COCPA NewsAccount – November/December 2018

NEWSACCOUNT COLORADO SOCIETY OF CPAs • NOVEMBER/DECEMBER 2018

Wanted: Algorithmic CPAs PAGE 16

Planning in the Wake of TCJA PAGE 8

Cryptocurrency In Your Investment Portfolio PAGE 20

November/December 2018 | www.cocpa.org

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NewsAccount | November/December 2018

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Contents Features 4

OPRRR Recommends State Board Continuation and Statutory Changes Eight recommendations are included in the Colorado State Board of Accountancy Sunset Review report, including continuation to 2030.

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Meet Colorado’s New OSPB Director Lauren Larson says nothing prepared her better for the work she does today than the experience she gained at PwC and at the White House.

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Filling in the Blanks: Planning in the Wake of the TCJA How do practitioners and clients prepare for the future when so many tax questions remain unanswered? It depends.

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22 Departments

Raising the Reporting Bar: Why <IR> Matters in the Digital Economy The <IR> framework helps organizations measure against six broad categories: financial, manufactured, intellectual, human, social and relationship, and natural.

Wanted: Algorithmic CPAs to Handle ‘Devastatingly Profound’ Changes Today’s ever-accelerating rate of change is deceptive. It isn’t coming from devices or technologies but rather from data and algorithms. What does that mean for CPAs?

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Should a Cryptocurrency Be In Your Investment Portfolio?

When you talk about investing in crypto, you have to ask yourself if you’re investing or speculating.

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Brian Parmelee: The Road Back In spring 2017, this CPA and firm tax director left his office earlier than usual.

Following his normal route, suddenly, everything changed forever.

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Chair Column

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Movers & Shakers

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In Memoriam/ Classified Ads

HOLIDAY HOURS

The COCPA off ice will be closed: Thanksgiving Thursday & Friday Christmas Eve & Day New Year’s Eve & Day

November/December 2018 | www.cocpa.org

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CHAIR COLUMN

Expanding Our Comfort Zone

NEWSACCOUNT

A bimonthly publication of the Colorado Society of Certified Public Accountants Vol. 64, No. 4 November/December 2018

BY VICTOR A. AMAYA, CPA, COCPA CHAIR OF THE BOARD

Officers

Victor A. Amaya, Chair Benjamin T. Hrouda, Vice Chair Christopher J. Telli, Treasurer Tawnya Y. Ramirez, Immediate Past Chair Mary E. Medley, Secretary

Directors

Kristine M. Brands, Renny Fagan, Dana J. Miller, Georgia Z. Phillips, Matthew O. Rolland, Randy L. Watkins

Editorial Board

Jack Allgood, Alan D. Bennett, Steve Corder, Peggy Jennings, Georgia Z. Phillips, Lori Anne Reinwald, Laura J. Theiss, Barbara J. Tedesko, Steve Van Meter, Michael D. West, Charlie Wright Mary E. Medley, President/CEO Natalie G. Rooney, Contributing Writer Ariana Cassard, Blue Ocean Ideas, Design 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 $9.00 one-year subscription to NewsAccount.

Periodical postage paid in Englewood, 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 = 6,743 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 6,688; free distribution by mail = 0; free distribution outside the mail = 20; total free distribution = 35; total distribution = 6,708; office use, leftovers, spoiled = 35; returns from news agents = 0; total sum = 6,743; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344

NewsAccount is available online at www.cocpa.org.

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he 2018 Chair Tour is over, and as crazy as it sounds, I’m disappointed.

Why? Because touring the state, meeting my colleagues from areas of Colorado I had never been to before, and hearing how their lives and issues differ from my own was an enlightening experience. Thank you to everyone who came out to meet with me and hear what’s happening at the COCPA. It was encouraging to see the number of young professionals in attendance at each stop. A lot of young people are pursuing the CPA designation and are excited about the profession. This tells me our profession is moving in the right direction.

I talked with COCPA members about the concept of the value add, which is the theme for this year. As CPAs, we become immersed in doing so much for our clients and our communities. It’s easy to forget that we add value to every thing we do – large and small. During the Chair Tour, I asked members to think about ways they add value for others. Several common themes emerged across the state: peace of mind, seeing and communicating the big picture, volunteering, being expert advisors, helping solve problems and make decisions, and even coaching teams. We need to understand and leverage our personal value add – whatever that may be – as individuals and professionals.

CPAs aren’t the only ones who need to be thinking about the value add. During the Chair Tour, I asked members, “How does the COCPA add value for you?” Not surprisingly, assistance with the Colorado Department of Revenue came up every time. Also mentioned as important were providing information about hot topics and strategic issues; CPE, locally and online; helping members see the big picture; networking opportunities; and advocacy.

I took it a step further. I asked members, “What isn’t the COCPA doing that it should be doing?” That was tougher to answer.

And, it’s the question the COCPA must and will keep asking. Our profession is changing

rapidly. The COCPA strives to meet your needs better and faster. We want you to look to us for help instead of going elsewhere. In everything we do, relationships are paramount to moving forward. That means we need to be in constant communication. It might feel awkward to tell us about a need we’re not meeting, but it’s important for us to know so we can deliver.

What’s important to you and your organization? Maybe it’s learning more about blockchain technology, a huge hot topic. What will be the impact for CPAs and those we serve? Where do we find more information?

Just as your client or employer looks to you for answers, you can look to the COCPA for answers.

We need to approach change positively and with the mindset of how it will impact our clients and organizations. When that happens, we’ll start looking at change differently – not just how it impacts us negatively, but how it can help others. See the article on the Algorithmic CPA, on page 16, for futurist Mike Walsh’s thinking.

So many interesting concepts are being developed or already are in use that will change the way we work. At the recent AICPA PCPS committee meeting, I learned about how firms are exploring the use of bots. The day a bot sits on every employee’s desk to facilitate even basic activities like scheduling appointments and making prospecting phones calls is imminent.

These are the types of concepts we have to start exploring. We need to determine how we make the time to actively look for new things. We need to make ourselves a little bit uncomfortable every day so our comfort zone grows bigger. We need to disrupt ourselves rather than wait for it to happen and take us by surprise.

Reach out to me at vamaya@mycpadvisors.com when you think of something we should be doing as an organization to help you be more effective.

Let’s all work together to be future ready.

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Every dollar you give will be MATCHED 6X thanks to:

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You can donate on Dec. 4, or you can schedule your donation now, to be processed on Dec. 4.

To learn more, go to

give.cocpa.org.

November/December 2018 | www.cocpa.org

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REGULATORY UPDATE

State Board Approves Rules Revisions

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n Sept. 19, 2018, the Colorado State Board of Accountancy held a rulemaking hearing and approved most of the proposed revisions to the 2013 rules, as published. The new rules are expected to be effective in mid-November.

The most significant revisions adopted are elimination of the education requirement of

three semester hours in business, technical, or accounting communications and elimination of the requirement to be current with CPE to apply for and be granted RETIRED status.

Two revisions the COCPA recommended were deferred – Rule 3.6 A.3. on providing flexibility in the rolling 18-month period

to complete the Uniform CPA Examination and Rule 6.11 A.2. on the CPE required for a certificate holder inactive, retired, or expired for less than 2 years. These will be discussed at a future, regular State Board meeting. To access the rules, go to www.dora.state.co.us/accountants/rules.

OPRRR Recommends State Board Continuation and Statutory Changes On Oct. 15, 2018, the Colorado Department of Regulatory Agencies issued its Sunset Review report on the Colorado State Board of Accountancy.

Prepared by the Colorado Office of Policy, Research, and Regulatory Reform, the report is available at bit.ly/SunsetReviews.

The following recommendations will be incorporated into continuation legislation to be considered during the 2019 Colorado legislative session.

Review the report for details on each.

Note that these recommendations may or may not be adopted as proposed. Changes may be made during the 2019 legislative session.

For more information, contact Mary E. Medley at mary@cocpa.org.

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RECOMMENDATION 1: Continue the State Board of Accountancy for 11 years, until 2030.

RECOMMENDATION 2: Make the use of fraudulent, coercive, or dishonest practices, or the demonstration of incompetence or untrustworthiness, grounds for discipline.

RECOMMENDATION 3: Clarify that foreign corporations operating a Colorado office must register with the Board and add “limited liability partnership” to the list of business types.

RECOMMENDATION 4: Allow graduates of unaccredited programs to petition the Board to determine whether their education is substantially equivalent.

RECOMMENDATION 5: Permit Chartered Global Management Accountants who are not CPAs to use the title “chartered global management accountant” and the abbreviation CGMA, provided they do not purport to provide services that require a CPA license.

RECOMMENDATION 6: Clarify section 12-2-123(1)(j), C.R.S., to accurately reflect the Board’s jurisdiction.

RECOMMENDATION 7: Allow CPAs to request inactive status via other Board-approved methods.

RECOMMENDATION 8: Make technical changes to the law.

NewsAccount | November/December 2018

NONPROFIT ORGANIZATIONS NEWS

Changes Enacted: Colorado Charitable Solicitations Act

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everal significant changes in law took effect, Oct. 1, 2018, as summarized here. The first change you may see is a notice from the Colorado Secretary of State’s office that your organization’s registration has expired. As part of the transition from the previous schedule and content of notifications to the new notification process, the Secretary of State (SOS) will re-set organizations in a delinquent status to the new “expired-may not solicit” status. Organizations will have an opportunity to renew without penalty, if they renew within seven days of the second notice of expiration.

Organizations affected are those that were delinquent but not yet suspended as of 12:01 AM on Oct. 1, 2018.

REGISTRATION STATEMENTS A charitable organization’s registration is valid until the day on which the required financial report is due and may be renewed upon application to the Secretary of State and payment of the registration fee and any assessed fines.

Charities no longer will be fined and suspended automatically for failure to timely renew a registration. Instead, fines will be assessed when an organization reinstates its registration and discloses that it should have been registered earlier (i.e. that it should not have allowed its registration to expire).

Previously, registrations were suspended and fines were assessed on the 61st day after the renewal deadline.

The registrations of paid solicitors and professional fundraising consultants will continue to be effective until the anniversary date of initial registration, at which point they will expire. Like charities, paid solicitors and professional fundraising consultants will be allowed to renew without penalty if they do so within seven days of the second notice of the expired registration. Previously those registrations were suspended on the 61st day after the renewal deadline.

The registration of a paid solicitor still may be suspended for failure to timely file a solicitation campaign financial report.

AMENDMENTS A charity must report to the SOS any changes of name, address, principals, corporate forms, tax status, and any other changes that materially affect the identity or business of the charity within 30 days after the change.

EXPIRATION AND WITHDRAWAL A charitable organization that withdraws its registration or allows its registration to expire must, on or before the date of withdrawal or expiration, file a final financial report that includes information through the last date on which the organization solicited contributions in Colorado.

If no solicitation activity has occurred in Colorado since the fiscal year-end of the last approved financial report, the organization may simply allow the registration to expire.

A charity that is required to register cannot solicit contributions in Colorado or participate in a charitable sales promotion prior to reinstatement of an expired registration.

FINES Any registrant who, after sufficient notification, fails to properly register, renew a registration, file a financial report, or file a solicitation campaign financial report by the end of the seventh day following the issuance of the final notice, is liable for a fine in an amount established by rule.

The fine for charities that fail to timely file a renewal, financial report, or an amendment to replace initial estimates with actual financial information is $60 per overdue report for charities, and $200 per overdue renewal for paid solicitors and professional fundraising consultants. A charitable organization that fails to timely renew its registration and fails to file the financial report is only subject

to a single fine for the failure to renew its registration.

The fine for soliciting before registering is $300 per year for a charitable organization or $1,000 per year for paid solicitors.

If a paid solicitor fails to file a solicitation notice at least 15 days before commencing a solicitation campaign, the Secretary of State shall assess a $200 fine against the paid solicitor, at the time the paid solicitor files the solicitation notice.

NOTIFICATIONS The Secretary of State will mail two notices by first-class mail to the address of record for the charitable organization, professional fundraising consultant, or paid solicitor when an organization’s registration expires.

An organization can avoid fines by renewing within 18 days of the expiration date (i.e. within seven days of the second notice).

After that, the organization must reinstate its registration and pay a fine for the overdue renewal.

The Secretary of State will continue to send courtesy reminders of the approaching expiration date by email to the organization’s authorized officer and, if applicable, thirdparty preparer.

REGISTERED AGENT NO LONGER REQUIRED It will no longer be necessary to name a registered agent on filings required by the Colorado Charitable Solicitations Act. Beginning Oct. 1, 2018, the Secretary of State ceased sending notifications to a registered agent named on earlier filings.

However, the requirement in the Colorado Corporations and Association Act to file a Statement of Foreign Entity Authority remains, and that filing does require a registered agent. See 7-90-801(5), C.R.S. Access the new rules at bit.ly/ChangesEnacted.

November/December 2018 | www.cocpa.org

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ACCOUNTING IN GOVERNMENT

Meet Colorado’s New Office of State Planning and Budgeting Director

BY NATALIE ROONEY

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movie about Lauren Larson’s journey to Colorado could be called Escape from D.C. The New Hampshire native had been living and working in the nation’s capital for more than a decade, managing a $50 billion budget in the White House Office of Management and Budget where she was Chief of the Treasury Branch under Presidents Bush and Obama. Then, she made her move west and never looked back.

