New Jersey CPA - September/October 2015 by New Jersey Society of CPAs

30 3 p. 24

Magazine of the

New Jersey Society of Certified Public Accountants

Alternative Financial Reporting Know Your U.S. Financial Reporting Options, p. 6 Tax Practitioners and Financial Reporting Alternatives, p. 8 Reporting for Non-Accountants, p. 10 Changing Your Reporting Framework, p. 12

Sept â&#x20AC;˘ Oct 2015

A Look Ahead from the FASBâ&#x20AC;&#x2122;s Susan Cosper p. 2

30 3 p. 24

Magazine of the

New Jersey Society of Certified Public Accountants

Sept â&#x20AC;˘ Oct 2015

A Look Ahead from the FASBâ&#x20AC;&#x2122;s Susan Cosper p. 2

September • October 2015

Ralph Albert Thomas, CGMA Chief Executive Officer & Executive Director rthomas@njcpa.org

Ellen C. McSherry, CGMA

Chief Operating Officer emcsherry@njcpa.org

features 6

Don Meyer

Chief Marketing Officer dmeyer@njcpa.org

David Plaskow

Managing Editor dplaskow@njcpa.org

Jeanette L. Miller Editorial Assistant jmiller@njcpa.org

Editorial Advisory Board Daniel R. Arcuri, CPA Neil B. Becourtney, CPA Salvatore A. Collemi, CPA Rebecca B. Fitzhugh, CPA Catherine Z. Horn, CPA Barry S. Kleiman, CPA Victoria Kosuda, CPA Ryan J. Lapinski, CPA David A. Lopez, CPA Anthony F. Marone, CPA Marc D. Mintz, CPA Sean Stein Smith, CPA Michael R. Steiner, CPA Margaret Van Brunt, CPA

The New Jersey Society of Certified Public Accountants 425 Eagle Rock Avenue Roseland, NJ 07068-1723 973-226-4494 njcpa.org #njcpamag Read New Jersey CPA digital at njcpa.org/newjerseycpa.

Design/Production/ Advertising The YGS Group

3650 West Market Street York, PA 17404 Advertising Contact: Jason Vranich, Account Executive 717-505-2357 jason.vranich@theygsgroup.com

Know Your U.S. Financial Reporting Options Yes, you do have U.S. GAAP alternatives for providing highquality financial reporting results.

10 12

2 Close Up Tax Practitioners and Q&A with FASB Technical Financial Reporting Director and EITF Chair Alternatives Susan Cosper Even tax practitioners should maintain an updated knowledge of 4 News Briefs framework and reporting standards, along with their pros and cons. 14 A&A Buzz The 2014 Federal Financial Statement Transparency Act Reporting for Non-Accountants 16 Best Practices Thanks to a wider variety of Why a Voluntary Leave of reporting requirements, there is an Absence Policy Makes Sense increasing need for a realignment of financial reporting. What role can 17 Corporate Finance CPAs play? Investing in Private Equity

18 Financial Planning Changing Your Reporting Financial Planning Across Framework State Lines Changing your reporting framework is no small undertaking. 19 Forensic File Learn the three key steps to ensure Same-Sex Marriage, Divorce a smooth transition. and Prenuptials 20 Small/Sole Practitioner Compliance Resources for Small Practitioners

21 Tax Talk Determining Bundled Transactions in New Jersey 22 Tech Center Try Wearable Technology on for Size 24 30 Under 30 36 Young Professionals Speak Now—or Forever Hold Your Peace—on Proposed CPA Exam Changes 38 Legislative Views Big Issues Dominate First NJCPA Business & Economic Roundtable 40 Member Profile On Your Mark, Get Set … Society Pages CPE Offerings and Events, 30 Member Benefits, 31 Get Involved, 32 NJ State Board of Accountancy Report, 34 Classifieds, 35

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue-Suite 100, Roseland, NJ 07068. Issue No. 53 Copyright © 2015 New Jersey Society of Certified Public Accountants. Annual membership dues includes $8 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

Q&A with FASB Technical Director and EITF Chair Susan Cosper B Y DAV ID PL AS KOW, NJ C PA C OM M U NI C AT I O NS M A N AG E R

hat are the challenges of implementing the new private company generally accepted accounting principles (GAAP) from the Private Company Council (PCC), and how successful do you think that is going to be to reduce the burden of GAAP compliance on smaller companies? There is only one source of GAAP, which is GAAP as promulgated by the Financial Accounting Standards Board (FASB). The PCC was formed by the Financial Accounting Foundation (FAF) Board, the FASB’s parent organization, to work with the FASB to identify areas in GAAP that may be in need of a private company alternative. The PCC also serves as the primary advisory body to the FASB on the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda. Since 2012, the PCC’s input has prompted the FASB to issue a number of GAAP alternatives designed to make financial reporting less complex and more relevant for private company stakeholders. These include alternatives that improve accounting for interest rate swaps, goodwill, applying variableinterest entity guidance to common control leasing arrangements, and identifiable intangible assets in a business combination. Through its work with the PCC, the FASB has found that areas of accounting that are complex for private companies are also generally complex for other types of organizations. As such, the PCC has become a springboard for efforts to reduce complexity in GAAP for all organizations. I’d say the PCC’s work has been successful. To continue to meet the

needs of private company stakeholders, the FAF Board recently embarked on its three-year review of the PCC. We expect to learn more from that in the coming months. What is the FASB doing to manage new accounting and reporting requirements (for public and private companies, away from the private company GAAP) so that disclosures are truly meaningful to investors? We’re managing the pace and scale of new accounting and reporting requirements as part of our standardsetting process. For example—by the end of this year, we expect to issue new major standards on leases and financial instruments. The board will decide when those standards should take effect based on stakeholder feedback. The FASB has also been working on its disclosure framework project to improve the effectiveness of disclosures in the notes to financial statements by clearly communicating the information that is most important to users. The framework is intended to promote consistent decisions by the board about disclosure requirements and to guide reporting organizations when making disclosure decisions. (An exposure draft is expected later this year.) This project includes our efforts to develop a chapter of the Concepts Statement on disclosures that would become a basis for the board when both evaluating existing disclosure requirements and creating future disclosure requirements. We have selected several topics in GAAP to test the board’s process on selecting disclosures, which includes fair value measurements, pensions, income taxes and inventory. Potential improvements to these disclosures will

be exposed for public comment later this year. Why did the FASB delay the effective date for the new revenue recognition standard for one year? Based on stakeholder feedback, we wanted to ensure a smooth transition. We’re making some narrow-scope improvements to areas where additional application was needed to ensure consistent application of the new guidance.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

To read a more in-depth version of this article, visit njcpa.org/newjerseycpa/ sepoct15.

2015/16 Board of Trustees EXECUTIVE COMMITTEE President – Frank R. Boutillette, CPA President-Elect – Walter J. Brasch, CPA Secretary – Edward I. Guttenplan, CPA Treasurer – Lynn L. Albala, CPA Immediate Past President – Brad E. Muniz, CPA CEO & Executive Director – Ralph Albert Thomas, CGMA TRUSTEES Jean I. Abbott, CPA Sharon J. Bishop, CPA Leonard N. Brooks, CPA Joseph C. DiFalco, CPA Carol Donatiello Iocca, CPA Sarah Krom, CPA Roy H. Kvalo, CPA Edward G. O’Connell, CPA Stephen O. Richard, CPA William J. Ryan III, CPA Audrey J. Sherrick, CPA Lorenzo T. Vanore, CPA

DESIGN YOUR

EDUCATION

MAXIMIZE YOUR ROI

Earn your Master of Science in Management with an Area of Study in Accounting In a world where every penny counts, the right degree could accrue serious interest. Expand your management and leadership skills while supplementing your knowledge in financial accounting, theoretical structures of accounting, stock market transactions, and auditing and investigative fraud techniques. At Thomas Edison State College, you can do it on your schedule and at a cost that makes balancing your budget a whole lot easier.

LEARN MORE: VISIT CALL

www.tesc.edu/businessdegree (888) 442-8372

Thomas Edison State College is one of the 11 senior public colleges and universities in New Jersey, and is accredited by the Middle States Commission on Higher Education, 3624 Market Street, Philadelphia, PA 19104 (267) 284-5000.

NEWS Proposed Revisions to CPE Provider Standards for Comment The National Association of State Boards of Accountancy and the American Institute of CPAs have issued proposed revisions to the Statement on Standards for Continuing Professional Education (CPE) Programs for public comment. The standards, last revised in 2012, provide a framework for the development, presentation, measurement and reporting of CPE programs. Among the most significant of the proposed revisions is the addition of nano-learning and blended learning, two new delivery methods for CPE. The proposed standards also require CPE providers to maintain the license information and status of CPAs, tax attorneys and/or enrolled agents used in the development of their accounting, auditing and tax programs. Additionally, the program descriptive materials must now be maintained for all programs, regardless of the field of study classification. Interested parties are encouraged to review and provide comment on the exposure draft by October 1, 2015. Visit aicpa.org.

FASB Votes to Defer Revenue Recognition

The Financial Accounting Standards Board (FASB) has voted to approve a one-year deferral of the effective date of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. The FASB expects to issue its final Accounting Standards Update formally amending the effective date by the end of the third quarter of 2015. Complete details about the decisions— including those related to interim reporting and early adoption—are available in the summary of tentative board decisions, available at fasb.org.

CBT Filers Can Submit Electronic Annual Reports Commencing with tax year 2014, the New Jersey Division of Revenue and Enterprise Services is offering corporate business tax filers the option of submitting corporate

briefs annual reports—legal filings that disclose key names and contact information for the public record—with their Corporate Business Tax (CBT) returns and payments. This approach will allow corporations to address their annual tax and legal due-diligence obligations. The enhanced electronic filing service will also help businesses comply with the annual reporting process and avoid the non-compliance penalty: revocation of their business charter— their legal authority to operate. The enhanced service links with the federal/state modernized e-file program. Through it, corporations may submit the combined CBT returns, annual reports and payments electronically, in a single transmission. The system: • Uses the corporation’s 10-digit public ID to ensure correct updating of the state’s public records system. (The 10-digit ID is not required if there is no annual report included with a return.) • Processes CBT payments and filing fees separately to ensure accurate accounting. • Provides rejection processing for annual reports, with automated notices explaining rejection reasons and electronic resubmission requirements. The availability of the electronic CBT/annual report service complements recently adopted e-file regulations (N.J.A.C. 18:7-11-9), which mandate e-file/pay for all CBT returns and payments by 2016, with the practitioner mandate now in effect. For more information, call 609-530-3227.

AICPA Offers Guide to SSARS No. 21

The AICPA has a new guide to aid CPAs in the interpretation and application of Statement on Standards for Accounting and Review Services No. 21 (SSARS No. 21). SSARS No. 21 creates a bright line between accounting (preparation) services and reporting (compilation or review) services and is a better fit for the current electronic and cloud-based practice environment. The new guide, available as an eBook and in print format, was written to assist CPAs in interpreting and applying SSARS No. 21, as well as to provide interpretative guidance and implementation strategies for all preparation, compilation and review engagements. It will help practitioners establish best practices, including practice tools and resources to assist with compliance, and discusses independence and ethics requirements. For more information, contact Mitchell Slepian at mslepian@aicpa.org or 212-596-6177.

ETAAC Issues 2015 Report The Electronic Tax Administration Advisory Committee (ETAAC) released its annual report to Congress, featuring recommendations on a range of electronic tax administration issues. As an advisory committee to the Internal Revenue Service (IRS), ETAAC’s mission is to provide an organized public forum of relevant electronic tax administration issues. Based on its findings, ETAAC has recommendations concerning IRS funding, accelerating a digital-first taxpayer service strategy to improve levels of service and more.

Leading States for Value of Land Per Acre New Jersey

$196,410

Rhode Island

$133,730

Connecticut

$128,820

Massachusetts

$102,210

Maryland

$75,430

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

The 2015 Electronic Tax Administration Advisory Committee Report is available on irs.gov.

Paid Sick Leave Most Lobbied in NJ

According to a report by the Election Law Enforcement Commission (ELEC), paid sick leave was the most lobbied issue in New Jersey in 2014. The report indicated that nearly 70 organizations reached out to lawmakers almost 300 times concerning the proposed NJ paid sick leave bill. The ELEC indicated that $58.3 million was spent on lobbying statewide last year, which is down from 2013’s total of $63.4 million.

AICPA to Develop Pair of Fair Value Measurement Credentials

The AICPA has voted to approve the development of two new specialty credentials in the area of fair value measurement. The two new credentials will respectively cover the areas of fair value measurement for business and

AICPA Offers New Notfor-Profit Section

The AICPA’s Not-for-Profit Section provides support and resources in the areas of audit, financial accounting and tax for members and other finance professionals who work in the not-for-profit sector. NFP Section members will benefit from comprehensive financial management and governance resources as well as an extensive learning library. The practical tools to help simplify and streamline tasks include workpaper templates, checklists, illustrative examples, and sample letters, reports and policies in areas such as tax compliance, governance, financial reporting, auditing and accounting. Section members will also stay up to date through webcasts covering hot topics and timely e-alerts that provide breaking news and insights on the issues not-for-profit organizations can expect to encounter. AICPA members, including associate and non-CPA associates, are eligible to join the NFP Section. Visit aicpa/nfp.org to learn more.

