Issuu

Magazine of the

New Jersey Society of Certified Public Accountants

Continuing Education The Future of CPE Delivery, p. 6 14 Myths and Facts About CPE, p. 8 CPE: Take It. Embrace It. Use It., p. 10 CPE for the Non-Public CPA, p. 14

Jan â€˘ Feb 2015

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January • February 2015

features

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

Ellen C. McSherry, CGMA

Chief Operating Officer emcsherry@njcpa.org

Don Meyer

Director, Communications & Marketing dmeyer@njcpa.org

David Plaskow

Managing Editor dplaskow@njcpa.org

Jeanette L. Miller Editorial Assistant jmiller@njcpa.org

Janice M. Celeste Multimedia Specialist jceleste@njcpa.org

Editorial Advisory Board Daniel R. Arcuri, CPA Neil B. Becourtney, CPA Timothy A. Burley, CPA Salvatore A. Collemi, CPA Rebecca B. Fitzhugh, CPA Catherine Z. Horn, CPA Bernard M. Kiely, CPA Ryan J. Lapinski, CPA Gregory Levine, CPA Marcella LoCastro, CPA David A. Lopez, CPA Anthony F. Marone, CPA Marc D. Mintz, CPA Margaret Van Brunt, CPA

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

Design/Production/Advertising Lionheart Publishing Inc. 506 Roswell Street, Suite 220 Marietta, GA 30060 President – John Llewellyn 770-431-0867 x209 llewellyn@lionhrtpub.com

The Future of CPE Delivery Nano bytes, micro blogs and tagging may not be on the tip of your tongue when it comes to CPE, but they may be one day soon.

14 Myths and Facts About CPE When it comes to continuing professional education (CPE), there are many rules which are often unknown, forgotten or misinterpreted.

CPE: Take It. Embrace It. Use It. Passing the CPA Exam isn’t the end of learning, but the beginning. Why not use your CPE to set yourself apart in an increasingly competitive marketplace?

CPE for the Non-Public CPA Thanks to more options courtesy of technology, industry CPAs can look at CPE as something they want to do, rather than need to do in order to keep their licenses active.

Letter to the Editor The Buzz on Buzzwords

Editor’s Note A New Column … Sort Of

Close Up A Chat with the Society’s Chief Learning Officer News Briefs

18 A&A Buzz Revenue Recognition Update 19 Best Practices When Do You Terminate a Mediocre Employee? 20 Business & Industry Insights CFO Succession Planning 21 Financial Planning What You Need to Know About the New AICPA PFP Standards 22 Forensic File The New Jersey Bureau of Securities Is Watching

23 Small/Sole Practitioner Tax Considerations When Changing Business Entity Classification 24 Tax Talk Create an Audit-Proof Estate Tax Return 25 Tech Center Tips for Windows 8.1 30 Young Professionals Hit the Ground Running with Vital Excel Skills 31 Legislative Views Death and Taxes Top Society’s Legislative Agenda 32 Member Profile Father Time Society Pages CPE Offerings and Events, 26 Member Benefits, 26 Get Involved, 27 NJ State Board of Accountancy Report, 28 Classifieds, 29

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue-Suite 100, Roseland, NJ 07068. Issue No. 49 Copyright © 2015 New Jersey Society of Certified Public Accountants. Annual membership dues includes $8 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

LETTER Dave,

Paul,

Thanks for the article on buzzwords. I could not agree with you more with the overuse of the terms in an attempt, in my opinion, to sound more hip as a professional. Admittedly, I do catch myself using these terms (as infrequently as possible) when I cannot find the right word or phrase quickly. I then mentally wince and chastise myself to get a better command on verbal communications.

Thanks for the feedback and taking the time to write. This article seemed to resonate with people. While I had a list of 10 annoying corporate buzzwords, it could have easily been 50.

Paul P. Wild, CPA

note

A New Column … Sort Of

The Buzz on Buzzwords

editor's

to the editor

You may notice that the Student Outlook column is missing. Don’t worry, it isn’t. We renamed it Young Professionals. Why? What’s in a name? I could say that with a new year comes a new name, but that’s not really the reason. As this is the Continuing Education issue, it occurs to me that we’re all students, basically our whole lives, always learning. Topics in this rechristened column will be expanded to include not only people beginning their accounting educations, but embarking on their CPA careers. So whether you’re in your late teens or early 30s, we’re confident you’ll get some helpful information from Young Professionals.

Regards,

Enjoy!

David Plaskow Managing Editor

What’s Your Story? Did you ever win a chili cook-off?

New York State Tax Audit Representation and Advisory Services Residency Audits — Sales Tax — Corporation Tax

Brian Gordon, CPA State and Local Tax Director bgordon@st-cpas.com

Do you have the world’s largest collection of matchbooks? We want to know. New Jersey

CPA magazine is looking for candidates for its Member Profile column. Profilees should have a unique career path or interesting hobby—the quirkier the

Former NYS Dept. of Tax and Finance — District Audit Manager Frequent Speaker at Hudson and Bergen County Tax Seminars • Appeals • Offers in Compromise • Deferred Payment Plans

• Tax Planning • Multi-State Nexus Studies • Voluntary Disclosure

www.st-cpas.com Long Island Office: 350 Jericho Turnpike, Suite 1, Jericho, NY 11753 | Phone: 516-938-5219 New York City Office: 275 Madison Avenue, Suite 1711, New York, NY 10016 | Phone: 212-370-3743

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better. If you have a captivating personal story to tell, contact the magazine’s editor, David Plaskow, at dplaskow@njcpa.org.

A Chat with the Society’s Chief Learning Officer B y David Plaskow, N J C PA C ommu nications M anager

Do you see NJ moving to an incremental CPE model similar to what Ohio is preparing to launch? Learning is changing, and I think every state accountancy board will eventually need to move in that direction. NJ regulations sunset in 2018, and the best approach will be to capture all of these changing environments to make them impactful in the 2018-20 licensing cycle. It remains to be seen if the CPE landscape will be radically different in 2020, because it will depend on the regulatory environment and how the market embraces these changes. Are 10-minute CPE increments something people will really take to? I can see it possibly being a generational thing where Baby Boomers stay more with traditional classroom learning, while Millennials jump right into nano learning. We’ll see.

ith the new continuing professional education (CPE) triennial cycle beginning this month, New Jersey CPA magazine sat down with the New Jersey Society of CPAs’ Chief Learning Officer James Hardenberg, CPA, CGMA, CAE, and discussed the evolving CPE landscape. What does the NJCPA Chief Learning Officer do? I try to make sure that we offer enough learning opportunities for CPAs in NJ and their staffs to remain competent in what they do. I also wear the peer review hat to make sure our administration of the program meets the American Institute of CPAs’ requirements. Tell us about your background. I graduated from Montclair State College and went to work initially in public accounting for KMG Main Hurdman, which was a top 10 firm back in the early 1980s. I then jumped into industry, working for two corporations before coming to the NJCPA in 1987 at the ripe old age of 27. I began as the Society’s finance director as there were no mandatory CPE requirements back then. Are CPAs embracing online learning, such as webinars and webcasts, or is live training still the preferred instruction method? They’re embracing online learning, but live training is still the dominant model. The current ratio is probably 90-percent live and 10-percent online, and we’ve actually had record attendance at our live training programs. NJ also has a challenging environment from a mandatory regulation standpoint, and our board of accountancy actively audits CPE compliance.

If you were to give Society members advice about their CPE, what would it be? Take it seriously, and plan for it. When people put it off is when they can get into trouble. If you get too busy and come to the end of a cycle, just taking any CPE simply to comply is not a good strategy. That’s one reason for the new 20-credit annual minimum. Don’t take CPE just to comply; it’s meant to build competence, which is what you do by getting the right training at the right time.

Kindly update us on the work being done by the NASBA CPE Task Force. I was asked to serve on the National Association of State Boards of Accountancy’s (NASBA’s) CPE Model Rule Task Force. Currently, we’re trying to digest all of the requirements that are out in the marketplace. We’ve looked at different professions and in different countries. The model rule will be what are we, as a profession, going to do with 120 credit hours. How do you carve that up; what should qualify? It should be broader than what it is now as learning has changed. The standards currently don’t capture nano learning and blended learning, for example, so they’ll have to evolve. Ultimately, we’re probably going to have a model with more ways to get to 120 credits than exists now, whether that includes mentoring, on-the-job training or others. Things that don’t qualify now perhaps will.

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To see a video of Hardenberg giving additional CPE strategy tips, visit njcpa.org/ newjerseycpa/janfeb15.

2014/15 Board of Trustees Executive Committee President – Brad E. Muniz, CPA President-Elect – Frank R. Boutillette, CPA Secretary – Edward I. Guttenplan, CPA Treasurer – John M. Szczomak, CPA Immediate Past President – Gerard Abbattista, CPA CEO & Executive Director – R alph Albert Thomas, CGMA Trustees Sharon J. Bishop, CPA Leonard N. Brooks, CPA William A. Cadmus, CPA Joseph C. DiFalco, CPA Michael W. Gutwetter, CPA Robert P. Herman, CPA Sarah Krom, CPA Edward G. O’Connell, CPA William J. Ryan III, CPA Audrey J. Sherrick, CPA Lorenzo T. Vanore, CPA Joseph A. Zielinski, CPA

NEWS Treasury Finalizes Changes to Circular 230

Since the Treasury Department issued its finalized regulations regarding written tax advice, questions have arisen regarding the elimination of the Circular 230 disclaimer from all written communications, including emails, and whether a replacement disclaimer is needed. CPA firms should consider including appropriate limitations when providing written advice to clients, including advice sent via email. Limitations could include, but are not limited to, practitioners’ lack of responsibility to provide updated advice and their reliance upon the completeness and accuracy of information provided by clients. Written documentation should also follow advice provided orally. Refer to Treasury Department Circular 230 Section 10.37 and Section 7 of the American Institute of CPAs’ Statements on Standards for Tax Services for requirements related to tax advice. Also consider including a tax advice provision in your engagement letters. It is further recommended that all emails contain a privacy disclaimer, drafted with the assistance of the firm’s attorney, restricting the use of email to the intended recipient. Visit aicpa.org.

IRS to Realign Compliance Operations

The Internal Revenue Service (IRS) has realigned its tax compliance organizations serving individual and small business taxpayers. Realignment of core business operations in its Wage and Investment (W&I) and Small Business/Self-Employed (SB/SE) divisions is expected to make processes more efficient, reduce redundancies and improve the ability to identify emerging compliance issues. The goal of the realignment is to primarily focus SB/SE on post-filing compliance and W&I on pre-refund compliance. Visit irs.gov.