THE VALUE ADD Accounting, Larson says, adds huge value to the budgeting world in which she lives. At the beginning of her career, governmental accounting was entirely cash-based. In the mid-90s, GASB published an exposure draft on moving to accrual accounting. As a graduate student intern at the University of Michigan, Larson had to apply the exposure draft concepts to Michigan’s Comprehensive Annual Financial Report (CAFR) and demonstrate to the state how its financial statement would look.

After hiking pretty much every trail in Boulder County, Larson began giving presentations about the financial crisis, eventually talking to Colorado’s administration. Soon, she landed a job at the Department of Regulatory Agencies as Director of the Division of Professions and Occupations. From there, Larson moved to the Office of the Lt. Governor and Chief Operating Officer as Director of State Operations.

“I always thought the federal process was condensed, but it’s even more so at the state level because of the rapid cycle for turning around analysis and producing recommendations for the Governor and legislature.”

Now, as Director of the Office of State Planning and Budgeting, Larson is responsible for developing the Governor’s annual budget request for Colorado, forecasting state revenue, and conducting research and evaluation of programs.

Policy officials were concerned. “What you show for your state is political,” Larson explains. “So as a young intern in graduate school, my MBA accounting skills gave me the building blocks to do the analysis.”

“New Hampshire’s ‘Live Free or Die’ motto made me feel at home here in Colorado every time I drove over a mountain pass with no guardrails,” Larson chuckles. “I wanted to live somewhere beautiful.” Colorado fit that bill and also allowed her to pursue a few of her favorite outdoor activities like hiking and camping.

BIG FIRM BUILDING BLOCKS Early in her career, as an economist in Coopers & Lybrand’s transfer pricing practice, Larson was in the Boston market when the firm merged with Price Waterhouse. “It was a fascinating experience,” she recalls of the largest corporate merger Boston had ever seen.

Larson says nothing prepared her better for the revenue forecasting portion of her current role than the experience she gained at PwC. “As an economist, I got to dig into a client’s profit drivers, set up arm’s length royalty and technology payment streams in a tax structure, figure out core profit drivers in multiple industries, and figure out comparables from the 10-K literature to determine how a company’s profit drivers may differ or have special value. Then I had to package all of that into a defendable analysis for the IRS or international audit authorities. My time at the firm was a stunning and vast education in business economics,” she reflects.

Aerospace client company execs shared their manufacturing processes with her, ushering her through their factories, so she could see for herself how and why they were special. “When you start talking about transfer pricing and taxes, people’s eyes glaze over,” Larson says. “But I was this young analyst at the table in the C-suite.”

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NewsAccount | November/December 2018

It was the beginning of helping the public see the true financial position of the government. “Decades later, you can look at PERA (Colorado’s pension plan for public employees) reform and the investments Gov. Hickenlooper has made,” Larson says. “Colorado’s pension liability will improve on this year’s CAFR, evidence of the value add accounting concepts bring to the public’s awareness of state government’s economic condition.”

ON THE JOB When Larson moved to the Office of State Planning and Budgeting in June 2018, she was immersed immediately in helping develop Gov. Hickenlooper’s final budget submission. The process starts in the summer and is submitted, Nov. 1.

In addition to the annual budget, Larson and her team of 20 also produce quarterly budget supplementals for changes in spending for the current fiscal year. In September, proposals go before the Joint Budget Committee. “I always thought the federal process was condensed, but it’s even more so at the state level because of the rapid cycle for turning around analysis and producing recommendations for the Governor and legislature,” she says.

CPAs make a DIFFERENCE

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As Gov. Hickenlooper’s term ends, Larson says her team is focused on setting up the next administration for success. The entire team is working to build effective transition materials, including cataloguing information on key issues. “There will be a lot of intense work around the time of change in the administration,” Larson says.

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Also on the horizon are the December revenue forecast, January supplementals, and budget amendments.

Under Gov. Hickenlooper’s guidance, Colorado’s state reserves have tripled. “That is an important accomplishment that will greatly help the new administration and the people of Colorado,” Larson says.

“But, we’re keenly aware that this is the second longest running expansion time in the economy, and we need to be prepared for a downturn,” Larson cautions. “We know how quickly business and government conditions can change.”

Larson started at the White House Office of Budget Management at the end of the Clinton administration when there was a surplus. “My first job was to write a memo to the President about what to do with the FHA budget surplus,” she recounts. “When I left, we had finished the $700 billion rescue of insurance companies and banks. If we had undertaken that rescue without doing the accounting correctly – if we had done it on a cash basis rather than on investments and loans that were being paid back – the funds would have looked flush. We insisted that the $700 billion in spending be done on a net present value basis and carried on an accrual basis. You can look back now and see what we spent for what and the loss or return we got. It was all transparent. Without what accounting brings to the budget world, none of that would have been possible. I’m most proud of that.”

Larson says she feels lucky to be drawing on the experience she built over the years. “Hands down, my decade at the White House Budget Office is what I pull from every day.” She adds that having run an executive branch agency, she knows how hard it is to do what the Governor’s Office expects, deliver and meet the demands of legislative requirements, develop a staff, and operate within constraints and outside the daily whirlwind. “When I’m asking a department for a budget or to set a goal or complete a function, I have a clearer eye. I can be more empathetic to the practical challenges of what I’m asking for.”

While Larson’s staff tends to be trained as policy analysts, she says they favor the accounting side and are more comfortable than not in a spreadsheet. “A lot of them are drawn to the job from the policy angle, and I share that,” she says. She says a mentor, who was a former budget director for New York, told her she shouldn’t go into policy but rather budget because there’s no policy that doesn’t touch budget. “I think he was right. I love budgeting because it’s an orderly way to look at a messy policy world.”

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November/December 2018 | www.cocpa.org

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TAX REFORM

Filling in the Blanks: Planning in the Wake of the Tax Cuts and Jobs Act

BY NATALIE ROONEY

For Americans generally, passage of the Tax Cuts and Jobs Act of 2018 (TCJA) was like crossing the finish line. For tax practitioners, the reality is much different. Nearly a year later and with the 2018 filing season on the horizon, they’re still waiting on regulations and clarification from the IRS. How do practitioners and clients prepare for the future when so many questions remain unanswered?

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“WE JUST DON’T KNOW” ost practitioners didn’t let any moss grow under their feet when it looked like tax reform was actually going to happen in late 2017; they proactively let clients know change was coming. The problem: No one knew what that change would look like.

In October 2017, Fran Coet, CPA/CFF, CVA, CFP, MAFF, owner of Coet 2 CPAs in Denver, was teaching a CPE course in Kansas. The proposed legislation was morphing daily. “I was in the peculiar position of standing in front of a group of CPAs and tax preparers, trying to give them a heads up about what might be coming,” she recalls. “We knew something was happening; we just didn’t know exactly what.” In January 2018, several weeks after the TCJA became law, she was in Hawaii teaching another group. “They expected me to be the expert by then, but no one possibly could be.”

Despite the uncertainty, Coet says the firm sent a letter before the end of 2017 focusing on the business and individual changes that were likely ahead. “The qualified business income information was the most important thing for our clients,” she says. “What that means for carryover schedules is still evolving.”

Mark Fesler, CPA, shareholder at Matzen & Fesler, P.C. in Englewood, says it was a scary moment when the TCJA passed. “I thought, ‘they’ve passed it and given us no guidance.

How do we instruct our clients? How do we educate ourselves? Clients were asking, ‘How does this affect me?’ Great question. I’d like to know myself!’”

Debbie Misegadis, CPA, sole proprietor of Debbie L. Misegadis, CPA, MT, Centennial, says this year has been frustrating. “All of us who work in this field want to help our

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clients legitimately reduce their taxes. When the new law came out, it generated more questions than answers because of the incomplete guidance. It’s been hard to plan.”

Brent Corrigan, CPA, JD, LLM in taxation, partner at Brinkerhoff Revenig & Corrigan, LLC in Denver, describes the current tax environment as challenging. “You’re now looking at two different sets of laws: 2017 and then 2018 and forward. We’re just starting to get answers for some of the questions regarding the new law’s provisions,” he says.

“There are gray areas. You can read the law as it is in the tax code, but the law sometimes shifts slightly based on recently issued

“There are gray areas. You can read the law as it is in the tax code, but the law sometimes shifts slightly based on recently issued proposed regulations.” proposed regulations. We’re trying to keep up with the changes and advise people as we go. We’re spending extra time evaluating and repositioning clients for their ultimate benefit under the new law.”

NewsAccount | November/December 2018

Misegadis spent January 2018 going to courses and reading any material she could find. Then the filing season hit. “In reality, waiting is proving to be the best solution,” she says. “The IRS has come out with guidance that has limited some of the planning opportunities we thought we had.”

MORE TIME, MORE BILLINGS As practitioners work through the changes with and for their clients, they’re seeing billings go up. “It’s definitely more time-intensive,” Coet says. The IRS has indicated it will take two and a half hours per K-1 form. “We have to anticipate that for our filing period and have that additional time available. We already have staffing problems, and we’re trying to make this work for clients. I don’t see how billings can’t go up. If practitioners aren’t already thinking about this, they’re going to be caught short. It’s going to be very costly for us timewise and for the clients.

We’re proactively educating them as to why.”

Fesler explains that even while he was trying to complete 2017 filings in time for the Sept.

15 deadline, he was simultaneously talking to clients about 2018 and what they need to get their books in order to accommodate the changes. “It was a Catch-22,” he says. “We explained to clients what we did for 2017 and then went straight into what it looks like going forward. We had to explain last year’s rules and then project based on current rules under the new law.”

Some of Fesler’s small- and medium-sized businesses reached out to him as soon as the TCJA passed. “Some clients read the headlines and worry about how everything will affect them.” Fesler says it’s those clients who really like to play the tax game. “They want to know how they can keep more money in their pockets.” There was a definite scurry in December 2017 to help clients who

wanted to pay their income and property taxes in 2017 to get the deduction that would be limited for 2018.

Under normal circumstances, Fesler sends clients two or three emails a year with a current update and things to consider. When the TCJA passed, the firm sent an email of changes and a two-page letter to individual and business clients. “None of them really reacted at that point,” he says. “They waited until their 2017 tax meeting and came with questions that applied specifically to them.”

Fesler says those questions revolved around what they could and could not deduct.

AS THE GUIDANCE TRICKLES IN Corrigan says for his clients, the biggest and most dynamic benefit from the TCJA is the 20 percent qualified business income (QBI) deduction which will allow owners of sole proprietorships, partnerships, trusts, and S corporations to deduct 20% of their qualified business income. (The IRS issued proposed regulations on Aug. 8, 2018, regarding the qualified trade or business income deduction under Sec. 199A of the TCJA. See the article on page 10.)

“We probably have spent the most time talking to businesses about how to maximize that benefit in their single company or groups of companies,” Corrigan says. “We’re reviewing restructuring alternatives for clients with a view on tax savings and economic effects. There’s still lots of movement to come on this new law, but overall, most people are going to be pleased this time next year when they see their tax savings.”

Part of Corrigan’s client conversations includes the disclaimer, ‘We’re still not sure.’

“Right now, I know what position I’d take,” he says. “The IRS is on track with the first round of regulations, but we expect final regulations to be more refined and comprehensive.”

Corrigan’s firm primarily is scheduling client face-to-face meetings or conference calls to communicate changes. The firm spent most of last December anticipating what might happen and advising clients on planning choices. This year, the communication looks a bit different. “Some decisions are being deferred, awaiting clarity from regulators.”

These uncertain times are when the face-toface meetings are most valuable, and Corrigan’s firm has been aggressive about reaching out to clients. “We feel this interaction is the most efficient way to discuss the complexities of clients’ business and tax situations.”

SHOCK AND AWE Coet says her goal is to help clients avoid unwelcome surprises. With media headlines and politicians touting better cash flow and bigger paychecks as a result of the TCJA, clients need a reality check. “We’ve been cautioning them that we can’t control what their employers do with their withholding. In my mind, the withholding tables dropped too far to prove the politicians right,” she says.

“We’re recommending to pay as you go in small bites. Otherwise, clients may experience some shock and awe when they hear they owe four figures at filing time. It’s not going to be pretty for individuals. They’ll be short, and for us, that’s going to lead to more time demands and more complications.”

Before the end of 2017, Coet sent a client letter to businesses and individuals outlining what was to come. She says she also was trying to quell rumors. “With so many different iterations of the bill being released, we wanted to tell everyone to hold their horses,” she says. “People were latching onto different provisions that maybe weren’t even going to survive in the end. We wanted to give clients a profile of what was actually signed into law.”

Coet 2 CPAs doubled up, filing for 2017 while simultaneously doing what they could to help clients prepare for 2018 and save where they could. The firm sent an analysis to more than 700 clients that included the advance warning to tune into their withholdings.

