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Numbers Have Meaning

April 26th, 2012 | Posted by Caren Rodriguez in Audit and Accounting | Business Consulting | CPA | Inside DMJ | Tax | Uncategorized - (0 Comments)

On Wednesday, April 25 over 150 professionals and community members celebrated ethics in business at the 12th Annual Piedmont Business Ethics Awards. As a Premier Partner, DMJ was proud to announce, recognize, and congratulate the 2012 winners – Graphic Visual Solutions, R&R Transportation, and Zaki Oriental Rugs.

Below is a transcript of the opening remarks by Caren Rodriguez, DMJ’s Director of Marketing:

 

On behalf of all of us at DMJ and DMJ Wealth Advisors, thank you for the opportunity to be here today. For those of you who are not familiar with DMJ, we have been a part of the community since 1949. Today, we provide a wealth of services from tax planning, audit and accounting to business consulting and comprehensive financial planning.

We are accountants, advisors, and for many of you, we are your fellow SFSP (Society of Financial Service Professionals) members.

And numbers mean something to us.

In the case of DMJ Wealth Advisors, a number may be the ability to provide for your grandchildren or care for your aging parents.  For our tax, audit and accounting professionals, numbers may mean a healthy business or uncovering a planning opportunity.  When you’ve invested everything you’ve earned into everything you own, numbers mean something.

In 2006, DMJ began its partnership with the Piedmont Business Ethics Awards, because we felt ethics in business is a critical component to a healthy business community. And in our six years together, we’ve seen more than 600 nominations and more than 100 entries participate in this process.  That’s 167 entries to be exact.

As in our business, these numbers mean something. 167 tells the stories of businesses that examined ethics in their workplace and in their everyday business dealings.   

At DMJ, we’re proud to be a Premier Partner. These numbers mean that through the awards efforts 167 companies sought to demonstrate how they excelled in ethics. Are they able to exhibit honesty, integrity and compliance within the law and in all business dealings? Do they have an ethics policy or corporate philosophy that is unique and deserving of recognition? And, perhaps most crucially, how is that philosophy applied when a challenge arises?

Ethics presents complex issues and today we’ll learn many definitions of ethics.  But, if numbers demonstrate anything, it is that ethics is a conversation worth having – one story at a time.

Congratulations again to today’s nominees, finalists, and winners.  All of us at DMJ wish you continued and onward success.

Never Too Busy!

March 14th, 2012 | Posted by Mike Gillis, CPA in CPA | Inside DMJ | Tax Consulting - (0 Comments)

It’s March — which means we are smack in the middle of “busy season.” That crazy time of year when we “live” at the office. For our staff, busy season means some personal sacrifices with less time at home. But, we always stress (no pun) how important it is to make sure your family stays your number one priority, no matter the time of year.

For CPAs, busy season is also that amazing time when we get to see so many friends/clients. The office is buzzing and the conference rooms stay full. It is the time of year that makes us remember why we chose this profession. And the truth is, yes, we love busy season. For me, it is sort of like a football game where every play is 4th and goal.

At DMJ, we also feel it’s more important than ever to make time for some fun. Last month, a full DMJ contingent took a Polar Plunge into a 34 degree pool to raise money for Special Olympics – a 12-year tradition for our firm. There will be plenty of March Madness chatter and even the TV screen in the lobby will switch from financial news to basketball.

Above all, we realize that our busy season is also the time of year when taxes and finances are on our minds the most. While we may be busy, we are never too busy to want to hear from you, talk about your finances or concerns, or receive a referral for a client who may need our guidance. For me, being a CPA is what I am — not just what I do. Thank you for the trust you have placed in DMJ.

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FASB and IASB Part Ways on Leasing Standards

March 7th, 2012 | Posted by Arthur M. Winstead, Jr., CPA in Audit and Accounting | FASB - (0 Comments)

That was the headline an “Accounting Today” article of March 1, 2012. Did they really part ways?

Are headlines important? I have my own opinion in that regard and I also have an opinion regarding did the FASB and IASB really “part ways.”

After reading the article, I returned to the headline and gave it more consideration.  The article contained much of the same the same discussion/debate that has been ongoing for several years between the FASB and the IASB regarding the application of the requirements for accounting for leases.

