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JULY/AUGUST 2013

FeaturesLeadership Day 2013 9Featuring pictures from Leadership Day in June.

What is Your Practice Worth in 2013 11Baby boomers selling practices may shift the “seller’s” market in the next few years.

by Gary Adamson

What’s at Stake? The CPA Professionon Federal Fiscal Responsibility 14A new AICPA video raises awareness of seriousness of nation’s budget deficit.

AZVolume 29 Number 6

CPA

Columns & Departments 6 Chair’s Message by Karen Abraham, CPA

9 Focus on Members

22 Classifieds

23 In the Black ... Adventures in Accounting

Arizona Society of Certified Public Accountants4801 E. Washington St., Suite 225-BPhoenix, Arizona 85034-2021www.ascpa.com

www.ascpa.com

Comfort Letters: Just Say No 15 Find out the best way to respond to lending institutions and client requests for comfort letters.

by Benjamin Podraza, CPA

Subpoena Questions and Answers 18Understand the nature of subpoenas and how CPAs can minimize their professional liablity exposures when responding to them.

by Nadia Bell and Natalie Vu

Unleashing Innovation 20Organizations who are able to foster creativity, reap numerous rewards in terms of growth and profitabiltiy.


The Arizona Society ofCertified Public Accountants

President & CEO Cindie Hubiak

Editor Patricia Gannon

Copy & Advertising DeadlineThe first of the month one month prior to publication date.

Board of DirectorsChair Karen Abraham Chair-Elect Anita BakerSecretary/Treasurer Rob DubberlyDirectors Diane Groover Sandra Hieb Debra Johnson Jimmy Lovelace Adam Miller Molly Montgomery CW Payne George Raysik Andy Spillum Leslie Stackpole Jared W. Van Arsdale Craig Van Slyke

Immediate Past Chair Armando RomanAICPA Council Members Jim Buhr Rick Goldenson

Chapter PresidentsSouthern Chapter Flo ZenbluNorthern Chapter Jennifer NordstromSouthwest Chapter Jayne WrightNorth-Central Chapter Richard Joliet

AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends in the profession of accounting. It is distributed 10 times a year as a regular service to members of the Society. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in advertisements within this publication. Opinions expressed by correspondents and contributors are not necessarily those of the ASCPA.

Arizona Society of CPAs4801 E. Washington St., Suite 225-BPhoenix, AZ 85034-2021

Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700Fax (602) 252-1511

www.ascpa.com

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Chair’s Message by Karen Abraham, CPA

Good News... Did you know? The current U.S. unemployment rate is 7.5%. For

accountants, the unemployment rate is only 3.5% and the

projected growth in accounting jobs by 2020 is 16%.

What is Happening in the Accounting World?

“The only thing constant in life is change.” – Francois de la Rochefoucauld

That quote is certainly applicable to our accounting pronouncements. I re-

cently looked on the Financial Accounting Standards Board (FASB) website

and learned that 140 standards were issued between 2005 – 2012. That’s an

incredible amount and averages out to 17.5 standards per year! In addition,

there are currently nine exposure documents out for public comment. Change

does seem to be the dominant factor – at least in our accounting world!

Happy Anniversary FASBThe FASB celebrated its 40th anni-

versary this spring. At a recent confer-ence, FASB Chairman Leslie Seidman commented that the FASB only issues standards if the expected improvements in the quality of the reporting are likely to justify the costs of preparing and us-ing the information.

Chairman Seidman noted that “when market participants perceive an im-provement in the quality and credibility of the information they are receiving, the efficiency of the market improves, and investors are better able to price stocks and other capital investments.” He stated that more experienced staff has been hired to do outreach and research. The FASB has also improved on answering implementation ques-

tions and resolving issues before the pronouncement is effective. A Global Merging of Standards

What about the International Ac-counting Standards Board (IASB) and the international convergence of standards? There are times that I liken this to the U.S. attempting to adopt the metric system. All of us were taught to use the metric system in grade school. Canada adopted the metric system in the mid-70s only to see the U.S. aban-don our implementation efforts in the 1980s.

