COCPA NewsAccount - 2014 - March/April Issue

NewsAccount March/April 2014

Colorado Society of CPAs

PREMIUM OR PENALTY? The Affordable Care Act

Short Staffed in accounting or finance?

We can bring you the right people.

Whether your company needs a new CFO or additional accounting staff, we can help you find the right professional.

Rhonda K. Trimble, CPA

Thomas J. Trimble, CPA

Trimble & Associates, Inc. offers you: Over 25 years recruiting candidates at all levels ◆ 12 years experience in “Big 4” public accounting ◆ 23 years total public accounting experience ◆ Expertise in accounting, finance and business consulting ◆

If your business has hiring needs, please call us for a free consultation.

Remember - You pay no fee unless you select a candidate through us.

Potential candidates - call us if you’re seeking new challenges. Candidates never pay a fee, so email your resume to us at info@trimbleassociates.com.

We may have just the right position for you.

Whatever your business staffing needs, contact us today at 303-779-5800 or info@trimbleassociates.com Let us put our experience to work for you.

Trimble & Associates, Inc. ◆ Contingency Search for Accounting, Finance & Business Consulting 8400 E. Crescent Parkway, Suite 600 ◆ Greenwood Village, CO 80111 Phone: 303-779-5800 ◆ Fax: 303-779-0808 email: info@trimbleassociates.com www.trimbleassociates.com

Contents Features

}

4 7 8

Through the Leadership Lens The 2014-2015 Board of Directors and Educational Foundation nominees share why they accepted the opportunity and what's on their minds.

How Advocacy Really Works CEO Mary Medley describes what's involved in representing the profession before policy makers.

A Seat at the Table Christine Benero brings experience and fresh perspective as the public member on the Board.

10

The ACA: Premium or Penalty?

14

The Texas Margin Tax

Whether now or later, individuals and employers will have to decide. Will they choose health insurance coverage or pay to go without it?

Is the TMT a tax on income or a gross receipts tax?

It depends.

Departments

}

2 Chair Column 21 Movers & Shakers 21 Classifieds COCPA leaders enjoy a lighter moment during the fall 2013 AICPA Council meeting.

March/April 2014 • www.cocpa.org •

1

Chair Column

NewsAccount A bi-monthly publication of the Colorado Society of Certified Public Accountants Vol. 59, No. 6 March | April 2014 Board of Directors Marc C. Hendrikson, Chair Sheila M. Balzer, Vice Chair Lora L. Finley, Treasurer Scott E. Bush, Immediate Past Chair Mary E. Medley, Secretary Directors Carrie J. Bartow, Christine Benero, Peter J. Derschang, Sharon S. Lassar, Mark J. Smith, Debbi C. Warden Editorial Board Jack Allgood, James M. Boak, Kay R. Dragon, Jennifer Emerson, Georgia Z. Phillips, Patrick A. Lytle, Mark Paller, Barbara J. Tedesko, R. Stephen Van Meter, Michael D. West Mary E. Medley, President/CEO Elizabeth M. Julin, Deputy Director Krista Flynt, Editor/Publisher Natalie G. Rooney, Contributing Writer NewsAccount (ISSN #10899952) is published bimonthly by the Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111. NewsAccount is published in January, March, May, July, September, and November and reports information, news, and trends in the accounting profession. The Colorado Society of CPAs assumes no liability for readers’ business decisions in reference to advertisements or other information included in this publication.

Membership dues include a $9.90 one-year subscription to NewsAccount. Periodical postage paid in Denver, CO, and additional mailing offices.

POSTMASTER: Send address changes to NewsAccount, Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111.

Net press run = 8,550 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 8,450; free distribution by mail = 50; free distribution outside the mail = 0; total free distribution = 50; total distribution = 8,500; office use, leftovers, spoiled = 350; returns from news agents = 0; total sum = 8,850; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344 • cpa-staff@cocpa.org

NewsAccount is available online at www.cocpa.org.

2

• NewsAccount • March/April 2014

Passing the Baton

T

ime really does fly. My year as your Chair is almost over, and it seems it has only just begun.

I can honestly say this has been a year I will never forget for many, many reasons.

I have experienced so much professionally and personally, and I have greatly enjoyed the opportunity to represent you and our profession here in Colorado and at the national level with the AICPA. The year started and ended on positive notes, with the Chair Tour — my chance to travel across Colorado and meet with you where you live — being the highlight.

Many past chairs told me how much they

enjoyed their own tours, and they’re weren’t exaggerating. This was truly a wonderful opportunity to discuss issues with you face-to-face and share important updates and information on many facets of our ever-changing profession. The most valuable aspect: hearing directly from you about the issues affecting you and exploring how the COCPA may assist you in meeting the challenges you face.

I got to talk about many topics ranging from the Colorado Department of Revenue, the Colorado Department of Regulatory Agencies, and the Colorado State Board of Accountancy to upcoming

changes in GAAP, private company financial reporting, and international matters. I was genuinely impressed with the appreciation you expressed for the COCPA’s efforts to reach out and connect statewide. And, serving as Chair gave me a much broader perspective of our profession. For all of this, I will forever be grateful. Thank you.

A Few Reflections In my travels, many of you told me you’ve seen improvements on the Colorado Department of Revenue front – and I also learned that’s not everyone’s experience. When I became Chair, I was very concerned about making progress in this important area. I knew about the significant challenges many tax practitioners had experienced in recent years. And, I was thankful your COCPA leadership, volunteers, and staff already had been working diligently behind the scenes to improve the environment for all. Still, this is an area of continued emphasis. Be assured we won’t stop until this is no longer a pressing matter for you and your clients.

My theme for the year has been to connect members and create alliances. I’ve often said, “It’s all about you, the members.” This wasn’t just a nice sentiment or catchy phrase for me. It captured my entire focus as your Chair. And, while this member-centric attitude has long been ingrained in the COCPA staff, there always is room for improvement.

That’s why I’ve routinely highlighted the need to be highly member-focused at the Board of Directors and staff levels.

The COCPA is more than a place that offers CPE. Nonetheless, CPE continues to

present challenges, for us in Colorado and nationally. You have many options to choose from, including free offerings. And, competition is fierce. The COCPA is focused on high-quality CPE that meets your needs. To that end, we are actively seeking ways to provide more online and on-demand options, as well as broadcasting more programs so you can take advantage of excellent content even from a distance. Please let me know how we’re doing in this regard.

One of the benefits of being chair is the opportunity to attend AICPA Council meetings and see firsthand how state CPA societies and the AICPA work together to address the numerous issues facing the profession.

At the fall 2013 Council meeting for example, we heard about literally dozens of open agenda items the Institute is tackling on our behalf. The CPA profession in action as a whole, through its organized efforts, is truly impressive to witness. One subject in particular, the Institute’s efforts to address diversity and inclusion, gives me confidence we will be successful in creating a profession in the future that encourages, supports, and values people of all backgrounds.

Changes Coming As this amazing year draws to a close, I am quickly reminded that so much work still must be done. The COCPA must continue to evolve as your needs change. While this organization is fortunate to possess a rich history of member engagement and service, volunteers who are dedicated to their initiatives, and staff who know how to get things done, the future will demand even more.

You will demand more, and the COCPA must deliver.

That’s why, at each Chair Tour stop, I asked, “What’s on your radar?” More webbased CPE, continued assistance with the Colorado Department of Revenue, and educational opportunities on hot topics like dealing with the Affordable Care Act (ACA) provisions topped the list of issues and ideas you shared with me. Check out the ACA information beginning on page 10 for the latest news.

The invitation to hear your thoughts doesn’t end when my term ends on April 30, 2014. Please let me know of particular issues with which the COCPA can assist you.

On May 1st, Sheila Balzer will become your Chair, and she is well poised to take the baton and run with it, supported by the Board of Directors and staff. Reach out to her, as well. As the next COCPA ambassador for the CPA profession, I know she’ll want to hear your suggestions, too.

On A Personal Note My work with Citywide Banks and the COCPA definitely kept me busy this year, and my family did, too. I’m delighted to report that by the time you read this column, my wife Michelle and I have completed the adoption of our fourth child and are working towards adoption of our fifth child. Our eldest has left the Hendrikson nest, and we actually have an unoccupied bedroom for the first time in many years.

As I finish this year, I wish you success in your professional and personal lives. Thank you for this unforgettable, grand privilege to be your ambassador. You have honored me with your support, your feedback, your ideas, and your continued connection with the COCPA and the profession. It’s all good!s Email Marc Hendrikson at hendriks@ citywidebanks.com.