AICPA to Issue SSARS No. 21

The American Institute of CPAs will introduce SSARS No. 21, Statement on Standards for Accounting and Review Services, which represents the AICPA’s Accounting and Review Services Committee’s efforts to clarify and

briefs A New Acronym for a New Time On January 1, 2015, the New Jersey Society of CPAs officially changed its acronym from NJSCPA to NJCPA. The change was made for several reasons, including a desire to better communicate the essence of the organization and reinforce our relevance to the next generation of New Jersey CPAs. Along with the new acronym, the NJCPA established a new website address and email domain: njcpa.org. “We live in a 140-character world. In an era of social networking and online and offline communities, the ‘S’ for Society didn’t convey the same attributes that it did 117 years ago,” said NJCPA CEO & Executive Director Ralph Albert Thomas, CGMA. “New Jersey and CPA are the two elements that define the membership. The change to NJCPA reflects how proud we are to support Garden State CPAs, enhances the brand and positions us for the future.” revise the standards for members in public practice who perform reviews, compilations and engagements to prepare financial statements. SSARS 21 creates a bright line between accounting (preparation) services and reporting (compilation or review) services and is a better fit for the current electronic and cloud-based practice environment. To help firms that are asked by their smaller clients to prepare financial statements when that client does not need a compilation or review report, SSARS No. 21 includes a new preparation standard. Further, Section 70 does not require an accountant’s name or report to be associated with the preparation of the financial statements, but it also does not prohibit a CPA from doing so. The standard is effective for engagements on financial statements for periods ending on or after December 15, 2015. Early implementation will be permitted. Visit aicpa.org.

PCAOB Issues Going Concern Staff Audit Practice Alert

The Public Company Accounting Oversight Board issued a Staff Audit Practice Alert saying that auditors should look to the applicable financial reporting framework—whether U.S. GAAP or International Financial Reporting Standards (IFRS)—to assess management’s going concern evaluation and the related financial statement disclosures. The alert also makes clear that auditors should continue to look to the existing requirements of AU Sec. 341 when evaluating

whether the auditor’s report requires an explanatory paragraph disclosing the auditor’s substantial doubt about a company’s ability to continue as a going concern. It also notes that the auditor’s evaluation is qualitative based on the relevant events and conditions and other considerations set forth in AU Sec. 341. A determination that no disclosure is required under U.S. GAAP or IFRS, as applicable, is not conclusive as to whether an explanatory paragraph is required under AU Sec. 341. Auditors should make a separate evaluation of the need for disclosure in the auditor’s report in accordance with the requirements of AU Sec. 341. Visit pcaobus.org.

U.S. Treasury Tackles Corporate Tax Inversions

U.S. Treasury Secretary Jacob J. Lew announced targeted actions to meaningfully reduce or eliminate the economic benefits of corporate inversions. The actions are designed to significantly diminish the ability or economic sense of inverted companies to escape U.S. taxation. These transactions relate to when a U.S.-based multinational restructures so that the U.S. parent establishes a foreign tax domicile, in large part to avoid U.S. taxes. “The transactions should be primarily driven by genuine business strategies and economic efficiencies, not a desire to shift the tax residence of a parent company to a low-tax jurisdiction to avoid U.S. taxes,” said Lew. The actions eliminate certain techniques inverted companies currently use to access the

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overseas earnings of foreign subsidiaries of the inverting U.S. company without paying U.S. tax. Lew added, “We’re also making it more difficult for companies to invert, by strengthening the requirement that the former owners of the U.S. entity own less than 80 percent of the new combined entity.” Visit treasury.gov.

Website Lists 30 Top Affordable Graduate Accountancy Programs

The educational website Master's in Accounting Degrees (masters-in-accounting.org) picked 30 of the best and least expensive master's in accounting programs in the U.S. The list features schools from a field of more than 200 accredited universities, and each charges less than $22,000 per year for tuition. 22. Rutgers University: New Brunswick, NJ 5. University of Illinois: Chicago, IL 4. College of William and Mary: Williamsburg, VA 3. Indiana University: Bloomington, IN

2. University of Central Arkansas: Conway, AR 1. University of Texas: Dallas, TX

NJ Corporation Business Tax Amendments

P.L. 2014, c.13 amends N.J.S.A. 54:10A-6.1(a), N.J.S.A. 54:10A-15.11(b), and N.J.S.A. 54:10A-4(k) (6)(F) of the Corporation Business Tax Act. Section 1 of the new law amends N.J.S.A. 54:10A-6.1(a) and now defines “operational income” that is subject to allocation to New Jersey as income from tangible and intangible property if the acquisition, management [or] disposition of the property constitutes integral parts of the taxpayer’s regular trade or business operations. Section 2 of the new law amends N.J.S.A. 54:10A-15.11(b) in response to the Tax Court decision in BIS LP, Inc. v. Director, Div. of Taxation, 2014 N.J. Tax. Payments made by a partnership on behalf of its nonresident partners are only refundable to a nonresident partner that files a New Jersey tax return and reports

income that is subject to tax in this state. The nonresident partner may apply the tax that was paid by the partnership and credited to the nonresident partner’s partnership account against the partner’s tax liability and claim a refund of any resulting overpayment. The law also provides that a partnership that pays tax pursuant to N.J.S.A. 54:10A-15.11 is not entitled to claim a refund of payments credited to the account of any of its nonresident partners. Section 3 of the new law amends N.J.S.A. 54:10A-4(k)(6)(F) to require that a corporation’s net operating loss be reduced by the amount excluded from federal taxable income under subparagraph (A), (B) or (C) of subsection (a) (1) of IRC § 108 for the privilege period of the discharge. Amounts excluded under IRC § 108 include debt discharged and excluded from income on account of bankruptcy, insolvency or qualified farm indebtedness. Visit nj.gov/ treasury/taxation.

njcpa.org Spotlight

A New Website Coming Your Way The New Jersey Society of CPAs is launching a new website. We set out with the goal of making the online experience easier, cleaner and more functional for our members. As a cornerstone of the NJCPA’s recent rebranding project, the website now matches the new look of our communications—simple and member-focused. In addition to a fresh new look and feel, here’s a rundown of the other changes you’ll see on the new njcpa.org: A faster way to find what you’re looking for – We’ve completely revamped the site’s navigation to make it easier for you to find what you’re looking for and reflect the activities members perform most on the site. The new main navigation items are: • Become a CPA • Connect with Our Community • Advance Your Career • Earn CPE • Stay Informed • Give Back

A seamless experience on any device – The new site is optimized for viewing on tablets and smart phones, as well as on desktop and laptop computers, making it easier for you to access what you need anytime on any device. Customized content – Once logged in, you’ll have access to the following personalized dashboards: • My Account (profile, areas of interest, transaction history, membership renewal and more). • My Events (upcoming registrations, recently attended events, CPE Tracker and events you might be interested in). • My Content (articles and website content that you might be interested in). Please note our new website address: njcpa.org. Your username and password will remain the same as our previous website. We welcome your questions and comments. Contact NJCPA Digital Communications Manager Rachael Bell at rbell@njcpa.org or 973-226-4494 x220.

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The Future of CPE Delivery As you know, CPAs are required to complete continuing professional education (CPE) in order to renew their licenses. Each state has its own requirements for licensees. New Jersey requires 120 credits over a three-year period, with a minimum of 20 credits per calendar year. The current CPE triennial is from 2015 through 2017. CPE can be fulfilled through a variety of means, such as in-person instruction, webcasts and self-study.

By Stephen F. McCarthy, CPA Kean University

Whether you view CPE as essential to maintaining high professional standards or merely a cumbersome burden, it is likely to remain an ongoing part of our profession. However, what isn’t certain is the form it will take. With the new year, and the new triennial, I would like to speculate on what changes may be coming for CPE. Certainly, individual states and various professional organizations have the power to change and improve the CPE process. But just how is that future shaping up? As the accounting profession matures and keeps pace with an increasingly complex, global, regulatory environment, the relationships among each company, its employees, clients and regulators must evolve. With that, continuing education for accountants, too, must change. The experts I spoke with (Senior Vice President for Education Policy & Strategic Alliances Jeff Livingston from McGraw-Hill Education, and instructional design experts Joseph Bittner and Daniel King in the Learning & Development area of EisnerAmper) agree that there are huge opportunities to improve learning outcomes in CPE due to the impact of technological innovation.

Many large professional organizations, like EisnerAmper, develop content in-house using their own subject matter experts. Others collaborate with content providers, such as McGraw-Hill, to design tools for a more personalized learning experience. These tools will adapt to the needs, experiences and goals of each learner while meeting the organization’s objectives. The goal is to continue the development of accounting professionals in more meaningful ways. Bittner and King note the growing use of tools, such as YouTube videos, for individual learning. In the future, some organizations may grant CPE credits in a pair of innovative ways: nano bytes of learning and real-world learning opportunities that are not currently associated with an approved program.

Nano Bytes

Nano bytes are 10-minute segments of instruction designed to be impactful and focused. This approach is ideal for updating busy professionals on relatively minor changes in tax regulations that don’t require 50 minutes of instruction. Rather than lump these changes and updates into a larger course, the idea is to instruct and document the training using user-friendly applications designed for a finely targeted purpose. Most state accountancy boards currently do not allow nano bytes of CPE, but there is considerable support for this change and for counting this instruction as part of training requirements.

Real-World Learning

The second change that is being considered by organizations, according to Bittner and King, is the granting of credit for meaningful learning opportunities that occur on the job, but are not part of a formal program and are currently

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difficult to document. For example, as part of ongoing research on behalf of a client, an auditor could log onto a tax research site to investigate a specific tax issue. To earn CPE, an organization would leverage technology to create an assessment tool and document the learning experience. As technology improves, both the time researching an issue and the knowledge acquired could be documented within a well-designed learning and research system. Livingston, Bittner and King all concur on the need to create a smart, lightweight, modular learning infrastructure with a flexible assessment paradigm that satisfies the needs of the organization for soft skills, technical skills and industry-specific knowledge. These professionals agree there are three areas ripe for such change.

Customized Content

Bittner and King cite the design of the EisnerAmper program to meet the future needs of its practitioners. Each practice group—tax, audit and consulting—can create its own curriculum with the specific knowledge each group wants to acquire. This design works well with today’s younger staff members. The key is to perform a needs analysis that ties learning objectives into the delivery method.

Flexible, Multimodal Delivery

Self-Study – This will grow in importance mostly via videos that allow professionals to pause for reflection and note taking. Individuals will be able to fast forward through already mastered content and repeat difficult concepts. Live Group – The traditional classroom still has its place and can provide an efficient process when groups of professionals need the same course content. This method does have its limitations. The content is usually delivered at an average pace: too fast for some, too slow for others. Group Internet – CPA Exam prep courses make extensive use of video lectures. This works well if most participants already know the material fairly well and is efficient if participants

are unable to attend in person. Blended Learning – Video lectures at home will be combined with live group classrooms to actively discuss and ask questions on specific content. The advantage is that the instructor can spend more time with those having difficulty, while others work independently. Et Cetera – Virtual worlds, nano bytes, micro blogs, tagging, wikis and social networking will also play a growing role in this flexible new world of content delivery.

New Assessment Techniques

Video instruction enables the implementation of a competency-based grading system. Since learning is selfpaced, assessment can be made on how deeply one goes into the content, either by self-assessment quizzes or

instructor-generated exams, all online and automated. Adaptive technology, currently used in college boards, will become commonplace in assessing knowledge gained. We don’t know what the future will be, but we need to imagine it before we can direct it. It is exciting to see creative professionals actively engaged in bringing 21st century teaching techniques to the CPE process. As accounting professionals, it is up to us to embrace these changes as well as bend them and blend them over time to make them even more responsive to the needs of our profession. Stephen F. McCarthy, CPA, is a lecturer in accounting at Kean University. He is a member of the New Jersey Society of CPAs. Contact him at stepmcca@kean.edu.