“At least a dozen individuals who have sent in their year-to-date pay stubs have found out what we predicted would happen, and they’re down four figures,” she says. “They ask how it could happen. I’ve been telling them this for five months.”

Misegadis says she had an “uh oh” moment last January in a COCPA CPE class taught

by Don Farmer, CPA. “As great as Don is, he had to say many times, ‘we just don’t know,’” she recalls. She was concerned about the QBI deduction and how it would impact her business clients. It seemed to be the greatest opportunity to lower her clients’ taxes, and it’s where she continues to focus her planning time.

“It’s difficult to talk about this with clients because you’re getting into such complex matters,” Misegadis says. As a sole practitioner, she began calling other CPAs and tax attorneys. One of the concerns for their real estate clients was whether they could or should be rewriting leases and just how to apply the trade or business standard in

the context of rental activity. “Guidance is trickling in and answering some questions though still leaving others unanswered. Final regulations are needed,” she says.

On a more positive note, Misegadis says because compliance season came quickly after the TCJA passed, it presented opportunities to help her individual clients prepare for 2018 early in the year while getting through the 2017 season. With regard to the new standard deduction and SALT limitations, she found opportunities with her higher wealth philanthropic clients to alternate giving years and further use donor advised funds to garner more cumulative deductions. “Awareness of these changes early in the year was a benefit.” Analyzing certain home equity indebtedness and making recommendations was another area for which early awareness was helpful. “Getting through the season was challenging, but I could highlight certain situations and help clients proactively prepare for 2018.”

WHAT LIES AHEAD? The coming year might be driven by two words: amend and restatement.

Fesler says he expects the coming filing season to be busier than usual, due to educating clients about all the changes and amending tax returns for new clients.

While the mortgage interest component was preserved in the TCJA, other caveats, such as only being able to deduct a home equity line of credit if it were used specifically for improvements or to make an addition to a property, makes it more complicated for clients to understand. “That’s our job – to make it simpler for our clients,” he says.

Fesler describes the TCJA implementation process as more frustrating and time-consuming this year than ever before. “It’s about not having the time or resources,” he says. “The new regulations and tax code are written in legalize. In addition, the TCJA was compiled in a very short time period. We go to classes to learn about the changes and dissect the information. Then a client asks a question, and your first response is, ‘It depends.’”

Fesler says there are regulations and IRS guidance yet to come before the 2018 filing deadline. “But in the end, we get to be more creative. It will be a fun filing season.”

November/December 2018 | www.cocpa.org

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FEDERAL TAXATION

From the IRS: TCJA Sec. 199A FAQ’s NOTE: These FAQs, published at irs.gov, are not included in the Internal Revenue Bulletin and therefore may not be relied upon as legal authority. The information cannot be used to support a legal argument in a court case.

H

ere are answers to some basic questions about the new 20-percent deduction for pass-through businesses. Also known as the section 199A deduction or the deduction for qualified business income, the deduction was created by the 2017 Tax Cuts and Jobs Act. WHAT IS THE QUALIFIED BUSINESS INCOME DEDUCTION? Section 199A I.R.C. provides many taxpayers a deduction for qualified business income from a qualified trade or business operated directly or through a pass-through entity.

The deduction has two components.

Eligible taxpayers may be entitled to a deduction of up to 20 percent of qualified business income (QBI) from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust, or estate. For taxpayers with taxable income that exceeds $315,000 for a married couple filing a joint return or $157,500 for all other taxpayers, the deduction is subject to limitations such as the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid by the qualified trade or business, and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business.

Income earned through a C corporation or by providing services as an employee is not eligible for the deduction.

Eligible taxpayers also may be entitled to a deduction of up to 20 percent of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. This component of the section 199A deduction is not limited by W-2 wages or the UBIA of qualified property.

The sum of these two amounts is referred to as the combined qualified business income amount. Generally, this deduction is the lesser of the combined qualified business income amount and an amount equal to 20 percent of the taxable income minus the taxpayer’s net capital gain. For details on

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figuring the deduction, see the information which follows. The deduction is available for taxable years beginning after Dec. 31, 2017. Most eligible taxpayers will be able to claim it for the first time when they file their 2018 federal income tax returns in 2019. The deduction is available, regardless of whether an individual itemizes deductions on Schedule A or takes the standard deduction.

WHO MAY TAKE THE SECTION 199A DEDUCTION? Individuals, trusts, and estates with qualified business income, qualified REIT dividends, or qualified PTP income may qualify for the deduction. In some cases, patrons of horticultural or agricultural cooperatives may be required to reduce their deduction. The IRS will be issuing separate guidance for co-ops.

HOW DO S CORPORATIONS AND PARTNERSHIPS HANDLE THE DEDUCTION? S corporations and partnerships are generally not taxpayers and cannot take the deduction themselves. However, all S corporations and partnerships report each shareholder’s or partner’s share of QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income on Schedule K-1 so the shareholders or partners may determine their deduction.

WHAT IS QUALIFIED BUSINESS INCOME (QBI)?

QBI is the net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business. Only items included in taxable income are counted. In addition, the items must be effectively connected with a U.S. trade or business. Items such as capital gains and losses, certain dividends, and interest income are excluded.

WHAT IS A QUALIFIED TRADE OR BUSINESS? A qualified trade or business is any trade or business, with two exceptions: 1. Specified service trade or business (SSTB), which includes a trade or

NewsAccount | November/December 2018

business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets, or any trade or business where the principal asset is the reputation or skill of one or more of its employees.

This exception only applies if a taxpayer’s taxable income exceeds $315,000 for a married couple filing a joint return or $157,500 for all other taxpayers.

2. Performing services as an employee HOW IS THE DEDUCTION FOR QUALIFIED BUSINESS INCOME COMPUTED? The SSTB limitation does not apply if a taxpayer’s taxable income is below $315,000 for a married couple filing a joint return and $157,500 for all other taxpayers. The deduction is the lesser of: a. 20 percent of the taxpayer’s QBI, plus 20 percent of the taxpayer’s qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income b. 20 percent of the taxpayer’s taxable income minus net capital gains If the taxpayer’s taxable income is above the $315,000/$157,500 thresholds, the deduction may be limited based on whether the business is an SSTB, the W-2 wages paid by the business, and the unadjusted basis of certain property used by the business. These limitations are phased in for joint filers with taxable income between $315,000 and $415,000 and all other taxpayers with taxable income between $157,500 and $207,500. The threshold amounts and phase-in range are for tax year 2018 and will be adjusted for inflation in subsequent years.

I HAVE INCOME FROM A SPECIFIED SERVICE TRADE OR BUSINESS. HOW DOES THAT AFFECT MY DEDUCTION? The SSTB limitation does not apply to any taxpayer whose taxable income is below the

$315,000/$157,500 threshold amounts. For taxpayers whose taxable income is within the phase-in range, the taxpayer’s share of QBI, W-2 wages, and UBIA of qualified property related to the SSTB may be limited. If the taxpayer’s taxable income exceeds the phase-in range, no deduction is allowed with respect to any SSTB. The threshold amounts and phase-in range are for tax year 2018 and will be adjusted for inflation in subsequent years.

IN 2018, I WILL REPORT TAXABLE INCOME UNDER $315,000 AND FILE MARRIED FILING JOINTLY. DO I HAVE TO DETERMINE IF I AM IN AN SSTB IN ORDER TO TAKE THE DEDUCTION? IS THERE ANY LIMITATION ON MY DEDUCTION? No, if your 2018 taxable income is below $315,000 if married filing jointly, or $157,500 for all other filing statuses, it doesn’t matter what type of business you are in. You will be able to deduct the lesser of: a. 20 percent of your QBI, plus 20 percent of your qualified REIT dividends and qualified PTP income, or

exceeds $415,000. However, you may be entitled to a deduction for QBI earned from another trade or business that is not an SSTB or from qualified REIT dividends or qualified PTP income.

IN 2018, I AM SINGLE AND WILL REPORT TAXABLE INCOME OVER $207,500. I AM NOT IN AN SSTB. AM I ENTITLED TO THE DEDUCTION? Yes, if you have QBI, qualified REIT dividends, or qualified PTP income. For eligible taxpayers with total taxable income in 2018 over $207,500 ($415,000 for married filing joint returns), the deduction for QBI may be

IN 2018, I AM SINGLE AND WILL REPORT TAXABLE INCOME OVER $207,500. MY ONLY INCOME IS FROM AN SSTB. AM I ENTITLED TO THE DEDUCTION WITH RESPECT TO THE SSTB? No. The same is true for a married couple filing a joint return whose taxable income

HOW DO CO-OPS QUALIFY FOR THE 199A DEDUCTION? The IRS will be issuing separate guidance for co-ops.

TAX YEAR IN REVIEW AND 2018 PLANNING with

Toby Clary, CPA, CVA Toby Clary’s Tax Year in Review and 2018 Planning course will cover revenue rulings, notices, and tax cases you’ll need to know for the 2018 tax season.

b. 20 percent of your taxable income minus your net capital gains IN 2018, I WILL REPORT TAXABLE INCOME BETWEEN $157,500 AND $207,500 AND FILE AS SINGLE. I RECEIVE QBI. DOES IT MATTER IF IT IS FROM AN SSTB? Yes, because your taxable income is above the threshold amount, your section 199A deduction with respect to any SSTB will be limited. However, because you are within the phase-in range, you may be allowed some section 199A deduction with respect to an SSTB. In addition, for taxpayers above the threshold amount, the section 199A deduction with respect to any trade or business, including an SSTB, may be limited by the amount of W-2 wages paid by the trade or business and the UBIA of qualified property held by the trade or business. The phase-in range is $315,000 to $415,000 for joint filers and $157,500 to $207,500 for all other filing statuses. Section 1.199A-1 of the proposed regulations provides additional information.

limited by the amount of W-2 wages paid by the qualified trade or business and the UBIA of qualified property held by the trade or business. The proposed rules provide additional information on these limitations. The IRS also issued a notice of proposed revenue procedure providing methods for determining W-2 wages for purposes of the limitation.

TOPICS

FIND A COURSE NEAR YOU!

Colorado Tax Update Tax Cuts and Jobs Act 199A in Depth - Deduction for QBI New Proposed Regulations The Wayfair Decision - State Taxing of Internet Sales Planning Points Under the New Law

11/5 - Steamboat Springs 11/12 - Grand Junction 11/13 - Glenwood Springs 11/29 - Pueblo 11/30 - Colorado Springs 12/3 - Longmont 12/6 - Durango 12/11 - Boulder 12/13 - Ft. Collins 12/17 - Westminster 12/20 - COCPA or Webcast

Register online at cocpa.org November/December 2018 | www.cocpa.org

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EDUCATIONAL FOUNDATION OF COCPA

$105,000 in Scholarships Awarded in Diamond Anniversary Year

T

he future of accounting in Colorado is bright considering the 42 juniors, seniors, and graduate students who were awarded a $2,500 scholarship for their academic achievements, demonstrated leadership, and commitment to the profession.

In its Diamond Anniversary 60th year, the Educational Foundation of the Colorado Society of CPAs (a 501(c)(3) organization) continues its mission to promote accounting education in Colorado and support individuals and institutions engaged in its study and teaching. Due to the generous support of donors, the Board of Trustees awarded scholarships to 50% of all applicants, who are attending 13 different Colorado colleges and universities.

Congratulations to the Diamond Anniversary Scholarship recipients:

Anton Collins Mitchell LLP Scholarship Maria Kelly, Colorado State University Global

Otto and Betty Butterly Scholarship Taylor Din, University of Denver

Carol Cameron Scholarship Astride Mukabagula, University of Colorado Colorado Springs

Past Presidents Scholarship Derek Downing, University of Northern Colorado

Crowe LLP Scholarship Abbey Stagner, Adams State University

PricewaterhouseCoopers LLP Scholarship Brian Brentlinger, University of Colorado Colorado Springs

Deloitte Scholarship Thomas Calvo, University of Colorado Colorado Springs Eide Bailly LLP Scholarship Lydia Lawton, University of Colorado Colorado Springs EKS&H LLLP (now Plante Moran) Scholarships Catherine Ray, University of Denver; Sydni Rose, Colorado Mesa University; Jacqulyn R. Kiefer, Regis University; Trevor Hunt, Fort Lewis College EY LLP Scholarship Erika Jeffs, Fort Lewis College Gordon Scheer Scholarship Michelle Ihlefeldt, Regis University Hugh C. Braly Scholarship Karissa Schroeder, University of Colorado Denver KPMG LLP Scholarship Colton Jackson, University of Denver Mark J. Smith Scholarships Elisabeth Hensley, Metropolitan State University of Denver; Kristy Lindquist, Colorado Mesa University; Jeffrey Deyoe, University of Colorado Boulder Moss Adams LLP Scholarship Michele Barnes, Colorado State University Pueblo 12

RubinBrown Charitable Foundation Scholarship Desrae Johnson, University of Colorado Denver Thomas J. Kundinger Scholarship Stephanie Long, Metropolitan State University of Denver General Scholarships Taylor Blagg, University of Denver; Zachary Fryer, University of Denver; Rachel Gustafson, University of Denver; Jena Hnativ, Regis University; Trey Hoefer, University of Denver; Danielle Keen, University of Denver; Alex Lopez, Adams State University; Steven Lorenzen, University of Denver; Morgan Miller, University of Colorado Boulder; Taylor Munchrath, University of Denver; Lane Olsen, University of Colorado Boulder; John Owsley, University of Denver; Hailley Pedersen, Regis University; Kathryn Schell, Colorado State University Fort Collins; Steven Schopen, Colorado Mesa University; Sean Sutanto, Colorado State University Fort Collins, Morgan Tomenchok, University of Denver; Christi Walker, University of Colorado Colorado Springs; Max Wellman, University of Colorado Denver; Evan Wiemers, University of Colorado Colorado Springs

NewsAccount | November/December 2018

2018 - 2019 EDUCATIONAL FOUNDATION OF THE COCPA BOARD OF TRUSTEES Diego Baca, CPA, President EY LLP, Denver Toby Clary, CPA, CVA, Vice President Soukup Bush & Associates, P.C., Fort Collins Audra Dixon, CPA, Treasurer EY LLP, Denver Sharon Lassar, PhD, Past President University of Denver, Denver Theresa Hilliard, CPA Fort Lewis College, Durango Ann Hinkins, CPA Plante Moran PLLC (formerly EKS&H LLLP), Denver Patrick Lytle, CPA SM Energy Company, Denver Scott Ranby, CPA, CFP Kuhn Advisors Inc., Denver Laura Theiss, CPA Holben Hay Lake Balzer CPAs, LLC, Denver Mary Medley, CEO Colorado Society of CPAs, Englewood Alicia Gelinas, CPA Executive Director Educational Foundation of COCPA, Englewood

Distinguish yourself as a strategic leader.