The Norwalk Agreement Memoran-dum of Understanding was signed in October 2002 between the FASB and the IASB, committing to the conver-gence of U.S. GAAP and International

Financial Reporting Standards. Since then, we have been bracing ourselves to adopt these new standards. There has been notable progress:

• Revenue Recognition in 2013• Re-exposure of lease accounting in

April 2013• Plans for financial instruments

being completed in piecemeal in early 2014

These are far-reaching and will affect nearly every business, but full conver-gence is still a very long way away.

ASCPA Annual Meeting and Awards Luncheon 2013

Our annual meeting of ASCPA mem-bers was held May 14 and was a fantas-tic event. Greg Anton, CPA, CGMA and Immediate Past Chairman of the AICPA was the guest speaker. Greg discussed many of the changes we are seeing in our industry, including the IASB, the FASB’s Private Company Council, legislative and tax issues. However my favorite portion of his presentation was on CPAs’ Public Service. Greg talked about educating consumers on the federal government’s finances.

To help, the AICPA, with Greg as the spokesperson, produced a video called “What’s at Stake?” which reviews the


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federal government’s latest financial report. He speaks with the co-chairs of the Congressional CPA and Accountants Caucus about the profession’s role in promoting the importance of fiscal responsibility. This video is part of an ongoing initiative of the AICPA, which calls on members of the CPA profession to inform their colleagues, clients and communities about the need to put the federal government on more solid financial footing.

Highlights include:• The need for CPAs to help protect

the public interest. To assist with this, education of the American people is critical. This can be done in a non-partisan and objective way.

• Discussion of the federal govern-ment’s financial statements, both in terms of the income statement and the balance sheet – but also li-abilities for social programs (Social Security and Medicare) that are not part of the financial statements and are only shown in footnotes.

• The long-term implications of the government’s health can be reviewed and understood in the financials, and they are much more insightful than the annual budget that is reviewed and debated by congress and the president.

• Social insurance and the deficit are larger than the household net worth of all Americans.

You can view “What’s at Stake?” at www.aicpa.org.There you can also find PowerPoint presentations, talking

points and background information for starting a dialogue in your communi-ties. (See page 14 for more information.)

In Our CapitolI attended the AICPA conference in

Washington D.C. and visited with our legislative representatives. We gave our representatives educational materials, including the “What’s At Stake?” video. It was all a very interesting process, but I’ll save that discussion for my next column.

at www.ascpa.com


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Focus on Members Mark Eberle, CPA, partner at Henry

& Horne, LLP received the honor of having the Rising Star award from the Scottsdale Area Chamber of Com-merce renamed the Mark F. Eberle Ris-ing Star Award as part of their annual Business Volunteer Awards. The Rising Star Award recognizes an individual for his or her volunteer spirit and leader-ship. The award was named the Mark F. Eberle Rising Star Award as a tribute to Eberle’s contributions to the Chamber and Scottsdale community.

AXIOM Financial Advisory Group, LLC announced expansion into new larger offices. New offices are located

Leadership Day 2013The ASCPA Board of Directors, Section and Chapter chairs met to discuss matters of importance to the Society, hear from Rep. Forese who was instrumental in passing SB 2260 and network with each other at the annual ASCPA Leadership Day.

in Scottsdale in the Gainey Ranch Fi-nancial Center at 7373 E. Doubletree Ranch Road, Suite 170.

Ron Butler, CPA, managing partner at Ernst & Young, LLP, was listed as a Most Admired Leader by the Phoenix Business Journal.

Darlene Hagan, CPA, of Hunter Hagan & Co., Ltd., was elected to the board of the Central Arizona Estate Planning Council.

Heinfeld, Meech & Co., P.C. an-nounced the following promotions: Eugene Park, CPA, to audit manager,

Kaleigh Hotchkiss, CPA, and Michael Paul Rohr, CPA, to senior associate, and Anthony St. George and Justin D. Robertson, CPA, to staff associate II.

Tracy Taylor, CPA, of Moutainside Fitness was selected by Wells Fargo as its 2012 CFO of the Year.

In MemoriamDouglas McCulley


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Behind the Scenes ... at the Federal ReserveASCPA Members got a special tour of the San Francisco Federal Reserve Bank’s Phoenix cash facility. This group was among the first to see the new $100 slated for release in October 2013.

