Category: The JDA

>75: Procrastination

Procrastinate.jpgEditor’s note: This is the latest edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
First of all, I have to give it to all of you little future CPAs of America, you REALLY know how to put things off until the last minute, don’t you?
I’m going to let you in on a tiny little secret: the exam never goes away.
Let me paint an “imaginary” scenario where CPA Review classes are starting in less than 48 hours. Classes have been on hold for over two months and suddenly, within this 48 hour period, there is a rush of panicked CPA exam candidates realizing they’ve got less than a day left to figure out a plan. Anyone else see what’s wrong with this picture?
I’m not talking about a handful of people, I’m talking about a significant chunk of you. You know who you are and you know exactly what I’m talking about.


So what is it? Do you believe that the exam will pass itself? Or if you put it off long enough somehow you’ll wake up one day a CPA? I hate to break it to you but that’s really moronic.
There are students in our classes that are 50-some years old. Think about that. They graduated 30 years ago and are STILL putting this stupid ass exam off. So don’t think you’re some hero of procrastination just because you let 18 months go by and started losing exam scores, you aren’t special.
The bottom line is this: it is all about what you want to do with your life. Do you really want to be a CPA? Then you’ll suck it up and finish. Don’t do it because your parents want it or your girlfriend wants it or it’s your grandma’s dying wish. You are only setting yourself up for a life of half-assed failure, misery, and disappointment.
Which is kind of like what you’re setting yourself up for with a CPA and a career in public accounting except + tchotchkes. Win* (I think).
Point is, stop. In the time it takes for you to come up with 1000 excuses, you could have already booked your exam and gotten through at least 150 MCQ. Yes, it sucks but guess what? You picked it. You can make it worse on yourself and be that 50 year old guy in the back of our Live class or you can just get through it and stop bitching.
/end rant. Do it.
*I’m obligated to say that because of my day job

The Fed on Glass-Steagall; Me on STFU, Fed Boys, We Got This

Thumbnail image for Solutions.jpgKansas City Federal Reserve President Thomas Hoenig is a voting member of the FOMC this year and apparently he got my note.
He is charging into the year as a cheerleader of long-dead regulation and ending TBTF. This is a song and dance we’ve seen from the Fed about a bazillion times now. Just because regulation is my shit doesn’t mean I’m entertained in the least by this.


WSJ:

A top U.S. Federal Reserve official said Tuesday it’s necessary to consider how banks considered too big to fail can be broken up so they no longer pose a systemic risk to the U.S. economy.
“Beginning to break them, to dismember them, is a fair thing to consider,” Federal Reserve Bank of Kansas City President Thomas Hoenig told a panel at the annual meeting of the American Economics Association.

Well if insisting too big to fail is too big to continue isn’t enough, maybe Hoenig’s declaration of “bring back Glass-Steagall!” will make the panties drop?
Nope.

“We’ve got to start somewhere — and size matters,” Hoening said, calling for rules to address the problem that are simple and easy to enforce.
“We’ve got to strike while the iron is hot … but we must also do it right,” Hoenig said, adding there was a “chance” that new rules could be passed this year.

I’m going to go ahead and resist the easy joke here.
So? Should commercial banking and investment banking once again be absolutely distinct from each other?
I think if we’ve learned anything from this crisis it’s that the lines are blurred; accountants should know finance, finance professionals should know accounting and Christ, no one let the quants near the securitization models again. I have seen a noticeable increase in bankers, CFOs, etc pursuing CPA licensure since 2007. I can’t tell you numbers (if I did I’d be making them up) but a lot more of them call and the line is no longer as definitive as it was.
Our rules need to change. It’s not that we should bring back Glass-Steagall, it’s that two new guys need to write one hell of a regulatory bill that redefines our financial system as we know it and slap their names on it.
The financial system we’ve got sucks and if we don’t do that, Fed guys like this will keep yammering on about interest rates they never plan to raise and popping future bubbles.

Apparently the Fed Needs More Money

Thumbnail image for PiggyBank_broken.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
I know, the headline stunned me when I read it the first time too. First via James Turk, I had to stop and look at that for a second. Don’t they make it? How could they possibly need it?
Initially, the Fed called this proposed deposit facility a component of its “exit strategy” (the existence of which, much like Sasquatch, is still up for debate), insisting that by creating an interest-bearing drain for banks’ funds held at the Fed, it could clear out some of the money sloshing around in the system.


