”

S e c o n d , t h e k e e p ‘ e m a rg u m e n t : S t a r s often bring much too much to the table for a company to consider letting them go. Jim Muehlhausen, CPA, author of The 51 Fatal Busi ness Errors and How to Avoi d Them, suggests that companies approach staffing d e c i s i o n s m u c h a s p r o f e s s i o n a l s p o r t s leagues do; namely, introduce a salary cap. “Companies have x number of dollars for payroll, and need to figure out what perc e n t a g e o f t h e o v e r a l l p a y r o l l a s t a r i s worth,” he explains

The National Football League offers a few good examples Teams like the Indianapolis Colts could afford to hire or retain a lot more talent if they cut Peyton Manning and his reported $14 million a year contract from their payroll Manning, though, is a “superstar” who helped the team win a Super Bowl, says Muelhausen. Similarly, companies should identify who’s helping them meet their goals and then figure out how much of the salary cap they’re worth

Sure, the superstars are expensive, but they’re also hard to find Let yours go and your competitors, if they’re smart, will snap them up.

“A great salesperson is a great salespers o n , n o m a t t e r w h a t t h e e c o n o m y. L e t someone like that go and you’re only taking away a great revenue source for yourself,” says Muelhausen

Client Cutbacks

A s t e m p t i n g a s i t i s t o h o l d o n t o e v e r y client, it doesn’t always make sense to

“It’s important to keep the clients who a r e m o s t p r o f i t a b l e , ” B o s w e l l e x p l a i n s . “ T h a t m i g h t s o u n d l i k e a n o - b r a i n e r, b u t m a n y c o m p a n i e s t r e a t a l l c u s t o m e r s equally That’s a mistake ”

Hanging onto all your clients can be problematic, Muelhausen agrees, particularly if you’ve reduced your staff “Employee burnout becomes a risk,” he explains. “If your best people are working harder and getting paid the same amount, they’re not likely to stick around

“You have to do a customer-cost analysis,” he continues. “The mistake most people make is thinking that revenue drives expense....Some customers demand a lot more activity for the same amount of money If you’re a $100 client with a 70 percent margin and I’m a $100 client with a 10 percent margin, you’re a much better client ”

Space Savers

Now that you’ve streamlined your staff and clients, it may be a good idea to focus on your office space If you have fewer people, you probably need fewer desks, and even if you have the same number of people, you should ask yourself whether you can cut back on square footage

“ I t h i n k t h e r e c e s s i o n i s a n i m p o r t a n t opportunity for firms to really look at their real-estate portfolios, especially if they’re l e a s i n g , ” s a y s M i k e H i l l g a m e y e r, w h o overseas firm-wide operation services for Crowe Chizek

C u t t i n g s p a c e c a n b e a t o u g h c a l l , though, especially if the economy is predicted to gain momentum anytime soon “Business owners tend to say things like, ‘ I d o n ’t w a n t t o g e t r i d o f t h a t s p a c e , because things are going to pick up next year,’” says Muelhausen. “You need to be objective. If sales are down, and have been down, you don’t know for sure if they’re g o i n g t o p i c k u p i n s i x m o n t h s G o w i t h what you know to be true right now ”

During economic downturns landlords are likely to renegotiate the terms of a lease t o k e e p t h e i r b u i l d i n g s o c c u p i e d “ T h e r e are a lot of cards you can play right now You might be able to get a reduced rent per s q u a r e f o o t , a c e r t a i n t i m e p e r i o d w h e n you might not have to pay rent, or some tenant improvement dollars,” Hillgameyer suggests “Landlords also might allow you t o r e d u c e y o u r f o o t p r i n t i f y o u a g r e e t o extend the lease term ”

Be creative consider employee requests to work from home or telecommute What’s more, at Crowe Chizek, a few offices work with a system called “Space on Demand,” a revamp of the hoteling concept.

“It might be a desk, it might be a meeting room, it might be a project room,” Hillgameyer explains “When people do come i n t o t h e o f f i c e , w e o f f e r s e r v i c e s a n d amenities We’ll put pictures of their children or awards they’ve won at their desks, or give them a nice biscotti or cup of gourmet coffee ”

A l s o c o n s i d e r h o w a n d w h e n y o u u s e y o u r s p a c e . “ We h a v e o n e g r o u p t h a t works weekends during busy periods, and instead of giving them their own floor, we h a v e o n e g r o u p u s e a s p a c e M o n d a y t h r o u g h F r i d a y, a n d a n o t h e r u s e i t o n weekends,” says Hillgameyer

Simply think outside the box and you’ll find the savings you’ve been looking for

X Factor

Now more than ever, Gen X women are a valuable commodity in the executive suite

By Renee Beckman, CPA

Sa n d w i c h e d b e t w e e n 8 0 m i l l i o n B a b y B o o m e r s a n d s o m e 7 8 m i llion Millennials is Generation X G e n X ( r o u g h l y a n y o n e b o r n b e t w e e n 1965 and 1976) accounts for about 46 mill i o n p e o p l e S o m e h a v e c a l l e d i t t h e l o s t g e n e r a t i o n , t h e u n d e r a p p r e c i a t e d g e n e r ation and even the overlooked generation. But one thing’s certain: Gen X amounts to n e a r l y h a l f t h e s i z e o f b o t h t h e B a b y B o o m e r s ( b o r n b e t w e e n 1 9 4 3 a n d 1 9 6 4 ) a n d t h e M i l l e n n i a l s ( b o r n b e t w e e n 1 9 7 7 and 1998).

With the flood of retiring Baby Boomers, G e n X w i l l b e r e s p o n s i b l e f o r f i l l i n g k e y c o r p o r a t e l e a d e r s h i p g a p s , b u t w i t h o n l y h a l f t h e m a n p o w e r t o d o s o . G i v e n t h a t , understanding the needs of Gen X women, a n d w h a t w i l l k e e p t h e m i n y o u r r a n k s , becomes evermore vital

Why focus on Gen X women, specifically? Because, according to the Small Business

Administration, 1-in-15 Gen X women are leaving corporations to find new employment opportunities or to pursue their own entrepreneurial endeavors.

Charlotte Shelton and Laura Shelton, authors of The NeX t Revol uti on: W hat Gen X W omen W ant at W ork and How Thei r Boomer Bosses Can Hel p Them Get It, write, “This looming crisis constitutes more than a mere labor shortage; it’s a loss of the female perspective in leadership roles ”

According to the authors, a 2004 Catalyst research study revealed higher profitability among companies that hired a greater number of women for senior management roles “In fact,” they explain, “the companies with the most women on their senior management teams outperformed the businesses with the least women by at least 34 percent ”

What Makes Them Tick?

Gen X women saw their parents face economic downturns and limited job opportunities Not surprisingly, they mistrust institutions and give little loyalty to their companies. That’s not to say they have no loya l t y w h a t s o e v e r R a t h e r, i t i s r e s e r v e d f o r their peers, bosses and work

The aggressive nature of corporate consolidations has added to their mistrust by stunting career growth for those standing at the threshold of senior management Now, the corporate ladder is viewed more as a lattice, where movement up, down or out is a situational option.

Since Gen X women are the first to face widespread divorce and single parenthood, its populace tends to be fiercely self-reliant and individualistic. This group has become known for working smarter not harder by learning on the fly and maneuvering fluidly between teams Because of corporate America’s heavy focus on cost-cutting and downsizing over the last 20 years, there’s been very little on-the-job mentoring or long-term training for Gen X As a result, members of this generation of employees have been forced to become efficient self-managers.

Keys to Retention

What, then, can corporate America do to retain this crucial group of professional women, who make up approximately 46 percent of today’s workforce?

Mike Shove, CEO of Computer Sciences Corporation-Australia and ceoforum.com, explains that, “Gen X-ers are no less willing than Boomers to do as the company directs, but they do expect something in return As managers, they hold you more accountable in keeping your promises to look after them you also have to take more time to explain things to get their commitment and be more open and transparent in your management style.”

For these women, each project is viewed as a learning experience and a way to acquire marketable skills However, they tend n o t t o c o m m i t t o t h i n g s w h e n t h e y d o n ’t h a v e a n i n t e l l e c t u a l u n d e r s t a n d i n g o f t h e o b j e c t i v e In fact, research conducted by Charlotte and Laura Shelton found that 77 percent of Gen X women would quit in a minute if offered “increased intellectual stimulation” at a different company.

Encouraging creativity and initiative-taking are key motivators for this demographic Keeping them informed and stimulated by establishing clear performance expectations and measures witho u t m i c r o m a n a g i n g c r e a t e s a n e n v i r o n m e n t i n w h i c h t h e s e women will thrive.

Charlotte and Laura Shelton also found that Gen X women are intent on managing their own time: 51 percent would exit their current position for the chance to telecommute, and 61 percent would leave their current jobs if offered more flexible hours elsew h e r e R e c o g n i t i o n s c o r e d v e r y l o w a n d p o w e r a n d p r e s t i g e ranked last.

Time management is indeed a significant factor among Gen X women, who tend to have different priorities than their Boomer bosses This generation grew up valuing time spent with family and the flexibility to take part in personally enriching activities Offering flex-time and telecommuting can significantly increase retention efforts. And, in fact, higher pay often will be conceded in exchange for the opportunity for greater work-life balance.

Gen X ’s openness to wage and salary discussions often leads to quick realizations of discrepancies in pay equity Even though federal laws protect women against discrimination, a pay gap exists Census statistics released on Women's Equality Day August 26, 2008 revealed that the gap between men's and women's earnings changed by less than one percent from 2006 to 2007; women earned 77 8 percent of men's wages in 2007 Clearly communicating to all staff that women receive the same pay as men for the same work is a vital retention tool

Career opportunities or the lack thereof has been a tiring point o f c o n t e n t i o n f o r m a n y G e n X w o m e n . I t i s i m p e r a t i v e t h a t employers understand that workers are more willing to stay in jobs that offer the opportunity for skills development and professional growth If not given this opportunity, then Gen X women will quickly opt for an organization that is willing to invest in their development, or will set up an entrepreneurial venture on their own. The result for employers is diminishing retention numbers and increasing business competition in the marketplace.

ICPAS member Renee Beckman, CPA, i s a pri nci pal at Pareto, I n c , a f i n a n c e , a c c o u n ti n g a n d I T pe r m a n e n t a n d te m po r a r y s ta f f i n g f i r m S h e c a n be r e a c h e d a t

o r r be c kman@ paretoi nc com

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IFRS Guru

Position yourself as an expert in all things IFRS

By Selena Chavis

It c o m e s d o w n t o b a s i c e c o n o m i c s . When the demand is high and the supp l y i s l o w, t h e c o m m o d i t y b e c o m e s much more valuable In this case, that commodity is International Financial Reporting Standards (IFRS) knowledge.