Heinfeld, Meech & Co., P.C. recently completed their annual community service day on May 24. Here are teams from their volunteer day at food banks in Tucson and Flagstaff.


What is Your Practice Worth in 2013?by Gary Adamson

Tax Season 2013 is over and the M&A frenzy will pick back up again where it left

off. So, what is your practice worth? What can you expect whether you are a buyer or

seller? One thing is for sure – Baby Boomers are selling at a rate that the profession

has never seen before. It is still a sellers market, for now. But the demographics and

the thousands of practices that will soon be for sale suggest that may change over the

next few years.

We are often asked by our clients about the market and what firms are selling for. Everyone wants to know “what’s the multiple?” Let’s start with a little bit of background and defini-tion. First of all, there are basically two types of deals in the CPA firm M&A world. One is a “merger” transaction where generally, partners of the smaller firm join the larger firm with the key characteristic being that those partners plan to continue with the larger firm on more


AZ CPA

than a short term basis. Normally no cash changes hands. Rather the incom-ing partners are brought into the firm’s existing deferred compensation /partner buyout plan.

The second is really a purchase where the partners or sole proprietor of the smaller firm are selling the practice and are not continuing on a long term basis with the larger firm. These tend to be the smaller deals. Often, a single transaction will combine a merger ap-proach for some incoming partners and the buyout of others.

This article is focused on the purchase transaction. At the smallest end of the spectrum are the cash deals. In spite of lots of talk, we just don’t see them. In fact, they are almost non-existent in the firms that we work with. The gen-erally accepted deal structure for most purchases in the profession today is a multiple of revenue approach paid out over a period of time, with no interest.

The first question we get from our clients is usually “what multiple of revenue are practices selling for?” We normally answer that question with another question: As the buyer, would you take this deal: a $500,000 tax practice, good rate per hour, located in your back yard, zero or a small down payment, good transition of clients by the retiring sole practitioner, and the price is 15 percent of collections over 10 years? There usually is a short pause and the answer is “yes, absolutely.” So far I don’t think we have heard a no.

In the preceding example, as the buy-er you just said yes to paying a multiple of 1.5 times revenue for the practice! What?? Why would you do that? The point is it’s not just about the multiple; it’s about the overall deal structure and terms. The multiple is only one piece of the puzzle.

Although we won’t touch on every-thing, the important components that go together to make up and influence the structure are:

• Size of practice• Profitability of the practice• Location• Down payment• Term (number of years) of the

payments• Length of time before the purchase price is fixed

• Extent and quality of client transi-tion

• And finally, the multiple of revenue being paid.

The relative size of a practice being acquired will have an impact on the pricing of a deal. Generally, the larger the target, the fewer potential buyers there will be and the price is lower. Likewise, the pricing is impacted by the location of the target. If you are in a major metro area, there are more potential suitors and you can command a higher price.

Be careful on analyzing the profit-ability of the practice. Most of us want to focus on the financials of the target and yes, we do want to review and understand them. But as the buyer, the more important questions should be the margins and profitability in our firm. What is it going to look like in our shop? Cost structures are different and how we staff it may be different.

The down payment, length of pay-ment term and when the price is fixed or locked down all work together to influence the multiple. As you can probably imagine, as the down payment goes up the buyer has more risk and the multiple may go down. A down pay-ment of more than 20 percent is fairly unusual in this post recession market and we often see any down payment treated as an advance on the first year or two of payments. The length of the payment term is normally in the range of four to six years, and the multiple will be higher as the term increases.

The lock down of the price deserves some explanation. In our $500,000 tax practice example, there is no lockdown and the seller would have received 15 percent of collections or $75,000 for ten years, assuming that the revenue stayed at the $500,000 level. Of course, it won’t stay at that same amount. Hope-fully the acquiring firm is going to grow it, but most sellers are worried that it will shrink. To protect against that shrinkage, sellers want a lock down or fixing of the price after some period of

time. We normally see that in the one to three year range. So, if in our example we included a two year lock down, the value would be fixed at the end of two years based on the revenue of the prac-tice at that time. The remaining pay-ments would be adjusted accordingly.

