September 2010

Watch your Facebook settings, if you don’t want to tell everything to the world

If you want everything you say on Facebook to be visible to the world, that is okay.  If you want to set limits on who can see how much, then you need to modify your privacy settings.  Best explanation I have seen on how to manage your privacy is found in this article from the Christian Computing Magazine.  Took me a while to wander through the settings and instructions at Facebook to learn what is covered here in just a few pages.

By the way, the magazine is free.  You can read it online or get email delivery.  Check it out. Sign up for a free subscription.

Expanded 1099 reporting starts in 2012

SEE this post for Update!  

Reporting requirements for 1099s will soon expand dramatically.  From the Journal of Accountancy: “(b)eginning Jan. 1, 2012, virtually all payments by a trade or business aggregating $600 or more to any single vendor during any calendar year will have to be reported at the end of each calendar year to the vendor and to the IRS on Form 1099. Vendors include almost anyone a trade or business pays in the course of doing business, other than its employees whose compensation is already reported on Forms W-2.” – the full article is available online. …

Revised accounting for leases – proposed changes to Topic 840

FASB has proposed massive changes to lease accounting.  Essentially, all leases with a term over 12 months will be recorded as an asset with an offsetting liability for the lease payments.

This is a casual summary (well, as casual as I can get when discussing accounting).  A separate post goes into more technical details.

A very rough analogy is that all leases in the future will be treated in somewhat the same way as a capital lease is handled today.  …

Increased fair value disclosures – ASU 10-06

Fair value disclosures will increase for December 2010 financial statements.  Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820) will require a few new items.  The two main items I see for small and medium-sized NPOs are first, disclosing transfers in & out of Level 1 & 2, and second, disaggregation of fair value disclosures. …

The recession officially ended in June 2009

The people who make the official call for the start and end point of recessions, which is the National Bureau of Economic Research, announced on September 20 that the recession officially hit bottom in June 2009.  We need to look at what that actually means.  The bottom point of the economic cycle is considered the end of a recession.  The Bureau calculated the low point, or the trough, was in June last year.  Since then the economy has been recovering, although slowly. …

Dangers of social media

People are using social media to do simple checks on people they are involved with.  Examples?  Employers obviously, but that is old news.  Recently I have read articles mentioning that potential roommates, first dates, parents hiring babysitters, and college admission officers are also using social media to scope out people.

How?  The easiest way is to look at FaceBook and then Google or Bing the person’s name. …

Data on unemployment & GDP changes available on-line

If you are so interested, lots of economic data is available from the federal government on-line.  Two items of interest to me are unemployment data and GDP changes.  Those are fairly major pieces of the economic picture.

Unemployment data:  Alternative measures of labor utilization – table A-15 from the Bureau of Labor Statistics

Of particular interest are U-3 and U-6. The most quoted information is the U-3 measure, which is a calculation of unemployed people as percent of the civilian labor force.  This is the official number you hear about. The broader data is the U-6 measure. That is based on the total number unemployed plus people only able to work part-time, plus people who want to work but have dropped out of the market.  Or at least that is my casual interpretation of the data.

Changes in GDP:  Percent change from preceding period in real Gross Domestic Product – table 1.1.1 from the Bureau of Economic Analysis. 

There are several frequently requested tables from the BEA.

http://www.bea.gov/national/nipaweb/SelectTable.asp?Popular=Y

Test for ethical behavior – what will this look like on the front page of the newspaper?

Update: Superb illustration of the concept here.

You have probably heard this story before, but I will mention it again.  When you are pondering how to handle a situation, think about how it would look on the front page of the newspaper.  Do you want to see this policy, decision, or personnel action on the front page of the Wall Street Journal®?  How about the lead article in the local section of the Los Angeles Times®? The front page of your local paper?  …

Will SAS #115 increase or decrease Significant Deficiency comments?

Here is a question for thought:  Do you think the change from a bright line definition of significant deficiency in SAS 112 (greater than remote chance of more than inconsequential error, etc.) to a very loose definition in SAS 115 (something the auditor believes should be brought to the attention of those charged with governance) will increase or decrease the number of significant deficiency comments? 

To frame up the discussion, I am thinking about the smaller entities, perhaps from $1 to $15 million of revenue in the non-profit community.

My thought process is that by calling something a “significant deficiency” and putting it in the same letter as the comments on material weaknesses we are clearly saying this is a ‘biggie’.  Don’t have any technical words now to describe that categorization like we did before, but we are obviously calling a lot of attention to the issue.  We still have the letter of recommendation as a tool to communicate suggestions, ideas, opportunities to improve internal control, or scold management for those pesky technical things we always comment on (you know, document every credit card purchase, list the who and why for all meal purchases, please get the fixed asset detail to tie to the general ledger). From my perspective, I think there are probably more items that will drop from the SD list to the LOR than move up from the LOR to the SD letter.  Possibly will be some SD comments that don’t need to be mentioned.  There are a lot of comments we auditors give to our clients that really should be fixed, but don’t seem to be serious enough to frame them up as a ‘biggie’.

One of the major CPA firms working in the non-profit community thinks the volume of comments will go up.  Another person in that school of thought was the presenter at a class I attended a while back.  His perspective, coming from running a very large volume of yellow book audits in his firm, is the volume of SD comments will increase.  If I recall correctly, his line of reasoning is if there is something that the auditor firmly believes in and is worth putting in writing, and then the issue probably should be brought to the attention of the board and thus is an SD. 

Had a fun visit with a colleague at another firm recently.  His thoughts are that the volume will increase.  I will rephrase his comments to reflect my expanded perspective of the issue.  So, this is partly my description, not completely his.  Since we as auditors are now freed of the bright line definition, we can reposition the comments as helpful ideas instead of problems at the mid-level of severity.  Instead of being a ‘problem’ to be fixed, the SD comments can now be phrased as something that we (the auditors) really thing you (the board or those charged with governance) should think about and work on.  How does this work for a characterization:  the SD letter become more of a structured ‘lets talk’ framework instead of ‘fix this problem’ notification.

One more idea – – since the definition is much more subjective, do you think there will be serious push-back from management during single audits?  Seems to me there will be massive push-back to prevent something that is only an opinion (without support of a bright line) from going to the federal agencies in writing.

So, those are my thoughts.  Perhaps this blog is too young for a conversation to begin. However, if you wish to comment, I would welcome the conversation.  Remember this is an evolving idea. Since it will take a few years to develop a wide consensus for the impact of the new definition, all opinions expressed here (including mine!) are subject to change and revision when we feel like it!