As the accounting industry readies itself for the adoption of IFRS, many companies are scrambling to find talent capable of getting them up to speed That demand for tale n t i s o n l y e x p e c t e d t o i n c r e a s e o v e r t h e next decade

“It’s no longer a question of whether we a r e g o i n g t o c o n v e r t t o I F R S , i t ’s w h e n , ” says Mike Shapow, regional vice president of Robert Half International (RHI) “This is the cutting edge of accounting ”

I n A u g u s t 2 0 0 8 , t h e U S S e c u r i t i e s a n d Exchange Commission (SEC) unanimously v o t e d t o i s s u e a p r o p o s e d r o a d m a p a n d rules changes for US public company adop-

Find Tomorrow’s Talent Today

Industry professionals agree that companies need to approach the search for IFRS talent as a strategic recruiting effort “For companies, it ’ s important that they identify someone in their firm as a champion,” says Resch, noting that clients are a l r e a d y a s k i n g a b o u t t h e a v a i l a b i l i t y o f IFRS talent up front Hopkins, agrees, adding that, “Companies should be looking for a sound technical person with a willingness to embrace global issues ”

And it ’ s not just a competency for public accounting, says Resch “Most of the air t i m e h a s b e e n g i v e n t o p u b l i c c o m p anies, but business globalization will drive I F R S n e e d s a c r o s s b o t h p u b l i c a n d p r ivate sectors ”

What ’ s more, “In five years, if a particular university isn’t teaching IFRS fundamentals, we ’ re not likely to recruit from that school,” says Grant Thornton’s Cavanaugh “In 10 years, US GAAP isn’t going to be talked about anymore, ” she stresses “ You’ve got to get on the wagon If you don’t start understanding what ’ s going on, you ’ re going to get left behind ”

t i o n o f I F R S b y 2 0 1 4 . T h e p r o p o s a l w i l l make 110 of the United State’s largest publicly held companies eligible to begin using IFRS at the end of 2009 in connection with their 2010 filings

“ T h o s e t w o p i e c e s t h e r o a d m a p a n d the rules changes firmly placed IFRS on the table,” says Ben Resch, IFRS technical leader for the Midwest region at Deloitte “If 2008 was the year of IFRS awareness, then 2009 will be the year of IFRS assessment for many companies ”

Don’t let your guard down, says Debra Hopkins, CPA/CIA, director of CPA Review at Northern Illinois University “Accounting professionals absolutely must be trained for IFRS,” she states “IFRS would be a cost-cutting measure across the world, which is what companies are looking for today ”8

C u r r e n t l y, n e a r l y 1 0 0 c o u n t r i e s r e q u i r e o r a l l o w t h e u s e o f IFRS for the preparation of financial statements by publicly held companies. This growing acceptance puts increasing pressure on t h e U n i t e d S t a t e s t o c o n v e rg e i n t e r n a t i o n a l s t a n d a r d s w i t h i t s o w n . E s t i m a t e s s u g g e s t t h a t m o r e t h a n 1 2 , 0 0 0 c o m p a n i e s a r e currently reporting under IFRS, including listed companies in the European Union.

Regardless of the US roadmap, many professionals agree that business globalization will continue to increase the demand for IFRS knowledge “I almost can’t come up with a client that isn’t challenged by globalization on some level Global accounting is an increasingly important cog in the wheel of how business is run today,” says Resch “Companies are trying to market to international investors they often need IFRS statements for that purpose ”

Large firms like Grant Thornton are already seeking IFRS talent and creating their own internal pool of experts to serve clients, s a y s J e n n i f e r C a v a n a u g h , p r o f e s s i o n a l s t a n d a r d s p a r t n e r i n t h e o rg a n i z a t i o n ’s C h i c a g o o f f i c e “ We a l r e a d y h a v e a n u m b e r o f clients on IFRS because they are subsidiaries of European companies,” she explains “As more and more companies demand that skill set, we’ll have more and more staff apportioned that way.”

It’s not just the big players though. In an unstable economy where smaller companies are being bought out by foreign players, Resch cautions that many are caught off guard by IFRS needs. “We’ve seen a number of smaller entities that are suddenly thrust into the realm of IFRS,” he explains. “They don’t have the time to plan.”

To get up to speed, Shapow sees larger firms forming IFRS teams from within “Last year, we had a large client that was way ahead

of the curve,” he recalls “They reached out to their Canadian subsidiary for talent Canada is three years ahead of the United States in adoption ”

Trends suggest that a number of companies, in fact, are starting with their overseas talent Grant Thornton, for example, is leveraging the knowledge of experienced staff in Europe to serve US clients and get others trained internally “I suspect that’s going to be expanded in the very near future,” says Cavanaugh, adding that the company has started an educational IFRS series for staff and clients as an introduction “Next we’ll move to the more nittygritty technical aspects of the standard.”

Deloitte kick-started its IFRS efforts by taking stock of partners and staff with experience working with overseas clients Next, it i

o u g h t n e e d e d t o have IFRS skills," Resch explains To help them develop the necessary skills, the company created a comprehensive course curriculum with an accreditation system and CPE credits “That is working well,” he says.

The firm also recently announced the availability of a complete IFRS academic curriculum through its IFRS University Consortium, offering lectures and transcripts from Deloitte subject matter leaders, actual case studies and case solutions, and other materials The course is available for free to all colleges and universities.

Hopkins acknowledges that the halls of learning are behind in their efforts to make IFRS curricula available to students “There’s a d e f i n i t e a

To learn more, contact: Katrina Street at 800.634.6780, option 4, or Mary Ellen Thomas at 800.993.0407, ext. 298

v a n t a

o r u n i v e r s i t i e s t h a t a r e g e a r i n g u p , b u t resources are tight,” she says “Small universities need help, but the big firms are reaching out.” Deloitte’s IFRS University Consortium, for example, numbers approximately 150 colleges and universities since its launch in spring 2008. KPMG, PricewaterhouseCoopers and Ernst and Young are also moving forward with strategic academic initiatives

H o p k i n s s u g g e s t s t h a t s m a l l e r f i r m s t h a t l a c k t h e n e c e s s a r y resources for training and education consider partnering with consortium groups that have an international sponsor and offer comprehensive education courses “There’s a cost involved, but there’s a g r e a t e r c o s t f o r n o t d o i n g i t , ” s h e s a y s “ Yo u w i l l b e c o m e a dinosaur fast if you don’t gear up Those firms that have done it already are pleased with the results ”

Resch suggests three strategies for accountants. First, “Seek out those in your organization who are knowledgeable about IFRS and let them know you are interested in learning more,” he says. Second, stay apprised of transitional plans and US roadmap status through industry newsfeeds and other resources And third, obtain specific skills in this area through seminars and online courses that c a n b e f o u n d o n w e b s i t e s d e d i c a t e d t o i n t e r n a t i o n a l f i n a n c i a l reporting topics (such as www.IASPlus.com).

I t ’s a s m a l l i n v e s t m e n t w i t h g r e a t r e t u r n s , s a y s R e s c h “ I believe that in the next 8 to 10 years, IFRS will be what we do for a living Even in the next 5 years I expect IFRS to develop as a core competency It’s the next platform that will generate leaders in the field.”

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Public Exposure

Is it worth taking your business public when the economy is down?

By Sheryl Nance -Nash

No t s o l o n g a g o , c o m p a n i e s w e r e tripping over themselves to get to t h e h e a d o f t h e I P O l i n e T h e s e days, only the brave dare step up.

“ T h e I P O m a r k e t i s d e p l o r a b l e , e v e n non-existent. I’ve been in practice nearly 3 0 y e a r s a n d I ’ v e n e v e r s e e n a n y t h i n g remotely comparable,” says Thomas Murphy, partner-in-charge of the Chicago corporate practice at the law firm of McDermott Will & Emery.

The numbers aren’t pretty Globally, only six companies were able to raise more than $100 million in the fourth quarter of 2008, down 97 percent year-over-year, says Frederick Lipman, author of Internati onal and US IPO Pl anni ng: A Busi ness Strategy Gui de.

In the United States, more than 100 companies withdrew or cancelled their plans to go public, adds Stephen Ferrara, a partner with BDO Seidman in Chicago Total US IPO proceeds were approximately $30 billion in 2008, a 50-percent drop from 2007 Much of that money included the $18 billion from Visa, which was the largest US IPO in history.

“If you exclude Visa, it was the worst IPO market since 1990,” says Ferrara

Many of those who ventured into IPO waters nearly drowned “The average return on IPOs in 2008 was negative 32 percent,” Ferrara adds

“Poor economies or strong economies are not the problem with markets uncertainty is. Stock analysts and investors love stability, not uncertainty,” says Mark Lundquist, cofounder of SellMyBusiness.com, an online resource for finding business, real estate and equipment for sale or lease

That uncertainty, plus the costs and complexities of Sarbanes-Oxley, have really hurt the public market, says Lundquist. Nobody expects a major turnaround any time soon

“Based on recent economic reports, we will be lucky if the economy picks up this year. Maybe the fourth quarter will bring an uptick in IPO activity But in reality, it may be 2010 before we see market conditions

m e r e a l i m p r o v e m e n t . B e c a u s e w e ’ r e i n u n p r e c e d e n t e d e c o n o m i c t i m e s , no one really knows what the future holds at this point,” says Ferrara

Companies that are in declining industries, including retail, financial services and real estate, likely aren’t good candidates for a n I P O i n t h e n e a r f u t u r e , h e a d d s W h o else should think twice? “Companies that need 5 years before reaching positive cash flows or any appreciable revenue, and possibly even energy-related products, unless t h e r e a r e s o m e h u g e g o v e r n m e n t i n c e ntives,” says Lundquist.

Rather than selling equity in the public markets, companies might look at alternative ways to raise capital For example, in late 2008, Chicago firm Entrex announced that it was institutionalizing an alternative n e w s e c u r i t y s t r u c t u r e k n o w n a s “ T I G Rc u b s ™ ” ( To p - l i n e I n c o m e G e n e r a t i o n Rights Certificates) for private and public c o m p a n i e s . T h i s s e c u r i t y s t r u c t u r e r e p r es e n t s a f i x e d o w n e r s h i p i n t e r e s t i n a n issuer ’s GAAP gross revenues, in consideration for a lump sum infusion of cash This i n t u r n p r o v i d e s i n v e s t o r s w i t h c u r r e n t income and avoids dependence on liquidi t y e v e n t s a s t h e s o l e s o u rc e o f i n v e s t o r r e t u r n s I t ‘ s i d e a l l y s u i t e d f o r c o m p a n i e s with annual revenues of between $5 million and $250 million.

“ T I G R c u b s ™ i s a n a l t e r n a t i v e s e c u r i t y t o e q u i t y a n d m e z z a n i n e f i n a n c i n g f o r c o m p a n i e s t o u s e , a n d i s a t t r a c t i v e t o i n v e s t o r s b e c a u s e o f i t s p r i c i n g a n d c u rrent income features” explains Entrex CEO Stephen Watkins.

Chief among the advantages for an issuer is the fact that there is no equity dilution, which means that ownership percentages are retained For investors, the advantage is that cash distributions are provided monthly and, unlike equity investments, returns a r e n o t d e p e n d e n t o n l i q u i d i t y e v e n t s o r market timing

“It’s a radical change that reverts back to t h e o r i g i n a l a n d f u n d a m e n t a l m e t h o d s o f

t h e r e g i o n a l s e c u r i t y e x c h a n g e s t h a t w e r e s o s u c c e s s f u l w h e r e there was transparency,” says Watkins

Even with the risk, doom and gloom, going public still might be a savvy strategy for some. Two factors are making going public attractive now “First, the SEC changed its rules just before the holidays, making it easier to conduct an IPO The SEC recognizes that if banks and private lenders can’t provide the capital for companies to grow, it’s best to allow more companies to raise capital via shareholders,” says Lundquist.

“Second, hedge funds and some investment banks have decided to take matters into their own hands, away from Wall Street, and are now aggressively seeking appropriate companies to invest in Some investment banks that normally shied away from pre-review or early-stage companies now see that these opportunities may provide better returns than the Standard & Poor ’s,” he explains.