The length and quality of the tran-sition to be provided by the exiting partners or sole practitioner is critical to the retention of clients and the value of the practice.

The interplay of the transition and the lock down of the pricing is key.

So, what about the multiple? We see a lot of transactions in the one to 1.25 range, with the higher end of the scale in the metro areas. That would assume terms in the “somewhat normal range” such as a down payment of not more than 20 percent, a five-year payout, a two-year lock down, good transition, etc.

A few more details to be aware of include:

• Furniture and equipment are nor-mally included (the buyer receives them).

• Work in process and accounts re-ceivable are normally not included.

• As the buyer, always share the up-side prior to the lock down with the seller.

• Make sure that your transition plan includes two cycles.

For a little bit more information, in a recent article available on our web-site, we shared what sole practitioners are thinking regarding multiples and terms in the sale of their practices. Our source was the 2012 Succession Survey conducted by the Succession Institute in cooperation with PCPS.

Gary Adamson is a CPA and the pres-ident of Adamson Advisory, specializing in practice management consulting for CPA firms. He can be reached at (765) 488-0691 or [email protected]. For more about Adamson Ad-visory, visit www.adamsonadvisory.com.


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What’s at Stake? The CPA Profession on Federal Fiscal ResponsibilityNew Video Raises Awareness of Seriousness of the Nation’s Budget Deficit

The fiscal cliff, the debt ceiling and sequestration have brought greater attention

to our nation’s budget policy. The American Institute of CPAs (AICPA) strongly

believes that there is a longer-term threat posed by the nation’s budget deficit. In December 2012, the AICPA conducted an online survey of its members and found

that the majority believe that cutting the federal budget deficit should be the govern-

ment’s top economic priority. They also expressed concern that individuals and families

will be affected most severely if policy makers are unable to reduce the federal debt.

“CPAs have a powerful, credible voice in this matter, and can make a major difference

in helping policymakers, as well as the public, understand just what is at stake,” believes

Gregory Anton, CPA, CGMA, former AICPA Chairman of the Board of Directors and

the founder of the Institute’s “What’s at Stake” initiative. To help others understand

the significance of the issue, AICPA released What’s at Stake? The CPA Profession on

Federal Fiscal Responsibility, an update of the May 2012 video What’s at Stake? A CPA’s

Insights into the Federal Government’s Finances.

In this video, Anton explains to viewers why the federal financial statements provide

a different perspective compared to the annual budget. He also reviews the 2012 Fi-

nancial Report of the U.S. Government and offers guidance for policy makers and

the public on how the U.S. government’s financial statements can be used for greater

understanding of the nation’s fiscal health.

The CPA profession can play an important role in promoting the importance of fiscal

responsibility. The video includes interviews with the co-chairs of the Congressional CPA

and Accountants Caucus, Representatives Brad Sherman (D-CA) and Mike Conaway

(R-TX), who discuss the value of the CPA in shaping this fiscal policy discussion and

creating change. To get started, watch the video now and share it with clients, colleagues

and your community. Resources to support CPAs in these outreach efforts can be found

on aicpa.org/whatsatstake. AZ CPA


Comfort Letters: Just Say No by Benjamin Podraza, CPA

Many lenders and loan brokers offering no-documentation and low-documentation

loans have developed a bad habit of asking CPAs to issue comfort letters for self-

employed borrowers. These requests come in many forms. A lender may ask for

a simple written confirmation of a client’s self-employed status or verification of

self-employment income. More aggressive requests ask the CPA to confirm the

sustainability of a client’s profitability or to indicate that withdrawing money from a

business to fund a down payment will not adversely impact the borrower’s business.


Guidance related to such requests is provided in Interpretation No. 2, “Responding to Requests for Reports on Matters Relating to Solvency,” of AT section 101, Attest Engagements (AICPA, Professional Standards, AT sec. 9101 par. .23-.33). Paragraph .25 of Interpretation No. 2 defines matters related to solvency as whether an entity (a) is not insolvent at the time the debt is incurred or would not be rendered insolvent thereby, (b) does not have unreasonably small capital, or (c) has the ability to pay its debts as they ma-ture. Paragraph .27 of Interpretation 2 indicates that because of the varying legal interpretation of solvency, the practitioner does not have suitable cri-teria to evaluate the assertion. CPAs are therefore precluded from giving any form of assurance on matters related to solvency or any financial presentation relating to solvency.