Yes, the two Boards did vote for differing approaches. There is not a headline regarding that vote and the differences still remaining between the FASB and the IASB as to accounting for leases. As well, FASB Chair Leslie Seidman is quoted in the article as saying, “There was a fair amount of frustration at the board table.”

What else could the FASB do? The FASB has made it clear that the “leasing” proposal is going to be re-exposed. As well, Chair Seidman goes on to state “the purpose of the meeting was to discuss the continued feedback about the income statement effects for lessees. The discussion did not address, nor was it intended to address the balance sheet treatment of leases.”   To me, that is fairly significant as to if the FASB-IASB have indeed parted ways on the “leasing standards.”

There is a lot in the current proposed standard update the Boards do agree. And there is some disagreement even within the FASB members. It seems the “right of use’ model does have agreement between the Boards. There are some differences regarding contingent rentals in the calculation of the “right of use” amount and the amortization method(s) of the “right of use” amount. In the article, the income statement recognition, i.e., amortization, created enough disagreement that both Boards instructed their staff members “to conduct an outreach” on both approaches.

This is project is already in somewhat of a “delay”’ pattern. I believe that is rightfully so. I am in agreement with Chair Seidman’s statement, “I have been of the view that if we make a small investment of time and effort upfront to resolve concerns that have been identified, it will save us all time in the long run.”

The article itself seems to clearly indicate The FASB has not wavered from their expectation the Boards will eventually issue a converged standard.  I do not see a “parting of the ways” by the FASB anyway.

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Stepping Up for Special Olympics

February 2nd, 2012 | Posted by Caren Rodriguez in Inside DMJ | NonProfit - (0 Comments)

A Message from Dana Beeson, CPA/PFS, Partner, DMJ

It takes a healthy mix of nerve and a sense of adventure to participate in the Polar Plunge for Special Olympics North Carolina. But for the past 11 years, my colleagues at DMJ have not only braved the icy waters in frigid temperatures, sacrificed their personal time, and participated in fundraising efforts leading up to this event; but have done all of it during a time of the year in which we, as CPAs, do not have any time to spare – tax season.

As a cycling coach and step-parent of a Special Olympic athlete, I not only appreciate their willingness to do so but have seen firsthand the positive impact of this organization. The 25 athletes that I have helped coach for the past 20 years have benefited directly from Special Olympics and so have the many coaches and volunteers of this organization who carry on its mission.

There is nothing like seeing the joy on an athlete’s face when he is able to ride a bike for the first time or when he has trained all summer and can now ride well enough to participate in a 5K road race — both things that he was told he would never be able to do.

Special Olympics provides training, support, community, inclusion, and participation for athletes with no cost to them or their families. That’s right, no cost. It is the generosity of individuals like my coworkers and those individuals who donate to this organization that make this possible.

Eunice Kennedy Shriver, the founder of Special Olympics, challenged her listeners in a speech at the Kennedy Library Foundation. She said “I hope that many of you will join in my special mission to make the world safe for people with intellectual disabilities and to make the world safe for human dignity itself.”

It is my belief that Special Olympics is a step in the right direction towards Mrs. Shriver’s mission.

For more information about DMJ’s participation in the 12th Annual Guilford County Sheriff’s Department’s Polar Plunge, visit the firm’s fundraising page at http://bit.ly/xEyT1M

FASB-IASB – Accounting for Financial Instruments

February 2nd, 2012 | Posted by Arthur M. Winstead, Jr., CPA in Audit and Accounting | FASB - (0 Comments)

It’s difficult to state with any preciseness the status of most of the joint projects for the FASB and the IASB. It’s even more difficult to state where most U.S. stakeholders are in regard to the use of International Financial Reporting Standards. Most stakeholders seem to indicate agreement that an acceptable set of high quality global accounting standards will be ultimately realized. It does seem the IASB is expressing more enthusiasm than say the FASB perhaps the SEC. With great anticipation, most of us are watching this process.

In any event, the FASB and IASB held a joint meeting last week and discussed “accounting for financial instruments.” This project has been ongoing since 2005. There was a “discussion paper issued that had a comment period ending in 2008. This discussion “runs” to accounting for value. As we know, those differences still exist at this time between the FASB and the IASB. The “fair value” joint project is ongoing as well.

The following is from the FASB website posted this week.