From left: Daren, Savaya, Michelle, Xanaliah, Marc, Luca, and Austin March/April 2014 • www.cocpa.org •

3

Board of Directors

Through the Leadership Lens

Meet the 2014-2015 Officer, Director, and Trustee Nominees

Sheila M. Balzer, CPA

Steven R. Corder, CPA

Tawnya R. Ramirez, CPA

Partner Holben Hay Lake Balzer CPAs LLC Denver

Managing Director Kundinger, Corder & Engle, P.C. Denver

Controller Charter School Growth Fund Broomfield

I am passionate about our profession and believe that as CPAs, we truly impact the communities, people, and businesses we serve in various capacities. As part of being a CPA, I believe it is vital to advocate on behalf of our profession and to give back to the profession.

Serving on the COCPA Board of Directors truly is an honor and a privilege. I previously served on the Board and gained an understanding of the important statewide and national issues for our profession. Working with a great COCPA staff and fellow Board members in dealing with these important issues is gratifying.

I was honored to be nominated to serve as Treasurer and readily embraced the opportunity to give back to the profession that has given so much to me.

Chair-elect

What difference has being a COCPA member made in your career?

The COCPA has influenced my career from the beginning to today. I was fortunate receive an Educational Foundation scholarship in college so the COCPA invested in my career in its infancy. By volunteering in various capacities, I've had the opportunity to interact with others looking to join our profession and participate in the Centennial Scholars Campaign to grow the Educational Foundation's scholarship funds. I've developed relationships with my fellow professionals through the COCPA which have been truly rewarding.

And, the entire COCPA staff has supported me whenever asked to help with issues I've faced.

4

• NewsAccount • March/April 2014

Vice Chair-elect

What difference has being a COCPA member made in your career?

First of all, the COCPA has made me a better professional through the top-notch CPE classes that I have attended and by being able to teach fellow CPAs at COCPA courses. The friendly discussions I have with other CPAs about real life accounting and auditing matters have helped our firm provide better service to our clients.

Through the COCPA I have also developed friendships that have led to opportunities for new client work and personally rewarding activities, including great golf. It has been a true blessing to be a COCPA member.

Treasurer-elect

What is the top issue facing Colorado CPAs? It's best articulated by Andrew Zolli as quoted by Tom Hood at the 2013 COCPA Leadership Council meeting. “The number one reason organizations fail is that they miss the weak signals of disruptive change.” As technology becomes more sophisticated and as functions traditionally performed by CPAs are automated, we need to have the skills to enable us with be strategic thought partners with the clients, organizations, and students we serve.

Sincerest thanks to Lora L. Finley, CPA, for her service as treasurer in 2012-2014. She will complete her term on April 30, 2014.

We asked the 2014-2015 nominees why they accepted the nomination to serve and to share their thoughts on one additional question. We hope you enjoy getting to know these dedicated individuals who help the COCPA excel in serving you and advancing the profession.

Victor A. Amaya, CPA

Craig A. Arfsten, CPA

Kelly G. Boggs, CPA

Partner ClearPath Accountants LLC Littleton

Financial Advisor Prosperion Financial Advisors Greenwood Village

Partner Reese Henry & Co., Aspen

I accepted the nomination to serve on the Board of Directors because giving back has always been an important part of my upbringing. I also want to be a part of the solution to the challenges that are affecting our profession today.

I’ve had the good fortune to be a member of the Financial Literacy Committee, become friends with other committee members, and make a difference in the community, all of which make for a very rewarding experience. I’m looking forward to more of the same on the COCPA Board of Directors. Because my education and work experience are very different from many CPAs, I expect to bring a fresh and different perspective to COCPA matters.

Director-elect

What are the top issues facing Colorado CPAs? Three critical challenges face Colorado CPAs. We need to focus on retaining younger CPAs long enough to ascend to the ranks of ownership in accounting firms. Another issue is the acceptance and implementation of new technology to work in a more efficient and effective manner. Finally, we need to work on the concept that time and value provided to our clients are integrated.

Director-elect

Describe briefly a time when your CPA expertise made a difference. I graduated with a degree in mechanical engineering. After graduation, many of my coworkers went on to pursue their MBAs. I wanted to know more about how business really worked and instead took accounting classes in my free time. Being both an engineer and CPA caused people take a second look which definitely opened unexpected career doors.

Director-elect

I accepted the nomination to serve on the Board of Directors because I want to serve the professional community that has served me so well throughout my career. I am excited to play a small part in helping set the direction for the COCPA and our profession.

What are the top issues facing Colorado CPAs? In my view, the top issues center around our profession’s ability to adapt to a rapidly changing environment. Rapid change is happening on several fronts: technology, competition, legislative, regulatory, and talent succession. How do we effectively manage the risks and opportunities that emerge from our changing environment in an effort to ultimately advance the CPA profession? As a member of the COCPA Board of Directors, I look forward to working on these issues and others.

Nominees | Continued on 6 March/April 2014 • www.cocpa.org •

5

Educational Foundation of the COCPA

Kristine Brands, CPA

Amy E. King, CPA

Allen W. McConnell, CPA

Assistant Professor of Accounting Regis University School of Management, Denver

Manager of Professional Services The Business Manager LLC Greenwood Village

Professor of Accounting University of Northern Colorado Greeley

As an Assistant Professor of Accounting, I understand the importance of supporting accounting students at Colorado colleges through scholarship awards. I believe that the Educational Foundation provides vital support for future Colorado CPAs. It's an honor to be joining the Educational Foundation Board to support its work.

I accepted the nomination to serve on the Educational Foundation Board of Trustees because I think it’s important to promote the accounting profession as a career option and to encourage talented individuals who pursue studies in the field.

Educational Foundation Trustee-elect

What is one of the top issues facing Colorado CPAs? The rapid increase in accounting regulatory reporting requirements immediately comes to mind. The Sarbanes-Oxley Act of 2002 was a dress rehearsal for the ongoing development of regulatory compliance activities such as the SEC’s 2009 XBRL Reporting Mandate, the Dodd-Frank Act of 2010 that includes enhanced SOX requirements and Conflict Minerals disclosures, and the Affordable Care Act. Expertise in these compliance activities is an important role for Colorado CPAs in public practice and in corporations. They must be able to respond quickly to new regulatory requirements to serve their clients and their companies effectively.

6

• NewsAccount • March/April 2014

Educational Foundation Trustee-elect

What difference has being a COCPA member made in your career?

My COCPA membership has given me insights into other areas of accounting that I might not have experienced in my career or within my own small business environment.

The Society has provided topnotch continuing education and opportunities for me to work with mentors, participate in leading-edge accounting discussions, and allowed me to help shape the organization’s future. The COCPA has been helpful in communicating changes and trends within the profession and has been an advocate for dealing with those changes.

Educational Foundation Trustee-elect

I look forward to serving on the Educational Foundation Board of Trustees because its financial support of students really matters. I’m in education, and I know firsthand how important scholarship dollars are for students pursuing accounting degrees and careers as CPAs. What difference has being a COCPA member made in your career?

During my years as a professor at the University of Northern Colorado, the Society has been very important and instrumental in my career. I was encouraged from the start to become involved and meet as many practicing CPAs as possible for placement of our graduates. I remember the first Northern Chapter meeting I attended in 1968. My department chair told me he expected me to bring back four job openings; we only had seven seniors.

That first experience set a direction for me that I have really enjoyed. The COCPA has been the most important group I've belonged to over the past forty-five years at UNC. Because of the COCPA, I've made many friends and important professional contacts.

Legislative and Regulatory Affairs

Behind the Scenes How Advocacy Really Works

C

an you testify? It’s a question I receive routinely. Providing testimony on behalf of the accounting profession comes with the COCPA territory. And, whether the topic is tax-related, accounting standards-related, or involving regulation of the profession itself, just to name a few, the answer always is yes. Participating in the process is critical, whether the outcome is favorable or not.

What’s Involved Recently, I received the “can you testify” call for HB 14-1107, sponsored by Rep. Max Tyler (D-Lakewood). It concerns “the authority of the Department of Revenue to offer taxpayers the option to receive electronic notices.” If you’re a Colorado taxpayer, living and working in the 21st century, you might think this is already possible. In fact, the Department is required by current statute to send notices, “postpaid by first-class mail to the last known address.”

Why would the COCPA — our legislative counsel at the Capitol and I — become involved in something that sounds so obvious in our technology-driven world? Put on your CPA hat, and you quickly see the potential pitfalls. What if email is hacked? What if the electronic notice is stopped by spam filters?