“It may be a good time, too, for companies with proven business models in mature industries that are generating significant cash and returns, that have a fast return on cash, but are looking to transition the business,” says Roger Hardy, CEO of Coastal Contacts, an online vision-care supplier based in Vancouver, Canada

If a company is already a household name, with great growth plans and a compelling reason for the money, then public may be an option, says Murphy Companies that haven’t been so adversely impacted by the recession, such as healthcare businesses, energy and defense, also may make good candidates

What’s more, some companies will stand to benefit from the economic stimulus package. For those fortunate businesses, the timing might be right for an IPO. There isn’t likely to be a crowd of companies hankering for the spotlight They’ll get their 15 minutes and hopefully more

So if the odds are in your favor, here’s what you need to consider

For starters, be clear about your objectives “CEOs have to look hard at the IPO journey. Besides the often underestimated cost and resource implications to reach and maintain public status, you have to consider what being on the open market offers you in t e r m s o f s u p p o r t f o r o n g o i n g s h a r e p r i c e Wi t h s t o c k p r i c e s s o depressed, it’s hard to say where a company might price or what it can sustain for shareholders beyond that If remaining as, or becoming, a public company doesn’t provide efficient access to

capital (at a reasonable cost), along with shareholder liquidity, then what’s the value of being public?” asks Watkins

“The IPO process in itself is not the end all and be all that it’s chalked up to be. An IPO is not a kind of accomplishment of stat u s , a s i t w a s o n c e t h o u g h t t o b e ; i t ’s a n a c t i v i t y t h a t t a k e s a tremendous amount of attention and resources, has its associated risks, and needs to be considered in relation to its benefits It’s an extraordinary commitment, actually, and if alternatives to raising capital at less cost are available then they should be seriously considered,” he explains.

Secondly, be willing to complete your transaction at a lower price Think conservatively, says Murphy

“Don’t rush Spend more time than usual planning and preparing for the offering Don’t hurry to market to meet a window Even i f a w i n d o w o p e n s i n t h i s m a r k e t , o v e r- p r e p a r e a n d o v e r- p l a n , because it will be hard to extrapolate from previous markets, since there’s no real comparison,” he explains

Slowing down will keep you grounded in those things that are important, such as researching the investment bank behind the IPO “Gain an understanding of the strengths and weaknesses of the partner they are working with, including the bank’s success rate in completing IPOs, the bank’s knowledge of your industry, its track record in getting the price promised to the target company and for supporting the company in markets post-IPO,” explains Ferrara

Most importantly, ask yourself, “Will the IPO help my company in the future when seeking financing, acquiring businesses and recruiting/retaining talent?” and “Are we ready for the microscope?”

You’ll be measured quarter to quarter, and senior management will be required to disclose personal compensation and benefit information There will be less flexibility in managing your business, since you’ll be required to report to an independent board And you’ll need to guarantee the appropriate internal corporate structure to support a public company’s reporting requirements.

If after a good, long look the answer is decidedly a go, know that success is possible in any market, even this one Says Ferrara, “The top performing IPOs in 2008 were all niche businesses that had a distinct market for their products They returned approximately 30 percent on average ”

Not so bad after all, perhaps.

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On the Move

WiFi is everywhere; mobile technologies are it But are you putting yourself at risk by using them?

By Theresa Carey

Whether you’re on the road or just o u t t o d i n n e r, m o b i l e d e v i c e s used for everything from schedu l i n g m e e t i n g s t o p a y i n g b i l l s o n l i n e a r e part of our everyday lives. But are we risking identity theft, corporate data loss, or an empty bank account by using them?

Probably the biggest risk facing mobile device users is theft or loss Imagine forgett i n g y o u r l a p t o p a t t h e a i r p o r t , o r h a v i n g your iPhone pickpocketed Wave good-bye to email accounts, logins, photos, and more

Then there’s the WiFi peril Thieves use strategies such as packet sniffing, phishing, and pharming to steal login information.

Not familiar with these terms? Well, you should be.

Packet sniffing refers to software or hardware that logs data being transmitted over a d i g i t a l n e t w o r k T h e i n t e n t i s u s u a l l y

b e n i g n t o l o c a t e t r o u b l e s p o t s o r h i g hl i g h t a t t e m p t e d b r e a k - i n s e a r l y o n B u t packet sniffers also can be used to steal data such as passwords

Former FBI agent Geoff Bickers suggests u s i n g a s e c u r e Vi r t u a l P r i v a t e N e t w o r k (VPN) to tunnel your web traffic through an open access point and therefore avoid sniffing. You can install a VPN on your mobile devices for a monthly fee between $7.50 a n d $ 1 5 . ( Ta k e a l o o k a t H o t s p o t V P N [www hotspotvpn com] or Hotspot Shield [www hotspotshield com] ) Or you can use non-commercial open source VPN equivalents, but these require technical expertise to deploy Linux users, however, will have relatively few problems

An even better option, says Bickers, is to “Leave open WiFi for dead and join the rest of us on EVDO (Evolution Data Optimized, [ w w w. e v d o i n f o . c o m ] ) o r G P R S ( G e n e r a l P a c k e t R a d i o S e r v i c e ) . I t ' s f a s t e r, m o r e secure than WiFi, and not that much more expensive when you realize you won't be wasting time looking for a signal or worrying about what you can and can't do on it ” N e x t o n t h e l i s t o f t h r e a t s i s p h i s h i n g , which uses a seemingly legitimate email to d e c e i v e a r e c i p i e n t i n t o c o m m u n i c a t i n g confidential information For example, an email might claim to be from your bank, and sensitive financial information, like a Social Security or bank account number, is needed ASAP.

In pharming, the victim is lured into making transactions on a phony website that looks like the homepage of a bank or legitimate investment company These sites typically ask for a lot more log-in information, including Social Security number and credit card information, than a legitimate site would do in order to verify your identity.

One way to thwart these scammers is to use a digital security ID card, which is the size of a credit card with a small numerical display The number changes every minute

or so, in sync with the broker ’s system. A user logs in with his or her ID and password, and then types in the current number. Many banks and brokers make these “two-factor authentication” cards available to their customers upon request

S c o t t M c G r a t h , d i r e c t o r o f p r o d u c t m a n a g e m e n t f o r R a v e Mobile Safety, says that, ”Mobile security risks are much the same as those confronting web surfers. Watch out for phishing, and use caution and common sense when clicking links from emails, SMS messages and Twitter feeds If you want to get to the web, type in the web address rather than trusting a link, and use bookmarks in your browser Even at the cost of typing on a small or virtual keyboard, never reveal passwords ”

I f y o u ’ r e m a k i n g a n y f i n a n c i a l t r a n s a c t i o n s f r o m a m o b i l e device, make sure the firms you’re working with employ encryption for transmitted data, and that they’re monitoring transactions for unusual behavior Most banks and brokers are now on the lookout for activity that originates from geographical areas that they know are hotbeds of criminal activity, and have been successful at stopping the great majority of these intrusions

Another major line of defense is firewall software, which monitors your Internet connection and alerts you to intruder attacks. It’s also a good idea to disable file and printer sharing, especially on Windows-based laptops, when working in a public hotspot You should password-protect extremely sensitive files, and consider encrypting them as well

Jamie Rawson, a technical instructor at VM Ware, Inc., who t a u g h t s e c u r i t y a t S u n M i c r o s y s t e m s f o r o v e r a d e c a d e , s a y s , "Encrypt everything you send across wireless connections Once you send data over a medium that you do not control 100 percent, you risk it being intercepted by unauthorized folks Encryption is the best protection to reduce that exposure to acceptable levels "

Also password-protect your mobile devices, including your laptop. While this won’t stop a determined crook, it will slow down the amateurs. If your laptop carries confidential data, you should seriously consider some kind of biometric security, such as a fingerprint recognition device

Your laptop isn’t the only problem though The incredible popularity of Apple’s iPhone has made it a target, especially now that it’s possible to write third-party applications for the platform. In t h e “ S e t t i n g s ” m e n u , y o u c a n d e f i n e a 4 - d i g i t p a s s c o d e l o c k , which should be one of the first things you do when you buy your phone The passcode can be set so that all the data the iPhone h o l d s , i n c l u d i n g c o n t a c t s , t e x t m e s s a g e s , a n d e m a i l l o g i n , i s erased if someone enters the wrong code 10 times

P h o n e n u m b e r s p o o f i n g i s a n o t h e r t r i c k b e i n g p e r p e t r a t e d a g a i n s t o w n e r s o f v a r i o u s S m a r t p h o n e s w i t h b u i l t - i n w e b browsers Let’s say you’re searching for a copy shop or a restaurant while you’re traveling, and you want to call one that came up on your device’s web browser Some crooks are formatting the dial links so that you are charged for an expensive 900 number or overseas number You may need a defibrillator when you read your next mobile phone bill should that happen.

Mobile devices, whether phones or laptops, are indispensable to business today It’s not as though we can say, “These gadgets a r e r i s k y ; l e t ’s n o t u s e t h e m ” I t ’s s i m p l y a m a t t e r o f k n o w i n g w h a t t h e r i s k s a r e , a n d d o i n g w h a t e v e r n e c e s s a r y t o p r o t e c t against them

2009 | call for nominations

Women toWatch AWARDS

The Illinois CPA Society, together with the AICPA, is once again looking for outstanding women who have made significant contributions to the accounting profession, their organizations, and to the development of women as leaders.

Awards will be given in two categories:

experienced leaders

•mentoring other professionals

•public or community service

•major or unique contributions to the profession

•leadership in workplace improvements

•authorship of professional articles

emerging leaders

•demonstration of leadership

•contributions to the profession

•creation and implementation of unique initiatives in the workplace

•public or community service

•involvement with her alma mater

For more information or to nominate a deserving woman, visit www.icpas.org, or call 800.993.0407, ext. 220.

Deadline for submissions is June 20, 2008

Love & Money

Protecting your client’s assets before they tie the knot goes beyond traditional prenups

By Janet Haney

Romance isn’t all wine and roses

The nation’s divorce rate is proof of that In fact, marriage is just as much about protecting assets as it is about love these days

“You don’t know what the future will bring, so arm yourself with the best defense,” advises Mark Gilbert, CPA/PFS, of Reason Financial Advisors “Look at your future spouse as a future creditor down the road ” That might not seem the most romantic sentiment, but it is, perhaps, the most practical A r e c e n t U n i v e r s i t y o f P e n n s y l v a n i a Wharton School of Business study reveals that divorce rates in the United States fluct u a t e d e p e n d i n g o n a g e , e d u c a t i o n a n d length of marriage "The ubiquitous 50-percent divorce rate is unlikely to ever be true for those who married in the past few decades," says Betsey Stevenson, assistant professor of business and public policy at Wharton. "For many of these folks, their divorce rates so far have fallen substantially compared with previous generations "

So why worry? “My view is that it is less expensive if you have a premarital agreement that delineates what is marital property and what the rights are to maintenance,” says Barbara Grayson, partner at Mayer Brown LLP in Chicago. “Without a premarital agreement, there is room for more vigorous litigation Since a premarital agreement is negotiated when the future spouses are feeling more fondly about each other, they will be more generous,” she says “What clients are worried about is facing a long, drawn-out court battle.”

