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August 2015
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The Forensic Accountant: Designation and Certification

The Forensic Accountant: Designation and Certification Whether it’s a case of fraud in the form of embezzlement, misappropriation of assets or a misrepresentation of financial statements, the forensic accountant is the detective to employ for damage control. With all the fraud and breaches in internal control that have led to identity theft, financial loss and reputations of companies being damaged, the need for quality professionals to seek out the truth and report on the facts is great.

Then there’s the gap between the lawyers and the accountants. They each speak their own form of professional language. When individuals and businesses (from sole proprietorships, partnerships, limited liability entities as well as large corporations) require disputes to be litigated in court, they often need a common link between their lawyer and their accountant. Many times, this link is the forensic accountant who can crunch the numbers and then explain those numbers to the judge in the case. This litigation support can help settle cases amicably by way of clear and concise explanations of the financial facts.
The forensic accounting professional performs an orderly analysis, investigation, inquiry, test, inspection, or examination in an attempt to obtain the truth and form an expert opinion. Almost every scientific and technical field has a forensic application. Forensic accountants may be involved in both litigation support (providing assistance on a given case, primarily related to the calculation or estimation of economic damages and related issues) and investigative accounting (looking into illegal activities).
The field of forensic accounting includes:
  • Auditing for fraud prevention, detection and response
  • Litigation support and dispute resolution including family law and testifying as an expert witness
  • Reconstruction of income and the calculation of damages for businesses and individuals
  • Investigation through interviews, interrogations and public data bases
There are certain educational requirements related to the qualifications under Rule 702 of the Federal Rules of Evidence in providing testimony as an expert witness for litigation. Specifically, Rule 702 authorizes the judge, as the trier of fact, to decide on the credibility of an “expert” by requiring the following:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
  1. the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
  2. the testimony is based on sufficient facts or data;
  3. the testimony is the product of reliable principles and methods; and
  4. the expert has reliably applied the principles and methods to the facts of the case.
Respected professional organizations designate professionals with the requisite education, skills and experience to perform engagements as forensic accountants.
The American Board of Forensic Accounting (ABFA) offers a Certified Forensic Accountant program (CR.FA) which assesses Certified Public Accountants (CPAs) knowledge and competence in professional forensic accounting services in a multitude of areas. Certification as a CR.FA requires the professional to meet certain eligibility requirements, submit an application and pass a rigorous examination.
The Association of Certified Fraud Examiners (ACFE) offers professionals credentials as a Certified Fraud Examiner (CFE) by becoming a member of the organization, submitting an application with the proof of education and professional recommendations, passing the CFE examination and then gaining approval from the certification committee.
The American Institute of Public Accountants (AICPA) offers credentials as a Certified in Forensic Accounting (CFF) by maintaining membership in good standing with the AICPA, paying the annual dues, maintaining a valid and unrevoked CPA permit, obtaining NASBA-approved continuing professional education, and passing a comprehensive examination.
The Checkpoint Learning Forensic Accounting Certificate ProgramTM provides a carefully selected curriculum of courses and comprehensive examination to test the competency of the professional in the various fields of study related to forensic accounting.
New Sharing Technology Creates New “Dependent Contractor” Tax Status

New Sharing Technology Creates New "Dependent Contractor" Tax Status In this article, Charles R. Goulding and Michael Wilshere presents information on new sharing technology affecting dependent contractor tax status.
Ride-sharing services like Uber and Lyft are creating new employment categories for tax purposes. Uber, the $50 billion dollar ride-sharing company from San Fransisco and its neighbor Lyft treat their drivers as independent contractors and not as regular employees. Some drivers for both companies dispute that classification.
The difference between an independent contractor and an employee is critical because it determines not only how drivers pay taxes but whether companies like Uber and Lyft will be obligated to withold social security and Medicare taxes, and pay workers compensation, not to mention complying with a host of other labor laws.
The rules for determining whether a service provider is an employee or an independent contractor were laid out by the courts decades ago during the New Deal Era. But the application of those standards to the new tech-oriented “sharing economy” is controversial. The correct classification is not clear because the drivers occupy somewhat of an interim category that some commentators are referring to as “dependent contractor”. The chart below demonstrates the different service provider classifications:
Service Provider Classification
Independent Dependent Employee
I’m my own person I rely a lot on your infrastructure I act as directed

