May 22. 2013 | Corey Reinke
Contributed Services from Affiliates Clarified
Not-for-profit organizations have long benefited from the skills of volunteers—from seniors delivering meals for shut-ins to church groups caroling over the holidays. Occasionally, NFPs are lucky beneficiaries of pro-bono services from attorneys, nurses, and—dare I say it—accountants. Volunteerism is the life blood of America’s not-for-profit community.
Fortunately, figuring out how to account for these services has been pretty straightforward. Services which require a specialized and necessary skill are recorded as both a revenue and expense on the statement of activities at the fair market value. Other volunteer services don’t need to be recorded at all.
There’s been a lack of clarity, however, when those services come from an affiliate of a not-for-profit entity. A recent amendment, ASU-2013-06, defines the process. Healthcare organizations should report the professional services as an equity transfer, increasing the net assets associated with the services. Other NFPs have some flexibility, as long as they don’t report the services received as a contra-expense or contra-asset.
In both cases, contributed services should be recorded at the cost recognized by the affiliate. But be aware that if the cost significantly overstates or understates the value of the service received, you may elect to recognize the service at either the recognized cost or the fair market value.
If this is news to you, relax. This amendment is effective for fiscal years beginning after June 15, 2014.
The best news of all, however, is that you still don’t have to account for those carolers!
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May 8. 2013 | Oscar Martinez
Ever Wonder What Happens After Your Client Clicks the ‘Buy’ Button?
Have you ever given any thought to what happens after you or your client, trade securities online? It seems pretty straightforward, but there’s a little bit more to the story. To keep the explanation simple, we’ll assume that you are buying IBM shares, the trade is routed to an exchange, and the trade takes place electronically.
After you click on the ‘Buy’ button of the online accounts, the order to buy IBM shares goes from the broker (e.g. E*TRADE, Scottrade, TD Ameritrade) to one of the stock exchanges (e.g. Nasdaq, DirectEdge, BATS). Once there, a set of computers, collectively referred to as the matching engine, matches your clients’ ‘buy’ order with someone else’s ‘sell’ order. Once this transaction takes place, you receive a trade confirmation message on your screen saying that you now own IBM shares. The execution, as referred to in industry parlance, takes a fraction of a second from beginning to end. However, that’s the trigger for a few more steps to come.
Which ones you may ask? Well, you ultimately need to get your IBM shares and the sellers need to get their money and that doesn’t happen at the exchange. This last phase of exchanging stock certificates for money is called ‘clearance and settlement’ and is handled by a subsidiary of the Depository Trust Clearing Corporation (DTCC). Soon after the trade executes, the exchange sends the transaction records (i.e., share symbol (IBM), price per share, and number of shares) to a centralized back-office operation. More likely than not, it will be DTCC. In DTCC systems, shares change ownership and money is transferred to the seller. This process is transparent to most clients and culminates with your brokerage account receiving credit for the IBM shares and the cash balance decreasing accordingly.
That is, in simple terms, what happens after you click on the ‘Buy’ button.
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May 1. 2013 | Emily Weiss
FBAR: Prepare for E-Filing
The next tax form soon to be required electronically is Form TD F 90-22.1, “Report of Foreign Bank and Financial Accounts” (more commonly known as the FBAR). The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) back in 2011 created an electronic filing system for the FBAR, and then announced the mandatory e-filing requirement to begin on June 30, 2012. However, in early 2012, FinCEN announced a postponement until July 1, 2013—giving tax preparers and software companies more time to prepare for this e-filing requirement.
FBAR Form Content
The FBAR form is for reporting financial interest in or signatory authority over foreign financial accounts, for any US persons with foreign accounts totaling $10,000 or more in a given year. The instructions to the Form detail the definitions of US persons, foreign financial accounts and financial interests, and specify certain exceptions to the FBAR filing requirement. FBARs are due on June 30 of each year.
Failure to file an FBAR carries a civil penalty of up to $10,000 per violation, or even $100,000 or more for willful violations. Although this form is small, failure to file it carries heavy implications.
Make note that the 2012 instructions to the Form TD F 90-22.1 do not currently refer to the e-filing option.
Some relevant links:
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April 24. 2013 | Kip Huffman
Business Size Does Matter for Health Care Act
The Patient Protection and Affordable Care Act (PPACA, or “Health Care Reform Act”) has earned a great deal of press coverage since being signed into law on March 23, 2010. The 906 pages of legislative text are too complex for in-depth coverage in this blog, but with the PPACA scheduled to go into full effect in 2014, it is worthwhile discussing some major changes that will impact businesses large and small, depending on the definition of size.
According to the PPACA, a large business is one with over 50 full-time equivalent employees (i.e., those who average 30 or more hours per week). This definition is unique to the PPACA and may be overlooked by many employers. The Small Business Administration—which is often cited by employers when trying to define a “small business”—uses a higher range for the “small” designation: 100 to 500 employees. Comparing these two examples, a business with 100 employees could be designated as small for SBA purposes, but as large under the PPACA.
Large businesses will be required to offer health care coverage to all employees, or risk incurring a penalty (subsequently clarified by the Supreme Court as a “tax”). For each employee (over a 30-person threshold) who is not offered an employer-sponsored health care coverage plan, a $2,000 penalty will be assessed. This penalty has become known as the “No Coverage Penalty.”
If an employer offers a sponsored health coverage plan that is deemed unaffordable relative to the individual’s household income, or does not provide a minimum value, the employer may receive another fine. This fine has become known as the “Unaffordable Coverage Penalty” and will be assessed at $3,000 per individual.
Although we just discussed some “large business” implications, the new law will affect everyone—from large multi-nationals to your local corner market. According to an Urban Institute analysis conducted in 2011, there were approximately 50.3 million uninsured persons in the United States. The PPACA would reduce this number by approximately 24 million through implementation of penalties and tax adjustments on employers. To avoid pitfalls and major setbacks, employers need to be proactive and assess the major impacts the new law will have on their business.
For more information on the PPACA and the impact on individuals and companies alike, visit GovCon360.com
where you can also view presentation slides from a recent Watkins Meegan Lunch & Learn on the Future of the Health Care Reform Law.
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April 17. 2013 | Matthew Bernardo
No More Shoebox Accounting
As the owner of a small business start-up, you’ve probably thought through the important operational decisions. How many employees will you need to hire to conduct business efficiently and effectively? How much should you pay for office space? How will you finance the purchase of computers, office equipment, and machinery required to conduct day-to-day operations? One consideration any business owner needs to pay special attention to in these uncertain economic times is the accounting and financial reporting functions of their business.
The accounting and financial reporting function is critical to a Company’s success; whether it be a Fortune 500 company or a sole proprietorship. By hiring qualified personnel and properly implementing and utilizing an accounting system, owners can better monitor their revenues and costs, while also utilizing projections to see where the Company is headed. Implementing accounting software that meets the needs of the Company’s accounting and financial reporting is a critical step for any small business.
The following are some of the benefits of implementing proper accounting software:
• Accurate and timely financial reporting
• Safeguards on financial information
• Account reconciliations performed more efficiently
• Real-time vendor and customer data
Maintaining accounting records accurately and timely should be an activity in which every business, no matter how small, invests the time and up-front costs. The benefits of doing so will go a long way in helping your business be successful.
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