SBA Microloan Program Expanded

businesses and certain not-for-profit childcare centers start up and expand. Other changes to the program also promote increased microloan activity and provide intermediaries with additional flexibility in how they manage program funds. Learn more at sba.gov/ microloans.

The U.S. Small Business Administration (SBA) Microloan Program will provide more flexibility to SBA nonprofit intermediaries, expand the pool of microloan recipients and increase accessibility to SBA programs. The SBA’s Microloan Program, which focuses on startups, minority and other underserved markets, provides loans of up to $50,000 to help small

intangible assets, and fair value measurement for financial instruments. They will be available to CPAs and other qualified professionals who meet eligibility requirements determined by the AICPA’s National Accreditation Committee and approved by the AICPA Board of Directors. All fair value measurement credential holders will be required to demonstrate competency, adhere to the mandatory performance framework and comply with the ongoing fair value measurement engagement quality review. In addition, fair value measurement credential holders will be required to meet CPE requirements and adhere to the AICPA Code of Conduct. The credentials are scheduled to launch in 2016.

njcpa.org Spotlight

Have You Used the Open Forum? If you’re a New Jersey Society of CPAs member with a technical question on tax, accounting or another topic, your fellow NJCPA members can help. All members are subscribed to the NJCPA Member Open Forum on Connect, the Society’s online community. Questions can be posted to the Open Forum so that one or more members can answer them. Here’s how:

Post a Message

• Go to Connect at http://connect.njcpa. org and browse to Communities > Open Forum. • If you’re not already logged into the site, you will be prompted to do so (your username is your email address and your password is your member ID). • Click the “Add” button in the Latest Discussion Postings section. • Complete the “Subject” field and type your message in the Message field above your signature line. • Click the Send button.

Your message will be sent to more than 13,000 NJCPA members who will have the option to reply directly to you or to the entire group.

Search the Archives

All Open Forum discussions are archived and searchable. Use the Search field in the upper right corner of Connect to enter keyword(s). Make sure you’re logged in so that the site knows that you have access to Open Forum content. Questions about using Connect? Contact Rachael Bell at rbell@njcpa.org or 973-2264494 x220.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Know Your U.S.

Financial Reporting Options

Among a myriad of complex financial accounting

and reporting matters facing financial decision makers, accountants and auditors of small to medium-sized privately held businesses in the United States, there is hope. U.S. generally accepted accounting principles (U.S. GAAP) is not the final word of financial reporting and disclosure.

By Salvatore A. Collemi, CPA WeiserMazars LLP

Over the last decade, financial statement preparers and users have sought practical solutions to provide high-quality financial reporting results without the complications of U.S. GAAP. Fortunately, alternative frameworks do exist. It’s just a matter of performing adequate due diligence to decipher which alternative financial reporting framework works best for you—and your clients.

Options

Let’s explore the ins and outs of permissible U.S. alternative financial reporting options: Modified Cash Basis – A basis of accounting used toward cash receipts and disbursements that is not influenced by the financing of sales or purchases and is limited to reporting entities whose operations are relatively simple and without complexities that require

significant modifications (i.e., recording of depreciation on fixed assets). Tax Basis – A basis of accounting the reporting entity uses to file its tax return for the period covered by the financial statements. Typically, businesses that use this basis of accounting are for-profit organizations (e.g., small closely-held companies) for which conversion to U.S. GAAP would exceed the benefit, partnerships whose agreements require such basis, or not-for-profits seeking relief from U.S. GAAP requirements. Regulatory Basis – A basis of accounting used by the reporting entity to comply with financial reporting requirements of a regulatory agency to which the reporting entity is subject. This is used by insurance companies, credit unions, construction contractors, certain state and local governments, and some not-for-profits. Contractual Basis – A basis of accounting used by the reporting entity to comply with an agreement between the entity and one or more third parties. Due to the unique aspects in a contract or agreement, it’s typical that interpretation is required with regard to measurement principles for the contractual basis. Financial Reporting Framework for Small and Medium-Sized Entities (FRF for SMEs) – An optional reporting framework that accounts a reporting entity’s transactions according to their

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

economic substance. The use of the historical cost approach is the primary basis of measurement; however, there are also similarities to the accrual income tax basis. For certain accounting policy elections, the FRF for SMEs allows business owners the flexibility to select the policy that best suits financial statement user needs. The FRF for SMEs does not define a small or medium-sized entity or set a size threshold to be considered an SME. The framework does provide a list (not all-inclusive) that indicates SME characteristics: (1) entity is not required to prepare U.S. GAAP financial statements; (2) entity has no plans to go public in the foreseeable future; (3) entity is for-profit (however, there may be some not-for-profit organizations that could use this framework that are not affected by specialized guidance on contributions and net asset classifications); (4) owners of the entity are involved in business operations; (5) there is no highly specialized accounting guidance for the industry in which the entity operates; (6) there are no overly complex transactions; (7) there are no significant foreign operations; and (8) financial statement users have direct access to management. Much of the guidance in FRF for SMEs is similar to U.S. GAAP. There are also significant differences: (1) accounting for income taxes; (2) goodwill amortization; (3) accounting for and reporting of variable interest entities; (4) accounting for leases; (5)

asset impairment; and (6) accounting for stock-based compensation. International Financial Reporting Standards (IFRS) – A single set of accounting standards, developed and maintained by the International Accounting Standards Board (IASB), with the intention of applying on a global, consistent basis for both public interest entities and privately held companies. The American Institute of CPAs Council has charged the IASB with establishing international financial reporting standards that give AICPA members the option of using IFRS or IFRS for SMEs (see below) as a U.S. GAAP alternative. IFRS for Small and Medium-Sized Entities (IFRS for SMEs) – A selfcontained standard designed to meet the needs and capabilities of SMEs. Compared to the full IFRS, this is less complex because (1) topics not relevant to SMEs are omitted; (2) many of the accounting principles are simplified; (3) significantly fewer disclosures are required; and (4) the standard is updated every three years.

Deciding on a Reporting Framework

Selecting a U.S. GAAP alternative can benefit both management and its accountants by providing more timely information at a lower cost, such as dealing with fewer measurement requirements. Remember, however, that the alternative financial reporting framework must be accepted by

the respective parties with whom management and the client are conducting business. When advising management or clients about the use of alternative financial reporting frameworks, accountants must have a clear idea about their users’ needs. For example, these entities are good candidates for modified cash basis or tax basis financial statements: • Small, closely held businesses with no third-party debt. • Entity’s creditors. • Owners and managers who are closely involved with the day-to-day business operations. • Business owners primarily interested in cash flows and transaction tax implications. Accountants must carefully consider the issues below before advising management and clients about which framework to use: • Does the company have inventory? If yes, the cash basis may not work. • Is the company highly leveraged? If yes, financial institutions may require U.S. GAAP financial statements. • Are there outside investors? If yes, U.S. GAAP financial statements may provide desired information. • Does the company’s cash flow parallel its income and expenses? If yes, the cash basis may be acceptable. • Does the company anticipate going public? If yes, the company will need a history of U.S. GAAP financial statements. • Was the company formed for tax purposes? If yes, the owners are probably interested in the tax effect of transactions. Thus, the tax basis would be acceptable. • Is the company subject to bonding requirements? If yes, most bonding companies require U.S. GAAP financial statements. Salvatore A. Collemi, CPA, is a director at WeiserMazars LLP. He is a member of the New Jersey CPA magazine Editorial Advisory Board. Contact him at salvatore.collemi@weisermazars.com or 212-375-6552.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Tax Practitioners and

Financial Reporting Alternatives

Practitioners often produce generally accepted accounting principles (GAAP) statements that come up short.

By Kenneth A. Heaslip, CPA Loscalzo Associates, Ltd.

These statements may omit disclosures and the statement of cash flows as well as depart from complex requirements such as deferred income taxes, variable interest entity consolidations and fair value adjustments. Such practical expedients are accepted by many financial statement users. It is also common to produce statements using the income tax basis of accounting. Peer reviewers have cited firms using alternative accounting methods for taking shortcuts without following acceptable professional guidance. Non-GAAP—also known as specialpurpose framework (SPF)—financial statements include cash, tax, regulatory, contractual or other basis. Other basis statements must use a definite set of rules and are usually limited to statements presented under the American Institute of CPAs Financial Reporting Framework for Small and Medium-Sized Entities (FRF for SMEs).

Appropriate Report

Regardless of framework, CPAs must assess the service level provided. This includes any financial statement

presentations: formal financials or informal ones such as financial information in a prescribed form, comfort letters or certain detailed trial balances. CPAs must understand which financial information comprises a financial statement. In addition to the traditional reports of audit, review and compilation, SSARS 21 now allows CPAs to prepare financial statements without issuing a report. Forms filed with the Internal Revenue Service are not considered financial statements and are not subject to reporting requirements. As such, entities that use tax basis commonly substitute tax returns for financial statements when permitted by their creditors.

Disclosure Requirements

When using SPFs, the framework must be described in the summary of significant accounting policies, including an explanation on how the framework differs from GAAP. Compiled financial statements can exclude disclosures, but this must be noted in a separate paragraph. Reviews and audits do not permit omitting disclosures.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Financial statements that omit disclosures work best when there is a good relationship between the entity and the bank or creditor. The bank can request the selected information that is relevant to its decision. When the information is not compiled, reviewed or audited, it should be noted that no assurance is given regarding the information.

Financial Statement Presentations

SPF financial statements cannot use GAAP terminology in financial statement names and should indicate the framework used. For example, statements issued under the tax method are typically called “Statement of Assets, Liabilities and Equity— Income Tax Basis” and “Statement of Revenues and Expenses—Income Tax Basis.” The cash flow statement is not required for SPFs.

Proper Framework Use

The AICPA technical guidance states that financial statements using SPFs cannot be misleading. This includes proper use of the framework’s rules and disclosures. Consider: • Disclosures are required for amounts measured on the financial statements. They should communicate the substance of GAAP requirements. • Tax-based financial statements should use the same methods and elections that were used on the entity’s filed tax returns. • Cash basis financials should disclose any modifications made. Modifications should have a GAAP equivalent or not be misleading. • Contractual statements (formerly called special-purpose financial statements) must be based on requirements determined by the financial statement user. These reports must include a paragraph restricting their use to the intended user.

SPF Framework Pros and Cons

Tax basis statements’ use is limited since they usually don’t properly

reflect income. For example, cash basis taxpayers do not record receivables and payables; depreciation is often an inflated amount causing fixed assets to be presented at little or no book value; accruals, contingencies and bad debts are not recorded; and investments are not presented at fair value. FRF for SMEs avoids many of the problems associated with tax and cash basis statements, including many of GAAP’s complexities. It matches depreciation expenses as well as records receivables, payables, accruals and contingencies. Complex areas, such as deferred taxes and consolidations of variable interest entities, are optional. Historical cost accounting is used with fair value only applicable to marketable securities, and parent-only financial statements are allowed.

Framework Departures

Departures from any framework must be disclosed. Pervasive departures result in an adverse audit opinion or a special paragraph in compilation and review reports. A departure paragraph is required, even in the case of no-disclosure compilation reports.

Applicability of New SSARS Standards

SSARS 21 is effective for calendar year 2015 financial statements. Some important changes under the standard are: • The format and wording of accountant reports change. Review reports will include paragraph headers, and the standard compilation report will be only one paragraph. • Compilation reports are only required when the CPA prepares a compilation. They are no longer required when the CPA prepares and presents financial statements used by third parties. • A new level of service—preparation of financial statements—has been created. CPAs can now assist clients in preparing financial statements without having to issue a report and consider independence. Each

statement page should include a disclaimer such as “no assurance is provided on these financial statements.” • All three SSARSs services require the client to sign an engagement letter. • When using an SPF, you must add a paragraph to compilation and review reports related to the framework. • Management-use-only statements have been eliminated. While these preparation services give CPAs more flexibility in servicing clients, under current NJ State Board of Accountancy regulations, they will avoid the requirement to be peer reviewed if the CPA does not issue any reports that would otherwise require reviews. Many CPAs believe these alternatives expose them to liabilities that are avoided when using compilation and review reports. Before issuing financial statements, make sure to properly present the applicable framework and follow the reporting standards. Even tax practitioners should maintain an updated knowledge of framework and reporting standards before issuing financial information to clients or third parties. To read a more in-depth version of this article, visit njcpa.org/newjerseycpa/ sepoct15. Kenneth A. Heaslip, CPA, M.B.A., M.S., CGMA, is with Loscalzo Associates, Ltd. He is a member of the New Jersey Society of CPAs State Taxation and Federal Taxation interest groups and Student Programs & Scholarships and Professional Conduct committees. Contact him at kheaslip@ comcast.net.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Reporting for

Non-Accountants Corporate strategy, brand enhancement, business development and customer satisfaction all require that timely information is captured, analyzed and presented throughout the organization. While seemingly a straightforward goal, reading market headlines provides a different perspective.