Commonly, spouses-to-be will establish either a revocable or an irrevocable trust to protect individual or business-related assets

The grantor of a revocable trust determines who will serve as the trustee and who the beneficiaries will be upon death The trust is considered part of the grantor ’s estate, and assets are therefore subject to individual taxation The trust can be changed or cancelled during the grantor ’s lifetime, and con-

tributions can be withdrawn while the grantor is still living

The grantor of an irrevocable trust, on the other hand, cannot take contributions out of t h e t r u s t , b u t c a n g i v e a w a y a s s e t s h e l d while he or she is still living (in cases of succession, for example) The downside is that the grantor effectively eliminates all of his or h e r r i g h t s o f a s s e t o w n e r s h i p O n t h e upside, he or she is relieved of tax implications on the income generated by the assets.

“The separation of assets is the most important thing. If you have assets keep them titled in your name,” says Kevin Metke, private client advisor in the tax practice at Deloitte & Touche in Chicago

This means keeping bank accounts and titles to homes and businesses independent. Each person also should be represented by his or her own attorney

Gloria Birnkrant, CPA, partner at NSBN L L P, s u g g e s t s t h a t b o t h p a r t i e s a t t a c h a s i g n e d b a l a n c e s h e e t t o t h e p r e n u p t i a l a g r e e m e n t , a c k n o w l e d g i n g w h i c h a s s e t s will remain separate. Non-marital property such as a house purchased before marriage, an investment portfolio or an inheritance generally goes back to the individual who holds the title

There are exceptions, however “How property is held can differ from state to state, and the rules covering property rights differ from state to state,” Birnkrant warns. If the assets increase in value during the marriage, or if a spouse buys additional property with income from the original assets, it might all be tagged as marital property upon divorce

“Meticulously maintain the separate property and the income from it so that the separate property doesn’t get comingled with the community property,” Birnkrant advises “This is the usual problem for couples and creates issues concerning which property is really separate and which property, by comingling, has become community. Keep detailed records of the source of the assets and the income from those assets ”

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Talking Points

The end of tax season doesn’t mean the end of tax talk Here, three developments you should know about

By Harvey Coustan, CPA

Tax returns have been filed, and the craziness of tax season has come to a n e n d f o r a n o t h e r y e a r B u t t a x developments are a constant In particular, there are three developments that I want to share with you

First, while we’ve lived for months with the final preparer penalty regulations and N o t i c e 2 0 0 9 - 5 t h a t a c c o m p a n i e d t h e m , there is one feature of the rules that escaped me the first time I read through them This rule should save a lot of angst on returns b e a r i n g t a x p a y e r u n d e r s t a t e m e n t s t h a t don’t rise above statutory thresholds

Second, I’ll tell you about a recent IRS memorandum that provided “Interim Guida n c e o n P r e p a r e r P e n a l t y P r o c e d u r e s f o r Employment Tax ” And third, I’ll describe a court case that reiterated a liberal application of “work-product” protection for taxpayer ’s accrual workpapers, but didn’t provide any clear direction on whether disclosure of those workpapers to outside auditors waives the privilege

Avoiding the Preparer Penalty

As most of us realize, an understatement of tax will only invoke a “substantial understatement” penalty for the taxpayer in a situation where it exceeds $5,000 or 10 per-

c e n t o f t h e c o r r e c t t a x ( i f t h e 1 0 p e rc e n t amount is greater). For C corporations, the threshold is $10,000, but the trigger point, once that amount is exceeded is 10 percent o f t h e c o r r e c t t a x I f t h e C C o r p o r a t i o n ’s understatement exceeds $10 million, however, it is “substantial,” and the penalty can apply even if 10 percent of the correct tax is more than $10 million

The preparer penalty has no thresholds Once there is an understatement, the penalty can apply This dichotomy has existed ever since the preparer penalty was first enacted, and has created some tension between preparers and their clients. Before May 2007, the preparer ’s standard for avoiding penalties for nondisclosed positions was “a realistic possibility of success,” a lower standard than substantial authority, which was and continues to be the taxpayer ’s standard for nondisclosed tax return positions This means that, before May 2007, there were fewer situations where the conflict arose Even in situations where the taxpayer ’s position failed to have substantial authority but the taxpayer threshold was not exceeded, the position had to meet a lower standard for the preparer to avoid a penalty.

For a while, from May 2007 until October 2008, the preparer ’s standard was higher than the taxpayer ’s, and only some preparerfriendly IRS rules for meeting disclosure obligations prevented conflicts. These friendly IRS rules didn’t provide relief in those situations where the taxpayer avoided the penalty, because it was lower than the thresholds, however. Now, with the preparer ’s standard for nondisclosed positions reduced to the same level as the taxpayer ’s, the IRS has provided relief for this scenario

Conflict can be avoided in those situations where an income tax return position invokes a preparer penalty because it doesn’t have substantial authority, but will not invoke a taxpayer understatement penalty because the amount of the understatement falls below the penalty thresholds 8

As a financial professional, you’ve probably anticipated expenses such as college tuition, a child’s wedding or retirement savings and factored them into your financial plan. You may even have life insurance so if you were to die, your family could still achieve the goals you set. What would happen to your finances if you were suddenly disabled and couldn’t work?

totally disabled, you would still be responsible for meeting all your dayto-day expenses. Without an income, that could be nearly impossible for you to handle.

There is a way you can help protect your future, even if you are no longer able to work. It’s called the AICPA Long Term Disability Income Plan. This insurance coverage, issued by The Prudential Insurance Company of America, can be an important component to your financial plan.

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Disabilities can strike without warning, affecting not only your health, but also your ability to provide for yourself and your family. In addition to the added costs that come with being

The money you receive under the LTD Plan can be used for daily expenses, additional medical treatment, or whatever costs you need to address.

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• Opportunity for cash refunds, which reduce the cost of coverage. Although never guaranteed, cash refunds have been paid annually by the Trust since 1987 from premium refunds received from Prudential

What’s more, your Social Security benefi ts won’t be reduced because of your LTD benefi ts.

Treasury Regulations Section 1.6694-2(d)(3) indicates that the signing preparer will be considered as satisfying disclosure requirements, “For returns or claims for refund that are subject to penalties pursuant to section 6662 other than the accuracy-related penalty attributable to a substantial understatement of income tax under section 6662(b)(2) and (d), (if) the tax return preparer advises the taxpayer of the penalty standards applicable to the taxpayer under section 6662. The tax return preparer must also contemporaneously document the advice in the tax return preparer ’s files ”

If the preparer describes any other penalties that can be applied under that same code section, and documents the advice in his or her file, this “disclosure” surrogate will avoid the preparer penalty as long as the position has a reasonable basis

The other taxpayer penalties contained in this code section are imposed for negligence, substantial valuation misstatements, substantial overstatement of penalty liabilities, and substantial estate or gift tax valuation understatements. One caveat this relief does not apply to tax shelters, listed transactions, or reportable transactions that have a significant purpose of tax avoidance. Positions that meet any of those categories require a more-likely-than-not chance of success, and disclosure will not avoid the preparer penalty.

Preparer Penalties for Employment Tax Returns

A recent IRS memorandum provides “Interim Guidance on Preparer Penalty Procedures for Employment Tax” for employment tax territory managers, group managers and specialists Issued by the IRS chief of Employment Tax Operations, the memorandum is a reminder that, since May 2007, employment tax returns (e g Forms 940, 941) are subject to preparer penalties if there is an understate-

ment of a taxpayer ’s liability due to an unreasonable position that the preparer either knew or reasonably should have known about A higher penalty is applied if the understatement was due to willful or reckless preparer conduct. Since paid preparers are required to sign these returns, penalties can be imposed for failure to sign and other actions under Internal Revenue Code Section 6695.

The memorandum also indicates that, during all field and office examinations, a determination based on oral testimony and/or written evidence will be made concerning whether the case supports the development of a preparer penalty issue Examiners are required to comment on preparer penalties on all cases examined Information on preparer penalty applicability will be kept in a separate file from the taxpayer ’s case file, and the IRS examiner cannot propose or discuss the preparer penalty in the presence of the taxpayer.

Generally, the employment tax examination must be completed at the group level before the preparer penalty is proposed Manager approval must be obtained, and the IRS Return Preparer Coordinator must be contacted prior to initiating a preparer penalty case

Many practitioners prepare these forms, and the application of the penalties to preparers of employment tax returns adds a layer of risk we all should be aware of

Tax Accrual Workpaper Protection

Finally, in January of this year, the First Circuit Court of Appeals affirmed the District Court’s decision in Textron (Rhode Island Dist Ct , 2007-1, USTC ¶50,605) that certain tax accrual workpapers prepared by Textron were protected under “work-product doctrine.” The Appellate Court, however, vacated the determination that work-product protection was not waived (by disclosure to Textron’s auditors, Ernst & Young [E&Y]) and remanded for the District Court “to reassess the question of whether disclosure of E&Y’s workpapers would reveal the information contained in Textron’s own workpapers.” In addition, the District Court was also asked to “assess the discoverability of E&Y’s workpapers by determining whether Textron has the legal right or ability to obtain these documents.”

The question, then, that has been the subject of much conjecture continues unanswered: Will disclosure to outside auditors of company-prepared tax-accrual or tax-reserve workpapers waive the work-product privilege?

The Appeals Court upheld the “because of” test applied by its circuit to determine that work-product protection exists even if the documents were prepared for more than one purpose as long as they were prepared in anticipation of litigation. In Textron, the papers also were prepared to determine the amount of reserves for income taxes that were necessary for financial statement purposes, and to justify that amount so that E&Y could certify the statements The Fifth Circuit has applied a “primary purpose” test that rejects the protection’s application where there is more than an anticipation of litigation purpose for the document preparation Of course, the conflict between appeals courts can eventually pave a road to the Supreme Court

The Textron court remanded the case to the District Court for a ruling on the questions described here, but the government can request an en banc (full court) review by the First Circuit or, I’ve heard, can appeal the case to the Supreme Court without resolution of the waiver issue

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top jobS?

By Derrick Lilly

Now may not seem like the best time to think about promotions, but even in the face of an economic downturn, lucrative jobs in finance may be within your reach

Why? It’s simple: Highly qualified finance professionals are a n e c e s s i t y, w h a t e v e r t h e e c o n o m i c c l i m a t e , a n d , i n f a c t shake-ups in the marketplace often create opportunities for career advancement

“ Org a n i z a t i o n s c a n ’t a f f o rd t o o p e ra t e w i t h o u t e x e c u t i v e l e v e l s i n f i n a n c e , ” s a y s To b y C o f f e y, d i re c t o r o f P e rma n e n t Placement Services with Robert Half International in Chicago

In fact, the Robert Hal f Gl obal Fi nanci al Empl oyment Moni tor reports that employers around the world are having difficulty finding accounting and finance talent, and the toughest positions to fill are in the C-suite

So, how do you position yourself as the best candidate to fill that empty executive seat?

The job market may be stuck in a rut, but top finance spots can still be won.

“There is no substitute for education,” says Coffey “Credentials like the Certified Public Accountant (CPA), Chartered Financial Analyst (CFA) and Master ’s in Business Administration (MBA) are the ‘gold standards,’ and there’s absolutely going to be opportunities available to professionals with those certifications ”

Advanced degrees like a Master ’s in Tax and credentials like the Certified Internal Auditor (CIA), Certified Information Systems Auditor (CISA) and Certified Management Accountant (CMA) also can help you stand out in the marketplace, he says.

“When companies come to hire at the executive levels, they have the expectation to find as many items on t h e i r l a u n d r y l i s t a s p o s s i b l e , a n d e a c h o n e o f t h o s e shaves off percentage points of the population qualified for that role,” says Coffey

To stay in the running you’ll need expertise in various business-critical areas. The Gl obal Fi nanci al Empl oyment Moni tor cites industry-specific experience, regulatory compliance expertise, public company knowl-

e r e s o u rc e p l a n n i n g (ERP) systems, and an understanding of international markets as the top five attributes sought in executivelevel candidates.