Earn the global designation for financial professionals.

Explore the CGMA Finance Leadership Program: A lifelong professional learning journey that puts you on the path to take your career to a new level. You’ll learn and acquire the skills it takes to become a more strategic, confident, secure and insightful leader who will better influence and guide groups and decisions within your organization. ®

Get started at CGMA.org/Program.

“ I believe the CGMA designation enhances and broadens a CPA’s awareness of the internal and external nuances of the complex workings of a business.”

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© 2017 Association of International Certified Professional Accountants. All rights reserved.

CGMA and Chartered Global Management Accountant are trademarks of the Association of International Certified Professional Accountants and are registered in the United States and other countries. The Globe Design is a trademark owned by the Association of International Certified Professional Accountants. 23169-326

November/December 2018 | www.cocpa.org

13

MANAGEMENT ACCOUNTING AND REPORTING

Raising the Reporting Bar: Why Integrated Reporting Matters in the Digital Economy

BY NICK TOPAZIO, ACMA, CGMA

O

ver the last 20 years, businesses have undergone dramatic change.

Technology is disrupting not only the products we offer but also the way we earn profit. Businesses have moved from the manufacturing of tangible goods to service-based business models. And this shift is fundamentally changing the assets that affect a corporation’s market value.

Economists refer to this shift as the “rise of the intangible economy.” Non-financial and intangible assets such as intellectual property, customer relationships, brand, and human capital now make up a majority of a corpora-

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tion’s net worth. This is the mirror opposite from the 1970s when over 80% of a company’s market value could be traced through to the financial statements. Today, less than 20% of a company’s market value can be accounted for by its financial and physical assets.

So, what does this move from tangible to intangible value on a company’s balance sheet mean for today’s financial professionals?

Quite a bit, actually. Business leaders look toward management accountants to provide a true picture of an organization’s value. This is where integrated reporting may help.

NewsAccount | November/December 2018

WHY <IR> MAKES SENSE Integrated reporting, or <IR>, is a way for businesses to share a holistic view with investors and stakeholders on how their strategy, performance, and assets will create value over the short, medium, and long term. The International Integrated Reporting Council (IIRC) made great strides in helping organizations adopt this approach to corporate reporting when it introduced the International Integrated Reporting Framework more than a decade ago. The <IR> framework helps organizations measure against six broad categories of capitals: financial,

to climate change is helping the cause for <IR>. Earlier this year, the China Securities Regulatory Commission introduced new requirements that, by 2020, will mandate all listed companies to disclose environmental, social, and governance (ESG) risks associated with their operations. In addition, the current Ministry of Finance (MoF) Accounting Regulatory Department five-year plan cites <IR> and the intention of the MoF to participate in continued development of <IR>.

Despite global adoption challenges, there are reasons to be hopeful. There is “investor pull,” for instance, from Larry Fink, CEO of BlackRock, which has over $6 trillion of assets under management. He has reminded CEOs around the world that they need to start accounting for their company’s impact on society. In addition, there is growing momentum from “preparers.” The U.S. <IR> working group website lists a number of examples from well-known companies including American Electric Power, Coca Cola, Dow Chemical, General Electric, and Pepsico. <IR> RESOURCES Whether your organization has adopted <IR> or not, you can embrace integrated thinking.

Several resources are available:

manufactured, intellectual, human, social and relationship, and natural. Reporting through this framework enables businesses to be more future-oriented and helps them think about their business strategy within the context of the external environment. This leads to better informed decisions, management of key risks, and identification of new opportunities.

For management accountants, adopting an <IR> reporting framework supports a fundamental principle of management accounting – integrated thinking. The Association of International Certified Professional Accountants, the global organization formed by members of the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA), supports adoption of integrated thinking and <IR> for all organizations.

The Association’s Global Management Accounting Principles, the world’s first universal framework for management accounting best practice, provide the information required to support integrated thinking and decision-making, in particular, through assessing financial and non-financial perfor-

mance – past, present, and future. This information can help organizations to achieve a better understanding of how value is created through their business model.

GLOBAL ADOPTION CHALLENGE More than 1,000 businesses globally use <IR> to communicate with investors, stakeholders, and regulators, with countries such as South Africa, Japan, India, and the UK leading adoption. However, the tipping point has not yet happened in markets like the U.S. and China, the world’s two largest economies.

Why might this be? In the U.S., the business environment, especially in relation to corporate reporting, is heavily rules-based. The fears of litigation and personal liability seem to play a disproportionately significant role in determining corporate reporting disclosures. This attitude clashes with the principles-based nature of the <IR> framework, its focus on voluntary disclosure, and its requirement for future-oriented information.

The outlook for China looks more positive.

Chinese determination to take a driving seat in international cooperation to respond

• A new report (bit.ly/BlackSunReport) from the Association and Black Sun shares executive insights on the global state of integrated reporting.

• A thought leadership paper (bit.ly/ IntegratedThinkingReport) lays out ten recommendations to help aid the design and management of effective processes of integrated thinking and reporting.

• A Facebook Live interview (bit.ly/IntegratedVideo) with Neil Stevenson, Managing Director at the IIRC, highlights how organizations can better express value through integrated reporting.

• The Global Management Accounting Principles (bit.ly/GlobalManagement) that provide a universal framework to help management accountants achieve integrated thinking.

Nick Topazio, ACMA, CGMA, is Associate Technical Director, Management Accounting, Integrated Reporting Research, with the Association of International Certified Professional Accountants. Contact him at ntopazio@aicpa-cima.com.

©2018 Association of International Certified Professional Accountants. All rights reserved. Reprinted by permission.

November/December 2018 | www.cocpa.org

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FUTURE READY

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NewsAccount | November/December 2018

Wanted: Algorithmic CPAs to Handle ‘Devastatingly Profound’ Changes

BY NATALIE ROONEY

Feeling overwhelmed by the pace of change? The media is full of stories about how artificial intelligence (AI) and data are changing the way the world works. How can today’s organizations and leaders keep up and even thrive?

M

ike Walsh, futurist, business strategist, speaker, and author, travels the world speaking and consulting with companies about leadership, marketing, culture, and technology in the 21st century.

Walsh describes how today’s ever-accelerating rate of change is deceptive because it isn’t coming from devices or technologies but rather from data and algorithms. “It’s subtle,” he says. “Google isn’t better today.

It’s one thousand times better today. Your photo app knows who’s in photos and makes albums better than you do. Change is happening exponentially, and it’s devastatingly profound.”

THE ALGORITHMIC AGE How to prepare for and move with such massive change is a bit like asking how to eat an elephant. “It’s a big topic,” Walsh admits. He suggests taking a step back and asking,”What’s new this time? What makes change now different from what has gone before? Is this an extension of the digital revolution or something new?”

Walsh offers a glimpse into life in 10 or 20 years. “If you could look through a window and see our world, it would look a lot the same,” he predicts. “There aren’t dramatic changes to daily life, but it will be different in the way things affect our behavior. We’ll still be staring at a screen, but algorithms will be better.”

These algorithms will improve our experiences by using our data to transform everything from retail to communication to marketing. “It will be an invisible revolution.

The algorithmic age is quite different from the digital age,” Walsh says.

The algorithmic age will require a big shift, and Walsh emphasizes that organizations must be willing and able to reinvent themselves. Creating products and services to survive and thrive requires different oper-

ating models, mindsets, and perspectives of the people who work there. “So, we need to reinvent the way we’ll work and operate,” he says.

THE ALGORITHMIC CPA Walsh uses tax work as an example of how things might evolve for the accounting profession. Breaking it down to the simplest form, tax practitioners work with facts that have to be determined and rules that have to be applied. As automation and machine learning impact these areas, it’s not so much about jobs disappearing as it is about how algorithms and automation will change jobs.

“When you automate the repetitive tasks, it’s not about how much money we saved but rather what can we do with the remaining hours we have?” Walsh says. “We can do higher value work.”

The concept raises all sorts of questions.

What is the potential of an accounting knowledge worker in this age? What do machines still struggle to do? “Issues around structuring and interpretation are going to get complicated for CPAs,” Walsh says.

“It’s the reverse of what is happening today where CPAs help clients prepare a return, a government pushes back on certain things, and then CPAs explain the issues to clients.”

In Brazil, regulators already require a live feed of transactional data to determine a company’s tax liability. “So, eventually, there won’t be tax returns,” Walsh says. “Everything will be automated. The future job of CPAs will be auditing an IT system for fidelity rather than the books.”

READY, SET, REINVENT Everyone needs to reinvent himself or herself, Walsh says. “Automation isn’t going away. Data isn’t going away. What is changing is the kinds of people the accounting profession needs in the coming years. We’re

TAKE ACTION • Constantly challenge your assumptions about the future.

• What can you learn from the youngest members of your team?

• Ask them to describe how their personal experiences of connected devices, data, and machine learning might impact the future of what you do.

going to need people with different cognitive skills, creative problem solving skills, and the ability to understand and see non-linear risk to understand how to bring context and experience that machines can’t fully understand. Interpretation becomes a big issue.”

Change isn’t exactly new for the accounting profession, but perhaps the pace of change is what feels so unnerving. Recall when new technologies such as spreadsheets and email changed the way we work. “We adjusted for that,” Walsh says. “Now AI and machine learning will change the value of what humans do. The more junior path into the accounting profession will be automated, so there may be a new pathway into the profession.”

Feeling anxious? Walsh recommends separating yourself from the fear and science fiction. “Given the tools and information, ask yourself, ‘What is the smart way to do this?’”

CONTINUED ON PAGE 18

November/December 2018 | www.cocpa.org

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FUTURE READY CONTINUED FROM PAGE 17 he suggests. “The idea is that our real job isn’t to work. It’s to design work. We have to take a meta perspective. Where is the value I’m bringing? What can change? Professionals have always had to reinvent. It just seems more intimidating because the pace of change is accelerating.”

Think about change on three levels, Walsh recommends. First, humans (your consumers) are changing their behavior because of algorithms. As a result, organizations must become more adaptive and fluid, hire different people, and find a balance between automation and human productivity. And then there’s leadership – the most exciting area, according to Walsh. “Great leaders aren’t worrying about losing their jobs. They’re asking, ‘What is the new job? What does it take to become an algorithmic leader?’”

THE TRUSTED ADVISOR The accounting profession is well-positioned to help organizations with their digital transformations. “CPAs already are so involved, touching all transactions, auditing, and providing assurance,” Walsh says. “CPAs can be a big part of transformation with their clients if they can find a way to define their roles in bigger, more interesting ways.”

Walsh suggests immediately auditing your current capabilities, both as an organization

“The idea is that our real job isn’t to work. It’s to design work.” and as an individual. How much of the work you’re doing has long-term value? What could and should be automated? How do you get ahead of the transformation curve so you’re not waiting for everyone else? “It’s better to do it yourself rather than wait for someone to redefine your job,” he emphasizes. “Understand today’s technology and think about the next five to ten years. What are the value-added things you’ll do in that timeframe?”

What skills will CPAs need? While STEM skills have been emphasized and may be necessary during this transition, Walsh predicts abstract thinking will be the algorithmic professional’s most prized skill. “It may be a very different thing to be a CPA.” Yes, the next few years are going to be tricky, Walsh admits. The way people enter

the profession will change dramatically. The tasks entry-level accountants do today will no longer be done by humans. But that concept of humans doing different work applies to everyone.

