SEC Using XBRL to Flag Reports for Review

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

Not too long ago, I heard Craig M. Lewis, Director and Chief Economist of the Securities and Exchange Commission’s Division of Risk, Strategy and Financial Innovation, give a presentation on the SEC’s new predictive accounting quality model, nicknamed “RoboCop” by the trade press, which will enable the SEC to monitor and flag reports for further review.

What makes AQM so useful, Mr. Lewis said in an interview with Merrill Compliance Solutions, is that, by using XBRL, the tool can be “applied broadly to the entire filer space.” Previous versions of the tool used Compustat data, which did not include all filing companies. With XBRL, 100 percent of filing companies will be analyzed by AQM.

Herz: Financial Reporting Triumphs and Challenges

Were there warning signs of the worldwide financial crisis and global recession?
Could the addiction to off-balance sheet accounting have been stopped?
How could contentious reporting issues have been better resolved?

From the reporting scandals of 2001 and 2002 to the recent global financial crisis and efforts at international convergence of accounting standards, former Financial Accounting Standards Board Chairman Robert Herz discusses critical issues and much more in his new book, Accounting Changes: Chronicles of Convergence, Crisis, and Complexity in Financial Reporting. Herz tells the story from the perspective of his front row seat on many of the major developments affecting accounting and financial reporting during his tenure.

Herz has had a long and distinguished career--as Chairman of FASB, a former senior partner at PricewaterhouseCoopers, a part-time member of the International Accounting Standards Board, an author and someone who has seen the accounting and financial reporting profession develop and grow over the past several decades. In his book, Herz shares his experiences and insight, including the importance of charting and setting a course to improve standard setting when he joined the FASB, making things simpler by rationalizing the structure of the U.S. accounting standard setting, and reorganizing and codifying U.S. GAAP. 

AICPA Insights interviewed Herz on financial reporting’s evolution and his role in it.

U.S. Employer Visits Underway to Promote the CGMA Designation

In his CGMA video interview, Chris Ling, Financial Controller of British Gas, explains well the increasing responsibilities of the finance department and why the function is evolving at such a rapid pace. “The rate at which the business world is changing is forcing everything to change faster,” Ling said. “So it’s our job as finance professionals to make sure we are supporting business as best as we can and as fast as we can.” As the external market drives the pace of change, and as that pace is ever-increasing, the finance function needs to continue to evolve to remain relevant.

Tomorrow's Company and the Ethics of Culture Change

Recently a colleague of mine attended a Tomorrow’s Company lecture in London as a guest of CIMA. Tomorrow’s Company is a London-based think tank that offers lectures and publications on issues like leadership and talent, sustainability and governance. CIMA, as a corporate member of Tomorrow’s Company, sponsors some lectures, as they did on this particular evening. The lecture she attended was given by Dick Olver, Chairman of BAE Systems, one of the world’s largest defense contractors.

Dick’s lecture was titled "A journey of culture change" and centered around his organization’s successful efforts in the area of ethics. With Dick’s appointment as chairman, he ushered in a complete overhaul of the company’s culture. He said, “The culture we’ve tried to develop is one in which our people take the company’s core ethical values into account in every decision they take. One where doing the right thing becomes an almost subconscious response.”

AICPA Advocates for CPAs with Mobile Workforce Legislation

Do you or your employees travel around the country, working in different states and jurisdictions? As I travel around the United States, I hear more and more management accountants lamenting the difficulties associated with interstate operations and the significant regulatory burden with regard to compliance with non-resident state income tax withholding laws.

Currently, there are 41 states that impose a personal income tax on wages and there are many different tax requirements regarding the withholding of income tax of non-residents among those 41 states. While some states offer de minimis thresholds or exemptions before taxes must be withheld and paid, others require only a work appearance in the state before imposing personal income taxes on the employee and withholding requirements on the employer—even for just one day.

CPAs Outlook on U.S. Economy Drops for Third Straight Quarter

Despite the traditional festive mood of the holidays and consumer confidence at a 6-month high, CPAs in business and industry are not impressed.

In fact, CPA financial executives reported their dimmest view of prospects for the U.S. economy since 2011 in the results of the AICPA’s fourth quarter Economic Outlook Survey. Why so sad? The main reasons cited for increased pessimism are the threat of the looming fiscal cliff, combined with concerns over future sales and profitability.