Uber and Lyft both argue that their drivers should be classified as independent contractors. The critical inquiry here is the degree of control that the worker has over operations. Employees, unlike independent contractors, typically do not control how the work gets done. That determination is usually dictated by the employer. Conversely, independent contractors are only responsible for the final outcome of the services. They may determine on their own how to achieve that result.
In determining control, all relevant factors may be considered. On the one hand, drivers at Uber and Lyft use their own cars and pay for their own gas and vehicle insurance. Uber and Lyft see themselves merely as software app providers who arrange sharing between drivers and customers. On the other hand, drivers at the companies have no ability to set prices and their on-the-job conduct is closely scrutinized by the app providers who set stringent standards and have the ability to terminate drivers.
The IRS provides some traditional guidance on the issue with its report on the “Classification of Workers Within the Limousine Industry”. Limousine service providers who only provide “pure dispatch services” may classify their workers as independent contractors. Those pure dispatch service providers, however, are few and far between. “Indeed, few companies in fact can accurately be classified as pure dispatch companies” as stated in the report. (Employment Tax Procedures: Classification of Workers Within the Limousine Industry, Internal Revenue Service)

Most companies fall into an intermediate hybrid classification. Vagueness arises in these circumstances because answers to the following inquiries are not clear:
  • Do drivers have a significant investment?
  • Do drivers have an opportunity for profit and loss?
  • Are drivers subject to employer direction?
  • Do drivers make their services available to the general public?
  • Do drivers render services personally?
Recent determinations by governmental agencies around the country also shed some light on the issue. California’s labor commissioner recently ruled that a driver for Uber Technologies should be classified as an employee of that company. Although the ruling isn’t binding authority for courts, similar rulings build momentum for judges that often defer to those determinations. There are about a dozen or so of these rulings by government agencies around the country that have weighed in on the topic. The state of Florida awarded unemployment benefits to a driver awarding him employee status. One court in California actually put the issue before a jury. Another earlier administrative ruling in the state actually ruled in favor of Uber. Uber points to at least five of these administrative rulings that they say are favorable. Given the sheer size of Uber and Lyft, an eventual unfavorable determination by courts on the issue will result in billions of added liability.
In deciding this and similar issues, courts will most likely prefer to move one small step at a time and assess the impact as they go. Only time will tell if long established rules work well in a rapidly evolving technological society. In fact, in five to ten years, the advent of driverless cars may make the driver/employer status irrelevant.
IRC §529A: Achieving a Better Life Act

IRC §529A: Achieving a Better Life Act According to the Social Security Administration, fifty-six million Americans live with disabilities. Entitlement programs are available for those individuals and for their families. But many of these federal programs have limitations on income that can be earned and resources that can be owned.
Members of congress recognized the need to provide a means in which individuals with disabilities and their families could save their own personal funds without interfering with eligibility for other federal entitlement programs. The concept takes advantage of tax incentives similar to regulations which allow families to save for their children’s college under popular “Section 529” college tuition savings plans also known as qualified tuition programs (QTPs).
On December 19, 2014, the President of the United States signed into law The Achieving Better Life Experience (ABLE) Act (S. 313 / H.R. 647). This legislation has been a long time in production as it was first introduced in 2006. ABLE creates a new subsection Section 529 of the Internal Revenue Code.
The purpose of ABLE is to encourage and assist individuals and their families in saving private funds dedicated to supporting people with disabilities with an age of onset up to 26 years of age by allowing individual choice and control for maintaining health, independence, and a better quality of life. The ABLE program is intended to provide secure funding for qualified disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance. The program is generally tax-exempt, but there are exceptions.
Amounts in an individual's ABLE account (including earnings), contributions to the individual's account, and distributions to pay qualified disability expenses are generally disregarded in determining the individual's eligibility for, or the amount of, any assistance or benefit authorized by any federal means-tested program including Medicaid, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI). This rule overrides any other federal law that requires those amounts to be taken into account.
Contributions may be made into an ABLE account for the benefit of an eligible individual for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account. A designated beneficiary is limited to a single ABLE account and must be a resident of the contracted state in which the account is established. There are other requirements of IRC Section 529 which also must be met.
Contributions to an ABLE account qualify for the annual gift tax exclusion which is adjusted annually and is exempt from generation-skipping transfer (GST) tax to the extent of the exclusion.
Qualified disability expenses are any expenses related to the eligible individual's blindness or disability that are made for the benefit of an eligible individual who is the designated beneficiary.
Distributions from a qualified ABLE account which are determined to be includible in gross income because they do not apply to qualified disabilities expenses are subject to an additional tax of 10 percent.
The advocacy group Autism Speaks summarized and compared the new ABLE program to the traditional 529 qualified tuition program. The ABLE program:
  • Creates a new subsection within Section 529 of the Internal Revenue Code
  • Follows the requirements and regulations of a traditional 529 qualified tuition program
  • Is relatively easy to open and available in any state
  • Has the same annual contributions (after $14,000 gift tax rules apply)
  • Has the same tax-free treatment of account (income earned grows tax- free and withdrawals for qualified disability expenses are tax-free)
  • Includes the same reporting requirements as with a traditional 529
  • Provides that a beneficiary may have either an ABLE account or a traditional 529 qualified tuition program (multiple ABLE accounts or multiple 529 plans still allowed)
  • Allows rollovers from an ABLE account to traditional 529 if beneficiary is no longer deemed disabled (all other 529 rollovers apply to ABLE accounts)
  • Allows rollovers to other family member’s ABLE account or their traditional 529
On July 6, 2015, the IRS issued IRB 2015-27, Notice of Proposed Rulemaking Guidance under Section 529A: Qualified ABLE Programs, which contains proposed regulations and guidance under IRC Section 529A.
For more information and continuing education credit, consider this course from Thomson Reuters Checkpoint Learning, The ABLE Act: Achieving a Better Life Experience Act of 2014.
Nine Critical Skills for Every CFO

