Accountants in the United States are in demand once again. There are specific needs at the Financial Accounting Standards Board (FASB) and the U.S. Securities and Exchange Commission (SEC). Separately, the skills and talents of those CPAs that practice in the “income tax world” will be helpful to address scheduled individual income-related issues as year-end looms.
The FASB is in need of a new chairman. The seven-member board loses its current chairman on June 30, 2013, due to mandatory term limits. Leslie F. Seidman will have served as a FASB member or its chairman for 10 years come next June, so she must leave the FASB. She has worked hard to provide leadership to converge several accounting standards with those issued by the International Accounting Standards Board (IASB).
Notably, the FASB and the IASB purportedly are close to finalizing a new standard on lease accounting. This standard would significantly add liabilities to the balance sheets of many lessees but, if the current thinking prevails, would not significantly affect the income statement of such lessees, as discussed in my prior blog article “Possible New Lease Accounting Rule—An Update.” The FASB believes it can finalize the new lease standard before Ms. Seidman leaves the FASB; however, several key decisions remain, for example, an effective date for the rule changes.
Separately, Ms. Seidman and the FASB and the IASB have been working on a new accounting rule for how companies should recognize revenue in their financial statements. This project is also on target to be completed before June 30, 2013. These boards have been working on other projects, including improvements to financial instrument accounting, but that won’t happen prior to Ms. Seidman’s leaving the FASB.
So what is required of a FASB chairman? The FASB is composed of seven voting members including its chairman, and, ideally, approval of any final accounting standard is unanimous to show strong support for the new rule. But that doesn’t happen all the time. Prior governance rules at the FASB required that any new or revised standard required a supermajority vote, but that requirement changed several years ago when certain impasses resulted. Now, a simple majority is all that is required.
The chairman determines which projects the FASB will address, and must try to guide the board to reach a consensus on any particular rule, which isn’t easy. All seven members of the FASB were selected on the basis of being strong thinkers, good financial professionals, and willing to take “risky” or controversial positions and defend them. Some argue that being a FASB chairman requires the skill of being able to herd cats.
SEC Chief Accountant and Corp Fin Chief Accountant
The position of chief accountant of SEC has been vacant since James L. Kroeker left in July 2012. Unlike the FASB chairmanship, the role of SEC chief accountant turns over fairly regularly. This turnover is in part because of the compensation level but also because the chief accountant serves at the pleasure of the SEC chairman who is a political appointee of the U.S. President. Historically, the SEC’s chief accountant frequently has been close to retirement and “doing it for fun”; however, Mr. Kroeker did not completely fit that stereotype—he was in his 40s, having had a career at a Big 4 accounting firm as well as a stint working at the FASB as a staff member. We can’t be sure whether Jim “had fun” in his role at the SEC, but he was certainly involved in the SEC’s “non-decision” on whether a U.S. registrant should be required or permitted to use accounting principles issued by the IASB (termed International Financial Reporting Standards or IFRS) when preparing its financial statements for investors (see my prior blog article).
In addition, the position of the chief accountant in the SEC’s Division of Corporation Finance (Corp Fin) has been vacant since Wayne Carnall left a few months ago. The role held by Mr. Carnall is much different from the role held by Mr. Kroeker. It involves less policymaking and more policing and enforcing of FASB and SEC rules, and it has historically been subject to less turnover. A registrant has its filings, including financial statements, reviewed by the staff in Corp Fin. If a registrant doesn’t agree with a view put forth by the staff in Corp Fin including its chief accountant, the registrant may “appeal” the decision to the SEC’s chief accountant. Rarely is such a move productive.
Changes in U.S. Income Taxes—Accountants Needed
Those of us that live in the United States are likely happy the Presidential election is behind us—whether we agree with the outcome or not. We can now watch television in peace without being constantly bombarded by political advertisements and their spin. But several key decisions now have to be made by the U.S. Congress working with the President on what to do with income taxes. For example, absent new legislation, the scheduled maximum individual rate on ordinary income goes from 35% to 39.6% and the maximum rate on capital gains goes from 15% to 20%. Then there is the interplay between the alternative minimum tax, deductions, etc. All of these scheduled changes are effective January 1, 2013.
CPAs can and should be working with their clients to quantify the impact of the changes. For example, if the rate on capital gains goes up, then investors should consider selling assets to trigger the tax in 2012. However, if a person expects to earn substantially less ordinary income in 2013, that may be the wrong decision—which is why a person who has unrealized appreciation on investments should consult with his or her tax accounting professional.
Some may make fun of accountants and their lifestyle—or at least of the stereotype. But when real dollars come into play, accountants are in demand and can be worth their weight in gold!
About the Author
Ron Pippin is an experienced CPA based in Wheaton, IL. His 40 plus year career includes being an audit partner in Arthur Andersen, a member of Andersen’s Professional Standards Group (“national office”) in Chicago, the Director of Financial Reporting for a Fortune 50 company and most recently, the editorial director of CCH’s Accounting Research Manager. Currently, Ron does independent writing and analysis together with accounting consultation on a variety of topics.