By Sean Stein Smith, CPA Hackensack University Medical Center

Despite the constant coverage and integration of analytics into business decision making, along with the continued leveraging of technology to make decisions faster, business executives often decry the lack of realtime information. Because businesses in virtually every industry are subject to a wider variety of reporting requirements— including a growing focus on customer profitability, governance, sustainability and regulatory requirements—there is an increasing need for a realignment of financial reporting. Business reporting needs to be more flexible, user friendly and real-time. The question is: What can CPAs do to meet these demands?

The Need

Businesses, investors and regulators all have different reporting requirements, but the current formation and distribution of traditional financial reporting does not meet the needs of this diverse and rapidly evolving audience. Current financial reporting

focuses on the requirements of two primary users of financial information: shareholders and creditors. These two groups exert significant influence over business decision making, but users of financial information extend far beyond shareholders and debt holders. Speaking and categorizing business needs in generalities is sufficient only for high-level analyses. In order to generate effective and actionable advice for CPAs, the next step is to drill down to specific levels and examples. There are several areas in which this need is particularly clear and related to realworld business needs. Innovation, strategic planning and finance are inextricably related. Without financial results, the best designed strategies will not succeed. Reflecting the growing influence of non-traditional stakeholders, such as NGOs and regulators, organizations must be able to produce usable, consistent and relevant information for a broad audience of end users. Strategic planning and stakeholder engagement are both externally oriented reasons why an organization should improve its reporting for non-financial users, but there are also two important reasons based solely on internal users: better profitability and better sales data. First, more transparent and easily understood reporting information makes it easier for non-financial management to make better decisions regarding goods, services and business lines. Second, better data flow from front-line operations to upper management—including the ability to

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

see the real-time sales and profitability of certain customers—is invaluable to understand business trends and see how they impact profitability. Real-time data and technology exist. So why are CPAs not leveraging this technology to deliver and identify more value?

Make It Happen

Recognizing the need for better reporting for non-financial management is an obvious first step. However, to create concrete ideas, accountants must drill down into the core needs and key trends of business. Identifying critical areas that organizations are focusing on will allow accountants to simultaneously produce reports that management will actually use as well as expand the scope and responsibility of the accounting function to non-traditional accounting areas. A few well-known organizations that have implemented more interactive, engaging and robust financial reporting include Boeing, Clorox and Pfizer. These external reporting modifications, however, are just one piece of the puzzle. Enhancing the value and usefulness of internal financial management reporting is an important step in increasing the value of financial information to the overall organization. Financial reporting must incorporate non-financial data. Most members of the management team are not finance experts. Whether the company is service- or goods-based, it already generates detailed operations reports that are circulated and analyzed. Why not integrate these key performance

indicators, flows, loads and other quantifiable data directly alongside financial information? In addition to clearly and unequivocally linking operations to finance—mirroring real life and breaking down the finance ivory tower—this also allows report users to understand the performance of the entire organization from front to back. In addition to fully integrating operational and other strategic and risk variables with financial sensitivity analyses, accountants should also collaborate with IT and customer-oriented employees. Customers/clients represent a wealth of information about organizational strategy as well as current and future financial performance. Building a bridge between front-end data from inventory management systems through sales is not something that can be done overnight, but if it is done correctly it can provide real-time data and link operations with financial outcomes. Creating new reports is great, but if the report’s visual aesthetics do not pass muster, it will probably be negatively received. Fortunately, there are many tools available to help accountants make presentations more interesting and easier to understand for both financial management and non-financial management. Excel and PowerPoint are excellent, but they can be made even more powerful through the development of specific macros and visual basic programming. Creating such templates requires upfront investment, but it can result in reports that are visually

pleasing, easy to read and actually used by management. In addition to pilot testing the visual aspects of reporting, you must update these reports in real time. Static PowerPoint slides and Prezi presentations are things of the past. Management dashboards and other reporting tools must reflect current situations and the forecasted impact current trends will have on future profitability. Accounting provides the building blocks for financial presentations and reporting; successfully integrating operational data within future reports, making reporting real-time, is a logical next step. Will reporting and management structures that are currently in place survive a rapidly changing business environment? This appears not to be the case. Reporting, which is the cornerstone of the accounting profession, must evolve and develop to meet the needs of both current financial managers as well as non-financial users. Doing so is not difficult, but it does require flexible thinking, a willingness to experiment and the courage to branch out into new areas. Sean Stein Smith, CPA, M.S., M.B.A., CMA, CGMA, is a financial analyst, joint ventures, at Hackensack University Medial Center. He is a member of the New Jersey Society of CPAs and Editorial Advisory Board of New Jersey CPA magazine. Contact him at ssteinsmith@yahoo.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Changing Your Reporting Framework

Companies have a number of options when it comes to choosing a financial framework:

By Joseph C. DiFalco, CPA EisnerAmper LLP

• Generally accepted accounting principles (GAAP) is the most common reporting framework in the United States, which all U.S. public companies are required to use. GAAP reporting is also required by most lenders. • International financial reporting standards (IFRS) were developed by the International Accounting Standards Board (IASB). • Special-Purpose Frameworks (SPF), (commonly referred to as other comprehensive basis of accounting, or OCBOA), encompass a series of reporting frameworks, including cash basis, income tax basis, regulatory basis, contractual basis or other basis. The American Institute of CPAs recently released a new SPF option known as the financial reporting framework for small and mediumsized entities (FRF for SMEs). Companies considering changing their reporting frameworks should evaluate the following points:

Financial Statement Stakeholders and Related Requirements Companies need to evaluate all of the current stakeholders in their financial statements, including shareholders, lenders and regulatory agencies. How will a change in reporting framework

impact each stakeholder? For example, shareholders may not be familiar with a different financial reporting framework. If adopting a new framework changes the landscape of the financial statements they base investment decisions on, they should be made aware of a potential change and understand any differences in financial reporting that will result. If lender covenants require that financial statements be prepared in accordance with a certain financial reporting framework, a switch may not be possible unless underlying agreements are amended. Also consider any financial covenants in lending agreements, since results under a new financial reporting framework are likely to be different. Because public companies are bound by the requirements of the Securities and Exchange Commission, switching to a simpler framework is not an option. You must also consider future stakeholders and anticipate their requirements. For example, it may not be prudent for a mid-sized privately held company to adopt an SPF if an initial public offering is being contemplated, in which case GAAP financial statements would be needed. Future investors may require GAAP financial statements as a matter of policy, so consider lost opportunities that may result from changing your framework. If a merger or acquisition could be in the near future, potential acquirers, their financiers and related stakeholders should also be a consideration.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

• Can current internal resources handle a framework conversion? You may need outside specialists to consider which framework makes sense for your business and its stakeholders, as well as manage conversion logistics. • Will you need to change your accounting infrastructure and/or IT system? • Will you need to revise accounting policies or adopt new ones? • How will you go about training accounting personnel?

Keep in mind that most business is conducted globally. Stakeholders in a company’s financial reporting are likely to include foreign vendors, customers, shareholders and potential investors. In our global economy, stakeholder location needs to be considered when deciding if it’s prudent to switch financial reporting frameworks. A more globally accepted framework, like IFRS, might make sense if that is what stakeholders are used to and comfortable with. If IFRS is being considered, understand that many countries have their own “flavor” of IFRS, which is not exactly the same as the IASB version of IFRS. And, IFRS for small and medium-sized entities (FRF for SMEs) offers an international framework with simplified reporting from IFRS. Stakeholder education and acceptance of alternative frameworks in advance is critical before moving forward. The benefit of reduced reporting under lesscomplex frameworks will be quickly lost if stakeholders are not onboard and do not embrace the switch.

Differences in Reporting Under Framework Options

Financial statements under a new reporting framework will look different, so understanding the differences is a critical step in the decision. Certain standards under GAAP are complex and resource-consuming to implement. The result could often yield information

that financial statement users find less informative. FRF for SMEs, however, simplifies reporting requirements in many respects and provides potentially relevant, cost-effective financial reporting for smaller companies that can implement this framework. When deciding whether a switch makes sense, consider: • Which metrics are key to the company and stakeholders using the financial statements? • What does the balance sheet, income statement and cash flow look like before and after the proposed switch? • What impact will switching have on key metrics, and how will stakeholders view the financial health of the company? • How will investor and industry benchmarking be impacted if the financial reporting framework is different? • Will the required financial statement disclosure increase or decrease? Consider a test run translation of financial statements from the current reporting framework to the proposed one. This will offer a view of how your reporting will look under a new framework and potential pitfalls involved.

Resources for a New Framework

Time and money are two critical resources in any conversion process:

While upfront costs are certainly important, what about ongoing costs? For example, by adopting a simpler framework, will time spent on ongoing financial reporting be reduced significantly? Generally, FRF for SMEs results in simplified reporting requirements, while IFRS may result in more robust disclosure requirements. Future costs and complexity of converting to (or converting back to) a more complex financial reporting framework in the future should always be weighed against the current benefits yielded from a simpler financial reporting framework. There are many financial reporting framework options available to companies these days. A change in reporting framework is no small undertaking. Remember that it is critical you (1) ensure current (and potential future) stakeholders are considered in the decision-making process; (2) understand how a change in reporting framework will impact your financial reporting landscape; and (3) evaluate the potential costs financially and in human capital, then allocate the appropriate—internal and/ or external—resources to facilitate a smooth transition. Joseph C. DiFalco, CPA, is an audit senior manager at EisnerAmper LLP. He is a member of the New Jersey Society of CPAs Board of Trustees. Contact him at joseph.difalco@ eisneramper.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

A&A

buzz

The 2014 Federal Financial Statement Transparency Act B Y COL L EEN CUL L A R I , C U LLARI C ARR I C O LLC

n 1999, the American Institute of CPAs Council approved a resolution designating the Federal Accounting Standards Advisory Board (FASAB) as the body promulgating generally accepted accounting principles for federal governmental entities. Since its inception, the board has made significant changes to uphold an appropriate level of independence while maintaining fiscal accountability and transparency. The Federal

Financial Statement Transparency Act aims to further support and enhance these objectives.

Operations

The FASAB is comprised of nine members: three federal members from each of the FASAB’s sponsoring agencies (Government Accounting Office, Office of Management and Budget, and the Treasury). The head of each of the three sponsoring agencies selects one

federal member to serve on the board and represent the agency without any imposed fixed term. Six public or non-federal members, eligible for two five-year terms, are appointed by the sponsoring agencies after considering recommendations of the panel. The panel consists of the three FASAB members who represent the sponsoring agencies, as well as representatives from the AICPA, the Accounting Research Foundation and the Financial

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Accounting Foundation. The sponsors select the board’s chairperson from among the non-federal members. The FASAB considers accounting standards by identifying accounting and financial reporting issues. Deliberations ensue, and initial proposal documents are created and released for public comment. Comments are considered, and the board votes on the proposal. If a twothirds majority affirmative vote is attained, the proposal is submitted to the sponsoring agencies for a 90-day review. Undisputed or amended proposals are entered into the Federal Register as policy.

Independence

The Federal Financial Statement Transparency Act of 2014 strengthens board independence by removing the Treasury’s voting rights on the board. If the Treasury fails to implement a FASAB standard, it must submit a public report explaining its deviation. The bill also requires the Secretary of the Treasury to establish an account to enable the board to independently fund its operations. This is not the first time the FASAB changed its structure to strengthen its independence standards. In 2002, the FASAB altered the board’s structure to provide a supermajority of nonfederal members. At that time,

the Secretary of the Treasury also relinquished his authority to object to standards during the 90-day review, but voting rights were retained by the Treasury Secretary’s board member. The 2014 Federal Financial Statement Transparency Act removes these voting rights. In 2010, the FASAB reinforced independence and ethics policies by reconfirming the board’s commitment to these policies. Additionally, the board established procedures to report undue influence of any board member to the AICPA.

Accountability and Transparency

In 2010, the FASAB made its operations transparent by issuing the first annual report. From the annual report, users found it difficult to find comparable data from which to make appropriate financial decisions. There were inconsistencies in application of accounting policies. For example, the maximum unfunded liability was reported on the face of the financials for pension and retiree health obligations, whereas the minimum liability in the estimated range of losses was reported on the face of the financials for Social Security and Medicare programs. The maximum liability for Social Security and Medicare programs was reported in the footnotes.