Although they also believe asset sales to be an option, I’m still not sure who the hell they are expecting to buy these bonds (unless they’re willing to take a loss, and knowing the Fed that’s not too likely) so stay tuned.
I believed this whole interest-bearing deposit facility nonsense was really just a Bad Bank for Dirty Fed money but it’s actually the Fed begging for deposits, so I guess I was wrong. But why, then, would they paint this as an exit strategy?
From the Turk piece:

The US government needs ‘deposit currency’ – or ‘electronic’ currency, to put it into Mr. Bernanke’s terms – so that it can pay its bills by check or wire transfer. Payment for goods and services by deposit currency are made through the banking system, and nearly all commerce in the United States is conducted in this way. So where will the Federal Reserve get enough deposit currency to enable it to continue purchasing US government debt?

In 2008, “public debt” was considered to be $9.9 trillion dollars or 70.2% of GDP. By 2009, that number had ballooned to over $12.9 trillion dollars, nearly 91% of GDP. Even more disconcerting? This is using governmental accounting rules which — as any of you who have ever worked in government can attest to — don’t necessarily coincide with GAAP logic.
Let’s not forget that a large chunk of this debt is owed to the Fed itself (for some reason) perhaps because inflation isn’t bad enough and we somehow should pay them more for the convenience of having printed money and payment systems.
I’m not 100% on what’s going on here but it’s beginning to look awfully suspicious.

How Bad Unemployment Is Guaranteed to Get Worse

Flush_hope.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
I try most of the time not to jerk myself off but this is important and worth paying attention to. Until the grand money laundering scheme is finally put out of commission, economic “recovery” will continue to drag, unemployment will continue to rise and credit will remain tight.
So check out “How a Jobless ‘Recovery’ Costs You… Quietly” for more on the plan to print our way out of this mess. Sort of like Enron after Ken Lay’s convenient death, it’s obvious what’s been going on once you realize the details are painfully simple.
Anyway, the strategy moving forward into 2010 will be one of cautious optimism. Hell, calling it optimism is pushing it.


Business Week (Why This Business Owner Isn’t Hiring in 2010):

Right now the Administration is proposing income taxes that are still equivalent to the rates during the Clinton era. I’m not sure how long this is going to last before the rates start going up. And I’m reading that many states are quietly raising their unemployment taxes. Some experts are estimating that state unemployment taxes could double or even triple in the next year or two. Is an increase in the Federal Unemployment Tax rate on the horizon? One expert thinks so.

Read that again just to make sure it sinks in. Increased unemployment taxes is bad enough a phrase on its own but add the words “double” and “triple” and suddenly you see small business walking blindly into the train tunnel with the 5p Bridge and Tunnel Express coming straight for it.
AccountingWeb reported the potential increase on December 17:

States that have borrowed money from the federal government under the Federal Unemployment Trust Act (FUTA) to cover their current obligations will need to pay this money back with interest.
According to the Journal of State Taxation, at least 12 states, including Michigan, Texas, and Virginia, with depleted trust fund balances had borrowed from the federal government under FUTA provisions of by the end of the summer, and others are expected to follow suit. States that accepted interest-free loans offered under ARRA (the Stimulus Act) will need to pay interest on these loans after two years.

There’s probably some really offensive translation of the FUTA acronym I’m missing here but frankly I’m just tired of having to report on this depressing shit. Looks like another exciting year ahead! Yay!

Pleasing the Accountants, Road Trip Style

Receipts.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
NYT had a piece yesterday called “Paying With Plastic to Please the Accountants” and I have to admit at first glance, the title annoyed the shit out of me. The accountants don’t care what you use when expensing your stupid airport Starbucks and car rentals, all they want is to be left alone to decode your receipts in peace. At least mine does.
But it isn’t just the accountants. Apparently your expenses are of extra importance to the IRS – though we’ll save the wild speculation that might dictate Timmy the Tax Cheat is just really hard up for some revenues (especially after that $38 billion tax break he gave Citigroup without anyone’s permission).

The I.R.S. is engaged in an initiative to audit tax returns of about 6,000 companies, partly to look at executive fringe benefits, including travel-expense procedures. This takes place as companies are already struggling to get a better handle on overall travel and entertainment management, especially as business travel picks up in a still shaky economic environment.

The article goes on to talk about extra airline fees (I won’t bitch about the $40 I just had to pay to check a suitcase on a recent Chicago trip) and makes expense reports sound like financial statements. The IRS apparently doesn’t care about receipts for charges under $75 while most companies use $25 as their receipt required limit. Is a $4 airport latté material? Maybe not. Are 25 dinners between $20 and $24? You bet your sweet little bean-counting ass.
I will go ahead and state the obvious here because sometimes I feel like you rubes need a BIG SIGN: in this economy, companies can no longer afford the jetsetting of yore, and why the hell should they? With video conferencing, email, mobile productivity and social networking helping to bring an entirely new meaning to collaboration, all of that cross country crap is no longer as critical as it once was. And so go the $4 airport lattés and bad $15 dinner tabs with it.
So remember, kids, keep your receipts, Timmy might want to run some substantive tests on your company rental cars and client dinners on the road. God forbid he not get a piece.