In regard to the accounting for financial instruments, the boards discussed the following:

  • the convergence efforts on aligning the classification and measurement models under IFRS 9 Financial Instruments and the FASB tentative model;

and (b) the “three bucket” approach for impairment of financial assets, including the application of the credit deterioration model to purchased financial assets with evidence of credit deterioration.

The Boards did tentatively decide to jointly redeliberate selected aspects of their classification and measurement models to seek to reduce following key differences:

  • The contractual cash flow characteristics of an instrument;
  • The need for bifurcation of financial assets and, if pursued, the basis for bifurcation;
  • The basis for and scope of a possible third classification category (i.e., debt instruments measured at fair value through other comprehensive income); and
  • Any interrelated issues from the above (e.g., disclosures or the model for financial liabilities given the financial asset decisions).

The Boards also discussed how the three bucket impairment model should be applied to purchased financial assets with an explicit expectation of credit losses at acquisition. In addition, the Boards discussed other aspects of the accounting for such purchased financial assets, including the following:

  • Application of the impairment model;
  • The scope of purchased financial assets that would be initially included in Bucket 2 or Bucket 3 and for which accretion from the purchase price to the expected cash flows would be required;
  • Favorable changes in expectations after acquisition; and
  • Presentation in the statement of financial position of purchased financial assets with an explicit expectation of credit losses at acquisition.

Where is Going Concern Going?

January 17th, 2012 | Posted by Arthur M. Winstead, Jr., CPA in Audit and Accounting - (0 Comments)

Earlier this month, the FASB announced they had decided “not to require that management of an entity assess whether there is substantial doubt about the entity’s ability to continue as a going concern.”

From the FASB summary of the January 11, 2012 meeting of the FASB, the FASB stated “a majority of Board members observed that such a requirement would be difficult to apply and that users of financial statements would benefit to a greater extent from ongoing disclosures about risks and uncertainties than they would from disclosures that would be made only after management concludes that there is a substantial doubt about an entity’s ability to continue as a going concern.”

Thankfully, the FASB did not leave it that simply and remove any further considerations from the FASB project agenda. The FASB summary release stated “as a next step in this project, the Board directed the FASB staff to develop a principle for an entity to assess the adequacy of its disclosures about risks and uncertainties and to evaluate how the content of such disclosures could be improved.”

This project has been exposed since October 2008. At that time, there was a 60-day comment period. There has been only 29 comment letters received regarding this ASU ED. Those comments were generally in favor of the ASU ED. As well, it would seem the small number (a small number to me anyway) would indicate there was not a lot of dissent, if any, in regard to the guidance as proposed in the ASU ED.

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What a Great Time to be a CPA!

January 9th, 2012 | Posted by Arthur M. Winstead, Jr., CPA in Audit and Accounting | CPA | Inside DMJ - (0 Comments)

With each passing generation, professionals probably believed that theirs was “the best of times.” But WOW! For CPAs here in the U.S., I imagine a no more exciting time than this to be a practicing Certified Public Accountant.

More than ever, our clients, communities, and other financial and business professionals are turning to CPAs for financial leadership and advice. I believe we are responding in a manner that is making a difference.  We have taken ownership in converging financial reporting standards with the international community as to how financial transactions are recorded and disclosed.  We are currently undertaking a project that will clarify and will converge U.S. Attestation Standards.  We have recently substantially completed a project to clarify and converge U.S. Auditing Standards.  And today, we are in the midst of a robust discussion regarding the application of accounting principles for companies in the private company sector.

Some argue that we have become a reactive community, as a profession, to international standard setters. I do not believe “reactive” is the proper word at all. The global financial markets (of which the U.S. is the most important and, perhaps, dominant member) requires comparable financial reporting standards and application of the comparable requirements necessary to provide relative forms of assurance for readers and users of financial information. The international financial community depends on the U.S. to provide leadership, recommendations, and advice as to how financial transitions are reported on a basis consistent and understandable by all members of what I consider a global financial market.

As an U.S. CPA practicing in 2011, I consider myself a partner in these efforts, both in the U.S. and the world. If we are reacting to anything, we are reacting to market conditions. As business leaders, CPAs have always reacted and provided leadership in changing market conditions. Let’s don’t stop now.

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What is DMJ?