Representative Jim Renacci introduced the Federal Financial Statement Transparency Act because he was concerned about the increasing U.S. deficit. He stated, “As a CPA and former business owner, it’s critical to have the financial information necessary before making a decision about how to best move an organization forward. In Washington, we know that our current path is unsustainable, but do we really know where we stand fiscally? The answer is we don’t and neither do the American people thanks to the federal government’s incomplete financial statements … Establishing the FASAB was a step in the right direction, but it lacks independence—opening the door to political influence.” By removing the Treasury’s voting rights on the board, the Financial Statement Transparency Act removes its role in writing the standards it applies. With the issues identified, the board can now better remediate them without inappropriate resistance. Colleen Cullari is the audit services supervisor at Cullari Carrico LLC. She is a New Jersey Society of CPAs CPA Candidate member and a member of the Accounting & Auditing and Nonprofit interest groups. Contact her at ccullari@cullaricarrico.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

BEST

practices

Why a Voluntary Leave of Absence Policy Makes Sense B Y MICH AEL MARIAN O, LE AF, M I E LE , M ANGANE LLI , F ORT UNATO & ENGE L, LLP

mployers usually cringe at the term leave of absence (LOA) because from the employer’s perspective it can have negative connotations: the cost, the company being left shorthanded, the employees taking unfair advantage. LOAs essentially entail that (1) the employee cannot work for a period of time; (2) both parties want to (or are regulated to) keep their relationship when the employee can return to work; (3) the employee loses his/her pay for the period of time; and (4) the employee maintains his/her employee benefits. It can be difficult on one or both sides in the short term, but in the long run there are worthwhile benefits for both parties.

Compliance

Without going into too much legalese about LOAs, suffice it to say that all CPA firms should comply with state and federal regulations, such as the Family and Medical Leave Act, jury duty leave, military family leave and the regulations surrounding maternity leave. Should you have any questions or doubt, one reference source is the Fair Labor Standards Act.

The Other Type of LOA

LOAs fall into two distinct categories: mandatory/regulated and voluntary. We’ve given the essence of mandated/ regulated LOAs above. Now let’s examine voluntary LOAs. Why would employers offer any type of voluntary LOA in addition to the LOAs that are mandatory under state and federal regulations? It is for the same reason companies offer a variety of nonmandated benefits: to attract better talent, retain staff, keep employees

content and productive, and so on. In many cases, such as at my firm, the owners genuinely care about their employees’ well-being. Most companies already offer many types of paid non-mandatory leave, including sick time, vacation time, personal days, holidays and others. It’s not such a stretch to consider the potential needs of some employees who may need an extended block of time to be away from work for a personal reason after they have used all of their paid or sick time and then have a job in which to return. Note: There are circumstances where it is necessary to fill the on-leave employee’s position, and then when the employee returns from leave he or she comes back to a different position but at the same level. Ultimately, as an employer you need to ask yourself, do you really want to lose any of your top employees because they have an issue they need to deal with outside of work for a period of time?

A Recruiting/Retention Tool

Another reason to create a voluntary LOA policy—which impacts many of us in the accounting profession—is when a company is below the regulated threshold of employees and is not subject to the Family and Medical Leave Act. Smaller companies certainly want to attract comparable talent to the larger ones, and not offering

comparable policies only impedes that recruitment goal. Smaller firms will probably never be able to compete with larger firms in terms of compensation. However, when you analyze the cost of offering an LOA benefit versus the number of employees who actually use it, you may find that the benefit to the company trumps any costs. Do we really want to hold it against an employee if he/she or a family member had a serious medical condition and needed to be away from work temporarily? Without getting too philosophical or preachy, the phrase “There but for the grace of God go I,” does resonate somewhat. Many employers might silently think: “There are a couple of employees that I would like to have a reason to get rid of.” However, an LOA policy is not the way to do it. An LOA policy, like all policies, should be designed to be fair, positive and non-discriminatory. Michael Mariano, PHR, AAAPM, is the firm administrator at Leaf, Miele, Manganelli, Fortunato & Engel, LLP. Contact him at michaelm@njcpafirm.com or 973-808-9500.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

CORPORATE

finance

Investing in Private Equity B Y DANIEL R. ARCUR I , C PA, L’ OR E AL USA

rivate equity firms are a lot like jet packs: They’re often heard about, but seldom used. Investing in private equity involves putting money into mature companies (that are frequently struggling) in order to improve their business operations and reduce costs. Such strategies are designed to increase the company’s bottom line. Many private equity firms are structured as limited partnerships, which can impact the accounting and tax guidelines by which the company must comply. The investment structure also has tax ramifications and reporting requirements. Finally, the amount of control that the new investors acquire wields a large financial impact on the private equity funds.

Employees

One of the first things private equity investors do is hire new employees and replace the management team at an acquired company. As some employees are let go, others are hired. Therefore, the net decrease in employees is sometimes as little as 1 percent. This approach, however, generally does not result in a net increase in the number of jobs. Whether or not to terminate existing employees can be a complex decision for the investors, because some of the employees may have been with the company for many years prior to the takeover.

Investor Requirements

With high risks come high expected returns. Investing in private equity firms does have the potential to lead to large returns. However, the Securities and Exchange Commission requires that investors are “accredited” or “qualified,” which may require an investor to have an income of more than $300,000 or a net worth exceeding $1 million, among other requirements.

Minimum investment amounts can also range from a few hundred thousand to a few million dollars. It’s worth noting that many large pension funds invest in private equity firms, so many of us may already be considered indirect investors.

Multiple Funds

It is also common for investors to invest in multiple private equity funds at once, often through a holding company. If invested in this manner, the transactions at the parent company need to take into account the transactions at the individual fund level, such as unrecorded liabilities and financial disclosures. It can be very lucrative to invest in multiple funds at once, but the returns on some funds may far exceed the returns on others.

Returns

For those investors who have the financial resources and are able to make investments in private equity funds, they often do not make these investment decisions based on the strategies that are taught in business schools, such as the discounted cash flow and net present value methods. Instead, many investors focus on expected internal rates of return, typically between 20 percent and 25 percent. Unfortunately, these are expected returns and there is no guarantee that the company will not go into bankruptcy. Private equity funds will often provide investor returns that exceed the returns in the stock market for public companies. This is because investors often charge fees for their investments while the company is growing. Investors want a return on their money while the company is improving, since not every investor wants to wait several years before he or she can realize a return on his or

her multi-million-dollar investment. Investors may charge a fee as a percentage of profits as high as 20 percent. This is especially common on funds that are attracting investors by providing debt.

Exit Strategy

After several years, investors may sell their equity in the company, or they may decide to take the company public—often at a substantial profit. The company may have been initially a listed company, but it was delisted to try to increase the company’s value. In the meantime, investors would need to increase current earnings or projected future earnings in order to attract other investors and make a substantial return on their investment. A common exit strategy is for the investors to sell the company to a larger company in the same industry. Daniel R. Arcuri, CPA, is a senior accountant at L’Oreal USA. He is a member of the Editorial Advisory Board of New Jersey CPA magazine. Contact him at daniel.arcuri1@gmail.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

FINANCIAL

planning

Financial Planning Across State Lines B Y MICH AEL R. S TEINE R , C PA, RE GE NTATLANTI C

he world seems to be shrinking more and more each day, primarily due to rapidly changing technologies. Take a second to ponder what life was like before we had smartphones. Now consider how lost you would feel if you went without yours for a day or more. One could only imagine what new and exciting technologies will debut in the next 10 years and how they will impact how we provide advice and ultimately service clients. As Baby Boomers retire in droves— particularly in NJ—we are seeing significant population migration south to warm-weather states, such as Florida and the Carolinas, or even out west to Arizona and Colorado. Sure, the climate can be a major deciding factor, but for our high-net-worth clients so is New Jersey’s current tax structure. Fortunately, as our New Jersey client base is slowly eroding and migrating, today’s technology makes it easier and easier to maintain our relationships without having to set up shop in myriad states. While in-person meetings are a bit more logistically challenging, technology allows us to have face-toface meetings with clients using nothing more than a smartphone or tablet. The

amount of computing power at our disposal is tremendous and shows no signs of slowing down. Who would have thought that videoconferencing from the 1960s cartoon The Jetsons would be a part of everyday life in 2015? Could flying cars be far behind? With a more mobile and technologysavvy client base, it’s becoming crystal clear that the only way to satisfy the demands of our clients is to stay on top of the technology curve for fear of losing out to more nimble competitors. As a financial planning practitioner, migrating to the cloud is a must. While it may seem like a scary endeavor, and there are misconceptions about security, there is no better way to go. Whether I’m working from home, on the road or at my local Starbucks, all I need is my iPad with a safe and secure Internet connection (no pubic Wi-Fi) to conduct business as usual. From my handheld tablet, I have access to my client relationship management package, portfolio accounting reporting system, custodian trading platforms and, of course, email and calendar. And if a client wants to hold a “faceto-face” meeting, I simply have to use my web conferencing application, such

as GoToMeeting, and point the camera toward me and we’re interfacing. So whether the client is three or 3,000 miles away, technology allows advisors to stay in close contact and maintain the intimacy of a client-advisor relationship that has taken years to cultivate. No longer is distance a deterrent. If that was the case, then it’s time to take the leap. The only other way to maintain strength in such relationships is to spend a copious amount of time in trains, planes and automobiles, and that’s an extremely expensive way to conduct business and a very poor use of an advisor’s time that should otherwise be spent advising clients. Does location and distance matter anymore? Hardly. When working with clients in other states and even countries, the only challenge facing an advisor today is ensuring that the proper time zone is considered when dialing Skype so as not to wake the client up at 4am. Finally, if you are working with clients outside of New Jersey, it’s crucial to consider any regulatory registration requirements that each state imposes. Most states allow a de minimis number of clients before requiring some form of registration. As such, you need to monitor that aspect as your client base continues to migrate out of state. The last thing any advisor would welcome is a time-consuming roadblock that could arise from non-compliance of a state’s registration requirements—or from any compliance regulatory agency for that matter. Michael R. Steiner, CPA, CFP, is a partner and wealth advisor at RegentAtlantic. He is chair of the New Jersey Society of CPAs Investment Committee and a member of the New Jersey CPA magazine Editorial Advisory Board. Contact him at msteiner@regentatlantic.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

FORENSIC

file

Same-Sex Marriage, Divorce and Prenuptials B Y R . DENNIS VOG T, C PA, ALLOY, SI LVE R STE I N, SHA P I RO, A DA M S , M U L FO R D, C I C A L E S E , W I L S O N & C O.

ust this summer, same-sex marriages have become legal throughout the United States. The confusion as to which legal principles applied in what states and how they differed has been erased by the U.S. Supreme Court ruling in late June. Married same-sex couples now enjoy the same legal rights and benefits as married heterosexual couples nationwide and will be recognized on official documents, such as birth and death certificates. Courts in every state must recognize a same-sex marriage legally formed in any other state.

Civil Unions

Prior to the federal legalization of same-sex marriage, there were states that allowed recognition of a samesex relationship via a civil union. This is still an available option, both for same-sex and heterosexual couples who decide not to marry for whatever reason. The laws that continue to apply to these unions vary from state to state. A civil union is not 100-percent equivalent to marriage, and this can cause complications in certain instances. Couples who do not marry will need to continue to follow the appropriate laws for their situation and may want to have an attorney draw up a contract outlining the agreement.

Divorce

It was inevitable that the legalization of same-sex marriage by certain states, and now by the federal government, would be followed shortly by the need for guidance on divorce. There are assets and liabilities to divide in a fair and equitable manner at the time that any marriage ends. Although there has been a Supreme Court ruling that applies on the federal level, the

state laws that apply to marriage and divorce are not uniform throughout the country. Those laws vary between the states and are sometimes very different between neighboring states. Also, certain states are communityproperty states and others are not. The New Jersey Alimony Reform Act of 2014 is the guidance for financial support for all couples divorcing under NJ’s jurisdiction.

Prenups

Unlike years ago when many couples who married were young and had few assets or liabilities to consider, many same-sex married couples have been together for some time before becoming legally allowed to marry. Together, they have accumulated assets as well as debts that need to be divided if the marriage ends, and an agreement entered into before the marriage can be very helpful. A prenuptial agreement is a valuable tool for any marriage in which participants find they need to terminate and divide what was accumulated during the term of the marriage, but don’t believe that those assets acquired prior to the marriage should be divided. Prenuptial agreements can help the courts to exclude or identify assets that will be subject to equitable division. They can also be valuable in carving out ownership for situations where creditors are asserting rights against the other spouse’s assets. A prenuptial agreement is also often appropriate and important when a family business or substantial family wealth is brought into any marriage. A prenuptial agreement entered into freely by the couple (or a postnuptial agreement for an already married couple) will be a helpful guide

for dividing the identified assets and liabilities should a divorce follow a marriage, either in the short- or longterm. This agreement sets out the intentions of the parties when they joined together, which could be very difficult to agree on later if a divorce occurs. Each couple’s situation is different, but all couples entering into a marriage need to be educated and should consider all of the important factors that may affect them now or in the future. Same-sex couples will need to work through the same hurdles faced by any divorcing couple. Now, all will follow the same basic rules for alimony, support and equitable distribution. Every couple should consider whether having a prenuptial agreement is something they want in the event of a divorce. R. Dennis Vogt, CPA, is a shareholder at Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co. He is a member of the New Jersey Society of CPAs. Contact him at 856-667-4100 or dvogt@alloysilverstein.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

SMALL/SOLE

practitioner

Compliance Resources for Small Practitioners B Y P ETER J. RENZULLI , C PA, B OO K K E E PE RS2 GO

mall practice owners often don’t have nearly enough staff or time to keep up to date with the massive amount of regulation and compliance changes happening daily. These changes aren’t just limited to financial reporting and tax. They also relate to malpractice insurance, client relationships and relationships with third parties and vendors. Add to this the increased enforcement by agencies in order to plug budget gaps. Visiting individual agency websites each day is far easier said than done. Small practitioners need more practical tools that let them stay both current and organized.