Technical expertise aside, superb communication skills will help you move up the ranks Jeramy Kaiman, division manager at Chicago-based recruiting firm Garelli Wong & Associates, stresses, “There’s a big difference between an accountant who can do a job and an accountant who can get in front of board members, sales people and customers. That’s what determines the difference between a front-office and back-office accountant in the market, and the front-office accountant is typically going to get promoted to much more visible roles ”

Dependability doesn’t hurt either “There’s a lot to be said for someone who is loyal to an organization that comes up through the ranks and has a track record o f s u c c e s s , ” s a y s C o f f e y “ T h e r e i s n o s u b s t i t u t e f o r s o m e o n e w h o i s t r u s t w o r t h y, w h e r e y o u k n o w t h e i r value and worth because you have worked with them day-in and day-out Those kinds of people are often going to be the first to get promotion opportunities.”

Now that you have an idea of the skills and experience needed to get you to the top, all you have to do is choose the best path to get you there

Go Public

“Public accounting is a phenomenal place for accounta n t s t o g e t t h e i r t e c h n i c a l s k i l l s s h a r p e n e d , ” s a y s Kaiman And while there are many significant positions t o b e w o n i n p u b l i c a c c o u n t i n g , p r o b a b l y t h e m o s t prominent is partner

“Financially, partners do really well; they do better than many corporate CFOs It’s very lucrative, but getting there is a lot of work,” says Kaiman.

Aside from extensive financial expertise, a partner ’s strategic p l a n n i n g , n e g o t i a t i o n a n d b u s i n e s s a n a l y t i c e x p e r t i s e m u s t b e top-notch. “A must-have is a business development mind,” says Kaiman “Without that it’s hard to become a partner because you have to generate business ” In fact, a partner ’s primary focus is t o e f f e c t i v e l y m a n a g e a n d g r o w t h e b u s i n e s s N o t s u r p r i s i n g l y then, paychecks directly reflect performance in this area

“Salaries obviously depend on how profitable the company is,” says Coffey, “but partners at successful firms can make in excess of $1 million a year.”

Climb the Corporate Ladder

Tr a n s i t i o n i n g i n t o t h e c o r p o r a t e s e c t o r c a n b e a n e x t r e m e l y rewarding career move “Individuals that work at public accounting firms have a lot of success finding jobs in the corporate world; they are very sought after candidates,” says Coffey In fact, publicsector experience is highly valued among corporations and private equity and consulting firms, alike

To get on a successful career track, Kaiman suggests identifying an industry you have a passion for because, generally speaking, “The people that make it all the way up stay in an industry and within a niche in that industry throughout most of their careers ”

The size of an organization also plays a significant role in determining upward mobility In large organizations, the top positions may include a VP of finance, treasurer and CFO; however, the CFO alone often fills multiple rolls in mid- and small-cap organizations, or in organizations that emphasize a hands-on management structure. Here, a CFO’s duties may comprise strategic management of the accounting and finance functions, procedures and p o l i c i e s ; c o m p l i a n c e ; b u s i n e s s r i s k ; h u m a n r e s o u rc e s ; i n v e s tments; insurance; and budgeting processes As a CFO, all of your skills will be put to test especially the softer ones

“The CFO is the face of the organization from a finance perspective,” says Kaiman. “If a company wants to go public or is publicly traded, the CFO is going to be doing the ‘road show’ with board members, investors and analysts ”

While the current economy has taken a chunk out of the earnings of many, base salaries for corporate CFOs typically stretch into six-figures and may surpass $1 million at large organizations a n d m u l t i n a t i o n a l s W h a t ’s m o r e , p e r f o r m a n c e b o n u s e s a n d incentives can often increase total annual compensation by 30 to 40 percent.

Join the PE Elite

The private equity (PE) market has heated up over the last few years, and its lucrative nature is garnering increasing attention

The opportunities and management structures found in PE firms are very similar to those of public accounting firms and corporations, but, Kaiman explains, “Finance and accounting jobs inside PE firms require very elite talent ”

PE firms look for the best-of-the-best and expect no less. Associates and principals on “deal teams” can reap substantial rewards, but the big money is again in the C-suite

“Those individuals make a tremendous amount of money,” says Coffey “But there is a very tough lifestyle that goes along with it, and it’s so competitive that many of those positions will not even be available to the everyday finance professional ”

PE firms demand financial leaders capable of handling typical CFO duties, while continually analyzing strategic acquisition targets and managing the CFOs at their portfolio companies Because of these extensive demands, total compensation commonly surpasses $1 million and is often accompanied by significant equity options and payoffs when portfolio companies are spun-off.

Turnaround Profits

Due to the ailing economy, the CTPartners 2009 Ex ecuti ve Hot Jobs Report identified restructuring officers, turnaround experts and distressed asset managers as the top three finance careers in the spotlight for the year.

Turnaround consultants analyze and restructure distressed company operations and balance sheets in order to return organizations to profitability They also help to spearhead bankruptcy reorganizations and company mergers and acquisitions

Organizations in need of a turnaround consultant will look for someone who is “battle-tested,” says Coffey, because “ownership in these organizations wants that comfort level of not only hiring someone who says they can do what they need to, but who has previously done it successfully.”

As a turnaround specialist, expect to be met with immense challenges and the monetary rewards befitting them Base compensation can range from $500,000 to $1 million, and is often accompanied by substantial restricted stock options or an equity stake in the restructured company.

Find the Road to the Top

It’s easy to find your inspiration in money and prestige, but, says Kaiman, “As you move up in a career there is going to be a sacrifice made each rung up the ladder ”

If you win an executive-level position, prepare to trade personal time for longer work hours The success or failure of a business is directly tied to its finances, and that responsibility will rest heavily on your shoulders What’s more, significant pressure to “outperform” will likely come from ownership, board members and investors who will be analyzing your financial performance and management techniques

“As long as you’re honest with yourself about what your motiv a t o r s a r e , y o u w i l l f i n d t h e j o b s a n d c o m p a n i e s t o f i t t h e m , ” Kaiman explains.

And if money and prestige are indeed your motivators, then n e t w o r k i n g i s k e y. “ I f a n o rg a n i z a t i o n i s g o i n g t o o p e n u p a n upper-level position there are probably a few people that they are going to use as networking resources,” says Coffey. Organizations often look to established business partners and individuals they have dealt with over the years for potential recruits or candidate s u g g e s t i o n s “ T h e r e i s a l o t o f c o m f o r t i n t h a t , ” s a y s C o f f e y, “ b e c a u s e t h e y a l r e a d y k n o w t h e q u a l i t y a n d t h e c a l i b e r o f t h e individual they’re getting ”

crossed cultures

Did you give your Russian colleagues the thumbs up after that impressive presentation? Yeah, well, you might as well have told them to “%@$#-$@#!”

By Judy Giannetto

Let’s face it, it’s really easy to mess things up when you’re doing business in another country. No matter how impressive your credentials or high your social status, wear a yellow and green tie to your business meeting in Brazil, use red ink to write a thank you note in China, or give the thumbs up to the captain of Russian industry (the equivalent of the middle finger in the United States), and you might as well pack your bags and book your ticket home Everything from what you wear to the gifts you give carry a cultural nuance

Think of Former President George H W Bush when he handed Chinese Premier Li Peng a pair of cowboy boots, embellished with the American and Chinese flags. A great gesture of Asian/American goodwill, wouldn’t you say? Actually, no Since the sole of the foot is considered the dirtiest, basest part of the body, Bush couldn’t have given a more flagrant albeit unintentional slap in the face

E v e n i n t h e c u r r e n t e c o n o m i c c l i m a t e , c u l t u r a l k n o w l e d g e i s extremely relevant “Cultural IQ has never been more important, since the volume of international business is increasing and companies can’t afford to make mistakes. Mistakes can ruin careers,” says Sheida Hodge, president of management consulting firm HIA and former managing director of the Cultural Consulting Division at Berlitz International

G M A C G l o b a l R e l o c a t i o n S e r v i c e s ’ r e c e n t l y r e l e a s e d 2 0 0 8 Gl obal Rel ocati on Trends Survey reveals that, of the 154 companies interviewed across various industries, an overwhelming 95 percent plan to increase the number of employees they send on international assignment, or, at the very least, to keep numbers at 2007 levels This is due in part to the opportunities presented by fast-developing economies, particularly Brazil, Russia, India and China collectively known as BRIC.

A n d w h i l e y o u k n o w t h a t B r a z i l i s h o t , R u s s i a i s c o l d , I n d i a brews great tea and China makes great dim sum, do you really know anything about the management styles and negotiation intricacies involved in doing business with these cultures?

“Too often we find that companies are coming to us when things s t a r t t o b r e a k d o w n , r a t h e r t h a n t a k i n g s t e p s t o m i n i m i z e t h e chances of a mishap in the first place,” says Diana Rowland, a cross-cultural trainer, consultant and author, and president of Rowl a n d & A s s o c i a t e s , I n c , a c r o s s - c u l t u r a l c o n s u l t i n g f i r m “ T h e American market is fairly forgiving, but in much of the rest of the world, damaged relationships and market faux pas are not easily repaired When crossing cultures, an ounce of prevention can be worth 1,000 pounds of cure.”

B is for Brazil

B r a z i l i a n s a r e a p a s s i o n a t e , e x p r e s s i v e , t a c t i l e p e o p l e B o d y language is exuberant, handshakes are heartfelt and eye contact is strong.

Brazilians are also extremely sociable Meetings and business dinners tend to be informal, starting and ending with a lot of small talk (soccer, the family, etc ), intended to build the basis of a long a n d t r u s t i n g r e l a t i o n s h i p . I f y o u ’ v e p r e p a r e d a n a g e n d a , d o n ’t bother bringing it

That bond-building aspect of business carries over to team-building as well. The cohesiveness of the group depends on the strength of the relationships forged and strong relationships take time Each team member will want to know his or her precise role, otherwise there’s the danger of encroaching on someone else’s turf

At the same time, the chain of command in Brazilian business is extremely hierarchical, with key decisions being made at the most senior levels of the company Personal relationships and t h e r e f o r e i n t e r n a l p o l i t i c s a r e e x t r e m e l y i m p o r t a n t a n d m a y impact the unofficial chain of command

Remember, too, that what you say carries much more weight than what you write. When you send a written proposal, contract or other document, you should follow it up with a phone call or personal visit Don’t rely on email, IM, text or any other technology to do the job for you

R is for Russia

The same is true of Russia, where people tend to trust what they hear over what they read not that surprising when you put contemporary Russia in the context of old Russia, where mistrust of state authority and its bureaucracies ran rampant. Relationship-

www icpas org/insight htm

b u i l d i n g , b u s i n e s s e n t e r t a i n i n g a n d f a c e - t o - f a c e m e e t i n g s a r e therefore a must But there’s a significant challenge to this in a culture often stereotyped as at once dour, volatile and corrupt

Generally speaking, the country follows a centralized system of business management, where a strong central leader carries the responsibility for strategic decision-making, with little consultation with others, save, perhaps, a small group of trusted advisors. Given this, negotiate with individuals as close to the top of the chain of command as possible If you do go straight to the top, you’ll find d e c i s i o n s a r e m a d e s w i f t l y. D e a l w i t h m i d d l e m a n a g e m e n t , though, and you’re on the road to nowhere

“Always start at the highest authority level and remember that people in BRIC countries would like to work with people at the s a m e l e v e l s , ” s a y s H o d g e ” S o m e t i m e s y o u m i g h t r e a c h o u t t o someone at the higher level in your company to pave the way before you take action ”

Micro-management is the rule in Russia Teams are not asked to take initiative, but rather to efficiently carry out explicit directions. It follows that meetings are extremely formal, and generally for information-sharing purposes only By the time you get to a team meeting, the likelihood is that the big decisions have already been made Think carefully about this without access to “behind-thescenes” discussions, you’re unlikely to have any impact on the decision-making process.