In obtaining a comfort letter, lenders and brokers effectively shift the burden of assessing a borrower’s creditworthi-ness to an unwitting CPA. If the bor-rower later defaults on the loan, the lender may sue the CPA alleging that it relied on negligent misrepresentations contained in the letter. The definitive guidance provided by Interpretation No. 2 would not afford the CPA with much of a defense. Essentially the CPA has co-signed the client’s loan via their professional liability insurance policy, assuming their policy does not specifi-cally forbid it, which many now do.

Despite efforts by the AICPA to reach out to the lending community to ex-plain what services CPAs can and can-not provide, lenders continue to press the CPA community for comfort letters. When these requests are submitted, it creates an uncomfortable tension between the practitioner and the client.

The client, who does not understand the implication of issuing such a state-ment, feels the CPA is being unreason-able and uncooperative at one of their most vulnerable moments. The client is fearful to return to their lender absent the requested documentation and has con-cerns about how they will explain why their CPA would not provide the letter.

There are several ways a CPA can respond to these requests. It is impor-tant to help the client understand the applicable professional standards, but simply quoting scripture and sending the client to face the lender alone will probably not solidify the relationship. The CPA should also engage directly with the lender to (1) help them un-derstand why the request cannot be fulfilled, and (2) to find out if there is alternative documentation that may satisfy the need. In many cases, the lender may accept a client’s articles of incorporation, a current state/ business license, a letter from a professional or-ganization verifying their current self-employment, a letter from a business that employs their services verifying the type of service and the dates that they were used, or a bond or workers’ compensation insurance policy verify-ing that they own the business.

The CPA should further advise the client and the lender of the profes-sional services that are available and may be useful for purposes of making a financing decision. The CPA may audit, review or compile financial statements. A CPA can examine, review or compile pro forma financial information. CPAs are permitted to examine or compile prospective financial information. CPAs can also perform agreed-upon procedures, provided the resulting report does not provide any assurance on matters related to solvency.

In the many cases where mortgages will be resold to Freddie Mac, lenders may assert that a self-employed bor-rower will not qualify for a mortgage unless the CPA provides the comfort letter. The CPA may challenge the lender by referencing the fact neither Fannie Mae nor Freddie Mac contain such guidance in their seller guides for residential mortgages.

Historically, Freddie Mac’s Single Family Seller/Servicer Guide (the Guide) provided that in order to as-sess whether the withdrawal of funds would adversely affect the ability of the business to continue operations, the secondary market sellers could obtain a comfort letter from the accountant stating that, “The Borrower has access to the funds and the withdrawal of the funds for the down payment and clos-ing costs will not have a detrimental effect on the business.” Such guidance regarding comfort letters has never been found in Fannie Mae’s guide.

In 2012, Freddie Mac revised the Guide by deleting the practice of ob-taining a comfort letter. Instead the Guide now indicates that the lender should verify the borrower’s business and personal assets and perform a cash flow analysis, both of which must now be contained in their mortgage file. The revision to the Guide places the burden of evaluating the borrower’s solvency solely on the lender or broker.

In an effort to avoid alienating their

In obtaining a comfort letter,

lenders and brokers effectively

shift the burden of assessing a

borrower’s creditworthiness to

an unwitting CPA.


client, the CPA may provide a letter confirming that the CPA prepared the applicable income tax return(s). Dis-claimers indicating that the tax return was not audited or verified are ap-propriate. The CPA should also make specific reference to the fact that in preparing the tax return, the CPA does not perform any assessment of credit-worthiness and that the lender is solely responsible for such determination.

If after offering these practical solu-tions the lender continues to press the client for the comfort letter, the CPA should consider that the client’s underlying desire is to have flexibility in obtaining credit in the marketplace. As an important center of influence in their clients’ lives, the CPA is well-positioned to help the client find a different lender.

Benjamin Podraza, CPA, is the principal at Podraza CPA, PLLC in Scottsdale. He provides tax and account-ing services for individuals and small businesses. He can be reached at [email protected] or (480) 998-3945.