What if the notice looks real but isn’t, and a taxpayer’s information is compromised? What if you’ve counseled your clients that the IRS and the Colorado Department of Revenue never communicate by email?

On Feb. 12, I attended the House Finance Committee hearing held in the Legislative Services Building across 14th Avenue from the Capitol. My testimony was succinct and neutral: The COCPA appreciates the Department’s interest in having this flexibility, and COCPA members have concerns about how the legislation would be implemented.

We’ve shared those concerns with the Department and stand ready to assist in developing

BY MARY E. MEDLEY

and vetting the procedures. A member of the Department’s senior staff testified too, as did Lauren Furman, the Colorado Association of Commerce and Industry’s Senior Vice President for State and Federal Relations.

Furman expressed similar concerns, as did committee member and House Minority Leader Brian DelGrosso (R-Loveland). When the vote was taken, it was unanimous. The bill passed out of committee with a favorable recommendation to the full House.

The story doesn’t end here, as the bill must be passed by the entire House, and go through the same hearing process and consideration by the full Senate. If the bill is passed by both houses during the legislative session, Gov. John Hickenlooper must sign or veto it within ten days of transmittal (excepting Sundays), or it becomes law without his signature. Legislation transmitted to the Governor within the last ten days of the session must be acted upon within 30 days after the last day of the session, or it becomes law without his signature.

Sharing with Colorado lawmakers what CPAs in Colorado think about particular proposals always contributes to the discourse, whether I testify or a COCPA member testifies. And, more often than not, our involvement makes for more informed and effective results.

At the National Level The AICPA’s legislative team in Washington, D.C., coordinates the profession’s efforts with Congress and reaches out to state CPA societies for assistance in communicating the profession’s positions on legislative proposals.

Although the federal legislative process differs, the importance of being involved is the same.

Just as I was writing this article, I received a request to contact our Colorado Senators Michael Bennet and Mark Udall encouraging them to sign on as co-sponsors to S. 1645, the Mobile Workforce State Income Tax Simplifi-

cation Act. This bipartisan legislation, introduced by Senators Sherrod Brown (D-Ohio) and John Thune (R-South Dakota), addresses the current environment in which each state has its own requirements for filing non-resident individual income tax returns and commensurate rules for employer withholding on those employees. It would establish a 30-day threshold and uniform rules to help ensure that the appropriate amount of tax is paid to state and local jurisdictions without placing undue burdens on employees and employers.

Already, we’ve asked Colorado members of the U.S. House of Representatives for similar support for H.R. (House Resolution) 1129, the companion bill.

Committed to You and the Public These are just two examples of the many issues the AICPA, the COCPA leadership, our legislative counsel, and I become involved in each year. Add active participation in the regulation of the profession by the Colorado State Board of Accountancy, and still you’ve only scratched the advocacy surface. If you hear about proposed legislation or regulation, be in touch. We may already be working on it, or you may be the first to raise the subject. If you have questions about how the process works or are interested in being involved, let us know about that, too.

Advocacy works because we’re all involved — for the public good.s Email COCPA CEO Mary E. Medley at mmedley@cocpa.org.

March/April 2014 • www.cocpa.org •

7

Board Member Profile

Leadership: A Fresh Perspective

C

hristine Benero isn’t a CPA, and yet she’s a vital member of the Colorado Society of CPAs’ Board of Directors as its public member. It may seem unusual for a non-CPA to sit on the COCPA Board, but Benero, who is president and CEO of Mile High United Way, Denver, brings a wealth of experience and a fresh perspective to the table, benefiting COCPA members and the public.

Learning the Power of Community Although much of Benero’s career has been devoted to the nonprofit sector, her experience and expertise span the corporate world, education, and policy-making. Today, she heads up one of the largest nonprofit organizations in Colorado.

With an undergraduate degree in special education from Boston University and a master’s degree in early childhood education and human development from Harvard, Benero’s first job was at a small private school in New Hampshire for adjudicated teenagers. “It was a life-defining job to work with these incredible young people who communities and families had let down,” she reflects. “I saw the power education and community have to wrap themselves around families and children who are struggling. It was my first introduction to how a community works together.”

From that first eye-opening experience in New Hampshire, Benero kept moving, learning, and adding to her expertise, which included running an employer-supported early childhood program. “That showed me the role employers can play to support workers and the community,” she says, adding that it was also her first taste of policy work.

She describes testifying before of the state legislature for the first time as a nerve racking experience. Convinced she didn’t know how to actually testify, she simply told the story of the families and children she served and why a change in policy was important.

8

• NewsAccount • March/April 2014

When she moved into the corporate world with Target Stores, Benero was pleased to discover the company gives five percent of its pre-tax dollars to the communities where its stores are located. “Target was one of the first companies in the country to realize that a healthy, educated community is what supports their business. That experience taught me that for a company to do good things, it has to do well. The corporate sector helped me understand that business model.”

After a stint in Washington, D.C., to do policy work, Benero returned to Colorado, eventually taking the reins as president and CEO at Mile High United Way. “It was a meandering path, but the common thread was always community,” she says.

Saying Yes to Board Service In her role at Mile High United Way, Benero is blending the connections among all her past career experiences. “Our mission is to really change lives in communities,” she says. The organization focuses on early childhood education, higher education, and adult self-sufficiency. “We’re at the crossroads of all three areas,” she explains. “We take our stewardship very seriously.”

It was her role at United Way that brought Benero and the COCPA together.

When the public position on the COCPA Board opened, Benero’s name came up, and she was approached by then-COCPA Chair Mike Bearup to fill the position.

While accounting isn’t Benero’s area of expertise, she enjoys learning about the profession and contributing a new viewpoint.

“It’s such a privilege to be on the COCPA Board,” she says. “I’m struck by the commitment CPAs have to their clients, customers, and the public. CPAs’ accountability to the stewardship and protection of the public comes across in everything they talk about.

They’re always thinking about the public good.”

As a full voting member, Benero’s nonprofit sector background brings a unique

perspective. She asks questions to make sure she understands the issues facing the accounting profession. “The other Board members have been gracious in helping me move through the learning curve,” she says. When she has questions, it also helps the Board realize that a member, client, or employer may have similar questions. “It’s humbling to sit with all of them and realize the knowledge, expertise, and financial prowess in the room.”

CPAs and the Community While Benero may be new to the COCPA board room, she has worked with CPAs constantly during her five-and-a-half-year tenure at Mile High United Way. And what she knows to be true is that CPAs make a difference. “My CPA colleagues on the United Way Board of Directors are dedicated and vital participants in our conversations,” she explains.

Benero stresses that whether a nonprofit is small or large — Mile High United Way has an annual budget of $35 million — CPAs play crucial roles. Whether it’s deciding on programming, accountability, stewardship, transparency of finances, long-term

financial decisions, or a myriad of other decisions, “Our CPAs on the Board are key to making those decisions,” she says. “The most important thing a nonprofit can do is to earn the trust of the people they serve and those who invest. CPAs are critical in upholding that trust and transparency.”

Benero encourages CPAs to find something they’re passionate about in addition to their profession. “We all have things we care about in our community whether it’s education, homelessness, hunger, the elderly, or animals,” she says, “To be able to combine your professional experience with your heart is an amazing experience. You’ll make connections with people who will change your life and your business, and that makes a community stronger,” she says. “Plus, it’s fun!”

Beyond the Board Room Raised in Colorado from the age of two, Benero comes from a family of avid skiers. “We took full advantage of Colorado while growing up,” she says. She travels extensively, including a recent adventure to Uganda and Rwanda. The trip was coordinated by a friend who runs a humanitarian program based in Uganda. Benero says her work there, combined with the opportunity to go gorilla trekking, was life changing. She has also traveled to Cuba with Project Cure and Africa and Haiti with the Global Livingston Institute to provide aid.

“After these trips, I come home more committed than ever to Colorado because I understand that if we’re going to be of service in the world, we have to make sure our own children know how to read, do math, graduate from high school, and even become CPAs,” she says. “It’s why I came back to Denver and why the COCPA Board has become so important to me. I’m continuing to learn and create new partnerships.”

Benero is looking forward to continuing her work with the COCPA Board. “The CPAs’ commitment to the public shouldn’t have surprised me, but it did,” she says. “The good of the public that CPAs bring is evident in every person I’ve met on the COCPA Board. And that’s something special to be around.” s

SAVE THE DATE May 22, 2014 4:30 to 6:30 p.m.