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14 Myths and Facts About CPE When it comes to continuing professional education (CPE), there are many rules which are often unknown, forgotten or misinterpreted.

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

Myth: A course sponsor must be approved by the NJ State Board of Accountancy. Fact: In addition to sponsors approved by the state board, NJ allows credits for courses offered by accredited universities and colleges, national and state professional organizations, federal and state government agencies that sponsor CPE courses, and sponsors approved by the National Association of State Boards of Accountancy (NASBA). Myth: Self-study programs offered by sponsors registered with the board qualify for CPE credit. Fact: The board does not approve selfstudy CPE sponsors. It will only accept self-study courses offered by NASBAapproved providers. Myth: You do not need any accounting and auditing CPE if you work in private industry. Fact: This is true if your only employment is in private industry. Many CPAs offer accounting and tax services on the side. In this case, they are considered to be practicing public accounting and are required to obtain 24 hours of accounting and auditing in addition to registering as a public accounting firm with the board. Myth: Accounting and auditing credits only relate to courses on GAAP accounting and auditing. Fact: The law states the courses

must be in auditing, review and compilation, but clarifying language was added several years ago that states that qualifying courses will include courses covering pronouncements or regulations issued by authorities such as the PCAOB, FASB, AICPA, SEC or other government agencies. While not listed in the regulations, the board also approves IFRS courses. Myth: Courses offered by organizations not listed in the regulations cannot qualify for CPE credit. Fact: The board can grant CPE for courses taken by unapproved sponsors. If the licensee takes such a course and shows proof of attendance and technical subjects covered, the board will grant CPE credits. To get approval for these courses, you must complete a form that is available on the state board’s website at state.nj.us/lps/ca/accountancy. Myth: It is a good practice to have your employer keep your record of CPE. Fact: It is the licensee’s responsibility to keep CPE records for five years. There have been issues in the past with licensees who have relied on their employers, especially in cases where the company records were lost or when the licensee leaves employment. Myth: Instructors automatically get three times the credits for being an instructor. Fact: Credits for preparing to teach a program are not automatic. The first time an instructor teaches, for each course hour taught the instructor earns

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for publication is limited to 30 hours per triennial cycle.

one credit plus up to two additional hours for preparation time. All the credits are granted by the board, and the instructor must submit an application. This form is also available on the state board’s website. No credit is given for subsequent sessions taught. After one year, credit will be given, but it is limited to one hour, not three. There is a triennial limit of 60 credits, including class time, for teaching.

Myth: The 20-credits per-year CPE requirement does not apply in the last year of the triennial if the credits are not needed. Fact: NJ regulations require all licensees to obtain at least 20 CPE hours each year. There is no specificity to topic, as long as the requirement is met by the end of the triennial. A licensee must obtain 20 hours in the last year, even if he or she has more than 100 hours after the second year.

Myth: Ethics courses by the American Institute of CPAs or other states do not count. Fact: NJ requires a licensee to take four hours in NJ Law and Ethics. If the ethics course is not a NJ Law and Ethics course offered by an approved sponsor, it will count toward the 72 technical hours required, but not the four hours in NJ Law and Ethics. Myth: A memo to a client resulting from research performed on behalf of that client counts for CPE credits. Fact: NJ allows credits for publications, but they must be published in a journal or book and contribute to the professional competence of accountants. To obtain this credit, the licensee must submit the publication and complete a request that is available on the board’s website for it to issue a certificate. CPE

Myth: There is a 30-day grace period at the end of the triennial to obtain the required 120 hours. Fact: All 120 credits must be obtained before December 31 of the final year of the triennial. If a licensee does not have the required credits, he/she should renew as an inactive licensee or self-report the deficiency on the renewal form. Myth: Credits must be rounded to the lower whole amount. Fact: Beginning in 2012, credits after the first hour are reported in half-hour increments.

Myth: Only half of self-study credits count. Fact: Self-study credits do not have to be cut in half. However, since NJ requires at least 60 didactic (live interactive) credits, a licensee does not benefit from any self-study CPE hours in excess of 60. Myth: Hardship provisions allow for a licensee with a good excuse, such as unforeseen circumstances, to request extra time to meet the CPE requirement. Fact: Hardship requests must be submitted at least 60 days prior to the end of the triennial cycle. There is no provision for a CPA to use an end-of-the-year illness or personal crisis for such requests. For example: In 2012, the board extended the annual requirement due to Superstorm Sandy, but licensees should not count on such relief provisions. Kenneth A. Heaslip, CPA, M.B.A., M.S., CGMA, is a discussion leader with CPE provider Loscalzo Associates, Ltd. He is a member of the New Jersey Society of CPAs State Taxation and Federal Taxation interest groups and Student Programs & Scholarships and Professional Conduct committees. Contact him at kheaslip@comcast.net.

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CPE: Take It. Embrace It. Use It.

We all recall the feeling of euphoria upon passing the CPA Exam. We immediately notified family members, friends and even some enemies. It surely was a moment in time never to be forgotten, but obtaining the CPA credential was just the beginning.

By Robert J. Traphagen, CPA Traphagen Financial Group

As you know, New Jersey CPAs are required to take 120 credits of continuing professional education (CPE) every three years, with a minimum of 20 credits per year (N.J.A.C.13:29-6). The NJ State Board of Accountancy requires CPAs licensed in the Garden State to maintain their professional competencies and fulfill their duties to protect the public’s interest. Our CPE requirement is one of the most stringent of any profession and it involves lifelong learning. This standard supports and distinguishes our profession. Successful CPAs recognize that our knowledge base is what enables us to be viewed by our clients as their trusted advisors, which is our competitive advantage in an increasingly complex financial marketplace. There are more CPE opportunities than ever before: classroom lectures,

self-study, webinars and cloud-based programs. The current CPE landscape is being transformed by technology and generational influences. The Ohio State Board of Accountancy recently approved 10-minute micro-level courses, and it anticipates approval and implementation of this regulation as early as 2015.

Develop a Plan for Leveraging CPE

A new paradigm is taking shape, with a shift from the existing compliancebased model to a competency-based model of learning. But regardless of the CPE model, CPE is still all about learning. As highly educated professionals, what sense does it make to take just any CPE because you have to or to simply fulfill a requirement? Take it. Embrace it. Use it. But what’s the best way to leverage your CPE?

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One approach is to focus on your professional growth by career stage. Consider establishing a professional education development plan (Figure 1), a matrix that tailors your CPE with a direct focus on career stages, such as early career, mid-career and late career. David Maister, in his book True Professionalism, emphasizes the importance of personal professional growth, “It’s non-negotiable. Every professional should demonstrate personal professional/career progress every year (zero tolerance for cruising).”

Early Career

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Early career plans should consist of courses that will be a foundation for understanding our professional landscape. This would include professional accounting standards courses and, of equal importance, the required NJ Law and Ethics course. Note: All newly minted CPAs must complete the law and ethics course as part of their orientation course within six months of licensure (N.J.A.C. 13-29-6.3A and 6.6C).

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Figure 1

Early-Career Objectives • Learn from seasoned professionals. • Network with colleagues. • Solidify professional ethics and standards. • Gain exposure to innovation and technology. • Develop soft skills.

Mid-Career Objectives • Improve competencies. • Understand your company's strategic vision. • Develop a knowledge base for a niche market. • Broaden your business perspective.

Late-Career Objectives • Be recognized as an expert. • Become a strategic thought leader. • Advocate for CPE. • Pass along knowledge to young professionals.

Early-career CPE also poses tremendous networking opportunities that are available through the New Jersey Society of CPAs’ Young CPAs Council or interacting with seasoned professionals at courses and conferences. These networking opportunities can help you develop soft skills, such as writing and communications. A key ingredient for success at this stage is to differentiate yourself for professional advancement. Accomplish this by exposure to innovative ideas and using technology to gain competitive advantages for you or your company.

understand your company’s goals and objectives and then align your personal growth plan within the company’s strategic long-term vision. For those in public practice, developing a knowledge base for a new niche market not only benefits the firm but supports your professional advancement, which could be the pathway to partnership. For example, it could be developing a niche service in forensic accounting or nonprofit accounting. It is also important to broaden your overall business perspective to allow for a more meaningful dialogue with key clients.

Mid-Career

Late Career

A mid-career professional education development plan should include continuous learning opportunities to not only maintain, but improve your competencies to an advanced level. Here, it is important to thoroughly

A late-career plan may include recognition as an expert in a particular area. Many seasoned professionals are relied upon by their clients and companies for advisory services and consulting services. As a seasoned

professional, my most rewarding experiences include participating in strategic thought leadership and mentoring young professionals. A late-career plan should also include advocacy. Use your CPE as a tool to advocate for change by sharing your knowledge and experience to advise colleges and universities on accounting curricula, serve on state CPA society or state accountancy boards, or teach CPE to the next generation of CPAs.

Self-Promotion Is a Good Thing

What’s leveraging CPE without sharing it? Maintaining and expanding your professional expertise increases your value. Why not communicate that value to your colleagues, clients and the public? We now have a multitude of opportunities to deliver that message through Facebook, Twitter, LinkedIn, publications, press releases, events and so

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Figure 2

on. Figure 2 shows how I had leveraged CPE awareness by my attendance at a national construction conference.

Marketing sends an internal announcement to firm staff so they are aware of my expertise and can inform clients and referral sources.

“CPAs who take continuing professional education seriously not only maintain but increase their levels of competency by incrementally improving their skill sets,” says John F. Dailey Jr., CPA, NJCPA member and president of the New Jersey State Board of Accountancy. “These professionals are active learners and represent the majority of the CPAs in the profession; they work to protect the public’s interest.” Robert J. Traphagen, CPA, is the managing partner at the Traphagen Financial Group. He is a past president of the NJCPA and serves on the NJCPA Accounting & Auditing Interest Group and Volunteer Relations Committee. Contact him at robert@tfgllc.com.

I send an email to my construction clients informing them of my upcoming attendance at the conference. I call clients and inquire about their industry needs prior to the conference. I connect with clients at the conference regarding specific areas related to their companies. I post information and photos on LinkedIn and Twitter from the conference. After the conference, I contact the bonding companies and banks about new financial statement standards that may influence their markets. Marketing sends a press release on a presentation I made at the conference.

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CPE for the

Non-Public CPA Not all CPAs are employed by public accounting firms; many work in private industry at businesses and corporations. Others work in government, for nonprofits, in academia or at consulting firms. It’s ultimately up to these non-public CPAs to decide whether or not they want to keep their licenses active.

By Daniel R. Arcuri, CPA L’Oreal USA

Although many accountants are not required by their employers or positions to do so, they feel it is to their benefit to have an active CPA license and, thus, fulfill the continuing professional education (CPE) requirements. Others feel that they have worked so hard to attain the CPA credential that they want to continue to put in the effort to keep it active. As a CPA in industry, I try to take CPE from all aspects of accounting and business: International Financial Reporting Standards (IFRS), business law, personal taxation, treasury and personal development. I have also taken courses surrounding internal controls and compliance. Since I am not required to participate in any specific classes other than law and ethics, I have the luxury of taking whichever courses interest me. Whether an accountant wants to learn something new or retain a specific skill set, it’s important for all CPAs to stay on top of the emerging trends and the constantly changing landscape of rules, principles and regulations that surround us daily. Continuing education courses are also a useful tool for CPAs to benchmark best practices across their industries and to make recommendations to their supervisors for redefining internal procedures and practices.

