There’s reason to come out of the bunker

March 31, 2009

Two recent presentations I attended made me think how a simple change in attitude can make a big difference during these trying times.

There’s a pervasive bunker mentality sweeping America. Hunkering down is all too easy when the news seems mostly bad. We want to hold tightly to our money, our jobs and our families until the storm passes.

Hardly anyone scoffed at Punxsutawney Phil on Groundhog Day. We’ve come to expect more of the same.

But James Glassman, a senior economist from JPMorgan Chase, helped me see the light. During OSCPA’s Corporate CPAs Conference, Glassman told members that yes, we are experiencing unprecedented times in our country’s economy. But the system is not totally broken. Problems are being solved one day at a time and he predicts the beginning of a recovery later this year. OSCPA members can logon and listen to Glassman’s presentation here.

A bigger problem is the American psyche.

Glassman notes it’s common for people to retreat into a psychological funk when a downturn follows a period of rapid growth. This makes us our own worst enemy.

When in a funk, we don’t think as clearly, have as much energy and we’re not as proactive about capitalizing on our own strengths and those of the organizations we lead.

Glassman’s advice? Businesses and leaders who act and think like winners will come out of this as winners.

So what does acting like a winner look like?

Be the solution. Things are nowhere near as bad as they were in the 1930s.Look for creative solutions to build your business and reduce risk. There are great resources everywhere to help you. Just last week, President Obama announced a new federal program to aid small businesses affected by the credit crunch. There are some key takeaways from this Wharton School post on Disruptive Innovation. Put resources like these to work along with a positive vision of what you want your company or your career to look like a year from now.

Make it easy for your clients and customers to do business with you. Sometimes we’re so caught up in the big problems, we forget the basics. Don’t. Mike Campbell, CPA, reminds you why that’s never been more important with this recent experience. Be available for clients but also show your human side, Rick Telberg advises CPAs in A Crisis is a Terrible Thing to Waste.

Invest in yourself. Everyone is trying to cut costs. But don’t cut yourself short. Keep your skills and your network intact. Go to seminars, meet new people and get a fresh perspective. Try Bob Littell’s NetWeaving approach which is simply sharing your knowledge and your resources without expecting anything in return. OSCPA members can logon to hear Bob’s presentation here.

Pay it forward. Use your time and talent to help others who are struggling. CPAs are just as busy this year as every other tax season, but we’ve had more volunteers taking part in OSCPA consumer tax call-ins than in the past. Why? It feels good to make a difference in someone else’s life. Identify a real need you can fill and give back. Volunteer in your community or in your professional organization.

The ultimate answer to what ails our country may be far down the road. But let’s take the first steps to move ourselves in the right direction.


BWC Rating – an Ohio Economic Development Issue

March 30, 2009

As I tweeted updates from an Ohio Workers’ Compensation briefing earlier this month, I could almost hear the collective yawns from those reading. Yes, the latest controversies of the Ohio Bureau of Workers’ Compensation (BWC) are best debated by actuaries, but the consequences of recent Bureau action will be far-reaching for Ohio business.

In response to the San Allen case in Cuyahoga County alleging inequities in the Ohio BWC group rating program, the Ohio General Assembly passed HB 79 allowing Ohio’s group rating program to continue, but with modifications. Group rating allows businesses with records of workplace safety to form groups that qualify for premium discounts. Group participants have an incentive to keep claims lower to stay in the group, and the BWC’s own data demonstrates that groups have resulted in reduced claims. To illustrate, participants in OSCPA’s group rating pool have received an annual premium discount of $542,000.

Responding to the case, the Ohio BWC was more than eager to be reactionary, approving sweeping changes introduced in the name of “rate reform” at its March meeting. The most significant changes include:

  • Overall base rate reductions for non-group employers, resulting in 25% overall savings.
  • A “penalty” for group employers of 31%, accompanied with a previously approved reduction in the maximum group rating discount from 85% to 77%. (A subsequent move to 65% has been proposed.)
  • Elimination of the “stacking” of discounts such as the Drug-Free Workplace discount on top of a group rating discount.

These rates were established to correct a $295 million “off-balance” calculation of the Bureau between current group and non-group employers.

Opponents of the rapid action by BWC claim that little transparency was provided in the calculations to allow Ohio employers and their representatives to question the calculation assumptions. Concerns have also been expressed that unintended consequences are not accurately modeled, including:

  • Are the discontinuation of groups with lower discounts, and employers leaving groups due to the impact of the penalty, adequately anticipated in projected revenue?
  • Does the introduction of regulatory complication and uncertainty further decrease the attractiveness of Ohio as a destination for employers?
  • What will be the Ohio business consequences of introducing increased costs of doing business during current economic challenges?

If projected revenue targets are not met due to unintended consequences, does this force increases in the group penalty in future years to correct the new “off-balance,” resulting in a downward spiral of additional unintended consequences that ultimately end the group rating program?