Kevin Taylor's at the Opera House 14th and Curtis St., Denver Keynote Speaker Christine Benero, CEO Mile High United Way

$50/person

To attend, contact Terry Cervi at tcervi@cocpa.org, 303-741-8610, or 800-523-9082, ext. 110.

SAVE THE DATE Correction The article, Renewable Energy Financing: Partly Sunny or Impossibly Gloomy?, appeared in the January/February issue of NewsAccount. We affiliated the author, Lizette Peña, with CliftonLarsonAllen LLP. She has her own consulting firm, Peña Consulting Inc. in Boulder, Colo. We apologize for the error.

Young Professionals Golf Tournament

JUNE 9 Lakewood Country Club

For details, contact Terry Cervi, tcervi@cocpa.org, 303-741-8610, or 800-523-9082, ext. 110.

March/April 2014 • www.cocpa.org •

9

The Affordable Care Act

Pay the Premium or Pay the Penalty?

T

he U.S. Department of the Treasury calls it “maintenance of minimum essential coverage and liability for the shared responsibility payment” — aka the penalty for not being covered by health insurance as required by the Patient Protection and Affordable Care Act of 2010 (ACA).

Whether to pay for health insurance or pay the penalty is a decision individuals will make this year.

Companies with 50 to 99 employees have until Jan. 1, 2016, to comply with the coverage mandate or face the penalty. Requirements for companies with 100 or more employees are phased in beginning, Jan. 1, 2015.

the Treasury and the IRS issued final regulations (www.gpo.gov/fdsys/pkg/FR-201308-30/pdf/2013-21157.pdf) on the Individual Shared Responsibility provision. On Jan. 23, 2014, the Department of the Treasury and the IRS issued proposed regulations

Individual Shared Responsibility Provision

(www.gpo.gov/fdsys/pkg/FR-2014-01-27/ pdf/2014-01439.pdf) addressing several issues that were identified in the preamble to the final regulations. In particular, the proposed regulations specify that certain limited-benefit Medicaid and TRICARE coverage is not minimum essential coverage.

The proposed regulations also address the treatment of health reimbursement arrangements and wellness program incen-

Starting in 2014, the Individual Shared Responsibility provision calls for each individual to either have minimum essential coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.

On Aug. 27, 2013, the Department of

tives for purposes of determining the exemption for individuals who cannot afford employer-sponsored coverage. Comments are due, April 28, 2014, and may be submitted electronically, by mail, or hand delivered to the IRS. Additionally, because individuals may not be aware that these limitedbenefit government health programs are not minimum essential coverage at the time of enrollment, Notice 2014-10, issued on Jan. 23, 2014, provides transition relief from the shared responsibility payment for months in 2014 in which individuals have certain Medicaid coverage or limited-benefit coverage under Chapter 55 of Title 10, U.S.C. For additional information on the Individual Shared Responsibility provision, the final regulations, and Notice 2013-42, go to the questions and answers at www.irs.gov/uac/ Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision. Additional information on exemptions and minimum essential coverage is available in final regulations issued by the U.S. Department of Health & Human Services, www. hhs.gov. s

Individual Mandate Penalty Table Year 2014

Year 2015

Year 2016

After 2016

Income based penalty

1% of income above filing threshold

2% of income above filing threshold

2.5% of income above filing threshold

2.5% of income above filing threshold

Minimum penalty amount

$95

$325

$695

$695 + inflation adjustment

10

• NewsAccount • March/April 2014

IRS Issues Employer Shared Responsibility Regs

O

n Feb. 10, 2014, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations implementing the employer responsibility provisions under the Affordable Care Act (ACA) that take effect in 2015. The final rules implement the employer shared responsibility provisions of the ACA, under section 4980H of the Internal Revenue Code.

In addition, final regulations will be issued soon that aim to substantially streamline employer reporting requirements for employers that offer highly affordable coverage to all or virtually all of their full-time employees. If employers decide not to offer insurance to their employees, they will make an employer shared responsibility payment to help offset the costs to taxpayers of their employees getting tax credits through the Health Insurance Marketplace.

The rules address a number of questions about how plans can comply with the em-

ployer shared responsibility provisions; ensure that volunteers such as firefighters and emergency responders do not count as fulltime employees; and phase in provisions for businesses with 50 to 99 full-time employees and those that offer coverage to most but not yet all of their full-time workers.

“While about 96% of employers are not subject to the employer responsibility provision, for those employers that are, we will continue to make the compliance process simpler and easier to navigate,” said Assistant Secretary for Tax Policy Mark J. Mazur. “(The) final regulations phase in the standards to ensure that larger employers either offer quality, affordable coverage or make an employer responsibility payment to help offset the cost to taxpayers of coverage or subsidies to their employees.”

The Impact on Employers • Small businesses with fewer than 50

employees (about 96% of all employers): These companies are not required to provide coverage or fill out any forms in 2015, or in any year, under the Affordable Care Act. • Larger employers with 100 or more employees (about 2% of employers): The rules phase in the percentage of full-time workers that employers need to offer coverage to from 70% in 2015 to 95% in 2016 and beyond. Employers in this category that do not meet these standards will make an employer responsibility payment for 2015.

• Employers with 50 to 99 employees (about 2% of employers): Companies that do not yet provide quality, affordable health insurance to their full-time workers will report on their workers and coverage in 2015 but have until 2016 before any employer responsibility payments could apply.

For more information, see the fact sheet at www.treasury.gov/press-center/pressreleases/Documents/Fact%20Sheet%20 021014.pdf. s

PARTNERS IN COVERING COLORADO

Medicaid

Who is eligible?

Beginning January 1, 2014, individuals earning up to 133%* of the Federal Poverty Level (FPL).

For 2013, this equates to about $15,000/year for an individual or $31,000/year for a family of four may be eligible for Medicaid coverage. The Department estimates over 160,000 newly eligible Coloradans could enroll in Medicaid. * Some earning more may still be eligible.

When does coverage begin?

Coverage begins as early as January 1, 2014 for newly eligible individuals.

Coverage is back dated to the first of the month of the application.

When can Coloradans apply?

To access additional information visit or call:

There is no deadline to apply—you can apply at any time.

Colorado.gov/Health (Medicaid expansion info.)

Colorado.gov/PEAK (to apply) Toll free: 1‐800‐221‐3943 TDD: 1‐800‐659‐2656

Child Health Plan Plus (CHP+) is still available for children and pregnant women who qualify.

For 2013, a family of four that makes nearly $31,000/year may qualify for Medicaid. Children and pregnant women in a family of four that makes nearly $61,000/ year may qualify for CHP+.

Coverage is back dated to the first of the month of the application.

There is no deadline to apply—you can apply at any time.

CHPPlus.org (CHP+ info.)

Colorado.gov/PEAK (to apply) Toll free: 1‐800‐221‐3943 TDD: 1‐800‐659‐2656

Connect for Health Colorado is a new health insurance marketplace for businesses with 2‐50 employees, Coloradans who buy their own health insurance, are uninsured or don’t have access to affordable coverage through an employer. It is not for Coloradans who are eligible for Medicare. New financial help will be available to nearly 500,000 Coloradans based on income.

Individuals earning $15,856 to $45,960/year or a family of four earning $32,499 to $94,200/year can get a break on premiums.

Coverage begins January 1, 2014, for those who signed up by December 27, 2013. Coverage for applications completed between December 28 and January 15 will take effect February 1, 2014.

Generally, health plans paid for before the 15th of the month will take effect on the first of the next month. Health plans paid for after the 15th of the month will take effect on the first of the next following month.

Open enrollment is October 1, 2013 to March 31, 2014. The next open enrollment is November 15, 2014 to January 15, 2015.

ConnectforHealthCO.com Toll free: 1‐855‐PLANS‐4‐YOU (855‐752‐6749) TDD: 1‐855‐346‐3432

To learn more about the changes to health care in Colorado and your coverage options go to Colorado.gov/Health.

March/April 2014 • www.cocpa.org •

11

The Affordable Care Act

Shopping for Health Insurance: The Colorado Experience

S

BY MARY E. MEDLEY

ix weeks, dozens of plans, doctors who need to be “in network,” daily medications to cover, numerous phone calls and emails to customer service representatives and insurance advisors, hours “on hold,” a 27-year-old son, and a looming deadline to enroll in a new health insurance plan through the Colorado marketplace, Connect for Health Colorado, www.connectforhealthco. com. All this demanded my attention since late December 2013. Finding health insurance for my son, Kellen, became my personal mission.