January 3rd, 2012 | Posted by Mike Gillis, CPA in Inside DMJ - (0 Comments)

It is always funny when asked what we do. The answer is either (1) We are a CPA firm  providing Audit, Accounting, and Tax services to privately-held businesses and/or (2) We are the most trusted financial advisers for entrepreneurs utilizing cutting edge thinking for proactive ways to help privately-held business owners succeed in their business and personal lives. I realize that (2) is a mouthful, but it is the best way for me to describe what we do and still fight the old cliché, “I don’t want to be a CPA because I am not good at math.”

If you don’t mind letting me use the “outside the box thinking” line, I want DMJ to be just that – outside the box. We have, and will continue to, think outside the box for ways to better serve our clients. I often joke that we try a lot of things and, occasionally, we get one of those things to be successful.  

Let me blog a bit on the successful ones:

In 2001, we decided that all too often the financial planning of privately-held business owners is left on the sidelines because they are constantly engrained with everyday business matters or the hottest fire on their desk. As a result, we launched a completely new entity, DMJ Wealth Advisors LLC*, offering comprehensive financial planning services and asset management. This entity has grown to 11 full time people, including 5 Certified Financial Planners, and nearly $350 million in assets under advisement. I am passionate about and consistently proud of the quality of the financial planning services provided by this team.

DMJ’s Healthcare Practice Consulting is another nontraditional service that began in 2002 when Rob Peddrick joined DMJ. Serving medical and dental practices throughout the state, DMJ Healthcare has continuously grown to become one of DMJ’s largest niches. The Healthcare division truly represents our goal as we strive to be the most trusted financial advisers for our clients. In a typical week, they will advise on new practice start ups, practice mergers, new coding requirements, sale of practices, and buyout of retiring physicians…and this brings them to 9:00 am on any given Tuesday! 

So what is DMJ all about?

Constantly investing in technology, paperless filing systems, new office buildings, embracing cutting edge marketing and social media, updating internal systems, recruiting and retaining the best and brightest personnel, thinking what to try next, and having a lot of fun along the way.

I would have never thought I would have such an amazing opportunity to sit across the conference room table from friends/clients and talk about the pulse of their business, their lives, their problems, and their opportunities. This is truly awesome.

* Advisory Services and Securities offered through ProEquities, Inc., Member, FINRA & SIPC.

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Dealing with the Downgrade: Accounting Principles Are Important

November 9th, 2011 | Posted by Arthur M. Winstead, Jr., CPA in Audit and Accounting - (0 Comments)

Accounting principles, like words, do mean something.

How accounting principles are applied as the downgrade of U.S. debt by Standard & Poor’s from AAA to AA+ weaves throughout global markets will be interesting, but probably not fun to watch.

The consequences of a potential decrease in asset values – and potential increase in borrowing costs – could be significant.

Of key importance during this time is the proper recording and recognition of financial assets in accordance with accounting guidance and rules.

The accounting requirements during the decline of the real estate market could serve as an omen. The accounting rules were extraordinarily important then and will be now as the markets navigate through the next days, weeks, and months.

The debate regarding the fair value or “mark to market” accounting requirements in collateralized debt obligations (CDOs) and credit default swaps (CDSs) centered on the question, “Did the accounting requirements that initially recognized the mark-to-market decrease become a self-fulfilling prophecy? Was the decrease being properly recognized in an orderly and efficient market?”

It is a tough question but a fair one, and we may never know the truth. The argument was that some banks and financial institutions wrote down those types of assets on their balance sheets to create a market in which they would “short” similar or identical investments. The institutions recognized a loss on the value they held on their balance sheets, but made significantly more in shorting similar, if not identical, assets.

How will the market and holders of U.S. debt respond to the downgrade? Will they respond in an orderly and efficient manner?

This is the concern. Let’s say Bank A holds U.S. debt on its balance sheet as an investment. Regardless, it is classified as a financial asset for the fair value accounting requirements. If that debt is downgraded, a significant decrease in its value as a result of mark-to-market/fair value accounting requirements requires recognition of that decrease. Does it become even more troubling for Bank A? It certainly could.

Consider another example. Bank A has a loan on its balance sheet that is secured by a borrower pledging U.S. debt the borrower holds. In all likelihood, the borrower will have a decrease to recognize, and Bank A may also have a decrease to recognize on that loan if the borrower cannot provide additional security to cover the decrease in the value of the U.S. debt pledged as collateral.

