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  tom@macpa.org  

Web  hNp://www.macpa.org  Blog  hNp://www.cpasuccess.com  hNp://www,bizlearningblog.com  

   

=

Leadership blogs:

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