On Feb. 7, thanks to many and 40+ hours of my time, we identified a plan and hit “submit.” As this NewsAccount goes to print, we’re awaiting acceptance and coverage to begin, March 1. The process was fascinating, frustrating, and far more challenging than I expected. The good news: Once you can talk with a Connect for Health Colorado representative, you can make progress.

we began exploring the Connect for Health Colorado website, gathering the information needed to apply, and completing all the paperwork online. It was tedious and incredibly time-consuming, but not difficult, and on Jan. 23, 2014, Kellen’s application was complete. First hurdle handled.

To Insure or Not

This was the hard part. We were unfamiliar with the terminology, overwhelmed by the options, and uncertain we could find what Kellen needed for a price we could manage. Step one of the application process had involved determining whether Kellen was eligible for Medicaid or an “advance premium tax credit” based on his income. We learned he qualified for a premium credit, and then it was a matter of combing through over 50 plan options.

We needed help, and we got it. I called the Connect for Health Colorado customer assistance number (855-752-6749), listened to many recorded announcements while on hold, and eventually talked with Pat. Explaining that we were ready to select a plan but struggling to evaluate the numerous options, he connected me with Roberto, a certified health insurance agent (a salaried employee, not on commission).

He logged into the online system with me, checked the various plan provisions, helped

This was a no brainer. Kellen is young and healthy. Nonetheless, he contracted pneumonia in January 2013. Because he had insurance, the physician’s assistant at the clinic in his local grocery store didn’t hesitate to test him, prescribe oral meds and an inhaler, and counsel him to follow up with his primary care physician — which he did. Total out-of-pocket costs: about $100 for the meds and co-pays. I threw in the homemade chicken soup and mom care at no charge. I can only imagine what it would have cost without insurance.

In February 2013, Kellen needed new health insurance because he turned 26 and no longer could be covered by my plan. Cover Colorado, the state plan, was the answer.

We’d already been through the selection process recently — how hard could this be?

With the March 31, 2014, ACA open enrollment deadline bearing down on us,

12

• NewsAccount • March/April 2014

me find Kellen's daily meds in the respective formularies, and walked me through evaluating the much shorter list of plans that best fit Kellen’s needs. Plus, Roberto advised me on dental coverage, which we applied for at the same time. Mission accomplished.

Know Before You Go

Selecting A Plan

The website is loaded with information.

Many questions are answered if you’re able (or inclined) to spend time reading everything before you begin the application process.

The customer service representatives are helpful, informative, and patient. Expect to wait to talk with one. The first time I called, I waited on hold for over an hour, and spoke with Jessica, who gave me several valuable pointers for completing the application. The second time, I waited on hold for about 20 minutes, and Jessica answered my questions again. When I made the third call, I waited on hold for about 40 minutes, talked with Pat for about 10 minutes, and Roberto spent over an hour with me. I couldn’t have succeeded without him.

The online system is straightforward until you reach the point of looking at plan options, especially if you have many choices.

Avoid the struggle; make the call.

Expect to spend time at every stage of the process. Have most recent pay stubs, employer and health care provider names, addresses, and phone numbers at your fingertips. Make note of the application number, case number for Medicaid acceptance or denial, and premium tax credit.

The final answer for Kellen: a PPO “gold” plan with Colorado HealthOP, for $1.02 more a month than his current premium (after the tax credit), and dental coverage through Delta Dental for $16.50/month.

We’ve canceled his Cover Colorado policy.

Here’s hoping he stays healthy! s

Careers

Why the Job-Hopper Label is One to Avoid

BY NEIL AMATO

Leaving one company to work for another is part of life, but job-hopping can be bad for your career. And from an organizational standpoint, hiring the job-hopper could be bad for business.

A new survey of HR managers by global staffing company Robert Half defines job-hopping and offers advice for employees considering a change of work scenery.

More than 300 managers at U.S. companies were asked, “Over a ten-year span, how many job changes, in your opinion, would it take for a professional to be viewed as a job-hopper?”

The average response: changing companies five times. Experts on recruiting in the UK agree that switching organizations every two years or less likely constitutes jobhopping.

For several reasons, hiring managers could eliminate from consideration those who bounce around from company to company. On its face, a job history with many stops in only a few years can indicate a worker doesn’t get along well with others or lacks engagement. And, if companies do hire the job-hopper and that person continues hopping, recruiting and training a new worker costs more.

Research by the Center for American Progress showed that the average cost to replace an employee was 21.4% of that employee’s salary. So, each time one $60,000-ayear worker leaves, U.S. companies are paying about $12,800 to replace that worker.

Data from the UK's Chartered Institute of Personnel and Development (CIPD) say the recruiting cost alone for replacing a senior executive is about £6,000 (about $9,825), and about £2,000 ($3,275) for mid-level employees. Clive Davis, a senior director at Robert Half UK, estimates total replacement costs for a worker to be at least 25% of salary, and possibly higher for highlevel jobs.

While some strategic job-switching can help workers advance careers or keep engagement high by providing new challenges, continued quick moves can be a red flag for hiring managers. In a 2012 survey by software

company Bullhorn, 39% of recruiters said the single biggest obstacle for an unemployed candidate in regaining employment is having a history of regular job changes.

“It’s up to candidates to justify their career history,” said Claire McCartney, a CIPD adviser for resource and talent planning. “If there are gaps, or they were in a role a short period of time, they need to fill in the gaps.”

In finance, career advancement could bring on the need to change jobs more often than every two years, experts say. Shahid Nawaz of global recruiting firm Hays says that showing career progression can help cancel out the negative perception of rapidfire job changes.

“For the core finance roles, if you’re moving every two years to gain greater exposure or some new skill set, people are accepting of that,” notes Nawaz, business director for Hays’s accountancy and finance practice.

Paul McDonald, Robert Half senior executive director in the U.S., says that hiring managers should also take into account the

economic tremors of the past few years when considering a job candidate who appears to be a hopper.

“You have to ascertain if those moves were warranted,” according to McDonald said. Some job changes, after all, could have been the result of a company going out of business or laying off an entire department of workers.

If you are deliberating about whether to stay with your current employer or look elsewhere, Robert Half recommends asking yourself three questions before updating your resume and beginning a job search: • Why do you want the new opportunity? Consider the job factors that are most important to you, and pursue the new job only if it helps improve those issues.

Money, a better relationship with your manager, new and greater responsibilities, more flexible hours — everyone has different priorities. In this electronic age, one can apply for many jobs by just clicking a mouse and filling out a few fields on an employer’s website. But candidates should apply only for jobs they truly want — and be able to articulate why they want that job before applying.

• Have you looked within? Other jobs with your current employer might be a better fit than going to another company. Logical, career-progressing moves in the same company do not constitute job-hopping.

• Where is the greatest long-term potential and stability? Your best chance to build skills and advance your career might be in your current job. Also, Robert Half recommends considering which company, current or targeted, is on the most solid footing. “You don’t want to make a move only to learn your career progression is stalled, or your new company is struggling.” s Neil Amato, namato@aicpa.org, is a CGMA Magazine senior editor.

March/April 2014 • www.cocpa.org •

13

Taxation

The Texas Margin Tax: Eligble for Credit?

O

kay, let’s say Fred Flintstone, a Colorado resident who lives in Boulder, spends six weeks in Kansas working at the Flatrock Mine. Fred receives a W-2 from the mine, reports the income on a non-resident Kansas return, and takes a credit on his Colorado return for any income taxes paid to Kansas.

It's a simple example. Colorado tax practitioners see this sort of thing all the time. But suppose Fred also receives $100,000 from his five percent ownership in a Texas LLC that was subject to the Texas Margin Tax. Can Fred take a credit on his individual return for his share of the Texas tax paid by the LLC? The answer is not certain and one upon which state revenue departments have taken conflicting positions.

There are two key questions in determining whether an individual Colorado taxpayer may take a credit for the Texas Margin Tax (TMT), paid by a flowthrough entity in which the taxpayer has an interest. Since the TMT is not an income tax imposed on individuals, but an entity-level tax, the first question is whether an individual taxpayer can take a credit for another state’s entity-level tax. The second question is whether the TMT qualifies for the credit as “federal taxable income taxed by another state.” In short, is the TMT an income tax or a gross receipts tax?

The Colorado Department of Revenue (CDOR) affirmatively answered the first question long ago when it ruled in Revenue Determination No. 36 that a taxpayer was eligible for a credit on the Colorado income tax return, for tax paid by the taxpayer’s S corporation, to a state that did not recognize the corporation’s federal subchapter S status.