What’s more, don’t be surprised if you don’t see a lot of docum e n t - s h a r i n g , c o n v e r s a t i o n a l g i v e - a n d - t a k e o r e x p r e s s i v e b o d y language during your meetings Responses are not given impulsively Patience is considered a great virtue in Russian culture And yours might well be tested. Final offers most likely are not final offers at all just as long as you have the patience to hold out for the lucrative deal you’ve been after And while your lack of punctuality would be considered extremely rude, your patience in dealing with your Russian colleagues’ lateness will be proof of your worth

Unlike the other countries covered in the BRIC group, Russia focuses more on short-term gains than on long-term ones This is a culture that grabs opportunity by the horns, and your Russian colleagues will want to know the short-term benefits of their collaboration with you

I is for India

A fascinating aspect of Indian culture is the caste system, where class is determined by heredity and strictly adhered to Where the American Dream tells you that you can change your social position if you just work hard enough, the caste system tells you that your lot in life is predestined and unshakable

Not surprisingly, this system permeates business structures as w e l l , a n d t e l l s a f a m i l i a r B R I C s t o r y : C o m p a n i e s a r e e x t r e m e l y h i e r a rc h i c a l , a n d t h e b o s s o f w h i c h t h e r e i s c l e a r l y o n e i s u n e q u i v o c a l l y t h e b o s s E x p l i c i t o r d e r s a r e i s s u e d , n e v e r q u e stioned, and carried out to the letter via the cut-and-dry chain of command The team leader takes responsibility in its entirely for the team’s successes and failures. If anything does go wrong, he is expected to handle the situation personally

A great advantage of doing business in India is that English is one of the nation’s 15 official languages, and it’s rare to find a business person who doesn’t speak English excellently This is fortunate given that, “For business people to learn a BRIC language is a waste of time To become fluent to the point of making a differ-

CULTURAL FAUX PAS

B R a Z I l : Av o i d w e a r i n g y e l l o w a n d g r e e n t h e c o u n t r y ’s national colors or purple and black the colors used in Holy We e k p r o c e s s i o n s A n d d o n ’t a s s u m e t h a t i t ’s f i n e t o s p e a k Spanish Brazil’s national language is Portuguese Never start into business discussions before your host does. And the A-OK hand gesture is absolutely not A-OK in fact, it’s an obscenity RUssIa: Never be late for an appointment and don’t express aggravation if your host is late Patience is a virtue no really, it is. Don’t stand with your hands in your pockets, or take your jacket off during negotiations But do take your gloves off before shaking hands. Never show the soles of your shoes the basest part of the body and don’t speak or laugh loudly in public you’ll be considered rude Oh, and that A-OK thing about Brazil? It applies to Russia as well

ence will take years. These days, people don’t have the time, and a little knowledge could be dangerous,” says Hodge

“On the other hand,” Rowland adds, “learning to speak ‘international English’ is imperative This means leaving idioms and colloquialisms at home. I know someone who spent 6 months on a d i f f i c u l t n e g o t i a t i o n i n A s i a A t o n e p o i n t h e r e s p o n d e d t o h i s counterpart’s comment with, ‘That’s a no-brainer ’ meaning to convey that the suggestion was acceptable without needing thought This, however, was the final straw in their dealings when the man sitting across the table from him thought it was an assessment of his intelligence.”

Note also that saying “no” in India (as well as in China) is considered an insult. Unless you get an unequivocal “yes” (not “yes, possibly” or “yes, if all goes well”), the answer most likely is “no ”

“Americans have been conditioned from childhood to ask questions when they don’t understand and to tell it like it is,” Rowland explains. “But in the Chinese and Indian cultures, respecting hierarchy and saving face are guiding values, so people are reluctant to tell superiors or clients that they don’t understand or that somet h i n g w o n ’t w o r k T h e p r o b l e m o n l y b e c o m e s a p p a r e n t w h e n deadlines are missed, the product has flaws, or other predicaments come up that spell business trouble ”

C is for China

G u a n x i t h e c o n c e p t o f f o rg i n g i n f l u e n t i a l , p e r s o n a l i z e d n e tworks is the crux of Chinese society, a place where diplomacy and accord are favored over bluntness and debate, and where r e s p e c t f o r e l d e r s , i n f l u e n c e r s a n d l e a d e r s i s s y n o n y m o u s with honor.

Naturally, then, the code of conduct for business meetings is e x t r e m e l y f o r m a l . F o r e x a m p l e , b u s i n e s s c a r d s a r e a l w a y s exchanged on first meetings and treated reverentially hold the card in both hands and study it closely. Whatever you do, don’t glance at it, jot down a few notes on the back of it and then shove it in your pocket. Handshakes are light and lingering (a bow or nod may be used instead), eyes are lowered as a mark of respect, and body language is restrained and definitely non-tactile.

“Americans like to slip into a casual informality,” Rowland explains “But in these hierarchical countries, formality and respect for status are essential And it’s hard to overstate the irreparable damage that can be done by causing someone to lose face by criticizing them in front of others or exposing their weakness ”

IndIa: Don’t stand with your hands on your hips (an aggressive gesture) or beckon someone with the “dog call” (palm raised, wagging finger), which is considered an insult Whistling is a definite no-no, as well. Also, don’t wear all-white or all-black, which are considered unlucky, perhaps because they’re often worn by widows. As an example of the intricacies of culture in business negotiations, note that saying “thank you” to your host at the end of a meal is considered a form of payment and therefore an insult.

ChIna: Don’t ever point with your index finger; use an open palm instead Always address your colleagues by title, not by first name Do not eat or drink before your host does and always taste all the dishes you are offered Do not discuss business during a meal, and whatever you do, don’t stick your chopsticks straight up in your bowl it’s considered bad luck

“People in China and India don’t express emotions as readily as they do in Brazil and Russia,” says Hodge ”Being group-oriented in these countries relates most to the level of importance of a person, and then to task ”

Even when it comes to business entertaining, formality reigns seating arrangements are linked to perceptions of hierarchy and social position, and gift giving takes on ritual status.

There’s a fine line to tread here Gifts should be thoughtful but not extravagant, and given in the spirit of friendship rather than business, since they otherwise may be misconstrued as a bribe It’s wise to give the gift to the company, rather than singling out a specific person. Always wrap the gift and expect it to be refused three t i m e s ( i n o r d e r t o n o t a p p e a r g r e e d y ) b e f o r e b e i n g g r a c i o u s l y accepted Even then, the gift will be unwrapped in private If you are receiving a gift, follow the same protocol

Unlike Russia, with its short-term take on business opportunities, China, as a culture, believes strongly in the merits of longevity Incorporate long-term objectives into your proposal and you’ll be upping your chances of a successful deal. Don’t expect any quick decisions though Business meetings tend to take place in series, during which relationships are forged and trust is built

While Brazil, Russia, India and China are very much in the limelight these days, cultural knowledge is a must for anyone whose w o r k c a r r i e s t h e m i n t o i n t e r n a t i o n a l w a t e r s w h e r e v e r t h o s e waters may be.

OBJECTS OF IRE

When gift-giving in China, it’s best to wrap your gift in plain red paper, the color of luck Avoid blue, black or white, which are funerary colors If giving a group of one object, avoid the number four or any multiple of four, which is symbolic of death Six, eight and nine are considered lucky numbers

What’s more, don’t give any of the following objects:

GReen hats: Symbols of cuckoldry

CloCks: Symbols of mortality tantamount to a death wish

handkeRChIefs: Associated with funerals

shaRp oBjeCts: Symbolic of severed ties.

Red Ink: Symbolic of severed ties

footweaR: An insult (extends to anything associated with the sole of the foot)

w e a t h e r a guide for rough

By Carolyn Tang

Climate changes are bringing on a tidal wave of natural disasters, with a huge social and economic impact

With earthquakes and forest fires on the West Coast, hurricanes down South and flooding in the Midwest, businesses today are keenly aware of the murky and uncertain aftermath that follows a natural disaster

Whatever the nature of the event, the outcome, potentially, could be devastating: Death or significant injury to employees, suppliers, and/or customers; incapacitated operations; devalued financial standings; and even a shattered public image

According to Frank Rudewicz, managing director at BDO Consulting, the basic objective when it comes to managing a crisis remains fundamentally the same: Secure your premises, protect personnel and ensure business continuity A 2007 report authored by Rudewicz reveals that 44 percent of businesses that lose records in a disaster never resume business

Even so, the majority of businesses spend less than 3 percent of their total budget on disaster recovery planning, and most don’t have an emergency recovery plan in place According to the Occupational Safety and Health Administration, 93 percent of companies that experience a significant data loss are out of business within five years

Such figures highlight under a neon light bulb the importance of having a solid disaster plan documented, especially when considering the absolute breadth of potentially critical scenarios

“ I t ’s n o t a q u e s t i o n o f h o w i m p o r t a n t i t i s t o h a v e a d i s a s t e r recovery plan in place In my opinion, it is a must,” explains James C. Bourke, CPA/CITP, partner and director of internal technologies at WithumSmith+Brown. “The plan should cover every aspect of the business and be the ‘go-to’ manual in the event of any disruption in any business process ”

Weather the storm

While a magic turnkey strategy that can solve the needs of any and all businesses simply doesn’t exist, it’s imperative for all organizations, no matter their size, to have some kind of disaster plan to turn to should the worst happen Rudewicz calls this strategy “The Two Ps” prevention and preparation “If you can prevent a disaster from happening, great If you can’t, then you must prepare for it,” he says

Think of a disaster plan as a form of risk management, advises Mitchell Freedman, CPA/PFS, AIF® “Businesses typically plan for any variety of matters,” he says “Downturns, growth, hiring needs, technology needs, financial needs, etc. Disasters are no different, albeit they are not as easy to anticipate.”

And while the more comprehensive the plan the better, a barebones start is better than no start at all

“A first run would not necessarily have to cover everything indepth, but as the plan is continually updated, it should go deeper and cover a broader spectrum of the business,” says Bourke

At a minimum, do include crisis procedures for each department; procedures for notifying employees of facility closures; priority lists of vendors; a data-retrieval system that consists of backups of all critical information or reports; and designation of crisis response team members.

Draw on all segments of the organization, including finance, human resources, purchasing, marketing, legal and security Then, for each of these functions, ask three interrelated questions First, will the systems and programs that served the firm in the past continue to function under heightened and complex needs? “Whatever your business was doing in the past, and whatever you had in place, as you’ve grown and as the environment has changed, are these same systems and programs applicable?” Rudewicz asks.

Second, does the firm already have some form of written emergency procedures and protocols in place? Finally, note the last time

those systems, procedures and protocols were reviewed Were they audited, tested, drilled and updated based on those results?