AZ CPA


Subpoena Questions and Answersby Nadia Bell and Natalie Vu

Facing a subpoena can be a daunting situation. CPA firms are often uncertain

about whether or how to comply with a subpoena while complying with a

number of rules and regulations that are intended to protect client confiden-

tiality. The following Q&A focuses on understanding the nature of subpoenas

and how CPA firms can minimize their professional liability exposures when

responding to them.


AZ CPA

What is a subpoena?A subpoena is usually a formal

request for documents and/or appear-ance, typically requested by an attor-ney in the course of litigation, or by a government agency in the course of a criminal or civil investigation.

What should I do when I receive a subpoena?

Consider the information you have in your client file and the recent com-munications you may have had with the client or any parties involved, and then contact your professional liability risk adviser or attorney before respond-ing to the subpoena. In evaluating the appropriate course of action for you to take, your adviser may consider the following questions.What is the underlying litigation

about? Do you have direct or other knowledge about what the issues are in the litigation? What is the subpoena asking you to

do? Is it requesting that you provide tes-timony, documents, or both? Does the subpoena excuse you from testifying if you provide the documents in advance?

Are you in possession of the infor-mation listed? Review the subpoena and consider whether your firm is in possession of the information.

Does the subpoena provide a dead-line for complying? If the deadline is quickly approaching, or if the subpoe-naing party did not provide sufficient time to comply, have you received any communications to suggest the op-posing party will grant an extension of time?

What communications have you had with your client? Have you had any con-tact with your client, the attorneys on the case, or the governmental agency? Does that contact suggest whether you are a target or merely a person in posses-sion of information? Is the client taking specific measures to formally object to the subpoena?

Why am I receiving this subpoena?

Typically, an attorney or other party will issue a subpoena because he or she

believes you are in possession of infor-mation that will establish facts that are relevant to the underlying case. How-ever, sometimes a subpoena may indi-cate you are a target in the underlying case by seeking information that could implicate you as possibly liable for the matter being investigated or litigated.

Am I required to comply with a subpoena? Is this subpoena a court order?

If you have received a subpoena that is signed by a judge, you must comply.

However, most subpoenas are pre-printed forms that attorneys or other parties fill out to request information. In these cases, accountants are bound by a number of rules and regulations that are intended to protect clients, including Internal Revenue Code sec-tion 7216. Under certain circumstances, these rules and regulations prohibit the accountant from complying with the subpoena, unless the accountant has undertaken specific measures to protect client confidentiality.

Again, contact your risk adviser re-garding all subpoenas to evaluate the underlying litigation and the obligation to comply.

Should I report this subpoena to my professional liability agent or carrier?

Yes, regardless of how much or how little information you may have pertain-ing to the client or former client, it is always important to promptly report the matter.

Should I notify my client if I either receive or comply with a subpoena?

Notification is generally suggested unless the cover letter or subpoena specifically requests that you do not

disclose the subpoena to your client or any third parties.

Am I required to comply with a request for documents without a subpoena?

In civil matters, absent a subpoena, first obtain written consent from the client to produce any documents to the requesting party. However, situations may vary, so it is still best to first consult with your risk adviser prior to providing any documents at all.

In criminal matters, request issuance of a subpoena prior to producing any documents or disclosing any confiden-tial client information. Providing docu-ments to a governmental agency (e.g., the IRS), absent a subpoena, could still potentially take place “as a one-time courtesy,” depending on the nature of the request.

Can I bill my client for the compliance of this subpoena?

Fees are generally suggested to be obtained from the requesting party that issued the subpoena. Reimburse-ment of fees is often governed by the applicable courts within your specific jurisdiction (state/county) with respect to per page copy costs, hourly fees, or reimbursement for mileage for deposi-tion/testimony.

If, however, there is language in your existing engagement letter between your firm and your client with respect to your firm’s involvement in any inves-tigation, litigation or document requests on the clients’ behalf, you may then be able to bill your client directly, based upon the agreed upon rates within the engagement letter.

Nadia Bell, MAOM, and Natalie Vu, J.D., are claims specialists with CAMICO (www.camico.com).