The state’s regulation reflects this at CCR 39-22-108(1)(b), which addresses sourcing income for S corporations or “any other pass-through entity.”

The second question is the tougher one.

Is the TMT a tax on income, or is it a gross receipts tax? If it is a gross receipts tax, no

14

• NewsAccount • March/April 2014

BY BRUCE NELSON, M.A., CPA

credit will be allowed. Credits are limited to “federal taxable income taxed by another state,” and a gross receipts tax is not an income tax.

Not surprisingly, state revenue departments have come to different conclusions about whether the TMT is an income tax.

Minnesota, Virginia, and Massachusetts have taken the position that the TMT is not a tax based on net income, while Kansas, Missouri, and Wisconsin hold that it is a tax on income. (See Minnesota Dep’t of Revenue, Notice 08-08 (July 21, 2008); Ruling of the Comm’r, PD 08-169 (Virginia Dept.

Tax’n, Sept. 11, 2008); Massachusetts Dep’t of Revenue, Directive 08-7 (Dec. 18, 2008); Kansas Dep’t of Revenue, Office of Policy and Research, Op. Ltr. O-2008-004 (Sept.

2, 2008); Missouri Dep’t of Revenue, Priv.

Ltr. Rul. No. LR5309, (Dec. 12, 2008); and Wisconsin Dep’t of Revenue, Publication 125 (Feb. 26, 2008). California declined to rule either way and said that the TMT’s characterization is “highly fact-specific and must be made on a case-by-case basis” [California FTB Notice No. 2009-06 (July 20, 2009)].

Ironically, enough, there was debate within Texas itself between the legislative and executive branches of government as to whether the TMT was an income tax. The enactors claimed that the new margin tax

was “not an income tax.” However, Carole Keeton Strayhorn, the Texas Comptroller at the time, publicly disagreed with the legislature’s description and called the TMT an income tax. To further confuse the issue, the TMT was treated as an income tax for financial statement purposes under Financial Accounting Standards Board Statement No. 109, “Accounting for Income Taxes.”

More recently, the Texas Supreme Court ruled that the state’s margin tax was not “a tax on the net income of [a] natural person,” but that it did, like the state’s prior franchise tax for which Colorado has traditionally given a credit, “constitute a tax on . . . an entity.” [See Allcat Claims Service, L.P., 356 S.W.3d 455 (Tex. 2011).]

Some argue that since the Texas Supreme Court has ruled that the tax is on a flow-through entity and Colorado allows for a credit for taxes paid by flow-through entities, the credit for the Colorado tax should be allowed.

Nevertheless, others argue that the TMT is not an income tax because it does not allow for the deduction of common business expenses to arrive at net income. Indeed, the states holding that the TMT is not an income tax all emphasized this fact. That said, the liberality of the TMT in allowing certain deductions does not, in and of itself, mean it is not a net income tax since all income tax calculations allow certain deductions and disallow others. For example, the federal income tax is still an income tax even when deductions are limited, like the TMT, to cost of goods sold. [See, for example, IRC §280E, which prohibits drug dealers from deducting ordinary, necessary, and common business expenses by limiting their deductions to cost of goods sold only.] Finally, the TMT apportions the Texas tax using a single sales factor. Apportionment is not necessary for a gross receipts tax but is for an income tax.

At the time of this writing, the Colorado Department of Revenue has not issued any specific guidance as to whether the TMT is

creditable. So what are a taxpayer’s options? There are three.

First, simply claim the credit on an originally filed return, and argue with the DOR if the return is challenged. Second, file the original return without claiming the credit, and then amend the return, claim the credit, and again, argue with the DOR if the amended return is challenged. This approach avoids any possible penalties and interest associated with the first option. Finally, one could simply avoid the whole issue by not taking the credit on either an originally filed or amended return. Given the debate, I suspect that the option one takes is largely going to be driven by the comfort level of the taxpayer.s

LeadFit

Now in its third year, Leadfit is designed for CPAs and CPA-track accounting professionals looking to grow pro2014 fessionally and personally. Facilitated by Lorrie Tietze, Interface Consulting, LLC, the program includes two full days and two half days of content delivered over five months, individual coaching, and networking events. It is recommended for 24 hours of CPE credit. The program is limited to 16 participants who commit to attending all sessions.

2014 Schedule

Bruce Nelson, CPA, MA, is a director at EKS&H LLLP, Fort Collins. Contact him at bnelson@eksh.com.

July 10: Welcome BBQ July 11: Full Day Aug. 15: Half Day

Sept. 26: Half Day Oct. 23: Debrief Nov. 14: Full Day

To apply, contact Terry Cervi at tcervi@cocpa.org, 303-741-8610, or 800-523-9082, ext. 110.

Application Deadline: June 20, 2014

March/April 2014 • www.cocpa.org •

15

Accounting for Technology

Software-as-a-Service Revenue Recognition Considerations

C

loud computing has become more relevant in recent years, and with it comes the need for software companies to evaluate their revenue recognition policies. Traditional software licensing and sales operating models and Software-as-a-Service (“SaaS”) operating models can result in significantly different revenue recognition models in a company’s financial statements.

SaaS business operating models are ones whereby vendors do not provide software to their customers but rather provide their customers access to software on either the vendor’s servers or a third party’s servers. In essence, the vendor is not selling the software to its customer but rather is providing a service whereby the customer is allowed to use the vendor’s asset (i.e. the software).

There are, however, exceptions to this rule. According to GAAP, if “the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty” AND if “it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the software provider to host the software” then the contract would be considered to have a software sales element. This would drive software sales revenue recognition. Without both of those conditions being present, the sale transaction would not be accounted for using software sales revenue recognition guidance. Rather, the software provider would account for revenue using a service model and multiple element arrangement guidance found in FASB Accounting Standards Codification 605-25.

SaaS contracts typically have two components, either explicit or implicit, in the contract. The first component is the right to use the software, and the second component is the hosting service. These services are typically rendered over time, and consequently result in an SaaS company recognizing revenue ratably over the service

16

• NewsAccount • March/April 2014

period.

SaaS contracts can oftentimes include a component related to start-up activities, such as migrating a customer’s data from its old platform to the vendor’s software. Multiple-element arrangement revenue recognition standards were updated a few years ago in response to constituents’ demands for accounting guidance to more accurately reflect the business reality of transactions.

However, the SaaS industry did not see a significant change in the pattern of revenue recognition as a result of the new standards.

Multiple element arrangement standards require a company to identify the key deliverables in the contract and determine the appropriate accounting methods for each deliverable, assuming they can qualify as a separate unit of accounting. A key factor for the SaaS industry in such determination is whether the deliverable has stand-alone value, which is defined as follows: “The item or items have value on a stand-alone basis if they are sold separately by any vendor or the customer could resell the delivered item(s) on a stand-alone basis. In the context of a customer’s ability to resell the delivered item(s), this criterion does not require the existence of an observable market for the deliverable(s).”

In practice, it is very difficult for an SaaS company to conclude that any startup activities in its contract have stand-alone value. The activities generally require those performing data migration or other similar actions to have access to the SaaS company’s software, and as this software is typically restricted and protected by the vendor, a third party would not be able to perform this function. The item therefore no longer meets the stand-alone value criterion and needs to be recognized in the same pattern as the main deliverable, which in the SaaS contract is the hosting service. Therefore, revenue related to the start-up activities usually would be deferred and recognized over the expected life of the relationship

BY DAVE S. HALLETT, CPA

with the customer.

There are other deliverables that could meet the stand-alone value criterion that are sometimes included in SaaS contracts.

A typical example would be training a customer on how to use the software. If it would be feasible for a customer to contract a third party to help train its employees on the use of the SaaS company’s software, which is in activity that typically would not require the trainers to have access to the source code of the software, the item could be considered to have stand-alone value. All revenue related to training could then be recognized by the vendor upon performing the training activities and thus accelerate revenue recognition related to that deliverable. Therefore, it is important for SaaS companies to critically assess all of the key deliverables in its contract so that the correct pattern of revenue recognition can be followed.

The basis of the SaaS revenue model is that a customer is using the vendor’s software, and not taking ownership of the software itself. Inherent in that conclusion is that the vendor never sells its software but rather uses its software as a revenue producing asset. This impacts the vendor’s methodology for capitalizing software costs, and the SaaS company should take care to

Client Communications

To Waive or Not to Waive

BY THOMAS J. LYONS, ESQ.

follow GAAP rules for recognition and subsequent measurement related to assets it constructs for its own use, as opposed to following GAAP for software to be developed and sold.

