macpa townhall / piu fall 2011
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What are the trends and issues facing Maryland CPAs? Tom Hood's legendary roadshows offering 4 hours of free CPE to Maryland CPAs every six months. Designed to keep MACPA member abreast of the rapidly changing CPA profession and let them know what they can do to shape their future and the future of their Profession.You will see updates on the latest accounting standards, federal and state legislative issues, and the macro trends facing businesses and CPAs.TRANSCRIPT
MACPA Professional Issues Update – Fall, 2011
Tom Hood, CPA.CITP CEO & ExecuDve Director
Maryland AssociaDon of CPAs Business Learning InsDtute
Our Agenda
• Economy • Future Trends
• General • Profession
• What MACPA is doing about it
• Thriving in the chaos
But first a word from our members
What do you think?
CPA Outlook
AICPA/UNC Economic Outlook Top Challenges
What we do know…
1. We’re geWng older -‐ Age will be biggest age cohort by 2015.
2. Age is impacDng economy – Healthcare will be 20% of GDP by 2020.
3. We’re creaDng fewer jobs – From 2000 to 2010 we’ve created 709 jobs for every 100 people, from 2008 to 2018 that drops to 49!
4. We’re spending less and saving more – Median wages fell in 2008 to 1983 levels and saving rates rose from .3% to 6.4% from 2008 to 2010. Sales of cars & homes have fallen off significantly.
5. The government will follow suit.
The economy is in a big downshie
The next thing… Thirty (30) years of Prosperity? "Economic historians assure us that new
technology will eventually enable millions of ordinary employees to add more value in the
workplace, increasing general prosperity," Snyder says. Historically, he says, such periods of economic
prosperity have lasted as long as 30 years. – Interview with Bill Sheridan – MACPA Chief Editor
What has gone away or been invented since you
have been born?
Why we are here?
The tornado of changes from CPA Vision Project circa 2000
What CPAs have said abut the future:
1. Aging population, loss of wisdom, knowledge transfer 2. Global rules & standards –IFRS – complexity 3. Information overload, complexity (Need for critical thinking & filter) 4. Information Security, Privacy & Data Protection 5. Global Competition, Rise of the Rest 6. Work-Life Balance 7. Diversity – Cultural Fusion – Beiging of America 8. Changing Communication (decline of face-to-face) 9. Increased Globalization 10. US Deficit 11. Education
The 6 C’s
1. Change 2. Complexity 3. Convergence 4. Compliance 5. CompeDDon 6. Competency
“# 1 reason organizations fail is that they miss the weak signals of disruptive change.”
– Andrew Zolli
4x=1890 7x=1670
1. Increased speed 2. Increased complexity 3. Increased risk 4. Faster pace of change 5. Surprises everywhere and everyday
Welcome to the Extreme Future!
Dr. James Canton – author of The Extreme Future
"It starts with the fact that globalization and the information technology revolution have gone to a whole new level. Thanks to cloud computing, robotics, 3G wireless connectivity, Skype, Facebook, Google, LinkedIn, Twitter, the iPad, and cheap Internet-enabled smartphones, the world has gone from connected to hyper-connected.”
- Thomas Friedman NY Times author The World is Flat
The single most important trend in the world today
IBM’s recent Global study of CEOs found
that eight out of ten CEOs see significant change ahead, and yet the gap between expected change and the ability to manage it has almost tripled since our last Global CEO Study in 2006.
How is your Complexipacity? All complex phenomena are systems of systems that cannot be predicted with confidence because they involve: • EssenDally infinite numbers of
variables and linkages about which we can never have complete data
• Incalculable risk • Uncertainty (the human factor) • Surprises – random “emergence” &
Black Swans • Ambiguity – Rumsfeld’s “Things we
don’t know we don’t know”
As knowledge moves from stocks to flows, how do we stop our inventory
from becoming obsolete?
We can choose to harness the winds of change
The tornado of changes from CPA Vision Project circa 2000
From feeling “lonely at the top”
To the wisdom of the crowd
Technology as Accelerator of Change
Speaking of Technology How the Tech guys are structured
From designer Manu Cornet via Foursquare product chief Alex Rainert
AICPA Top 10 Technology Issues
1. Control and Use of Mobile Devices 2. InformaDon Security 3. Data RetenDon Policies and Structure 4. Remote Access 5. Staff and Management Training 6. Process DocumentaDon and improvements 7. Saving and Making Money w/Technology 8. Technology Cost Controls 9. Budget Processes 10. Project Management & deployment of new apps
SOC it to me!
