Las Vegas-In contrast to the glitzy bonhomie that has become the signature of this town, the American Institute of CPAs' Fall Meeting of Council was nearly all business as attendees were given progress reports on a dizzying number of pending issues, such as International Financial Reporting Standards, sweeping financial regulatory reform and the rising importance of sustainability.
During the two-day confab, themed "One World" to highlight the growing internationalization and connectivity of the profession, members of the institute's governing council were also briefed on the organization's efforts on such front-burner measures as tax patent legislation and preparer registration, the proposed creation of a consumer financial protection agency, and private company reporting standards.
The fall confab also saw Robert Harris, managing director at the Vero Beach, Fla., firm of Harris, Cotherman, Jones, Price & Associates, become the 97th chairman of the AICPA, as he assumed the reins from outgoing chair Ernie Almonte. Harris is the first Florida member to chair the institute.
During a luncheon keynote, Harris challenged the institute's membership to rally behind what he described as "sea changes" and emphasized the need for younger CPAs to become involved in the profession. "We must set a course around, and sometimes through, uncharted waters," he said. "Thinking globally is no longer a luxury. It is a necessity. International Financial Reporting Standards are coming to America. In today's environment, you can't have a stock offering accounted for in Boston differently than it's accounted for in Beijing or Belgium."
Harris said that although the timeline for IFRS may be uncertain, and the phase-in may take years, the CPA profession must be ready in terms of education and preparedness.
Harris, who has referred to the economic downslide as our "Financial 9/11," said that reform rules for financial institutions are needed, but also ones that "balance entrepreneurial spirit with fiduciary responsibility."
With regard to the "triple bottom line" of sustainability, the new chair said that it adds two considerations to a company's traditional bottom line of economic viability - "social responsibility and environmental stewardship." He explained that sustainability gives CPAs the opportunity to advise companies on strategies to reduce their environmental footprint, as well as "developing systems to capture information related to sustainability."
Toward that end, the conference featured a videotaped address by the Prince of Wales, who called on the CPA profession to assume a leadership position to develop the tools and information necessary to "embed" sustainability issues effectively in their daily operations. "Who better to take the lead and set an example than the accountancy profession, which is in many respects the engine room of the corporate world and, indeed, government?" he asked.
IFRS AND OTHER STANDARDS
Institute president and chief executive officer Barry Melancon gave conference-goers a 90-minute "state of the institute" recap detailing a number of measures emanating from Capitol Hill that will impact the CPA community.
With the Securities and Exchange Commission recently revisiting the roadmap to adoption of International Financial Reporting Standards, Melancon revealed to the roughly 400 attendees the results of an institute survey that found about 65 percent of participants favored the SEC addressing its plans for adoption of IFRS by the end of the year.
However, Melancon cautioned that if IFRS were adopted, the profession would have to "create a mechanism to prevent the arbitrage of accounting standards."
"The direction has clearly been set," he said of IFRS. "But the issue of 360,000 professionals dealing with principles-based standards is going to be a huge change."
Both he and Thomas Sadler, the 2008-2009 outgoing chair of NASBA, called for the preservation of the Financial Accounting Standards Board, with Sadler revealing that the average cost of transition to IFRS for U.S. filers will be in the vicinity of $35 million.
"The question is, has the IFRS train left the station, and is it a train wreck?" asked Sadler. "We think not. Globalization is inevitable, but there are many things that have to be evaluated. And where do private companies fit in?"
With regard to that 30-plus-year debate over differential standards for private companies, Judith O'Dell, chair of the Private Company Financial Reporting Committee, a joint task force between the AICPA and the Financial Accounting Standards Board, told attendees that the time is now to consider a separate GAAP: "It's very hard to change a standard once it's been issued, so that's why we have concentrated our efforts on projects in progress. The needs of public investors and analysts have always taken priority."
She referenced a recent study conducted by Big Four firm Deloitte, which showed that 51 percent of the respondents indicated the need for a separate GAAP for private companies. "Acceptance of GAAP exceptions is increasing, so with enough exceptions, our question is, when does it stop becoming GAAP?" she asked.
O'Dell said that the PCFRC has focused its efforts on such areas as statement presentation, liabilities and equity, lease accounting, loss contingencies, and revenue recognition.
In July, the International Accounting Standards Board issued IFRS for SMEs (small and medium-sized enterprises), but O'Dell noted that several international bodies, such as the Canadian Accounting Standards Board, would not adopt it.
Melancon also outlined the institute's push to gain an exemption for CPAs from the sweeping oversight of the proposed Consumer Financial Protection Agency, which, when established, would oversee everything from gift cards to mortgages. He said that Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, has agreed to language that would exempt CPAs.
Tom Ochsenschlager, vice president of taxation, and Mark Petersen, vice president of congressional and political affairs, plied attendees with updates on Section 7216 of the Tax Code, which carries a criminal penalty for the misuse of taxpayer information. They also discussed the continuing battle against tax patent registration and the lesser-known FACTA, or Fair and Accurate Credit Transaction Act of 2003, and its "Red Flag Rules," which require financial institutions or creditors to develop and implement identity theft prevention programs in connection with both new and existing accounts. The guidelines would extend to CPAs because a firm's 30-day billing cycle is seen as extending credit.
BOTTOM LINES AND AWARDS
The institute also released its annual financials, which showed a net loss of $20.4 million, citing lower net operating revenue and a decline in conference and advertising revenues. For fiscal 2009, the AICPA had assets of $230 million and liabilities of $220 million. The institute said that market volatility impacted the value of assets lodged in the AICPA's pension plan, resulting in charges of $27.7 million. The institute will freeze the pension plan in 2017. Meanwhile, its marketing and services portal subsidiary, CPA2Biz, posted net income of $400,000.
Institute membership in fiscal 2009 rose to roughly 360,000, an increase of 27,000 year-over-year, while its newest designation, the Certified in Financial Forensics, or CFF, now has 3,400 members. Other updates included mention of some 29 Ph.Ds who are currently enrolled in the first class of the institute's Accounting Doctoral Scholars program.
Also, the institute awarded its 2009 Gold Medal for Distinguished Service to William F. Ezell. Ezell, who served as chair from 2002-2003, is national managing partner of legislative and regulatory relations in the Washington office of Deloitte. Former Financial Accounting Foundation chair Robert Denham was given the AICPA's Medal of Honor. Denham, a public member of the institute's Professional Ethics Executive Committee, is a partner in the Los Angeles-based law firm of Munger, Tolles & Olson.