General Revenue Recognition Update As this article was being written, the FASB and IASB were closing in on issuing a comprehensive new revenue recognition standard that will impact companies that report financial statements in U.S. GAAP or IFRS. This standard will be effective for public companies with calendar year-ends in 2017 and will have a deferral of one year for private companies. This standard is expected to include more judgment, including some critical areas around variable consideration in a revenue arrangement.

Additionally, more data will need to be gathered to support additional footnote disclosures based on how the new standard impacts a company’s revenue recognition policies. Accounting departments should keep an eye out for the new guidance and evaluate its impact on their businesses so that when it becomes effective companies are prepared to present their financial statements in accordance with the new standards.

Additionally, companies should understand how the new accounting rules will impact their financial statements so that those changes can be communicated in advance to users. Public companies are also required to disclose in their financial statements the expected impacts of recently issued accounting standards. Private companies are not subject to these same disclosure requirements but should consider whether including a disclosure would help the users of their financial statements understand the potential impacts.s Dave S. Hallett, CPA, is Audit Director with Anton Collins Mitchell LLP, Denver.

Contact him at dhallett@acmllp.com.

R

ecently, questions arose regarding Colorado State Board of Accountancy rules on conflicts of interest and the importance of obtaining waivers from all tax clients with relationships such as employer/employee and married couples. Colorado Rule 9.3 E.1.c. states that the Licensee may perform the professional service if a conflict of interest exists if “the Licensee obtains the informed written consent of the client, employer, or other appropriate party.”

The concern being addressed here arises where the CPA (Licensee) prepares the joint tax return, and one spouse tells the CPA of a plan to divorce the other.

Would the CPA be required to tell the other spouse of the original spouse’s intention, thereby violating accountant/client privilege?

If such an issue confronts you or whenever your concerns relate to the issue of informed consent, accountantclient privilege or both, you’re strongly encouraged to seek legal counsel. Nothing stated or suggested here serves as a substitute for legal advice provided in the context of an attorney-client relationship.

That being said, a written blanket waiver or consent obtained at the outset of a professional relationship, and in the absence of any specifics related to a potential conflict, appears wholly inadequate to meet the “informed” requirement found in Rule 9.3.E.1.c. as promulgated by the Colorado State Board of Accountancy.

Consider this. Even if a written waiver is obtained at the outset of a professional relationship, the subsequent receipt of information detrimental to one client from a second client still seems to compel you to inform that second client at once of the necessity to disclose the information to the first client, as well as to seek written consent to do so from the second client.

On receipt of such written and informed consent from client number two,

the first client should be informed of the information and asked to waive any conflict raised, before you proceed with any aspect of the relationship. Wherever either client balks at providing the requisite consent, it seems imperative you withdraw or face the prospect of an accusation from one or the other client regarding either the disclosure of privileged information or the existence of an unresolved conflict of interest, or both.

In the absence of the required consent from the client, no disclosure of detrimental/conflicting information to anyone seems justified. Withdrawal from the relationship may be your only alternative.

If you are inclined to provide a client with advance notice of an issue of this sort, a paragraph could be inserted into the initial engagement letter or agreement, stating that the nature of the relationship being formed, which includes multiple client participants such as a husband/wife, business partners, etc., may create the potential for conflict issues arising among the clients after the professional relationship is established. This might also be described within the letter or agreement as potentially jeopardizing your ability to persist in the relationship.

In addition, such a paragraph should state that no such conflict is known to exist as of the time the relationship is established (presuming that to be the case).

Finally, the paragraph should advise that each client should inform you that a conflict might exist as soon as that client becomes aware of any facts that suggest such a conclusion. s Thomas J. Lyons, Esq., is a member of Hall & Evans L.L.C., Denver, and the COCPA’s general counsel. Contact him at lyonst@hallevans. com.

March/April 2014 • www.cocpa.org •

17

Risk Management

Fraud and Corruption Trends for 2014

BY NEIL AMATO

Fraud and corruption risks are not going away. The threats facing companies doing business anywhere, but especially in emerging markets, are growing in number and complexity. Erst & Young LLP’s (EY) Fraud Investigation and Dispute Services practice recently released these six themes for fraud and corruption trends in 2014.

1.

Dealing with reputational harm and the business risk associated with cybercrime will become the responsibility of more than just the chief information security officer. Technology is great, except for all the problems it can cause. Companies must keep pace with technology to grow their businesses, but they also face greater threats associated with increased use of cloudcomputing and social media. Organizations’ reputations can be dented faster than ever thanks to the viral nature of social media. And cyber-attacks, more organized and more global, can lead to losses of trust and actual property. EY says cybersecurity has become a board-level issue, and risks in this arena require “immediate and planned responses” organized by legal counsel. In other words, it’s not just an IT problem anymore.

2.

Balancing significant growth opportunities with perceived corruption risk. EY research suggests that pressure placed on managers to generate growth in emerging markets leads companies to avoid addressing corruption risks. The research also showed that 83% of African respondents viewed bribery and corruption as widespread. The annual Corruption Perceptions Index by Transparency International shows many countries with high growth potential are perceived as corrupt, including the BRICS nations of Brazil, Russia, India, China, and South Africa. EY recommends that companies setting up operations in emerging markets perform robust due diligence to manage these risks.

3.

The impact of regulation will be felt stronger than ever by the financial services industry.

Regulatory enforcement pressure, EY writes, may affect midsize banks in 2014, not just the larger institutions in the U.S. One example of regulatory impact is the December 2013 passage of the so-called Volcker Rule, which prohibits institutional trading by U.S. banks and limits their ability to invest in hedge funds. The Volcker Rule is a key provision of the 2010 Dodd-Frank Act. EY also says the financial services industry will be forced to reassess strategies in response to U.S. Consumer Financial Protection Bureau rules on mortgage loans, student loans,

18

• NewsAccount • March/April 2014

and credit cards. More intense regulation in banking is not just a U.S. occurrence. A 2013 KPMG report said that for banks around the world, “the single most pervasive driver of change is the regulatory agenda.” Basel III standards, designed to ensure banks have enough liquidity to handle a potential run on funds, are among many new regulations.

4.

Compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and other global bribery legislation will remain a top priority for life sciences companies operating in emerging markets.

“Staying on top of the differing anti-corruption laws and standards, particularly in markets where the rule of the law is not always clear, will present a challenge and opportunity for companies that depend deeply on growth in those markets,” EY writes. One litigator who focuses on corruption said the most frequent trouble experienced by companies under the FCPA and the UK Bribery Act involves corruption charges related to third parties in developing markets.

5.

Anti-money-laundering and corruption programs face greater scrutiny. Regulatory pressure on the issues of money laundering, trade sanctions, and bribery and corruption will create the need for “robust program controls, sophisticated monitoring systems, and knowledgeable personnel at the watch,” EY writes. Regulatory scrutiny is moving beyond the banking sector to credit card issuers, insurance providers, and gaming enterprises, according to EY. Banks whose antimoney-laundering controls fail can be subject to fines from regulators that exceed $1 billion, according to research by PricewaterhouseCoopers LLP that recommends strategies for strong anti-money-laundering deterrence.

6.

The opportunity to leverage Big Data in the context of compliance and anti-corruption will allow companies to ask new questions. Companies now can analyze their data to prevent fraud and to create effective fraud risk mitigation program, EY writes. The opportunities for harnessing the power of Big Data seem infinite, but more information can create more risk. A survey by international IT trade association ISACA showed that about one-fourth of respondents felt their organizations were adequately or extremely prepared to provide effective governance and manage privacy related to Big Data.s Neil Amato, namato@aicpa.org, is a CGMA Magazine senior editor.

Experience Success

Become a Crowe Horwath Professional

The Colorado business community knows Crowe Horwath as one of the largest locally owned, independent public accounting firms. Clients know Crowe Horwath as an organization of dedicated, innovative and service-focused professionals meeting all of their audit, tax, advisory, and risk needs. Employees know Crowe Horwath as a place where they can learn, grow, and succeed in a collaborative and career focused environment.

Explore what a future with Crowe Horwath can do for you. recruitingdenver.crowehorwath.net 1670 Broadway, Suite 3000 | Denver, CO 80202 www.ghphorwath.com

Taking Payments, Anywhere In my business, I have to be able to accept payments however my customers want to pay.

Ent's payment processing solution is flexible and affordable. So now, whether I’m in the office or out on a call, I can accept payments – anywhere.