UK Financial Reporting Watchdog: ‘We don’t need no Big 5’

Solutions.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Once upon a time, there were 8. And then 7. And then 6. And then 5. And now 4. I’ve thrown out the idea of a large audit failure sending one of the Big 4 tumbling but the idea has been met with resistance; and naturally so, they’ve survived this long, right?


Accountancy Age:

Stephen Haddrill, the new Financial Reporting Council chief executive, in his first interview since taking the post, said there was little chance a global challenge to the Big Four – PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG – would emerge in the near future.
“I don’t think it is achievable in the near term and the priority for us has to be that we are prepared for the worst and that is where I will put my focus,” he said.

To read the rest of Haddrill’s interview with Accountacy Age, one might be inclined to point out that the guy is only a little bit pessimistic and for good reason. The Big 4 cannot exist indefinitely as they have, deflecting fines each time they bumble a big audit. It isn’t a problem exclusive to the UK and in fact, the Big 4 might not realize it but they are fighting the battle to save American capitalism. To that end, sacrifices may be required in the name of “competition”, whether or not the Big 4 are ready to embrace the idea.
They call them the Final Four because it is widely believed that the large accounting firms cannot lose another player but what’s to stop regulators — either Internationally or here at home — from busting down the joint and shutting one down? Anyone forgotten Satyam?
The firms — clever Trevors that they are — already know regulators are on their asses and behave accordingly. Crossing their Ts and dotting their Is, it was incredibly easy for PwC to say “Satyam wasn’t our problem” here in the states just as they’d have done if it had gone down in the UK, Dubai, China… it doesn’t matter, that’s what the lawyers get paid for.
Anyone get the feeling we’ve got a problem on our hands or is that just me? “Preparing for the worst” eh? Sounds like a plan.

>75: Seriously. Enough with the “Am I Outdated?”

Thumbnail image for ben bankes at the NYC marathon.jpgEditor’s note: Welcome to a special Wednesday edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
Enough with this question, I’m going to start emailing students this article directly.
First of all, if you don’t send me questions, I can’t answer them. No question is too stupid, trust me, I’ve been in CPA Review for almost 3 years. They don’t tell you kids shit about the exam in college, better to ask than listen to some guy you work with (he’s wrong 87% of the time – or so I have calculated from professional experience via our students). So send them in. I’ll try to be nice and at least sort of useful.


That being said, I keep getting the question at work about materials. 2010 materials. Updates to 2009 materials. Being the most up-to-date in the cubicle farm. I got it, your brain is programmed to think December 31st equals a whole new year. How many of you are getting married this 31st, btw? Happy Anniversary to my boss – the CPA – and his wife on that fine day that you CPAs love so much. Deductions, bitch.
As previously disclosed, the AICPA Board of Examiners doesn’t want you to know they’re cheap. Those difficulty-weighted questions cost a whole shit ton of money to pop in that exam (speaking of which, any IFRS experts out there willing to contribute their time to screwing with CPA exam candidates? Prestige! Honor! No money though.) and the BoE likes questions that have a little more, erm, staying power. Those guys’ “creativity” keeps me in a job so I can’t really elaborate, you get the point.
That means you’ve got a 6 month window to work with from the time pronouncements are announced and when they actually start appearing on the exam. They might appear earlier as pre-test (not counted toward your score and about 15% of exam content) but unless specifically noted – as in SFAS 141(r) – pronouncements trickle into the exam slowly and on a delay.
When new exam content does appear (as it does twice a year, inevitably), it tends to be introduced slowly. Think about it – the only test run those questions got was pre-test, and you were not expected to know that information anyway. How can they gather intelligence from candidates’ collective knowledge of things they don’t know? Seems bizarre to me but whatever, can’t question the wisdom of the AICPA.
Except in the case of the Feed the Pig campaign.

The Return of Capital?

Thumbnail image for Thumbnail image for magic money.jpgAfter last week’s talk with Sam Antar, he got me thinking about our major capital problems, reminding me of something I’d seen earlier in the year on the world running out of capital.
How is that even possible? Isn’t capital just an accounting entry?
In the April piece, it was argued that the global capital trench is not possibly large enough to cater to the budgetary debauchery of the Obama administration. The stimulus. Health care. Afghanistan. Pick one and you can easily identify where the problem lies; put them together and you realize that we are fighting an uphill battle against investor demand for risky assets – including sovereign debt. In other words, T-bills aren’t what they used to be.