“Many times, we’ve seen companies with written policies and procedures, and even some systems put in place But everything was written years earlier and never tested Under those circums t a n c e s , y o u w i l l n e v e r k n o w t h e v u l n e r a b i l i t i e s o r g a p s u n t i l something happens,” says Rudewicz.

Bourke recommends that businesses evaluate their disaster plan a minimum of once every quarter, and ideally on a continual basis.

“A word of advice regarding a disaster recovery plan: it is never finished,” he says.

Ensuring that the plan grows and changes with the organization, in fact, is imperative to effective crisis management. “There must be an understanding that even the best crisis management program is a work-in-progress,” Rudewicz emphasizes.

O n e a p p r o a c h i s t o c o n s i d e r t h e p l a n p a r t o f t h e t r a d i t i o n a l financial audit, especially since it can drastically affect the company’s financial stability “So as you’re reviewing your internal c o n t r o l s a n d f r a u d r i s k s , d i s a s t e r p l a n n i n g i s a n o t h e r a r e a t h a t should be looked at,” Rudewicz explains

It’s also important to recognize that even if your firm is not directly impacted by a disaster, its business operations could be vulnerable if the disaster impacts a key stakeholder, such as a major supplier

“If that supplier is key to your operations, any disruption in their pipeline could have a detrimental effect on your operations In fact, a good disaster recovery plan will include doing your homework to make sure your key suppliers also have plans in place,” says Bourke

Keep the wheels turning

Another essential component of disaster planning is business continuity For example, if your place of business is destroyed or inaccessible, it is critical to have temporary or alternative quarters available so that operations can return to normal as quickly as possible

Freedman also urges firms to secure critical financial records and documents to minimize operational disruptions “The business financial books and records must be able to be accessed, either remotely or via copies, in order to be certain that receivables and cash can be appropriately tracked,” he says

“If a business doesn’t have current, accurate knowledge of its assets, liabilities and records, it’s flying blind,” Freeman cautions Useful records include statements from depositories (banks and brokerage accounts); copies of insurance policies; up-to-date accountsreceivable data; and key client and employee contact information

5 Keys to Disaster Planning

1 . A n a l y z e Examine, identify and differentiate critical and non- critical organizational functions In addition, identify the various sources of threats (such as fire, water, wind, cyber, etc ) to create a plan that best fits your needs

2. D e s i g n a s o l u t i o n What are the minimum needs and time requirements of your plan? The solution’s design traditionally considers factors such as chain of command, location of the disaster recovery site, the physical infrastructure needs of the disaster recovery site, the data recovery process, where and how to back-up data created while offsite, contact information for critical support services, Internet connectivity, and more

3. I m p l e m e n t t h e p l a n Simply put, implementation is the roll- out of the solution determined in #2

4 Te s t t h e p l a n A n a l y z e t h e p l a n a s i t i s b e i n g i m p l emented Any flaws can now be identified, isolated and remedied The goal here is to get buy-in from all stakeholders Ideally, the plan is tested on a recurring basis, with larger organizations testing more frequently (monthly/quarterly) than smaller ones (semi-annually/annually)

5 M a i n t a i n t h e p l a n Examine the plan’s content to make sure it remains accurate and timely Maintenance should be addressed on a recurring basis.

Provided by Jam es C Bourke, C PA /C ITP, partner and director of internal technologies at Withum Sm ith+Brown

Value your losses

Accurate financial records are also necessary for insurance and legal purposes Civil litigation frequently sees claims for recovery of damages arising from business interruption, and courts have generally defined these damages to be the profits lost during the period of interruption. The question then becomes, what kind of methodology can you use to measure lost profits?

The “before-and-after method”: Following hurricanes Katrina and Rita, the amount of litigation in affected regions ballooned, resulting in a court backlog “In many instances of lost profits arising from business interruption, the event causing the interruption will have been cured by the time the action finally makes it to court or to settlement negotiations,” Rudewicz explains In these instances, the courts commonly apply a “before-and-after method,” in which sales and associated expenses before and after the incident are made comparable, and subsequent analysis yields projections for what profits should have been during the damage period.

The “projected-sales method”: Sometimes referred to as the “butf o r ” m e t h o d , t h i s i s m o r e c o m m o n l y u s e d w h e n t h e d a m a g i n g event is incurable or not yet cured, or when more precise estimation is needed “This approach uses more sophisticated econometric modeling, and often involves extensive evaluation of the market, suppliers, competitors, and political and economic events that may affect the future of the firm,” Rudewicz explains T h e “ y a r d s t i c k m e t h o d ” : T h i s m e t h o d e x a m i n e s t h e p l a i n t i f f ’s industry or another group of comparable businesses The analysis assumes that, but for the damaging event, the plaintiff would have enjoyed growth in sales within the same reasonable range as its p e e r s “ I t s e x p e n s e s w o u l d h a v e g r o w n c o m m e n s u r a t e w i t h i t s growth in sales for those expenses associated directly with sales, been impacted by regional and national inflationary factors, and enjoyed the efficiencies associated with economies of scale,” says Rudewicz. This type of examination would be quite difficult if the firm didn’t have key financial records and statements at hand

All said and done, it’s not impossible to recover from a natural disaster if there’s enough data to base a loss analysis on, and the right methodology is used to complete that analysis “As the losses from recent disasters mount into the billions of dollars, litigation and the need for supportable estimates of the lost profits and the values of affected businesses will explode,” says Rudewicz

“It ’ s not a question of how important it is to have a disaster recovery plan in place. In my opinion, it is a must.”

ar e we saved?

What used to be a hopeful question now sounds naîve in the face of an economic

By Kristine Blenkhorn Rodriguez

tion is a sure indicator of the US government’s priority for the upcoming year It passed, however, without the fanfare and applause for which many had hoped In their place, a flurry of partisanship and sniping ran rampant in our nation’s capital and media outlets. H.R. 1 passed nonetheless, to the relief of the 59 percent of Americans surveyed by Gallup in early February who said they favored passage.

The numbers are staggering: A roughly $790-million stimulus plan, with approximately $308 billion in new spending, $267 billion in social services and $212 billion in tax breaks Yet many experts say it’s not enough to dig the American economy out of its rut

New spending programs will include approximately $48 billion for transportation infrastructure, the lion’s share of which will pay for repair and replacement of highways, bridges and roads. A significant portion will be used to modernize the US electric grid And, of course, we will fund alternative energy research, per President Barack Obama’s campaign promise.

stimulus that has yet to take off.

T h e $ 2 1 2 b i l l i o n i n t a x b r e a k s i n c l u d e s a

“ M a k e Wo r k P a y ” r e f u n d a b l e t a x c r e d i t f o r individuals ($400) and families ($800) earning under certain cutoff amounts. En masse, f a m i l i e s a n d i n d i v i d u a l s w h o h a v e h i g h e r education expenses will receive $14 billion in tax credits Families with three or more child r e n w i l l r e c e i v e $ 4 7 b i l l i o n i n e a r n e d income tax credits

T h e n u m b e r s b e c o m e e v e n m o r e o v e rwhelming when you consider that US taxpayers footed the $700 billion financial industry bailout bill last autumn The irony is that $75 billion of the sum total will be used to provide mortgage relief f o r a s m a n y a s 9 m i l l i o n A m e r i c a n s , g i v i n g m o r t g a g e l e n d e r s incentives to help borrowers on the verge of foreclosure.

Missing the irony? If the US economy were a household with a checkbook and credit line gone amiss, we would have been foreclosed on long ago

the average taxpayer

It’s far easier to detail the potential benefits to taxpayers who have overextended themselves than it is to discuss how a truly average taxpayer will fare No government official or expert can accurately predict how US taxpayers will really end up paying for the bailout or the stimulus

Mortgage holders are a key area of focus According to Moody’s Economy.com, about 13.8 million of the 52 million Americans with a mortgage owe more on their mortgage than their house is now worth. Of those who don’t, many are still struggling to pay the monthly mortgage and avoid foreclosure

The $75 billion Homeowner Stability Initiative will help those “responsible” homeowners who have committed to making reasonable monthly mortgage payments and have loans owned or guaranteed by Fannie Mae or Freddie Mac The government will i n c e n t s e r v i c e r s f o r m a k i n g m o d i f i c a t i o n s l i k e r e d u c i n g a b o rrower ’s monthly mortgage payment to 38 percent of income. It also will create an insurance fund of up to $10 billion to discourage lenders from foreclosing on these homeowners. And it will provide $1 5 billion in relocation funds and other assistance to those displaced by foreclosure.

Robert Wright, a financial historian, New York University professor and author of One Nati on Under Debt: Hami l ton, Jefferson, and the Hi story of W hat W e Owe, looks at the current crisis with a sanguinity that only those with a broad perspective can muster “It’s not like there’s been a huge spike in greediness As long as there have been humans, there has been greed that has caused problems on a large scale. Our country owes its actual existence to two such crises in the 1700s,” he says

Wright first cites the crisis that occurred when America was still a British colony in the 1760s “Within a few years, housing prices had tripled. This was at a time when mortgages were callable by f i n a n c i a l i n s t i t u t i o n s M a n y c o l o n

homes, farms and shops, which worked just fine until the realestate market fell to 33 to 50 percent of its former value Many homes were lost; farms and shops folded Lenders were calling mortgages because they wanted their money back to invest at a higher rate elsewhere, and the value of the loans exceeded the value of the properties. Sound familiar?”

The second crisis took place in the 1780s, when America had no mother country to blame. “During the American Revolution, hyperinflation occurred The government paid for troops by print-

ing money lots of money And then there was a massive deflation a decade or so later,” Wright explains.

concept “In the 18th and 19th centuries, the government didn’t tend to bail anyone out ” Rather, says Wright, Hamilton’s Rule applied (developed by Alexander Hamilton during the panic of 1792): “Central banks raised the interest rate (above the prevailing rate under normal circumstances, but much less than market rates during the panic), but lent to anybody that wanted to borrow and could post sufficient collateral The notion was that companies that had taken on excessive risks would fail but all solid companies would be able to put up sufficient collateral to survive The collateral and the high rate of interest meant that the socialization of risk, while still present, was minimized, and most of the profits a c c r u e d t o t h e c e n t r a l b a n k H a m i l t o n ’s R u l e a l s o m i n i m i z e d m o r a l h a z a r d b e c a u s e r i s k y c o m p a n i e s e x p e c t e d t o f a i l a n d nobody expected to profit from adverse market conditions ”

M a n y t a x p a y e r s r i g h t l y c o n s t r u e b a i l o u t s a s p r i v a t e - i n t e r e s t handouts that come at their expense “And, statistically, you can’t prove that any bailout since the 1970s has worked,” says Wright. “Of course, statistically, you can’t prove that they haven’t either But the moral hazard element can’t be ignored. You’re rewarding people for taking on excessive risk, and they get a bailout from their more cautious brethren if all doesn’t go well.”

Dirk Van Dijk, director of equity research at Zacks Investment Research, is a bit less controversial in his opinions. “Even some of the things in the package that are not terribly effective are not horribly bad either,” he says

Van Dijk cites taxpayer rebate checks, which he says probably will be used to pay down personal debt or to save “Even if everybody used the $400 they get to pay down a credit card bill which is zero stimulus to spending there is still a net benefit for the individual paying down the bill.”

He is in favor of anything that helps the “tapped out middle class.” “The distribution of income in this country is more out of balance than at any time since 1929 In 2006, when the last data was available, the 400 highest-income individuals paid an effective tax rate of 17 percent You and I are paying 15 percent off the bat just for Social Security ”

Van Dijk does see the other side, though “For the past several years, many people acted like there were ATMs in their kitchens They’d roll 10 grand of credit card debt into a refinanced mortgage, go from 18 5 percent interest to 6 5 percent, and now it’s all tax deductible,” he says.