“You can ride the changes through if you’re personally invested in constant learning,” he says. “It doesn’t matter what you do today; tomorrow you’ll be doing something different anyway. It’s an exciting time to be a CPA and to be in the profession as long as you’re prepared to reinvent yourself as the world changes around you.”

Mike Walsh, best-selling author of FUTURETAINMENT and CEO of innovation research lab Tomorrow, is a leading authority on 21st century business. Rather than focusing on the distant future, Walsh takes an anthropological approach – scanning the near horizon for disruptive technologies and consumer innovations on the verge of hitting critical mass and then translating these into usable business strategies.

Walsh throws out “mind grenades” to push our thinking. Learn more at mike-walsh.com, or subscribe to his Between Worlds podcast.

M I N D G R E N A D E If you were to start your business again today, leveraging all available technology, data, and new ways of thinking - what would you do differently?

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NewsAccount | November/December 2018

WWW.MIKE-WALSH.COM

WWW.MIKE-WALSH.COM

PENSION FUNDING

Police and Fire Pensions in Colorado Five Years Later

BY PAMELA FEELY, CPA, MBA, AF

In May, 2013, Pamela Feely first wrote about how Colorado addresses pension funding for firefighters and police. Back then, the statewide defined benefit retirement plan offered by the Fire & Police Pension Association of Colorado (FPPA) was among the healthiest plans in the U.S., funding-wise. Yet, it had its problems.

Five years later, the plan is even healthier – excellent news for those who keep Coloradans safe.

L

ike many public pension plans, Colorado’s Fire & Police Pension Association (FPPA) has faced challenges in the last few years.

Members and beneficiaries are living longer, and investment returns going forward are projected to be lower than historical trends.

FPPA’s original plan design required both the employee and the employer to contribute 8% of pay each month. The economic downturn in 2008 forced the trustees to take a look at FPPA’s fixed funding method. The trustees and the members asked the question, “Will a 16% combined rate be enough to provide a reasonable pension upon retirement?” The members asked for and the trustees created a task force to look at options for a source of future funding increases. The task force recommended the members increase their contributions by four percent over eight years.

“Will a 16% combined rate be enough to provide a reasonable pension upon retirement?”

The members voted in June 2014 to increase their contributions beginning in January 2015. The annual increase is an additional ½ percent of pay. The full member contribution will be 12% in 2022. Currently, the employer contribution remains at 8% for a combined 20%.

As of Jan. 1, 2018, FPPA’s statewide plan is 103.7% funded with over $5 billion in assets. The plan uses a discount rate of 7.5%. In 2017, the plan earned 14.95% return net of fees. The trustees, along with their investment consultants, explored investment trends in the current environment. Fixed income products are expected to stay low for the foreseeable future. The equity markets are beginning to cool here in the United States while the emerging markets remain soft. At FPPA’s September 2018 meeting, the trustees voted to lower the discount rate to 7% to address the expected future earnings for the plan.

FPPA’s trustees grant cost of living adjustments (cola) increases only to the extent the fund can pay the increase over 30 years while remain-

ing 100% or greater funded. In recent years, the adjustments have been significantly less than the cost of living. The plan currently is projected to provide miniscule colas over the next few years.

Firefighters and police are not necessarily young twenty-two or twenty-three-year-olds any more. Departments across the state are hiring older people – even into their forties. Some of the hires are transfers from other departments. For other individuals, this is a career change. A young child’s dream to be a firefighter or police officer is being realized later in life. This change in hiring activity impacts the plan. The older first-time firefighter or police officer member does not contribute as long to the plan.

In addition, firefighters and police officers are living longer, resulting in the plan having to pay out a benefit over a longer period of time. In 2016, FPPA’s actuaries recommended increasing the plan’s life expectancy of its members. The trustees agreed to make the adjustment.

The impact on the fund was to decrease available funds for future cost of living amounts.

FPPA’s trustees desire to provide meaningful colas to retirees in the future. They are asking whether the combined twenty percent contribution from the employers and employees is enough to provide an adequate benefit. If not, what options exist to change the situation?

To answer these questions, the trustees recently created a task force of employers and employees to look at potential options. The task force will present its recommendations to the Board of Trustees in spring 2019. Any needed legislative changes will occur in 2020.

In conclusion, Colorado’s police and firefighter pension plan continues to be among the most healthily funded in the country. The foresight and leadership of FPPA’s Board of Trustees, the Colorado legislature, employers, and police and fire unions continue to serve us well.

For more information, visit the FPPA website, fppa.org.

Pamela Feely, CPA, MBA, AF, is President of the West Metro Fire Protection District and a director and trustee of the Fire & Police Pension Association. Feely also is the co-author of A Penchant for Pensions, A Guide to the Actuarial Valuations for Public Pension Plans, released in July 2018. Contact her at pamfeely@aol.com.

November/December 2018 | www.cocpa.org

19

INVESTMENT STRATEGIES

Should A Cryptocurrency Be In Your Investment Portfolio?

BY NATALIE ROONEY

When you hear the term cryptocurrency, you probably think of Bitcoin, but there are many different types of virtual currencies. Could they be an investment option for you or your clients?

A

WHAT IS IT? cryptocurrency is a digital or virtual currency that uses cryptography for security, making it difficult to counterfeit. A cryptocurrency is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.

Bitcoin, the first cryptocurrency, was launched in 2009. By May 2018, over 17 million bitcoins were in circulation with a total market value of over $140 billion. Bitcoin’s success spawned a number of competing cryptocurrencies.

Cryptocurrencies make it easier to transfer funds between two parties in a transaction.

Transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing costs, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers.

As of Sept. 30, 2018, there were 2,331 cryptocurrencies listed on Investing.com. That’s up from about 1,600 in December 2017. The number of cryptocurrencies varies wildly as they come and go. The Motley Fool notes that there are only a select few worth paying attention to, Bitcoin being the largest by far.

The appeal and function of cryptocurrencies come from the blockchain technology behind them. A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as ‘completed’ blocks, the most recent transactions are recorded and added to it in chronological order. Blockchain allows market participants to keep track of digital currency transactions without central recordkeeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically. (Source: Investopedia) Keep in mind, because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be 20

wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.

Despite the technology, cryptocurrencies aren’t immune to hacking. Bitcoin itself has been subject to over 40 thefts, including a few worth more than $1 million.

TO INVEST OR NOT? Despite the media hype, a February 2018 Finder.com study of 2,000 U.S. adults revealed that fewer than eight percent of Americans own cryptocurrencies.

According to the survey, more than 40 percent of Americans who hadn’t purchased cryptocurrencies said their reason was disinterest or the belief there is no need to do so. Another 35 percent said the risk is too high. Twenty-seven percent of respondents said they’re too difficult to understand, and another 18 percent said they believe they’re a scam.

So, should you invest? “In my opinion, no,” says Craig Arfsten, CPA, CFP, a financial advisor with Prosperion Financial Advisors, Greenwood Village. “When you talk about crypto, you have to ask yourself, ‘Are you investing or speculating?’ And should speculating play a significant role in moving you toward your financial goals?” It can be tempting when you’ve watched cryptocurrencies like Bitcoin go from being worth zero to more than $6,000 per coin in 10 years, but the key is to view cryptocurrency as speculative and not as a core investment in your overall financial plan.

It’s important to be purposeful in your investing, Arfsten stresses. “Spend with purpose. Save. Invest wisely. And have goals.

Then you can ask where and how cryptocurrency fits into your plans. For ninety-nine percent of people, the idea of crypto has no relevance at all.”

NewsAccount | November/December 2018

Like everyone else, Arfsten has heard stories of people making money – even a lot of money – from investing in a cryptocurrency.

He recounts a story of his sister’s neighbor who made a $500,000 return.

He also has observed people purchasing cryptocurrency when it’s all over the news and then watch the price drop significantly over the following months. “There’s no question that people are out there doing it,” Arfsten says. “But the question is, ‘Is it appropriate for you, and does it move you towards your financial goals?’ It should not be a part of your financial plan. At most it should be a curiosity. If you really want to have a plan and be serious about your money, it’s too speculative and risky. It’s like going to Vegas and putting your entire retirement portfolio on black.”

Perhaps you have a personal interest or consider it a hobby, for example. There’s nothing wrong with learning about it and possibly investing, Arfsten says. “Satisfy a curiosity, but know that it’s totally speculative. Expect to lose,” he cautions.

COMMODITY OR SECURITY? Academia already had been leaning toward calling cryptocurrencies commodities rather than securities when, in September 2018, in a landmark case for the cryptocurrency industry, a federal judge ruled that a cryptocurrency caught in the midst of a lawsuit is a commodity.

Mark J. Smith, CPA/PFS, CFP, CIMA, founder of MJ Smith & Associates, Greenwood Village, compares the concept of cryptocurrencies to traditional currencies, which are backed by governments and have many variables impacting the strength or weakness of that currency in relation to other countries.

Cryptocurrencies have no government backing, no interest rate, and no monetary policy attached to them.

Smith also mentions gold as he discusses the stability of cryptocurrency. “Gold, in theory,

you can use to buy things,” he says. “It’s not easy, but if you think of cryptocurrency like gold, the key is supply and demand. The price goes up when there is more demand for a limited supply. However, cryptocurrencies function differently. While Bitcoin does have a finite number of tokens it will issue, there could be an infinite market with different types of cryptocurrencies. “If it’s a commodity like gold and people want to get in, it’s the wild, wild west out there,” Smith says. “We have a hard time knowing where cryptocurrencies fit. It’s a buyer beware market.”

At this point, Smith says his firm doesn’t recommend any cryptocurrency investment whatsoever, but there are clients who don’t mind speculating and rolling the dice with a (hopefully) small piece of their portfolio.

A few of his clients have even sheepishly admitted they’ve bought some. “They know

our heartfelt philosophy relative to investing money is goal-based investing and quality investments. But if they want to explore individual stocks or cryptocurrencies, they can do so,” he says. “I’m not going to be overly offended. We just want them to be aware.

If they’re doing well, look in the mirror. Is it luck or brains? I’m betting more on luck.

It’s still a volatile and speculative part of the investing landscape.”

BLOCKCHAIN TECHNOLOGY What intrigues both Smith and Arfsten is the blockchain technology that underlies every cryptocurrency.

“Blockchain technology has some very serious positive ramifications for the future,” Arfsten says. “The technology is incredible.

Companies like MasterCard are researching it and looking for ways to implement it.” He adds that investing in companies which are

or will be pursuing blockchain technology to improve their business is a better investment than the cryptocurrencies themselves.

Smith describes the upside potential in blockchain as “tremendous in terms of where it’s taking the world with a decentralized and secure transfer of data among parties. That technology platform has a lot of uses among industries.”

Ultimately, both Arfsten and Smith emphasize the importance of investing according to your goals and maintaining a long-term philosophy. “When we deviate in relation to specific investments, which could be a stock, a private offering, Bitcoin, or lending a family member money to start a business, risk goes up,” Smith says. “As long as you take a broadly diversified approach, there will always be dogs. But there will be more winners than dogs, and you’ll do fine.”

Where can an AICPA C redential take your career next?

If you have a specialized interest, you can build on the value you offer clients by adding an AICPA advisory service credential: Personal Financial Specialist (PFS ), Accredited in Business Valuation (ABV ), Certified in Financial Forensics (CFF ) or Certified Information Technology Professional (CITP ). These credentials were developed for the profession by the profession. They set you apart, make a statement and get you noticed.

And, they can seriously boost your career. ®

™

®

®

© 2017 Association of International Certified Professional Accountants. All rights reserved.

AICPA and American Institute of CPAs are trademarks of the American Institute of Certified Public Accountants and are registered in the United States, European Union and other countries.

The Globe Design is a trademark owned by the Association of International Certified Professional Accountants and licensed to the AICPA. 23438B-326

November/December 2018 | www.cocpa.org Explore your opportunities at aicpa.org/aicpacredentials.

21

MEMBER PROFILE

Brian Parmelee: The Road Back

BY NATALIE ROONEY

COCPA member Brian Parmelee, CPA, was already well known for his dedication to his team and clients. But after a life-changing car accident in March 2017, Parmelee showed just how determined he was not only to recover but also to keep working, even in the worst of times.

22

NewsAccount | November/December 2018

O

n March 22, 2017, Brian Parmelee, CPA, tax director with Moss Adams LLP, Denver, left his office at about 6:30 pm and headed home. That was no small feat during tax season. “I had the opportunity to get out before midnight,” he recalls.

Following his normal route, he drove through an intersection and remembers looking up at the green traffic light. He was hit broadside in the driver’s door. Intense pain, his own screaming, and his car spinning in circles are jumbled memories. His next memory is of a police officer standing by his door. “I was sitting there, but I wasn’t very aware. I see pictures of my Jeep, and I don’t remember that much damage.”

What he remembers clearly: the pain in his back. “I was annoyed,” he recalls. “I thought, ‘You’ve got to be kidding me. I don’t have time to deal with this!’”

He sat there, waiting for the Fire Department team to cut him out of his vehicle. No matter how he tried to adjust his torso, he couldn’t get into a position that relieved his back pain. Bystanders asked how they could contact his wife, Tina. They fished his phone out of his left front pocket. He heard someone say, “This is going to be of no use.” His phone was shattered and bent into a crescent moon shape.