Insurance Providers

Many accountants don’t realize that their professional liability insurance companies set rules and guidelines for managing risk in their practices. Many CPA malpractice insurance providers offer clients a small practice portal containing guidance on how to handle issues such as CPA comfort letters as well as sample engagement letters for a variety of service offerings. Some insurance companies even have a telephone hotline to assist practitioners with more complicated issues.

NASBA

Another great resource is the National Association of State Boards of Accountancy (nasba.org). Its website includes a listing of all the state boards of accountancy, as well as links to each state board’s website. Here, you can easily find each state’s rules and regulations. It’s a good idea to review your state board’s website at least annually, if for nothing else to make sure that you’ve met the continuing professional education requirements for each state in which you provide services. By periodically reviewing your

insurance company and your state board’s websites, you can effectively manage practice risk plus obtain many time-saving resources.

Tax

When it comes to income tax, we all know about the Internal Revenue Service and state treasury department web portals for professionals. Sometimes we forget, however, that the Department of Labor (DOL) (dol.gov) also has rules and regulations that affect our practices and our clients. The DOL’s website has resources for wages and hours, family leave, disability and the employer’s handbook. New Jersey’s Department of Labor and Workforce Development (lwd. state.nj.us/labor) conducts many audits and fines business owners for being out of compliance with the details of payroll reporting. Its website provides a great deal of information to protect your clients from administrative penalties.

There’s More

Keeping up on regulations and compliance for financial accounting can be difficult due to the convergence project with the International Financial Reporting Standards (IFRS). The American Institute of CPAs (aicpa.org) and IFRS (ifrs.org) websites make a good starting point. Keep in mind that the largest accounting firms also provide analysis and suggestions on a host of timely topics. These firms publish whitepapers that can offer great insights into new regulations as well as many other issues impacting your clients. The large firms update their websites regularly, and most offer free access to timely information. As this is a New Jersey Society of CPAs publication, I’d be remiss if I didn’t mention the Society and

its publications, website (njcpa.org) and social media platforms that offer articles, links, continuing education courses and information on the latest rules and regulations.

Organizing It All

Visiting all of the aforementioned websites frequently and keeping their helpful resources organized can be a daunting and time-consuming task. Fortunately, there is an easy electronic solution. Flipboard (flipboard. com), available for both iPhone and Android devices, is a free electronic news magazine app that allows you to clip an article and place it in the app for future reading. Inside the app, you create a magazine that stores the articles and allows you to share them with co-workers. Another method of saving and sharing articles is to create a Google+ account specifically to store articles that you and your practice need to keep current with accounting rules and regulations. Connect with your co-workers on your Google+ account to easily share information.

Quick Resource Guide • aicpa.org • dol.gov • flipboard.com • ifrs.org • lwd.dol.state.nj.us/labor • nasba.org • njcpa.org • state.nj.us/treasury/taxation

Peter J. Renzulli, CPA, is with Bookkeepers2Go. He is a member of the New Jersey Society of CPAs. Contact him at renzulli@bookkeepers2go.com or 908-541-0101.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

TAX

talk

Determining Bundled Transactions in New Jersey B Y SEB AS TIANO B ANC HI T TA, C PA, T HE M I RO NOV G RO U P, L L C

bundled transaction is when two or more products are retailed together to a customer. In New Jersey, it is presumed that a bundled transaction’s sales price is taxable if any of the distinct and identifiable products are taxable. The official definition, as stated in the Streamlined Sales and Use Tax legislation, is “A bundled transaction is the retail sale of two or more products—including services, digital property and other products that tax is imposed upon— except real property and services to real property, where (1) the products are otherwise distinct and identifiable; and (2) the products are sold for one non-itemized price.” A bundled transaction does not include the sale of any products in which the sales price varies or is negotiable based on the selection by the purchaser of the products included in the transaction. In the accountant’s world of rules and regulations, there are almost always exceptions to the rules. The case for bundled transactions is no different. There are four exceptions to be aware of that will deem a bundled transaction no longer valid under the aforementioned definition. If a transaction qualifies under one of these four exceptions, then the application of a specific analysis will be required in order to determine the tax consequences. The four exceptions per the Streamlined Sales and Use Tax legislation are as follows: 1. The retail sale of tangible personal property and a service where the tangible personal property is essential to the use of the service and is provided exclusively in connection with the service and the true object of the transaction is the service.

2. The retail sale of services where one service is provided that is essential to the use or receipt of a second service, and the first service is provided exclusively in connection with the second service and the true object of the transaction is the second service. These are not bundled transactions. In these transactions, the true object test is used to determine taxability of the non-itemized price. 3. A transaction that includes taxable products and non-taxable products and the purchase price or sales price of the taxable products is de minimis. De minimis means the seller’s purchase price or sales price of the taxable products is 10 percent or less of the total purchase price or sales price of the bundled products. Sellers should use either the purchase price or the sales price of the products to determine if the taxable products are de minimis. Sellers may not use a combination of the purchase price and sales price of the products to determine if the taxable products are de minimis. Sellers shall also use the full term of a service contract to determine if the taxable products are de minimis. This is not a bundled transaction. In these transactions, since the taxable products are de minimus, the sales price is not subject to sales tax. 4. The retail sale of exempt tangible personal property and

taxable tangible personal property where (a) the transaction includes only tangible personal property and at least one product that is food and food ingredients, drugs, durable medical equipment, mobility-enhancing equipment, over-the-counter drugs, grooming and hygiene products, prosthetic devices (all as defined in the law), or medical supplies; and (b) the seller’s purchase price or sales price of the taxable tangible personal property is 50 percent or less of the total purchase price or sales price of the bundled tangible personal property. Sellers may not use a combination of the purchase price and sales price of the tangible personal property when making the 50-percent determination for a transaction. This is not a bundled transaction. In these transactions, since more than 50 percent of the products are not taxable, the sales price is not subject to tax. Demonstrating whether a bundled transaction meets one of the above exceptions will most certainly be central to overcoming the presumption of taxability for New Jersey sales tax. Sebastiano Banchitta, CPA, CGMA, is with The Mironov Group, LLC. Contact him at sbanchitta@mironovgroup.com or 732-572-3900.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

TECH

center

Try Wearable Technology on for Size B Y DON L OGAN, WI SS & C OM PANY, LLP

earable technology has been around since the 1970s, albeit the devices were primitive. In 1984, Microsoft produced a watch called the UC-2000, which was programmable through a keypad using the BASIC language. Jump to 2002, and Microsoft created Smart Personal Object Technology (SMART), which redrew the technology playing field by integrating its smart software into everyday products. Is wearable technology going to be around for a while? It’s certainly gaining more traction and popularity each day. The new wearable tech

enables us to stay more connected to our bodies, assets, businesses, and the list goes on. So what types of wearable technology are available, and what do they offer you?

Personal Use

Smart watches are obviously at the forefront of wearable technology. Activity trackers, cameras, smart glasses, smart tracking, pet wear, smart sport wear, health care and gesture controls are the other main categories for wearable tech right now. The application for wearable tech and the targeted audiences are just about anyone with a pulse.

Some devices are hybrid devices that can track fitness, tell the day and time, measure distances and notify you when you receive a text message or phone call. Smart watches and fitness trackers have a step counter, heart and pulse rate monitor, and mileage tracking. There’s also a few that can track sleep quality and altitude, which can be used by professional athletes and average people alike. You can even play music or check the weather through a smart watch.

Business Use

What’s the business case for wearable technology? Actually, there’s an endless

“I can get a free business checking account plus unlimited

cash back?”

It’s easy with FREE BusinessAdvantage Checking from Provident Bank.

Provident’s BusinessAdvantage Checking rewards you with unlimited cash back on the total amount of your signature-based debit card1 transactions. Use your card for purchases or expenses like meals, travel, office supplies, insurance, lease payments and more.

■ ■ ■ ■

FREE 1,000 transactions per month2 FREE Online Banking & Bill Payment3 No minimum balance requirements4 FREE, Instant-Issue Provident Business Debit MasterCard® For more information, call 866.4NJ.BIZZ or visit ProvidentNJ.com • 87 branches in NJ & PA to serve you.

1Cash Back rewards credited to your account will equal the total amount of eligible signature-based point-of-sale purchase transactions posted to and cleared through your Provident BusinessAdvantage Checking account each statement period multiplied by a factor of 0.25% (.0025). This Cash Back rewards factor is variable and may change at our discretion. To be eligible, qualifying point-of-sale signature-based transactions must be posted to and cleared through your Provident BusinessAdvantage Checking account as of the last business day of the statement period. Cash Back rewards will be redeemed, deposited and available on the first business day of the following statement period. 2 Free BusinessAdvantage Checking account includes 1,000 free transactions per statement period, with 12 statement periods per year. Free transactions include checks paid, deposited items, debits and credits. Fees will apply if the transaction limit is exceeded. 3 No minimum account balance required, however, you must deposit a minimum of $50 to open this account. 4 Does not include Cash Management accounts and services. Ask for details.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

list of possibilities. Some of the more notable uses are wearable cameras; corporate training or instructional videos; calendars and reminders; and notification of emails, phone calls and text messages, to name a few. If you can think of it, there’s probably a purpose or use for any wearable tech. Smart watches vary depending on the features and looks. They all tell time and have basic watch functionality. The main differences are the apps, built-in functions, styles and costs. The smart watch for business use right now would mostly be for communication notification and convenience. Just think how sitting in a meeting can be much easier using your watch because you can glance down and see what’s going on, rather than noisily digging your phone out of your pocket or bag. However, keep in mind, you still have to charge the watch, update it and interact with it on your phone.

Connectivity

Most of the current smart watches aren’t completely standalone devices, simply because they lack an Internet connection. Many of the watches are designed to link directly with other devices that do have Internet connectivity, such your smartphone. Most watches connect to a mobile phone using Bluetooth technology. Once linked with your phone, everything it does comes through your smart watch. Battery life is a concern on smart watch devices, particularly if linked with your mobile phone. As technology matures, they should become more efficient, less resourceintensive and hopefully less costly.

Aesthetics

Watch styles vary from rubberized bracelets to elegant dress, available in a host of colors and designs. They can cost from a few hundred dollars to a few thousand, so it pays to shop around

and get recommendations from friends, family and co-workers. In the coming years, eyewear, watches and gesture controls look like they’re going to have a large impact on the professional work environment. Just imagine having everything with which you interact within your eye view and controlling it with physical movement or voice, without even touching your phone or other mobile device. But before you run out and buy a wearable device, ask yourself exactly what the purpose is and know the differences between manufacturers and models. Performing some due diligence and obtaining some basic information will make for a more successful and enjoyable experience. Don Logan, MSCE, CCNP, is the director of technology for Wiss & Company, LLP. Contact him at dlogan@wiss.com.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

The

30 3

Join us in congratulating these 30 young professionals who are making a name for themselves in the New Jersey accounting landscape and beyond. After receiving many deserving nominations, the New Jersey Society of CPAs chose those who displayed a unique combination of Society participation, accounting profession involvement and community service dedication.

Daniel R. Arcuri, CPA

Christine M. Bowers, CPA

L’Oreal USA

CohnReznick LLP

David G. Calotta, CPA

Gaetana Carbone, CPA

ADP

Deloitte

Joseph P. Carnevale, CPA

Patrick F. Chong, CPA

Christopher R. Cicalese, CPA

Reynold P. Cicalese III, CPA

Gramkow, Carnevale, Seifert & Co., LLC

KPMG LLP

Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co.

Nicole M. DeRosa, CPA

Danielle Dvorak, CPA

Robert L. Gilbert, CPA

Lauryn M. Hanrahan, CPA

Friedman LLP

Citrin Cooperman & Co., LLP

XO Group

WithumSmith+Brown

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

30 3

Kaitlin A. Hodnicki, CPA

Megan T. Kelly, CPA

Jodi D. Kleuskens, CPA

Alyssa P. Leach, CPA

Wilkin & Guttenplan, P.C.

Sobel & Co., LLC

Integra LifeSciences Corp.