• Security • MulD-‐Tenancy • Reliability
The Cloud is geWng bigger
Social Media RevoluDon
The generation gap is widening
Eight ways you can work Smarter
1. Recognizes that s/he learns conDnuously as s/he does his/her job.
2. Wants immediate access to soluDons to his/her performance.
3. Is happy to share what he/she knows. 4. Relies on a trusted network of friends and
colleagues. 5. Learns best with and from others. 6. Keeps up-‐to-‐date with what is happening in
his/her industry or profession. 7. Constantly strives to improve his/her
producDvity. 8. Thrives on autonomy.
from Jane Hart author of the Social Learning Handbook
Old dogs need to learn some new tricks
5 Forces of GlobalizaDon 1. Growth of consumers in emerging
economies 2. Technologies that empower
consumers & communiDes 3. Increase in labor producDvity in
developed markets 4. Shie of economic acDvity between
and within regions 5. Increasingly global markets for
labor & talent
The counter trend is LocalizaDon or think globally, act locally
GlobalizaDon – Chinese auditors visit MACPA Towson CPA Center
Global CPA PosiDoning CGMA
Compliance
American Institute of CPAs American Institute of CPAs
The Year of Changes in Standards
SOC Reports • SSAE 16 (SOC
1) • SOC 2, 3 • Cloud
computing (C2B)
• 2 guides in July
FASB/IASB convergence • Major changes
to GAAP • June 30 target
for priorities
COSO Integated Framework • Comprehensive
Update • Exposure Draft
Q4 2011 • Final 2012
American Institute of CPAs American Institute of CPAs
The Year of Changes in Standards
Clarity Project • Finishes late
2011 • Standards
effective for 2012 year-end audits
Ethics Codification • Exposure draft
by late 2011 • Complete by
late 2012
Convergence -‐ IFRS & US GAAP?
• AdopDon / Conversion -‐ a switch from local standards to IFRS, without converging them first.
• Convergence -‐ migraDon of local standards to being closely aligned with IFRS.
• Endorsement -‐ formal endorsement of new or amended IFRS before they become legally binding.
• Condorsement – A liqle bit of 2 & 3 above. Term Coined by SEC Deputy Chief Accountant Paul Beswick in December, 2010
Small Business is the liqle engine that could
SMBs fighDng against the odds • Annual cost of Federal Compliance
$1.75 trillion • Federal burden exceed costs of
health care per person by 50% • Cost per employee = $8,086 • For SMB < 20 = $10,500 per
employee
SEC FASB
FASB PCFRC
IASB IFRS & SME
PCAOB AICPA
ASB, ARSC, PRB
IAASB
AICPA PEEC
AICPA PEEC
IFAC
Public Company Private Company Int’l Company
Financial Reporting
Audit /Attest Performance Standards
Code of Conduct
Another way to look at standards & oversight
State Oversight & Enforcement of CPA License CPA Licensure
FAF
FASB
PCFRC
GASB
The Players SEC
& State Boards & State CPA Societies
BRP
Additional Background Info
15,000 issuers and 28.5 million private companies but GAAP driven by public company issues
Small businesses employ more than half of all private sector workers
Private companies and their financial statement users have information needs that are different than public companies
Concerns About Private Company Financial Reporting Include:
± Too many GAAP-specific requirements not useful or relevant for private companies
± Greater FASB emphasis on public companies
± Increased cost, complexity, time-consuming using full GAAP
± Use of OCBOA raises the issue of what’s “generally accepted”
Blue Ribbon Panel’s Conclusions
± A problem exists that needs resolution ± Recommendation #1 - Enhance GAAP
for private companies by making significant modifications, where warranted
± Recommendation #2 - FAF should create a separate private entities accounting standards board
Other Key BRP Recommendations
Framework for differential decision criteria
3-5 year sunset review to determine effectiveness of new board
5-7 board members
$4-5 million annual budget
90.87% of MACPA members believe we need Private Company Standards
Insights form the Spring & Fall, 2010 PIU / town hall meetings covering 2,000+ members
Judy O’Dell chair of FASB PCFRC shared her perspective
MACPA’s response
± MACPA sent comment letter to FAF on December, 2010 for initial survey
± MACPA Chair Kimberly Ellison-Taylor appoints special Accounting Standards Task Force
± Accounting Standards Task Force held meetings from Jan – Mar, 2011
Our guiding principles
Draft conclusions –Approved by MACPA Board
± Private Company Standards need to be addressed (costs, complexity, OCBOA)
± Current structure is not working – PCFRC recommendations were not addressed, prior studies indicate issue
± Other jurisdictions around the world recognizes needs of private company users are different
± MACPA Sent comment letter to FAF (up to 2,554 letters)
Our State Tax Commiqee takes a proacDve posiDon in General Assembly
XBRL & MACPA & You • SEC Mandate – June 15, 2011 -‐ third wave • Radical Transparency (DATA Act of 2011) • LiberaDon of data for financial analysis • Reduced compliance burden (SBR)
XBRL
LegislaDve Advocacy and the Power of WE!