The accounting cycle as a result of the initial downgrade will in all likelihood culminate with an adjustment to the value of Bank A’s stock held by investors in Bank A. The next turn will be the adjustment to the value the investors in Bank A stock will have to recognize.

It is the same vicious accounting cycle that took place in the real estate market in recognizing the decrease in value of the CDOs and CDSs loss recognition when the real estate that supported those collateralized debt obligations decreased in value.

Was there an orderly and efficient market operating during the decrease in collateralized debt and credit default swap values two or three years ago?

Some argue there was not, and the mark-to-market rules should have been suspended. I personally and firmly believed at that time the market was orderly and efficient. But the more I have read since, I am not sure that was true. Legal experts, bank regulators, FINRA, the SEC, state attorneys general, etc., can make that determination.

We have seen an increase in value and earnings stream of those same CDOs and related financial assets. They have significantly increased in value, although they do not approximate their original value on the market. Ironically, S&P routinely graded these offerings AAA.

Does it make sense that S&P’s grading of CDOs years ago was AAA then and today U.S. debt is less than AAA? Those CDOs were made up of mortgage amounts issued to borrowers with the mortgage amount greater than the fair value of the real estate securing the mortgage, other types of subprime mortgages, car loans, student loans, and credit card debt.

The markets will determine the difference in value for U.S. debt at AA+ compared to AAA. Hopefully, those markets will be orderly and efficient. If they are, the application of the current accounting guidance as to fair value and use of mark-to-market accounting will be correct, and there will be no argument regarding the application of those accounting requirements.

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Auditing Standards Recently Improved

October 20th, 2011 | Posted by Arthur M. Winstead, Jr., CPA in Audit and Accounting - (2 Comments)

Some auditing standards have recently been improved in the areas of clarity and convergence with international standards.

On Monday, October 17, 2011, the AICPA Auditing Standards Board (ASB) released three Statements on Auditing Standards.

This website is an excellent source for general information; ranging from the kind of information a non-CPA/auditor may need and containing enough information that a CPA/auditor needs to understand and prepare for the transition.

While some auditing standards (four in total) have already been clarified, converged, and are effective today; most of the remaining standards will have effective periods ending on or after December 15, 2012.

While issuing auditing standards is not unusual for the ASB, the significance of these three standards is considerable. These three standards represent substantial completion of the ASB’s Clarity-Convergence Project.

The project has been in process since 2004 and represents a huge commitment of time and effort by members of the ASB, task forces of the ASB, and AICPA professional staff working with the ASB.

The “clarity” is related to the format of the auditing standards. “Convergence” is related to the fact the ASB wanted to address how to best carry out its mission after the creation of the Public Company Accounting Oversight Board (PCAOB) and the increasing global acceptance of International Standards on Auditing (ISAs).

The plan the ASB developed was to converge the AICPA ASB standards with the ISAs while avoiding unnecessary conflict with PCAOB standards.

The “clarity format” will have five parts:

  1. Introduction
  2. Objective
  3. Definitions
  4. Requirements
  5. Application and Other Explanatory Material

This format creates a clear, consistent, and easy-to-understand application of auditing standards.

Personally, I believe it is important to note that consistency within the standards and between the auditing standards used by other standard setters is extremely important.

I also believe that the establishment of a clear objective, for me as an auditor, to have both before and while evaluating specific audit procedures adds a needed element of specificity that can be quantitatively and qualitatively used and applied.

As auditors, we will now have to step back and evaluate what we planned to do, how we did it, and ask ourselves if we achieved a result that provides sufficient and appropriate audit evidence.

Finally, while some auditors and financial statement users believe all we did as a result of this project is react to the international environment, I believe nothing is further from the truth.

The due process the ASB went through as a standards-setting body was incredible and included consulting with an extraordinarily large and valued range of experts, such as those serving as members of the ASB during this period since 2004 and today, stakeholders or users of financial statements, regulatory agencies and organizations, members of the academic community, and other standard auditing and accounting standards.

There is no question in my mind, as a profession, auditors and the public will all be better served as a result of this project to clarify and converge auditing standards established by the ASB.

 

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