CPA Journal, The

Inbox: Letters to the Editor

Sunbeam &Amp; the 'Iron Curtain': Why a Dual Test for Materiality Assessment Was Necessary

On Sep 16, 2006, the SEC released Staff Accounting Bulletin (SAB) 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current-year misstatements for the purpose of a materiality assessment. Prior to SAB 108, companies used one of two methods to assess materiality: the "rollover" or the "iron curtain." This article ...

Personal Viewpoint

Unclaimed Funds in Search of Their Owners: It Really Is Free Money

Whenever a bank account, insurance account, or utility account becomes inactive, it gets turned over to the state comptrollers office. Anyone who has ever moved and forgotten to collect their utility deposit or to cash a health insurance check may have money at their state's office of unclaimed funds. New York State has more than $7.5 billion in unclaimed funds spread over 21 million accounts. This money belongs to the people of New York, and they should have it back. The author's solution to...

Publisher's Column

The Value of Including Public Members On Nysscpa Committees

The NYSSCPA is home to more than 65 committees, most of which are composed entirely of CPAs. The Society's primary goals include protecting the interests of its CPA members and helping accounting professionals succeed. But the Society also exists to protect the public interest, and doing so requires a willingness to seek out diverse perspectives. With these ideals in mind, in 2004 then-president John Kearney appointed two "public" non-CPA members to sit on the Society's Quality Enhancement Po...

In Focus

Materiality: Whose Business Is It?

It has long been established in the professional literature that financial statements are the responsibility of management. That responsibility includes establishing and maintaining accounting systems that record, process, summarize, organize, and control the myriad transactions that flow through businesses. Included in this mandate is maintenance of the integrity of the accounting system that summarizes the transactions into periodic financial statements. Auditors have a secondary responsibi...

Accounting & Auditing: Accounting

Accounting for Accelerated Share Repurchase Programs

Corporate executives are tasked with capital-allocation decisions that require them to choose from an army of investment options. One option is the return of corporate capital to individual shareholder via dividend payouts, or share repurchases that allow investors to redeploy capital efficiently and with access to a wider choice of investment alternatives. Repurchases of shares increased from $77 billion in 1995 to approximately $250 billion in 2005. Fueling this growth has been the recent p...

Taxation: Federal Taxation

Definition of a Qualifying Foster Child

Since 1997, legislation regarding children has been a moving target, and the legislative changes regarding foster children and their eligibility as qualifying dependents for personal exemptions, the child tax credit (CTC), and the earned income tax credit (EITC) are creating wide confusion. The Working Families Tax Relief Act (WFTRA) of 2004 created a uniform definition of "child" for purposes of the dependency exemption (IRC section 152 and 151), the CTC (IRC section 24), the EITC (IRC secti...

Finance: Corporate Finance

Cash-to-Cash Analysis and Management

There is a growing demand among companies for help in managing the cash flow cycle: accounts payable to inventory to accounts receivable. Managers must know their company's cash-to-cash (C2C) position, and not focus solely on bottom-line profits. C2C is a unique financial performance metric that indicates how well an entity is managing its capital. The definition of C2C, or cash conversion cycle, is the length of time a company's cash is tied up in working capital before that money is finally...

Technology: What To Bookmark

Website of the Month: Jobsinthemoney.Com

JobsintheMoney.com is the accounting and finance arm of Dice.com. a technology-career Web site. JobsintheMoney provides job posting resources for employers and job search tools for employees. The Web site focuses on accounting, finance, retail banking, and wealth management professionals. The homepage is organized around the job search and career-related features. Candidates can search job offerings and read articles without signing up for an account: however, users must be registered to post...

Editorial: A Message From The Editor-In-Chief

Determining Materiality: Relativity and Professional Judgment

Materiality is a concept that has caused much frustration and angst in the public accounting profession, primarily because it requires a substantial degree of auditor judgment regarding what is important to users of the financial statements when making economic decisions. So CPAs are looking for guidance on the meaning of materiality. The fundamental meaning of materiality continues to haunt regulators and practitioners. The PCAOB recently adopted Auditing Standard No. 5, An Audit of Internal...