S c o t t H a m e r, p r e s i d e n t a n d C E O o f C o m m u n i t y B a n kWheaton/Glen Ellyn, Ill., sees a very different trend now. “A large segment of our account holders are senior citizens who live off the i n t e r e s t f r o m t h e i r i n v e s t m e n t s , ” h e e x p l a i n s . “ A o n e - t i m e t a x break might help slightly but it’s certainly not enough to make them go out and spend. We’ve grown rapidly in deposits since the beginning of the year People are just looking for a safe place to keep their money ”

big business and the markets

“It’s big business that profits from this stimulus package,” says Van Dijk. “They’re better set up to act as contractors on government projects Small businesses may be helped to a much lesser extent as sub-contractors ”

Jerry Mills, founder and CEO of B2B CFO, a CFO firm focusing on mid-market entities, thinks the gains for certain sectors are not offset by the losses big business will incur as the result of raised

corporate and capital gains taxes “Cut those and this stimulus package makes more sense. Not a lot more, but some,” he says.

Mills isn’t even bullish on alternative energy, despite the flurry of activity certain to result from the funds earmarked for it “If the market demands alternative energy, then the free market will bring it to pass without this package,” he says “I like alternative fuels, but forced government involvement will put it back a decade or so Consumers won’t buy unless there’s a demand I don’t see it ”

Talk to Mills for a few more minutes and a Draconian picture c o m e s i n t o f o c u s : “ I n 1 2 m o n t h s o r m o r e t h e s t i m u l u s w i l l depress the markets. Our national debt is skyrocketing; taxes will have to pay for that, which means more money out of big business’ pockets. That means fewer dividends, lower stock values and a lower market ”

Again, Van Dijk is more optimistic “I see a net positive for equities markets in sectors where large firms will be beneficiaries of the stimulus spending: Engineering and construction firms, alternative energy companies, and electric companies the smart grid project is a potential goldmine for them Investment spending on things like infrastructure puts jobs here and now and leaves something of value going forward ”

He’s bullish on spending that provides ROI, though, and says infrastructure fits that bill “One person’s vital infrastructure project will naturally be another person’s pork simply because of the l o c a l i z e d g e o g r a p h i c i m p a c t o f m o s t i n f r a s t r u c t u r e w o r k T h e building of the George Washington Bridge between New York and New Jersey brings residents of those states a huge ROI To most Californians, it was pork But in tolls alone, it paid for itself quickly And to New Yorkers, while the Golden Gate Bridge may be a great piece of architecture, it’s pork ”

Larger-scale projects, such as improving the nation’s electrical grid, provide an ROI that goes beyond business, says Van Dijk “In J a n u a r y, a b o u t o n e m i l l i o n p e o p l e w e r e o u t o f p o w e r f o r t w o weeks due to bad weather Think of the impact on productivity

We ’ r e a F i r s t Wo r l d c o u n t r y w i t h w h a t ’s a m o u n t i n g t o a T h i r d World infrastructure We can’t function like that ”

small business

Small-business owners were not optimistic in December, according to a survey by the National Small Business Association (NSBA) While believing more could have been done to target small businesses, the NSBA is hopeful that the legislation may provide some help however modest to entrepreneurs. Only 3 percent of survey respondents anticipated economic expansion over the coming 12 months (compared to 21 percent anticipating it the previous August). A majority (64 percent) anticipated a recession in December, compared to just 26 percent who anticipated the same the prior August

While tactful, NSBA Board Chair Keith Ashmus, is also realistic “There’s very little in this act that’s directed specifically to small business, and what’s there may or may not be of help,” he says. “We wanted small-business targets included in the bill Without those, I think the most we can hope for is a trickle-down effect. That’s not enough ”

Seemingly not. According to the December NSBA survey, more members were using credit cards as a source of financing (49 percent) than bank loans (44 percent). Compare those figures to the previous August when 41 percent used credit cards versus 50 percent using bank loans

“There are lots of businesses with good credit ratings not getting financing,” says Ashmus “When businesses like those are using credit cards instead, that’s trouble They need cash flow ”

In 30 years of doing business, Mills has never seen as negative a view from bankers as he sees today “They’re a lot more skeptical regarding loans and lines of credit,” he says “These are bankers that didn’t get involved in the sub-prime scandals They say they have money to lend but it’s not being lent They’re skittish ”

According to Hamer, though, the publicity surrounding bankers not lending is overblown, at least for community-owned banks. “We are absolutely looking for good opportunities and are ready to lend,” he says.

The stimulus package does contain some provisions that will benefit small businesses, such as the net operating loss carry-back provision, which allows a 5-year carry back of 2008 net operating losses for small businesses with gross receipts of $15 million or less, at a cost of $947 million over 10 years Furthermore, the Business Stabilization Program included in the act provides $255 mill i o n f o r l o a n s u b s i d i e s a n d m o d i f i c a t i o n s T h e S m a l l B u s i n e s s Administration (SBA) could issue or back loans of up to $35,000 f o r “ v i a b l e s m a l l - b u s i n e s s c o n c e r n s , ” w h i c h a r e e x p e r i e n c i n g “financial hardship” and have a “qualifying small-business loan ”

The small-business recipients of these loans would use them to make full or partial payments on their existing loans for up to 6 months Interest would be fully subsidized, and payment on the loans would be due one year after the final disbursement of funds is made Borrowers would have 5 years to repay

Other provisions, while not providing immediate small-business relief, could help small businesses avoid big expenses down the road. One such provision allows for $1.1 billion in health programs (prevention and wellness) that will be invested in immunizations, health promotion, HIV/AIDS prevention and other programs aimed at avoiding large healthcare expenditures at a later date.

Regardless of the provisions, it seems that small business’ true needs were not met. When NSBA members were asked which issues Congress and President Obama should address first, reducing the tax burden clocked in as the leader at 29 percent, followed by increasing small business’ access to capital at 25 percent

“I think this stimulus package is a complete joke for small-busin e s s o w n e r s , ” s a y s M i l l s “ I w o r k w i t h m a n y s m a l l b u s i n e s s e s every day and most of the owners when shown this package would have said, ‘You might as well not do anything ’”

The litmus test will be how small businesses respond, says Ashmus “Improving general economic activity could improve this sector But making a million small businesses feel better and more secure about hiring one more person creates a million new jobs We haven’t done that in this package It’s well-intentioned but will its effects trickle down? That’s the question ”

the fallout

“Any government spending acts as a stimulant; that’s first-semester macroeconomics,” Van Dijk contends “But I think people are still underestimating how deep our problem runs This is not like the 1991 downturn Structurally, the causes are much more like the causes of the Great Depression This package is like triage It’ll save some of those that can be saved Or consider it an airbag It won’t stop the crash but it will at least allow some of the passengers to live ”

Not exactly words that will give you a comfortable night’s sleep But, truthfully, has any seasoned financial pro been sleeping well lately? Have you? We thought as much Edi tor’s note: Informati on current as of pri nt date

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Higher education costs are a drag, but finding financial aid doesn’t have to be

By Derrick Lilly

It’s no secret that college and university tuition is on the rise, and student loans are often a lingering burden long after your school days are over

The US Department of Education’s Free Application for Federal Student Aid (FAFSA) a n d u n i v e r s i t y - s p e c i f i c f i n a n c i a l a i d a n d scholarships are usually the first places students look for help. Unfortunately, though, they’re often limited in scope

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Realizing how important a continued stream of qualified accountants is to the CPA profession, the Illinois CPA Society (ICPAS), in tandem with the CPA Endowment Fund of Illinois, has established programs and scholarships specifically designed to aid accounting students and individuals on their way to becoming CPAs

“ T h e m i s s i o n o f t h e C PA E n d o w m e n t F u n d o f I l l i n o i s i s t o ‘ p a v e t h e w a y f o r t o m o r r o w ’s C PA s ’ b y p r o v i d i n g a c a d e m ically excellent students with financial assist a n c e t o a c h i e v e t h e i r e d u c a t i o n a l g o a l s a n d e n s u r e t h e c o n t i n u e d g r o w t h o f t h e accounting profession,” says Duane Suits, president of the CPA Endowment Fund of Illinois. “Thanks to the generous donations f r o m S o c i e t y m e m b e r s , w e a r e a b l e t o achieve this goal.”

Through the ICPAS’ and the CPA Endowment Fund of Illinois’ joint efforts, currently f o u r s c h o l a r s h i p p r o g r a m s a r e o f f e r e d , including the Illinois CPA Society Accounti n g S c h o l a r s h i p ; t h e Wo m e n ’s E x e c u t i v e

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o u n t i n g S c h o l a r s h i p ; t h e H e r m a n J N e a l Scholarship, which awards African-American accounting students, specifically; and a b o o k s c h o l a r s h i p , w h i c h h e l p s s t u d e n t s c o v e r t e x t b o o k e x p e n s e s . T h r o u g h t h e s e offerings, 38 students will receive approximately $82,000 for tuition and books during the 2009-2010 school year

Additionally, the CPA Exam Award Program helps students and recent graduates

c o v e r t h e N a t i o n a l A s s o c i a t i o n o f S t a t e Boards of Accountancy (NASBA) fee (currently $809 71), which is part of the total cost of the CPA Exam About 40 CPA Exam Awards are granted annually

The ICPAS and CPA Endowment Fund of Illinois also have collaborated with Chicago State University, DePaul University, Southern Illinois University and the University of Illinois Urbana-Champaign to expand schol a r s h i p o f f e r i n g s t o a c c o u n t i n g s t u d e n t s a t t e n d i n g t h e s e i n s t i t u t i o n s A l t o g e t h e r excluding the CPA Exam Award Program t h e S o c i e t y i s a c t i v e l y i n v o l v e d i n e i g h t scholarship programs

The American Institute of Certified Public Accountants (AICPA) is another prominent organization stepping up to help young accounting talent reign in financial burdens In addition to its own academic scholarships, the AICPA works with state societies and diversity partners to promote accounting scholarships and programs to students

“It can be challenging at times to encoura g e s t u d e n t s t o a p p l y f o r s c h o l a r s h i p s , whether it’s due to a cultural barrier, lack of t i m e o r l a c k o f a w a r e n e s s B u t w i t h t h e c u r r e n t e c o n o m i c c o n d i t i o n s , i t i s m o r e i m p o r t a n t t h a n e v e r f o r s t u d e n t s t o t a k e advantage of the financial aid opportunities available through their schools, state CPA societies, the AICPA or other institutions,” s a y s E l i z a b e t h D e B r a g g a , c o o r d i n a t o r f o r the AICPA’s diversity programs.

A l i t t l e r e s e a rc h c a n g o a l o n g w a y i n s e c u r i n g t h e f i n a n c i a l a i d n e c e s s a r y t o bring a quality education within reach As De-Bragga stresses, “The money and support is out there; students just have to take the time to dig in and explore, but the payoff is worth it ”

For i nformati on about ICPAS schol arshi ps, c o n ta c t D e bo r a h J a n i a t j a n i d@ i c pa s o r g F o r A I C P A pr o g r a m s , c o n ta c t E l i z a be th DeBragga at edebragga@ ai cpa org If you w o u l d l i k e to m a k e a g i f t to th e C P A Endowment Fund of Il l i noi s, contact Jul i e L enner at l ennerj @ i cpas org

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