He finally made contact with his wife through someone else’s phone, and they agreed to meet at the hospital. Parmelee’s memories from then on are fragments. A firefighter putting a coat over him. Someone talking to him through the passenger window. A bumpy, miserable ambulance ride.

He remembers telling a doctor who was examining his leg, “Dude, you’re killing me!” The doctor’s response: “Actually sir, I’m saving your life.”

The accident had crushed Parmelee’s left leg, the femur shattered into pieces. Doctors drilled a hole into his leg and ran a cable through it to extend it and keep the muscles from pulling the broken bones into a position where they could cut an artery. “The last thing I remember was the doctor yanking my leg,” he says. From then on, Parmelee relied on Tina’s memories to fill the gaps.

That day and the weeks that followed were filled with multiple surgeries. A rod was placed in his left leg from hip to knee. His right hip was dislocated so it was screwed back into place. Ligaments were torn in his left knee. His tibia and fibula were shattered, so a plate was placed from his shin into his foot with 16 screws.

In addition, Parmelee was bleeding internally, requiring probing through holes in his chest. The bleeding source was never found, but eventually it stopped. His kidneys shut down after he was given contrast dye. The list of injuries went on and on.

Parmelee’s medical team kept him sedated most of the time. In late April, he was transferred to an inpatient physical therapy center at Porter Hospital. From that point, his memories become clearer.

PAINFUL PROGRESS Parmelee’s bones set, but in the process, he suffered nerve damage.

“I still can’t feel my left foot from my low shin to my toes.” Movement now is returning in his ankle, but he describes it as a “big clump” since the accident. His right leg, while not directly injured in the accident, is difficult to move because the nerves aren’t talking to the muscles correctly. Parmelee wears braces on his lower legs for stabilization.

“The nerve damage has been the biggest trial,” he says.

At Porter, Parmelee learned to navigate in a wheelchair, using a board to transfer himself from a chair to a bed. Until he could bear weight

on his legs, a crane-like machine helped him to stand. Eventually, he was able to stand in the parallel bars and support his own weight with his arms.

Parmelee credits Tina’s strength throughout. “She dealt with a lot when I wasn’t able to,” he says. “Dealing with doctors. Making decisions. I should have died several times, and she had to deal with those emotions. If I had been in that position and had to see her like that, I don’t know how I would have done. She knew when to yell and when to be grateful.”

Friends visited, but Parmelee says when he sees videos of those conversations he doesn’t remember them, even when he talked to his kids: Tarsen (20), Alyssa (17), Sydney (15), and Hayden (10). “In the videos, I’m saying stuff, and I hear it, but I have no idea when it happened or what was going on. I’d start talking and fall asleep.”

Despite his altered state, Parmelee could consistently answer almost all of the questions doctors asked to assess his condition: his name, the current president, etc. But every time he was asked the year, he answered 1997. “I would get every answer except that one.”

Parmelee’s situation was bad. Really bad. Which makes the story of his continuing recovery even more remarkable.

“I never asked, ‘Why me?’ But I did think, ‘This sucks!’ I lived in fear of not being who I wanted to be,” Parmelee recalls. He spent time in an Iron Maiden-style apparatus to hold him up vertically. He would stare out the window for 15 minutes at a time, pondering how much his back and legs hurt. His arms got stronger, and he could then move himself pretty much anywhere he wanted using the slide board. He’d do laps around the floor in his wheelchair to wear himself out so he could sleep at night. Twice daily, he did physical therapy.

“The PTs would get excited about small improvements, but I didn’t,” Parmelee says. “I was frustrated that even though I couldn’t feel my legs, they still hurt.”

Eventually, it was the insistence and enthusiasm of those PTs, who pushed Parmelee to the point of hating the process, that made him realize what he could accomplish. “I’d think, ‘It can’t hurt worse than this, so just go ahead and bend me and stretch me.’” There were times, he bit a rag the pain was so bad. “But once they got me on the parallel bars, and I took my first couple of steps, I was hooked.”

In fact, he pushed himself so far, he tore something in his right shoulder. It was a reminder that he had limitations, but he also knew he could do more than just sit and feel pain. “It’s amazing what the human body can do.”

He received a blessing from his church family. “They told me I could recover, and I believed it,” Parmelee says. “I didn’t know what it was going to look like, but once I started walking, I didn’t stop.”

He practiced 20 feet at a time, resting for a couple of hours and then doing it again. He continued his outpatient PT at Parker Hospital.

The biggest issue continued to be his back. “When it lit up, I knew it wouldn’t work to put weight on my right leg.” But every day, he hit the reset button and started again.

In April 2018, he began working with a pain specialist. His goal was to stop taking narcotics. At the same time, he couldn’t tolerate the pain.

Many times, he’d undergo an injection, but the pain was still so bad, he couldn’t tell if was getting better. Finally, he had an epidural, which brought relief. For the first time, his back and feet didn’t hurt. The CONTINUED ON PAGE 24 November/December 2018 | www.cocpa.org

23

MEMBER PROFILE CONTINUED FROM PAGE 23 process, called Radio Frequency Ablation, has been nothing short of miraculous.

RETURNING TO WORK Parmelee calls Hein and Associates (now Moss Adams) “amazing” for how the firm worked with and supported him during his rehabilitation. In late summer 2017, he went into the office to say hi and pick up a few things. He was overwhelmed by the number of well-wishers.

“From the beginning, I was amazed by all of the support, GoFundMe donations, emails, and visits,” he says. “It reaffirmed that I work at a great place with great people.”

Parmelee says the firm never pressured him to return to work. Rather, the Parmelees were asked what they needed. The pressure to return came from Parmelee himself who wanted to get back to his book of business.

In August 2017, he began to work 10-15 hours a week. At first, even that proved too much. As a face-to-face kind of guy, Parmelee wanted to see his team and be a part of their training and development. With that option not viable, he had to learn to work from home and dial back his expectations for himself.

Although Parmelee won’t toot his own horn about his recovery and return to work, his colleagues have no problem stepping in to do so.

Jake Vossen, assurance partner at Moss Adams, recalls that Parmelee started helping co-workers on tax provisions early on, despite the energy it required. “His tax niche intermingles with all aspects of a CPA firm,” Vossen says. “He started working again before he could even come into the office.” Vossen adds that when most people would have sat back in a chair and yelled for a scotch and a cigar because they were in pain, Parmelee was different. “Brian always was about helping others and his clients. He never asked for sympathy. He never complained. Despite his hardships, he maintained his positive demeanor, hard work, and sense of humor. That never changed. It was inspiring.”

“From the beginning, I was amazed by all of the support. It reaffirmed that I work at a great place with great people.”

THE ROAD AHEAD These days, Parmelee is learning to celebrate the little things – like his PTs who would get excited when he couldn’t. His drive to be self-sufficient is strong – not just for himself, but for Tina who shouldered so much of the emotional side of his recovery process. “I also appreciate the fact that people still give me crap when I screw up, and they’re not careful with me. I like that feeling of coming to work and doing my job.

It may only be three to four hours a day, but I value the social interaction and being around people I value and feeling like they value me.”

The road still isn’t smooth and may not be for a long time. “With my beliefs, my family, and my peers at work, I feel like I can do it,” he says.

“I don’t have the fear anymore that I’m never going to be the same, because I’m not. If this is my reality, I might as well enjoy it. And if I can suddenly walk without my braces, it’s a plus. It’s more than I had yesterday. There’s no more ‘this is where I want to get.’ It’s ‘I’m going to get better every day.’ As long as I don’t stop progressing, I have a desire to make sure the positives outweigh the negatives.”

Pat Hanley, CPA, tax partner and Denver Office Tax Leader at Moss Adams, says despite Parmelee’s physical and emotional condition, his dedication to his clients never waned. “He wanted to take care of his clients to get through the fall busy season. He loves the people he works with, and he was eager to get back into the ball game. He wants to be back full time.”

Hanley describes Parmelee as a “highly valued employee. He’s a good person to work for and with. He’s solid ethically and morally. Salt of the earth. People were devastated when they heard about the accident.”

After the accident, Parmelee’s clients contacted the firm – not out of concern for their accounts but because they were concerned about Parmelee himself. “They’re constantly asking us how he’s doing,” Hanley says. “It’s a testament to his relationships with his clients.”

Parmelee says he’s just doing what has to be done. “This is my life.

This is what I’ve been dealt. I have to figure out how to make the best of it. I did have doubts. But I’ve had the firm’s support and flexibility to do whatever I could do.”

Parmelee took a driving class in April 2018 and now drives with hand operated controls. His original goal was to spend 20-25 hour a week at the office. He’s not quite there yet, but he finds being back in the office gives him a huge boost. “It put me back in my zone and where I thrive,” he says. “And when I can’t do something or struggle, it’s ok because it’s not permanent.”

24

NewsAccount | November/December 2018

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From corporate pension plans to endowments and foundations, sophisticated investors demand clear and disciplined investment processes created by investment management consultants who work in their clients’ best interests.

But we think institutional investors shouldn’t be the only ones to benefit from written investment policy statements, transparent portfolio management costs, avoidance of conflicts of interest and a comprehensive investment monitoring process. That’s why, at M.J. Smith and Associates, we treat individuals the same way we treat institutions – with honesty, integrity, objectivity, and a clear, understandable process.

Whether the portfolio is simple or sophisticated, every investor needs a trustworthy advisor. And it’s our pleasure and privilege to be of service.

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5613 DTC Parkway, Suite 650, Greenwood Village, CO 80111 | 303.768.0007 | www.mj-smith.com M.J. Smith & Associates is an independent registered investment advisor. Securities offered through RAYMOND JAMES FINANCIAL SERVICES, INC. member FINRA/SIPC. *Raymond James financial advisors do not provide tax advice. You should discuss any tax matters with the appropriate professional.

Barron’s annual ranking of the nation’s “Top 1,000 Financial Advisors” (changed to 1200 Advisors in 2014). Source: Barron’s “Top 1,000 Financial Advisors,” March, 2014. Barron’s is a registered trademark of Dow Jones & Company, L.P. All rights reserved.

The rankings are based on data provided by over 4,000 individual advisors and their firms and include qualitative and quantitative criteria. Data points that relate to quality of practice include professionals with a minimum of 7 years financial services experience, acceptable compliance records (no criminal U4 issues), client retention reports, charitable and philanthropic work, quality of practice, designations held, offering services beyond investments offered including estates and trusts, and more. Financial Advisors are quantitatively rated based on varying types of revenues produced and assets under management by the financial professional, with weightings associated for each. Investment performance is not an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment picking abilities. The ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of the advisor’s future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. Barron’s is not affiliated with Raymond James.

Source: Barron’s “Top 1,200 Financial Advisors,” March, 2018. Barron’s is a registered trademark of Dow Jones & Company, L.P. All rights reserved. The rankings are based on data provided by over 4,000 individual advisors and their firms and include qualitative and quantitative criteria. Data points that relate to quality of practice include professionals with a minimum of 7 years financial services experience, acceptable compliance records (no criminal U4 issues), client retention reports, charitable and philanthropic work, quality of practice, designations held, offering services beyond investments offered including estates and trusts, and more. Financial Advisors are quantitatively rated based on varying types of revenues produced and assets under management by the financial professional, with weightings associated for each. Investment performance is not an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment picking abilities. The ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of advisor’s future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. Barron’s is not affiliated with Raymond James.

The Forbes ranking of America’s Top Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative and quantitative data, rating thousands of wealth advisors with a minimum of seven years of experience. Ranking algorithm is based on quality of practice, including: telephone and inperson interviews, client retention, industry experience, review of compliance records, firm nominations; and quantitative criteria, including: assets under management and revenue generated for their firms. Investment performance is not a criteria because client objectives and risk tolerances vary, and advisors rarely have audited performance reports. Rankings are based on the opinions of SHOOK Research, LLC which does not receive compensation from the advisors or their firms in exchange for placement on the ranking. Research Summary (as of July 2016): 11,235 Advisor nominations were received, based on thresholds. 4,000 Advisors were invited to complete the online survey. 2,500 Advisors were interviewed by telephone. 425 Advisors were interviewed in-person at the Advisors’ location. Final list of the top 200 Advisors was then compiled based upon the quantitative criteria. Research Summary (as of September 2017): 19,872 Advisor nominations were received, based on thresholds. 4,504 Advisors were invited to complete the online survey. 4,432 Advisors were interviewed by telephone. 923 Advisors were interviewed in-person at the Advisors’ location. Final list of the top 250 Advisors was then compiled based upon the quantitative criteria. Raymond James is not affiliated with Forbes or Shook Research, LLC. This ranking is not indicative of advisor’s future performance, is not an endorsement, and may not be representative of individual clients’ experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating.