Accounting & Auditing: Standards Setting

Building the Foundations of Financial Reporting: The Conceptual Framework

The Financial Accounting Standards Board (FASB), together with the International Accounting Standards Board, has embarked on a project to rebuild the foundations of financial reporting by revising the Conceptual Framework. The Conceptual Framework is like a constitution for financial reporting, providing the foundation for standards. The Conceptual Framework provides structure to the process of creating financial reporting standards and ensures that standards are based on fundamental principl...

Finance: Employee Benefit Plans

Fiduciary Responsibilities and Opportunities

While many plan sponsors view the fiduciary obligations associated with retirement plans as a burden, it is refreshing that some plan sponsors embrace their obligations. Some plan sponsors also view their fiduciary responsibility as an opportunity to build a sound retirement program and better equip plan participants to secure adequate retirement savings. Most organizations structure an employee benefits committee (EBC) to allow representation from all significant business functions and bring...

Responsibilities & Leadership: Education

Earnings Management and Its Implications

In the wake of continuing, highly publicized financial frauds and failures, the accounting profession has placed renewed emphasis on issues related to earnings management and earnings quality. Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements, which was issued in December 1999 in response to the Committee of Sponsoring Organizations of the Treadway Commission report, illustrates the importance of earnings to the SEC. The SEC and the public are demanding greater assura...

Accounting Accreditation

The Association to Advance Collegiate Schools of Business (AACSB) accredits both schools of business and accounting programs. An accounting program cannot be separately accredited unless the business school of which it is a unit is also AACSB-accredited. Business schools can be accredited without having their accounting programs separately accredited. Accounting practitioners involved in on-campus recruiting, those who make decisions about hiring or training, and those who serve on accounting...

E-Commerce

Website Statistics: Vital Feedback for Cpa Firms

Having a Web site and not looking at its usage statistics is like running a company without ever reconciling the cash account. The statistics are an opportunity to reconcile a Web site. With the data, an accounting firm owner can tell how well the site is working, which pages need help, whether lead generation is on track, and more. In the most basic form, the information that even simple Web site statistics programs provide includes the following: 1. number of unique visitors, 2. length of t...

Management: Corporate Finance

Funding Opeb Liabilities: A Proposal for the Automotive Industry

American automobile manufacturing is facing significant challenges: increased competition in the marketplace, macroeconomic challenges related to oil prices and supply, and accounting challenges related to recent standards regarding other postemployment benefits (OPEB). OPEB is a major concern for the private sector, but it is an enormous issue for the automotive industry, with its large obligations for retiree health benefits. The state of OPEB is extremely unsettling, wrote S&P analyst ...

Management: Practice Management

Management Tools

Managers have introduced a number of relatively new tools to aid in delivering products and services faster, better, and cheaper. These include total quality management (TQM), benchmarking, activity-based costing (ABC), and balanced scorecard. Few studies, however, have been undertaken to show those that are actually in use. The authors surveyed MBA students working at a variety of enterprises to learn which management tools are in place at their organizations. The survey results indicate tha...

Ten Practical Suggestions for Terminating an Employee

When a manager offers a job to a professional and the professional accepts, both parties are optimistic. Even when a professional provides excellent service, business necessity may require a layoff. Either way, at some point, a manager will have to terminate an employee. While nothing will make a termination painless, the following 10 suggestions may make the process less likely to result in a costly legal battle. These are: 1. Do not fire an employee in anger. 2. Follow policy. 3. Document t...

Perspectives: Standards Setting

Sfas 159: The Fair Value Option

For more than 20 years, FASB and the International Accounting Standards Board have been on a steady march to radically overhaul the foundations of corporate accounting in Europe and the US. Statement of Financial Accounting Standards (SFAS) 159, The Fair Value Option for Financial Assets and Financial Liabilities, enacted in February 2007, represents a watershed event in FASB's drive toward a full fair-value basis for financial accounting. This article is the authors' attempt to stimulate a v...

Historical Perspective

Ellen Libby Eastman, Cpa: Trailblazer and Professional

The National Library of the Accounting Profession, located on the campus of the University of Mississippi, in Oxford, MS, is home to the world's largest accounting collection. This represents a treasure trove for scholars performing historical accounting research. Myriad dimensions of social research can be analyzed using the library's holdings. For example, some items relate to the earliest women CPAs. Ellen H. Libby Eastman began her career as a clerk in a Maine lumber company, then steadil...