CPA Day in Annapolis – January 18, 2012
The Maryland Story
Maryland Business Agenda - 2011 • Defeated Combined Reporting • Defeated extension of Millionaire Tax
(6.25%) • Passed Small Business Real Property
Tax Payment Plan (2012) • Defeated Corporate Throwback and
Gross Receipts Tax • New law – Requires MD Employers to
notify employees eligible for earned income credit
Source: Maryland Chamber of Commerce
MACPA 2011 Agenda 5 for 5!
ü Pass 120/150 legislation ü Stop Sales Tax on Accounting
Services ü Exempt CPAs from Debt
Counseling Bill ü Stop Trial Lawyers attempts at
Tort Liberalization – Comparative Fault
ü Pass Safe Harbor legislation
CPA Day in Annapolis January 18, 2012
Maryland CPA Agenda 2011 How we did it
Looking ahead to 2012
• Special Session to deal with redistricting (and budget) – will see tax proposals
• Maryland Social Security Privacy Act – AG Opinion
• Sales Tax on Services • Combined Reporting • Comparative Fault =
increase liability • Quid Pro Quo for DC
mobility
Sales Tax on Services • Should accounting services be taxed? • We’ve fought and won on this numerous times
---- but times are changing • 19 states are considering taxing services • Could be an issue in 2012-2013 budget
– Loss of the one-time bailout funding leaves an $8 Billion hole to fill
• QUESTION: Should this continue to be a bedrock issue for MACPA?
65
Safe Harbor LegislaDon passes and evens playing field for CPAs doing Reviews & CompilaDons
120/150 CPA Exam requirements
An example -‐ CPE RegulaDons involved all levels – law, regulaDons, and procedures
Maryland Senate & House passes bill
A Bill SB 128 From State Board
Law Maryland Governor signs into law
Maryland State Board of Public Accountancy
Clarify thru regulations And enforce the law
CPE
• CPE = CPE • Self-‐study allowed hour for hour & unlimited • 4 hour Ethics Requirement every two years • Peer Review qualifies for CPE • CPE Audits
– SaDsfactory Compliance – Adjusted Compliance – Audit Failure
New CPAs take oath to Protect the Public Interest
MACPA CPA Summit scheduled for June 11th & 12th, 2012
Record #s of CPAs take Exam in MD
It all adds up $ per partner / year
1. CFPA $250 2. Tax Prep $100 3. Debt $150 4. Mobility $500 Total $1,000
Sales Tax est $22,000 per partner
Help us help you – support our PAC
CompeDDon
AICPA / PCPS Survey Results
AICPA PCPS Survey Results
Why ERM? AICPA Thought Leadership Area in Business, Industry and Government Website with Briefs, MAGs, Research and other resources to help members with risk management.
Top 10 Issues Facing BizInd 1. CommunicaDng effecDvely (new tools vs face to face) 2. Talent – Training – Succession Planning 3. Economic environment 4. GeneraDonal – Work/Life balance 5. Supply chain – rising costs 6. Strategic planning in uncertainty 7. Financial literacy about business 8. Increasing government regulaDons 9. IT security / privacy 10. MulD-‐tasking and increasing workload
What can MACPA do to help? The group idenDfied areas that MACPA could help CFOs, controllers and financial professionals deal with the pressing issues. One major idea was to have quarterly roundtables focused on one of these main issues with a facilitated discussion aeerwards. Most of the key issues were already being dealt with by MACPA. The group emphasized the importance of conDnued advocacy at the federal, state, and state board areas.
hqp://www.theiirc.org
Sustainability – People – Planet – Profits and the Triple Boqom Line
Leadership Is this working for you?