Flackman, Goodman & Potter, PA

Kristina Lota, CPA

Brian P. Marchese, CPA

Kenneth Milgraum, CPA

Peter E. Motsch, CPA

Lota & Bernard, LLC

CohnReznick LLP

Deloitte

CIT Group

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

30 3

Zimka D. Patel, CPA

Gerardo C. Pecoraro, CPA

Megan A. Sartor, CPA

Melissa Setzer, CPA

Deloitte

SaxBST

Melissa Soranno, CPA

Sean Stein Smith, CPA

Lauren T. Taguer, CPA

Valerie Thorpe, CPA

WithumSmith+Brown

Hackensack University Medical Center

WithumSmith+Brown

Wilkin & Guttenplan, P.C.

Julia Van Saun, CPA

Stephen Weiss, CPA

WithumSmith+Brown

Untracht Early LLC

HONORABLE MENTION Sean Breheney, CPA Lawrence B. Goodman & Co., P.A.

Solomon Feraidoon, CPA WithumSmith+Brown

Michael Levy, CPA Candidate Burlington Stores, Inc.

Lovepreet K. Buttar, CPA Mercadien, P.C., CPAs

Joseph R. Hark II, CPA Candidate Deloitte

Takanari Tanahashi, CPA WithumSmith+Brown

Erica D. Calella, CPA Kreinces Rollins & Shanker, LLC

Temitope O. Kamson, CPA Deloitte

Jason Zenobi, CPA EisnerAmper LLP

Daniel A. Errera, CPA Deloitte

Christina Lazaro, CPA WithumSmith+Brown

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Nicole DeRosa, CPA

Lauren Taguer, CPA

Melissa Soranno, CPA

Julia Van Saun, CPA

WithumSmith+Brown celebrates the 2015 NJCPA’s Best 30 Under 30 honorees, Nicole DeRosa, Melissa Soranno, Lauren Taguer and Julia Van Saun. You represent the talented rising stars in the CPA world — making an impact on the future of the accounting profession and our Firm.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Congratulations Congratulations to Danielle Dvorak on your recognition as one of New Jersey CPA’s “30 under 30” for 2015

Your livelihood, empowered. New York New Jersey Pennsylvania Beijing friedmanllp.com

100 Eagle Rock Avenue, Suite 200 East Hanover, NJ 07936 p 973-929-3500

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

© 2015 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. NDPPS 398500

Congratulations to our very own Patrick Chong, and to all of the “30 under 30” honorees. KPMG LLP is proud to support the New Jersey Society of CPAs. kpmg.com

Wilkin & Guttenplan P.C. congratulates all of those named “30 Under 30” We are so proud of our team members Kaitlin Hodnicki & Valerie Thorpe for their achievement of excellence in our profession. We proudly support the NJCPA in recognizing these emerging leaders.

Kaitlin Hodnicki, CPA

Valerie Thorpe, CPA

Certified Public Accountants and Consultants

1200 Tices Lane, East Brunswick, New Jersey 08816

Ph: 732.846.3000

Fx: 732.846.0618

5 Penn Plaza, 19th Floor, New York, New York 10001

Ph: 212.835.1584

Fx: 212.849.6901

www.wgcpas.com

An Independent Member of the BDO Alliance USA

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

SOCIETY

pages

CPE Offerings and Events Upcoming Education Foundation Events Date 9/24

Event/Code Introduction to Business Valuation (E1509351)

Location Iselin

CPE Credit 8/MT

9/25

The Best Income Tax, Estate Tax and Financial Planning Ideas of 2015 (E1509091)

Roseland

8/TX

9/25

Fraud Update: Detecting and Preventing the Top Ten Fraud Schemes (E1509343)

Iselin

8/AA

9/28

Compilation and Review Practice Guide and Professional Ethics for New Jersey CPAs (E1509211)

Iselin

4/AA, 4/PE

9/28

Intermediate Core Tax Issues in Partnerships and LLCs (E1509111)

Roseland

8/TX

9/28

Private Company Accounting: New Directions, New Challenges (E1509403)

Roseland

6/MT, 2/AA

9/28

The Best Income Tax, Estate Tax and Financial Planning Ideas of 2015 (E1509101)

Jamesburg

8/TX

9/29

Business Valuation, Forensic Investigation and Litigation Services Conference (E1509250)

Edison

8/SK

9/29

Intermediate Core Tax Issues in S Corporations (E1509131)

Roseland

8/TX

9/29

Internal Controls and Risk Assessment: Key Factors in a Successful Audit (E1509371)

Iselin

8/AA

9/29

Fiduciary Income Tax Returns Workshop (E1509121)

Iselin

8/TX

9/30

Identity Theft: Preventing, Detecting and Investigating Identity Theft (E1509363)

Iselin

8/AA

9/30

Surgent’s 2015 Annual Tax-Planning Guide for S Corporations, Partnerships and LLCs (E1509141)

Roseland

8/TX

9/30

GAAP for Industry (E1509193)

Roseland

8/AA

9/30

Career Night (E1509035)

Edison

N/A

10/2

Revenue Recognition: Mastering the New FASB Requirements (E1510193)

Roseland

8/AA

10/8-9

Audit Staff Essentials – Level 3 – Audit Senior/In-Charge (E1510181)

Roseland

16/AA

10/14

New Jersey Law and Ethics Webinar (E1510404)

N/A

4/PE

10/15

Accounting for Deferred Income Taxes (E1510201)

Roseland

8/AA

10/15

GAAS/NJ Regulatory Reporting Update Webinar (E1510414)

N/A

1/AA

10/16

Construction Contractors Advanced Issues (E1510211)

Roseland

8/AA

10/19

Excel-Based Dashboards (E1510313)

Roseland

4/AA, 4/MT

10/19

Hottest Tax Topics for 2015 (E1510221)

Iselin

8/TX

10/20

Analytics and Big Data for Accountants (E1510243)

Iselin

8/MT

10/20

Small Business Internal Controls, Security and Fraud Prevention and Detection (E1510323)

Roseland

4/AA, 4/CS

10/20

Advanced Mergers, Acquisitions and Sales of Closely Held Businesses (E1510233)

Roseland

8/TX

10/20

Financial Management Skills: Become a Financial Leader (E1510363)

East Hanover

8/MT

10/21

Mastering the Fundamentals of Estate Gift Tax Planning (E1510021)

East Hanover

8/TX

10/21

Excel Tips, Tricks and Techniques for Accountants (E1510333)

Roseland

8/CS

10/21

Shorten Month-End: Closing Best Practices (E1510372)

Roseland

4/TX

10/21

Annual Update for Controllers (E1510253)

Iselin

8/MT

10/22

Surgent’s Federal Tax Camp (E1510160)

Iselin

8/TX

10/22

Transforming Your Role as Controller to Business Partner (E1510263)

Iselin

8/MT

10/22

2015 FASB and AICPA Update (E1510131)

Roseland

8/AA

10/26

Voorhees

8/TX

Iselin

8/AA

10/26

Complete Strategies for Maximizing Contributions, Rollovers, Distributions and Estate Planning of IRAs, Roth IRAs, SIMPLEs and SEPs (E1510061) Special Purpose Frameworks: Preparing and Reporting on Cash, Modified Cash and Tax-Basis Financial Statements (E1510051) The Strategic CFO: Big Picture Skills (E1510353)

Iselin

6/MT, 2/AA

10/26

Compilation and Review Practice Guide (E1510151)

Jamesburg

8/AA

10/27

The Tactical CFO: Make Your Business Processes Work for You (E1510343)

Iselin

6/MT, 2/AA

10/26

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

10/27

Accounting for New Revenue Standard Workshop (E1510143)

Iselin

8/AA

10/27

Basis/Distributions for Pass-Through Entities: Simplifying the Complexities (E1510271)

Voorhees

8/TX

10/27

Core Issues Related to Properly Assessing and Responding to Financial Statement Audit Risk (E1510071)

East Hanover

8/TX

10/28

Slashing Taxes for Your Small Business Clients: Corporations, Partnerships and LLCs (E1510301)

Voorhees

8/TX

10/28

Choosing the Best Entity Structure Under the New Tax Law in 2015 (E1510091)

Jamesburg

8/TX

10/29

8/TX

10/29

Social Security, Medicare and Prescription Drug Retirement Benefits: What Every Baby Boomer Needs to Know Roseland Now (E1510111) Business Continuity and Disaster Recovery Planning for Your CPA Firm, Company or Client (E1510103) Iselin

10/29

Identifying Fraudulent Financial Transactions (E1510283)

Voorhees

8/AA

8/TX

Upcoming Chapter Events Date

Chapter

Event/Code

Location

CPE Credit

9/23

Southwest Jersey

New Jersey Law and Ethics (E1509509)

Voorhees

4/PE

9/25

Mercer

New Jersey Law and Ethics (E1509449)

West Windsor

4/PE

9/25

Monmouth/Ocean

Dinner and Theater Party (E1509539)

New York

N/A

10/1

Mercer

Business Valuation (E1510459)

West Windsor

4/AA

10/6

Passaic County

Accounting and Auditing Series (E1510479)

Paterson

4/AA

10/20

Union County

Social Security and Retirement Planning (E1510539)

Kenilworth

2/CS, 2/TX

10/22

Passaic County

Pension Update (E1510489)

Paterson

4/AA

10/22

Passaic County

Annual Scholarship Dinner and Past Presidents Gala (E1510529)

Paterson

N/A

10/23

Atlantic/Cape May

Tax Topics with Cooper Levenson (E1510429)

Somers Point

4/TX

10/29

Mercer

West Windsor

4/AA

11/3

Passaic County

Accounting and Auditing Update, Peer Review and Small Company Controls (E1510469) Accounting and Auditing Series (E1511699)

Paterson

4/AA

KEY AA – Accounting & Auditing MT – Management

CS – Consulting Services PD – Personal Development SK – Specialized Knowledge

EC – Economics PE – Professional Ethics TX – Taxation

MC – Multiple Categories PM – Practice Management

Please note: Events are subject to change. For a full listing of all NJCPA events, visit njcpa.org/catalog.

New Member Dues Discount – 100% Member Champion firms receive $25 off each new Fellow member application. Discount applies to first year of Fellow membership dues only. Personal Service – 100% Member Champion firms have a key contact at the NJCPA to call or email with questions or concerns. Professional Development – Each CPA staff member can receive two free CPE credits when the firm hosts the Society’s free Business Communications Seminar, Social Media Seminar or Professional Issues Update. Recognition – 100% Member Champions are listed on the Society’s website and at NJCPA events throughout the year. They also receive a certificate for display along with electronic and print-ready versions of the 100% Member Champion icon for their websites and firm publications. Tax Time Treats – 100% Member Champion firms receive treats to keep their energy levels up during tax time. To see a current listing of 100% Member Champion firms, visit njcpa.org/100-percent. Become a 100% Member Champion firm today by contacting Susan Dyer at sdyer@njcpa.org or 973-226-4494 x266.

Become a 100% Member Champion Stand out and experience the rewards listed below by becoming a New Jersey Society of CPAs 100% Member Champion. It’s easy to achieve 100% status when all of the New Jersey-based CPAs in your firm or company are NJCPA members. CPA Candidate Coaching – NJCPA facilitates in-person instruction with your firm’s CPA candidates to help them navigate the CPA Exam application. Education Center Rental Discount – 100% Member Champion firms receive a 10-percent discount off of the rental of the education center located at the NJCPA offices in Roseland. For more details, visit njcpa.org/rental. Media Opportunities – 100% Member Champion firms are the NJCPA’s primary resource for press interviews and editorial opportunities.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

SOCIETY

pages

Get Involved The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success

• They advocate very lean corporate structures with an emphasis on decentralization. • They reject the hottest new management techniques. These independent-thinking CEOs believe that decentralizing decision making is the best way to release entrepreneurial energy, maintain low-cost structures and keep employees’ egos in check. They primarily spend their time analyzing options for raising and deploying capital and, under certain circumstances, shrinking capital when market conditions dictate. As profits are generated, a business is presented with certain options for deploying this newly found capital: (1) investing in existing operations; (2) acquiring other businesses; (3) issuing dividends; (4) retiring debt; and (5) repurchasing stock. Astute CEOs can grow shareholders’ equity by effectively allocating capital under the unique circumstances of the day. Repurchase stock only when the price is cheap; acquire other businesses when this same stock is overvalued. Invest in continuing operations when you can achieve an adequate rate of return; pay shareholder dividends when capital cannot be effectively deployed. According to Albert Einstein, “The most powerful force in the universe is compound interest.” The outsider CEOs have seized this mantra and applied it to the shareholders’ equity on their companies’ balance sheets. Mastering the timing and techniques for deploying shareholder capital has made Warren Buffet the second richest man in the world. Likewise, the owners of Berkshire Hathaway stock, and the other seven companies featured in this book, have all been the financial beneficiaries of these truly remarkable capital allocators. While the lessons provided by these outsiders may appear to apply mostly to publicly traded corporations, there are many worthwhile ideas that CPAs can use when advising their employers and clients. Investing in one’s own business can often be the most productive use of capital. This is especially relevant in today’s environment of historically low interest rates. Condition yourself to think beyond being merely a manager in your business, but think like an investor. Strive to create a culture within your organization that makes customers and clients want to do business with your firm. Avoid pressure to act in lock-step with your competitors; instead, seek creative means to establish new services that provide enhanced value. Carefully deploy resources and act boldly when opportunity presents itself. Seek to expand through strategic acquisition, and always look to find clarity when complex situations arise. These techniques will allow you to increase the value of both your advice and your business.