The FT 400 was developed in collaboration with Ignites Research, a subsidiary of the FT that provides specialized content on asset management. To qualify for the list, advisers had to have 10 years of experience and at least $300 million in assets under management (AUM) and no more than 60% of the AUM with institutional clients. The FT reaches out to some of the largest brokerages in the U.S. and asks them to provide a list of advisors who meet the minimum criteria outlined above. These advisors are then invited to apply for the ranking. Only advisors who submit an online application can be considered for the ranking. In 2014: roughly 1,500 applications received; 26.6% (400) were selected for the final list In 2017, roughly 790 applications were received and 400 were selected to the final list (50.6%). The 400 qualified advisers were then scored on six attributes: AUM, AUM growth rate, compliance record, years of experience, industry certifications, and online accessibility. AUM is the top factor, accounting for roughly 60-70 percent of the applicant’s score. Additionally, to provide a diversity of advisors, the FT placed a cap on the number of advisors from any one state that’s roughly correlated to the distribution of millionaires across the U.S. The November/December 2018 | pay www.cocpa.org 25 The FT is ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of advisor’s future performance. Neither Raymond James nor any of its Financial Advisors a fee in exchange for this award/rating. not affiliated with Raymond James.

NOT-FOR-PROFIT STANDARDS

Clarifying the Accounting of Contributions

BY STEVE CORDER, CPA, CGMA, AND LORI ANNE REINWALD, CPA

I

n June 2018, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update, (ASU) No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This clarification was determined to be necessary after the release of the revenue recognition standard update, which specifically excluded contributions. There are two parts to this clarification, (1) whether grants from a government agency or foundation should be classified as an exchange transaction or a contribution, and (2) determining when a grant is conditional or not, particularly those that are also donor restricted.

First, we should define an exchange transaction and contribution. An exchange transaction occurs when there is a “reciprocal transfer in which each party receives and sacrifices approximately commensurate value.” Examples of exchange transactions include a student paying tuition to a school in “exchange” for a year of education classes.

A contribution, on the other hand, is “an unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary, nonreciprocal transfer by another entity acting other than as an owner.” Examples of contributions would include a donor providing funds to help a not-for-profit to construct a new building. The donor may expect some kind of recognition of the gift, but that would be considered incidental to the overall benefit to the not-for-profit’s new building.

There were many questions about how contributions, particularly grants from the government, are accounted for, as there is a lot of diversity in current practice.

Many entities record government grants as exchange transactions. Based on the previous indicators used in determining whether a transaction was a contribution or an exchange transaction, it was a confusing determination, and gifts could be interpreted in different ways. For example, some of the indicators, such as the method of delivery or the method of determining the amount of 26

payment, are both indicators that were often used to support government grants being considered exchange transactions. Conversely, some entities record government grants as temporarily restricted contributions. These organizations viewed these grants as contributions because they are a voluntary nonreciprocal transfer.

This ASU clarifies that when looking at these transactions organizations should not get “hung up” on the entity which is providing these funds (resource provider). Rather, what does each party in the transaction receive? A transaction should be reviewed to determine if each party is directly receiving commensurate value. For example, when an entity receives a government grant and the benefit is to the general public, the government is not receiving commensurate value. The value that the government might receive is indirect or it may be incidental to the potential benefit to the public. A determination must be made about whether the transaction is part of an existing exchange transaction between a recipient and an identified customer. Examples would include Pell Grants to cover part of tuition or Medicare and Medicaid to cover healthcare. These types of transactions are to be treated as exchange transactions.

As previously mentioned, government grants have significant requirements tied to the agreements, and, if these strict requirements are not met, the government will require repayment. This ASU considers these requirements to be conditions that first must be met before the grant can be recognized as revenue. In cases of cost reimbursement these conditions are met as the funds are expended in accordance with the grant agreement.

Now, there is clarification that government grants are to be accounted for as contributions.

The second part of this ASU focuses on conditional grants. A conditional grant is now better defined in the ASU when “one or more barriers that must be overcome before a recipient is entitled to the assets trans-

NewsAccount | November/December 2018

ferred or promised” and “a right of return to the contributor for assets transferred (or for a reduction, settlement, or cancellation of liabilities) or a right of release of the promisor from its obligation to transfer assets (or reduce, settle, or cancel liabilities).”

Under previous guidance, there were some recipients of these types of grants for which the agreement would include a right of return but would not have a threshold barrier that must be overcome, and these grants were treated as conditional. These agreements would now be treated as unconditional grants.

There were other recipients, after review of these agreements and because the specific barriers were well within the recipient’s mission and would “likely” be met, which recorded these grants as unconditional. Now these grants would be treated as conditional grants. The FASB specifically took out the probability assessment as to whether it’s likely that a condition can be met or not. For example, if a food bank is required to give a Thanksgiving dinner to 50 families, and the food bank normally supplies 100 families with a Thanksgiving dinner, then it’s likely that the food bank will meet the condition.

However, until the 50 families are served, the grant is conditional and not recorded as revenue.

Indications of a barrier in a grant include: measurable performance-related barrier or other measurable barrier, limited discretion by the recipient on the conduct of an activity, and stipulations that are related to the purpose of the agreement. It is noted in the ASU that administrative and trivial stipulations, such as providing an annual report, are not considered to be a barrier. In fact, most government grants contain a right of return as well as barriers that must be overcome, whether it’s the eligibility of the population served or the allowability of expenses charged to the grant that government grants would generally be considered a conditional promise that is not recorded as a contribution until the funds are spent in accordance with the grant agreement.

Additionally, because the grant is for a specific program, the funds would be considered donor restricted. If this is a cost reimbursement grant, those funds would simultaneously meet the condition in order to be recorded as a donor restricted contribution, and then be released from restriction. The ASU allows that in these cases, even if itâ&#x20AC;&#x2122;s not the entityâ&#x20AC;&#x2122;s policy to show restricted funds that are spent in the same period as without donor restriction, for conditional grants (that also are restricted and released), these funds can be shown as without donor restriction.

The ASU contains many examples that are helpful in implementing this update. Familiarity with these examples can assist in supporting how a grant agreement is recorded.

Being able to walk through the steps and document the commensurate value or lack thereof, documenting any conditional barriers, and documenting donor restrictions are key to implementing this ASU.

Another key point of this ASU is that resource providers, such as foundations, also need to implement this ASU and review their agreements to determine if they are conditional or not. Note that even though this ASU helps to clarify, there are likely to be differences of opinion that could cause entities to record these agreements differently.

However, this new guidance could likely cause some entities to change how they are recording their current grant agreements.

This ASU is to be implemented on a modified prospective basis. The effective date for most not-for-profits (that are resource recipients) will be annual periods beginning after Dec. 15, 2018. If the not-for-profit has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, then it would be implemented for annual periods beginning after June 15, 2018. For any agreements that exist at

the effective date, only the portion of the existing agreement that is not previously recognized would be affected. It would also be applied to all new agreements entered into after the effective date. Entities will not be required to restate prior amounts recognized, however retrospective application is permitted, as is early implementation.

For resource providers (which also includes for profit businesses), an additional year is given to implement this ASU. Steve Corder, CPA, CGMA, past COCPA chair, is managing director and Lori Anne Reinwald, CPA, COCPA Editorial Board member, is a director with Kundinger, Corder & Engle, P.C., Denver. Contact Corder at scorder@kcedenver.com. Contact Reinwald at lreinwald@kcedenver.com.

2018 Women to Watch

Congratulations to the honorees, from left, Kristin Holthus, Leslie Schaus, Sharon Lassar, Danika Greiner, and Kimberley Higgins, who were honored at the Womenâ&#x20AC;&#x2122;s Summit, Aug. 24.

November/December 2018 | www.cocpa.org

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MANAGEMENT ACCOUNTING

The CFO as Chief Risk Manager Disruption is driving risks for every organization. CFOs can play a critical role in helping organizations proactively manage them and create value.

BY PAUL L. WALKER, CPA, PH.D., AND MARK L. FRIGO, CPA, CGMA, PH.D.

T

he role of the CFO in managing enterprise risk and creating future value continues to evolve in this dynamic and rapidly changing environment of disruption. Our research, which we released in a report by the Financial Executives Research Foundation (FERF), The Strategic Financial Executive: Managing Enterprise Risk in a Disruptive World, describes strategies CFOs can use to manage risk and create value in today’s dynamic landscape and discusses how CFOs can incorporate strategic risk themes emphasized in the new enterprise risk management (ERM) framework by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The research is based on extensive interviews with financial executives and other corporate stakeholders from leading companies. The takeaways in the report encompass four strategic themes: recognizing disruption, developing risk management maturity, communication, and strategic thinking.

THEME 1: RECOGNIZING DISRUPTION, THE SPEED OF CHANGE, AND UNDERLYING SOURCES OF DISRUPTION The roles and skillsets of the financial executive must swiftly adapt. CFOs bring value to the table by, among other things, informing the board and CEO regarding matters they may not be familiar with and providing insight to nuances they may not have seen.

Fifty years ago, people managed physical assets to deliver cash flows, explains Corey West, CPA (inactive), chief accounting officer and corporate controller for Oracle. “Today, you manage intangible assets to deliver cash flow. Those intangible assets can be valuable one day and can go ‘bye-bye’ the next, depending on who enters a marketplace

where you’re competing. ... The importance about understanding the business you’re in, the competitive landscape, and where your competition might be coming from, [from] a strategic standpoint, is a lot more important now. I think CFOs need to be part of that thought process.”

THEME 2: INCREASING THE ENTERPRISE’S RISK IQ AND CAPABILITIES ERM is evolving and becoming more strategic in its efforts and results. Given the efforts of COSO to highlight strategic risk dimensions, executives should expect board members to ask more strategic risk questions and be prepared to address them when asked. The ERM framework developed by COSO points out that strategic risks can be sourced as follows: • Strategy and business objectives not aligning with mission, vision, and values • The implications from the strategy chosen • The risk involved with executing the strategy Executives and board members should seek or reconfirm their knowledge related to those strategic risk dimensions. To get this right, financial executives should look to leverage their current ERM processes to determine what strategic risk help and analysis is being developed. Some advanced companies already use strategic risk analysis tools, such as workshops on strategic disruption, black swan events, and emerging trends practices.

THEME 3: THINKING AND COMMUNICATING STRATEGICALLY With the proper strategic thinking, noise and signals can help your organization to know where the market is heading and where

to compete. Consider all the factors, such as customers, the global economy, foreign currency hedging, and contracts with escalations.

Financial executives are in a unique position to take advantage of an integrated approach that sees changes, identifies the risks, and links them to the business model.

THEME 4: DEVELOPING SKILLS TO ENABLE A FORWARD-THINKING FINANCE ORGANIZATION Successful financial executives look toward future value creation. Decisions made with this risk information are aimed toward better business models and future strategy.

“Enterprise risk management consists of a set of forward-looking tools for senior management,” says Jeff Pratt, general manager of enterprise risk management at Microsoft.

Knowledge of accounting, finance, reporting requirements, and related skills may have helped financial executives move to the top.

But that knowledge is not enough to keep them successful and able to add the most value to their organizations. We recommend based on work with CFOs that they develop a professional development plan for their CFO team that incorporates strategy, strategic risk management, and business model skills.

Consider the profile of skills needed, and access the current skillset as a starting point.

“The more senior role you play in the organization, the more time you should spend looking forward versus looking in the rearview mirror,” says Bob Verbeck, senior vice president of finance and corporate controller at Boeing. “... It’s really about proactively determining where you are going with your responsibility [and] your business.”

This article first appeared in CGMA Magazine. For more articles, sign up for the daily email update CGMA Advantage at http://bit.ly/2svn2AY.

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NewsAccount | November/December 2018

DEALING WITH DISRUPTION Financial executives can take the following steps to help recognize disruption, grapple with the speed of change, and understand the underlying sources of change: 1. Periodically rethink and redefine your real competitors. Look outside of the normal channels.

2. Get involved in the identification of signals of change facing your organization.

3. Ensure that you are looking at the right sources of change and disruption.

4. Build a sophisticated process to identify noise and potential changes.

5. Consider your company’s customers as a key source of information, not just about current sales but about future change and potential disruption.

6. Have contingency and resiliency plans based on the size of a disruption.

7. Factor in reaction time. It is more important for some areas than others. Identify when it is critical for your organization.

8. Survey the landscape. Look for disruptors in technologies. Look for disruptors in other industries that might indicate changes in your sector.

9. Build a method to link change and disruption to the business model and to your enterprise’s current strategy.

BOOSTING RISK IQ Financial executives can take the following steps to help their organizations boost their risk IQ and capabilities: 1. Check with your board to determine what information it needs about each of the three strategic risk dimensions.

2. Develop a plan to address those needs.

3. Compare your current risks with the three dimensions. Do they all fall into one of the dimensions (perhaps strategic execution risk)? Adjust for any areas that have no associated plans or tools.

4. Review how strategic risk is addressed in your ERM process.

5. Know the answers to the following questions: What tools have we applied to know that our strategy is the right one? What tools have we applied to determine if we are aligned? What tools have we applied to strategic execution risk?

6. Work with the ERM team to improve the risk IQ and broader risk thinking in the organization.

7. Ensure that risk thinking is seen as part of business thinking.

8. Review the smaller recurring risks for potential surprises. Look for a larger pattern or theme that could signal additional risks.

9. Develop tactical strategies for known risks. Take the risk beyond a map and consider the longer-term budgeting and financial implications.