So how can regulators impose stricter capital requirements when trillions in fake capital built upon fantasy accounting in the years leading up to the financial crisis was vaporized?
Credit Suisse believes new capital requirements in Europe will cost affected banks £33 billion, some of which will inevitably come from those banks’ clients.
FT Alphaville:

Indeed, one of the theories about why lending by UK banks has yet to pick up — despite the Bank of England’s QEasing efforts — is that banks have been preparing for higher capital rules just like the ones above. That rather implies there are, perhaps less expected, costs for consumers as well.
As the FSA notes in the consultation:As noted in Table 1, costs for firms will rise substantially as a result of these measures and these costs will be passed on, at least in part, to consumers. This increase may manifest itself as lower deposit returns and higher borrowing interest rates. The extent to which this occurs depends on a number of factors, including the extent to which firms may already be able to charge above competitive prices for some products.

Know what’s happening? You’ve got to pay back your share of that fake capital vaporized in the decoupling process. You borrowed against it and bought crap with it and got a raise because of it and now you’ve got to give it back.
That’s all.

>75: The ‘Magical’ Order of CPA Exams

BelushiCollege_CPA.jpgEditor’s note: Welcome to latest edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
Just a reminder, if you have a CPA exam question for us, be sure to send them over. No question is too stupid, trust me, I’ve been in CPA Review for 3 years and have heard them all.
For today’s >75, let’s talk picking exam parts, shall we?
I get asked these questions at work constantly: “What part should I start with? Which is the easiest? Which is the hardest?”


My answer is always the same: there is no “easy” or “hard” section, they’re all equally and independently difficult for their own reasons. FAR is “hard” because of the sheer volume of information but believe it or not, BEC tends to be the part candidates struggle with most. AUD and REG have a slightly higher national pass rate but that does not make them any easier than the other two.
For now, I’ve been advising candidates to start with FAR so they can get it out of the way before IFRS hits the exam in 2011. In general, however, I advise our students to start with the part that they feel will be most difficult for them since your 18 month clock starts ticking once you pass the first part. If a candidate is going to struggle to pass one section, it’s best to do this before that 18 month period starts since the very last thing you want to do is to retake a section you already passed because you couldn’t pass that final part in time.
Point being, there’s no such thing as easy when it comes to the CPA exam. Nor is there a such thing as a “magical” order for taking the exams. But here are some tips for figuring out which part to start with:
• Anxious candidates with a confidence problem – Start with Audit or Regulation, whichever section will be easiest for you since, as I said above, these tend to have a higher pass rate. Passing that first section will be a huge motivator to keep you going.
• For candidates looking for “the easy way out” – Start with FAR. Since this section is the largest, getting it out of the way first will make the rest of your CPA exam experience seem downhill.
• For candidates planning to take the exam through 2011 – Get FAR and BEC out of the way now. Communications will be hitting BEC in 2011 so if you get it done now, you can take AUD and REG in 2011 when they no longer have communications. Win!
Good luck!

The PCAOB Setting a Precedent…for the Fed?

jump to conclusions.jpgFirst of all, before I go anywhere with this, I know GC already gave her a link but this recent Re: the Auditors post on, well, auditors — or rather the lack thereof — is a do-not-miss. It is especially relevant when we’re talking about the usefulness of audits, PCAOB or otherwise.
Anyway.
As many of you already know, the PCAOB is on the chopping block and bad. While we’ll have to let that one work itself out in court, the case against the PCAOB is actually an all-too-familiar argument.


The Federal Reserve System (much like the PCAOB) pulls its regional bank presidents not under direct Presidential directive but because that’s how it has always been. The President appoints a Fed Chairman of course but beyond that, Washington tries to stay as far away from the regional Fed bank structure as possible. Why? That question is a tad too complicated to answer here, so we’ll get into that another day.
The important part here is that the Fed should be closely watching the PCAOB case in the Supreme Court. If the PCAOB is brought before the people of the United States to answer for its alleged recklessness as an agency free from Presidential influence, the Fed may follow soon after.
WebCPA:

The plaintiffs argued that the PCAOB violates the separation of powers principles in the Constitution because the PCAOB’s members are appointed by the SEC and not directly by the president, and they cannot be fired except for cause. Several justices indicated some sympathy for that viewpoint in their questions.