Sometimes a subpoena may indicate you are a target in

the underlying case by seeking information that could

implicate you as possibly liable for the matter being

investigated or litigated.


New Resource for Management Accountants

To obtain further insights into how management accountants drive in-novation, the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA) developed a program to explore how successful organizations encourage innovation without compromising risk management. They were also in-terested in learning more about how management accountants can promote a culture of creativity while providing for sustainable success, reliable data analysis and strategic decision making.

As part of the program, the AICPA and CIMA held roundtable meetings and conferences in the Americas, Asia and Europe where financial lead-ers from The Coca-Cola Company, Royal Dutch Shell, BT Group and a wide range of other organizations from around the world shared their experiences and opinions. The result is a Chartered Global Management Accountant (CGMA) report titled Managing Innovation: Harnessing the Power of Finance.

The report combines top insights from roundtable and conference participants with AICPA and CIMA research findings, and explains how management accountants are playing a vital role in ensuring that the most innovative ideas are funded and prop-erly executed. It also features real-life examples and anecdotes from a diverse range of senior financial executives and acclaimed thought leaders about how the finance function, working with in-novation strategies, can have a positive, measurable, bottom-line impact on the organization. The report concludes with a detailed checklist that manage-ment accountants can apply to their own organization’s innovation plans.

Four Steps to Unleashing Innovation

Building a culture that comfortably balances creative thought and flex-ibility as well as it does discipline and control can be a challenge for even the best-managed organizations. The

Unleashing InnovationYou Can be the Catalyst for Long-Term Success

In the late 1950s, the average tenure of a company in the S&P 500® was

61 years. Today it is down to only 18 years. In just the last decade, approxi-

mately half of the companies in the Index have been replaced by newcomers

such as Google and Facebook. Organizations that are able to foster the

creativity needed for innovation, and finance and efficiently implement it

across the organization, reap numerous rewards in terms of growth, profit-

ability and marketplace distinction.

In the midst of this uncertain marketplace, a new role for management ac-countants—manager of innovation—has not only emerged but has also grown in demand. What uniquely positions management accountants as catalysts for the innovation needed for long-term success? Their ability to evaluate the risks associ-ated with specific opportunities, and their multi-faceted role across the organization when helping to transform creative ideas into commercially successful innovations.


AZ CPA

Arizona’s best resource since 2000 for Cost Segregation Studies

[email protected] (480) 963-2872 www.costsegstudy.com

following are four areas where manage-ment accountants can help strike this balance and put an organization on the path to an innovation-powered future.

Create a New Mindset. Support from the top is necessary for the suc-cess of the most important initiatives, and shaping an innovation-centric mindset is no exception. More than half of respondents to a recent McK-insey & Company survey cited C-suite support as a driver of innovation success. With demonstrated backing from the leadership team, innovation can more successfully flow within the organization—and spread among supporters and advocates at all levels.

Focus on Flexibility. When evaluat-

ing and measuring innovation, finan-cial metrics need to be more flexible than the traditional metrics applied to business operations. Financial processes and metrics should align with different innovation lifecycle stages—more relaxed criteria that gradually tightens as ideas approach implementation—with ideas chal-lenged and refined as necessary at each stage. There also needs to be an understanding that there will likely be detours, and in some cases failures, in the pursuit of innovation.

Pave a Path to Profits. The long-term rewards of innovation require that projects conceivably generate some degree of profit—innovation is not an end in itself. With expert ad-vice on costs, financing and resource allocation, among other areas, a more successful progression from idea to implementation can occur. What follows is finance being valued as a contributor to, and not a constraint on, innovation.

Take a Balanced View of Risk. Although minimizing risk plays an indispensable role in an organization’s daily activities, it can present a chal-lenge when applied to innovation, which includes risk as an inherent part of its process. However, innovative

organizations recognize that the risk function helps ensure that they have balanced strategies and actions needed for growth, which repositions risk as a value driver. Organizations are then better able to make business decisions that allow innovation to flourish.

Innovation is not easy to unleash and support. It can be disruptive to operations and uncertain in its out-comes, and requires new thinking and a strong appetite for risk. However, it has become a lifeforce for today’s or-

ganizations. Management accountants can guide organizations through the many stages of the innovation process and help them avoid the risks that can undermine long-term success, includ-ing what is perhaps the greatest risk of all—the failure to innovate.

