Cohen CPE Day Addresses Repair Regs, Economic Climate, Estate Planning and More– June 24, 2014

Cohen & Company held its annual client CPE half-day seminar last week, focusing on topics important to CFOs, controllers and other private company financial staff. Cohen & Company as well as guest presenters covered repair regulations, the state of the global economy, alternative staffing solutions, accounting and auditing updates, insurance options and estate planning. The day ended with a special break-out session on cloud accounting.

Below is a brief overview of the topics. More detail can be found in the full presentation materials.

Repair and Maintenance Regulations

Angelina Milo of Cohen & Company explained the final repair and maintenance regulations that define once and for all when to expense or capitalize tangible property. While compliance is optional on 2013 returns, in 2014 it will be mandatory. This was a hot topic for all in attendance, as the regulations apply to all costs incurred in connection with tangible property, including acquiring, improving, repairing, maintaining and disposing of property. But Milo pointed out that the heart of the regulations relates to improvements. If making improvements to a unit of property, such as adapting the unit to a new or different use, or bettering or restoring the unit, then the rules call for capitalization. Milo also cautions that when taking advantage of these final regulations, various accounting changes and elections will apply and must not be overlooked. Find more detail about the regulations, safe harbors and practical examples, as well as the proposed disposition regulations anticipated to become final later this year, in Milo’s presentation slides. Or read her article on the topic in the spring 2014 issue of Taxonomics.

Global Economic Outlook

Donald Laubacher, CFP®, CPA, of Sequoia Financial Group focused on global economic and investment trends. As a whole, while growth around the globe remains cautious, it appears to be poised to accelerate this year. In the U.S., fundamentals such as employment, output gap and the yield curve are improving but are doing so over a longer and less robust business cycle expansion, with unemployment still higher than desired. Interest rates are expected to remain low through 2014, and Don noted that recent reports show credit markets are as loose as they have been in the past 20 years. Overseas, the European Central Bank has been stimulative to fight off deflation and will continue to do what is necessary to keep the economy on its current, albeit slow, path to successfully exit recession. Japan’s “text book” economic plan is yielding positive signs of growth, increasing GDP and combating deflation, but in the process is causing high absolute levels of government debt. China, on the other hand, is putting on the brakes, slowing its growth through a normalization of the investment-consumption tradeoff and positive economic reform.

And in the investment arena, Don reiterated Sequoia’s approach of balancing portfolios with equities, fixed income assets, and alternatives/real assets. Currently, the firm is looking at opportunities to add meaningful allocations in the area of real assets, such as real estate, and looking to large cap versus small cap funds, value over growth funds and emerging markets. Find informative charts, graphs and more detail in Don’s full presentation. See important disclosures below.

Creative Staffing Alternatives

SueAnn Naso of Staffing Solutions enlightened the audience of three non-traditional ways businesses can beef up staffing: Recruitment Process Outsourcing (RPO)/Project Recruiting; Vendor Management System (VMS) and Managed Staffing Programs (MSP); and Professional Employer Organizations (PEO).

RPO allows a company to outsource all or part of its recruitment functions to a third-party expert either on a project basis or long-term contract. This solution, good for both large and small companies, is particularly effective if a company has peak hiring cycles or if it is acquiring a new business or opening a new division and needs a concentrated hiring effort. RPO is also half the cost of hiring traditional third-party outside search firms. Also good for most company sizes is VMS or MSP. Both rely on a technology-based management system for the recruiting function; VMS is managed by a company’s internal staff, while MSP is managed by an external third-party vendor. There are numerous efficiencies and benefits to each. Finally, Naso described PEO as a good option for smaller companies lacking an internal HR department. PEO provides businesses with more than recruiting; it offers traditional HR services, such as handbook creation, negotiated benefit rates and 401(k) programs. However, using a PEO creates a “co-employment” scenario for employees, making specific contract language critical to success. Learn more detail on each of these solutions now.

A&A Updates

Jami Blake of Cohen & Company focused on recent updates to generally accepted accounting principles (GAAP) made by the Financial Accounting Standards Board (FASB) solely applicable to private companies. These changes include accounting for goodwill, accounting for interest rate swaps and applying variable interest entity (VIE) guidance to common control leasing arrangements. The change to goodwill accounting allows the option to amortize goodwill over a 10-year period and test it for impairment only upon the occurrence of a triggering event, rather than the goodwill remaining unamortized and evaluated for impairment annually. With respect to interest rate swaps private companies can adopt a simplified approach to hedge accounting with settlement value being permitted to measure the value of the swap rather than fair value for swaps meeting certain criteria. In the area of consolidations, lessor entities under common control, that previously were required to be consolidated under the VIE model of consolidation, will no longer need consolidated if they meet all the defined criteria. All of these updates could have significant impact and should be given appropriate evaluation.

Blake noted that these changes to GAAP are yet another way that the FASB, in conjunction with the Private Company Council (PCC), is attempting to address the needs of private companies. The goal is to reduce complexity and minimize costs associated with preparing financial statements in accordance with GAAP, without sacrificing the relevance to the users of those financial statements. Additional information can be found on the FASB website, or by viewing Jami's full presentation.

Voluntary Benefits

Nick Giancola and Larry Musarra of CGI Voluntary Benefits, along with David Dickenson of Dickenson Group, LLC, gave a brief overview of some of the newest voluntary benefits available to employers. While programs that pay 100% of medical premiums are a thing of the past, and even short- and long-term disability are not “standard issue” these days, other innovative, supplemental offerings are becoming available. Alternative insurance programs that offer accident coverage for off-the-job incidents, group critical illness coverage for cancer, stroke, etc., and new forms of life insurance that provide individually customized policies are leaving employers with more options than ever before and may warrant a fresh look at company offerings.

Estate Planning Issues

Ronald Wayne of Buckingham law firm spoke to the audience on the sensitive issue of what and how to ask your parents about their estate planning. He emphasized that the main goal in any estate planning initiative is to take control of a person’s final decision-making process. The three critical areas to address — before something happens — include a financial durable power of attorney, health care documents, and a last will and testament.

Without a valid financial power of attorney, Wayne noted that much time will be wasted in probate court, not to mention that all personal financial information will become available to the public. Important health care documents to have include a health care power of attorney, living will and donor registry to make known any wishes regarding organ and tissue donations. A valid last will and testament is vital in that it serves as a safety net to avoid probate court, wrapping up any “loose ends” or assets lacking specific instructions. A will generally also covers important areas such as appointing an estate executor and guardians for minor or disabled children. It’s also a good idea to consider a trust, especially in the event of a second marriage or blended family, and long-term care planning.

Wayne left the audience with some key questions to help introduce the estate planning topic to parents. He also cautioned that helping set up the process for parents, such as helping them find an attorney, is fine, but that it’s best to stay outside of the estate planning process once it has started so parents can feel open to stating their true wishes. And as with any planning documents, it is imperative to review an estate plan upon any life-changing events that could have an impact. To read Wayne’s list of questions to begin the conversation with a parent or for more detail on the estate planning process, see his full presentation.

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