How is leadership changing?
“What got you here won’t get you there.” – Emmanuel Gobillot - Leadershift
Leadership is DEAD • DemocraDc • ExperDse • AqenDon • Diverse
What hasn’t changed about leadership?
• Engagement • Alignment • Commitment • Accountability
“First I get all of my men facing the same direction.” - Napoleon
CLO magazine shows the changing role of leaders
Leadership is…
The ability to gain insights and the apDtude to turn them into acDon –
Insights to AcDon
-‐ Tom Hood & Gretchen Pisano
(one without the other is either useless or destrucDve)
Five Qualities of Extraordinary Leaders 1. Sight - Ability to see emerging
patterns and shift perspective when necessary
2. Insight – Ability to think strategically and critically to gain insights
3. Create – Seek high leverage opportunities that build on your strengths
4. Communicate - Ability to make your thinking visible to others and the ability to collaborate inside and outside your organization
5. Inspire – Ability to mobilize support and engage others involved in doing the work to join you in ACTION
L≥C
Leadership in the new normal Three Critical Competencies
92
Network Leadership
Strategic Thinking
Strengths-Based
Leadership Self-awareness In the moment
Built on strengths and positivity
Future-minded and flexible mindset
Collaborative and curious with the ability to ask powerful questions
Capable of engaging and Inspiring people
Ability to make your thinking visible to others
From: Command & Control To: Connect & Collaborate
Leadership is Connect & Collaborate!
Leadership = MulDplicaDon • 15 X – ROI strategy as process & alignment
• 8 X – Strengths • 6 X – Trust & Engagement • 3 X -‐ PosiDvity
Finding Your Edge…
• Strategic thinking – all of the time
• Make your thinking visible to others
• The power of We – Collaboration
• Innovate by finding your edge (Strengths, Positivity, Opportunities)
The Great Hall at Oxford
FoundaDon started in 1249, completed in 1634 according to wikipedia
Succession Planning for our Profession
MACPA Leadership Academy debuts September 18-‐20, 2011
The 5 Major Features of the New Normal according to David Pearce-‐Snyder
1. Society will be older (and hopefully wiser); 2. A “rendezvous with austerity” – individuals and
insDtuDons will have to live within their means; 3. Technology will pervade every aspect of daily
life, work and play; 4. 3rd world growth will drive the global economy 5. The decision-‐making environment will be more
complex for everyone
Which one is the biggest opportunity for CPAs?
Some closing thoughts “It is hard to plan for the long term future when you don’t know what is going to happen five minutes from now. Today, a competitive edge is thin and temporary; the edge quickly becomes the margin. The ability to define the edge, and the ultimate competitive advantage, is found in the smarts, heart and ingenuity of your people - that's your powerhouse. Tap that, train it, focus it and mobilize it; now you've engaged a network and inspired a sustainable shift. Insight to action, one without the other is either useless or destructive.”
-Tom Hood & Gretchen Pisano co-authors of the i2a: Insights to Action Strategic Thinking System
http://www.bizlearning.net/live/i2astrategicplanning
A leader’s job is to…
Provide hope & inspiration!
Tom Hood & Gretchen Pisano
Links
• Strategic Planning – http://www.bizlearning.net/live/i2astrategicplanning
• Future Forums – http://www.bizlearning.net/live/i2afutureforums – Leadership Development – http://www/bizlearning.net/live/i2aleadership
• Customized Training – http://www.bizlearning.net/learningcenter/
• Search our Catalog – http://www.bizlearning.net/learningcenter/
customizedtraining/BLI_catalog.cfm
Tom Hood, CPA.CITP CEO
Maryland Associa8on of CPAs Business Learning Ins8tute
(443) 632-‐2301 E-‐mail [email protected]
Web hNp://www.macpa.org Blog hNp://www.cpasuccess.com hNp://www,bizlearningblog.com
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