The cumulative result of the Ohio BWC changes is that the selection of the best approach for an employer will be a very individual determination. The best success strategy we can recommend is to stay in close touch with your group sponsor as we progress through current and forthcoming changes. OSCPA will keep the 450 CPA firms in its group rating program informed as this continues to unfold.

Changes approved for 2009 will not likely be noticed by many employers until checks are written in January of 2010. It has been difficult to get the Governor or legislators excited until employers begin realizing the effects. BWC continues to study additional changes for the July 1, 2010 premium year. Legislators and the Strickland administration need to hear from constituents about the true financial impact these changes make for businesses struggling to thrive and grow in these tough economic times.

The Ohio Society of CPAs has been actively involved in working toward minimizing unintended consequences and enacting rate changes over an appropriate timeframe to allow for public transparency and feedback. If you have a relationship with an Ohio legislator or someone on the Ohio BWC Board, now is the time to have an impact. Contact Amy Mignogna, OSCPA Senior Manager of Governmental Affairs, to learn how you can get involved.

Two cents from the “sandwiched” generation

March 25, 2009

Like it or not, I’m in the “sandwiched” generation. I’m not talking about those who are caring for aging parents and young children. No, I’m talking specifically about the members of Generation X who feel sandwiched between the Baby Boomers and Generation Y.

I think many Gen Xers, including myself, are insulted nearly every time the subject of generations comes up, whether it’s in the news, on TV, by a public speaker or even in casual conversation. Gen X seems to be the butt of continual jokes. Some of the infuriating descriptions include saying we’re disloyal and always looking for “what’s in it for me.” Gen X is sometimes depicted to be lazy. They are the first generation predicted to not be as financially stable as their parents.

In the book Generation X, written in 1991 by Douglas Coupland, the Gen X stereotype was created.  A stereotype that painted us as “hopeless, frustrated and unmotivated slackers.” Ouch! What’s worse is the tag stuck and the stereotype still exists today.

And here we sit sandwiched between the “me” generation and the next “great” generation. We’re paying the price for the very way that we were raised by Baby Boomers and, at the same time, feeling like we’re just filling space until the next great generation is ready to take over. Seriously?

I don’t think anyone would argue that generations are very much a product of their environment. The adults (a.k.a., the parents, the teachers, the coaches, the executives, the role models) set the stage for the next generation.

The Baby Boomers clearly had a strong work ethic. They deserved the term “workaholics” – a term that was coined in the 60s. As women entered the workforce, more and more households had two working parents. Sadly, this led to some of the traditions and customs that had been the centerpiece of the American home slowly fading into the past. The family dinner is one that first comes to mind. How many people grew up sitting down to a family dinner every night of the week? How about once a week? You see it on Leave it to Beaver, and other TV shows, but for Generation X and the generations that follow, that’s just not reality.

For Gen Xers, the loss of quality family time seemed to be most noticeable and something we wanted to change. What you have now is the pendulum swinging the other way as Gen Xers become the parents and create the life they actually want. Gen Xers put an emphasis on the family first, and career second. Gen X exhibits great loyalty – but that loyalty is to their family. This generation is trying to achieve a work/life balance. Many are willing to forego the corner office and six-figure salary and instead spend time coaching their son’s little league team and taking their kids to the zoo. It doesn’t mean that this generation is any less intelligent or capable. This generation simply has a different set of priorities.

Ultimately, this may be to the detriment of their career and their financial futures. It hasn’t really helped that Gen X is also trying to survive a dot-com bust and the current recession that has produced a jobless rate for Gen Xers at 8.7%.

We all do the best we can with the knowledge and the resources we have at the time. History may well be unkind to the less-than-spectacular financial successes of Gen X. It may be that Generation Y is the next “great” generation. But for my two cents, I’m a proud, card-carrying member of Generation X who is logging off for the day so I can take my kids to the zoo.

The silver lining in the Stimulus Act

March 11, 2009

Over the last few weeks, there’s been a great deal of media focus on the $787 billion American Recovery and Reinvestment Act (ARRA) – a.k.a., the most recent Stimulus Act. The Act will soon be followed by the “Making Home Affordable” Program. While government spending isn’t always the answer, the Stimulus Act presents a number of opportunities for individuals to save some serious money and get help when they need it the most – a silver lining if you will.

One of the “winners” in the legislation is those who have lost their job.  David M. Reape, CPA, a senior manager with Ciuni & Panichi in Cleveland and chair of the OSCPA Tax Committee, told OSCPA’s editors: “Individuals, particularly those who have recently lost their jobs, stand to gain the most from this package. For the individual who has been laid off, the government is subsidizing much of their COBRA payment. There is also a provision that allows individuals to exclude from income up to $2,400 of unemployment benefits received in 2009. Those are huge benefits for the recently unemployed.”