10. Identify the assumptions in the risk-profile rankings.

THINKING STRATEGICALLY Financial executives can take the following steps to think and communicate more strategically: 1. Ensure that identified risks are incorporated into the business units.

2. Have regular sessions to rethink derailment, opportunities, new business models, and the related risks.

3. Understand the business’s view of the risk. Engage business units.

Listen to their points of view.

4. Bring in subject-matter experts, futurists, and others to validate the potential business model and strategic risks.

5. Review trends in cross-functional business teams to determine their impact and opportunities.

6. Measure each dimension of strategic risk.

7. Test new strategic risks.

8. Flesh out the financial implications of major risk assumptions.

9. Track identified risks to the strategic plan.

10. Have regular sessions to focus on leveraging the risks into new business models. Do this also with your key customers.

Paul L. Walker, CPA, Ph.D. (walkerp@stjohns.edu) is the executive director of the Center for Excellence in ERM at St. John’s University.

Mark L. Frigo, CPA, CGMA, Ph.D. (mfrigo@depaul.edu) is the director of the Center for Strategy, Execution and Valuation and Strategic Risk Management Lab at DePaul University.

November/December 2018 | www.cocpa.org

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PROFESSIONAL DEVELOPMENT

What’s Your Path to the Podium?

BY GEORGIA Z. PHILLIPS, CPA

C

ommitment. Focus. Rigorous training. Practice and preparation. A Formula One driver possesses a commitment to excellence, employs a non-wavering focus, trains consistently, and is able to adjust quickly to changing conditions and racing environments that vary by location, course terrain, and weather. The driver needs a top-notch team he can count on to support him on his path to the podium. Success cannot be guaranteed, but commitment, training, and focus significantly increase the chances of winning.

ON THE HORIZON The AICPA’s CPA Horizons 2025 Report (Horizons 2025) sought CPAs’ insights on current and projected trends that will impact the profession. Approximately 5,600 CPAs participated in the study that resulted in validation of the CPA’s core purpose as “Making sense of a changing and complex world.”

Success cannot be guaranteed, but commitment, training, and focus significantly increase the chances of winning.

These six core values underpin six identified core competencies needed to compete and provide differentiation in the marketplace:

The factors that come together to create a winning, high performance Formula One team are the same factors that contribute to the success of a CPA and his or her organization. A positive winning mindset embraces commitment to the profession, continuous training and improvement, proper preparation, and anticipation of what is beyond the next turn. Targeted, timely planned continuing professional education (CPE) will give you the knowledge and edge needed to compete successfully and provide value in the marketplace.

Baseball great Yogi Berra once said, “If you don’t know where you’re going, you’ll end up someplace else.” As CPAs, we’re in the midst of rapid change that affects how we work, who does the work (or what, in the case of automation), and what work we’ll be doing in the future. In preparing ourselves and our staff to be successful in this rapidly evolving business world, we must embrace traditional and non-traditional methods of learning in an environment where change is no longer the exception but is now the rule.

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The report lists six core values of the CPA profession: integrity, competence, lifelong learning, objectivity, commitment to excellence, and relevance in the global marketplace.

• Communication Skills • Leadership Skills • Critical Thinking and Problem-Solving Skills • Anticipating and Serving Evolving Needs • Synthesizing Intelligence to Insight • Integration and Collaboration A key finding was that the services CPAs provide have become so varied and diverse that the concept of core services is no longer representative of the profession. Technology, lifelong learning, developing solutions to complex problems, and dealing with the ongoing changes in the business environment were some of the topics identified as impacting the profession. A program of intentional, specific CPE is required for CPAs to succeed today and into the future.

COMPETENCY FRAMEWORKS There is no doubt that CPAs harbor concerns about developing and maintaining competencies such as technical skills, soft skills, and business acumen in order to provide value both within their organizations and to the public. The AICPA has addressed these concerns by developing competency frameworks that provide a roadmap of skills needed in four practice areas: assurance services, employee benefit plan audits, governmental audits, and tax and personal financial planning.

Each competency framework identifies specific skills within five core skill sets. In addi-

NewsAccount | November/December 2018

tion, the frameworks are divided into four skill levels to be attained: foundational, intermediate, advanced, and expert. These skill levels not only focus on technical knowledge but also include skills such as critical thinking, communication, and developing and/or modifying processes and procedures.

These competency frameworks can be useful for laying the groundwork for a comprehensive, multi-level training plan that accommodates the progression of a CPA’s career within an organization. Once an organization lays the groundwork for a training plan, appropriate CPE can be obtained to carry out the necessary learning.

The competency frameworks can be reviewed and downloaded at: Assurance Services www.aicpa.org/InterestAreas/FRC/ DownloadableDocuments/Competency_ Framework/AICPA_Competency_Framework_Assurance_Services.pdf Employee Benefit Plan Audits www.aicpa.org/interestareas/employeebenefitplanauditquality/resources/ toolsandaids/downloadabledocuments/ employee-benefit-plan-audit-competency-model.pdf Governmental Auditing www.aicpa.org/interestareas/governmentalauditquality/resources/downloadabledocuments/aicpa%20competency%20 framework%20govt%20accnt%20and%20 auditing_final.pdf Tax and Personal Financial Planning www.aicpa.org/InterestAreas/Tax/CPEAndEvents/DownloadableDocuments/AICPA-Competency-Framework-Tax-and-PFP. pdf TRENDS IN CONTINUING EDUCATION The continually changing business environment has created a need to be more anticipatory than ever. Employees look to management for leadership, education, mentoring, and support to develop and grow the proficiencies they need to navigate within and be successful in their careers. Training also has been identified as a crucial element in attracting and retaining top employees.

Without a doubt, technology has changed the way individuals learn and when they learn. Individuals prefer to learn new concepts and material in smaller increments of time as opposed to devoting an entire day to sitting in a classroom. Personalized learning is desired over generalized learning. Moreover, technology has changed the way education is delivered, with traditional methods of classroom learning being replaced by webcasts, webinars, podcasts, and on-demand study.

CPAs and their companies will need to balance future business objectives with the need for learning, and work within budgetary and time constraints to provide timely, relevant CPE. Customization and delivery of content is evolving to accommodate participants’ varied learning styles. For example, since individuals acquire and process information differently, what is effective for a visual learner is not as effective for an analytic or auditory learner. The goal of learning customization is to yield an optimal learning environment for all learners.

GETTING TO THE PODIUM The path to the podium is not the same for every CPA and organization. However, key elements help to define that path and increase the chances of successfully achieving personal and organizational goals, thereby creating a winning team.

First, determine your goals. Do the goals require additional specialization? Will compliance services be delivered in a different manner utilizing new technologies? Can automation free up time to concentrate on higher level work? What training do your employees need to perform their roles in an exceptional manner? How do the goals fit within the Horizons 2025 report and the AICPA competency frameworks?

Next, make a plan to engage your colleagues in working with you to achieve the defined organizational goals. Create an environment of enthusiasm, collaboration, and commitment to excellence. Create a list of training that will be required, the timeframe within which to complete the training, and the budget allocated to training.

Finally, determine the availability of training, the delivery method(s) that will be used, and scheduling. Remember, the onesize-fits-all solution for training style and delivery doesn’t work for everyone.

The process for determining the CPE CPAs need today is as multifaceted as the changes

occurring in the business environment. CPE options are more plentiful than ever and will continue to grow. Necessary skills and competencies can vary based on the areas of specialization within which a CPA operates.

What hasn’t changed is the successful CPA’s commitment to professional excellence, the need and ability to adapt to change, and the continuous training needed to provide the expertise the public expects. With planning, proper training, and a good roadmap (minus

the race car), the path to the podium in the form of personal and organization development and success is highly achievable.

Georgia Z. Phillips, CPA, is President and Shareholder of the Phillips Allderdice Consulting Group, P.C. and Partner at Focus Group Strategies. Contact her at gphillips@fgstrategies.com.

November/December 2018 | www.cocpa.org

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MOVERS & SHAKERS GREGORY J. ANTON, CPA, CGMA Gregory J. Anton, CPA, CGMA, Chairman, Anton Collins Mitchell LLP, Denver, was named the 2018 Bill Daniels Ethical Leader of the Year. A student selection committee of the University of Colorado Denver Business School chose Anton based on the eight Daniels Fund Ethics Initiative Principles: integrity, trust, accountability, transparency, fairness, respect, rule of law, and viability. In addition, Anton was named to The Business Journals Influencers: Finance, which spotlights 100 executives who are having a positive impact on business in communities across the U.S. BROOKE HIPP Congratulations to Brooke Hipp, marketing director, Anton Collins Mitchell LLP, Denver, who was named a Denver Business Journal C-Suite Awards honoree in the Chief Marketing Officer category.

EKS&H LLLP AND PLANTE MORAN EKS&H LLLP and Plante Moran merged, effective, Oct. 1, 2018.

Joe Bertsch, CPA, was named managing partner of the Rocky Mountain region. Jim Cowgill, CPA, was named managing partner of the Boulder office. Chris Otto, CPA, leads the Fort Collins office.

Jeff Watkins, CPA, is the firm’s Rocky Mountain regional tax director.

DALBY, WENDLAND & CO. INSIDE Public Accounting named Dalby, Wendland & Co. a Top 300 Accounting Firm for the fourth year.

The firm promoted Nathan A. Fyock, CPA, ABV, to principal; Sabrina J. Hoyt, CPA, and Rachel M. Schlepp, CPA, to associate principal; Kelsa D. Tinsley, CPA, and Jeff M. Wilson, CPA, to audit manager; Michael D. Brooks, CPA, and Jennifer S. Wright, EA, to tax accountant supervisor; Amanda E. Malinchak, CPA, and Mark W. Plantz, CPA, to tax supervisor; and Katie J. Taylor, CPA, to senior tax accountant.

CHADWICK, STEINKIRCHNER, DAVIS & CO. P.C. Chadwick, Steinkirchner, Davis & Co. P.C. relocated its office to 2499 Hwy. 6&50, Grand Junction, Colorado, 970-245-3000.

LEWIS MALLOY, CPA, AND COURTNEY VANCE, CPA Stockman Kast Ryan + Co., Colorado Springs, promoted Lewis Malloy, CPA, to supervising audit senior and Courtney Vance, CPA, to senior audit consultant.

Your Clients Have a trusted CPa.

RICHEY MAY & CO., LLP Richey May & Co., LLP., Denver, acquired Arrow Partnership and Corporate Blue which joined the firm’s Technology Solutions division.

THE SARGENT CONSULTING GROUP, LLC The Sargent Consulting Group, LLC opened a Denver office, Oct. 1.

+ Mark Kuhn

President & Founder

Scott ranby, CFP® Financial advisor

StrategieS aNd ServiCeS oFFered:

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investment management education funding Pre-retirement planning Charitable giving retirement income

Kuhnadvisors.com Minimum relationship: $1 million Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. Kuhn Advisors, Inc. is a registered investment adviser. More information about Kuhn Advisors, Inc., including its advisory services and fee schedule, can be found in its Form ADV Part 2, which is available upon request.

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NewsAccount | November/December 2018

North CaroliNa 919.493.3233

Colorado 303.803.1016

IN MEMORIAM We extend our sympathy to the families and friends of the following COCPA members and former members: Craig Grabau Member since 2015, Longmont, Colorado Gary C. Klein Member since 1960, Boulder, Colorado Bonnie J. McCurry Member since 1996, Bennett, Colorado

TAX STUDY GROUPS Boulder/Longmont Tax Study Group AT THE MEADOWS BRANCH PUBLIC LIBRARY

Tuesday, Nov. 27 and Tuesday, Dec. 18 This informal roundtable discussion group meets at the Meadows Branch Public Library, 4800 Baseline Rd., Boulder, BYO Bag Lunch. For additional information, contact Lynn M. Mitton, CPA, MT, MPA, (303) 499-7445 or email lynn@flewellingcpa.com.

Rudy C. Schreider, Jr Member since 1977, Lone Tree, Colorado Gerry Symanski Member since 1978, Thornton, Colorado

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Boulder County CPA Firm seeking individual to purchase tax practice from retiring partner. Gross billings are in the $150k range.

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Looking to retire/transition? DTC full service accounting and advisory firm is looking to acquire a practice with revenues up to $500,000. We specialize in working with small business in the Colorado market; attest, tax, consulting, write up, payroll, and general business matters across multiple industries. No brokers. Please email your inquiries to: carley@cocpa.org, Attention Box #100932.

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Denver Tax Study Group AT THE COCPA OFFICE

Tuesday, December 4 This informal roundtable discussion group meets over lunch, the last Tuesday of most months, at the COCPA office, 7887 E. Belleview Ave., Ste. 200, Englewood. Register at www.cocpa.org.

30 years experience in public accounting 25 years of service with Lang & Company, CPAs 7 years experience as a business broker for CPAs Please call for your free consultation 303-726-7646 www.thomaslangcpabroker.com tom@thomaslangcpabroker.com Colorado Real Estate License and CPA license Member of the Colorado Society of CPAs Board Member of Colorado Association of Business Intermediaries

November/December 2018 | www.cocpa.org

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