Requirements

New Jersey CPAs need to obtain at least 20 CPE credits annually and a total of 120 credits per triennial to keep their licenses active. Of these 120 credits, 60 must be live courses. (The current triennial runs from January 1, 2015, through December 31, 2017.) The only mandated CPE course for all CPAs is the New Jersey Law and Ethics course, which must be taken once per triennial.

Course Types

There are many CPE courses available that are specific to accountants in industry. These courses can benefit both industry accountants as well as those accountants employed by an accounting firm or consulting firm that specializes in a particular business sector. For example, there is CPE in health care, investment banking, manufacturing, retail, media, energy, government and nonprofit. There are also more general courses that are just as beneficial to CPAs outside of public accounting, such as accounting and auditing updates, tax updates, management practices, international business and personal/ professional development courses.

CPE Delivery

In addition to the many types of CPE available to benefit non-public CPAs, there are several convenient ways to obtain these credits. If you like the traditional classroom approach, there are live classes sponsored by a host of providers, including the New Jersey Society of CPAs. Some employers offer in-house courses or bring an approved speaker on site. And thanks to technology, there is an increasing number of self-study and webinar courses that you can take at your office

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interesting to see the diverse group of accountants who attend different classes. Apart from the pure educational element, it’s also a great networking forum that can help you advance your career.

or from the comfort of your home on weekends or in the evenings. You can even take the combination live and self-study approach if you prefer.

Incentives

For those employers that do not provide internal courses, they might provide you a reimbursement or an annual allowance for attending external courses. And for those employers that do not offer a reimbursement or allowance, they might allow you to attend a seminar during work hours without having to use personal or vacation time. If you’re looking for an inexpensive way to receive live credit, many of the Big Four accounting firms, as well as some large global consulting firms, offer free webinars throughout the year. These courses are offered at different times and cover a variety of industries and business functions. These sessions typically offer 1 or 1.5 credits and require you to answer polling questions throughout the webinar and complete an online evaluation at the end of the session. CPE opportunities for non-public CPAs are endless, and it is really

NJCPA Resources

Shameless plug: NJCPA members receive a discount on CPE provided by the Society. It’s a member benefit, why not use it? And if you are looking for convenient live CPE courses, there are many events sponsored by NJCPA chapters. These events range from one- and two-hour breakfast and dinner sessions to full-day tax updates. There is also the NJCPA Annual Convention & Expo that offers multiple CPE credits in different categories. This multi-day event is an easy way to complete a majority of the required minimum number of credits for a particular year. “CPE is an extremely important part of being a licensed CPA, even for those of us who aren’t in public accounting,” says Rosemarie A. Fisher, CPA,

CGMA, president of Real Possibilities, LLC. “CPE classes are a great place to network with other CPAs and discuss technical topics. Taking CPE that’s relevant to my consulting practice always broadens my perspective and lets me stay current on financial issues facing all businesses, not just CPAs.” Whether you are employed by a global corporation, small business, government agency or nonprofit foundation, you have the opportunity to learn newly updated rules and best practices unbeknownst to you that are impacting your specific organization. You also have the opportunity to learn what potential impact a changing business landscape can have on your particular function, whether it’s internal audit, tax, treasury or corporate accounting. CPE credits are available at your fingertips, and they are a great way to continue your professional development. Daniel R. Arcuri, CPA, M.B.A., is a senior accountant at L’Oreal USA. He is a member of the NJCPA and is on the Editorial Advisory Board of New Jersey CPA magazine. Contact him at daniel.arcuri1@gmail.com.

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Self-Directed Investments May Take Many Directions With self-direction, investors make all their own investment decisions—usually based on investments they already know and understand, and may already be investing in outside of their existing IRA. These include traditional assets—stocks, bonds, and mutual funds—as well as a broad array of non-publicly traded alternative assets such as residential and commercial real estate, precious metals, hedge funds, commodities, commercial paper, mortgages, unsecured loans, and many more. All income and expenses related to the investments must flow through the self-directed account. Anyone can open a self-directed IRA at any age. Self-directed plans can be opened with new funds, by transferring

from an existing IRA, or rolling over funds from an old employer-based plan. Self-directed accounts can be Traditional and Roth IRAs, Health Savings Accounts, and Coverdell Education Savings Accounts; SIMPLE IRAs and SEP IRAs for employers and the self-employed; and in some cases, 401(k) plans.

Alternative Investments for a More Eclectic Portfolio

Some of Next Generation’s clients have made relatively unusual investments in their self-directed retirement plans to build their retirement nest eggs (the profits realized from these investments must return to the IRA). In general, about 50 percent of self-directed investments are in real estate or are real estate-related. Among the more unusual investments are: • Shares in a foreign TV station, investment in a Broadway show, purchase of race horses • Natural gas rights • Personal loans • Venture capital • Trees on a rubber plantation • Overseas condominiums

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professionals never endorse or sell any products or investments, nor give investment advice; however, they do make sure clients are investing in accordance with IRS regulations and guide clients through their selfdirected transactions. As part of Next Generation’s client-centered approach, all employees are cross-trained so they can answer basic questions immediately or direct clients to the right person; and the company’s website and blog contain educational information, links to resources, and timely IRS updates regarding retirement accounts. There are also many user-friendly innovations on the website to make opening accounts and conducting transactions more streamlined. In addition, investors may schedule a complimentary one-on-one consultation to learn more about this retirement wealth-building strategy, and determine if it’s right for them.

Although Next Generation’s clients make all their own investment decisions, sometimes with the help of a trusted advisor, the transactions within a self-directed retirement plan are handled start to finish by the account administrator. Next Generation Trust Services holds the assets and expedites the transactions; manages all the paperwork and required IRS filing and reporting on the accounts and assets; and answers questions about the diverse investment options available. The firm’s experienced, knowledgeable

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A&A

buzz

Revenue Recognition Update By Henry Rinder, CPA, Smolin Lupin

he Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2014-09 (Topic 606), Revenue from Contracts with Customers. This comprehensive update made several changes to how revenue should be recognized across various industries. Revenue recognition standards used to be generally specific to industry and transaction type and sometimes resulted in different accounting and reporting for similar transactions. Previous revenue recognition requirements for U.S. Generally Accepted Accounting Principles (GAAP) had differed significantly from those promulgated for International Financial Reporting Standards.

Core Principle

The new update is principle-based. This change affecting revenue recognition is far reaching and will likely impact all industries. The new revenue recognition standard relies on a core principle: “Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”

Steps to Evaluate a Transaction

The change to a principle-based approach makes revenue reporting faithfully representative of the actual economics behind the transactions. The ASU defines five steps that organizations must take when evaluating if a transaction can be recognized as revenue: 1. Identify contract(s) with a customer. 2. Identify the separate performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to separate performance obligations.

5. Recognize the revenue when the entity satisfies each performance obligation.

to adopt the new rules earlier than the deadline, subject to certain conditions.

For contracts with multiple performance obligations, businesses must allocate the transaction price to each performance obligation in an amount that represents appropriate consideration.

Implementation Process

Industry Impact

Many industries will see significant changes in how they recognize revenue. Contract-based industries, such as telecommunications, construction, engineering, information technology and real estate, will be impacted. The financial sector, including banks and brokerage firms, will see less of an impact. Organizations in all industries may need to evaluate how their contracts and business transactions should be approached given the newly defined steps. The new rules apply to all contracts with customers, whether the contract is for goods or services. However, some contracts are specifically excluded from this ASU: leases, insurance policies, obligations connected with financial instruments, and guarantees unrelated to warranties on products and services. Companies need to evaluate both the impact of the changes and what additional reporting functions and data are needed in order to adopt the change.

Implementation Schedule

For public companies, the new accounting method must be implemented with the financial reporting period that begins after December 15, 2016. Public companies are not allowed to implement changes before the effective date. For nonpublic companies, the change begins with the reporting period that immediately follows December 15, 2017. Nonpublic companies have the option

To implement the required changes, businesses should create an appropriate process that might include: 1. Assigning responsibility to an individual or group for managing the transition to the new standard. 2. Evaluating the impact to the business by examining all areas that may be impacted by the change. 3. Comparing the current GAAP on revenue recognition to the new standard. Use this information to determine if other aspects of the company’s business should be re-evaluated. 4. Once the changes are fully understood, deciding what, if any, changes need to be made to sales and reporting software in order to capture accurate information that matches the accounting requirements. 5. Educating employees, management and all other stakeholders about how the change in the reporting standard will affect the business and its financial reporting. If an appropriate strategic process is followed, the transition to abiding by the new revenue recognition standard should be smooth. While it may be a lengthy and cumbersome project, it is one that all reporting businesses must undergo to ensure that they have fully adopted the new revenue recognition standard promulgated as U.S. GAAP by the applicable deadline. Henry Rinder, CPA, ABV, CFF, CFE, is a member of Smolin Lupin. He is a past president of the New Jersey Society of CPAs and a member of the NJCPA Accounting & Auditing Standards Interest Group. Contact him at hrinder@smolin.com.

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BEST

practices

When Do You Terminate a Mediocre Employee? By C atherine Z. Horn, CPA, Alcatel-Lucent

f you catch an employee stealing from you, falsifying time records or being in any other gross violation of your company’s code of conduct, you wouldn’t hesitate to immediately terminate his or her employment. But what do you do when you have an employee whose performance is okay, marginal, so-so? Perhaps he isn’t too interested in keeping up with the latest technology, regulations and standards. Maybe she’s friendly in the break room, but never offers to help a struggling colleague or take a stretch assignment. Bad performance is obvious. It’s easy to spot and difficult to ignore. Most supervisors address bad performers and take corrective action. And when the performance is that bad and the evidence is plentiful, the action is often termination. But what do you do with a mediocre performer? Employee performance expectations should be set through annual objectivesetting and reinforced during ongoing feedback and coaching sessions. Finally, they should be clearly documented in an annual performance review.

Objectives

Ensure expectations are clearly documented and understood. They should be specific, measurable, achievable, realistic and time-sensitive. Are the objectives for your so-so employee documented, communicated and appropriately challenging? Is this employee meeting these objectives? If the answer is yes but you’re still struggling with the decision to terminate or retain this employee, are you setting challenging enough expectations? If the employee is clearly not meeting the objectives, are they too tough? Did you provide enough coaching? Did the employee have every chance to succeed yet squandered those chances?