Gee, that sounds just a little too familiar. Seeing as how two-thirds of regional Fed bank directors are chosen by the very banks those regional banks “supervise”, the Fed may have some ‘splaining to do.
So while Bernanke is out there running PR for the Fed System to keep nosy Congressmen out of their business, where is the PCAOB defensive play against SCOTUS? Don’t they have anything to say in their own defense? Apparently not if my experience is any indication.
While most of you know I am not exactly a cheerleader of the PCAOB nor the Fed, I can’t see how consolidating all of our power in Washington can be a benefit either. There is something to be said for the wacky structure of these agencies as it is a Frankenstein of influence instead of a concentrated wave of power emanating from DC.
So watch the PCAOB case closely, Ben Bernanke, it could be you next and you don’t want to have to explain why the banks you regulate pick the soldiers of your precious System.

>75: What Happens When You Get a 74?

agony.jpgEditor’s note: Welcome to latest edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
It might be the worst feeling in the world. Trust me, I know people who have gotten 17s and 24s on the exam – these are not my CPA Review students, of course, these are people who tried to go the CPA exam alone – and a 74 beats their misery any day of the week.


Nearly 99% of the candidates I talk to (I’m making that percentage up off the top of my head, mind you) who get a 74 on any part of the exam did everything they were supposed to do. They did hours of multiple choice and tons of practice simulations and even did the tutorial at cpa-exam.org before test day.
These are people who asked me very early on how they could plan their time, requested updates weeks before they were available and had me emailing 3 years’ worth of previous CPA exam questions for them to practice on. From all appearances, they did everything they were supposed to and yet got a 74, the worst possible score you can get (17 on FAR aside but we won’t talk about that mmmmmkay?).
So what do you do if you’re that person?
• Don’t bother requesting a “rescore” from the AICPA Board of Examiners: For all of 2008, not a single rescore request resulted in a candidate going from FAIL to PASS. It’s a waste of time and money and the AICPA isn’t going to admit their CBT is at all faulty (those of you who have actually taken it probably know better but we won’t talk about that either) so accept your score and move on.
• Don’t move on to a new section While you have to deal with the fact that you’re going to have to pay re-application fees to the Board and another exam fee, the best thing you can do in the case of a 70 – 74 is to go right back to that section and schedule a new exam as soon as possible. A 74 especially shows that you have an excellent command of the information, just a little more studying and you’re over that hump.
• Look at your score report: Your score report is going to give you quite a bit of insight on where you went wrong the first time. When you fail an exam part, they go so far as to tell you where you failed the worst, USE THAT! When you go back over your review materials, there’s no need to watch every single lecture video again fourteen times – just look at the report, figure out where you need more work, and do extra practice questions in those areas.
Finally, don’t beat yourself up. If this exam were easy, everyone would be a CPA.

Can the FTC Even Deliver on Newspaper Bailout Promises?

newspaper-pages.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
For months there has been the underlying hum of a newspaper bailout in the air – not much surprise there given dropping subscriber numbers and dwindling ad revenues. But in lieu of an actual bailout (i.e. a check from the Treasury), how about some tax breaks and anti-trust waivers?
NY Mag:

At a workshop on the the [sic] future of journalism yesterday, the head of the Federal Trade Commission said the agency is studying ways to help struggling media companies struggle a little less. What might this help look like? It could come in the form of new anti-trust laws, tax breaks, government subsides [sic] or even changes to copyright law.

Well if “journalism” involves rampant copy errors like that, we’re more screwed than it appears.
Tax breaks for mainstream media? Why? I’m a fringe journalist and I still have to pay my taxes, if I don’t bother to tailor my content to my audience to the point that it draws enough ad revenue to pay my bills, maybe I don’t deserve to eat that week.
It gets better.
Rupert Murdoch has long fought Internet news aggregation and would love to see a pay-per-view program for news that — holy shit! — might actually save news. Where do you get yours from? Would you pay for it?
In recent comments, he basically called every blogger who has ever clipped a news article a thief, including Arianna Huffington. You may have heard of her.
Fine, charge for it. I’d pay if it was worth paying for. Would you pay for the recent CNN article that said the Big 87654 ended with more employees than they started with? Me neither.
Point being, Murdoch would rather see news sites charging than peddling for a bailout. I don’t seem to recall major media outlets begging for any bailouts recently, which naturally inspires a healthy skepticism towards the FTC’s comments.
Has the FTC checked this proposed mainstream media bailout “tax break” with the Treasury? Because if I heard correctly, we have $30 billion to put towards Afghanistan now, not to mention the fact that the FDIC is broke and Citigroup is probably going to need a Dubai backstop. I’m not sure if Timmy would be okay with this, better ask him first.