By Marc D. Mintz, CPA, Marc Mintz & Associates, LLC Who is the greatest CEO of the last 50 years? This question begins The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, authored by William N. Thorndike Jr., founder and managing member of Housatonic Partners private equity firm. The Outsiders presents a compelling quantitative proposition that neither high visibility nor intense direct operational control is a requisite trait for the most exceptional CEOs. Instead, the most successful chief executive officers are master investors who recognize capital allocation is a CEO’s most important job. Warren Buffett of Berkshire Hathaway is a perfect example of this. In identifying the greatest CEOs, Thorndike seeks companies that have provided the largest compounded annual shareholder returns over decades. Devoting a chapter to each of these eight well-known, publicly traded entities—and their often lesser-known CEOs—the outsiders’ average returns outperformed the S&P 500 Index by a factor of 20 and their industry peers by a multiple of seven. These CEOs share the following common attributes: • They have a laser focus on per share value. • They possess a talent for allocating both capital and human resources. • They maintain a strong belief that free cash flow determines a company’s long-term value.

Marc D. Mintz, CPA, CITP, CGMA, is the managing member of Marc Mintz & Associates, LLC, a technology consulting firm that assists businesses with strategic planning and the selection and implementation of information technology systems. He is a member of the New Jersey Society of CPAs Strategic Planning Committee and the New Jersey CPA magazine Editorial Advisory Board. Contact him at marc@marcmintz.com or 973-808-9040. N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Get Involved Now

Pay It Forward Speakers – Tell high school students about the many career opportunities that come from pursuing an accounting degree during Pay It Forward week beginning November 9. Our ready-to-go presentation, which includes speaking points, fun facts, quizzes and videos, makes it fun, easy and rewarding. Pick the school or location where you would like to speak when you register at njcpa.org/payitforward. Contact Lauren Walsh at lwalsh@njcpa.org for more information. NJCPA Mentor Program – CPA members under age 36 are needed to be mentors for the 2016 NJCPA high school scholarship recipients to provide guidance throughout their college careers. Apply by December 31 at njcpa.org/mentor. Contact Carolyn Hook at chook@ njcpa.org for more information.

Volunteer opportunities are available throughout the year. Let us know how you’d like to be involved at njcpa.org/volunteer. Here is how you can get involved now: NJCPA Food Drive – Brought to you by the NJCPA Young CPAs Council and benefitting the Community FoodBank of New Jersey, the food drive will take place from Monday, September 14, to Friday, November 20. Support the drive when you: • Bring your non-perishable items to NJCPA headquarters in Roseland. Additional drop-off locations are listed at njcpa.org/fooddrive. Invite your co-workers to participate. • Make an impact with a team of NJCPA members when you sort and repack food for distribution at the Community FoodBank of New Jersey in Hillside on Tuesday, November 10, from 5:30 to 7:30pm. Contact Lauren Walsh at lwalsh@njcpa.org to participate.

Changed Specialties? Earned a Promotion? Taken on New Challenges? Let us know so we can deliver the news and information you need to keep advancing.

Update your professional profile at njcpa.org/profile.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

SOCIETY

pages

NJ State Board of Accountancy Report NJ CPA Exam Numbers Still Trail Neighbors Public

Newark (July 16) Miscellaneous

The board received an ethics refresher from the state ethics officer.

Committees

CPA Examination – Regarding the second quarter CPA Exam results, New Jersey test takers had a pass rate of 47 percent and an average score of 70. For New York, the numbers were 50 percent and 72 respectively; Pennsylvania’s numbers were 52 percent and 73 respectively.

New Jersey Society of CPAs Immediate Past President Brad E. Muniz, CPA, mentioned that the 10th Annual NJCPA Convention and Expo in Atlantic City was a success as more than 900 members, sponsors, exhibitors and guests attended. NJCPA CEO Ralph Thomas, CGMA, along with the CEOs from the NJ State Chamber of Commerce and the New Jersey Business and Industry Association, presented at a press conference at the NJ State Capitol to express concerns and advocate against passage of a millionaire’s tax proposal, which Governor Christie vetoed prior to approving the state’s 2016 budget.

Thomas met with the American Institute of CPAs Director of Content and CPA Examinations Team to obtain an update regarding proposed changes to the CPA Exam slated for January 2017. The Society will hold an Educators Committee meeting in October to review the exposure draft of the changes and discuss possibly issuing a comment letter on the proposed changes. Thomas met with the William Paterson University dean and accounting chair to strategize about action items to improve the CPA Exam pass rate for William Paterson students. The Society again requested the board to consider a previous recommendation that it conduct periodic audits and reviews of NJ Law and Ethics program providers.

November/December Coming Attractions Tax Matters Magazine of the

New Jersey Society of Certified Public Accountants

Nov • Dec 2015

• Annual Tax Update • Corporate Tax Reform • NJ Resident Credit • Who’s Winning the Tax War: NJ, NY or PA?

When it is time to transition out of your practice you want to do it right. Accounting Practice Sales is the largest facilitator in North America for selling accounting and tax practices. We provide a free estimate of your firm’s value, market extensively, assist in negotiations and find you the right situation. We understand your concerns and respect your confidentiality. Contact us today so your last decision will be your best. Bradley K. Holmes, CPA Toll Free: 800.397.0249 www.AccountingPracticeSales.com bradley@apsleader.com

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

CLASSIFIEDS Mergers/Acquisitions

1040 practice for sale in Hazlet, NJ. This seller owns one territory that includes five towns. The practice consistently prepares in excess of 850 returns each year. This part-time business makes a great opportunity with room to grow. Asking price $179,000. Reply to tploskonka@ comcast.net.

Brick, NJ, two-partner CPA firm, grossing $350K, seeks self-sustaining CPA to take over older partner’s accounts. Partner will remain for one-plus years to aid in transition. Reply to ngmeyer@verizon.net. Expanding Union County CPA practice is seeking small firms or sole practitioners for potential acquisition or merger. Please reply in confidence to unioncountycpa2015@gmail.com. Seize a merger/acquisition opportunity with benefits for you. Tired of dealing with issues of running a firm? We are looking for firms ranging from $300,000 to $5,000,000 eager to combine forces as we continue to grow across northern NJ, Westchester and the Hudson Valley region. Goldstein Lieberman & Company is ideally situated to service all types of industries. Visit glcpas.com; email me, Phillip Goldstein, CPA, managing partner, philg@glcpas.com; or call 800-839-5767 to have a confidential conversation.

Replies to ads with file numbers should be sent to: File______________________ New Jersey CPA Classifieds 425 Eagle Rock Avenue, Suite 100 Roseland, NJ 07068-1723

Two-partner firm in Montville seeks sole practitioner with $100,000+ book to join firm and assume partial book of retiring partner. Reply to njcpa07045@yahoo.com. Union County, peer-reviewed CPA firm grossing approximately $500K. Retirement-minded owner plus two part-time CPAs and one part-time administrator. Interested in merger with three- to four-year transition and buyout. Practice is profitable, high-quality tax and accounting oriented. Please respond to njcpa645@gmail.com. The Curchin Group, LLC, a central NJ, Monmouth County firm is seeking to merge-in near-retirement sole practitioners and small firms needing succession planning. Other individuals seeking growth and expansion are welcome to inquire. Initial practice continuation also an option. Reply in confidence to Peter Pfister, CPA, at 732-747-0500 or ppfister@ curchin.com.

Thinking of selling your practice? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. We have qualified buyers waiting and the experience to help you find the right fit for your firm and negotiate the best deal possible. For information about our risk-free and confidential services, call Bradley Holmes at 800-397-0249 or email bradley@apsleader.com. Buyers see listings and register for free email notifications at accountingpracticesales.com.

Classified Advertising

Professional Services Cost segregation services – Seeking firms that want to increase their revenues by adding cost segregation to their portfolio of services. Contact Joe DeSantis at 800-785-1018 or joed@carraraservices.com.

Flexible merger/acquisition – Middlesex/ Somerset CPA firm seeks semi-retirementminded CPAs. Interested in cutting back while staying involved with the practice to the extent you wish, working at our office or remotely? Please reply to njcpa@juno.com for more information.

Real Estate

New Jersey practices for sale: Hudson County CPA practice, gross $735K; Moorestown CPA practice, gross $700K; Middlesex County CPA practice, gross $400K; multi-location tax franchise, gross $242K; Ewing tax and bookkeeping practice, gross $150K. For more information, call Bradley Holmes, 800-397-0249, or visit accountingpracticesales. com to view all listings and register for free email updates.

Professional office space available for rent in Wyckoff, NJ. It includes normal office supplies, copier, printer and scanning. Wonderful opportunity is available for sole practitioner accountant with an objective of a possible partnership in our firm pending senior partner retirement. There is also the opportunity to reduce monthly rental costs with work from our firm. Please call us at 201-560-1199.

Class A office building located on Route 208, Fair Lawn, share 3,000 square-feet of office space with two other CPA firms. Two private offices and shared conference room available. Call Bruce Kaminer at 201-794-6400 or Pat Merrit at 201-796-6400.

To see additional classified listings or to place an ad, visit njcpa.org/classifieds.

ADVERTISERS INDEX Accounting Practice Sales accountingpracticesales.com

ADP 37 adp.com Alloy Silverstein alloysilverstein.com

Artha Systems LLC arthasystems.com

Bank of America bankofamerica.com

Electronic Office Systems eosnj.com

Friedman LLP friedmanllp.com

KPMG LLP kpmg.com

PNC Bank pnc.com

Provident Bank providentnj.com

Thomas Edison State College tesc.edu

Thomson Reuters checkpointcatalyst.com

Untracht Early LLP untracht.com

Wilkin & Guttenplan, P.C. 29 wgcpas.com WithumSmith+Brown, PC withum.com

XO Group 27 xogroupinc.com

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

YOUNG

professionals

Speak Now—or Forever Hold Your Peace— on Proposed CPA Exam Changes B Y A NN MARIE C AL L AHAN, C PA, AND E LE NA C . K L A R B E R G , C A L DW E L L U N I V E R S I T Y

n September 2015, the American Institute of CPAs plans to distribute an exposure draft that represents a final proposal for the next version of the Uniform CPA Examination, which is expected to be launched in 2017. This exposure draft is the culmination of an analysis that the AICPA began in early 2014 to gather feedback from the profession and ensure that the CPA Exam remains relevant going forward. The process included interviews, focus groups, a survey and an Invitation to Comment (ITC) designed to collect input from key stakeholders, including boards of accountancy, regulators, educators, state societies and CPAs from public and private practice. “The CPA Exam plays a significant role in ensuring that newly licensed CPAs have the requisite knowledge and skills to protect the public interest,”

said Richard Gallagher, CPA, who recently joined the AICPA as director of examination content. Feedback from respondents, especially supervisors of newly licensed CPAs, revealed a significant need for newly licensed CPAs to function at a higher level in today’s complex business environment. Increased sophistication in the workplace—caused by technological advances and outsourcing of basic accounting, auditing and tax functions— has changed the nature of work performed by newly licensed CPAs. CPAs today need to possess higherorder skills (such as critical thinking, problem solving, analytical ability and professional skepticism) earlier in their careers than their predecessors. It is expected that the proposed CPA Exam will incorporate these skills but will maintain the existing sections

of Auditing & Attestation (AUD), Financial Accounting & Recognition (FAR), Regulation (REG), and Business Environment & Concepts (BEC), as ITC respondents supported maintaining the exam’s current structure. Testing of higher-order skills will include the application, analysis and evaluation of data across the existing four sections of the CPA Exam using multiple-choice questions and task-based simulations. The exam will also provide for some content crossover between sections to provide contextual integration of knowledge to better reflect the wideranging tasks of current practices. “The integration of content would be in the context of the task and would rise to the level of knowledge a candidate would have upon graduating with an accounting degree,” noted Gallagher. “For example, in the AUD section of

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

the exam, a task-based simulation on an inventory observation might include some inventory valuation/obsolescence or sales cutoff considerations, albeit these concepts would be more extensively evaluated in FAR.” Given Excel’s importance in the workplace, respondents supported including it in the exam to replace the generic spreadsheet currently being used. The AICPA Exams staff agreed with respondents’ comments and has begun working toward implementing Excel in the exam beginning in 2018. Respondents also commented that written communication is critical to the work of newly licensed CPAs and supported assessing practice-driven concepts through writing. While the AICPA will continue to conduct additional research on a more complex

writing skills assessment for the future, the current level of writing assessment in the CPA Exam will remain unchanged for now. Together, the AICPA Board of Examiners and AICPA Exams staff have reviewed the comments to date and evaluated all suggestions. The proposed final draft blueprint for the revised CPA Exam will combine content, skills and tasks and will go out broadly to the profession as an exposure draft in September for comment through November 2015. This proposal will also be distributed to boards of accountancy, standard setters, regulators, public accounting firms, academics and state CPA societies. The Board of Examiners has targeted an announcement of the next version of the Exam for 2016, with a launch in 2017.