While optimism has declined over the past three quarters, the fourth quarter survey did not include any silver lining as every major measure of economic expectations fell, both quarter over quarter and year over year. 

Does Your Organization Invest in its Employees’ Training and Skills Development?

Organizations around the globe face extraordinary challenges when navigating through the current global economy. To thrive in the long-term, organizations must constantly innovate, evolve and transform.

One of the most critical factors that determines an organization's fate in this environment is the quality of its human capital and the way it manages its talent pipeline.

A recent report from the AICPA and CIMA showed that while most companies understand the importance of human capital, they do not appear to have the right systems, processes and information in place to manage talent effectively. Think about your organization for a minute. Does it invest in training and the development of talent and skills? Or does it view training as a compliance tool?

In the News: CGMAs Can Bridge the Gap in Human Capital Management

David McCann at CFO.com spoke with Arleen Thomas, CPA, CGMA, AICPA SVP of management accounting, about a recent talent management survey for Chartered Global Management Accountants conducted jointly between the AICPA and the Chartered Institute of Management Accountants by the Economist Intelligence Unit. The report found that 43 percent of the CEOs, CFOs and human resource directors surveyed said their companies have missed financial goals in the past 18 months because of inadequacies in human capital management. Almost the same number, 40 percent, indicated that such shortcomings—which could include insufficient systems, processes or management information—have hindered their ability to innovate. “We believe that talent and the human dimension drive business growth and companies haven’t focused enough on that,” said Thomas. “Too many companies look at talent in terms of what they have to do to comply with labor laws and regulations, rather than understanding that it can be a competitive differential.”

In the News: Executives Pessimism Towards Economy Erodes Confidence in Own Organizations

With the announcement yesterday that the Federal Reserve is launching a third quantitative easing in an attempt to generate momentum for the stalling recovery, the economy—and unemployment—are back in the spotlight.

The AICPA’s 3rd quarter Economic Outlook Survey results were released last week, which provided insights into the direction of the economy from 1,365 qualified CPAs who hold leadership positions, such as chief financial officer or controller, in their companies. Their gloom was reflected in last week’s jobs report, which showed the labor market continuing to stagnate and served as one of the reasons behind the Fed’s actions yesterday.

Outlook for the Global Economy Declines in Latest CGMA Forecast

On July 10, the AICPA and CIMA released the results of the most recent CGMA Global Economic Forecast, which showed the world’s CEOs, CFOs and senior management accountants hold an increasingly pessimistic outlook for the global economy over the next 12 months. The shift to a more negative sentiment appears to reflect the worsening of the sovereign and financial crisis in Europe and its effects on other regions, as well as slower growth in China and political and fiscal uncertainty in the U.S.

The CGMA Global Economic Index – a comprehensive gauge of executive sentiment within the Forecast – declined 7 points to 58 from the first quarter 2012 reading of 65. The Index is a composite of 10 equally weighted survey measures on a scale from 0 to 100, with 50 considered neutral and numbers above that signifying positive sentiment.

CPAs: The Startup Community Needs You

There is a joke in Hollywood that no matter what one’s day job is, everyone has a headshot in their back pocket. In business, the back pocket accessory isn’t the headshot—it’s the business plan. The startup community is exploding across the U.S. Whether it’s Silicon Valley, New York City or Detroit, state and local governments are embracing startups and encouraging talent to call their fair city home. According to the Global Entrepreneurship Monitor, there was a 60% increase in startups from 2010 to 2011. But there is one important thing most startups are missing: financial guidance.

You and I know the value a CPA brings to any organization. But many startups don’t. The qualities a CPA possesses—integrity, competence and objectivity—are needed and missing from some startups. Not to mention the financial and business knowledge that makes CPAs trusted business advisers. Recently, a report was released that examined the appointments of accounting and financial experts to audit committees, exploring whether concerns about the status of these experts discouraged companies from appointing them.

Case in point: Groupon.

Creating Social Capital for Not-for-Profit Support

Ask any non-for-profit development director and they will tell you there are two ways to fundraise: 

• Ask 1000 people for $10
• Ask 10 people for $1000

Which is the easier task? In terms of time and resources spent, certainly option B is the easier option. But in terms of broader reach and influence over a large audience, option A is a formidable contender because of something called social capital. Social capital is a concept that points to the power of networks to build a powerful entity, such as support for a cause, political candidate or even a corporate brand.