Ongoing Feedback and Coaching

Feedback, both good and bad, should always be timely and impactful. Most people don’t enjoy giving negative feedback, but with proper preparation you can do it in such a way that the employee gets the message and feels motivated, supported and empowered to improve. Has the employee been given immediate and direct feedback? Coaching should happen on a regular basis. Unfortunately, coaching sessions often turn into superficial conversations that don’t really address an employee’s challenges. Start these conversations with “How are you? How’s the family?” in order to establish rapport, but quickly segue into a healthy conversation about exactly what happened, why it happened and what corrective action will be taken. Coaching should address the quality and timeliness of the work, areas where the employee is seeking help and employee behaviors. Does he or she have a healthy attitude toward peers and clients, or is he/she achieving results at the cost of others? Give special attention to areas where the employee is struggling, not performing or just delivering a seat-of-the-pants performance. Feedback and coaching for underwhelming performance must be

clearly given, documented and conveyed in a motivational manner. Have you been giving performance feedback and coaching to your marginal employee, as well as documenting it? Will the employee acknowledge and agree to what was covered, and what if he or she doesn’t? Review your documentation. Is the person improving, worsening or stuck in a holding pattern? Can the behavior be improved with further coaching? If so, is the individual willing to step up, and are you willing to invest more time as a coach?

Annual Performance Review

If the employee’s marginal performance still exists at the time of the annual performance review, you need to decide if you are willing to accept this performance and the message it sends to your organization. Or, if you are going to require improvement, you need to clearly convey any deadlines and consequences. Then, if the mediocre performance continues, no one should be surprised at being terminated. The rigor you require in this performance management process sets the tone of your workplace culture. Organizations that have a quality performance management process in place tend to have a high-performing workplace, one where employees are motivated, engaged and perform at high standards. You certainly don’t want a workplace where mediocre performance is an acceptable norm. Catherine Z. Horn, CPA, is a human resources director at Alcatel-Lucent. She is a member of the New Jersey Society of CPAs Volunteer Relations Committee and the Editorial Advisory Board of New Jersey CPA magazine. Contact her at cathy.horn@alcatel-lucent.com.

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BUSINESS & INDUSTRY

insights

CFO Succession Planning B y Lawrence Feld, Hunter Grou p C PA LLC

he strategic nature of replacing a chief financial officer (CFO) poses particularly thorny obstacles, including replacing specific skills, vertical industry experience and possibly a familiarity with family-owned business dynamics. The task can be monumental. For many organizations, CFO succession means launching an external search. For other enterprises, internally grooming a pool of potential replacements is a more effective strategy. Finding the faces of future financial leadership requires honing the job descriptions of the team, and this begins with defining the CFO’s duties. With a keen eye on trends that may impact future responsibilities, the CFO should be able to create a succession management organizational chart for the rest of the financial team. Clearly and completely articulating this framework of needs and responsibilities—upward to the CEO and directors, and downward to staff— will begin to transform your concept into a succession-oriented team and build the basis for all strategic hiring and training. “CFOs are some of the brightest, most hardworking and skilled people in business, yet they are miserable at selfpromotion,” notes Andrew B. Zesas, SIOR, CEO, of Real Estate Strategies Corporation and publisher of CFO Studio, a New Jersey-based publication

that caters to those who face the daily challenges of financial leadership. This lack of articulation to ownership can lead to a misguided view of the real role a CFO plays in the organization. According to the Chartered Institute of Management Accountants (CIMA), CFO succession is a human resource issue. A recent CIMA report by Peter Bartram suggests that CFOs take an active role in the process by focusing on these eight key strategies: • Identify the next generation of leaders internally, and make succession part of the leadership training process. • Hire to have a good mix of talents to be able to re-engineer midstream should you lose some key people along the way. • Engage and champion your identified talent early on. Help them develop into well-rounded managers, not just task masters. • Utilize “headroom” hiring tactics, hiring someone for a lesser role, ideally building systems that they will ultimately step-up and manage down the road. • Go “deep and wide” in planning; develop many levels of talent to ensure potential skill gaps are covered. • Nurture skills of the future in your teams and direct reports to be prepared for a changing world. • Engage likely successors in an on-boarding process to determine if they want the job. • Create a training program that cross-trains, promotes job rotation, and develops and promotes an environment of succession as part of the organization’s culture. Avoiding CFO failure is the goal. In the 2013 research paper, “CFO Succession and Corporate Financial Practices,” published by the University of Chicago Booth School of Business,

authors Engel, Gau and Wang suggest that CFO succession in the 10 years following passage of Sarbanes-Oxley has had more to do with boards reacting to poor financial performance, revealing substandard controls and reporting. Not surprisingly, the successor CFO ushers in a new age of accountability, systems and controls, improved performance and the creation of a blueprint for building or acquiring the future generation of company financial leadership. A 2012 study by Accenture supports this expanded role as a future trend. Accenture’s research, outlined in a paper by the Financial Executives International, reveals the top five challenges CFOs struggle with: (1) absorbing knowledge of legacy systems and environments; (2) managing the needs of shareholders; (3) accommodating new and complex business risks as companies expand and acquire global assets; (4) complying with increasingly complex tax and legal structures; and (5) struggling in supporting ultra-complex operating models. As CFOs overlap into the role of a chief of operations or chief executive, overseeing human resources, operations, IT systems and even sales and marketing—in addition to tackling the company’s financial business and reporting needs—succession planning is both essential and immensely difficult to build into a best practice. As such, CFO succession planning plays a pivotal role in organizational growth. From strategic hiring that builds a broad bench of talents to creating a culture of training and crosstraining, the molding of future leaders is an ever-evolving process. Larry Feld is with the Hunter Group CPA LLC. Contact him at lxf@thehuntergroup. com.

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FINANCIAL

planning

What You Need to Know About the New AICPA PFP Standards B y P. Jeffre y Christakos, C PA, C hristakos F inancial G rou p

he rapid expansion of personal financial planning (PFP) services has led to the need for enhanced and definitive guidance in the delivery of these services for the protection of both firms and clients. The American Institute of CPAs has issued SSPFPS No. 1, Statement on Standards in Personal Financial Planning Services, which provides CPAs with comprehensive, enforceable guidance on how to consistently and competently deliver PFP services. Effective July 1, 2014, the statement provides guidance on providing PFP services in alignment with the responsibilities already outlined in the AICPA Code of Professional Conduct. These new standards, in accordance with the code, hold PFP service providers to the highest levels of integrity, professionalism, objectivity and competence. SSPFPS No. 1 applies to all AICPA members who also provide PFP services to their clients. These services are defined as the process of identifying personal financial goals and resources, designing financial strategies and making personalized recommendations that, when implemented, assist clients in achieving these goals. The standards apply when a member provides PFP services and either represents to the public or clients that the member provides PFP services, engages in activities that would require registration as an investment adviser under federal or state law, or sells a product as a result of the engagement. Making client-specific recommendations for planning strategies, which are covered under the statement, include cash flow, risk management, insurance planning, retirement planning, investing, estate planning, gifting, wealth management, planning around the transfer of assets, charitable giving,

education and tax planning. The statement provides a useful framework that CPAs should use to protect themselves and their clients while acting in an advisory role. CPAs who are not AICPA members may still be required to adhere to the new standards if they have active licenses with a state board of accountancy. State boards have broad authority over licensees who provide professional services, including PFP services, to the public. The state boards determine whether a licensee has followed professional standards under state laws and regulations. State boards may also look to AICPA standards when they evaluate whether a licensee has complied with the standards applicable to licenses. CPAs must consult the state board for an authoritative answer as to how the state board might apply any particular AICPA standard. Failure to adhere to these standards, if applicable, may result in loss of licensure. SSPFPS No. 1 also applies to whether PFP services are delivered to clients verbally or in writing. Implementing recommendations, monitoring a client’s

progress or updating the engagement are separate engagements. You would not have an obligation for implementing, monitoring or updating services unless you have an agreement with the client specifically to do so. If you do provide these services, the statement provides additional direction. SSPFPS No. 1 elevates longstanding professional principles to authoritative, enforceable rules regarding the conduct of PFP professionals. It addresses the key areas of communication, disclosures and documentation as they relate to the basics of engagement planning, the development of recommendations, and working with and recommending other professionals. Following the statement ensures that your clients receive the information they need to make sound financial decisions and that you meet the standard of care expected of a trusted adviser in the provision of these services. Aicpa.org/pfp/standards features a compliance toolkit to help CPAs and PFPs navigate the new standards and effectively apply them in practice. The toolkit includes a manual, complete copy of SSPFPS No. 1, PowerPoint presentation to educate staff members, statement-requirement checklist and flowchart, and customizable client engagement letters. Both seasoned practitioners and those who are new to the PFP area can benefit from these resources, as well as have a roadmap for working with clients in the development of their personal financial plans. P. Jeffrey Christakos, CPA, CFP, CLU, AIF, is a partner at the Christakos Financial Group. He is a member of the New Jersey Society of CPAs Federal Taxation and State Taxation interest groups. Contact him at jeff@christakoscpa. com or 908-654-4784.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

Forensic

file

The New Jersey Bureau of Securities Is Watching B y K eith S . B alla, CPA, O’ C onnor Davies, LLP

ew Jersey’s securities regulatory agency is the New Jersey Bureau of Securities (NJBOS), which is under the auspices the NJ Attorney General (AG). The bureau administers the Uniform Securities Law in New Jersey and related regulations. The bureau also regulates all broker-dealers, agents, securities issuances, registrations, and securities purchases and sales in New Jersey. The bureau has broad powers to investigate all securities matters and the facts and circumstances surrounding any and all securities fraud. CPAs perform many types of accounting, tax and consulting services for entities that buy, sell and pledge their securities and ownership interests. As such, CPAs are involved with matters that fall under the auspices of the NJBOS. Many securities fraud cases are reported to the NJBOS by investors, lenders and other tips from the public. The NJBOS aggressively investigates and pursues the parties who are directly and indirectly involved in securities frauds. The financial and accounting services and products produced by CPAs are those that are closely scrutinized as part of securities investigations by the NJBOS. Most CPAs follow the statutes, rules and regulations administered by the NJ State Board of Accountancy, which also falls under the direction of the AG’s office. There is a direct link between the board and the NJBOS and, where possible, they assist each other.

The CPA Connection

When investment frauds are perpetrated by dubious individuals, the paper trail usually has some connection to the accountant working with the enterprise. Investors rely on the financial statements, projections, tax returns and other communications prepared by the CPA in making their investment decisions.

Therefore, the CPA is directly connected with the loss when the investment was a scam. The CPA frequently only worries about being sued for audited financial statements when a business goes bust. But CPAs need to be aware that they are sitting ducks when it comes to any of their actions or communications that are linked to investment fraud. The fraudsters, knowing that the CPA is a business owner’s most trusted advisor, love to capitalize on the CPA’s integrity to entice investors to provide money for their ventures.