Former employees must have been enrolled in their employer’s health plan at the time they lost their jobs. The former employees will now only have to pay 35% of the cost of the COBRA coverage – not the full 100%.

More silver lining: the legislation extended the qualifying period for the homebuyer credit to 12/1/2009. For purchases made after 12/31/2008, the credit is $8000 and repayment is not required.

According to Michael Mares – one of OSCPA’s most popular tax instructors and a federal tax expert, “Homebuyers can treat a purchase made in 2009, as if it was made in 2008. Homebuyers can even file a modified return for 2008 and get the credit in 2009, rather than having to wait until filing your 2009 return.”

OSCPA Hot Topic WebinarsMares joined Lynn Nichols in an OSCPA hot topic webinar on March 6 and reviewed the many credits, extensions and incentives contained in the Stimulus Act with over 150 participants. “This is a very complex set of rules,” Mares told the virtual audience. “But one that is filled with significant benefits for those that really need them right now.”

An even larger silver lining: The Stimulus Act provided AMT relief – extending the individual and MFJ exemption.

“The problem with this is they haven’t increased the phaseout number since 1986, which means there are people that shouldn’t be burdened with the AMT but they still are,” Nichols said.

Mares added, “The basic problem is that since Congress has waited so long to reform the AMT, it will be cheaper to repeal the Internal Revenue Code than it would be to repeal the AMT.”

The Economic Stimulus and Your Tax ClientsNow here’s a silver lining for you: this webinar is now in the OSCPA Online Library. That means that any OSCPA member can listen to this webinar – and any of the other 100+ titles – any time at no charge. Get up to speed on the most significant business and individual credits, extensions and incentives without reading through 3,000 pages – unless you have a lot of time on your hands!

What does the future hold for IFRS?

March 3, 2009

Reading the subtle – and not so subtle – communications from the SEC make it nearly impossible to anticipate the direction the “new” SEC is going to travel with IFRS.

Under former SEC Chair Christopher Cox, the SEC moved toward a new frontier. The commission implemented IDEA – the replacement to the EDGAR database, passed XBRL for financial statements and mutual funds and proposed a landmark roadmap to transition the U.S. to the International Financial Reporting Standards (more commonly referred to as IFRS).

While most decision-makers believed the move to IFRS was inevitable, a loud majority still voiced their opposition saying the roadmap timeline was too aggressive. As Cox finished his term as SEC chairman, the SEC rushed to get the roadmap out for comment.

Then the recession took center stage. The Stimulus Act was passed in October 2008 to help the unstable economy. Job losses were mounting. Fingers began pointing to fair value and financial institutions were demanding the SEC suspend fair value. Congress mandated that the SEC undertake a study of fair value accounting. Understandably, the roadmap was delayed.

Things then went from bad to worse. The alleged Bernie Madoff $50 billion Ponzi scheme broke. And fingers again pointed to the SEC. Investigators failed to investigate many repeated allegations against Madoff over 15+ years. 

Nonetheless, even though mired in the recession and the Madoff scandal, the SEC released its proposed roadmap for IFRS. While the roadmap was significantly delayed, there was only one major change made in the timeline.

Then newly elected President Barack Obama nominated Mary Schapiro as the new chair of the SEC. A former SEC commissioner, Schapiro said from the very beginning, “I will not be bound by the existing roadmap that’s out for public comment.” And she has not. Schapiro has come in and is reinvigorating the SEC as the securities watchdog for the nation – and promises not to take it easy on corporate fraudsters.

Already Schapiro has:

Her actions and her words have made many wonder about the roadmap and the outlook for IFRS. Will the nation actually transition to IFRS or is it just being delayed? How long will the delay be? Six months? Six years? Given the current economy and the many calls from lawmakers to reform the nation’s financial regulatory system, including the SEC, this may not be the ideal time to be completing a transition such as this – one that will dramatically change financial reporting, the accounting profession and possibly litigation.

Right when many were ready to put on the brakes completely, Schapiro met with Sir David Tweedie, chair of the International Accounting Standards Board, in mid-February. Tweedie made his case for keeping the transition on its current – or close to – the current timeline. It’s also been reported that Schapiro has advised staff to review the current proposal to identify elements that can be used.

Actions do speak louder than words and the only real action to date is extending the deadline to comment on the proposed roadmap to April 20.

Next steps from the SEC . . . your guess is as good as mine. What are your expectations? Do you think the U.S. will transition to IFRS in the near future or has been this delayed extensively?

Take a look at some of these IFRS resources and recent news stories:

OSCPA IFRS Issue Monitoring home page

  • Investment executives favor IFRS
  • Big four firms push IFRS education efforts PwC unveils $700K grant, Deloitte readies materials

In May, The Ohio Society is also starting an International Special Interest Section. Watch for more details to come soon.

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