With the input of stakeholders, it is anticipated that the revised exam will provide more depth in its assessment of content, test higher order skills and demonstrate that newly licensed CPAs have the knowledge and skills necessary for the challenges facing businesses and the profession well into the 21st century. Ann Marie Callahan, CPA, M.B.A., M.S., is a professor at Caldwell University. She is a member of the New Jersey Society of CPAs Student Programs & Scholarships Committee and an NJSCPA Scholarship Fund Trustee. Contact her at amcallah@ caldwell.edu. Elena C. Klarberg is a student at Caldwell University and an NJCPA Scholarship recipient. Contact her at elenack1@aol.com.

The days are getting shorter, but your clients’ to-do lists aren’t. As summer fades to fall, that means getting back to business for many of your clients. And chances are they look to your firm for more than just tax advice. If that includes complex HR issues like ACA compliance, health plans and overtime exemption regulations — that’s what we do best. We’re here for you, so you can be more for them. See how ADP can provide a more human resource for your small business clients: adp.com/backtobiz The ADP logo and ADP are registered trademarks of ADP, LLC. A more human resource is a service mark of ADP, LLC. Copyright © 2015 ADP, LLC.

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

LEGISLATIVE

views

Big Issues Dominate First NJCPA Business & Economic Roundtable B Y JE F F R EY T. KASZE R M AN , N J C PA G OV E R N M E N T R E L AT I O N S D I R E C TO R

ncertainty. Frustration. Cautious optimism. Those were some of the sentiments expressed by a panel of thought leaders from business groups, government, academia and the media at the New Jersey Society of CPAs’ first NJ Business & Economic Roundtable. The panel met on June 12 at the 10th Annual NJCPA Convention & Expo in Atlantic City. Moderated by New Jersey political and media veteran Jim McQueeny, roundtable panelists included: • Thomas Bracken – President and CEO of the NJ Chamber of Commerce. • NJ Senator Steven Oroho – Member of the NJ Senate Budget & Appropriations and the Senate Economic Growth committees. • Dr. Siamack Shojai – Dean of the Cotsakos College of Business at William Paterson University.

• Michele Siekerka – President of the NJ Business & Industry Association (NJBIA). Siekerka kicked off the discussion with a plea to policymakers to bring an end to mandates that she believes are unnecessary and burdensome for NJ businesses. Bracken echoed that sentiment and recommended that the state hold a series of hearings to ask small businesses what they need. “There are 300,000 small and medium-sized businesses in NJ, and we’re doing nothing for them,” said Bracken. He added that the uncertainty NJ businesses feel is one of the primary reasons that NJ has the fourth lowest growth rate of any state in the country and lags well behind other northeastern states. According to Dr. Shojai, NJ is one percent above the national unemployment rate

and one percent below the national growth rate. The discussion quickly turned to two familiar and contentious issues: the NJ Transportation Trust Fund (TTF) and taxes. While Dr. Shojai claimed that 66 percent of Garden State roads are in “bad shape,” Senator Oroho didn’t believe that a gas tax increase—an increase that would save the TTF from bankruptcy—will be included in the state budget. He added that the only hope of passing a gas tax increase is as part of a compromise package that includes estate tax reform. Oroho is hopeful that might happen during the lame-duck session following the November elections. Dr. Shojai believes that Governor Christie’s presidential ambitions are holding back a compromise on TTF funding: “If the governor wasn’t thinking of running for president, he’d

The inaugural NJCPA NJ Business & Economic Roundtable. N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

be more pragmatic and would probably agree to a gas tax increase.” While the panel was circumspect about whether the governor’s presidential aspirations are a distraction, a recent public opinion poll was more certain. According to a survey shared by McQueeny, 55 percent of NJ residents believe that the governor is more concerned about running for president than running the state, and 32 percent believe that the governor’s presidential aspirations are hurting NJ. Oroho, Siekerka and Bracken were in agreement on their opposition to the millionaire’s tax and the need to reform

NJ’s estate and inheritance taxes, which are the worst in the nation. According to Senator Oroho, NJ lost more than $70 billion in capital between 2004 and 2008 because of the state’s onerous tax policies. Reforming NJ’s estate and inheritance taxes is a key component of the NJBIA’s legislative agenda commented Siekerka, along with developing a long-term solution to fix the TTF and cutting back or eliminating new mandates such as paid sick leave. The NJCPA and NJ Chamber share similar views on these issues. “The business community is cautiously optimistic because we’re

coming off of two years of strong earnings,” noted Siekerka. “But businesses are cautious because they need more regulatory and political certainty.” The business and economic roundtable supports the “one voice” initiative that the Society is organizing. The NJCPA is holding discussions with the NJBIA, NJ Chamber, Commerce & Industry Association of NJ and other business groups to urge all of the groups to work together and pool resources to maximize their collective influence to advance key issues and public policy outcomes in Trenton.

Your community is my community. Together, we can help keep it strong. Small businesses are the heart of every community. And we have a local, dedicated Small Business Banker, ready to help you so you can continue serving and strengthening our community. See how Bank of America supports businesses locally in our community, visit us at bankofamerica.com/local Let’s get started.

To find out how a local Small Business Banker can help you, contact one of our bankers at 888.287.4637 or visit bankofamerica.com/smallbusinessbanker For information on fees and other costs related to business products and services, please visit bankofamerica.com/smallbusiness. Bank of America, N.A. Member FDIC. © 2015 Bank of America Corporation. All rights reserved. ARKT3CMC

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

MEMBER

profile

On Your Mark, Get Set … B Y DAV ID PLASKOW, N J C PA C O M M U N I C AT I ON S M A NAGER

“G

rowing up in Jamaica,” says O’Neil A. Reid, CPA, “track and field is the sport of kings.” That love for the sport stayed with Reid when he immigrated to the United States with his parents in 1989. “My mom and dad were factory workers, so life had its ups and downs,” says Reid. “But they always taught me and my sister to work hard, finish a task you start and get a good education.” In high school at Kingston College, Reid took science courses, such as biology, but he knew that science wasn’t for him. “Besides, I really hated the sight of blood,” laughs Reid. Reid began his college career at the University of the West Indies in Jamaica where he majored in economics. After he took a principles of accounting course, he fell in love with it and changed majors. After settling in Morristown with his parents, Reid enrolled at Rutgers University as a 21-year-old freshman where he graduated with a B.S. in accounting and a minor in math in 1992. He continued his studies at Rutgers and received an M.B.A. in 1995. “I didn’t get recruited by any of the major public accounting firms when I graduated,” notes Reid. “So I took a position as a credit analyst at Panasonic.” Thus began a career in private accounting for Reid. He did stints at Dun & Bradstreet; Brother International; and TRAC Intermodal LLC, where he’s been since 2005. “I enjoy accounting because you’re able to combine math and business. There are rules and a preciseness to accounting. The numbers don’t lie; one plus one always equals two,” says Reid.

“And with corporate finance, I enjoy the challenge of breaking down as well as building up financial statements. I have no regrets about not going into public accounting.” Reid also has no regrets about obtaining the CPA designation. “It’s extremely prestigious. And I always want to validate what I do and add credibility to my work,” comments Reid. In 2002, Reid became a New Jersey Society of CPAs member. “The Society helps me stay on top of the accounting profession, and I enjoy the CPE courses,” says the Mount Laurel resident. “It’s also great running into colleagues and former classmates at NJCPA events because it’s such a closeknit profession.” One tie to his Jamaican homeland— in which his sister still lives— is the sport of track and field. “I’m an avid fan,” says Reid, who goes to many of the professional and collegiate track meets in the New York metropolitan area. Reid took his fandom one step further and began writing about the sport for TrackLedger.com in 2007. “I write athlete profiles, analysis, previews and recaps of meets,” notes Reid. Reid had been a guest many times on a friend’s radio program that covers the Carribean sports scene, primarily track and field, basketball and cricket. Reid was such a natural behind the microphone that his friend invited him

to do his own show: The Sports Zone with the Professor, which airs Sundays from 12pm to 2pm on jamminzradio. com and 100.7 FM. “I love it,” says Reid. “I get to interview athletes, the media and sports executives.” Why the professor, you may ask? Well, it turns out Reid has taught math, accounting and statistics at the County College of Morris, Burlington County College and Warren County Community College. Notice a theme? “I like to teach introductory courses at the county colleges because the students there are very bright-eyed about learning,” exclaims Reid. Reid’s genuine passion for track and field led to an interesting meeting with a former Jamaican runner, Steve Mulling. Mulling was banned for life from competition for using banned substances. Reid agreed to write Banned for Life, the Steve Mulling Story. Published in 2014, the book is available on Amazon.com, BarnesandNoble.com and elsewhere. “We all have a story to tell,” comments Reid. “Whether Mulling is guilty or not, that’s for the reader to decide.” Could there be any possible link between accounting and track and field? “Track and field fans are obsessed with speed and timing,” says Reid. “And accounting is obviously numbers based. So there’s definitely a kinship there.”

N E W J E R S E Y C P A • S E P T E M B E R • O C TO B E R 2 0 1 5

Seems like plenty of companies have the right business solutions for your company. HOW DID WE GET HERE?

Everything You Didn’t Know About

ERP

and Where It Is Headed The business environment is becoming increasingly complex with functional units requiring more and more inter-functional data flow for decision making, timely and efficient procurement of product parts, management of inventory, accounting, human resources and distribution of goods and services. In this context, management of organizations needs efficient information systems to improve competitiveness by cost reduction and better logistics. It is universally recognized by large and small-to medium-size enterprises (SME) that the capability of providing the right information at the right time brings tremendous rewards to organizations in a global competitive world of complex business practices. Below is a brief outline of the history of these systems and what to expect in the future. In the Past Enterprise Resource Planning (ERP) systems history started during middle of the last century. From its early beginnings to the business processes software it is known for today, the goal of such tools has always been to help businesses operate more efficiently. ERP was born from its

predecessor, Manufacturing Resource Planning (MRP). MRP and the first ERP systems were designed as an organizational and scheduling tool for manufacturing firms. It wasn’t long before other industries began to recognize the benefits of ERP systems; government agencies and organizations in the service sector began taking advantage of the technology. It was during 1970’s and 80’s it started gaining its popularity. How It’s Changing The 1990s was a time of explosive growth for the technology, particularly with ERP software systems that were meant to integrate businesses processes throughout every functional area. Additional functions like “Purchase-to-pay” and “order-tocash” were being incorporated more and more regularly. New developments and the number of options in both software and hardware quickly grew. To satisfy the environment of planning and initiating, accounting, HR and supply chain business process software suites grew in functionality. More than 60% of the Fortune 1000 companies installed or implemented a packaged ERP system to support their back-end business activities. Growth for the Future The major industrial information systems manufacturers that emerged from the 1980s and early 1990s defined the history of the development of ERP systems. They have left out a huge gap in terms of their solution being complex, expensive and only targeting few industries. Analysis of the market penetration of ERP systems shows clearly that the current players have to downsize their products and offerings to be attractive to SMEs. This situation again is an opportunity for smaller players to seize the day and offer smaller systems running on smaller hardware platforms more efficiently. These innovators will ultimately take the lead in the ERP software market as large systems will not produce the continual income stream that small, robust, easy-to-use systems can achieve. Future successful vendors

will capture large markets of smaller businesses who will provide a more consistent and enduring income stream. What Artha is and how it answers the call for a modern ERP Artha Systems was born and is a world class innovator of supplying ecommerce and business management software. Artha’s business management software solutions incorporates everything a modern business needs to stay in control, sustain the momentum and steer itself toward expansion and growth. The system is designed to help manage multiple aspects of business operations. Human resource management, finance management, operations management and manufacturing are among the features of the software. With this software, you are able to better analyze and control what’s happening in your business, ensuring a smoother operation and thus, increased revenue. Artha answers the call for businesses who can’t afford traditional ERP systems while still needing all the benefits. It delivers a robust suite of features encompassing finances, inventory, point of sale integration, e commerce platform, business and financial reports, The modern business’s needs are far reaching and require a system tailored to meet them. A system that not only affords them every tool needed to succeed, but also the flexibility to manage their unique business from anywhere at any time. It’s the co Not just a software, minimize transactions made by humans to eliminate error. Checks and balances built in so that everything adds up and the room for error is minimal. What distinguish-

Artha Systems LLC www.arthasystems.com