Notable Cases

The NJBOS recently ordered a Jersey City hedge fund fraudster to pay $55 million in investor restitution, penalties and disgorgement. Misrepresentations or failing to disclose pertinent information to investors is an area that pulls in many parties to securities fraud. In 2010, the Securities and Exchange Commission (SEC) charged the state of New Jersey with securities fraud for misrepresenting and failing to disclose to investors in bond offerings—worth $26 billion— that the state’s pension plan was underfunded. Many NJ municipalities are currently taking measures to report to the SEC matters where the municipal

bond offering disclosures may have been inadequate to avoid future negative actions. The CPAs preparing and assisting with these bond issuances and the municipal audit reports need to be aware of their exposure for securities fraud actions, sanctions and fines. I worked as the court-appointed accountant with the court-appointed receiver in the Crazy Eddie case for the disgorgement fund. The receiver, along with the attorneys, worked for years to recover and liquidate assets that were ultimately returned to creditors, bondholders and investors. Another high-profile securities fraud case was the Brennan case and First Jersey Securities, which involved hundreds of millions of dollars defrauded from investors. The case involved selling stocks at inflated prices and then selling shares before the market realized the true values: pump and dump schemes. The case involved boiler room operations, money laundering, bankruptcy fraud and offshore accounts. Other noteworthy cases have involved attorneys leaking confidential insider information for trading securities profits. CPAs possess confidential information and are involved in many aspects of dealing with company information that can influence stock prices if made public. Unprotected and unsecure CPA offices are a treasure trove for unscrupulous fraudsters who can access this confidential information to obtain profits in trading the stock with the information. CPAs need to be vigilant and careful in the information they possess and release. Keith S. Balla, CPA, CFF, PSA, FCPA, is a principal at O’Connor Davies, LLP. He is a member of the New Jersey Society of CPAs. Contact him at kballa@odpkf.com.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

Small/Sole

practitioner

Tax Considerations When Changing Business Entity Classification B y George E. Williams, C PA, Ross Rosenthal & C ompan y L L P

hether it is even possible to convert an existing business to a new form of entity requires an enabling statute and creditor cooperation. For example, some state statutes restrict the particular form of entity for certain types of businesses, such as law, medicine or public accounting. You must also determine if there are creditors or vendors that may object to the transfer of assets to a new form of entity. Does the reorganization make economic sense? Do the tax and nontax advantages outweigh their conversion costs? With few exceptions, you can accomplish proprietorship and partnership conversions taxfree. Conversions from a corporation to a different entity can involve a corporate liquidation, which can trigger corporate-level tax.

Converting a Sole Proprietorship to an LLC

A sole proprietor has unlimited liability for his or her business debts and action. An LLC can protect the business owner’s personal assets. When converting a sole proprietorship to a one-member LLC, the “single member LLC” is disregarded for tax purposes, which means the conversion has no tax consequences. The sole proprietor can contribute all of the assets of the business, subject to the associated liabilities, to the newly formed entity to obtain a level of liability protection. If a sole proprietor takes an equity partner, the transaction is treated as the formation of a new partnership. There may be matters other than federal tax issues to consider, depending on state law. These may include homestead exemption, franchise tax, filing new articles of organization, filing new mortgages or other documents to secure debt, and realty transfer taxes.

Converting a Partnership or LLC to a Corporation

You can incorporate a partnership or LLC three different ways: (1) transfer the assets and liabilities from the partnership or LLC to the corporation in exchange for corporate stock and any other consideration, followed by liquidating the partnership; (2) distribute partnership or LLC assets and liabilities to its partners or members, who then transfer the assets and liabilities to the corporation in exchange for stock and other consideration; or (3) partners or members contribute their partnership or LLC interests to the corporation in exchange for corporate stock and other consideration. Generally, any of these methods will result in tax-free incorporation, but the path to incorporation may affect the tax consequences. Thus, determine the tax implications at each step of the transaction.

Converting a C Corporation to Another Entity, Such as an LLC

Converting a C corporation to an LLC can create significant negative tax consequences. Liquidation can be taxable to both the corporation and its shareholders. If the corporation’s assets and/or stock have appreciated, the tax cost of liquidation can be prohibitive. If the corporation has accumulated losses, there may be little or no tax cost, although any unused NOLs would be lost. Liquidating a corporation is generally a taxable event for both the corporation and its shareholders. IRC §336(a) states that a liquidating corporation recognizes gain on the distribution of appreciated property, recognizes depreciation recapture as if the corporation had sold each

of its assets at its fair market value, and generally recognizes loss on the distribution of depreciated property. IRC §331(a) provides that the corporation’s shareholder(s) also recognize gain or loss on the distribution equal to the fair market value of the distribution received minus the basis in the shareholder’s stock.

Converting an S Corporation to an LLC

Converting an S corporation to an LLC has similar tax consequences at the corporate level; gain or loss is recognized on the sale or distribution of assets at fair market value. However, because the S corporation gain passes through to the shareholders, there is only one level of tax. Any deemed gain increases the shareholders’ basis in their stock, which reduces their gain upon liquidation of the corporation. No matter what conversion technique is used to convert a business from corporate ownership to LLC ownership, valuing the business is a key issue and potential point of attack by the Internal Revenue Service. Planning and implementation are keys for successful structural changes. George E. Williams, CPA, Esq., is a partner at Ross Rosenthal & Company LLP. He is a member of the New Jersey Society of CPAs Federal Taxation and State Taxation interest groups. Contact him at gwilliams@rossrosenthal.com.

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TAX

talk

Create an Audit-Proof Estate Tax Return B y K imberly A. Dula, C PA, F riedman LLP

hen people think of being audited, many feel that the risk is higher with estate returns that contain a complicated, technical issue or with difficult-to-value assets. In some cases, this is true. However, whether you have a complex estate with challenging elements or a simpler estate with common, everyday characteristics, there is a common-sense approach that you should follow before you file the client’s return. Whether it is federal or New Jersey estate tax returns, there are some practical steps that you can take to reduce the risk of the estate being audited. And if your client should be chosen for audit, these practical steps will make the process much more efficient.

Organize and Complete the Return

When readying a return for filing, put yourself in the shoes of the agent who may be doing the initial review. Your goal is to make his or her job as simple as possible. All information should be included, all applicable questions should be answered, and all required documentation should be attached. If documents are attached, make sure they are labeled appropriately so that the agent understands the relevance to each of the various assets, liabilities or deductions being reported. Include all of the required descriptive information when listing an asset. Use complete names and addresses, include account numbers, and attach relevant supporting documentation if required—and if it just makes sense. Attach supporting information for the values that you are reporting. Appraisals, property closing documents and investment statements are examples of documentation to include. Refer to the federal estate tax return checklist of items to attach to the return before finalizing.

Also include items like accrued interest on bonds and stock dividends that have been declared but not yet paid. This shows the agent that you have been diligent in including all information on the return. When the return is filed, the package you submit should speak for itself. An agent shouldn’t have to reach out to you for additional information or clarification on any issues.

estate tax return preparer’s responsibility to understand the appraisal so that any subsequent questions regarding it can be answered quickly and without issue. People make mistakes, so check the math within the appraisal and be sure that it makes sense overall. If something doesn’t make sense to you, chances are the agent will question it as well.

Review the Return for Consistency

Both the federal and New Jersey estate tax return instructions provide detailed information on how to assemble the return before filing. Read these instructions carefully, and be sure to follow the requirements provided. For example, if the state of New Jersey instructs you not to use staples, don’t use staples. There is no need to add undue aggravation for the agent before he/she reviews the important items on the return.

After you complete the return, review it for inconsistencies. There are questions on the estate returns for a reason. The answer you provide for each question allows the agent to determine what he or she should or should not expect to see on the return. There should also be consistency with the information you report on the return. For example, if there is an expense related to an insurance policy on artwork, the agent is going to expect to see artwork listed on the return.

Use an Appropriate Appraiser

The type of asset requiring a valuation will determine the proper appraiser. Select a firm that has the appropriate amount of expertise in that particular area to prepare the appraisal, and state this expertise in the appraisal document. The appraisal should be clear, concise and based on current values. It is the

Follow Assembly Instructions

Although the ultimate results of an audit may include no changes to the originally filed return, it can still cause unnecessary professional fees and stress to a family that has just gone through an emotional time. By following some of these common-sense points, this can be an easier process than initially expected. Kimberly A. Dula, CPA, is a partner at Friedman LLP. Contact her at kdula@ friedmanllp.com.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

TECH

center

Tips for Windows 8.1 B y A nthon y Mongelu zo, PC S

indows 8 certainly had its share of detractors. As one expert put it: “It was just too different. I think they made a lot of decisions that make complete sense if you’re bringing a completely new tablet OS to market. But the PC experience is loaded with expectations that go back decades. That was completely upended by what they put in front of people.” But most computer experts have to remind themselves that despite the negative hype, there are those who enjoy, indeed become addicted to, certain products. (The Blackberry is a great example of this.) Windows 8 is no different. Windows 8 followed a familiar Microsoft pattern of a terrific release (XP), followed by a mediocre one (Vista), followed by another excellent one (Windows 7) and then back to a clunker (Windows 8). The jury may still be out on Windows 8.1. (Microsoft recently unveiled Windows 10, which it will release next year.) If you like or feel comfortable with Windows 8.1 and its tile-friendly program, stick with it. If not, then waiting for Windows 10 might be your best move. In the meantime, here are a few tips to make Windows 8.1 more meaningful.

No More Ads

If you’re using Internet Explorer and load a webpage, you’ll see a reading view icon on the address bar. Go ahead and click it. Surprise. Internet Explorer gives you a reload, a clean page without advertisements. Reading becomes easy. However, this feature is unavailable for the desktop version of Internet Explorer 11.

Make History

Windows 8.1 is the first operating system that supports 3D printing. It allows you to print from the Windows Store apps or from desktop

applications. You’ll still need 3D to design and build product.

Start Me Up

The Start button has returned, which is similar to the Start button on Windows 7. Left-click the button, which is located at the bottom left of the screen, and you’ll be redirected to the Start screen. Right click to see your options, including Run, Search, Desktop, Shutdown and more.

Read New Jersey CPA Magazine

Too busy to read the magazine now? Windows 8.1 has a cool new app called Reading List. It can run alongside Internet Explorer (and other apps) and has articles that you can save for later. This app lets you create a personal (virtual) reading library. Now there’s no excuse for not finishing this article. The default is full screen, and you’ll see articles you’ve already saved.

Shortcuts

What is life without shortcuts? Even with Windows 8.1, the loyalty to a mouse remains strong. Yet a keyboard shortcut is faster. Here are a few of my favorites: • Windows key + C: It’s open sesame for the charms menu. • Windows key + Q: Opens the App Search pane. • Windows key + M: Minimizes all of your windows and gets back to the desktop. • Windows key + H: Opens the Share charm in any app you are in. • Windows key + F: Opens up the Search box, which saves time finding files. • Windows key + I: Opens the Settings charm.

The Desktop Login

The default start for your computer is usually the Start screen. You can go immediately to the Desktop and bypass the Start screen. Right click on your desktop toolbar, and choose properties on the Navigation tab. Look under the Start screen option and enable the box: When I sign in or close all applications on a screen, go to the desktop instead of start.