Nine Critical Skills for Every CFO The Chief Financial Officer's (CFO) job has changed over the years. No longer is the CFO just the steward of an organization's financial affairs and functions. CFOs have evolved from a trusted advisor, an accountant, and a risk manager to a role focused on strategic direction and operational management who works hand in hand with the Chief Executive Officer (CEO) to guide the organization.
A variety of factors have influenced the challenges facing CFOs in the 21st century. The list includes the corporate scandals that spawned the Sarbanes Oxley Act of 2002, introduction of enterprise risk management, and the interdiction of an overwhelming number of new accounting standards. All of this has created a demand for a new type of CFO.
After combining these issues with the credit crisis and financial meltdown of 2008, one starts to understand how the CFO's job has changed over the last decade.
The business environment has become more strategic. Because of this shift, CFOs have, by necessity, become challenged to help redirect business strategy to achieve higher levels of operational excellence and revive obsolete business processes. In many instances, business models needed a makeover, thrusting many CFOs into uncharted territory.
What has emerged is the new face of the CFO whereby strategy, change agent, financial stewardship, and operations are defining where and how CFOs spend their time. A new world of competitive business demands that today's CFOs learn and utilize new skills.
The nine key areas that CFOs should address to gain an edge on the competition include:
  1. Strategic thinking
  2. Enterprise risk planning
  3. Capital and cash management
  4. Capital structure
  5. Financing – long and short term
  6. Mergers and acquisitions
  7. Planning and analysis
  8. Accounting and internal control
  9. Organizational structure and leadership
Mastering these areas will help today’s CFOs gain the edge needed to guide their organizations to success.
In a world of rapidly changing and developing technology, CFOs and their teams should be willing to adapt and use the newest and best tools and techniques that are available. One of the most significant issues facing CFOs is the ability to focus on external factors including customers, investors, competitors, vendors, and regulators. This includes developing a global understanding of the business and its environment. The focus on multiple external factors, including globalization, is a reality that CFOs should not ignore.
The world of the CFO is no longer limited to data and analysis. CFOs should communicate effectively and be capable of developing and utilizing empowered employees. CFOs should understand the concept of value propositions that are based upon a win/win mentality. In the world of Sarbanes-Oxley regulation, integrity and accuracy are required and necessary. This will always be the case whether the CFO is working for either a public or private company.
For continuing education on this topic, take a look at the Checkpoint Learning interactive online course, 9 Must-Have Skills for Every CFO.
FASB ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs

