Archive for the ‘Journal of Accountancy’ Category

How the CPA Exam Is Scored

April 27th, 2011 Comments off

Those of you sitting for the CPA Exam in the near future will find it interesting to read how the CPA Exam is scored.  In this Journal of Accountancy article, you’ll learn more than you ever thought possible.  I know I did!

Read more at: How the CPA Exam Is Scored.

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2011 CPA Exam Changes

January 28th, 2011 Comments off

If you are looking toward the future and that future includes sitting for the CPA Exam, check out the video at the link below that highlights the changes to the Exam for 2011.

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CPAs Provide Expertise for Transfer Pricing Analyses

May 20th, 2010 Comments off

I’ve posted some things previously about the increasing scrutiny taxing authorities are placing on transfer pricing methods used by companies.  Given that countries worldwide are hungry for tax revenue, this is likely to remain a big area of concern for companies as they seek to minimize taxes while satisfying legal requirements in each jurisdiction where they have operations.

Transfer pricing, the process by which multinational companies set arm’s-length prices for cross-border transactions within a corporate group, is complex and consistently ranks as the No. 1 international tax issue facing multinational companies, according to Ernst & Young’s 2009 Global transfer pricing survey. To avoid penalties and potential interest, most tax authorities require taxpayers to prepare annual transfer pricing reports when they file tax returns.

The Journal of Accountancy has a short piece online that looks at the different areas of expertise that are required when calculating and managing transfer pricing and tax obligations.

CPAs Provide Expertise for Transfer Pricing Analyses. Steve Snyder, CPA/CFF, CVA. Journal Of Accountancy (Online). May 2010

CPAs Provide Expertise for Transfer Pricing Analyses.

IFRS is Coming to the CPA Exam in 2011

May 6th, 2010 Comments off

As I previously posted, the CPA Exam is going to be changing in several ways next year but possibly the biggest item of note will be the inclusion of questions based on IFRS.  IFRS stands for International Financial Reporting Standards and has yet to be adopted in the United States though various timelines and convergence schemes have been proposed in recent year.

As a practitioner, I can tell you that very few of my colleagues have much IFRS knowledge and I suspect that the same can be said for most accounting students.  That could spell trouble for those you that will be among the first to sit for the new exam starting next year.

There is kind of a chicken/egg thing playing out where textbook publishers and schools are awaiting more clarity before adopting widespread IFRS curriculum, not to mention the fact that faculty will need to be brought up to speed on these things before they can teach it to students.

IFRS will only add to the test anxiety CPA candidates face when preparing for the exam.  It will be interesting to see how many people try to take the exam before the content changes and how the pass rates are affected once the changes go into effect.

The Journal of Accountancy prepared a 10-question self-test of some IFRS concepts and put them on their website.  See the link below and take a stab at these to see how much (or how little) you know about IFRS:

Test Your Knowledge of International Standards.

Billable Hour Under Attack

August 25th, 2009 Comments off

This article focuses on Law Firms, but I imagine that Accounting Firms will be feeling the same pressure to change their pricing model from “billable hours” to other ways of charging for their services.  That doesn’t mean that there still can’t be a profit margin factored in, of course, but it will mean that people that want to charge so much for certain types of services will need to really understand what their costs are so that they aren’t surprised at the end of the month/quarter/year to find out that they didn’t charge enough.  For example, it will be imperative that things like fixed costs and variable costs are well understood.

With the recession crimping legal budgets, some big companies are fighting back against law firms’ longstanding practice of billing them by the hour.

The companies are ditching the hourly structure — which critics complain offers law firms an incentive to rack up bigger bills — in favor of flat-fee contracts. One survey found an increase of more than 50% this year in corporate spending on alternatives to the traditional hourly-fee model.

‘Billable Hour’ Under Attack — In Recession, Companies Push Law Firms for Flat-Fee Contracts. Nathan Koppel, Ashby Jones. Wall Street Journal. (Eastern edition). New York, N.Y.: Aug 24, 2009. pg. A.1

An earlier item from the Journal of Accountancy referred to the practice in CPA Firms as “Value Pricing” in a similar context:

“Value Pricing” in CPA Firms

June 2nd, 2009 Comments off

We talk extensively about pricing in HDFRI Chapter 12 and one of the key concepts in that chapter is the recent adoption by many companies of a practice called “target costing.”  In target costing/pricing, a company estimates the value perceived by a customer given the nature and features of a proposed product and then tries to determine what price a customer would pay for that product.  The company then works “backwards” from that price to the “target cost” necessary for the company to sell the product for that price while still earning their desired rate of return.  This is the opposite of cost-based pricing where the company looks at their costs and then determines the price based largely on that.

The Journal of Accountancy this month explores a similar philosophy change in some CPA Firms (a service industry) where clients are no longer billed according to the number of billable hours worked by their accountants, but instead by the specific service being performed.  There is also a sidebar about pricing at Ben & Jerry’s that is a good example of the thought process that can come into play when determining prices.

Pricing on Purpose: How to Implement Value Pricing in Your Firm. By Ronald J. Baker.  The Journal of Accountancy, June 2009.

A Lesson in Value Pricing Ice Cream: From an Accountant. By Ronald J. Baker.  The Journal of Accountancy, June 2009.

Loan Covenants Tighten Up

April 21st, 2009 Comments off

We talked about loan covenants in passing several weeks ago in class when we were discussing managing cash in/outflows, but the Journal of Accountancy has  a short piece about things tightening up in this area and it ties in somewhat with the performance measures we discuss in Chapter 23.  Things like Return on Sales ratios are potentially becoming more important not only as performance measures but to remain in compliance with loan terms.