Don’t Close the Library

If you use the library feature in Windows, you won’t find it displayed in Windows 8.1 File Explorer. Windows didn’t eliminate it, you just have to know how to display it. Start by opening file explorer and choose the view tab on the ribbon. Then, choose options and select the change folder and search options. The folder options dialog will pop open. Choose the General tab, and in the Navigation pane place a check next to Show Library. Tap OK. Close and reopen the file folder. For more Windows 8.1 tips, Microsoft offers tutorials at windows.microsoft. com/en-us/windows/tutorial. Anthony Mongeluzo is the president and CEO of PCS. Contact him at 877596-4446 or anthony@helpmepcs.com.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

SOCIETY

pages

CPE Offerings and Events Upcoming Education Foundation Events Date

Event/Code

Location

CPE Credit

1/27

The Best Individual Income Tax Update Course by Surgent (E1501271)

Roseland

8/TX

Upcoming Chapter Events Date

Chapter

Event/Code

Location

CPE Credit

1/22

Morris/Sussex

Tax Research (E1501189)

Mount Olive

4/CS

1/26

Southwest Jersey

New Jersey Division of Taxation Update (E1501149)

Voorhees

2/TX

2/5

Bergen

Tax Season Hot Issues (E1502059)

Paramus

4/TX

4/21

Hudson

Peer Review/Cloud Computing (E1504099)

Secaucus

4/AA

4/24

Southwest Jersey

Nonprofit Update (E1504059)

Berlin

4/AA

4/24

Mercer

Controllership Update (E1504079)

West Windsor

4/AA

4/24

Atlantic/Cape May

Consulting Services (E1504039)

Northfield

4/TX

4/24

Essex

Not-for-Profit Update (E1504029)

East Hanover

4/AA

4/28

Union County

Technology and CPA Succession Planning (E1504049)

Kenilworth

4/MC

4/30

Passaic County

Real Estate and Financing (E1504129)

Paterson

4/AA

KEY CS – Consulting Services EC – Economics MC – Multiple Categories PD – Personal Development PE – Professional Ethics PM – Practice Management SK – Specialized Knowledge TX – Taxation Please note: Events are subject to change. For a full listing of all NJCPA events, visit njcpa.org/catalog.

AA – Accounting & Auditing MT – Management

Save Time and Money at the Member Benefits Marketplace New Jersey Society of CPAs membership adds sustainable value to your career, demonstrates a professional commitment to your employer, and opens doors to knowledge and industry contacts not accessible through other organizations or the Internet. It also provides tangible savings through our Member Benefits Marketplace. The marketplace is a mix of providers that offers services and discounted rates to our members: Bank Services Affinity Federal Credit Union Business Products and Services ADP CCH Energy Plus IQMedia Managed IT Services

PRCounts, LLC The PromoTouch UPS Buying Power Buyer’s Edge Career Services CPASuccessionMatch.Com NJCPA Job Bank Transition Advisors LLC CPA Exam Prep Becker Professional Education Roger CPA Review Yaeger CPA Review General Services Family Trusted Child ID Insurance Askin, Weber & Reed Inc.

CAMICO/Bollinger Plymouth Rock Assurance Sports & Entertainment Brooklyn Nets Morey’s Piers New Jersey Devils New York Jets Travel Air Brook Limousine Avis Car Rental Make it your New Year’s resolution to keep more money in your pocket and learn how the NJCPA Member Benefits Marketplace can help. Visit njcpa.org/ marketplace.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

Get Involved Mastering Success at the Young CPAs Conference By Katherine E. Zech, CPA, O’Connor Davies, LLP As a CPA who’s received a college degree, on-the-job training and continuing professional education, I’m confident in my abilities to answer difficult technical questions clients have about accounting and taxes. But when it comes to soft skills, like networking and communications, I could use a little help. That’s one reason why I attended the New Jersey Society of CPAs' Young CPAs Conference in September. Kathleen Cashman, president of Cashman Consulting, LLC, held an interactive session, “Mastering Success by Capitalizing on Connection: The Common Core of Communication” that covered these very skills. Cashman told 50 young CPAs that the executive suite door has a lock on it—a combination lock to be more exact. And the way to open it is by demonstrating knowledge, expertise, business know-how and soft skills. Here are some of Cashman’s points about expanding your network and building your soft skills to advance your career:

Soft skills, such as communication, teamwork building and engagement, shape the common core values that many professionals, both young and experienced, need in order to become successful. Cashman identified these common core values so that young professionals can build credibility, gain confidence, collaborate with team members and make solid connections within their networks. Cashman noted that after a day of listening to experienced mentors and discussing issues with her peers, she’s more self-assured and can expand her network and reach for the next level in her career. Katherine E. Zech, CPA, is a supervisor at O’Connor Davies, LLP in Cranford. She is a member of the NJCPA Young CPAs Council. Contact her at kzech@odpkf.com.

Ask for Feedback We are used to reviewing our engagement performance through written forms, particularly in public accounting. These firm-mandated questionnaires are great for checking off the various boxes needed to advance our careers, but may lack the touches or suggestions we can use to build our skills. Cashman recommends asking specific questions of your managers or mentors: (1) What did I do well? and (2) What can I do better?

Speak Up A common belief is that “your work will speak for itself.” But Cashman reminded us that our work doesn’t actually speak. You must speak for your work, and do it often. Don’t wait for annual reviews or a manager to come to you. When you’re networking, talk about what you’re working on, not just what you do. When asking for feedback, communicate with your network about your hard work and results.

Bergen Chapter Makes a Difference in Little Ferry

Know Your Network Many people participate in social networks, such as LinkedIn and Twitter. But we don’t really know our networks. We need to transition from having social media acquaintances to having social media relationships. Start by finding commonalities within your contacts by observing interactions, reading biographies and asking questions. It helps to speak with people in senior positions to see how they got to where they are.

Nine members of the NJCPA Bergen Chapter Board of Directors recently volunteered for Habitat for Humanity of Bergen County’s (habitatbergen.org) Little Ferry Project. This is a Sandy restoration project to “Repair. Rebuild. ReStore” in Little Ferry where repeated flooding from an overflowing levee damaged homes and left some families with no choice but to continue to reside in them. Bergen Chapter leaders plan to continue their group volunteer activities semi-annually to give back to the community and strengthen their team. To find out who participated, who displayed their skills with a circular saw and who mastered a nail gun, visit njcpa.org.

Use Your Network Effectively Once you’ve made stronger connections, Cashman suggests reaching out to selected professionals for conversations about who you are, what you do and where you want to be.

N E W J E R S E Y C P A • january • february 2 0 1 5

SOCIETY

pages

NJ State Board of Accountancy Report Two for Review: Incapacitation and SEC Suspensions Newark (October 16)

Legislative

Public

Committees

Education – Committee Chair Ainsley A. Reynolds, CPA, attended a New Jersey Society of CPAs’ accounting educators meeting. Discussion points included scholarships; getting high school students more interested in accounting; acknowledging accounting professors for practicing, teaching and technology, in addition to research; tracing the disconnect where college accounting students do not go for the CPA credential; and the 150-hour rule. Statutes/Rules/Regulations – If a licensee receives a Securities and Exchange Commission suspension, he or she may wish to self-report to the state board in order to avoid consecutive (versus concurrent) discipline. The committee will look at other governmental precedents. Monitoring Profession – The committee received a summary of outstanding issues of the American Institute of CPAs’ Uniform Accountancy Act. One issue discussed was the disposition of clients and their records if a practitioner becomes incapacitated. Currently, there is no board policy, but it is something to consider adding to the regulations. The committee will examine “wrap-up periods” in other states.

Magazine of the

NJCPA President Brad E. Muniz, CPA, indicated that the Society’s legislative efforts on both the state and federal fronts were progressing. Muniz will be attending the AICPA Council meeting where issues such as audit quality, future CPAs, and diversity and inclusion will be discussed.

Newark (November 20) President’s Remarks

NJ State Board President John F. Dailey Jr., CPA, discussed his attendance at the National Association of State Board of Accountancy’s (NASBA’s) national conference in Washington, D.C. He passed around a sample of the Georgia State Board of Accountancy’s newsletter and suggested the NJ State Board consider creating one.

Executive Director’s Remarks

NJ State Board Acting Director Khaled Madin indicated that he has been working with his IT department and NASBA to get the Accounting Licensee Database (ALD) online by the end of the month. New Jersey will be the 50th out of 55 jurisdictions to implement the ALD system.

New Jersey Society of Certified Public Accountants

March • April 2015

March/April – Coming Attractions The Cloud l

Should You Be in the Cloud?

Private Versus Public Clouds

When It Rains: Cloud Problems

The Internet of Things

The board will begin reviewing public comments on the revised regulations when the 60-day comment periods ends on December 19.

Committees

CPA Examination – NASBA had sent a survey seeking the board’s input on the CPA Exam. Ethics – All course providers should provide a hardcopy, electronic copy or web link to the NJ statutes and regulations in their course materials. Peer Review Oversight – The committee discussed (1) the new AICPA guidelines on processing a report that is considered incorrect; (2) NASBA’s list of each state’s employee benefit plans indicating which ones are “must selects;” and (3) an exposure draft on exempting the preparation of financial services from peer review. No changes to the regulations appear needed as a result of the exposure draft. Nominating – The committee should ramp-up its efforts during the first quarter of 2015 to nominate and select officer candidates for the board.

Public

NJCPA CEO and Executive Director Ralph Albert Thomas, CGMA, mentioned that the Internal Revenue Service appealed an AICPA lawsuit regarding the registration of unlicensed tax preparers. The AICPA was deemed not to have standing. Thomas said that the Society is making a big push in the legislative arena to reform New Jersey’s estate and inheritance taxes. Thomas offered the board assistance in helping promote and create awareness for a NJ State Board of Accountancy newsletter via the Society’s communications and social media platforms. Thomas reported that the NJCPA received a positive review on its peer review program from the AICPA. Lastly, Thomas indicated that the Society will issue a comment letter on the revised regulations.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

CLASSIFIEDS Mergers/Acquisitions

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

Essex County sole practitioner grossing over $550K looking for CPA with similar-sized practice. Not looking for merger or partnership, rather an association in case of disability or death. Reply to cpannj@gmail.com. Sussex, Morris and Warren County-based, peer reviewed CPA firm is seeking to acquire or merge-in near retirement, small firms or sole practitioners in need of succession planning. Reply to morrissussexcpa@gmail.com. Bergen County, small size, peer reviewed CPA firm is seeking association with same for office/ practice sharing of space. Will consider future merger of practices. Contact Bruce Kaminer at 201-794-6400 or bruce@brucekaminercpa.com. Parsippany, NJ. Three-partner CPA firm seeks retirement-minded practitioner to merge/acquire practice ranging from $100K and up. Please contact Carl Gutt, 973-451-0800 x22 or cgutt@dglcpa.com. The Curchin Group, LLC, a central NJ, Monmouth County firm is seeking to merge-in near-retirement sole practitioners and small firms needing succession planning. Other individuals seeking growth and expansion are welcome to inquire. Initial practice continuation also an option. Reply in confidence to Peter Pfister, CPA, at 732-747-0500 or ppfister@ curchin.com. Seize a merger/acquisition opportunity with benefits for you. Tired of dealing with issues of running a firm? We are looking for firms ranging from $300,000 to $5,000,000 eager to combine forces as we continue to grow across northern NJ, Westchester and the Hudson Valley region. Goldstein Lieberman & Company is ideally situated to service all types of industries. Visit glcpas.com; email me, Phillip Goldstein, CPA, managing partner, philg@glcpas.com; or call 800-839-5767 to have a confidential conversation. Mountain Lakes, two-partner CPA firm is seeking to merge with or acquire retirement-minded sole practitioners and small firms looking for succession planning. Firm's gross billings should be from $100K and up. Please reply in confidence to Murray Leipzig, CPA, at 973-394-8920 x11 or northjerseycpas@earthlink.net.