FASB ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs The Financial Accounting Standards Board’s (FASB’s) Simplification Initiative is a tightly focused initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. The projects included in the initiative are intended to improve or maintain the usefulness of the information reported to investors while reducing cost and complexity in financial reporting. In addition to the Simplification Initiative, the FASB recently completed several projects and is currently working on several more intended to reduce cost and complexity in financial reporting. The FASB launched the initiative in 2014 by making targeted changes to U.S. generally accepted accounting principles (GAAP) while maintaining or improving the usefulness of information for investors. In April 2015, the FASB issued Accounting Standards Update (ASU) 2015-03, Simplifying the Presentation of Debt Issuance Costs, as part of that initiative.
Debt issuance costs are specific incremental costs, other than those paid to the lender, that are directly attributable to issuing a debt instrument (i.e., third party costs). Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented in the balance sheet as a deferred charge, i.e., an asset. This presentation differed from the presentation for a debt discount, which is a direct adjustment to the carrying value of the debt, i.e., a contra liability. Having different balance sheet presentation requirements created unnecessary complexity.
Recognizing debt issuance costs as an asset is also different from the guidance in International Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify presentation of debt issuance costs, the amendments in FASB ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.
Recognition and Measurement
The guidance in ASU 2015-03 is limited to the presentation of debt issuance costs. The amendments do not affect the recognition and measurement of debt issuance costs. Therefore, the amortization of such costs should continue to be calculated using the effective interest method and be reported as interest expense. Additionally, the other areas of U.S. GAAP that prescribe the accounting treatment for third-party debt issuance costs will not be affected. For example, the amendments will not change the accounting for third-party costs related to a debt restructuring accounted for under FASB Accounting Standards Codification (ASC) 470-50, Debt, Modifications and Extinguishments, or impact the calculation of a beneficial conversion feature in accordance with ASC 470-20, Debt with conversion and other options. Therefore, reporting entities may still need to track debt issuance costs separately in order to address these other areas of U.S. GAAP. The appendix includes an example that illustrates how a reporting entity would record debt issuance costs before and after adopting the new guidance.

Effective Date and Transition
For public business entities, the amendments in ASU 2015-03 are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption of the amendments is permitted for financial statements that have not been previously issued.
An entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include:
  • The nature of and reason for the change in accounting principle
  • The transition method
  • A description of the prior-period information that has been retrospectively adjusted
  • The effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability)
Providing Advice for the Robot Purchase Decision

Providing Advice for the Robot Purchase Decision Charles R. Goulding and Jennifer Pariante discuss low-cost robot integration in the manufacturing and warehouse industries and the potential tax incentives offered.
Before the current generation of low-cost robots, most business robots were large purchases made by industrial companies with internal engineering resources skilled at performing capital expenditures analysis. Today, low-cost robots aimed at light manufacturing and warehouses are being purchased by smaller companies that often rely on their outside advisers for business, accounting and tax advice.
Besides calculating the projected economic rate of return, robot financial advisors should get a basic understanding of the major robot categories and consider attending the new robot product demonstrations.
Light Manufacturing and Packaging
Some of the major lower cost robot manufacturers include Universal, Rethink, ABB, and Motorman. These companies make newer so-called collaborative robots that are low in cost and work side-by-side with existing human staff. Common brand names for Rethink are Baxter and Sawyer. For ABB the collaborative robot brand name is YuMi.
Warehouse Applications
One of the fastest-growing robot categories is warehouse robots. The two largest warehouse employee categories are 1) pickers who pick goods off warehouse shelving and who bring the goods to 2) packers who then pack the goods for shipment. Major picker warehouse robot brands include Amazon's Kiva and Kuka. After the picking process, some of the collaborative robots described above can be used for the packaging function.
Robot Economics
The first question is: does the prospective purchaser have a sufficient volume of receptive unit tasks necessary to justify the robot purchase? Excluding routine maintenance, robots work 24/7. They don't take any breaks or vacations, therefore enabling them to process surprisingly large unit volumes. For example, a three-year high-volume customer contract might justify a robot purchase. Two- and three-shift labor force high-volume business operations will have an economic payback that is corresponding multiples greater than that of a single shift staff operator.
Robot Tax Incentives
Robot tax incentives include potential Section 179 equipment expensing, possible bonus deprecation, and R&D tax credits related to the robot integration process.
Many of these yearly tax incentives typically depend on the enactment of federal tax extenders, which typically have been available in recent years.
Informed robot purchase advisors in the manufacturing and warehouse industries can play a crucial role in helping their clients address the automated future.
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