Payment Processing Services Contact a Business Banker today!

(719) 574-1100 ext. 6770 or 800-525-9623 ext. 6770

Ent.com/PaymentProcessing

Equal Housing Lender | Federally insured by NCUA | Equal Opportunity Lender © Ent Federal Credit Union, 2014 | Ent is a registered trademark of Ent Federal Credit Union.

March/April 2014 • www.cocpa.org •

19

Practice Development

Aging Population Translates to New Opportunities

BY C. LYNN NORTHRUP, CPA

T

he needs of aging baby boomers represent big opportunities for CPAs. There are 10,000 boomers hitting retirement age each day, and they need help in a lot of areas, which translates to practice development opportunities.

Over 13% of the U.S. population will be 65 by 2020, and more than 16% will be over 65. By 2030, most baby boomers will have hit their 65th birthday. This means that more than one in five Americans will be 65 or older, and about 10 million will be over age 85.

Money tops the list of problems for boomers since most haven’t saved enough to retire and survive through their later years. They also aren’t prepared to deal with declining health. Plus, they may have to contend with caring for parents. Combine these challenges with Social Security, Medicare, Medicaid, and estate planning. A lot more people will have questions and need guidance.

CPAs can help retirees and elders in a wide range of areas. Typically, seniors turn to attorneys for guidance, which makes sense in many areas. However, CPAs educated on the needs of baby boomers and elders can become valuable and needed advisors for a huge segment of the population.

The first step for CPAs is to get up to speed on the issues particularly related to Social Security, Medicare, and Medicaid. In addition to CPE programs, a lot of resources are available on elder issues.

The next step is letting people know how you can help them. Boomers try to do their own basic budgeting and cash management, and many are successful. Objective input from a CPA can verify they're on the right course or help them build a concrete plan.

A simple budget spreadsheet can be a useful tool to assist boomers with understanding their situation and developing a plan for the future. Consider all possible income streams and all living expenses that boomers will incur. Most think their expenditures will be reduced in retirement. This often is not the case.

A good analysis can become the basis for projecting into the future and providing boomers

20

• NewsAccount • March/April 2014

with guidance on possible options. The budgeting exercise helps provide an independent sense of reality on retirement finances.

Assisting Seniors Having additional knowledge to help seniors gives CPAs an edge in developing an elder care practice. Here are some thoughts on how to gain the needed knowledge and information.

Take CPE on estate planning tools. This will give you a foundation on the basics of wills, trusts, and powers of attorney. If you're advising boomers on caring for elder parents, make sure they have signed powers of attorney for business and medical reasons in case the parents can’t manage their own affairs.

These documents are essential and critical.

Take the time to learn about senior housing options. Understand the differences among independent and assisted living, skilled nursing, nursing homes, and memory care. Most boomers don’t think about elder care and what it entails. CPAs who understand the complexities can provide much needed support.

One of the best ways to gain knowledge about the variety of living options is to take a tour of a facility, or better yet, talk to someone

in the senior living field. Billing structures and other financial requirements vary from facility to facility. Some accept Medicaid and long-term care insurance, while others don't or only accept them for specific care.

Even with the best planning, some elders run out of money or may need to be moved for care reasons. A CPA who can provide guidance before a move is made can be a life saver to baby boomer and senior clients.

Gaining knowledge of senior housing facilities can also become a great networking and marketing opportunity as these organizations are happy to know of available resources for their residents. CPAs who understand elder care and associated issues represent a valuable and needed resource.

CPAs who understand the shifting needs of baby boomers and elders can position themselves to provide significant added value to a segment of the population that needs all the help it can get. While it will take some time to gain the necessary knowledge and market it, CPAs are well qualified to serve this growing practice area. s You can reach C. Lynn Northrup, CPA, at cln@northrupcpa.com. He is the author of Navigating Retirement and the Challenges of Aging, www.northrupcpa.com.

Classifieds

A

dhering to the adage that "a rising tide lifts all boats," the Checkoff Colorado public awareness campaign is a collaborative effort focused on educating taxpayers and tax preparers about check-off giving — the program that allows taxpayers to make voluntary contributions to their favorite charitable organizations when they file their state income tax returns.

This year, 15 charitable funds are eligible for voluntary donations through the checkoff program. Each was established after a vigorous review process by the Colorado State Legislature.

With the goal to increase the statewide percentage of checkoff giving, the funds collaborate in getting the word out to Colorado taxpayers and preparers while raising the visibility of the diverse range of causes represented — from Alzheimer’s research, pet overpopulation, children, cancer, mental health, unwanted horses, and job placement to military families, among others.

Consider checking the box yourself, and encourage your clients to do the same. Share the information with those who might be interested. Help these worthwhile organizations keep their respective boats afloat. It's truly "a simple way to give."

For more information on Checkoff Colorado, visit www. checkoffcolorado.com. s

Practices for Sale, Purchase, or Merger Fred Mehring, Select Business Group, Inc., specializes in the sale, merger, and acquisition of accounting and tax practices. Over 25 years of experience. Confidentiality stressed!

Call Fred Mehring at 303-771-3100, fax 303-477-6010, or fmehring@selectbg.com.

Office Space Available Greenwood Executive Park at S. Quebec St. and Peakview Ave. (near I-25 and Arapahoe Road, Greenwood Village). Windowed office, conference room, kitchen, receptionist, copier, fax, telephone system, DSL line, tax library, free parking, great environment.

Contact Arlyn or Neil, 303- 771-7377.

Movers & Shakers Robert C. Loewan, P.C., acquired the accounting practice of Scott W. Stauffer, CPA. The office's new address is 7887 E. Belleview Ave., Suite 1100, Denver, Colorado, 80111.

Anton Collins Mitchell LLP has promoted Brian Zales, CPA; Christine Triantos, CPA; and Kevin Gile, CPA, to partner. Rich Leonard, CPA, was promoted to tax director.

Jessica Schmitt, CPA; Mark Lumsden, CPA; Caleb Crandell, CPA; Brandon Powers, CPA; Jessica Friedly, CPA; Tyra Litzau, CPA; Sean McDonald, CPA; and Tim Stueven, CPA, were promoted to senior manager. Bryan Adam, CPA; Andrew Dick, CPA; and Marc Furton, CPA, were promoted to manager.

Tax Checkoff is a simple way to help clients help others.

Please take a moment to help your clients with their charitable intentions by explaining the voluntary checkoff. For more information, scan the QR code or visit www.spurrfp.com/mhac.

Please consider Families in Action for Mental Health Fund.

Mental health affects 1 out of 4 Coloradans. Donations to Families in Action for Mental Health Fund will:

 Increase access to mental health services for Colorado families

 Empower people living with mental health conditions

 Assist families in obtaining community support www.FamiliesinActionforMentalHealth.org Line 49 under Voluntary Contributions This reminder proudly sponsored by

Helping clients meet their financial and charitable goals March/April 2014 • www.cocpa.org •

21

Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111-6076

Periodicals Postage

Build Your Knowledge April CPE for CPAs in Industry Colorado Board of Accountancy Statutes, Rules, and Regulations April 9 (Webcast) Rosemary E. Weiss • $75/$107 Critical Skills for Today's Controller and CFO April 21 (COCPA or Webcast) John Cox, The ROME Group, Inc. • $345/$493 The New Controllership: Keys to Boosting Corporate Performance April 22 (COCPA) John Cox, The ROME Group, Inc. • $345/$493 The Mobile Office - 4 hours April 23 (COCPA or Webcast) Steve Phelan, K2 Enterprises • $160/$229

Technology Update - 4 hours April 23 (COCPA or Webcast) Steve Phelan, K2 Enterprises • $160/$229 Excel Financial Reporting and Analysis April 24 (COCPA) Steve Phelan, K2 Enterprises • $320/$478 Construction Contractors — Essential Concepts, Tax Savings Opportunities, and Traps for the Unwary in Sales and Use Tax April 25 (COCPA or Webcast) Bruce M. Nelson, EKS&H LLLP • $75/$107

Manufacturing and Sales Tax — Continuing Opportunities - 2 hours April 25 (COCPA or Webcast) Bruce M. Nelson, EKS&H LLLP • $75/$107 Financial Statement and Cash Flow Forecast Model April 27 (COCPA or Webcast) Dan Spilman, Spilman Consulting Ltd. • $365/$521 • Denotes Member/Nonmember Course Fees

TO REGISTER Visit: www.cocpa.org Call: 303-773-2877 Toll Free: 800-523-9082