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September 26, 2023

Accounting News Roundup: Millennials and Value Pricing; Corporate Cash Piles; Fewer SEC Comments | 01.22.16

Millennials can play a role in move to value pricing [JofA]
Value pricing demigod Ron Baker says that the end of the billable hour is "within sight" and discusses about how younger CPAs can have an impact, including this anecdote:

There have been several firms that have made the transition where young people have certainly played a big part. I remember working with one firm in California where one of the key members was a star. She was definitely partner material, somebody you wouldn’t want to lose. She actually went to the partners and literally told them, “If you don’t make this transition, I am leaving.”

Maybe I'm stating the obvious here, but the whole value pricing versus billable hour debate is polarizing. The ideas that Baker advocates make a lot of people really mad and I personally don't understand why. If I listed the things I didn't like about working in an accounting firm, performance evaluations and timesheets would be neck and neck for the WIN. Now, it's true that how a firm accounts for its people's time is not high on most people's "want" list when looking for an employer, but maybe it should be? Baker sat for another another interview — this time with our sister from another mister site, Accountingfly — and, at the very least, a case can be made for it. Thinking about it now, if I was to go back to work for a CPA firm in a CPA capacity, I think I'd be asking whether or not the firm used timesheets and, if they did, I'd have a hard time accepting an offer from that firm.

Why Are Corporations Hoarding Trillions? [NYT]
This article from Adam Davidson does a good job of showing just how much cash is lying around in corporations:

Take, for example, Google. Its new parent company, Alphabet, is worth roughly $500 billion. But it has around $80 billion sitting in Google’s bank accounts or other short-term investments. So if you buy a share in Alphabet, which has sold for roughly $700 lately, you are effectively buying ownership of more than $100 in cash. With $80 billion, Google could buy Uber and its Indian rival Ola and still have enough left over to buy Palantir, a data-mining start-up. Or it could buy Goldman Sachs outright or American Express or most of MasterCard; it could buy Costco or eBay or a quarter of Amazon. Surely it could use those acquisitions to earn more than 2 cents on the dollar. 

Davidson explores the possible reasons for corporate cash hoarders, among them: saving for a rainy day, tax avoidance, M&A, but he says that still doesn't explain it away. Part of the reason, he found, is that "stock market is rewarding them for it" but no one really knows why. There's a hunch of course, and that hunch is that tech, pharma, auto and a few other industries are on the cusp of "something big." This is all scary and exciting at the same time so I'll probably dream of monster piles of cash destroying cities tonight. Or curing disease! I'll report back.

SEC Averages Fewer IPO Comments in 2015 [CFOJ]
According to Audit Analytics, the SEC's first letter to companies looking to go public had an average of 27 comments, down from 34 in 2014 and 39 in 2013. There are some theories as to why:

That could be because “companies are just getting better,” said Olga Usvyatsky, vice president of research for Audit Analytics.

“There’s more information available in the markets,” she said. “Companies can learn from previous experience of previous companies.”

The decline could also be because the companies that went public in 2015 simply had “less complex accounting issues [and] less complex business issues,” she said. Despite this, companies still needed 151 days on average to go public after receiving the first letter, up from 143 the previous year and 150 in 2013.

Maybe it's just me but "less complex accounting issues [and] less complex business issues” and companies "just getting better" at securities filings doesn't seem plausible. I'd be willing to bet someone $1 that a combination of a short-staffed SEC and legislation like the the JOBS Act have greased the gears a bit. But companies being more forthright about their business, accounting and financing? Hahahaha. No.

Last time, on Going Concern…
Chris Hooper wrote about the plight of the Millennial accountant. I wrote about CPA bar talk. And from Open Items: Newly Licensed CPA in Industry Wonders About Free CPE and CPE Carryover.

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