New Jersey practice for sale. Franklin area; gross $60K. Loyal client base; familiarity with Indian culture and language helpful. Revenues primarily tax, however over 2/3 generated from businesses. For more information, call Bradley Holmes at 800-397-0249, or visit accountingpracticesales.com to view all listings and register for free email updates.

Professional Services Add a wealth management division to your accounting practice. Successful Bergen County, high net worth financial planning and money management firm wants to work with your firm to create a financial services division. For 30-plus years we have been successfully implementing professional partnerships with CPA firms to increase their revenues by offering financial products to their clients. Contact Steven Kolinsky at 201-474-4012 or skolinsky@ kolinskywealth.com.

Classified Advertising Replies to ads with file numbers should be sent to: File______________________ New Jersey CPA Classifieds 425 Eagle Rock Avenue, Suite 100 Roseland, NJ 07068-1723 To see additional classified listings or to place an ad, visit njcpa.org/classifieds.

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N E W J E R S E Y C P A • january • february 2 0 1 5

YOUNG

professionals

Hit the Ground Running with Vital Excel Skills B y Evelyn McDowell , C PA, Rider University, and Patrick M c D owell , K P M G L L P

formulas. The SUMIF function adds a qualifier to a summation formula that will yield a total for only a specific condition. These functions can be very short and simple, to very long and complex, making them a versatile tool in analyzing data.

Formatting Commands

ven though the days of six-, 10- and 24-column paper are long gone in the modern accounting world, spreadsheets continue to be a critical tool for accounting professionals. As this technology evolved as one of the early applications on personal computers, the level of sophistication and ease of use has greatly expanded. To be efficient, accountants must be able to create, develop and maintain increasingly complicated spreadsheets. Despite the importance of spreadsheet skills, many accounting students graduate without ever mastering important spreadsheet commands, such as those used with Microsoft’s Excel, one of the widely used software applications. It’s much more favorable for emerging professionals to already possess these skills, rather than trying to learn them on the job. The following is a list of useful spreadsheet commands and functions every accounting student should master before his or her first day of work.

Functions

The basic IF function indicates whether a condition is met and returns a TRUE or FALSE. IF functions can be used to quickly evaluate data or transactions that match specific criteria using conditional formulas. The IFERROR function returns a customizable error message to Excel

Use the Text to Columns feature to divide text fields into two or more columns. The Concatenate command joins two or more cells together in one cell. For example, a file containing the first and last names in two separate columns can be instantly combined for all names in a file. Conditional formatting can be applied to data only if one or more specific conditions are met. For example, you can highlight all transactions of more than $10,000 in an audit test.

Database Commands and Functions

Accountants often use large datasets in various formats and organizations to analyze and gather specific information. Excel provides database commands to help save significant time. A pivot table is an interactive table that summarizes, organizes and compares large amounts of data in a worksheet. Pivot tables can be used to summarize large datasets with multiple transactions in just seconds. LOOKUP functions are used to find values in a table that has either row labels (VLOOKUP) or column labels (HLOOKUP). LOOKUP functions are useful when comparing two large datasets for specific items or when searching for specific information in large spreadsheets. AutoFilters help users quickly and easily filter and sort large datasets.

Excel provides drop-down boxes for each column of data, allowing the user to filter out unwanted information. AutoFilters also allow users to select text or amounts for further testing or review. The Remove Duplicates command scans an entire range of data to eliminate duplicate entries and other information.

Resources

Even if your college or workplace does not offer classes to help you gain expertise in using spreadsheets, there are many ways to develop these skills on your own. Microsoft has free online training videos available by using the search function on its help menu. KPMG provides students free access to its KPMG University (kpmguniversityconnection.com). The site contains short, how-to videos for many of the commands referenced in this article, using common accounting settings. Detailed online searches—like “How do you create complicated IF statements in Excel?”—can return links to course providers, online video tutorials and detailed descriptions of these and other commands and functions. Spreadsheet applications are powerful tools in an accountant’s arsenal. The time you devote to learning and developing your ability to use them is a wise investment that will pay off for many years to come. Evelyn McDowell, CPA, Ph.D., CGMA, is an associate professor at Rider University and a member of the New Jersey Society of CPAs. Contact her at emcdowell@rider.edu. Patrick McDowell is a senior associate at KPMG LLP. Contact him at pmcdowell@kpmg.com.

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

LEGISLATIVE

views

Death and Taxes Top Society’s Legislative Agenda B y Jeffrey T. Kaszerman , NJ C PA Government R elations D irector

he New Jersey Society of CPAs joined with other pro business groups in calling for death tax reform at a press conference held on the NJ State House steps in September. Society leaders also met recently with Assembly Speaker Vincent Prieto to urge him to support reducing the burden of these taxes. There are more than a dozen bills pending in the state legislature that would reduce or eliminate the state’s estate and inheritance taxes, and the NJCPA is making passage of meaningful death tax reform a top legislative priority for 2015. Society members have complained for many years that New Jersey has the most onerous death taxes in the country, which are forcing growing numbers of their clients to leave for other states where there are either no death taxes or the burden is much lighter. New Jersey is one of only two states that has both an estate tax and inheritance tax and, unlike most states, NJ never hiked its $675,000 exclusion to match the federal exclusion of $5.1 million. New York recently reduced its estate tax significantly by enacting legislation that will phase-in its estate tax exemption to match the federal exemption, tempting even more New Jerseyans to flee the state. A January 2014 Regent Atlantic Study, “Exodus on the Parkway: Are Taxes Driving Wealthy Residents Out of New Jersey,” noted that in just one year, from 2009 to 2010, New Jersey lost more than $1 billion in taxable adjustable gross income because it suffered a net loss of 11,167 tax filers who left for Florida, Maryland, North Carolina, Pennsylvania and Virginia. New Jersey’s estate and inheritance taxes together bring in about $700

NJCPA CEO & Executive Director Ralph Thomas, CGMA, joined legislators and leaders from several business groups at a September rally at the NJ State House calling for a reduction of the estate and inheritance taxes, claiming it drives capital from the state. million to the state coffers annually, and some lawmakers are hesitant about passing reforms because they believe the state can’t afford the lost revenues. Business and taxpayer groups counter that in the long run there would be a net gain in revenues because less money, capital and investment would leave New Jersey. This would generate more economic activity and taxable income.

Governor Signs Bill Changing Board of Accountancy Composition In September, Governor Chris Christie signed legislation (S2163) that makes important changes to the composition

of the New Jersey State Board of Accountancy, allowing him to appoint two additional CPAs to the board. The bill, supported by the NJCPA, reflects the changing composition of those practicing public accountancy. There are more than 22,500 licensed public accountants in NJ who are regulated by the 12-member state board. The board regulates four types of licensed accountants: Certified Public Accountants (CPAs), Public Accountants (PAs), Registered Municipal Accountants (RMAs) and Public School Accountants (PSAs). Almost all of the licensed accountants in New Jersey are CPAs. However, a small number of PAs were collectively grandfathered in 1977, after which only CPAs could be licensed as public accountants. Of the original 8,000 PAs licensed in 1977, fewer than 400 have active licenses. State law was never updated to reflect the diminishing number of PAs relative to the composition of the state board. Until S2163 was signed, two seats on the board were allocated to PAs. S2163 lets the governor appoint a CPA or a PA to either of the two seats currently allocated to PAs, thus providing the state the flexibility it needs as the number of PAs continues to decline. The bill also provides that at least one board member should possess an RMA and a PSA license. This will ensure that there is always at least one member of the board who is familiar with the unique licensing requirements for RMAs and PSAs. The bill also allows newly licensed CPAs to take the required law and ethics course six months before or after licensure, and changes the accounting and auditing CPE requirement for RMAs from 40 to 24 credits per triennial.

N E W J E R S E Y C P A • january • february 2 0 1 5

MEMBER

profile

Father Time By David Plaskow, NJCPA Communications Manager

s a “future business leader of America” at Lacy Township High School, Mark Philips knew he would go into accounting. “I like structured thinking and telling a story through financial data,” says Philips. So, he chose a college with a well-respected accounting program, The College of New Jersey (TCNJ), where he received a B.S. in accounting in 2002. It was at a TCNJ career fair that Philips met with representatives of the NJ Division of Taxation. “After an interview process, I joined the Office of Criminal Investigation as an auditor,” notes Philips. “I investigated individual, sales and use, and cigarette tax fraud cases, including joint insurance fraud investigations.” In 2005, while working on his master’s of accountancy in taxation degree at Rutgers, Philips took a course in state and local taxation (SALT) that altered his career trajectory. “The class covered day-to-day tax issues in business, court cases, controversy and applying the law—it was eye-opening,” he recalls. Bolstered by his newfound taste for SALT, Philips obtained a conferee position at the NJ Division of Taxation in the Conference and Appeal Branch. “We heard administrative appeals for all types of companies: small businesses up to large public corporations,” he comments. Philips loved his work at Conference and Appeals, but by 2008 he was at a crossroads. “I had a master’s degree and the CPA certification. Unfortunately, it was around this time that the NJ State government was cutting benefits and freezing promotions,” says Philips. “I was hungry to learn more, quicker.” That same year, 2008, Philips received a LinkedIn message from a recruiter at KPMG. “I always had in

the back of my mind working for a Big Four firm one day, and the timing was perfect,” remarks Philips. He joined KPMG’s SALT practice where he became a specialist on NJ tax issues. “It was a big transition, but I was used to extended hours because while I was at the NJ Division of Taxation, I was also an adjunct professor at Burlington County College,” says Philips. “And having the CPA designation was a huge help when I entered public accounting.” It was around this time Philips became more active at the New Jersey Society of CPAs. “It went back to advice my parents gave me growing up: ‘Be mindful of the company you keep,’” recalls Philips. “I want to surround myself with and learn from smart, like-minded people. Since I’ve joined the Society, I’ve been able to increase my involvement through presenting the Pay It Forward program, interviewing scholarship candidates and chairing the State Taxation Interest Group.” One of the reasons Philips feels he’s found a home at KPMG is the firm’s approach to work-life balance initiatives. “My wife Erene and I had a boy, Gabriel, in June. KPMG’s paternity leave program lets me take up to six weeks off at 100-percent pay within six months of the child’s birth, provided the other parent is back at work for four of those weeks,” says the Middletown resident. “Erene’s ecstatic

about the leave. I can really bond with Gabriel, plus he isn’t the best sleeper, so I can pick up from where my wife left off in getting him into a routine.” So how does Mark plan on spending those golden moments? “Right now, I’m perfecting my swaddling technique,” he notes. “I look forward to us going to the park, running errands and visiting Gabriel’s 91-yearold great grandmother Evone.” Philips made sure to tie up his loose ends at work before the paternity leave. “I scheduled the leave after my busy season,” he says. “I’ve created an Excel file that has all of my projects, who the partner is on each project, any staff on each account and the project’s status. I’ve distributed the spreadsheet to everyone who needs to know.” Far removed from the days when the dad could enjoy a cigar outside the delivery room and then go back to work in a day or two, Philips thinks KPMG’s paternity leave policy makes good business sense: “I can appreciate this incredible bonding time now and hopefully enjoy a long career at the firm. So what’s six weeks in the grand scheme of things?”

N E W J E R S E Y C P A • J A N U A RY • F E B R U A RY 2 0 1 5

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