Additional InformationCGMA designation holders can

download a copy of Managing Innova-tion: Harnessing the Power of Finance at CGMA.org.

Although minimizing risk plays an indispensable role in an organization’s daily activities, it can present

a challenge when applied to innovation, which includes risk as an inherent part of its process.


ClassifiedsBusiness Opportunities/

Practices for Sale

WE BUY CLIENTS— Our CPA firm would like to offer a smooth transi-tion in the purchase of your clients. We will purchase anywhere from one client, up to an entire practice in the Phoenix/Scottsdale metro area. If you are thinking of retiring or downsizing your practice and need to transition your clients to a professional CPA firm, please give us a call. Our staff has been practicing in the valley for more than 30 years with an emphasis in business taxes and accounting. Our office is located near Thunderbird and Scottsdale Rd. Please contact us today for more information and ask for Craig (480)990-2727 [email protected].

HAVASU CPA FIRM FOR SALE— 10 year+ CPA firm for sale in Lake Havasu City. The Firm has yearly revenues of $250,000 consisting of 38% tax, 39% accounting and 23% audit. The asking price is $270,000; terms are negotiable. Send email to [email protected].

MESA CPA FIRM FOR SALE — Mesa CPA firm extablished over 30 years for sale by sole owner planning for retire-ment. Reply to [email protected].

TUCSON CPA CONSIDERING MERGER OR OFFICE SHARING OP-PORTUNITIES—Lease expires in Oc-tober. Considering merger with another

firm or renewing lease and subleasing one large office. Current space has large reception room, conference room and two offices. Reply to: [email protected].

Employment Opportunities

GOVERNMENTAL/NPO SPECIAL-ISTS — Heinfeld, Meech & Co., P.C., recognized leaders in governmental and non-profit accounting and audit-ing, seeks ambitious and motivated individuals for all levels of consulting and auditing positions in our Phoenix and Tucson offices. Nationally and lo-cally recognized for our firm culture, we are committed to providing a superior work environment and career opportu-nities for our staff. Competitive salaries and benefits offered. BS in Accounting required. CPA, CPA candidates and CFEs preferred. Senior and managerial positions require extensive experience in governments/nonprofits. Travel required. E-mail resume and salary requirements to [email protected].

SENIOR TAX PREPARER / AC-COUNTANT— Scottsdale CPA Firm in business for over 30 years is hiring a CPA with 5-7 years recent tax experi-ence to prepare business and individual tax returns. Your primary focus will be our business clients and the preparation of all business tax returns. The success-ful candidate needs to possess a strong

knowledge of the full accounting cycle, be able to do tax preparation and re-search along with understanding GAAP and AICPA professional standards and be familiar with QuickBooks. Salary is $60-70k based on experience. Please send resumes to [email protected].

SENIOR TAX ACCOUNTANT — Dalby, Wendland & Co., P.C. - Continue your career with a market-leader firm in beautiful Western Colorado! DWC is seeking a Senior Tax Accountant to join our Glenwood Springs office. This person must be a licensed CPA or a current CPA candidate with 2-5 years of experience in public accounting. We are consistently ranked by Accounting Today as one of the top firms in the Mountain States Region. Our strong team culture and quality-focused work environment provides challenging opportunities and growth throughout your career. We provide a good work/life balance, competitive compensation, a comprehensive benefits package, and opportunities for advancement. To apply, email your resume to [email protected]

To place a classified ad, go to

www.ascpa.com

and visit marketplace.

For display advertising, contact

[email protected].

Escape to the Red Rocks of Sedona for CPEJuly 25

Federal Tax Update - Individual and Business Current Developments

Presented by Patrick Garverick

Sedona Rouge Hotel & Spa


In the Black ... Adventures in Accounting Concept: Heidi Frei Illust.: Jack Gannon

Make sure you know how to protect yourself and maintain a good relationship with your clients by reading the article “Comfort Letters: Just say No” on page 15 or contacting your professional liability carrier.

Sunny skies ahead...

The weatherman may not be sued for a bad forecast, but a CPA can be.

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